Thought of the Week:
Off the top of your head, right now, can you name your state’s governor, two Senators, and your local Congressperson? My wife came close—it wasn’t Maryland Governor Hogan, he was term limited in 2022 and replaced by Wes Moore, and she named our old district’s Congressman, Rep. Trone (D-MD-6), rather than our new district’s, Rep. Raskin (D-MD-8). She’s not alone. According to some surveys, just over one-third (37%) know their Representative’s name, and just over half (56%) of Americans could guess their Representative’s party affiliation; only about two in five (42%) could name at least one local member of Congress; one-third couldn’t name their governor; and 77% of Americans between the ages of 18 and 34 could not name one senator from his or her home state. Assuming you knew yours, do you ever contact your local representative on an issue important to you or visit his/her office either in Washington or in your home district?* Could Americans’ lack of familiarity with their local representatives be due to not having enough of them? Well, believe it or not, there are a number of campaigns ongoing to expand the number of Representatives in the House in an effort to bring elected officials closer to their constituents. Up until 1929, the size of the House used to grow with the American population. The Reapportionment Act capped the number of members at 435. Ever since, advocates have argued that House districts have simply gotten too large and ineffective for efficient administration. In 1910 the average House district represented 210,000 people; today, that number is about 761,000, according to the Congressional Research Service. One bill, sponsored by Rep. Blumenauer (D-OR), would increase the size of the House to 585 members after the 2030 Census. Perhaps, a larger House—which could bring representatives closer to their constituencies, create a more competitive landscape, and possibly make the chamber more equitable—would be a step in the direction toward a more representative and responsive government.
*When visiting Washington, contact your Representative’s office, and request a staff-led tour of the Capitol Building—you’ll bypass several long lines and may even see some areas not open to the general public. Also, if you’re ever need of an idea for a unique gift, either one of your Senators or your Congressman can obtain an American flag that was flown over the Capitol on a specific date.
Thought Leadership from our Consultants, Think Tanks, and Trade Associations
Eurasia Group Notes that Former President Trump’s Fourth Indictment may have Implications Beyond the Courtroom. Former president Trump and 18 others were indicted in Georgia on racketeering charges relating to alleged efforts to overturn the results of the 2020 election. The charges will not affect the former president’s standing in the Republican primary, in which he is the overwhelming favorite (75% odds), but represent his most serious legal risk and will hurt him among general election voters. Due to the number of defendants and witnesses, the trial could last years and is unlikely to be resolved before the 2024 election. There is no obvious route out of legal jeopardy for Trump if he is convicted, making the Georgia case higher-risk than either his federal or Manhattan indictments. The Georgia case carries mandatory minimum sentences and could result in the former president going to state jail even if he is elected in 2024. Since he is charged with state, not federal, crimes, he would not be able to pardon himself if he wins the White House in 2024, and Georgia’s governor does not have pardon power in the case. Although a state has never attempted to arrest a sitting president, there is no constitutional prohibition on doing so, meaning that any conviction would likely go to the Supreme Court. If convicted, Trump would be sure to resist, pitting his federal protective detail and federal law enforcement, as well as millions of Trump supporters, against the state of Georgia. There is no precedent for a presidential candidate undergoing even a single criminal trial, much less two federal and two state trials at the same time. While the trials will hurt Trump with independent voters, they will also serve to discredit the legal system among Trump supporters who see the prosecutions as inherently political. The associated reduced faith in political institutions will do damage to the American justice system, take years to repair, and echo politically for decades.
Eurasia Group Marks IRA’s One Year Anniversary, Notes Gathering Political Headwinds. One year after its approval, the Inflation Reduction Act (IRA) has achieved many of its initial goals but faces political and implementation challenges that could limit its long-term impact. Permitting reform, which is needed to unlock the renewable energy goals of the IRA, is the most important near-term constraint and faces an uphill battle in Congress this year. Friction between the U.S.’s climate and security goals represents another handicap. With the U.S. trending toward more expansive trade and investment restrictions on Chinese entities, clean energy supply chains may be unable to meet the goals set by the IRA. Republican victories in the 2024 elections would also set up likely challenges to the financing provisions of the IRA, with direct spending facing more of a risk than tax credits, although some tax provisions, including electric vehicle (EV) and clean energy credits, could also be affected when tax policy is debated in 2025.
