Congress and the White House

The Senate returns today, and the House returns tomorrow.  Funding for the government runs out on Friday at midnight and there are less than six weeks to go before the midterm elections. 

Congress has one main task this week – keep the government funded.  The process will start this evening in the Senate with a cloture vote on the continuing resolution (CR) that includes Sen. Joe Manchin’s permitting reform language.  Senate Majority Leader Schumer is fulfilling a promise to Sen. Manchin to include the permitting reform on the CR – a promise Sen. Manchin got in return for his support for the Inflation Reduction Act.  The problem is, Sen. Manchin does not have 60 votes for his permitting reforms, so the cloture vote is expected to fail tonight.  The next step will be deciding whether the House or Senate goes first on passing the CR minus the permitting reform language. 

The text of the CR was released Monday night.  It runs until December 16th and is relatively “clean.”  FDA user fees will be reauthorized for five years.  An additional $12 billion is included for Ukraine.  The Flood Insurance program is extended and there is limited disaster relief funding.  Once the permitting issue is dropped, the CR is expected to have enough support in both the House and Senate to pass – but a final vote is not expected until Friday in either the House or Senate. 

Legislative Text of Continuing Resolution

Section by Section summary

There is little doubt that the global economy is slowing.  The President of the European Central Bank (ECB) Christine Lagarde told the European Parliament yesterday that, “The economic consequences for the euro area have continued to unfold and the outlook is darkening … inflation remains far too high and is likely to stay above our target for an extended period … we expect activity to slow substantially in the coming quarters.”  The British Pound is in a bit of a freefall.  The OECD lower its forecast for China’s growth to 3.2 percent – the lowest since the 1970s.  A slowing global economy is going to  impact the U.S., but the immediate political question is whether that happens before or after the midterm elections.  In many ways, it doesn’t matter – voters already have a negative view of the economy.  But in the U.S. that has largely been driven by inflation.  The White House hopes to see a reduction in inflation – and a lag in the consequences of tighter monetary before the November elections.  The past week’s economic news has put that hope in question.  The stock markets have declined significantly – both the Dow and S&P are down over 20 percent for the year.  Mortgage rates hit an average 6.87% yesterday and the housing market is slowing rapidly.  Historically, voter attitudes about the economy are locked in by October, but this is a unique midterm.  Voters rate the economy and inflation as their top issues – but abortion is not far behind.  Polls are close and Republicans are running on the economy and Democrats on the Dobbs decision.  The economic news over the next few could determine the intensity swing voters bring to the top issues and impact the key races down the final stretch. 

White House anxiously watches Meloni’s rise to power

The earthquake in Italy has sent tremors that could be felt in the White House.  The victory of Italian far-right leader Giorgia Meloni rattled Europe, furthering fears about a new right-wing shift on the continent as it battles economic hardship and nervously watches a raging war on its Eastern flank. It also was met with deep, if private, worry within President Joe Biden’s administration.  The White House put a brave public face on it, noting that Meloni’s win was the will of the Italian people while expressing confidence that Italy would remain a steadfast partner with the West.

McConnell works to box out Manchin

The GOP leader is pushing his members to block the West Virginia senator's energy permitting bill, the latest loop in their roller-coaster relationship.  It’s Mitch McConnell versus Joe Manchin yet again.  McConnell is urging Senate Republicans to vote no on advancing Manchin’s permitting reform legislation as part of a government funding package, according to three people familiar with the effort. It’s an ominous development that puts the West Virginia Democrat’s legislation in peril as he works behind the scenes to drum up support.

Price tag of Biden’s student debt relief is about $400B, CBO says

Congressional budget scorekeeper estimates that 90 percent of borrowers will participate in the program.  President Joe Biden’s plan to cancel large amounts of outstanding student debt for tens of millions of Americans will cost the federal government roughly $400 billion, according to a new analysis released Monday by the Congressional Budget Office.  The report by the nonpartisan congressional budget scorekeeper is the first full, official cost estimate of Biden’s student debt plan issued by a government agency. And it adds new fuel to the contentious debate over whether the loan relief to tens of millions of borrowers is justified or an irresponsible use of taxpayer dollars.

House GOP deploys a 2023 agenda it can use in November

Republicans say their "Commitment to America" is a guide to a future majority. Key provisions were tested to serve as a unifying national message this fall.  House Republican leaders arrived here prepared to show they can do two things at once: keep hammering Joe Biden while finally acting on their policy ideas.  Minority Leader Kevin McCarthy, alongside Minority Whip Steve Scalise (R-La.) and Conference Chair Elise Stefanik (R-N.Y.), plan to formally unveil an agenda here that focuses on ramping up fossil-fuel production, curbing illegal immigration and combating crime, echoing their most salient campaign-trail points against Democrats. To many Republicans, the platform feels like a turning point for their conference after four years stuck in the House minority.


