March 1, 2024

Made famous by the band R.E.M. with their early-1980’s hit Don’t Go Back to Rockville, my hometown has been going through a sort of identity crisis lately. A current land use trend called “urbanism” has created pockets of concentrated neighborhoods inside Maryland’s tenth largest city. In what was once just dubbed Rockville, the rebranding effort has brought new districts with labels such as Pike and Rose, NoBe, Park Potomac, King Farm, and Town Square (SCOA was an equity investor in a luxury apartment building in Downtown Crown, another urban neighborhood just barely north of Rockville). My little island of urbanism and the metro stop that serves it has even gone so far as changing names from Rockville to North Bethesda and from White Flint to North Bethesda, respectively. Whether it’s called redevelopment, renewal, or even gentrification, the effort to transform Rockville into sub-units of tighter-knit communities is not entirely unlike the wide range of political labels I’ve recently heard people in and around Washington affix to themselves. Although likely to be registered with one of the two major political parties, rarely do you ever hear someone simply identify as a Republican or Democrat without at least some qualifier attached. Becoming just as rare is hearing an individual self-identify as “conservative” or “liberal.” Today, more often than not, you’ll hear someone say they’re a “moderate” or “independent” or “not that political.” People have told me they’re “fiscally conservative, but socially liberal;” that “neither party represents their views;” or that they’re either “right of/left of center.” I’ve heard others describe themselves as “classically liberal,” “constitutionally conservative,” “libertarian,” a “throwback neo-liberal along the lines of Clinton and Blair’s Third Way,” a “Democratic Socialist,” and most recently a “Progressive Capitalist.” While I’m not entirely sure that any of these labels actually describes a distinct political philosophy, what’s clear is that most are trying to avoid being pigeonholed as a strict partisan. But does non-partisanship really exist, and, if so, would a post-partisan approach to business advocacy lead to success? A growing number of trade associations and lobbying and consulting companies think so. Unlike past cycles, this election year I’ve felt a more concerted effort by business advocacy reps to focus on policy, rather than politics, personality, or process. What’s more, there’s been a spotlight placed on specific goals and priorities, rather than fuzzy themes; for instance, passing GSP and MTB over general support for free trade. And finally, there’s a stated effort, although not always followed in practice, to proceed with trust and respect regardless of who is in charge. By purposely avoiding reliance on a single party, Big Business may be going through their own form of rebranding or gentrification; or as R.E.M. might sing, “losing their religion.” 

Thought Leadership from our Consultants, Think Tanks, and Trade Associations

 Conference Board Says U.S. Economic Growth Will Slow, but Recession Unlikely. The U.S. economy entered 2024 on strong footing with business activity, labor markets, sentiment, and inflation all moving in favorable directions. Going forward, headwinds, including rising consumer debt and elevated interest rates, are expected to weigh on economic growth. With these factors in mind, although a recession remains unlikely, consumer spending growth will cool, and GDP will slow to under 1% in Q2 and Q3. Thereafter, inflation and interest rates should normalize, and quarterly growth should reach 2% potential in 2025. Despite elevated inflation and interest rates, consumer spending held up in 2023; however, this trend is unlikely to continue as personal income growth struggles to keep pace due to declining savings and rising debt. In fact, consumer spending growth will slow to a standstill by Q3 as households search for equilibrium between income, debt, savings, and spending. Slowing business investment will continue through H1 2024 as the Fed resists calls to cut interest rates before June, and residential investment growth will not improve until interest rates begin to fall. General labor market tightness will continue as Baby Boomers retire. Inflation will abate over the coming quarters as supply chains continue to heal and price pressures moderate. Inflation readings should hit the Fed’s 2% target by Q3 2024, triggering rate cuts in June. Anticipate 25 basis point reductions at each meeting until rates fall below 3% in Q3 2025.

