Congress and the White House

The Senate returned yesterday.  The House returns next week.  This begins the final congressional session before the increasingly competitive mid-term elections.  Congress has one “must do” item this month – pass a continuing resolution (CR) spending bill to keep the government open.  The current funding expires on September 30th.  A CR would keep the government funded at current FY ‘22 levels.  The CR is needed because Congress has been unable to pass any of its FY ’23 full year appropriation bills.  The CR is likely to last until December – past the midterm elections. 

Neither party wants and no one is talking about a government shutdown.  But because it is a “must pass” bill there are always temptations to attempt to attach other items to the CR.  The Administration wants additional funds for Ukraine, COVID and monkeypox.  Sen. Joe Manchin wants his promised permitting reforms included in the CR.  Senate Majority Leader Schumer, according to Punchbowl news, is considering attaching the same sex marriage bill to the CR.  The path forward will become clearer when the House returns next week. 

Congress returns with Democrats feeling momentum.  They had a good summer – passing legislation and winning special elections.  Polls show improvement in President Biden’s approval rating and probably more importantly, Democratic voter enthusiasm has picked up since the Dobbs decision overturning Roe v. Wade.  But Democrats have had a good summer after a terrible year.  The U.S. is structurally a closely divided country and as the mid-terms approach, we are seeing a natural tightening.  Analysts expect a large voter turnout for a midterm election – and if both sides turnout in large numbers it dampens the chances for a wave election. 

The Republicans, however, continue to lead on most of the core issues driving the election.  The economy, inflation, crime and security.  Democrats hold an advantage on abortion which has emerged as a top tier issue.  And the White House is trying to make the midterms a “choice” election rather than a referendum.  The White House wants Donald Trump front and center.  They do not want this election to be a referendum on President Biden’s first 2 years in office.  It didn’t work last year in the Virginia gubernatorial election, but the White House appears ready to try again.

Nine weeks until the midterms.

Biden’s Climate-Bill Win Offers Fresh Chance to Woo Midterm Voters

Republicans plan to focus on the economy as Labor Day begins an election campaign sprint.  President Biden and Democrats are promoting recent legislative wins in a bid to boost their support and overcome stiff economic headwinds as Labor Day kicks off the final sprint of midterm-election campaigning.  A new Wall Street Journal poll suggests that Democrats have a fresh opportunity to entice swing voters by pitching the components of the Inflation Reduction Act, which Mr. Biden signed into law in mid-August and plans to tout throughout the fall. The plan is designed to lower prescription-drug prices, bolster renewable energy and impose new taxes on large corporations.  Republicans plan to focus on the economy as Americans continue to contend with high rates of inflation not seen since the early 1980s.

GOP still has inside track to House majority despite Dem gains

Redistricting gains, red-leaning seats and retirements have opened up numerous paths for Republicans to net the five House seats they need.  A month of special election upsets and improved standing in generic ballot polling have narrowed a House battlefield that seemed to be expanding for the GOP into some heavily blue districts. The shift has lifted some Democratic incumbents out of immediate peril and made some Republican members squirm after feeling safe earlier this year.  Still, House Democrats face this sobering fact: Republicans may not need to flip any districts that Biden carried in 2020 to reclaim the majority. Speaker Nancy Pelosi and her caucus are also staring down a coming wave of outside spending, which could swamp them in TV ads in the critical final weeks of the midterms. And historical precedence is not in their favor. In all, Republicans need to net only five seats to win the gavel. And while Democrats may be poised to mitigate some losses, Republicans say there’s still little chance the party’s summertime surge can overcome the stacked map.

Red wave crashing? GOP momentum slips as fall sprint begins

The possibility of a great red wave still looms.  But as the 2022 midterm elections enter their final two-month sprint, leading Republicans concede that their party’s advantage may be slipping even as Democrats confront their president’s weak standing, deep voter pessimism and the weight of history this fall.  The political landscape, while still in flux, follows a string of President Joe Biden’s legislative victories on climate, health care and gun violence, just as Donald Trump’s hand-picked candidates in electoral battlegrounds like Arizona, Georgia, Ohio and Pennsylvania struggle to broaden their appeal. But nothing has undermined the GOP’s momentum more than the Supreme Court’s stunning decision in June to end abortion protections, which triggered a swift backlash even in the reddest of red states.  “This midterm looks and feels significantly different than it did six months ago,” said veteran Republican pollster Neil Newhouse. The abortion ruling “has energized some segments, especially the Democratic constituency, and it has thrown a wrench, at least to some extent, into the hopes of winning a ton of seats.”

