Update 899 — Shutdown in Stalemate;
Trump Resorts to Partisan Scare Tactics
The government funding stalemate for the fiscal year starting October 1 resulted in a shutdown this week with no end in sight. Meanwhile, the Trump administration took a partisan turn, canceling infrastructure funding in blue cities/states and using agency web pages and email autoreplies to blame Democrats. The shutdown has also delayed the release of key economic data, including the September jobs report due out today. Additional government data drops on the labor market, inflation and growth will also be postponed if the shutdown drags on.
This week, the White House also withdrew its nominations of Brian Quintenz to lead the CFTC and EJ Antoni to lead the Bureau of Labor Statistics and nominated FDIC Acting Chair Travis Hill to chair the agency. The Trump administration announced new lumber tariffs and a deal with the drug-maker, Pfizer, to offer a few of its drugs at a reduced cost to consumers on a “TrumpRx” website, even as Republicans in Congress refuse to address the healthcare crisis they created.
Good weekends all…
Best,
Dana
Headline
Shutdown Update
Topline Developments
The government funding stalemate continued today, as the Senate again failed to reach the 60-vote filibuster threshold on competing continuing resolutions (CRs) proposed by each party. The government shutdown is now expected to last into next week, with Senate Majority Leader John Thune (R-SD) planning to hold the same votes on the CRs for the fifth time on Monday.
While there has been some talk of informal bipartisan conversations among moderates in the Senate regarding a one-year extension of expiring enhancements to ACA premium tax credits (PTCs) — which could potentially bring Democrats on board with a CR — both sides are dug in to their current positions for now. Republicans are largely unwilling to make any sort of deal on this front during the government shutdown, and Democrats are demanding swift action to avoid irreversible price hikes ahead of marketplace enrollment beginning next month.
Further complicating matters, the House has been out on recess in an effort to jam the Senate with its proposal since passing the Republican-drafted CR on September 19. The House was originally scheduled to return on Monday, but Speaker of the House Mike Johnson (R-LA) chose to delay its return at least through the end of next week. In any case, the House GOP has all but closed the door to bipartisan negotiations or compromise. Even if the behind-the-scenes work in the Senate results in a viable bipartisan agreement, it remains unclear whether it will be able to pass the lower chamber and end the shutdown.
Meanwhile, the Trump administration is continuing with its efforts to make the shutdown as painful as possible – both for the American people and the Democratic Party.
This week, the administration blocked funding for infrastructure projects in places like New York, Chicago, and Portland. Much of this funding was already approved by Congress via Biden’s various infrastructure spending plans. Additionally, Trump met with OMB Director Russell Vought on Thursday, “to determine which of the many Democrat Agencies, most of which are a political SCAM, [Vought] recommends to be cut, and whether or not those cuts will be temporary or permanent,” suggesting he plans to carry out more politicized and targeted cuts. None of this is legal – the goal, rather, is to threaten and cause enough pain for Democratic constituents, cities, and states that congressional Democrats back down from their demands.
To make matters worse, Trump has politicized federal agencies to an unprecedented degree by plastering their websites with partisan banners and pop-up messages that blame Democrats for the shutdown. For example, the following message can be seen at the top of the webpage for the Department of Housing and Urban Development:
Trump’s use of federal agencies for partisan attacks does not stop here, as the administration has also reportedly changed some employees’ email auto-replies to messages that blame Democrats for the shutdown, potentially in violation of the Hatch Act.
For now, there is no clear resolution in sight that could end a government shutdown. While the administration believes that it can scare Democrats into backing down on their healthcare demands, Trump’s unprecedented partisan attacks may only serve to antagonize the situation, leaving little promise of bipartisan cooperation.
Funding Lapse Delays Economic Data
The ongoing government shutdown has started to postpone the release of key economic data on job gains and unemployment as monetary policy makers seek to understand the degree to which the labor market is weakening ahead of their next interest rate decision late this month.
The release of the September jobs report, which was scheduled for this morning, has been delayed. The Department of Labor has suspended all operations of the Bureau of Labor Statistics (BLS), which releases the monthly report, for the duration of the shutdown and announced that all economic data scheduled to be released during the funding lapse will not be released. The Labor Department also announced that all active data collection activities for BLS surveys will cease as the shutdown drags on. The September Consumer Price Index (CPI) report, showing inflation for the month, is now scheduled to be released by the BLS on October 15. Data to be included in the report has already been collected, but the report could be similarly delayed if the government funding impasse is not resolved by then.
The interest rate-setting Federal Open Market Committee (FOMC) is relying on these key data points to determine the appropriate path for interest rates. The labor market is weakening and inflation is rising under the weight of the Trump administration’s tariff policy, putting the Federal Reserve’s dual mandate of maximum employment and stable prices in tension. Labor market and inflation data for September will help FOMC officials decide whether to cut rates once again at their next meeting on October 28 and 29.
