The powerful resilience of the U.S. economy and the dominant dollar continue to demonstrate global leadership as the world recovers from the COVID pandemic. Challenges from abroad — from the outbreak of conflict in the Middle East to the rapid economic contraction in China — and ones at home, which we detail below, have not slowed the steady progress the U.S. has seen in job creation and the battle against inflation.
But the clearest present danger to this progress comes from the dysfunction in Congress. The failure of the House GOP to lead the institution in which it has a small majority means that, for now, the House of Representatives is unable to attend to any legislative business from assistance to Ukraine and Israel to border security to the federal budget, with the threat of a shutdown looming. With Rep. Scalise ending his speakership bid late yesterday and now multiple announced candidates, the way out looked as murky as ever by week’s end.
Happy Friday the 13th and good weekends, all…
House Speakership Fight without Clear End in Sight
House Majority Leader Steve Scalise (R-LA) may have beaten out Representative Jim Jordan (R-OH) in a GOP vote to nominate the next Speaker on Wednesday, following the ousting of former Speaker Kevin McCarthy (R-CA) last week. But by the end of the week, despite attempts to gather enough votes to win in a floor vote, Scalise ultimately removed his name from candidacy for the speakership citing a lack of unity within the Republican conference.
As of this writing, Representative Jim Jordan (R-OH) remains a leading candidate. The only other candidate that has filed to be speaker of the House is Representative Austin Scott (R-GA). House Republicans will meet later today to hear from both candidates.
Democrats have again unanimously nominated Minority Leader Hakeem Jeffries (D-NY) for the speaker position, and we can expect all 212 of them to vote for him on the House floor, whenever the next vote is held. The next Republican nominee will need to gather votes from all but four of the 221 GOP members of the House in order to be elected speaker.
While it is currently unclear if there is a Republican who could clear the 217 vote threshold after the withdrawal of Scalise, Representative Jim Jordan (R-OH) is the current front-runner. Provisions laid out in the FRA trigger a one percent budget reduction to both defense and non-defense funding if a short-term deal is still in place come January 1. Jordan has been on the record saying he would seek these terms as speaker. These plans have garnered Jordan support among Republican conference members who are looking for a clear path ahead in the appropriations process or who are opposed to CRs that would hold spending levels constant.
The clean continuing resolution (CR) that averted a government shutdown at the end of September is set to expire on November 17. Congress is losing time and opportunities to narrow the gap between Democratic proposals and Republican demands. How long it takes to elect a speaker will tell us a lot about whether Congress will pass a full FY24 spending bill, another CR, or fail to avert a government shutdown altogether before the November 17 deadline.
In the meantime, the House will remain in a state of legislative paralysis, presided over by Speaker Pro Tempore Patrick T. McHenry (R-NC). While there has been some discussion of temporarily extending his authority to respond to international developments, this idea will probably await talks within the Republican party that will likely go into next week. Although far less politically feasible, we could also see a sort of power-sharing agreement where Democrats are brought into formal House leadership roles or given some gavels to help get a candidate over the 217 vote threshold. While this would help facilitate bipartisan legislative solutions, it is unlikely Republicans will be willing to make this concession.
Core Inflation Continues to Cool in September
Core inflation continued to cool last month in a positive sign for the Federal Reserve before it decides the fate of interest rates at the end of this month. This morning’s Consumer Price Index (CPI) data showed that headline inflation rose by 0.4 percent in September, an annual increase of 3.7 percent.
Year-Over-Year Percent Change in CPI
The increase in headline CPI was driven by an increase in shelter costs which rose by 0.6 percent over the month, an annual increase of 7.2 percent, and contributed to over 70 percent of the overall increase. Energy costs, which rose by 1.5 percent last month, were also a major contributor to the increase. This included a 2.1 percent increase in the price of gasoline and an 8.5 percent increase in the price of fuel oil.
Core CPI, which excludes more volatile food and energy prices, rose by 0.3 percent in September, consistent with the 0.3 increase seen the month before. Core CPI increased by 4.1 percent on an annual basis, down from a 4.3 percent annual increase in August. The core inflation measure has fallen significantly from a high of 6.6 percent in September of last year and has been consistently falling since March.
The continued downward inflation trend is a welcome sign for the Federal Reserve, which may be inclined to leave interest rates unchanged at the Federal Open Market Committee’s next meeting on October 31 and November 1. The Fed is wary of overcorrecting at this stage in its effort to cool inflation, and the latest economic data is not likely to change its outlook. Personal consumption expenditures price index data for September, which will be released on October 27, could further push the Fed toward a pause if it also shows inflation cooling over the month.
UAW Strike Continues, Kaiser Close to Resolution
Kaiser Permanente Reaches Tentative Contract
The Coalition of Kaiser Permanente Unions, representing roughly 40 percent of workers at Kaiser Permanente hospitals and clinics across the country, has reached a tentative agreement with the hospital system.
