It has been a big week for the White House and for Congress, with big implications for President Biden’s domestic and foreign policy agendas. Here at home, Democrats are positioning to send two significant legislative victories to President Biden’s desk. And U.S.-China relations are in focus as House Speaker Nancy Pelosi may take a controversial trip to Taiwan.
Democrats and Joe Manchin are finally back working together
I think most Democrats in Congress had sort of long given up that West Virginia Senator Joe Manchin was going to agree to much of anything. Just days before the deal.
And he had essentially sort of announced, look, with the sort of latest state of the economy and inflation concerns, I’m only willing to support sort of this narrow health-care-focus bill. Democrats were pretty demoralized by that and just sort of assumed, you know, any sort of serious negotiations were sort of over for the time being, just also given the timeframe. I mean, we’re heading into a long, planned August recess.
But just days later, unbeknownst to us, Manchin reached out to Senate Majority Leader Chuck Schumer and said, let’s start talking. We learned sort of out of the blue, right after the Senate passed that big Chips bill, that they had come to a deal. And not only was this a deal on some big issues, like allowing Medicare to negotiate the price of prescription drugs, and extending health care subsidies but also a big climate package that Manchin, you know, many times over has said he could not support. And then all of a sudden, we now have, you know, $370 billion in climate spending as part of this new domestic package.
Democrats now have $370 billion in climate spending
They were all sort of a little shell-shocked and sort of wondering if they had gotten punked again by Joe Manchin and were sort of like, I can’t really say much because I don’t know what’s in it. And I need to actually find out if this is actually happening. Ihis was a shock to the Hill. It was a shock to K Street, to the lobbying community that works on these energy issues. Everybody was telling everybody, climate’s dead, climate’s dead. Move on. The president said as much on the record. Nancy Pelosi said as much on the record.
it was really interesting how Manchin kept the White House on the sidelines during all of this. I mean, it was fascinating to learn over the last few days, you know, that reportedly Manchin and Biden hadn’t spoken for months, you know, since the last, a larger, spending plan fell apart. Supposedly, it was – the first time they spoke was on Wednesday, when Manchin was briefing the president on the deal. And Manchin even, you know, insisted to local West Virginia reporters that the president was not involved and that he didn’t think it was fair to Biden in case it fell apart. And as we’ve just been talking about, as you guys just noted, it falls apart a lot.
Democrats and White House struggling to find something to run on as midterms are coming
I can say, you know, that Biden is very happy about it now. You know, it’s really breathing some life into his stalled domestic agenda. And frankly, it could not come at a better time. You know, he’s facing some of his lowest approval ratings since taking office. And, of course, it is just before the midterms, when he and the Democrats really need something to campaign on.
We are still waiting for the Senate parliamentarian to sort of clear all the language and say that it’s OK to use through the budget process. Joe Manchin supports it, but fellow moderate Arizona Senator Kyrsten Sinema has yet to say whether she would support the package. Senate has to go through a huge vote-a-rama process to pass it. And then it still has to get through the House.
Democrats focusing on what’s in the bill
Democrats are really worried about what they’re going to run on in the midterms, that – you know, all the things that tend to go against their favor. But they can point to a lot of things if they are able to pass this Inflation Reduction Act. If this also becomes law, I mean, you’re looking at – this Chips bill is significant. The Inflation Reduction Act is significant. That infrastructure bill they passed was pretty significant. They’ve been able to pass gun legislation, the first gun legislation in a generation. Yet Biden’s approval ratings, still pretty much in the tank. And I wonder how Democrats are sort of interpreting this. Like, it makes more sense when you’re not getting anything done, but they are getting some stuff done. But the climate doesn’t really still tend to balance in their favor right now.
I think the other thing the Democrats are starting to try to do is to pivot about what’s not in this bill, to talk about what’s in it. For so many months, they were sort of complaining and griping amongst themselves about what they couldn’t get done. And now there’s this, you know, like – look, if we can save people money on prescription drugs, that’s a huge deal. And if we can bring money to our districts to build infrastructure, that’s more jobs.
Nancy Pelosi headed to Taiwan
Meanwhile, there has been a lot of focus on China this week as well. Speaker of the House, Nancy Pelosi, may take a visit to Taiwan. This has been a very delicate issue talked about in Washington for a lot of reasons that I’m hoping, There’s so much turmoil about this question of whether she’s going to step foot there.
Details about congressional delegations abroad are usually tightly held because of security reasons. But in the case of the speaker of the House visiting Taiwan, it’s even more amped up because, you know, Taiwan – you know, China considers it to be part of its territory. The U.S. doesn’t have official relations with Taiwan. But, you know, Speaker Nancy Pelosi, over her more than three decades in Congress, has been a big sort of critic of China. And there are, you know, national security and diplomatic consequences for such a high-level official in the U.S. government – second in the line for the presidency – to go and visit Taiwan and talk about the importance of self-governance.
She, for her part, is not officially talking or publicly talking at all about her trip, but we know she’s expected to go to the region and could possibly stop there. But I don’t think anyone should be surprised that Pelosi wants to go. She’s visited China several times and caused, you know, diplomatic incidents when she’s been there before. And, you know, this may be her last term as speaker, as many expect, so this is sort of a capstone to her championing pro-democracy movements in other countries.
Democrats and Republicans both think Pelosi should make this trip
I haven’t found anyone on Capitol Hill who doesn’t think she should go. You know, House Minority Leader Kevin McCarthy said, you know, he thinks that she supports the trip. I mean, he wishes it was bipartisan, and we understand that there have been efforts to get Republicans to go on the trip. We don’t expect any to be part of it, but no one is criticizing her or saying she should not go.