The Bureau of Economic Analysis in the Department of Commerce is also set to suspend operations, including its releases of economic data, until Congress appropriates funding for the 2026 fiscal year. This could delay the release of estimated Gross Domestic Product (GDP) data for the third quarter and the Personal Consumption Expenditures (PCE) Price Index for September, which are set to be published by the BEA in the days immediately following the FOMC’s next meeting.
The shutdown of the federal government comes as the Fed continues to face pressure from the Trump administration to cut rates. This month’s FOMC meeting will include Fed Governor Lisa Cook, whom President Trump has attempted to fire in an unprecedented attack on the Fed’s independence. On Wednesday, the Supreme Court allowed Governor Cook to continue to serve on the Fed’s Board of Governors until the court holds oral arguments in January. We applaud the Supreme Court’s decision to allow Governor Cook to continue to serve, and we emphasize the importance of protecting the Fed amid President Trump’s continued attempts to undermine its long-standing independence.
Trump Nominees
White House Pulls Quintenz Nomination to Lead CFTC
On Tuesday, Trump quietly withdrew Brian Quintenz’s nomination for chair of the Commodity Futures Trading Commission (CFTC), the financial regulator in charge of regulating commodities such as grain, oil, and, if the crypto lobby has its way, digital tokens. The administration did so while stressing that Quintenz “remains a trusted ally” of Trump and leaving the door open for Quintenz to work with the administration in a different capacity. A new nominee has yet to be announced for the prominent federal financial regulatory agency.
The reasons that Quintenz’s nomination was withdrawn are a bit unusual and offer quite a bit of insight into Trump’s crypto agenda and the inner workings of his administration. The CFTC usually plays second fiddle to the SEC as a financial regulator, but it now plays a key role in Trump’s crypto agenda as the crypto lobby wishes for it to become the main regulator of digital assets. Quintenz is a close ally of Trump’s, but the Winklevoss twins, tech billionaires who are also close allies of Trump, came out against his nomination to the CFTC back in July. Their stated reason was that Quintenz did not align enough with the Trump administration’s agenda and would not do enough to shake up the CFTC.
Behind the scenes, however, it appears that Quintenz may have run afoul of the Winklevosses’ business interests. Quintenz claimed that Tyler Winklevoss had called him to ask what he would do about the CFTC’s previous scrutiny of Gemini, the crypto platform that he and his brother own. Quintenz claims he responded by stating he would undertake a “fair and reasonable review of the matter,” which apparently was not a strong enough response for the Winklevoss twins. Quintenz contends that this is the point where they came out in opposition to his candidacy, not because he did not align with Trump’s policy agenda, but because he did not align with the Winklevosses’ business aspirations.
Curiously, a former CFTC commissioner who has been nothing but supportive of crypto during his time in the private sector is no longer considered pro-crypto enough by members of Trump’s inner circle. Even though he was very much aligned with Trump’s crypto policies, that was not enough when Trump’s billionaire supporters took a dislike to him. The withdrawal of Quinenz’s nomination raises questions about what the next nominee, even a strongly pro-crypto one, would need to do to remain in the good graces of Trump’s allies.
White House Pulls Nomination of EJ Antoni to Lead Bureau of Labor Statistics
The Trump administration withdrew the nomination of Erwin John Antoni III, who goes by E.J. Antoni, to serve as the head of the Bureau of Labor Statistics (BLS) on Tuesday. Antoni is currently the Chief Economist at the far-right Heritage Foundation.
President Trump nominated Antoni to the position after he fired former Commissioner of Labor Statistics Dr. Erika McEntarfer, who led the agency while it published the July jobs report. The report revealed the labor market to be notably weaker than previously estimated. Trump claimed the jobs report was “rigged” and accused McEntarfer, without evidence, of manipulating jobs reports “before the Election to try and boost Kamala’s chances of Victory.” Trump’s claims were based on revisions made to previous jobs reports.
Revisions are not, as Trump has suggested, a statistical tool for political manipulation, but rather the routine result of additional data coming in over time, making initially estimated figures more and more accurate. Large upward and downward revisions have occurred under both Democratic and Republican-led administrations and in no way suggest that the data was manipulated for political purposes. The Commissioner of Labor Statistics also does not collect data or compile numbers included in the report, but reviews these numbers after they are finalized.
