April 14, 2023

Thought of the Week

Today is the last day of Passover. I know this because mine is a mixed marriage. My wife is Jewish, and I was raised Catholic. While Easter is a Christian celebration of resurrection, new beginnings, and rebirth, Passover tells the story of the Jewish people’s flight from Egypt, and their freedom from bondage. Both celebrations are steeped in tradition and history. In fact, the story of Passover begins with a simple line, “A new king rose over Egypt, who did not know Joseph.” Without delving too deep into the meaning of Passover, which is told in Exodus, the second book of the Old Testament, that single line portends a cautionary tale about those who fail to learn from history are the same who may one day be condemned to repeat it. In fact, Passover’s traditional Seder dinner, which is based on a Biblical verse commanding Jews to retell the story each year, is a history lesson unto itself told for generations (Jesus’ Last Supper was a Passover Seder dinner). Unfortunately, in recent years, we’ve seen efforts in the U.S. to rewrite, even erase history. We’ve become almost accustomed to the removal of likenesses of Confederate generals and Christopher Columbus from public places; we’ve seen efforts to reset the nation’s founding from 1776 to 1619; classic literature has been rewritten to remove words and phrases deemed offensive; and we have even seen the U.S.’s founding fathers become targets of cancel culture. In contrast, Italians have not removed statues of, obelisks named for, or structures built by Italy’s fascist dictator Benito Mussolini. Just as they view the Colosseum and Pantheon, Italians see the reminders of Mussolini as history and recognize the losses that can come from laundering the past. The remainders of Mussolini are history lessons that explain both his rise and fall as a historical villian. Corporate histories are important too—not just the highs, but also the lows. It’s why I’m looking forward to next week’s legal training on “The Copper Trading Incident: Compliance Lessons from Sumitomo’s Past.” The scandal is our history, and if we don’t learn from it, there exists the chance that one day we may repeat it.

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

Bloomberg Government Says House Republicans’ First 100 Days are Off to a Bumpy Start. House Republicans emerged from their first 100 days struggling to carry out much of their agenda while facing debt limit and spending showdowns that could make or break their ability to hold their majority. The past few months have tested Speaker McCarthy’s (R-CA) strategy of ensuring all factions of his conference have a voice in crafting legislation and messaging. His more-carrots-and-fewer sticks approach has helped Republicans push through education and energy measures, and they claimed victory after forcing the White House to accept their rejection of D.C.’s crime overhaul. Yet, the biggest hurdles lie ahead. House leaders have made little headway on their pledge to link raising the debt limit to reducing federal spending. Despite high-profile trips by GOP members to the southwest border, the party hasn’t coalesced behind a plan to curb illegal immigration. While Republicans remain in the midst of a multitude of oversight investigations, lawmakers continue to caution they need to balance probes into Biden family ties with issues of broad public concern like the recent closure of several banks and train derailments. The leadership’s ability to overcome these, and other, fiscal, legislative, and oversight challenges will be key if they hope to retain control of the House and expand their majority in 2024.

 Eurasia Group Sees the GOP Nomination Process Tilting the Primary Playing Field in Trump’s Direction. Even after his indictment for business record fraud and with the threat of potential future criminal indictments, former president Trump remains the frontrunner to secure the Republican presidential nomination (a 55% probability); his most formidable potential opponent, Florida Governor DeSantis, has yet to demonstrate a clear strategy or capability to challenge Trump head-on, which he would need to win the nomination (a 30% probability). The race, tracked through polling averages, is likely to change significantly as more candidates enter the campaign, and the landscape will become clearer once the primary debates begin in August. While GOP state-level rules for allocating delegates at the 2024 Republican convention favor the frontrunner, rules that allow for proportional allocation in early states could help a second place candidate consolidate the field late in the process. However, any unwillingness by Trump to concede defeat and his followers’ influence in the party’s nomination process may help him prevail in the primary contest, and eventually hurt the GOP’s chances in the general election.

“Off the Record”

According to Punchbowl News, there are several behind-the-scenes debt-ceiling developments happening. First, House Republican leaders have begun putting together a debt-limit package they intend to share with rank-and-file members when Congress returns to Washington next week. The legislation would lift the debt limit until May 2024. The package is to include either a cap on non-defense discretionary spending or a cap on overall discretionary spending after reducing it to FY 2022 levels. One consideration is $584 billion for non-defense discretionary spending—excluding Veterans Affairs programs, with an aim to limit budget growth to 1% annually over the next 10 years. The proposal would rescind unspent Covid money, prohibit student loan forgiveness, repeal some green tax credits, institute work requirements for social programs, and implement the Republican energy plan (HR 1) and regulation-cutting REINS Act. While such a debt-limit bill would have no chance to pass the Senate, House GOP leadership believes it will be enough to start negotiations with the White House. Second, Speaker of the House McCarthy will head to New York next week for a speech at the New York Stock Exchange on the debt limit. Republicans believe that Wall Street is not entirely cognizant of the fact that debt limit and government spending talks are nowhere—the Speaker hasn’t had any discussions with the White House in more than two months on the issue. McCarthy wants the finance world to understand that Congress will not raise the debt limit without spending reductions. It’s important to note that Treasury will run out of “extraordinary measures” to stave off a default sometime this summer. While various analysts place the x-date at the end of July, the Congressional Budget Office suggests extraordinary measures will run out between July and September.

In Other Words

“As opposed to trying to have a conversation about how to beat a Republican, I think we’re better off having a conversation about beating Biden,” Sen. Scott (R-SC) on how he plans on beating former President Trump if he runs for president.

“I plan on at least three or four more Easter Egg Rolls. Maybe five. Maybe six, what the hell? I don’t know…I’ll either be rolling an egg or end up being the guy who’s pushing ’em out…I plan on running, Al, we’re just not prepared to announce it yet,” President Biden soft-launching his reelection campaign at the White House Easter Egg Roll.

Did You Know

The Democratic National Committee selected Chicago for the 2024 Democratic National Convention. The Windy City beat out Atlanta and New York City to host the convention for the first time since 1996. The convention will be held Aug. 19-22, 2024.

Graph of the Week

The challenge for any GOP hopeful is that the size and loyalty of former president Trump’s base provides a floor of support that any candidate will struggle to overcome. President Trump’s base is near a third of Republican primary voters, and about a quarter of these voters would support him even if he ran as an independent. As a result, even if Trump’s support among “floating” voters fades, he will remain one of the top two candidates throughout the primary and will be the nominee unless the field consolidates. While the number of undeclared candidates remains large, Governors like Sununu (NH), Youngkin (VA), and Noem (SD) could get in the race, as could Trump officials such as former Secretary of State Pompeo and former Vice President Pence. These candidates are running on the small odds that Trump and DeSantis both stumble, on the hope of increasing their profile to become Vice President, or to becoming the attack dog that weakens Trump sufficiently for DeSantis to win.


Although the latest IMF World Economic Outlook lowered 2023 and 2024 growth forecasts, it still conveys a scenario of a gradual recovery from the pandemic and Russia’s war in Ukraine. Although the IMF cites multiple concerns, including inflation, financial instability, the war in Ukraine, growing geopolitical tensions, and economic fragmentation, its forecast is somewhat stronger than consensus for the global economy and developed markets, below consensus for emerging markets, and more optimistic than previous base cases. The Fund now expects global output to grow 2.8% in 2023 before rising to 3.0% in 2024; however, risks to the global outlook are skewed to the downside, with the chances of a hard landing having risen sharply. 

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