June 18, 2021

Thought of the Week:

At first glance,  you wouldn’t think that heavy metal drummer Morgan Rose and political analyst Charlie Cook would agree on much of anything, especially politics. Rose is routinely recognized as one of the top 100 drummers of all time, and he has played with such groups as Sevendust, Methods of Mayhem, Korn, and Motley Crue. I was paired with him in Nashville during a charity golf tournament to benefit post-9/11 veterans. When he found out I was a lobbyist in D.C., he asked me, “what’s going on down there; do our representatives purposely try not to get along?” Charlie Cook is one of the country’s premier political analysts who specializes in election forecasts and political trends. Cook is a creature of Washington politics, he writes for the National Journal, appears regularly on NBC, and his Cook Political Report is one of the most respected political journals in the country. During this week’s regular “Cook Catchup,” Charlie told members of the Washington office that it appears as if Congress is purposely drafting bills that legislators cannot support. Partisans, on both sides of the aisle, have expressed similar sentiments concerning President Biden’s budget resolution. The perception of critics and some members of Congress is that the request is the President’s effort to alter the role of government in the economy. Critics see the resolution as moving the country toward industrial policy, fostering national-champion industries, and expanding the social welfare state, all paid for by increasing taxes on the “wealthy” and corporations. These same critics point out that the private sector has been making massive investments in manufacturing and R&D on its own and that it is in a better position than the government to pick winners. From their standpoint, it would be a negative for U.S. competitiveness to raise taxes; maintain trade barriers; and burden companies with regulatory mandates, antitrust actions, policies that raise energy prices, and higher government deficits that crowd out private investment. From the other side, progressive Democrats fault the budget package for spending too much on defense and subsidies they consider “corporate welfare” rather than on social needs and greater regulation. Although this may be a long-standing debate between the two sides, developments over the past year, from the pandemic to the push for racial and social justice to an increased focus on ESG issues, have raised the debate to a higher plane than the country has seen in years. This is why former Trump White House Legislative Affairs Direct Mike McKenna told us that the Senate’s bipartisan effort to pass an infrastructure deal is so important. According to McKenna, the 21 Senators (11 Republicans and 10 Democrats) reaching compromise are not so much concerned with the details of the bill, but proving to the country that the Senate, and Washington in general, can work for the American people. The reason this inside baseball over a single bill matters is that it will: first, signal the way in which the remainder of this Congress will operate—in a bipartisan fashion or strictly through the power politics of reconciliation and the filibuster; and second, it will highlight the issues the 2022 mid-term election may turn on.

Thought Leadership—from our Associations, Think Tanks, and Consultants:

Eurasia Group: Odds of Second Term for Powell Rise with Inflation Risks: Federal Reserve Chairman Powell’s odds of winning reappointment have risen to 40% from 20%, while those of the field of potential replacements have narrowed. The Eurasia Group assigns a 30% probability (up from 25%) to Lael Brainard getting the job, 20% odds to Janet Yellen, and a 10% likelihood to the selection of another candidate. Although there will be pressure from the progressive left on President Biden to appoint a more liberal chair—particularly one who would do more on climate change—rising financial risks and the lack of a consensus alternative who would not scare markets leaves the White House with few options. Even if Powell stays, the administration will potentially have three other positions to fill, providing ample room to move the board in a structurally much more dovish direction.  

Eurasia Group: House Anti-Trust Bills Open Long War Against Big Business: Although a package of five bipartisan House antitrust bills will not pass into law this year, it is expected that the House will act quickly to approve them; this signals a potentially durable sea change in Washington’s approach to big business. As currently drafted, the bills would affect only a small number of large technology companies, but they attempt to go after mergers generally and specific practices used in other industries, making the tools envisioned a threat beyond big tech. While some Republicans remain committed to a limited path that would codify current antitrust doctrine, following a populist tone in the party, others have proposed more sweeping changes that align them with Democrats against major corporations.

Conference Board: Economic Growth Remains Poised for a Strong Rebound in the Second Half of the Year: Led by a number of large economies, the global economy is on course to rebound from the pandemic-induced recession of 2021. The rotation from goods to services consumption is expected to produce above-trend growth both this year and next. While the pace of vaccination has picked up in recent weeks in several emerging markets, including Latin America, low overall vaccination rates remain a risk to the short-term outlook. For the U.S., strong macroeconomic indicators are bolstering prospects for economic growth in Q1 2021 and beyond. However, it is critical that consumers continue to dip into large pools of savings to finance spending, especially on in-person services. Inflationary pressures related to high demand for durable goods may begin to ebb soon, but will likely be replaced by service sector price pressures. While the prospects for the Administration’s $2.3 trillion infrastructure, spending, and tax plans remain uncertain, they do pose upside risks to economic growth in 2022

In Other Words (Quote): 

“All I’m saying is I don’t think our founding fathers anticipated the survival of this democratic experiment to rest in the hands of a man that who lives in a house boat,”

— Sen. Durbin (D-IL), in a since-deleted tweet about Sen. Manchin (D-WV).

Did You Know:

Florida Gov. DeSantis (R) ran narrowly ahead of former President Trump in a straw poll of potential 2024 candidates conducted at the Western Conservative Summit in Denver.

Image of the Week:

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