Thought of the Week:
A confession…My name is Jamie, and I’m a last minute Christmas shopper. I’ve never participated in Black Friday or Cyber Monday. It is because of this that my son never did get that Hot Wheels Carwash Santa promised him, and that both my kids often had to wait into the New Year before getting the newest gaming platform and/or hottest video game. The holiday rush for the latest Gameboy cartridge or most recent version of Super Mario is something my parents never had to contend with. At the time, not only were video games in their infancy, but I was always more sport than gamer. While video games offer their own set of skills from risk-taking to perseverance to problem-solving transferable to the business world, there is increasing recognition that the value of non-cognitive skills cultivated through athletics cannot be overstated in today’s economy. Although technical proficiency and academic knowledge remain crucial, skills such as teamwork, resilience, and strategic thinking are critical to professional success, and nowhere are these talents more intensively cultivated than athletics. According to researchers at the Federal Reserve Bank of Philadelphia and Duke and Georgetown Universities, sports, especially at competitive levels, serve as an incubator for developing such essential non-cognitive business skills as learning to navigate novel challenges, working collaboratively, dealing with failure, and implementing disciplined approaches to goal achievement. In fact, the study showcased how the value of skills taught through athletics translated to the workforce. In “No Revenge for the Nerds? Evaluating the Careers of Ivy League Athletes,” researchers found that athletes achieve higher terminal wages and earn more cumulatively over their careers than their non-athlete peers, even when controlling for variables such as graduation year, major, and first job. The study concluded that the non-academic human capital developed through athletics––teamwork, resilience, and leadership—has significant labor market value. The implications of the findings extend far beyond the playing field and point to an opportunity to leverage athletics to help build skills for all workers. While not exactly a game, set, or match, last week’s SCOA Americas Week video competition showcased some of the same skill-building techniques that are so prevalent in athletics. I would encourage future Americas Weeks, and HR initiatives, to include similar collaborative experiences. And if your business development programs include a government affairs and/or competitive intelligence component to them, please consider adding the Washington office to your team.
Thought Leadership from our Consultants, Think Tanks, and Trade Associations
Bloomberg Government Reports that Lobbyists will Feel the Pinch of Capitol Hill Departures. The mounting congressional departures causing disarray inside the Capitol complex are about to rock the lobbying sector. Lobbyists already are grappling with the fallout from a rash of retirement announcements and resignations, including former Speaker McCarthy (R-CA) and a pair of top-committee chairs in the House. The prominent personnel shuffle, combined with the uncertainty of next year’s elections, promises to throw more chaos into Congress’s future agenda—and lobbyists’ workload. Companies and sectors are poised to lose longtime champions including House Appropriations Chair Granger (R-TX) and House Financial Services Chair McHenry (R, NC). While many of the lawmakers, making for the door with their aides in tow, will shop the influence industry for future work, lobbyists will have to build new or deeper connections as the remaining lawmakers, and emerging newcomers, seek to fill committee vacancies and the legislative portfolios of those eyeing the exits. At least 18 seats on exclusive House committees—Appropriations, Ways and Means, Energy and Commerce, Financial Services, and Rules—will open by 2025 when members skip reelection, resign, or seek other office. On one hand, you’re losing institutional knowledge, which might add to the already difficult negotiations toward reaching compromise; on the other hand, departures also presents opportunities for emerging leaders to rise and usher in new visions of leadership. Yet, there’s no question Congress and K Street alike will feel the gaps of losing longtime lawmakers, especially those with specialized knowledge from legislative work. In fact, the three most senior Democrats on the Ways and Means Trade Subcommittee are planning to leave: Blumenauer (OR), Higgins (NY), and Kildee (MI); likewise, the Energy & Commerce’s Health Subcommittee will lose at least six members.
Brownstein Summarizes the House’s Strategy to Win Economic Competition with the Chinese Communist Party (CCP). The House Select Committee on Strategic Competition between the United States and the Chinese Communist Party adopted a bipartisan report titled “Reset, Prevent, Build: A Strategy to Win America’s Economic Competition with the Chinese Communist Party.” The report contains nearly 150 recommendations, of which a majority are supported by bipartisan members of the Select Committee, geared toward strengthening U.S. economic competitiveness vis-à-vis China. The report’s recommendations are broadly focused on three priorities: (1) reforming existing laws, bilateral agreements, and federal regulations that form the U.S.’ present economic relationship with China; (2) expanding the U.S. export control regime and policies impacting sensitive technology research and development (R&D) to slow the CCP;s military modernization, economic advancement, and enablement of human rights abuses; and (3) strengthening the U.S.’s domestic research capabilities and joint partnerships with allies to catalyze additional growth in critical and emerging technology sectors. While the report’s recommendations are not legislation, Select Committee Ranking Member Krishnamoorthi (D-IL) noted that the report provides a blueprint for bipartisan next year.
