Thought of the Week
With a three-day meeting of the Conference Board’s Government Relations Executive (GRE) Council* scheduled for the latter half of this week, rather than wait until the last minute like I’m doing now, my idea was to get started and complete this week’s blog post on Monday. It was going to be another golf related metaphor about how partisanship and polarization have altered the political rules of the game from Thomas (Tip) O’Neill’s belief that “all politics is local” to today’s nationalization of even down ballot contests like Virginia’s attorney general race. The analogy being that politics was once like stroke play in golf where the emphasis was on long-term consistency and a cumulative record [all politics is local]; whereas today’s political arena is much more like golf’s hole-by-hole match play—a series of isolated, high-stakes, head-to-head contests where the focus is on winning specific, often volatile, battles and the ability to recover from individual “bad holes” (mistakes or losses) to win the overall match (election). However, it was a side discussion on the last day of the GRE conference that I found particularly animating and worth sharing. On one side of the discussion were those who held that the U.S., as a nation, has never seen anything like President Trump. Their argument being that he’s single-handedly breaking the system of checks and balances, that profiteering in his administration runs rampant, and that the very notion of democracy is at stake. The other side of the debate took the position that there is a whole lot of pearl clutching hypocrisy in Washington when it comes to President Trump. I took a more nuanced view stating that there definitely seems to be a recency effect going on with President Trump where much more emphasis is placed on what is going on today simply because we forget or are even unaware of our own history. The bottom line is that the country has always had politicians with flawed characters, graft has always been inherent in politics, and major compromises have been made in smoke-filled rooms or with little to no transparency. What’s more, President Trump isn’t even the first American chief executive who defied political norms, expanded presidential power, and showed a general disregard for judicial decisions. One president openly defied a Supreme Court ruling, expanded executive power by championing a “spoils system,” made direct populist appeals to the mass of voters, and even threatened military force against a state to assert the supremacy of federal law. Sound familiar? If you don’t know who I’m referring to check your $20 bill, and check out John Meacham’s biography American Lion.
*The Washington office sits on the Council along with representatives from companies such as AT&T, BASF, Fidelity Investments, John Deere, Warner Music and others.
Thought Leadership from our Consultants, Think Tanks, and Trade Associations
Conference Board Says Rising Unemployment Will Dwarf December’s Solid Payroll Gains in FOMC Decision. Despite a solid 119k rebound in payrolls in September, a Federal Reserve interest rate cut on December 10th is still more likely than not given continued unemployment rate increases. Companies should expect the Fed to cut rates by 25bps at their upcoming meeting. Still, the September jobs report’s mixed messaging will not make the Fed’s job any easier. According to Bureau of Labor Statistics (BLS), the FOMC will not receive October nor November data before their meeting. The unemployment rate rose to 4.44% in September, up from 4.32% in August, with the rise in the rate being primarily driven by an increase in labor force participation and permanent job losses. The jobless rate could rise by an additional 0.1-0.2pp from the current level by the end of this year due to federal government worker retirements and layoffs of private sector workers negatively impacted by the federal government shutdown.
Observatory Group Outlines Federal Reserve Dynamics for December and Early 2026. The current Federal Open Market Committee (FOMC) voting dynamics are based on the interplay of these groups: (1) Enthusiasts for rate cuts now and next year (3 or 4 participants); (2) Skeptics about a December cut who are intensely skeptical about more cuts next year unless inflation definitely slows (the largest group); and (3) Opponents of a cut in December and any more next year (at least 4). Fed Chair Powell is closer to group 2 than 3 but has his eye on the bigger picture. He is willing to see a cut at the December 9-10 meeting even if the data make it a close call, but is convinced that additional cuts will not be warranted without an all-clear from the inflation data. The Skeptics will probably follow him, realizing they can hold the line in 2026 with a more hawkish FOMC voter lineup. As a consequence, and without a full set of timely macro data, the odds of a rate cut in December are slightly over 50%, and the chances of additional Q1 2026 cuts are falling. Time to bring on the data.
