January 27, 2023

Thought of the Week

There are signs that Washington may be on the cusp of returning to its pre-Covid normal. Although few, if any, companies have returned to the office full-time, in her inaugural address D.C. Mayor Muriel Bowser forcefully called on the White House to either bring federal government workers back to the office or realign their unused property holdings to allow for use by residential developers, local government, non-profits, and others. Similarly, Speaker McCarthy has reopened House office buildings to the public and visitors no longer require staff escorts to walk the halls of Congress. Likewise, Senate office buildings are mostly open, and the Capitol complex is expected to reopen fully in March. Trade associations, think tanks, and media outlets are also slowly dipping their toes into in-person events. Just this week, I attended a Global Business Alliance (GBA) meeting with the Assistant Secretary of the Treasury for Investment Security; the National Association of Manufacturers (NAM) restarted their in-person meet and greets with new members of Congress; and Bloomberg Government held their Never Miss a Beat reception, which featured celebrity mixologist LP O’Brien, and attracted numerous White House and Congressional staffers. Beyond these openings, next month, the Public Affairs Council will hold their Advocacy Conference for lobbyists and government affairs professionals in person for the first time since 2020; I’ve begun to receive more and more invites to corporate and political action committee (PAC) dinners, fundraisers, and meet and greets; and it seems that State of the Union watch parties are coming back—yes, that’s a thing in Washington. Besides Washington office staff being able to trade Zoom for in-person events, what does this mean for SCOA? If you’re visiting the nation’s capital and your business or a key project could benefit from an introduction to Congressional, Senate, or committee staff, the Washington office can assist in making the necessary arrangements. Similarly, if you’d like to introduce a Senator or Congressperson to your business in their home state or district, consider a site visit. The Washington office is here to help.   

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

Eurasia Group Sees Fed Chair Powell Hinting at a Moderate February Rate Hike. After a series of rapid interest rate hikes, the Fed is preparing to slow down their rate of increase. Officials have indicated that quarter-point hikes will be likely throughout the spring. This follows the Fed’s December signals that spring interest rate hikes would likely be smaller than the four consecutive 0.75 basis point hikes in the latter half of 2022. In fact, pressure on the Fed to raise interest rates to combat inflation may be abating; the December CPI report had inflation at 6.5%, down from its high of 9.1% in June. However, much still depends on the economic data for January. If inflation comes in hot, a 0.5-point increase is possible. On the other hand, if the economic data is poor, markets will expect the Fed to stop hiking at the end of Q1.

Inside U.S. Trade Reports that Treasury Secretary Yellen Feels the EU and Japan May Need New Trade Pacts with the U.S. to Meet the EV Tax Credit Rule. According to Treasury Secretary Yellen, the EU and Japan may have to negotiate new arrangements with the U.S. to qualify as “free trade agreement” partners for the purposes of a new localization requirement for electric vehicle tax credits. Consumer tax credits for electric vehicles, enacted under the Inflation Reduction Act (IRA), have several sourcing rules. These rules include requirements that a certain percentage of the critical minerals used in a vehicle’s battery are recycled in North America, or extracted or processed in the U.S. or in a country that has a free trade agreement with the U.S. Treasury plans to issue proposed guidance on the rule in March, and has said it will propose that the secretary “may identify additional free trade agreements” beyond the U.S.’s list of traditional FTAs. Any newly negotiated agreements will be evaluated for the purposes of the minerals-sourcing requirement based on a December white paper issued by the department. Secretary Yellen clarified that existing arrangements with the EU and Japan would not qualify as FTAs under the developing rules. While both governments are pressing Washington to loosen the tax credits’ sourcing rules, at the same time, Senator Manchin (D-WV) has proposed new legislation to amend the IRA that would block the effort to loosen “made in North America” provisions.

Observatory Group Hears Economic Rumblings from Inside the White House. Although multiple news outlets report that Federal Reserve Vice Chair Brainard is being seriously considered, potentially even the front runner, for a senior White House position—Chair of the National Economic Council, no one is certain who President Biden will ultimately choose. It is common knowledge inside the beltway that Brainard’s ultimate ambition is to be Treasury Secretary. And while current Secretary Yellen has committed to staying on the job “for now,” that horizon probably doesn’t extend much beyond the time necessary to get the debt limit raised, which is later this year. So, the question is, would a perch at the White House help Brainard’s chances of getting the top job at Treasury? Most likely, yes. A White House position would demonstrate how well Brainard can work with the administration and also help smooth the transition to a political position, one that has been difficult for Yellen. It should be noted that Brainard held multiple positions in the Obama administration, so she is not new to the political arena. If Brainard views any White House job as a stepping-stone to being nominated the next Treasury Secretary, it would be attractive to her. What’s more, with a Democratic majority in the Senate, her chances of approval are almost certain. What would this mean for the Fed? Brainard’s departure would be a major loss for the FOMC and for Chair Powell. Brainard has held all the leadership positions at the Fed, except for Chair; her experience and expertise are unparalleled; and she has been a good soldier when needed, a tough negotiator in service of the Chair, a thought leader, and a source of continuity amid a group of mostly newly serving Governors.


We met up with a National Republican Senatorial Committee (NRSC) staffer at this week’s Bloomberg Government ‘Never Miss a Beat’ reception. Candidly, he admitted that money wasn’t the GOP’s problem in 2022, even though the party was outraised by Democrats; he shrugged off whether the Biden classified document scandal would have had any impact on the midterms or Georgia runoff; and he placed candidate quality at the center of Republicans’ underperformance. With 20 Democrats and 3 Independents who caucus with Democrats vs. just 11 Republicans up for reelection, 2024 could be a make or break year for Senate Republicans (the map gets difficult for the GOP in 2026—13 Ds vs 19Rs—and 2028—13 Ds vs. 15Rs). If not 2024, Republicans could find themselves in the minority until at least 2030. At present, the NRSC sees WV as ripe for flipping; AZ, MT, and OH as toss-ups; and MI, NV, PA, and WI in play. Beyond candidate quality, the key for Republicans will be getting their voters to accept mail-in and early voting.

In Other Words

“I’ve never lost a race. I said that then, I still say that now. I’m not going to lose now,” Former U.N. Ambassador Nikki Haley (R) on a potential presidential campaign.

“He’s nutty as a fruitcake. That’s why I called him a bunny boiler. I don’t know if you’ve seen Fatal Attraction, but there are people like that out there,” Sen. Kennedy (R-LA) assessing Rep. Santos (R-NY).

Did You Know

The “Star-Spangled Banner” became the national anthem in 1931.

Graph of the Week

Although Republicans didn’t vote for it, many are reaping the benefits of the Inflation Reduction Act (IRA). In the five months since the IRA passed, companies have announced tens of billions of dollars in projects that benefit from incentives in the law. In fact, roughly two-thirds of major projects are in districts whose Republican lawmakers opposed the Act. The dynamic is forcing a political balancing—tout the jobs and economic benefits coming to their states and districts, but not the law itself. The results are also awkward for Democrats who expended the political capital to enact the bill, only to see the GOP sharing in the jobs and positive headlines it is creating.

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