US President Joe Biden delivers a speech on infrastructure spending in Pittsburgh. Getting Congressional approval will prove difficult, although not impossible. AP Photo
US President Joe Biden delivers a speech on infrastructure spending in Pittsburgh. Getting Congressional approval will prove difficult, although not impossible. AP Photo
US President Joe Biden delivers a speech on infrastructure spending in Pittsburgh. Getting Congressional approval will prove difficult, although not impossible. AP Photo
US President Joe Biden delivers a speech on infrastructure spending in Pittsburgh. Getting Congressional approval will prove difficult, although not impossible. AP Photo

An ambitious Biden's margin for error or bad luck is close to zero


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US President Joe Biden has breathtaking ambitions. The $1.9 trillion pandemic relief bill is the most far-reaching legislation in 50 years to redirect assets to the poorest Americans, especially children. And he intends to go far beyond that spectacular start.

He is now promoting a massive $2tn infrastructure and climate change package. Securing that means operating at the Franklin Roosevelt-level of historic significance.

Since the 1960s, Democrats mainly emphasised social spending. Republicans have mostly promoted the interests of corporations and the wealthy. Both robustly fund the military and serve the special interests that support them.

Suddenly here is a major federal initiative for the country as a whole, the basic infrastructure of the US.

It goes far beyond traditional definitions of "infrastructure", although it does provide considerable spending on roads and bridges, railways and public transportation, schools and affordable housing. Yet there are also vast investments in home and community care, universal high-speed broadband, the power grid, cleaner energy and electric vehicles.

Critics see a liberal laundry-list grab-bag, especially since the plan will supposedly be primarily funded through tax increases on corporations and the wealthy, effectively reversing former US president Donald Trump's 2017 tax cut. It would be another huge step in rearranging social and economic relations in the interests of ordinary people at the expense of corporations and the wealthy. And it would transform significant aspects of the living conditions of many Americans.

Passing anything like this will be extremely difficult given the Democrats' razor-thin majorities in the US Congress.

Eventually, Mr Biden should be able to win the support of the House of Representatives, despite objections from several New York-area representatives who want to lift the cap on deductions for state and local taxes imposed by the Trump tax bill. The Senate, however, is an entirely different matter. And Democratic hopes of passing any such bill this year begin with a little-known official called the Senate "parliamentarian".

The pandemic bill, like Mr Trump's tax cut, was adopted by a simple majority under “budget reconciliation” – an unwieldy workaround to bypass the 100-member Senate's otherwise inflexible 60-vote supermajority to allow legislation to move forward. This exception to the filibuster only applies to spending proposals, meaning that all or most of the infrastructure legislation will probably, but not certainly, qualify.

The main complication is that reconciliation, being supposedly a budget procedure, has never been used twice in the same year. Whether it can will be ruled on by Elizabeth McDonough, the Senate’s professional parliamentarian who referees issues of parliamentary procedure and the correct application of Senate rules.

Ms McDonough has already shown herself willing to thwart the re-empowered Democrats by correctly ruling that a minimum wage increase that had been intended for the pandemic relief bill exceeded the parameters of what is allowed under reconciliation and therefore had to be removed.

A simple Senate majority can always overrule the parliamentarian, but that’s rare and arguably improper. Ms McDonough is a fair-minded arbiter, and changing the rules – not overruling her impartial interpretations – is the appropriate response to an unwelcome ruling.

Joe Biden has an ambitious agenda but the US Senate will need convincing. AP Photo
Joe Biden has an ambitious agenda but the US Senate will need convincing. AP Photo

If she finds that the infrastructure bill can move forward despite reconciliation already having been used for pandemic relief, the really difficult problems commence.

Unless Mr Biden can win some Republican support, which seems exceedingly unlikely on this or any other significant legislation, he will need to hold every single Democratic vote in the 50-50 split Senate, with Vice President Kamala Harris breaking the tie.

