February 3, 2023

Thought of the Week

Last December, I appeared on the SCOA Americas Week ‘Enriching Lives through Volunteerism’ panel. It was a great opportunity for me to not only showcase the volunteer work that has become a passion of mine, but also express my gratitude to SCOA for encouraging my community service. In a nutshell, I co-founded a non-profit that incorporates the game of golf into the mental and physical rehabilitation programs of post-9/11 veterans. This is our 17th year; we’ve touched the lives of more than 5,000 veterans and their families; and we’ve given away tens of millions of dollars in equipment, instruction, experiences, and rehabilitation services all free of charge to veterans—a short video of our work can be found here: SMGA 2023. SCOA has been instrumental in supporting my volunteer work through SCOA Foundation monetary grants and the approval of Volunteer Service hours. As a lobbyist and government affairs director, my volunteer work has also crossed over to my day job, bringing me closer to the offices of Senator Boozman (R-AR), Congressman Raskin (D-MD), former President Bush, the last three Maryland state governors, and others. During the Q&A portion of the panel, I was asked to highlight a real world example of how the non-profit actually benefitted one of our constituents. I highlighted one veteran whose introduction to the game of golf provided him with a transition back to civilian life, marriage, a new career, and a growing family. It was a great example, but as is typically the case, upon reflection, one always thinks of something unique or a different way of framing an answer. The truth is that veterans make up more than one-quarter of all the suicides in the U.S. At the time of last year’s panel, of the 5000 veterans who had gone through our program, I only knew of two suicides. It would have been a perfect answer to an intriguing question. So, why in this week’s ‘Thought of the Week’ am I not highlighting the meeting between President Biden and Speaker McCarthy on the debt ceiling, describing the inside baseball of committee assignments, or featuring potential climate disclosure rules pertaining to federal contracts? Its’ because this week, I received news of a third. Next Friday, I’ll be back with a thought on the political and policy topics of the day; this week, I hope you’ll indulge me because it’s difficult to think of anything else.   

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

International Business Government Counsellors (IBC) Sees Developments but No EV Subsidy Solutions. Dueling efforts are under way to either accommodate the concerns of close U.S. trading partners who are furious about the Inflation Reduction Act’s (IRA) discriminatory rules, or assure that the rules will not be diluted to the detriment of domestic interests. In fact, with intense scrutiny continuing over electric vehicle (EV) tax credits contained in the IRA, this week, Senator Manchin (D-WV) introduced a bill, the American Vehicle Security Act, that seeks to delay implementation of the IRA’s tax credits and remove the Treasury Department’s authority to interpret and implement origin requirements for qualifying critical minerals and battery components (a white paper issued by Treasury sought to address allies’ objections to the IRA’s provisions by broadening the definition of “free trade agreement”). While Senate Finance Committee Chair Wyden (D-OR) says he has no interest in reopening the IRA, Treasury Secretary Yellen stoked confusion by suggesting to reporters that the U.S. could enter into narrow, limited trade deals for the purpose of enabling vehicles made in the EU and Japan (and presumably South Korea and the UK) to qualify for the subsidies. At the same time, unions representing autoworkers, steelworkers, and machinists are teaming with environmental groups like the Sierra Club and consumer advocacy groups such as Public Citizen to urge the Biden administration not to change the IRA’s EV tax credit rules.

Eurasia Group Spots Governor Haley Streaking into the 2024 Race Ahead of a Constellation of GOP Stars. Former South Carolina Governor and UN Ambassador Nikki Haley announced her campaign for president this week, making her the first official challenger to former President Donald Trump. Ambassadr Haley, who has been eyeing a presidential run for years, previously vowed not to run against her former boss. Haley’s move puts pressure on Florida Governor DeSantis and former Vice President Pence to announce their runs as well, and previews what will likely be a crowded Republican field. Other potential candidates, including Virginia Governor Youngkin, South Dakota Governor Noem, former Maryland Governor Hogan, and South Carolina Senator Scott are likely to delay their announcements until later this spring. A time-worn strategy in American politics is to run for president, hoping for the vice-presidential, or some other cabinet level, nod. While President Trump still holds a roughly 10-point lead in an average of multi-candidate polls, he lags Florida Governor DeSantis by 5 points in an average of head-to-head polls. The difference between multi-candidate and head-to-head results for Trump reflects his weakened status in the GOP, and is the primary reason additional challengers may enter the ring. Exactly which challengers will end up on top remains an open question, and polling this early in a campaign cycle offers merely a general sense of the state of the race. While DeSantis is, by a healthy margin, the strongest of the potential Trump alternatives, early Republican front runners have a history of flaming out, and in a crowded field of experienced politicians, his lead may not last. 

