Thought of the Week:
It’s weird how the mind works. Earlier this week, as I attended a home dedication for a post-9/11 veteran, while sitting outside in wind chill temperatures in the 20s, Cicero’s On Duties, a book I last read as a philosophy major, came to mind. Written as a letter to his son, the treatise remains a seminal work in defining moral obligations and ideals of public behavior. The book is said to have influenced such profound thinkers as John Locke, Montesquieu, Adam Smith, Voltaire, and St. Thomas Aquinas. Not only did America’s Founding Fathers, from John Adams to Thomas Jefferson to James Madison, cite the work as inspiration for establishing the United States as a stable, free republic, its essays on natural law, mixed government, and civic virtue provided the frameworks for the Declaration of Independence and U.S. Constitution. In On Duties Cicero observed that the drive for self-preservation and security is the fundamental natural instinct that enables the pursuit of higher virtues, such as the creation and preservation of a civil society, the practice of justice, and the development of strong character, all essential ingredients required in a flourishing commonwealth. Fittingly, the dedication was held on Veteran’s Day, by the Gary Sinise Foundation, for a post-9/11 veteran who is an active member in the Salute Military Golf Association (SMGA), the non-profit I co-founded nearly 20 years ago. When listening to Mr. Sinise’s video message (the Lt. Dan Band was in Nashville playing the Grand Ole Opry for Veteran’s Day), watching the flag raising ceremony, and seeing the keys (well, iPad) to the home being handed over to the family, it struck me that it is our nation’s veterans and first responders who guarantee the very security Cicero cited as necessary for a country to flourish; in turn, it struck me how it is our obligation to support these same heroes upon completion of their service.
“We all have a destiny: nothing just happens, it’s all part of a plan. I should have died out there with my men, now I’m nothing but a God damn cripple, a legless freak, do you know what it’s like not being able to use your legs? I had a destiny; I was supposed to die out there in the field with honor and you cheated me out of it. This wasn’t supposed to happen to me,” Lieutenant Dan Taylor in the movie “Forrest Gump.”
I feel fortunate to work for a company that not only recognizes Veterans’ Day, not only matches monetary and service donations, but also offers the volunteer days that have allowed me to support our service men and women, like Lt. Dan, in their time of need.
pictured above: members of SMGA attend a Gary Sinise Foundation home dedication for the home of Capt. Tyson Quink (retd.) and his wife (both are center, holding SMGA flag).
Thought Leadership from our Consultants, Think Tanks, and Trade Associations
Center for Strategic and International Studies (CSIS) Thinks Trade Bullying Can Work, but Has Limits. During President Trump’s whirlwind trip through Asia, we were treated to an impressive series of agreements on trade, investment, and technology transfer with a long list of countries. First came Malaysia, Cambodia, Thailand, and Vietnam, the latter two “frameworks,” which means something short of an agreement. Next came a minerals agreement with Japan, a technology cooperation agreement and a trade agreement with South Korea, and then the big one with China. These agreements are not without winners. U.S. soybean farmers, of course, and also Boeing, since several of the countries committed to buying more airplanes. The Southeast Asian nations may also consider themselves at least partial winners since they avoided even worse outcomes, although that is not much of a victory. The White House, of course, will say the agreements are good for the United States because they provide for more market access, more investment, and more tariff revenue. While they will certainly do that, they will come at much lower levels than President Trump expects. Countries will slow-roll their market access commitments; investors will not always follow through; and tariff revenue will be less than predicted because the Trump administration has reduced the tariffs and added a lot of exceptions.
Inside U.S. Trade Says President Trump’s Visit to Japan Should Ease Implementation of the Tariff Deal. President Trump’s visit to Japan, including a first meeting with new Prime Minister Takaichi, may have laid the groundwork for the smooth implementation of the prior government’s trade and investment pact with the U.S. The overall feeling about the summit between Trump and Takaichi is that it was extraordinarily successful, particularly from the Japanese perspective. Although the meeting led to incremental movement on the trade deal struck with Takaichi’s predecessor, added focus was placed on a critical minerals pact that aims to combat unfair and nonmarket trading practices via pricing measures. The friendly tenor of Trump’s first meeting with Takaichi appears to be a win for Japan. Maintaining good relations with President Trump is seen as critical to smooth trade relations with the U.S. because the tariff agreement signed earlier this year allows the White House to raise duties on Japan whenever they are deemed in violation of the deal, giving the U.S. wide discretion on enforcement with no formal review process. During the summit, Takaichi was able to leverage both her ideological alignment with Trump, especially on immigration and social issues, and personal relationship with late Prime Minister Abe, who Trump saw as a friend during his first term. Good relations with Trump will be no guarantee that Japan avoids retaliation, particularly if it takes steps that the White House sees as anti-U.S. To date, implementation talks have focused largely on Japan’s promise of $550 billion in new U.S. investments over the next four years. Separate from the minerals agreement, the White House issued a fact sheet that highlighted a host of investment and purchasing commitments by the Japanese government and individual companies, touching on energy, aerospace, automotive, electronics, and artificial intelligence among others. The fact sheet describes the announcements as “advancing” the original commitment rather than revising or expanding it, indicating that the two sides remain in agreement on how to proceed with the investment plan, including a novel framework for selecting projects that gives Trump final say on where the $550 billion is spent, with input from an interagency “Investment Committee” chaired by the Commerce Secretary and a “Consultation Committee” made up of officials from both countries. Even if the two governments find common ground, it would not be until Q1 2026 before any project will be announced.
