No Progress Yesterday, Let’s Wait Until Friday
Author: Greg Valliere
May 10, 2023
WHAT STRIKES US is that there still isn’t a sense of urgency, either in the country as a whole or among most members of Congress. There was far more interest yesterday in Donald Trump’s legal defeat, and potential criminal charges against Rep. George Santos. Meanwhile, the potential for default continues to grow.
SO WHAT HAPPENS NEXT? We wouldn’t be surprised to see some modest progress on Friday, with tentative agreement on some spending cuts. That could include clawing back some pandemic aid that states haven’t spent, as well as reducing student loan relief, and perhaps also forcing recipients of federal benefits to find a job. A cap on spending also is on the table.
BUT IT COULD TAKE MANY WEEKS to iron out these and other spending cuts, and Congress has a very generous vacation schedule this spring. Both houses will be in session for only 7 or 8 days for the next month.
THUS WE STILL BELIEVE THAT A “KICK THE CAN” scenario is very likely as a default approaches. Maybe an extension would last until the Fourth of July recess; maybe it would last until the fiscal year ends on Sept. 30.
THE PROBLEM WITH THAT SCENARIO is that House hard-liners are not enthusiastic about more delays. Speaker McCarthy would have to twist arms to get an extension, and he certainly would not succeed in watering down the deep spending cuts that passed in the House earlier this spring. The huge influence of a couple dozen House militants is frequently overlooked by analysts.
BOTTOM LINE: A final deal is not remotely imminent, although some areas of agreement may emerge in Friday’s meeting. Politicians in both parties are still focused on the spin battle, eager to blame the other for jeopardizing Social Security payments.
SO WHAT’S THE CATALYST that could prompt Congress to get moving? Unfortunately, the catalyst might have to come from the financial markets, which may send an angry message to Washington.
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IS DONALD TRUMP STILL THE LIKELY NOMINEE? Yesterday’s court ruling probably will cost him a point or two in the polls, but he can affort that, with a lead of 30% or more against Ron DeSantis for the GOP nomination.
REPUBLICAN INSIDERS in this city continue to dread a Trump nomination, with the likelihood that he would lose the general election, as GOP House and Senate seats are jeopardized. The irony, of course, is that the feeble Biden looks increasingly vulnerable, as he faces a recession, an immigration crisis, and a fresh focus on business dealings by him and his son Hunter.
A BIDEN-TRUMP MATCHUP would be so depressing for many voters that we have to conclude that fresh challengers will emerge — Glenn Youngkin, Joe Manchin, Mitt Romney, McCarthy (if he can get a budget deal), or a third party candidate. The general election remains very much up for grabs.
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