Eurasia Group Says a Surprising Fed Pivot Could Signal More Support for Pre-election Recovery. Fed chair Jay Powell caught us, and the market, by surprise with a dovish message sharply at odds with recent Fed messaging. In addition to projections showing three cuts next year to 4.6% (from a median forecast of 5.1% in September and 5.4% currently), Powell candidly admitted the committee was discussing the timing of cuts, emphasized that policy was “well into restrictive territory” and made other comments seemingly validating market easing expectations. The inflation outlook was marked down, and while growth was slightly lowered for 2024, unemployment remains low throughout the forecast. Still, in trying to understand the sharp pivot, it’s easy to speculate that concerns about recession now weigh more heavily on the committee. Markets are now pricing in six rate cuts next year, beginning in March; in our view, the outcome is likely to be closer to the FOMC’s projections than the current market pricing. Earlier and more aggressive rate cuts would provide an early easing in financial conditions and additional support for recovery later in 2024, ahead of what we expect to be a close election, providing a tailwind to President Joe Biden’s struggling re-election bid. Regardless, monetary policy will remain restrictive in 2024, and we retain our outlook for sub-par US growth, consistent with the FOMC’s current projections. There will be a temptation to extrapolate a global policy pivot following the Fed’s move, and in the aftermath of yesterday’s meeting, markets priced in additional policy easing in both the UK and euro area. The implied early and steep rate cuts are inconsistent with the current messaging from European policymakers, but lower US rates and a weaker dollar, if sustained, will ease financial conditions globally and could create room for other central banks to ease policy.
Political Jokes from the Annual Gridiron Club Dinner. The Gridiron Club hosted its winter roast featuring Washington’s most prominent faces poking fun at themselves, at the storylines driving politics, and the obsessions that loom large around the Beltway but don’t matter anywhere else. Below are some of the best jokes from the evening’s speakers Rep. Mace (R-SC) and Sen. Manchin (D-WV):
· Rep. Mace on reports about high staff turnover in her office: “The Daily Mail wrote an article about me firing my staffers, and now people say it’s going to hurt my career. I say, ‘Right, because nobody ever known for saying “You’re fired” could make it in politics.’…The Daily Mail also says that I talked about my sex life in the office. This is categorically false. I save that topic for prayer breakfasts.”
· On her recently canceled engagement: “I am single now. My ex wanted to get married, but I attached it to border security and the deal fell apart.”
· On the response of university presidents to antisemitism: “You know things are bad when even Mitch McConnell was like, ‘How come they’re not saying anything?’”
· On Manchin’s decision to retire from the Senate: “Joe Manchin recently announced he won’t seek reelection. You know the Senate sucks when Option A is to go back to West Virginia.”
· On President Biden: “There are rumors that Democrats want to replace Joe Biden with someone who has more energy and vitality, but so far, Jimmy Carter has said no.”
Sen. Manchin’s turn…
· On what he has in common with Nancy Mace: “Nancy and I are really kindred spirits in many ways. She was the first Republican woman elected to Congress from South Carolina. And I’m going to be the last Democrat of any gender elected from West Virginia.”
· Borrowing a joke format from comedian Jeff Foxworthy: “If you think Joe Biden is the best and you think Joe Biden is the worst, you might be a centrist. If you ever wondered what happened to Evan Bayh, by God, you are a centrist.”
· On his famous houseboat: “People wanna know about my boat—they always ask about why I’m on the boat. And you want to know the real reason I live on water? Ted Cruz can’t swim.”
· On why he isn’t running for reelection: “If I’d run for reelection and won, my term would’ve ended in January 2031. I’d be 83 years old. Now, I don’t want to be wasting my time away in Congress at that age. Hell, those are peak White House years.”
In Other Words
“You bet your ass I am! Let’s get this thing done!” New Hampshire Governor Sununu (R) endorsing former UN Ambassador Haley (R) for president
Did You Know
The Resolute Desk, a replica of which is housed at the William J. Clinton Presidential Library and used by nearly every president since Rutherford Hayes with the exceptions of Presidents Johnson, Nixon, and Ford, was first used in the Oval Office during the presidency of John F. Kennedy. Constructed of mahogany timbers taken from the HMS Resolute, the desk includes a version of the Presidential Coat of Arms with the eagle facing left toward the talon holding the arrows.
Graphs of the Week
The Conference Board’s Measure of CEO Confidence fell to 46 in Q4, down from 48 in the third quarter (a reading below 50 reflects more negative than positive responses). Compared to last quarter, CEOs’ view of current economic conditions was less optimistic, and chief executives are carrying forward a cautious outlook for the economy ahead. In Q4, 18% of CEOs reported general economic conditions to be better than they were six months ago, down from 28% in Q3. At the same time, future expectations became more pessimistic: while 19% of CEOs now expect future conditions to improve, 47% expect general economic conditions to worsen over the next six months, up from 39% in Q3. A large majority of CEOs continue to expect a U.S. recession, although that consensus has receded notably over the course of the year—in Q4, 72% of CEOs reported they are preparing for a recession over the next 12-18 months, compared to 93% at the start of the year. CEOs are still hiring; 38% expect to expand their workforce over the next 12 months, down slightly from 40% in Q3, and 71% of CEOs plan to raise wages by more than 3% over the next year.