Washington on Wednesday had a message for Americans looking for relief from inflated prices and economic hardship: We’re trying. The subtext: Pack your patience.
The Federal Reserve announced it was aggressively raising interest rates again, a mixed message because the aim is to slow the economy and cool consumer demand, even if unemployment rises.
Across town, Senate Democrats unveiled a surprise, pulled-from-the-ashes $670 billion spending plan that has the blessing of the mercurial centrist Sen. Joe Manchin (D-W.Va.). It’s an outline to help lower drug prices, give Americans more subsidized health coverage under ObamaCare and mitigate climate change (The Hill). It would be paid for with higher taxes on corporations and the wealthy, which sounded similar to proposals Manchin previously rejected.
To become law before the Senate escapes for its August break, the proposed reconciliation package needs all 50 Democrats and a tie-breaking vote from Vice President Harris as well as approval by the House. It would be a big win for President Biden, and Republicans have said they are opposed. (We get to the details in a minute).
“It’s like two brothers from different mothers, I guess. He gets pissed off, I get pissed off, and we’ll go back and forth. He basically put out statements, and the dogs came after me again,” Manchin told Politico in an interview about talks with Senate Majority Leader Charles Schumer (D-N.Y.). “We just worked through it.”
If Democratic deal-reveals in the Senate prompted some gasps and head-shaking, the uncertainties of monetary policy described by Federal Reserve Chairman Jerome Powell on Wednesdayunderscored how squishy the future looks to officials in charge of problem-solving, whether economic or political.
Powell said projections are based on shifting data.
“I do not think the U.S. is currently in recession,” he told reporters after the central bank announced for the fourth time this year that it raised its benchmark interest rate, mirroring its aggressive decision in June to try to tame inflation with another hike of three-quarters of a percentage point (The Hill).
What was clear in Powell’s remarks was the Fed’s belief that while it is the central bank’s “goal” to try to avert a recession, it’s better to be too aggressive with rate hikes than to throttle back too soon and fail to achieve the Fed’s “obligation” to achieve price stability.
“It’s gotten more challenging over recent months,” he noted. “We don’t want this to be bigger than it needs to be.”
The chairman expressed concern for people who are struggling to afford high prices for everyday necessities, including food, gasoline and rent. He said he understood why many say the country is in recession, no matter what yardstick economists use. “We know that inflation is too high, how painful it is,” Powell said.
Although the chairman was not specific about when the Fed might ratchet back on rate hikes, which affect mortgages, other loans and credit cards, he said U.S. consumer demand is easing, which in turn lowers prices, even as inflation remains a global problem.
“We think that demand is moderating. How much is it moderating? We’re not sure,” he added. “We do want to see demand running below potential for a sustained period.”
The Wall Street Journal: Fed signals further rate hikes are likely.
Part of the central bank’s backstop against recession, at least now, is what Powell called the economic “overhang” of a strong employment picture for jobs and wages, even as he conceded that “labor demand is slowing.” The outlook for jobs is the same upside insurance the president and his economic advisers have leaned on this month while they describe the economy as strong.
The government this morning reports on gross domestic product in the quarter that ended in June and economists estimate a meager expansion (The Wall Street Journal). Friday, it will describe consumer spending in June.
▪ Bloomberg News: Key takeaways from the Fed decision to raise rates 75 basis points.
▪ CNBC: Dow rallied 400 points on Wednesday as Powell hinted the Fed could slow its pace of rate hikes; Nasdaq jumped 4 percent.
▪ The Hill: Five ways the Fed interest rate hike will impact Americans’ wallets.
© Associated Press / Manuel Balce Ceneta | Federal Reserve Chairman Jerome Powell at a press conference on Wednesday.
LEADING THE DAY
In a shocking development, Manchin struck a deal with Schumer after more than a year of hemming and hawing in talks over a number of proposals that had been unable to garner his backing.
Headlining the rejuvenated bill is $369 billion in funding for energy and climate programs over the next 10 years — with the goal of reducing emissions by roughly 40 percent by 2030 — and an additional $300 billion to reduce the deficit.
According to a summary released by the two senators, the blueprint would raise $739 billion in new revenue through a variety of proposals: $313 billion via a 15 percent corporate minimum tax, $288 billion from empowering Medicare to negotiate lower drug prices, $124 billion from strong IRS enforcement of tax law and $14 billion from closing the carried interest loophole for money managers.
The newly announced proposals will be tacked on to a bill that includes items that were expected to dominate as part of an even-slimmer package — a multiyear extension of Affordable Care Act subsidies aimed at preventing premium increases that is extended through the end of Biden’s first term and provisions aimed at lowering prescription drugs (The Hill).
