Congress and the White House
The House and Senate are both in session this week.
The White House and congressional Democrats hope to keep their summer momentum going this week. The White House will hold a celebration for the passage of the Inflation Reduction Act on Tuesday – right after the August report on the Consumer Price Index for August is released. With gas and energy prices falling, economists expect to see inflation dip below 8 percent. But prices in other areas, especially food continue to see steep increases and the Federal Reserve is likely to signal that it will continue to raise interest rates to slow inflation.
Timing is everything in politics and with under 60 days to go before the elections, Democrats welcome improved economic numbers. But Biden is still under water on the economy. A new NPR/Marist poll shows a majority of Americans (57%) say President Joe Biden’s decisions as president have weakened the U.S. economy. “This is the highest proportion of Americans with this view since Biden became president.” RealClear Politics average for Biden handling of the economy has him at 38.4 approve and 57 percent disapprove – better than last month, but still not good. The White House may also be benefiting from some timing gaps in the economy. The Federal Reserve’s tightening is beginning to cool inflation but has not yet sent the U.S. economy into a recession. The strengthening dollar reflects the weakness in Europe as it deals with a severe energy crisis. The impact of a Europe in recession will eventually be felt in the U.S., but that could take some time. This all helps the White House at the moment, but by how much? Margins maybe narrowing, but Republicans still have the advantage on the economic message heading into the midterms.
Congress still needs to resolve the continuing resolution (CR) to keep the government open after September 30th. While leaders had hoped to begin votes on a CR this week, that now seems unlikely. Democratic leaders have yet to resolve an internal dispute over including permitting reform to the CR. Senator Manchin secured a promise to pass permitting reform for some oil and gas projects as part of his support for the Inflation Reduction Act. Several progressive Democrats oppose the bill, and it is also difficult to see Republicans wanting to help Democrats advance this language following the reconciliation play. All of this indicates a rough road ahead in passing a CR with 60 votes in the Senate. Once the Senate is able to pass a CR – its cleanliness to be determined but, at this time, unlikely to include permitting reform legislation – the House will take it up, where it is expected to need the support of almost all House Democrats to become law.
Republican leaders are scrambling to shore up their chances to win back both the House and Senate as inflation concerns fade, Democratic enthusiasm for protecting abortion rights surges and new fundraising challenges emerge in the crucial final months of the campaign. GOP officials have been mixing up their advertising spending, with a new focus on issues like crime, plans for a major policy rollout meant to reclaim voter attention and moves to send reinforcements for struggling Senate candidates. Leaders have also been working, with mixed success, to cool down intraparty squabbles over their own strategic missteps and the quality of candidates in pivotal Senate races.
Congress is flashing warning signs about the prospects for passing legislation to speed up permitting of both renewable-energy and traditional fossil-fuel projects, with a growing number of lawmakers objecting to the proposal being tied to a must-pass spending bill. Last week, Senate Majority Leader Chuck Schumer (D., N.Y.) said he would attach the permitting bill to a short-term budget measure known as a continuing resolution needed to keep the government funded beyond the end of September. Lawmakers on both sides of the aisle have balked at supporting the permitting bill, leaving its fate up in the air with just a few weeks until the funding deadline. The newest hurdle came Friday, when House Natural Resources Committee Chairman Raúl Grijalva (D., Ariz.) said that he had the support of more than 70 Democrats for a letter opposing the inclusion of the permitting measure in legislation funding the government. That was up from more than 40 just days earlier.
Prices fell for gasoline, airfares and lodging, though food and other costs kept climbing. U.S. consumer-price inflation showed signs of moderating in August for the second straight month, though the decrease was uneven across sectors and it remains unclear whether the slowdown will continue. Gasoline prices fell sharply in August, airfares dropped and used cars and hotels ebbed, while rent increases also gave hints of slowing, according to private firms that track such data. Still, food prices continued to soar this past month and prices for a range of goods and services remained much higher than a year earlier, the figures show. The path of inflation could influence looming decisions by the Federal Reserve about how high to lift interest rates. Inflation could also shape midterm elections as voters assess their pocketbooks. Looking ahead to a government inflation report to be released on Tuesday, many Wall Street analysts estimate the Labor Department’s overall consumer-price index was unchanged or dropped in August from July. If so, it would mark the second straight month of slower inflation since annual inflation surged to a four-decade high in June.
The standoff with Russia over Ukraine and rising energy prices are rapidly overturning European economic orthodoxy, with barely a peep of dissent. Nationalizations. Subsidies. Cash handouts. Price caps. Profit taxes. It’s back to 20th-century economics in Europe. Governments are resorting to old-school solutions, long dismissed as bad policy, throwing vast amounts of money at the energy crisis engulfing the region, in a bid to avert a political, social and economic meltdown. The standoff with Russia over Ukraine is upturning European economic orthodoxy at rapid speed with barely a peep of dissent at the European Union’s headquarters in Brussels, a bastion of neoliberalism that not so long ago imposed brutal austerity on its own members, most notably Greece, even after it became clear it was harmful. The huge public spending is in addition to a nearly trillion-dollar stimulus package adopted over the past year to deal with the economic fallout from the pandemic, mostly through borrowing. The ballooning debt load would have normally caused an uproar in the bloc, where fiscal conservatism has dominated policy and politics for years.
The energy crisis has left few businesses untouched, and some factories might never reopen. European industry thrived for decades on a steady supply of cheap Russian gas, which flowed uninterrupted throughout the Cold War and other times of tension between Moscow and the West. Since invading Ukraine, Russian President Vladimir Putin has weaponized the country’s vast stores of energy to undermine support for Kyiv. He turned off the taps to the biggest natural-gas pipeline, Nord Stream, completely this month. The impact has pushed Europe to the brink of recession and threatens to inflict lasting harm on its manufacturing businesses. Unlike the U.S., Europe leaned on manufacturing and heavy industry to keep its economy chugging in recent decades. A bigger chunk of its economy comes from the likes of steelmakers, chemicals producers and car makers. Europe’s energy crisis has left few businesses untouched, from steel and aluminum to cars, glass, ceramics, sugar and toilet-paper makers. Some industries, such as the energy-intensive metals sector, are shutting factories that analysts and executives say might never reopen, imperiling thousands of jobs.
Most consumers won’t see much of an increase because of enhanced federal subsidies, but many small employers will be hit. Insurers on the ACA marketplaces are proposing median monthly premium increases of 10%, according to a Kaiser Family Foundation review of proposals made by 72 insurers in 13 states. Some insurers are seeking rate increases as high as 20%. The proposed increases vary widely among insurers and markets. Also, state regulators don’t always approve the full increases sought by insurers. Insurers generally propose rates to state regulators, which have different timelines for reviewing and approving them. The federal government is expected to certify ACA plans in early October.
Illness caused by Covid-19 shrank the U.S. labor force by around 500,000 people, a hit that is likely to continue if the virus continues to sicken workers at current rates, according to a new study released Monday. Millions of people left the labor force—the number of people working or looking for work—during the pandemic for various reasons, including retirement, lack of child care and fear of Covid. The total size of the labor force reached 164.7 million people in August, exceeding the February 2020 prepandemic level for the first time. The labor force would have 500,000 more members if not for the people sickened by Covid, according to the study’s authors, economists Gopi Shah Goda of Stanford University and Evan J. Soltas, at the Massachusetts Institute of Technology.