Voices across the political spectrum were critical of Antoni’s nomination, given his history of making false statements about the BLS and the accuracy of its data, going so far as to say that the data is “rigged,” claiming that previous revisions to monthly jobs data were part of a conspiracy under the Biden administration to make itself look better, and calling for a pause to the BLS’s monthly jobs reports to fix these alleged problems with the data. He also has a history of making statements and posts on social media espousing far-right beliefs, including opposition to the federal social safety net programs, including social security, as “Ponzi schemes.”
Antoni was also linked to a now-deleted X account, which shared content promoting several far-right conspiracy theories, including 2020 election denial. Antoni was also identified among the crowd outside the Capitol on January 6, 2021.
It appears that enough Republican senators had a problem with Antoni’s nomination that the administration decided to pull the plug instead of plowing ahead and expecting the Senate to fall in line as it did with previous controversial nominees. It is difficult to know who the administration will nominate in his stead: Trump does not appear to have changed his mind about the need to “fix” the BLS, so presumably whoever he nominates next will not simply be a nonpartisan technocrat.
White House Nominates Travis Hill to Head the FDIC
On Wednesday, the Trump administration nominated Travis Hill to serve as chair of the Federal Deposit Insurance Corp (FDIC), a position he has held in an acting capacity since January. when former chair Martin Gruenberg stepped down.
Hill’s nomination does not come as a surprise, and his previous work establishes him pretty firmly as a conservative seeking deregulation of the banking system. Some of his actions and statements to this effect include:
- criticizing his Democratic counterparts on the FDIC board for supporting the Basel III Endgame proposal;
- moving to no longer consider reputational risk as part of FDIC bank exams; and
- working to withdraw Biden-era proposals on banking resilience that were put forward in the wake of the Silicon Valley Bank collapse in 2023
In short, Hill would continue to push for less oversight and fewer guardrails in the banking sector if he were to be confirmed. Considering his resume, lack of serious controversies, and the fact that he was already confirmed to the FDIC once before, it is hard to imagine at this point that his nomination will fail.
Other Developments
Trade and Tariff Developments
This week, the President announced a surprising deal with Pfizer in perhaps another capitulation of a major corporation to win the good graces of the President, as well as a fresh set of Section 232 tariffs, this time on lumber. Next week, be on the lookout for an announcement from the administration on a potential bailout for farmers amid mounting pressure from a retaliatory blockade in Chinese markets of American agricultural goods.
Trump, Pfizer Strike a Deal
The President announced a deal with the drug-maker Pfizer on Tuesday that will lower the prices of some drugs it charges to state Medicaid programs. Pfizer also announced it would introduce new drugs at prices seen in the European Union. It will partner with the government to supply a direct-to-consumer website, TrumpRx, where people can purchase certain drugs without insurance.
Last week, the President announced pharmaceutical tariffs, which could be avoided if companies invest in manufacturing in the United States. Flashy deals such as the Pfizer announcement can put drug companies on Trump’s “good” side, as Pfizer will reportedly enjoy a three-year tariff grace period. This deal may inspire other drugmakers to race to the negotiating table with the President to secure some tariff reprieve.
Pfizer accounts for a small share of Medicare drugs, at less than 5 percent of the company’s U.S. sales. The same is true for the other drugmakers who are likely deciding if a deal with the Trump administration is the right move.
In the face of a national debate about healthcare costs as Democrats attempt to strike a deal with President Trump and Republicans to end the shutdown, the President also recognizes that prescription drug costs are a concern to voters. However, this deal does not negate the nearly 15 million people who could lose healthcare from his signature reconciliation bill, the One Big Beautiful Bill Act, and Republicans’ ongoing failure to extend enhancements to the ACA premium tax credits that are scheduled to expire at the end of this year.
Lumber Tariffs Announced
On Monday, the Trump administration announced new tariffs on timber, lumber, and related products. Following a Section 232 investigation, which is used to identify if imports pose a national security threat, the President outlined the following new tariff rates:
- 10 percent tariff on softwood lumber,
- 25 percent tariff on certain upholstered furniture, which will increase to 30 percent on January 1,
- and a 25 percent tariff on kitchen cabinets and vanities will increase to 50 percent on January 1.
Countries that have secured a trade agreement with the United States are protected from higher tariffs. Those with more or less handshake trade deals include the E.U. and Japan, which will not face tariffs higher than 15 percent, and the U.K., which will not face tariffs higher than 10 percent, according to the White House.
In a struggling housing market, these tariffs will drive up the already high cost of building houses. The National Association of Home Builders (NAHB) wasted no time in criticizing the move, especially since Canada accounts for nearly 85 percent of American lumber, and domestic production shows no sign of picking up to the point where it will meet demand. It should be noted that, back in April, before most of these tariffs took effect, the NAHB found that the typical cost increase per home created by existing tariffs stood at $10,900, which is passed on to home buyers. If these new tariffs go into effect, the new costs will undoubtedly be much higher.