Biden plan may be too pricey for Congress, may end up closer to $1 trillion, Wall Street says

Published Fri, Jan 15 20219:23 AM EST

(This story is for CNBC Pro subscribers only.) President-elect Joe Biden is going big with his $1.9 trillion coronavirus rescue package, but economists and strategists on Wall Street fear that his plan might be too ambitious to pass Congress. Biden on Thursday revealed t he breakdown of his proposed package, titled the American Rescue Plan, which includes $1,400 in additional direct stimulus payments, increased unemployment payments, state fiscal aid and public health funding. While Democrats will soon hold both the House and Senate, Biden will still face challenges in pushing through the pricey plan and a pared-down version with a price tag closer to a $1 trillion is more realistic, many on Wall Street said. "Biden's plan ambitious but unlikely," Ed Mills, Washington Policy Analyst at Raymond James, said in a note. "This package, as proposed, does not have the 60 votes necessary to pass the U.S. Senate. Its ambitious nature will likely delay implementation of a scaled-down package." "Pre-election Speaker Pelosi and Treasury Secretary Mnuchin were closing in on a $2T deal, so an additional $1T in spending should be considered the more likely threshold," Mills added. House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer cheered Biden's plan after its release, saying they will "get right to work to turn President-elect Biden's vision into legislation that will pass both chambers and be signed into law." However, the nearly $2 trillion price tag will likely draw disdain from Republicans such as Sen. Rand Paul of Kentucky who may be wary of spending even more after December's $900 billion bill. The stock market, which had been moving higher on stimulus bets, is set for losses on Friday. Futures on the Dow Jones Industrial Average fell more than 100 points. "The proposal faces hurdles in Congress," Jan Hatzius, Goldman Sachs' chief U.S. economist, said in a note. "It would need 60 votes in the Senate, and therefore the support of at least 10 Republicans. We do not expect ten Republicans to support a $1.9 trillion relief package... it looks more likely that the need to find bipartisan support might constrain the size of the package." Hatzius believes that Congress will enact $1.1 trillion in additional fiscal support. He expects smaller funding size in state fiscal aid, education grants, public health stimulus payments and child tax credit. The bank previously estimated $750 billion in further fiscal aid. Logistical challenges Raymond James' Mills said there is support for a smaller package that includes the $1,400 checks, more health care funding, support for small businesses, and some state and local support. As for Biden's $400 billion effort to contain the pandemic, Mills said he sees logistical challenges. The president-elect is calling for additional funding in coronavirus response, including $20 billion to ramp up vaccines and $50 billion to expand testing capacity. "Government tends to move slowly. Biden's proposed testing and vaccine support could lead to an unprecedented ramp up, but by the time parties receive the money and hire individuals, it may be second half of this year," Mills said. "It remains unclear if there are even enough tests to purchase in the volume proposed."

U.S. President-elect Joe Biden speaks as he announces members of economics and jobs team at his transition headquarters in Wilmington, Delaware, U.S., January 8, 2021.

Kevin Lemarque | Reuters

(This story is for CNBC Pro subscribers only.)

President-elect Joe Biden is going big with his $1.9 trillion coronavirus rescue package, but economists and strategists on Wall Street fear that his plan might be too ambitious to pass Congress.