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As the global recovery takes hold, governments around the world will be increasingly tempted to stop throwing so much cash at the economy. Investors could see that as a big mistake.

What’s happening: President Joe Biden’s infrastructure proposal — part of $4 trillion in potential spending — is a priority in Washington this week. But there are still deep divisions that could stymy its passage, and some on Wall Street are starting to worry that the end result will be nowhere near as ambitious as they’d previously hoped.

“We got a sense of Congressional spending fatigue when we visited Washington a few weeks back,” Tobias Levkovich, Citi’s chief US equity strategist, told clients this week.

His team now thinks that $4 trillion to $4.5 trillion in new spending plans “appear likely to be scaled back” to less than $3 trillion, reducing the boost to the country’s economic output.

The battle lines: White House officials — which put up a $2 trillion infrastructure package in April — remain optimistic about a bipartisan agreement. Yet there’s still lots of debate over costs. A bipartisan group of 58 moderate House members pitched a $1.25 trillion infrastructure package earlier this month, though Republicans and Democrats in both the House and Senate are still negotiating how to pay for it.

Meanwhile, Sen. Bernie Sanders said Sunday that Democrats need to work toward a larger infrastructure package that addresses the climate crisis and other issues.

“While a bipartisan deal on a broad infrastructure package cannot be ruled out, we continue to think the odds are against it, as there seems to be little agreement on financing it,” Goldman Sachs strategists told clients Monday.

The United States isn’t the only place where policymakers appear increasingly skeptical about maintaining historic levels of government spending.

In the United Kingdom, government borrowing fell by £19.4 billion ($26.9 billion) in May compared to the same month last year, the Office for National Statistics said Tuesday.

But it was still the second-highest level of May borrowing since monthly records began in 1993, and “way above what would be sustainable over the medium-term,” said Isabel Stockton, research economist at the Institute for Fiscal Studies.

Investors should pay attention as conversations about the sustainability of government finances ramp up. Ongoing fiscal stimulus has been a key part of rosy forecasts for risky assets like stocks this year.

Tough choices: With higher interest rates on the horizon, some politicians are getting jittery about additional borrowing, making deals on raising taxes that would bring in more government revenue and address fiscal deficits a crucial component of talks on how to finance bold plans. But governments also risk getting complacent, and could jeopardize their countries’ recoveries if they pull back support for the economy too soon.

The Organization for Economic Cooperation and Development warned in its most recent economic outlook that “it would be dangerous to believe that governments are already doing enough to propel growth to a higher and better path,” especially as they try to decarbonize their economies.

The Paris-based group said strong fiscal support this year remains “appropriate,” and that it while planning around managing public finances should start now, “ensuring debt sustainability will be a priority only once the recovery is well advanced.”

Jerome Powell gets grilled on the Fed’s Covid response

There’s one man that everyone on Wall Street wants to hear from, and he’s about to take center stage in Washington.

The latest: Federal Reserve Chair Jerome Powell will answer questions from lawmakers on the central bank’s Covid-19 response at 2 p.m. ET Tuesday.

According to prepared remarks, Powell will emphasize that the US economy “has shown sustained improvement” in recent months, and that “conditions in the labor market have continued to improve, although the pace has been uneven.”

But most closely parsed will be his remarks on rising prices. Last week, the Fed increased its 2021 inflation forecast to 3.4%, a whole percentage point higher than its previous estimate. That raised anxiety that the central bank could be forced to imminently reduce its pandemic-era support for the economy.

In his testimony, Powell acknowledges that “inflation has increased notably in recent months,” the result of higher oil prices, the rebound in spending and supply chain bottlenecks.

He continues to maintain, however, that this phenomenon will be transitory.

“As these transitory supply effects abate, inflation is expected to drop back toward our longer-run goal,” Powell will testify.

On the radar: How Powell responds to questions from members of Congress could hit markets, which have been volatile since the Fed indicated last week that it could hike interest rates sooner than expected.

But stocks climbed Monday, snapping a losing streak as some investors decided it may be too soon to worry about the Fed changing course.

“We must keep in mind that many of these [price] increases are simply reversals of the large declines we saw last year when the pandemic first took hold,” New York Fed President John Williams said in a speech Monday. “Once these prices have fully adjusted to the reopened economy, they shouldn’t continue to increase at recent elevated rates, and their effect on overall inflation should subside.”

How Netflix is thinking about the future

Netflix (NFLX) has proven time and time again that it’s willing to spend big to compete with a growing legion of streaming competitors.

But it may have just signed its most significant deal yet. On Monday, Netflix announced that it’s partnering with Steven Spielberg, Hollywood’s premier director and the force behind hits like “Jaws,” “Raiders of the Lost Ark” and “Jurassic Park.”

The details: Spielberg’s film and TV production studio, Amblin Partners, will produce multiple new feature films per year for the service.

Spielberg has been critical of streaming in the past. In 2018, he told ITV News that “once you commit to a television format, you’re a TV movie.” He’s since softened his stance. “I want people to find their entertainment in any form or fashion that suits them,” Spielberg told the New York Times in 2019.

Watch this space: Financial details were not disclosed, but you can guess that Netflix is shelling out quite a bit of cash for this tie-up.

Paying the big bucks is central to Netflix’s strategy to stay ahead of competitors like Disney+ and HBO Max, owned by CNN’s parent WarnerMedia. Netflix has said it plans to spend $17 billion on content this year.

But it’s also taking steps to draw revenue from new sources as subscription growth slows. Earlier this month, Netflix announced it was launching an online shop that would sell merchandise from popular shows like “Stranger Things.” Next up, theme parks?

Up next

Plug Power (PLUG) reports results before US markets open.

Also today: Existing US home sales for May arrive at 10 a.m. ET.

Coming tomorrow: Data on new US home sales for May.