According to the two Senate Democrats, the bill will be brought to the floor next week before the upper chamber recesses in August. The breakthrough hands the party a massive and a seemingly improbable victory that very few, if any, had anticipated. Even top Democrats were taken aback by the deal after being burned by Manchin time after time in the past year. Sen. Maria Cantwell (D-Wash.) told The Wall Street Journal that she only learned of the bill while on the way to the chamber to vote on Wednesday evening.
“Holy shit. Stunned, but in a good way,” Sen. Tina Smith (D-Minn.) said.
▪ The Hill: Biden throws support behind Manchin-Schumer agreement.
▪ The Associated Press: What’s in, and out, of Democrats’ inflation-fighting package.
▪ The Hill: Schumer, Manchin agree on billions of dollars for electric vehicles, solar panels and other clean-energy priorities.
For context, the $670 billion is only a fraction of the previous proposals Democrats backed since last summer.
The party’s budget resolution a year ago checked in at $3.5 trillion. That figure was ultimately chopped down to the $1.75 trillion “Build Back Better” framework agreed to by Senate Democratic leaders and the White House but was ultimately blown to smithereens by Manchin in December, scuttling reconciliation discussions for months.
The timing of Manchin and Schumer’s announcement also raised eyebrows. Only hours before, 17 Republicans joined Democrats to pass a $280 billion bill aimed at boosting domestic semiconductor chip production (The Hill). Senate Minority Leader Mitch McConnell (R-Ky.) had promised in late June to torpedo any bill aimed at doing just that if Democrats moved ahead with a reconciliation bill.
The CHIPS bill is expected to pass the House without issue today, though House Republican leaders reversed their prior decision and were whipping against the bill as of late Wednesday. Rep. Kevin Brady (Texas), the top Republican on the House Ways and Means Committee, called Democrats “deceitful” with a reconciliation announcement after the CHIPS bill passed.
“Senate Democrats can change the name of Build Back Broke as many times as they want, it won’t be any less devastating to American families and small businesses,” tweeted Sen. John Cornyn (R-Texas), a top McConnell ally. “Raising taxes on job creators, crushing energy producers with new regulations, and stifling innovators looking for new cures will only make this recession worse, not better.”
Senate Republicans retaliated hours later on Wednesday by blocking a procedural vote on a $278 billion bill to help veterans suffering from toxic chemical exposure, 55-42, that needed 60 votes to advance.
There are outstanding questions, however, headlined by what Sen. Kyrsten Sinema (D-Ariz.) will do. A spokeswoman declined to comment on the deal (Bloomberg News).
▪ Axios: Washington waits for Sinema’s verdict.
▪ The Hill: Climate activists optimistic about Manchin-Schumer deal.
▪ Morgan Chalfant, The Hill: Semiconductor bill marks a White House win, but impacts remain to be seen.
On the international front, Speaker Nancy Pelosi (D-Calif.) is moving ahead with a planned visit to Taiwan next month and invited congressional leaders to join her.
Rep. Michael McCaul (Texas), the top Republican on the House Foreign Affairs Committee, confirmed on Wednesday that he, along with panel Chairman Gregory Meeks (D-N.Y.), were invited on the working trip. However, the Texas Republican had to decline, citing a previous engagement.
Pelosi’s office has yet to confirm the travel plans. The trip to Taipei is expected at some point over the August recess, which starts on Friday for the House (The Hill). According to Bloomberg News, other stops on the agenda include Japan, Indonesia and Singapore.
The news also comes on the eve of Biden’s planned call today with Chinese President Xi Jinping (Bloomberg News). The White House said the discussion would focus on areas of possible cooperation between the two countries, though issues of contention, including Taiwan, economic disputes and the ongoing war in Ukraine, are expected to come up (CNBC).
▪ Mike Lillis and Laura Kelly, The Hill: GOP lawmakers are cheering on Pelosi when it comes to Taiwan.
▪ Peter Baker, The New York Times: China’s domestic troubles will hang over Biden-Xi call.
▪ The Wall Street Journal: Democrats punt on votes amid split on police funding.
IN FOCUS/SHARP TAKES
The Wisconsin Senate race took a turn on Wednesday as Alex Lasry, an executive with the NBA’s Milwaukee Bucks, dropped out ahead of the Aug. 9 primary, clearing the way for Lt. Gov. Mandela Barnes (D) to take on Sen. Ron Johnson (R-Wis.) in November.
Lasry immediately endorsed Barnes upon exiting the race, as the lieutenant governor has cemented himself as the front-runner for the nomination. Only days earlier, Outagamie County Executive Tom Nelson suspended his own Senate bid and also endorsed Barnes.