Democrats weigh gay marriage vote in pre-election sprint

And that's just one of the five big questions for the fall congressional session.  Senate Majority Leader Chuck Schumer is committed to a vote at some point on the marriage equality bill, but has been circumspect about the timing. He said in August “we will have a vote on it. Not giving you a timetable,” and emphasized the impending confirmation of Circuit Court judges.   There’s a host of questions facing congressional leaders, in addition to voting on marriage equality, like capping insulin costs, how to approve energy permitting reform sought by Sen. Joe Manchin (D-W.Va.), and what strategy to use on funding the government. There’s also the question of whether the Senate will slash its October session.

The Economy

Biden’s Student-Debt-Forgiveness Plan May Cost Up to $1 Trillion, Challenging Deficit Goals

President Biden’s plan to cancel student debt and modify payments for millions of Americans could cost as much as $1 trillion, according to budget analysts, challenging the administration’s efforts to scale down the federal deficit.  Analysts expect strong interest in both debt cancellation and in programs that allow borrowers to pay a lower percentage of their income to keep up with their loans. The expected popularity of the policy could drive up costs and raise questions about whether the expense can be offset by other Biden administration policies, as the White House says.  The total price tag for the program could reach $1 trillion, according to the Penn Wharton Budget Model, a widely regarded analysis frequently cited by policy makers. Other analysts say the total bill could be nearly $500 billion, a range that shows the uncertainty and complexity of projecting the student-loan portfolio’s performance.

Federal Oil Leases Slow to a Trickle Under Biden

President, citing climate change, spurns resources his predecessors relied on to boost U.S. energy production.  The Biden administration has leased fewer acres for oil-and-gas drilling offshore and on federal land than any other administration in its early stages dating back to the end of World War II, according to a Wall Street Journal analysis.  President Biden’s Interior Department leased 126,228 acres for drilling through Aug. 20, his first 19 months in office, the analysis found. No other president since Richard Nixon in 1969-70 leased out fewer than 4.4 million acres at this stage in his first term.  Harry Truman was the last president to lease out fewer acres—65,658—in 1945-46, when offshore drilling was just beginning and the federal government didn’t yet control the deep-water leases that have made up the largest part of the federal oil-and-gas program in modern times.

A Slowing China Helps Rein In Inflation Around the World. 

China is a key factor in falling costs for energy and commodities, but domestic factors are still keeping U.S. inflation high.  A global slowdown, in particular in China, is taking the edge off inflation pressures, especially for key imports and commodities.  Global inflation eased in July, to 0.3% on a monthly basis, down from an average of 0.7% a month in the first half of the year, according to analysis by Nora Szentivanyi, a global economist at JP Morgan, and colleagues. The figures omit Turkey, where inflation is unusually high.  “Weaker global demand in the face of diminished purchasing power through the past year is now driving disinflation through two main channels,” said Ms. Szentivanyi—first, by weighing on some commodity prices, and, second, by easing global supply-chain constraints.

Investors Are Pouring Into U.S. Stocks to Avoid Greater Turbulence Overseas

‘There’s scarier places to be than in the U.S.,’ says one investor who has been seeking safety in defensive sectors of the U.S. stock market.  Investors around the world are piling into U.S. stocks, even as they brace for the prospect of a rocky autumn, because they say there’s nowhere better to shelter from the turbulence in global markets. Skyrocketing inflation, worries about a potential recession, Russia’s invasion of Ukraine, rising energy prices and new Covid-19 outbreaks have rattled everything from stocks to bonds to commodity prices this year.   “The U.S. looks the least challenged in a very challenging world,” said Christopher Smart, chief global strategist at Barings and head of the Barings Investment Institute. “Everybody is slowing down, but the U.S., because of the continuing strength of the jobs market, still seems to be slowing more slowly.”

Biden Administration Releases Plan for $50 Billion Investment in Chips

The Department of Commerce issued guidelines for companies angling to receive federal funding aimed at bolstering the domestic semiconductor industry.  The Department of Commerce on Tuesday unveiled its plan for dispensing $50 billion aimed at building up the domestic semiconductor industry and countering China, in what is expected to be the biggest U.S. government effort in decades to shape a strategic industry.  About $28 billion of the so-called CHIPS for America Fund is expected to go toward grants and loans to help build facilities for making, assembling and packaging some of the world’s more advanced chips.  Another $10 billion will be devoted to expanding manufacturing for older generations of technology used in cars and communications technology, as well as specialty technologies and other industry suppliers, while $11 billion will go toward research and development initiatives related to the industry.

The department is aiming to begin soliciting applications for the funding from companies no later than February, and it could begin disbursing money by next spring,  Gina Raimondo, the secretary of commerce, said in an interview.

Unrelenting September heat wave grips California and western U.S.

The historic heat wave, expected to last another five days, has been fueling fires and endangering health. California and the western United States are immersed in a historically severe September heat wave that is predicted to intensify early this week. The record-breaking temperatures are stressing power grids, fueling fires and endangering health.  “This is the worst September heat wave in Western USA history no doubt,” tweeted Maximiliano Herrera, a world weather historian, on Saturday night.