The Defense Spending Brawl; End of an Era at the Fed
Author: Greg Valliere
July 14, 2023
THIS BILL HAS ALWAYS WON BIPARTISAN SUPPORT, but not this year. The far right in the House smells blood, sensing an opening to get its priorities attached to a must-pass bill. The activists want pay-back against Speaker Kevin McCarthy, who supported a debt ceiling deal last month that cut spending by far less than the far right favored.
ABOUT TWO DOZEN ACTIVISTS may have just enough votes to kill Pentagon funding for abortion and transgender care, while defunding diversity programs. And the far right has a chance to cut outlays for Ukraine. These provisions will never pass in the more moderate Senate, which is narrowly controlled by Democrats.
THIS IS STILL ANOTHER REASON TO HATE CONGRESS, which will waste more time posturing on this, with about three weeks left until a five-week vacation that will last until after Labor Day. Then the debate will get serious over the $886 billion defense bill. But this is not a case, in mid-July, of the defense bill being “doomed,” as one newsletter reported this morning.
IT’S POSSIBLE THAT McCARTHY IS ON THIN ICE: The far right wants him out, and there’s a chance he could lose a no-confidence vote. But there’s no one waiting in the wings who could plausibly be a credible Speaker, which even the radicals privately concede.
BOTTOM LINE: There will be plenty of ink expended in the coming days about cuts for defense and Ukraine, but eventually the center will hold and a compromise deal will prevail this fall — just as it did in the debt ceiling fight. As usual, there will be theats of a government shutdown as the new fiscal year begins on Oct. 1; resolution of this non-defense fight may be delayed until winter.
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THE UBIQUITOUS JAMES BULLARD, a recent advocate of tighter monetary policy, announced yesterday that he is retiring after 33 years at the Federal Reserve, where he was the St. Louis bank president for the past 15 years. Bullard said he will not play a policy role at the July 25-26 FOMC meeting; he will become Dean of the Purdue University Business school on Aug. 15.
ALWAYS OUTSPOKEN AND A REGULAR ON BUSINESS TV, Bullard became much more hawkish in recent years. He isn’t a voting member this year, but his departure will tilt the Fed a bit toward the doves as a debate heats up internally on how much more to tighten policy.
THIS WEEK’S SOFT INFLATION DATA has prompted many members of Congress — led by liberal Sen. Elizabeth Warren — to question why more rate hikes are necessary if inflation has peaked. If there’s another rate increase after the anticipated July 26 move, the political heat from Democrats will begin to percolate.
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