As The Hill’s Max Greenwood notes, Barnes still faces some primary opposition, including from state Treasurer Sarah Godlewski. However, recent polling showed her trailing the sitting lieutenant governor by double digits prior to race departures by Lasry and Nelson.
▪ Politico: Herschel Walker’s fumbles highlight GOP’s rocky Senate roster.
▪ Reuters: Former Republicans and Democrats to form a third party. It has been tried before.
On the 2024 scene, governors are finally getting some shine as possible contenders on both sides of the aisle if Biden doesn’t run and on the GOP side if they seek an option outside of former President Trump.
For the current party in power, California Gov. Gavin Newsom (D) and Illinois Gov. J.B. Pritzker (D) have made a number of appearances outside their home states that have garnered some attention nationally. For Newsom, he has raised eyebrows by releasing ads attacking some of his Republican gubernatorial counterparts.
Across the aisle, Virginia Gov. Glenn Youngkin has also fueled White House chatter over the last several weeks, putting him alongside Florida Gov. Ron DeSantis as a potential successor to the former president. Youngkin has repeatedly deflected that discussion, maintaining that he is focused on his work in the commonwealth.
As The Hill’s Julia Manchester writes, the new focus on governors — which comes after a cycle where governors were roundly dismissed on the Democratic side — comes as polls show voters are frustrated with the direction of both parties. Significant numbers of Democrats and Republicans want someone other than Biden or Trump to be their party’s standard-bearer come 2024.
▪ Amie Parnes, The Hill: Biden allies say enthusiasm gap fueled by lack of engagement, “personal touch.”
▪ Karl Rove, The Wall Street Journal: Where do Trump’s donations go?
The U.S. offered a deal to Russia on Wednesday aimed at bringing home WNBA star Brittney Griner and another jailed American, Paul Whelan, Secretary of State Antony Blinken announced. Russia has been silent on the proposal as of this morning, The Washington Post reports.
Blinken wants to speak with his Kremlin counterpart, Sergey Lavrov, for the first time in months in hopes of expediting an answer from Russia. Specifically, the United States is proposing a prisoner swap of a convicted and imprisoned Russian arms dealer for release of Griner and Whelan (CNN and Axios).
Griner, who has been in detention near Moscow since February on charges of drug possession, testified for the first time on Wednesday during her ongoing trial, saying her rights have been denied. She previously pleaded guilty to possessing vape cartridges containing cannabis oil, found in her luggage (Yahoo).
© Associated Press / Alexander Zemlianichenko | WNBA star Brittany Griner on trial in Russia on Wednesday.
Housing: The Treasury Department announced a plan Wednesday to make more money available for affordable housing loans as part of the American Rescue Plan fiscal stimulus package. The initiative complements multiple proposals from lawmakers on Capitol Hill to boost the supply of lower and middle-class housing across the country (Reuters). … The Justice Department said in Philadelphia on Wednesday that a mortgage company owned by Warren Buffett’s Berkshire Hathaway discriminated against minority homebuyers in Pennsylvania, New Jersey and Delaware. The Trident Mortgage Company agreed to pay $20 million to settle the case (The New York Times).
■ Do you think the Fed hasn’t done enough? Think again, by Nir Kaissar, columnist, Bloomberg Opinion. https://bloom.bg/3PLf6XR
■ Charles Barkley: Please don’t leave the NBA for LIV Golf, by Jason Gay, columnist, The Wall Street Journal. https://on.wsj.com/3PGN67O
WHERE AND WHEN
The House will meet at 10 a.m.
The Senate convenes at 10 a.m. and will resume consideration of the nomination of Constance Milstein to be ambassador to Malta.
The president will receive the President’s Daily Brief at 9:30 p.m. Biden will speak by phone with Xi. The president, accompanied by economic advisers and members of his Cabinet, at 2:15 p.m. will speak about the economy and meet with invited CEOs in the South Court Auditorium in the Eisenhower Executive Office Building near the White House.
The vice president this morning flies to New York City to tour the Bedford Stuyvesant Restoration Corporation Economic Solutions Center at 1:30 p.m. Harris will speak at Billie Holiday Theatre in Brooklyn at 3:25 p.m. about administration policies that benefit underserved communities. The vice president flies from New York City to Water Mill, N.Y., to speak at a Democratic fundraiser at a private residence at 6:50 p.m. Harris returns to Washington tonight.
Treasury Secretary Janet Yellen will hold a press conference at 1:30 p.m. to discuss the economy.
Economic indicators: The Commerce Department at 8:30 a.m. will report the gross domestic product for the second quarter. … The Labor Department at 8:30 a.m. will report on filings for unemployment claims in the week ending July 23.
The White House daily briefing is scheduled at 3:15 p.m.
⚾ The Congressional Baseball Game will be played at 7 p.m., covered by C-SPAN.