The Observatory Group Reviews the Federal Reserve’s February Rate Decision. Yesterday, the Fed raised interest rates by 25 bp to 4.50 to 4.75%.  Accompanying guidance continued to refer to ‘ongoing’ rate hikes and allowed that although inflation had eased, it remains elevated. In public statements Chair Powell tried to thread the needle—acknowledging progress on inflation, which is provisional, with the central bank’s general view that more progress is required. In fact, in his prepared statement Chair Powell said that “substantially more evidence of inflation slowing is needed for the Committee to be confident inflation is on a sustained downward path.” In this ‘on the one hand and on the other hand’ Washington-speak, the second phrase is typically the dominant/operative one. As such, it can be concluded that policymakers see inflation as elevated, evidence of slowing as preliminary and narrowly based, and that the labor market continues to be in a state of excess demand. It follows that the December FOMC median projection for the policy rate topping out at 5.0-5.25% remains a solid baseline. Any case for halting rate hikes in March would require shocking negative developments that are far from the FOMC’s baseline. May presents a lower hurdle for a pause. If inflation continues to slow gradually as the Fed expects, an additional 50 bp in hikes before a pause is the right call.


Although it has been well-known for months that the White House has considered taking action to limit U.S. outbound investments to China, it is only recently that we learned that the Biden administration is considering complete bans on American investments in certain high-tech sectors. In a Global Business Alliance (GBA) trade policy call, Brian Pomper, International Trade Policy Partner at law firm Akin Gump and a former Senate Finance Committee Counsel, confirmed the possibility of investment prohibitions across entire portions of the economy; to the best of our knowledge sector-wide prohibitions of American capital flowing into China had not been previously reported. According to Mr. Pomper, the outbound investment screening mechanisms under consideration are the brainchild of the NSC, and more aggressive approaches have gained prominence inside the White House over the past several weeks. With Secretary of State Blinken’s visit to China and President Biden’s State of the Union address both coming up, an announcement is expected out of the administration this month. At the very least, the new rules will carry blocking authority similar to CFIUS. While China hawks in Congress are considering legislation of their own, if the administration’s rules have real teeth, it is unclear what more will happen legislatively. The sectors that could see a de facto ban on U.S. investment are AI, quantum computing, and semiconductors. Although biotech and pharmaceuticals do not seem to be on the table yet, they are on the menu.    

In Other Words

“There is an old quote that has been attributed to Lee Atwater: ‘When your enemy is in the process of drowning, throw him a brick.’ None of Donald Trump’s opponents ever have the balls to throw him the damn brick. They just hope someone else will. Hope isn’t a winning strategy,” GOP strategist Terry Sullivan.

“My guess is endorsing her would be like handing her an anvil, so I’m not going to do that,” Sen. Mitt Romney (R-UT) on former U.N. Ambassador Nikki Haley’s (R) presidential campaign.

Did You Know

This year’s Super Bowl teams, Philadelphia (Republican) and Kansas City (Democratic), hosted the presidential nominating conventions in 1900. In a rematch of the 1896 race, incumbent Republican President McKinley defeated Democratic challenger, William Jennings Bryan.

Graph of the Week

More Americans name the government as the nation’s top problem in Gallup’s latest poll, and with high prices persisting, inflation remains the second most-cited problem. The government ranks as the top problem for both Republicans and Republican-leaning independents (24%) and Democrats and Democratic-leaning independents (18%). Inflation and immigration are cited next by Republicans, while mentions of inflation, the economy in general, and race relations trail the government among Democrats.

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