Observatory Group: Last Week’s Elections Point to Republicans Losing the House in 2026; but President Trump Will Maintain Policy Course. Last Tuesday’s election results confirm what seemed clear over the summer: the economy—specifically the cost of living—will drive 2026 midterm election outcomes. Democrats across the ideological spectrum united around affordability promises and won by larger-than-expected margins. This follows an electoral pattern seen since the 2022 midterms: the party in power implements policies they promise will lower costs, costs don’t go down, and they lose. Some caution is needed as off-year elections with single party control in Washington are usually weak indicators for the midterms. But the recent consistency of voters casting ballots against the ruling party because of high costs of living signals that 2025 will be more predictive. Republicans believe the OBBBA, including lower income taxes and tax refunds for some individuals, will help them in the midterms, but everyday costs that voters care about—groceries, housing, health care, electricity—have continued rising or have not fallen to the levels they expect. Republicans are unlikely to deliver the pocketbook impact needed for them to maintain their trifecta in Washington. Negative personal economic sentiment among marginal voters should drive enough losses to flip control of the House, and this may happen even if macroeconomic indicators such as PCE inflation, unemployment rates, wage increases, and equity markets perform well going into next November. Because the White House has honed new ways of executing policy without needing Congress, expect the president to maintain his current policy portfolio and execute many robust measures over the next three years regardless of the midterm results.
“Inside Baseball”
Federal Reserve’s Contrasting Policy Views Extend to 2026 Outlook. While Federal Reserve Chair Powell has emphasized the “strongly differing views” among Fed policymakers about the upcoming December rate decision, those differences also extend into the 2026 outlook. Although this should put less pressure on the December decision to resolve the policy differences completely, it opens 2026 to a similar debate. The base case right now for December is another 25 bp cut, but this is subject to change should the regular flow of economic data resume and douse optimism concerning inflation or flash more warning signs about the labor market. In addition, the scope for more cuts next year is limited until the inflation effects from tariffs are shown to be small and not just delayed, or if the FOMC personnel lineup changes dramatically next May. Nonetheless, expect median December policy projections to be optimistic about inflation and consequently to show gradual cuts, including a few next year.
In Other Words
“Pathetic. This isn’t a deal. It’s a surrender. Don’t bend the knee!” California Governor Newsom, a near-lock to run for president in 2028, writing on X in response to the Senate deal to end the shutdown.
Did You Know
The U.S. has Stopped Making Cents. The U.S. Mint in Philadelphia struck the nation’s last 1-cent coin this week, ending 232 years of penny pinching. The death of the penny has long been in the offing. Evolving consumer habits and rising production costs have made production penny-wise but pound-foolish. Over the past decade, the cost of producing a penny has risen from 1.42 cents to 3.69 cents. With up to 300 billion coins still in circulation, pennies won’t be going out of style just yet, but economists expect companies to start rounding their prices to compensate for the phase-out. The Federal Reserve Bank of Richmond calls this a “rounding tax” and estimates it could cost consumers approximately $6 million annually. If the nickel, which costs 13.8 cents to produce, is phased out, the Bank projects those costs to climb to $56 million.
Graph of the Week
Shutdown Created an “Eco Fog.” The government shutdown has made it harder to get a read on what’s happening with the economy. Two monthly jobs reports have fallen victim to the closure, and a key inflation snapshot is in jeopardy. While the Bureau of Labor Statistics (BLS) was scheduled to report the October consumer price index yesterday, the government’s closure has not only delayed its release but also halted in-person data collection. While the BLS may forgo issuing an October CPI report altogether, all the missing data just complicates matters at an already divided Fed as it prepares for its December rate meeting.