President Biden also spoke with Chinese President Xi Jinping on Thursday about the relations between our two countries. the White House painted the call as part of ongoing efforts to maintain open lines of communication between the two superpowers, you know? And there are really some big tensions over the war in Ukraine, U.S. tariffs and Chinese aggression in the South Pacific. But the big takeaway was Taiwan.
Which Beijing sees as part of China. And, you know, the two talked about Taiwan and the differences that they see about this self-governing island. And a lot of that was likely because of the increased tension over this trip. Now, China nor Biden acknowledged that Pelosi’s potential trip is part – was – you know, spurred this on, but it certainly raised the stakes because China is very concerned about that trip. After, you know, first news of that was leaked, you know, they promised or warned that there would be a forceful response if she followed through with it. And after the discussion between President Xi and President Biden – you know, in the readout from China, President Xi warned Biden against meddling in China’s dealing with Taiwan, though he did not specifically mention Pelosi’s possible trip.
Federal Reserve increased interest rates by 75 basis points
The Federal Reserve increased interest rates by 75 basis points – a pretty big jump. And we heard from Treasury Secretary Janet Yellen that the economic picture for Americans right now is not one many have seen for a while.
But you heard the Federal Reserve chairman said the same thing the day before when they made this interest rate decision. Things are really bad. Jerome Powell was pretty frank in his assessment of what the economy looks like. He said the labor market is too tight, and inflation is too high. And, you know, the overarching thing here is prices have continued to go up really fast and really dramatically. Prices are rising at their fastest rate in four decades, and that’s hurting a lot of people.
And then we’re seeing this kind of broader slowdown, and that’s because of the economic situation we’re in. It’s also because of what the Fed’s doing. The economic situation is pushing up interest rates. It’s slowing demand. It’s cooling off the economy. So business activity is slowing. We’re seeing a slowdown kind of in consumer spending as well. Construction is slowing as a result of interest rates getting higher. People aren’t as eager to buy a home if a mortgage rate is getting higher – twice what it was last year.
The economy is really bad right now
I think a lot of economists would say by that traditional definition, yes, things are really bad. But the quirk of this moment – and this is something the administration has really emphasized over the last week – is there’s something unique about this economy right now. You don’t tend to have a jobs market that is doing as well as the jobs market is right now before past recessions. I mean, look back to June – 372,000 jobs were added to the economy. That’s an astonishing number. And the unemployment rate is at 3.6%. That is really close to what it was before the pandemic. So you have policymakers, and politicians arguing this can’t be a recession just because it doesn’t look like it.
President Biden coming out, making, you know, his pronouncement about this as well. And again, it’s just such a funny thing where, you know, there is this technical definition – I won’t call it textbook definition – but one that economists lean on. Really, what it comes down to is feeling. And we were talking about that just a moment ago, how, you know, regular folks in this country are feeling. It’s also just an element of how politicians and policymakers are feeling as well.
And, you know, the closest thing that we got to kind of an unequivocal statement this week was from the Fed chair at the press conference that followed that rate announcement. He was asked several times by reporters, are we in a recession? He didn’t bite. The Fed chair didn’t bite. And then he finally did. And using the same rationale, he said, no, we’re not in one again because of the jobs market and just because there still is strength in some pockets of the economy.
The White House emphasized we are not in a recession
I think it’s fair to say that no president wants the economy on their watch to be compared to the ’70s and ’80s. That’s not a good thing – right? – even as any president only has so much control over what’s happening in the U.S. economy. But they do have some control over how they message it.
One clear message this week is from the White House that the United States is not in a recession. And they are hitting that drum over and over and over again despite obvious signs of a weakening economy. You know, and, you know, quibble as they want over the definitions, that is definitely one of their focuses, to make sure they send that message.
Other than that, you know, what they want to do is do everything that they can to show that they are working on these issues. I mean, as you point out, a lot of this is out of their control, but what they can do is just make sure that they are bringing in all their White House heavy hitters to let the American people know that they understand that they’re feeling some pain and that they’re working to address those things.
White House looking to lower gas prices
That’s why you’re seeing these high-profile meetings with the economic team, all these announcements about pulling oil from the strategic petroleum reserves, trying to get gas prices down, and, of course, you know, the big news from yesterday on the spending package, which Biden argues will help fight back inflation. You know, it just was announced, but I am sure we are going to continue hearing about it over the next week with, you know, very likely – you know, provided it gets across the finish line – a big signing ceremony. And, you know, the White House wants to show that they’re taking action even when, you know – even if it’s on the margins.
I think a lot of them are. And the first thing I’ll say is that it’s a great name. I say that really objectively. I mean, I think Inflation Reduction Act communicates really clearly to people, you know, what the goal of it is, at least. And I think that’s got to be – of course, it’s deliberate, you know, that this is something that needs to be fixed. People want the rate of price increases to go down. I think the frustration of the Fed chairman, although he’s so mild-mannered and wouldn’t say so and hasn’t said so at press conferences, is there’s a real limit to what he can do.
The Fed’s Job is to focus on Inflation and Bringing it down
And monetary policy can only do so much. And the treasury secretary said this in her comments this week. She said, you know, it’s fundamentally the Fed’s job to kind of focus on inflation and bringing it down. But all along, throughout this crisis, from the beginning of the pandemic, the Fed has kind of looked to Capitol Hill to do more. So there’s monetary policy – that’s what the Fed does.
There’s fiscal policy – that’s by and large the domain of Congress, with help from the White House in sort of ushering it through. I think that economists will look at what’s happening here as a sign that another part of the government is taking this seriously and trying to do something to bring inflation down. And, yeah, I think that economists see that as progress and see it as sort of a – more people joining this fight against something that really is having a kind of profound effect on so many people in this country.