Heritage Foundation Releases Its 2024 Index of Economic Freedom. Global economic freedom has been declining for the last three years, according to Heritage’s latest Index of Economic Freedom, which assesses the economic governance and entrepreneurial environments of 184 countries. Over the last three decades, the Index of Economic Freedom has documented how countries committed to policies that safeguard and advance economic freedom consistently outperform others in terms of economic resilience and prosperity; at the same time, countries with lower economic freedom often fall into economic stagnation and deteriorating social conditions. Five notable takeaways from the 2024 Index:

• As a whole, the world economy is “mostly unfree.” The global average score for economic freedom is at its lowest point since 2001.
• Singaporeis the world’s freest economy, followed by Switzerland, Iceland, and Taiwan.
• Recording its lowest score ever, economic freedom continued to decline in the U.S., leaving it just the world’s 25^th-freest economy.
• Globally, fiscal soundness deteriorated significantly over the past year.
• Economic freedomcorrelates significantly with overall well-being, including factors such as health, education, the environment, innovation, and democratic governance.

Trade Analyst Laura Chasen, “It’s Nippon’s China Connections that could Scuttle the Deal.” Presenting a potential stumbling block to its acquisition of U.S. Steel, Nippon Steel’s China connections are being examined by the Biden administration. The complication being that regulators may look unfavorably on the acquisition’s potential to allow more Chinese-sourced steel to access American markets, particularly at a time when the White House is using tariffs and other measures to keep steel from being dumped in the U.S. In fact, the issue of Chinese steel circumventing trade restrictions and making its way into the American market is a concern that has already been raised with other trading partners, most notably Mexico. Although it remains unclear whether Nippon’s China assets will be part of a CFIUS review, the holdings add just another hurdle at a time when the Biden administration is considering tougher trade measures against Beijing. The appearance of greater scrutiny than usual due to the China connection, is something that could inhibit the administration’s desire to attract more foreign investment. Even though Nippon’s presence in China is small compared to its global output, given the political sensitivity around China’s steel sector, it presents a challenge the company may need to overcome to receive final approval. Blocking the acquisition, particularly after Nippon exhausted considerable resources to finalize the deal, may cool Japanese enthusiasm for investing in U.S. firms operating in other politically sensitive industries like aerospace, information technology, and communications.

“Off the Record”

Texas Judge Strikes Blow to Covid-Era Proxy Voting. A federal judge curtailed lawmakers’ abilities to vote on behalf of others not physically present in Congress, ruling that the practice initiated during Covid lockdowns violated the Constitution’s quorum requirements. The ruling raises new questions about the fate of legislation passed while proxy voting rules under former House Speaker Pelosi (D-CA) were in effect, and it leaves the door open to further challenges. However, the judge made it clear the case brought by Texas is “narrow” and that his decision doesn’t indicate that a quorum clause challenge could be brought against “any act of Congress.” By targeting a specific vote in the House, Texas’s claim is much narrower than former House Minority Leader McCarthy’s (R-CA) challenge against the chamber’s use of proxy voting, which he lost on jurisdictional grounds.

In Other Words

“One of life’s most underappreciated talents is to know when it’s time to move on to life’s next chapter. So, I stand before you today…to say that this will be my last term as Republican leader of the Senate,” Senate Minority Leader McConnell (R-KY),” Senate Minority Leader McConnell (R-KY).

“Joe Biden, he’s working and firing on all cylinders. Does he talk slower? Yes. Does he move like he’s older? Yes. But I’m a CEO all my life. People who run the thing are the smart people you hire, the people around you. And getting great people in all those jobs, as many as you can—that’s how the government works, is through others,” Rep. Trone (D-MD).  

Did You Know

South Dakota Governor Kristi Noem and entrepreneur Vivek Ramaswamy tied atop a Conservative Political Action Conference (CPAC) straw poll for who should be former President Trump’s running mate.  

Graphs of the Week

Although President Biden labels himself the most pro-labor president in history, workers who donate to the major presidential candidates beg to differ. Former president Trump wins financial support from grassroots campaign contributors who work for highly unionized workplaces. He also has more donors from those who report working for blue-collar workplaces, a symbolic blow to President Biden who’s staked his political identity as an advocate for blue-collar workers.

Consumer Confidence Depleted in February. Following three consecutive months of gains, the Conference Board’s Consumer Confidence Index fell in February. Coupled with January’s downward revision, the data suggests that there was not a material breakout to the upside in confidence at the start of 2024. The drop in confidence was broad-based, affecting all income groups except households earning less than $15,000 and those earning more than $125,000. Confidence deteriorated for consumers under the age of 35 and those 55 and over, whereas it improved slightly for those aged 35 to 54.