Some conservative Democratic senators from largely Republican-leaning states, especially Joe Manchin of West Virginia and Kyrsten Sinema of Arizona, will find supporting such an expansive spending programme politically risky. Moreover, for the same reason they strongly oppose filibuster reform – to preserve their own centrality in Senate deliberations under current circumstances – they may be tempted to either greatly dilute the proposed legislation or simply oppose it altogether.

Mr Biden's ambitions are at least as grand as those of Lyndon Johnson in the early 1960s. But he will have to somehow channel Johnson’s legendary parliamentary skills and powers of persuasion to prevail.

Prospects are even dimmer for another potentially historic bill, this one on securing voting rights, which would require reforming or bypassing the filibuster. That isn't necessary for the infrastructure spending package. But the same block of all 50 Democratic Senate votes plus Ms Harris' tiebreaker will probably be needed to secure either.

Franklin Roosevelt, the former US president, carried out massive infrastructure spending in the 1930s. AP Photo
Franklin Roosevelt, the former US president, carried out massive infrastructure spending in the 1930s. AP Photo

Yet the pandemic relief, infrastructure and voting rights acts – if all three passed – would almost certainly make Mr Biden a transformative president, probably beyond even Johnson's legacy and closer to Roosevelt's.

Such an achievement would be all the more remarkable because it can only be done by keeping the fractious and still ideologically diverse Democratic Party unanimously united behind extraordinarily bold spending plans. And in the unfortunate event any one of the several elderly Democratic senators passes away, his task would become even more daunting and perhaps impossible.

So his margin for error or bad luck is close to zero.

Yet Republicans lack a coherent rebuttal other than budget concerns. Since they evinced no interest in fiscal discipline during the Trump administration, that will be highly unconvincing for anyone paying attention to their stances. And a major infrastructure project would probably be broadly popular, including among Republican voters.

Donald Trump did not carry out infrastructure spending despite talking about it extensively. Bloomberg
Donald Trump did not carry out infrastructure spending despite talking about it extensively. Bloomberg

Such spending would generate huge numbers of good working-class jobs, which Mr Trump always promised but never really delivered beyond what the economy was already in the process of achieving. His endless but meaningless "infrastructure weeks" became a national joke.

If Mr Biden can hold the Democrats together, pass transformative legislation while defeating the pandemic, and avoid sustained, high inflation (the obvious danger of such huge expenditures), the Democrats would be in an extraordinarily strong position.

Typically, a new president's party loses congressional seats in the first midterm, and Mr Biden cannot afford any losses in either the House or the Senate next year. But the historic exceptions have always come during times of crisis, and no one doubts there is one now.

If Mr Biden shows that sweeping government actions can solve big problems, the existing Republican playbook may be rendered obsolete. They will finally have to abandon the Donald Trump personality cult and categorically opposing almost everything, and seriously reengage with policy and governance.

Hussein Ibish is a senior resident scholar at the Arab Gulf States ­Institute and a US affairs columnist for The National

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Your rights as an employee

The government has taken an increasingly tough line against companies that fail to pay employees on time. Three years ago, the Cabinet passed a decree allowing the government to halt the granting of work permits to companies with wage backlogs.

The new measures passed by the Cabinet in 2016 were an update to the Wage Protection System, which is in place to track whether a company pays its employees on time or not.

If wages are 10 days late, the new measures kick in and the company is alerted it is in breach of labour rules. If wages remain unpaid for a total of 16 days, the authorities can cancel work permits, effectively shutting off operations. Fines of up to Dh5,000 per unpaid employee follow after 60 days.

Despite those measures, late payments remain an issue, particularly in the construction sector. Smaller contractors, such as electrical, plumbing and fit-out businesses, often blame the bigger companies that hire them for wages being late.

The authorities have urged employees to report their companies at the labour ministry or Tawafuq service centres — there are 15 in Abu Dhabi.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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