The Economy

War, Inflation Knock World Economy Off Balance

Business surveys show soaring prices in the West and the fallout from Russia’s attack on Ukraine are infecting the global economy.  The global economy outside the U.S. is stuttering, knocked off course by soaring inflation, an energy crisis and now Russia’s nuclear war threats.  Business surveys published on Friday indicate that economic activity in Europe declined sharply in September, raising the risk of recession in one of the world’s industrial powerhouses as governments grapple with surging prices and disruptions from Moscow’s attack on Ukraine. With Asian economies also struggling with rising interest rates and weakening exports, this leaves the U.S. as the only large economy showing a degree of resilience despite the Federal Reserve’s repeated interest-rate rises.  “A eurozone recession is on the cards as companies report worsening business conditions and intensifying price pressures linked to soaring energy costs,” said Chris Williamson, chief business economist at data firm S&P Global Market Intelligence.

World Bank Cuts China Growth Forecast as Covid-19, Real-Estate Crunch Take Toll.

Emerging economies in Asia are seen outpacing China for the first time since 1990.  The World Bank said it expects developing economies in East Asia to grow faster than China this year for the first time since 1990, as the world’s second-largest economy struggles with a real-estate crunch and the government’s zero-tolerance approach to Covid-19.  The Washington, D.C.-based lender cut its forecast for Chinese growth this year but said it expects growth among 22 neighboring economies to more than double in 2022 compared with the pace they notched last year, as countries benefit from dismantling most Covid-19 restrictions and a revival in tourism.  The bank said the outlook for the region is threatened, however, by the risk that central banks including the U.S. Federal Reserve raise interest rates more aggressively than investors anticipate to contain galloping inflation. That could hurt global growth and fuel financial stress in heavily indebted emerging markets, it said.

China Reins In Its Belt and Road Program, $1 Trillion Later

After loans have gone sour and projects have stalled, Beijing is revamping its troubled initiative.  China has spent a trillion dollars to expand its influence across Asia, Africa and Latin America through its Belt and Road infrastructure program. Now, Beijing is working on an overhaul of the troubled initiative, according to people involved in policy-making.  A slowing global economy, combined with rising interest rates and higher inflation, have left countries struggling to repay their debts to China. Tens of billions of dollars of loans have gone sour, and numerous development projects have stalled. Western leaders have criticized China’s lending practices, which some have labeled “debt-trap diplomacy,” embarrassing Beijing. Many economists and investors have said the country’s lending practices have contributed to debt crises in places like Sri Lanka and Zambia.  After nearly a decade of pressing Chinese banks to be generous with loans, Chinese policy makers are discussing a more conservative program, dubbed Belt and Road 2.0 in internal discussions, that would more rigorously evaluate new projects for financing, the people involved said. They have also become open to accepting some losses on loans and renegotiating debt, something they had been previously unwilling to do.

Rents Drop for First Time in Two Years After Climbing to Records

Nationwide, rents declined on a monthly basis in August amid new apartment construction and weaker consumer sentiment.  Apartment rents are falling from record highs across the U.S. for the first time in nearly two years, offering the prospect of relief to millions of tenants who have seen steep increases during the pandemic.  August apartment asking rents nationally fell 0.1% from July, according to a report from property data company CoStar Group. It was the first monthly decline in rent since December 2020, the company said.   Last month’s rent declines are modest compared with the 23% overall increase in rent since August 2020, according to, and there is no guarantee that rents won’t move up again. As more households feel priced out of the sales market because of rising mortgage rates and near-record sales prices, overall demand for rentals is unlikely to fall drastically, said Orphe Divounguy, an economist at Zillow Group.

Retailers Face Pressure to Offer Discounts While Battling Inflation

Finance executives say they are working to protect their companies’ profit margins.  Retailers and their finance chiefs are facing a challenge balancing consumer expectations for discounts and the need to keep raising prices to offset high inflation.   Major retailers including Macy’s Inc., Walmart Inc. and Target Corp. in recent months have used markdowns to clear out excess stock after miscalculating customer demand earlier in the year. General and specialty retailers saw their days of inventory outstanding—a metric that describes how long a company holds its stock before turning it into sales—increase to an average of 63.7 days in the second quarter from 57.4 days a year earlier, according to Hackett Group Inc., a business advisory firm. Across all industries, that figure has remained about flat at an average of 46.5 days in the second quarter, according to a Hackett survey of the largest 1,000 U.S. companies by revenue.