March 3, 2023

Thought of the Week

Last week, we looked into generative AI and its potential to impact the lobbying industry. While I was supremely impressed by the speed and accuracy with which OpenAI’s ChatGPT could regurgitate information in the form of what one might expect from a university student answering an essay question, if you remember, the chatbot’s responses lacked imagination, did not include persuasive arguments, and provided no story-telling elements to place issues in context. The conclusion was that while present day AI could expand the reach of lobbying elements such as digital advocacy campaigns, it was well short of learning how to understand political networks and developing strategies to influence them. As luck would have it, this week, famed political analyst Charlie Cook took on two questions similar to what ChatGPT was stumped by: (1) who will be the presidential candidates in 2024; and (2) what issues will the 2024 election turn on. While the AI program told me it couldn’t predict the future in response to question 1 and gave me an error message on question 2, here is a summary of Charlie’s take on essentially the very same questions:

Approximately one year from now, a dozen states will hold Super Tuesday primaries. The nomination battles for both parties are likely to lead to four possible general-election scenarios—(1) the obvious one, President Biden against former President Trump; (2) Biden against a non-Trump Republican; (3) Trump versus a non-Biden Democrat; and (4) a non-Biden Democrat against a non-Trump Republican. A Biden-Trump rematch would pit the two highest-profile, and arguably most-polarizing, figures in their respective parties against one another. It would match an incumbent three weeks short of his 82nd birthday against his 78-year-old predecessor, making each the oldest nominee in their respective party’s history. A CNBC survey found that while large majorities did not want either Biden or Trump to run in 2024, age seemed to be a much bigger obstacle for Biden than Trump—while 19% wanted Biden to run again, 70% did not; by contrast, 30% wanted Trump to run while 61% did not. Among those who didn’t want Biden to run, 47% cited his age as the major reason, but among those who said they did not want to see Trump run, only 8% said age was a factor, making it easy to surmise that most who don’t want Trump to run have reasons other than age, most likely personality and style. A Biden-Trump rematch would be about little else than the two men, while a race between Biden and a non-Trump Republican would be a referendum on Biden, with age being a relevant factor; Democrats would surely try to make the race about the Republican nominee. A contest between Trump and a non-Biden Democrat would probably be more about Trump than anything else, with age secondary to his inimitable personality. Republicans would certainly try to make the race more about the Democratic candidate than Trump, but that would be easier said than done. The most wide-open and least-defined contest would be one between a non-Biden Democrat and a non-Trump Republican.  Last year’s midterm election was expected to be about Biden and the economy, something that would not have resulted in a happy ending for Democrats. Instead, it focused on abortion, poor Republican candidates, election denialism, and January 6. While it’s not hard to see the economy dominating in 2024, with a recession, no matter how long it lasts, certainly impacting the 2024 race, the “what’s it all about” question could surprise again. In the end, the choice of candidates will matter as much, or more, than anything else.

I don’t know about you, but the political score right now seems to be: Humans: 1 – ChatGPT: 0.

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

Eurasia Group Predicts Fed Rate Hikes are Increasingly Likely to Run Smack into the Debt Ceiling Debate. Based on recent data showing persistently high core inflation and a resilient labor market, the Federal Reserve is more likely to target an interest rate range of 5.5-5.75%, higher than the previously assumed 5%. Steady job growth has allowed Fed Chair Powell to put aside the concerns of Democratic Senators and focus on stabilizing prices; however, political criticism of the Fed for creating an economic slowdown will continue, and is likely to be on full display at this March’s congressionally mandated semi-annual Humphrey-Hawkins report on monetary policy. Assuming the Fed continues to raise rates by 25 basis points, this would require rate hikes in March, May, June, and July to reach the new target range. The schedule creates a challenge for the Fed as a July rate hike would occur at roughly the same time Congress is beginning to get serious about increasing the debt limit, potentially increasing volatility that will feed into the Fed’s thinking—and increase their caution—about a final mid-summer hike. 

Bloomberg Government Reports That Republicans are Eyeing a Ban on Earmarks.* House Republicans may ban earmarks from their Labor-HHS-Education appropriations bill, and potentially other government funding bills, according to Rep. Aderholt (R-AL). The decision, while not final, would be aimed at winning support from conservatives, including those who oppose all earmarks, for annual funding bills. Conservatives have called for tighter restrictions on individual project funding and have bashed earmarks included in the fiscal 2023 omnibus spending law that funded a hiking trail named for Michelle Obama and LGBT college student support. Although the effort could make it more difficult for House and Senate appropriators to agree on final funding deals, as House Republicans create more restrictions on earmarks than senators, conservatives’ votes are needed to get GOP funding bills across the House floor before members can even worry about a final, bipartisan agreement.

*Earmarks are defined by the Office of Management and Budget (OMB) as funds provided by the Congress for projects or programs where the congressional direction (in bill or report language) circumvents the merit-based or competitive allocation process, or specifies the location or recipient, or otherwise curtails the ability of the Administration to control critical aspects of the funds allocation process.

“Off the Record”

Despite fraying relations with Beijing, President Biden is expected to forego expansive new restrictions on U.S. investment in China, denying a push by some hawks in his administration and Congress. According to Politico as well as sources on Capitol Hill and K Street, the White House will scale back an executive order overseeing American investments in China to focus largely on increasing the transparency of such deals. Although the order may still prohibit U.S. investments in advanced semiconductors, it will likely not block money from flowing to other parts of China’s high-tech economy. Instead, the order is now expected to require firms to notify federal authorities when doing deals in industries like quantum computing and artificial intelligence. The White House is expected to issue the order in late March or early April.

In Other Words

“The FBI has for quite some time now assessed that the origins of the pandemic are most likely a potential lab incident in Wuhan. The Chinese government, seems to me, has been doing its best to try and thwart and obfuscate the work here, the work that we’re doing, and that’s unfortunate for everybody,” FBI Director  Wray on the origins of the Covid-19 pandemic.

“Our goal is to make sure that the United States is the only country in the world where every company capable of producing leading-edge chips will be doing that in the United States at scale,” Commerce Secretary Raimondo announcing new rules for enforcing the CHIPS Act.

Did You Know

While blooms are emerging all across Washington because of a historically mild January and February, the famed Yoshino cherry blossoms at the Tidal Basin will be impacted by an abrupt change in weather patterns during the second week of March. Because of the prospect of a cold March in the D.C. area, peak bloom will take place between March 25 and 29, just a few days earlier than normal.

Graph of the Week

Due to continued government borrowing over the past several years, the fiscal goal of budgetary balance has become much more difficult to reach, and it is very unlikely to be achieved in a decade or less, particularly if revenue, defense, and other parts of the federal budget are excluded from the solution. In order to achieve budgetary balance within a decade all spending would need to be cut by 27%, with the necessary cut growing to 78% if defense, veterans, Social Security, and Medicare spending were off the table. The cuts would be so large that it would require the equivalent of ending all nondefense appropriations and eliminating the entire Medicaid program just to get to balance. 

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