Politico Reports that President Trump’s ‘Incredibly Complex’ Tariffs are Sucking Up CEO Time and Company Resources. Businesses, small and large, are struggling to comply with President Trump’s byzantine tariff regime, driving up costs and, for some, counteracting the benefits of the corporate tax cuts Republicans passed earlier this year. The president has ripped up the U.S. tariff code over the past year, replacing a decades-old system that imposed the same tariffs on imports from all but a few countries with a vastly more complicated system of many different tariff rates depending on the origin of imported goods. To give one example, an industrial product that faced a mostly uniform 5% tariff rate in the past could now be taxed at 15% if it comes from the EU or Japan, 20% from Norway and many African countries, 24 to 25% from countries in Southeast Asia, and upwards of 50% from India, Brazil or China. Upping the pressure, the Justice Department has announced that it intends to make the prosecution of customs fraud one of its top priorities. The proliferation of trade regulations and threat of intensified enforcement has driven many companies to beef up their staff and spend what could add up to tens of millions of dollars to ensure they are not running afoul of the new requirements. The time and expense involved, combined with the tens of billions of dollars in higher tariffs that companies are paying each month to import goods, amount to a massive burden that is weighing down industries traditionally reliant on imported products. And it’s denting the impact of the hundreds of billions of dollars of tax cuts that companies will receive over the next decade via the One Big Beautiful Bill Act. A recent survey by KPMG, found 89% of CEOs said they expect tariffs to significantly impact their business’ performance and operations over the next three years, with 86% saying they expect to respond by increasing prices. This impact will reduce the amount of money that companies are willing to spend on purchasing new capital equipment or making investments to boost long-term growth. The administration has previously defended tariffs as key to boosting domestic manufacturing, along with their overall economic agenda of tax cuts and reduced regulation. They’ve also touted commitments from companies and other countries for massive new investments in the U.S. in order to avoid tariffs, although they’ve acknowledged it will take time for the benefits to reach workers and consumers. For many companies, any benefit they’ve received from the push to lower taxes and reduce regulations has been substantially eroded by the new burden of complying with a complicated tariff system.
“Inside Baseball”
Democrats Look Stronger in Next Year’s Midterms. According to the Eurasia Group, Democrats are now stronger favorites to flip the House of Representatives in next year’s midterm elections (80% odds, up from 75%), on the back of five factors: (1) The generic congressional ballot has moved in Democrats’ favor. While a Marist poll giving Democrats a 14-point lead may be an outlier, it is the latest in a series of polls showing Democrats as the clear popular-vote favorites; (2) President Trump is becoming less popular, with his approval falling to the low 40s; (3) Democrats’ wins in Virginia and New Jersey earlier this month suggest the 2024 GOP coalition may not be durable; (4) Cost-of-living concerns, on which the White House polls poorly, are top of mind for voters; and (5) Redistricting looks increasingly likely to end in a near-tie; however, a Supreme Court ruling limiting the Voting Rights Act would substantially change this outlook. Flipping the Senate is still challenging, but more achievable (30% odds, up from 25%), as Democratic-held seats are likely safe and Democrats have stronger chances of flipping Maine and North Carolina. Flipping two of the three other competitive GOP-held seats are still a tall order. Losing the Senate would matter more to the White House than losing the House. Democratic control of the House would lead to bare-minimum policymaking, but would still allow the Trump administration to advance its policy objectives using executive action. The more important consequence of losing the House would be on oversight, as Democrats could use the powers of the majority to conduct investigations, while losing the Senate would be more significant, limiting the White House’s ability to get nominees confirmed.
In Other Words
“Mom and Dad are separated,” Jackie Harling, Georgia Republican Party Chair, on the split between President Trump and Rep. Marjorie Taylor Greene (R-GA).
“If I see a picture of a woman, might I look at it longer than a sunset? Yeah,” Rep. Brad Sherman’s (D-CA) explanation for viewing explicit photos on a commercial plane.
Did You Know
Below is the only eye-witness account of the first Thanksgiving, which was included in a letter written by Edward Winslow, a Mayflower pilgrim and three-time governor of the Plymouth Colony.
Our harvest being gotten in, our governor sent four men on fowling, that we might after a more special manner rejoice together, after we had gathered the fruits of our labors. They four in one day killed as much fowl as, with a little help beside, served the Company almost a week. At which time, amongst other recreations, we exercised our arms, many of the Indians coming amongst us, and among the rest their greatest king Massasoit, with some 90 men, whom for three days we entertained and feasted, and they went out and killed five deer, which they brought to the plantation and bestowed on our governor, and upon the captain and others. And although it be not always so plentiful as it was at this time with us, yet by the goodness of God, we are so far from want that we often wish you partakers of our plenty.
Graph of the Week
Record Withdrawal. A record number of President Trump’s picks are bowing out of the Senate nomination process, and it’s increasingly because they don’t have enough GOP votes to win Senate confirmation. An analysis of Senate records shows the White House has withdrawn more than 50 nominees so far this Congress—the most in any single year over the last several decades.