Russian forces on Thursday launched missile strikes on Ukraine’s Kyiv and Chernihiv regions, areas that haven’t been targeted in weeks, while Ukrainian officials announced an operation to liberate an occupied region in the country’s south. Kyiv regional governor Oleksiy Kuleba said on Telegram that a settlement in the Vyshgorod district of the region was targeted early on Thursday morning; an “infrastructure object” was hit. It wasn’t immediately clear if there were any casualties (The Associated Press).
Reuters reports today that the Ukrainian counter-offensive has virtually cut off the Russian-occupied southern city of Kherson and left thousands of Russian troops stationed near the Dnipro River “highly vulnerable,” according to British defense and intelligence officials.
U.S. precision rocket launchers have enabled Ukraine to pummel a key supply bridge used by Russia to bolster its forces in southern Ukraine’s occupied Kherson region (The Associated Press).
Reuters: Russia captures power station, redeploys troops to southern Ukraine.
Russia has amended its planned exodus from the International Space Station to 2028, saying it will remain at least until the country’s own outpost in orbit is completed (Reuters).
Today, French President Emmanuel Macron will meet in Paris with Saudi Crown Prince Mohammed bin Salman amid an energy crisis affecting most of Europe (Politico).
➤ PANDEMIC, POX & HEALTH
Biden tested negative for COVID-19 in two consecutive screenings and on Wednesday returned to socially distanced work during an event in the Rose Garden. His doctor issued a letter about his recovery, noting the president’s brief bout with the coronavirus was aided by antiviral treatment Paxlovid. Biden tweeted a photo of a negative Binax antigen result (The Hill).
The Hill: The House on Wednesday passed a bill that would expand COVID-era telehealth services.
NBC News: A fifth person worldwide is likely cured of HIV, and another is in long-term remission. In one case, a stem-cell transplant was used to cure blood cancer and appeared to cure a patient’s HIV. In another case, an immune-boosting regimen produced long-term remission in a woman with HIV.
Monkeypox outbreaks continue to concern public health specialists in multiple countries. The World Health Organization recommended that men who have sex with men reduce their number of sexual partners amid the current spread through intimate contact, even if monkeypox is not considered a sexually transmitted disease. … Nearly 800,000 previously announced doses of the monkeypox vaccine known as Jynneos will soon be available for distribution in the U.S. after signoff by the Food and Drug Administration following shipment from Denmark (The Associated Press).
In clinical trials, a vaccine for malaria appears to reduce deaths by 75 percent, according to a research study published in The Lancet (The Hill).
Total U.S. coronavirus deaths reported as of this morning, according to Johns Hopkins University (trackers all vary slightly): 1,028,819. Current average U.S. COVID-19 daily deaths are 366, according to the Centers for Disease Control and Prevention.
© Associated Press / Andrew Harnik | President Biden spoke on Wednesday in the Rose Garden after testing negative for COVID-19 following a week of White House isolation.
➤ ANIMAL ATTACKS
News from the animal kingdom this summer includes headlines about shark attacks, a coyote eating Martha Stewart’s pet peacocks and bison hazards out West, and now from Japan comes news of malevolent macaques. Monkeys from a troop in Yamaguchi are attacking humans, not for food but for flesh, according to The Associated Press. On the hunted list: babies and vulnerable elders. Why are the large monkeys (one killed was 15 pounds) behaving so aggressively? The answer behind 58 human attacks since July 8 is still unknown but apparently is not identified with rabies or other known causes.
© Associated Press / Alberto Pezzali | British Prime Minister Boris Johnson announces his resignation, July 7.
And finally … It’s Thursday, which means it’s time for this week’s Morning Report Quiz! Inspired by the coming turn of the calendar, we’re eager for some smart guesses about July in the news.
Email your responses to firstname.lastname@example.org and/or email@example.com, and please add “Quiz” to subject lines. Winners who submit correct answers will enjoy some richly deserved newsletter fame on Friday.
Where did Biden not visit during the course of July?
3. Saudi Arabia
As of Wednesday, what is the highest-grossing film in the U.S. since the start of July?
1. “Top Gun: Maverick”
2. “Thor: Love and Thunder”
4. “Minions: The Rise of Gru”
British Prime Minister Boris Johnson announced on July 7 that he will resign his post when a successor is elected. If all goes according to plan and Johnson resigns on Sept. 5 (when results are expected), which of the following conservative prime ministers will have had the longest tenure?
1. Boris Johnson
2. Theresa May
3. David Cameron
4. John Major
The 2022 Baseball Hall of Fame induction ceremony took place on Sunday. Who was not part of this year’s induction class?
1. Minnie Miñoso
2. Buck O’Neil
3. Scott Rolen
4. Jim Kaat