Welcome to Thoughts on the Market.

I'm Michael Zezis, Head of Public Policy Research and Municipal Strategy for Morgan Stanley.

Along with my colleagues bringing you a variety of perspectives, I'll be talking about

the intersection between U.S. Public Policy and Financial Markets.

It's Wednesday, August 18th at 10.30 a.m. in New York.

With both the Senate and the House of Representatives in recess this week, it's a good time to take

stock of what comes next in the fiscal policy debate.

Here's how we're tracking it.

In particular, we're closely watching what Democrats and the House of Representatives do

next.

Media reports suggest the House will reconvene next week.

If they approve the budget reconciliation instructions passed down from the Senate, then

things would appear to be on track with our base case, Congress approving a total spending

uplift approaching $4 trillion over the next 10 years.

If not, then the risk of delay or failure increases.

Here, we're watching the actions of Democratic moderates, who are pushing to delay this

vote in favor of first approving the bipartisan infrastructure plan.

While this might seem inconsequential, the concern here is that reordering these votes

would create a stalemate by risking the loss of support of progressive Democrats.

Their fear is that allowing moderates to get their smaller bill first gives them an option

to oppose the more progressive elements in the budget reconciliation bill.

But assuming House Democrats stick to the script and pass the reconciliation instructions

...