The tentative deal comes after 75,000 members of the coalition went on strike for three days last week in California, Colorado, Oregon and Washington in the largest health care strike in U.S. history. It also comes as the coalition warned of a longer strike next month in California, Oregon, Virginia, Washington, and Washington D.C. from November 1 through November 8.
The union thanked Acting US Labor Secretary Julie Su for her “instrumental support.”
The coalition has called for fair wages, a strategy to address staff shortages that they have called unsafe, and limitations on subcontracting and outsourcing.
UAW Strike Expands
The United Auto Workers (UAW) union expanded its strike against the Big Three Detroit automakers — Ford Motors, General Motors, and Stellantis — this week after opting not to expand the strike last Friday, for the first time in three weeks. Late Wednesday night, the UAW instructed about 8,700 employees at Ford’s largest factory, its Kentucky Truck Plant, to join the picket line.
The union’s strike expansion this week is the first to occur without warning since the strike began on September 15. This came after the union met with Ford officials on Wednesday night. The vehicles produced by the plant are responsible for about $25 billion in the company’s annual revenue, roughly a sixth of Ford’s global revenue.
Today, the union announced that it would not expand the strike further but remains ready to add additional workers to the strike at any time.
FTC and CFPB Moves to Ban Junk Fees
On Wednesday, President Biden delivered remarks at the White House announcing his administration’s most comprehensive actions yet to eliminate hidden junk fees across the economy.
Two new rules were proposed on Wednesday:
- The Federal Trade Commission (FTC) announced a new proposed rule would require businesses to include all mandatory fees in the upfront prices shown to consumers. Importantly, the rule’s enforcement mechanism would allow the FTC to secure refunds for harmed consumers and seek monetary penalties against companies violating the rule.
- The Consumer Financial Protection Bureau (CFPB) issued an advisory opinion that would ban financial institutions from charging fees for providing basic services to customers, including checking account balances and accessing loan balances.
The CFPB also released new reports on Wednesday focused on the agency’s work to protect consumers from illegal junk fees. The reports show that companies are refunding $140 million to consumers due to the CFPB’s supervisory work, including $120 million for surprise overdraft fees and double-dipping on non-sufficient funds fees. Additionally, the CFPB found that most financial institutions have eliminated non-sufficient funds fees, saving consumers roughly $2 billion annually.
The President also called on Congress to pass the Junk Fee Prevention Act, which was introduced in the Senate by Senators Richard Blumenthal (D-CT) and Sheldon Whitehouse (D-RI) and led in the House by Representative Ruben Gallego (D-AZ).
Biden’s New Student Loan Plan
Last Wednesday, President Biden announced an additional $9 billion in student debt relief for about 125,000 borrowers. Specifically, the President announced adjustments to income-driven repayment (IDR) and Public Service Loan Forgiveness.
The announcement included:
- $5.2 billion in additional debt relief for 53,000 borrowers under Public Service Loan Forgiveness programs
- Nearly $2.8 billion in new debt relief for nearly 51,000 borrowers who made 20 years or more of payments through fixes to income-driven repayment
- $1.2 billion for nearly 22,000 borrowers who have a total or permanent disability
Biden’s announcement comes days after student loan payments resumed on October 1 after a three-year pause.
Tuesday, October 17th
- Senate Committee on Banking, Housing, and Urban Affairs Subcommittee on Housing, Transportation, and Community Development: How Community Development Financial Institutions Promote Housing and Economic Opportunity
Thursday, October 19th
- Senate Committee on Energy and Natural Resources: Hearing to Examine the Department of Energy’s Decision-Making Process for Awarding Competitive Loans and Grants Funded Through the Inflation Reduction Act and the Bipartisan Infrastructure Law
- Senate Committee on Banking, Housing, and Urban Affairs: Hearing to Consider Nominations
- Tanya Otsuka to be a member of the National Credit Union Administration Board
- The Honorable Mark Uyeda to be a member of the Securities and Exchange Commission
- The Honorable Spencer Bachus III to be a member of the Board of Directors of the Export-Import Bank
- The Honorable Jennifer Fain to be Inspector General, Federal Deposit Insurance Corporation
- The Honorable Claudia Slacik to be a Director of the Securities Investor Protection Corporation
- The Honorable William Brodsky to be a Director of the Securities Investor Protection Corporation
Other Related Articles
- Update 726 — Out of the Frying Pan: Speaker Fight Raises Shutdown Risk
- Update 725 — Saturday’s Surprise: Shutdown Averted in the Final Hour
- Update 724 — Days Grow Few, Down to Two: As Nation Confronts Government Shutdown
- Update 723 — Fed Pauses, House Punts: Econ. Policy in Week of Moving Sideways
- Update 721 — Econ. Policy Preview: What to Expect in a Busy September