Trade Analyst Laura Chasen’s Take on President Biden’s Long-Awaited EO on Outbound Investment. Last week, President Biden signed and released his long-anticipated Executive Order (EO) on regulating outbound foreign investment. While Congress had also been working on outbound investment legislation, the EO had been under consideration for two years. Through the EO, the White House declared a national emergency to “deal with the threat” posed by certain outbound investments. Accompanying the EO, the Treasury Department released a Fact Sheet with an Advance Notice of Proposed Rule-Making and a solicitation for public comments, due in 45 days. As administration officials had signaled, restrictions are tightly targeted to a few specific advanced technologies—quantum computing, AI with possible military uses, and advanced semiconductors—while certain other outbound investments in China (such as in Chinese companies developing regular AI, semiconductors, and other technologies) will only have to be notified to the government. The White House stressed the narrowness of the restrictions, saying “The program complements the U.S.’s existing export control and inbound screening tools with a ‘small yard, high fence’ approach.” The phrase “small yard, high fence” is what the President Biden hopes China, U.S. allies, and American businesses will see in its approach—that it is limited to a small area of investment but for that area, the restrictions will be insurmountable. The EO will not be implemented immediately. As with most government rule-making, the initial announcement is preliminary, and it has to go through a public comment period before a final rule is issued. Treasury is seeking input regarding several aspects of the rule, including which transactions should be covered. The final rule is expected to take effect next year. Contact the Washington office for more of Laura Chasen’s take on this subject and other trade issues.
“Off the Record”
A CR to Avoid a Government Shutdown? House conservatives are in an uproar over the possibility of a passing a stopgap funding bill. Ever since House Speaker McCarthy (R-CA) privately told members that he expected Congress would need to pass a continuing resolution (CR) to fund federal agencies past the Sept. 30 deadline, several House Republicans have voiced their opposition to it absent some clear conservative policy victories. The idea has created a difficult situation for McCarthy, who may be forced by conservatives to attach poison-pill riders to the CR that could never pass the Senate. Senate Majority Leader Schumer is already laying the groundwork to blame House Republicans if there’s a shutdown at the end of September. According to Schumer, he and McCarthy agreed that a CR would be necessary at the end of September, not a surprise given the impossibility of getting all 12 appropriations bills signed into law by Sept. 30. Although neither McCarthy nor Schumer have elaborated on the length of a short-term CR they might try to pass, conservative hardliners have made it clear they won’t vote for any funding measure that doesn’t include major spending cuts or policy wins. And even if they do get several wins, a number of GOP hardliners have said they aren’t interested in supporting a CR for more than a very short period of time. To level set, the House has 11 appropriations bills to pass next month with only 12 legislative days left until the end of the fiscal year, while the Senate has approved all 12 funding bills with bipartisan majorities. Because there is simply not enough time in September to pass all appropriations bills, a CR is the only solution to avoid a government shutdown. That said, some conservatives have related that a government shutdown doesn’t bother them if that’s what it takes to achieve their fiscal goals.
In Other Words
“There is so much information out there today, such an abundance of content, it just takes a while to make sure that information really actually sinks in,” Sen. Wyden (D-OR) on why the Inflation Reduction Act (IRA) hasn’t resonated with voters.
“The media loves to talk about Trump. That is what they are talking about. Americans are not talking about Trump,” Former U.N. Ambassador and presidential candidate Nikki Haley (R).
Did You Know
Former President Carter was the most recent president to complete his term without making any appointments to the Supreme Court. The other three who did not make any nominations, as there were no vacancies while they were in office, were William Henry Harrison, Zachary Taylor, and Andrew Johnson.
Graph of the Week
The Conference Board forecasts that real GDP growth will slow to 1.9% in 2023 and then decelerate further to 0.5% in 2024. Although the likelihood of a “soft landing” is rising, on balance, the projection is that the economy will gradually buckle under mounting challenges later this year, leading to a very short and shallow recession. Despite headwinds associated with inflation and interest rates, consumer spending surged in early 2023 and has continued to expand modestly in recent months. The Conference Board does not believe this trend can hold. Compensation growth is decelerating, pandemic savings are dwindling, revolving credit usage is rising, and student loan repayments are set to restart in September. Given these challenges, consumer spending will contract in Q4 2023 and Q1 2024. That said, recent upside surprises—including high Q2 GDP growth, a reacceleration in personal consumption expenditures, and rising consumer confidence—have brightened the outlook compared to previous forecasts. With or without a mild recession, pandemic-era volatility will finally recede in 2024, with inflation drifting back toward 2% and Fed interest rates settling near 4%.
