Fed decision, Congress deal with wars and spending
- Fed announces rate decision 2:00pm Wednesday.
- New Speaker wants to split Ukraine and Israel funding, will Senate go along?
- November 17 government shutdown deadline grows near, what will Congress do?
Fed
The Fed meets tomorrow and Wednesday to decide on the next step in their fight against inflation. There is a general consensus that they will hold rates steady. On Wednesday the central bank will announce the decision at 2:00pm and at 2:30 Chair Powell will host his regular post-decision press conference.
The Fed Chair often telegraphs future policy direction at these pressers and markets will be weighing his words carefully. The FOMC has one more meeting in 2023, on December 12/13, and the data-driven Fed can use the last meeting to adjust policy if they believe more tightening is needed.
Ukraine/Israel
The House doesn’t return until Wednesday after a tumultuous few weeks that ended with the election of Louisiana Representative Mike Johnson to serve as the 56th Speaker of the House. He is one of the least experienced Speakers in the nation’s history, having never served as either a House Leader or a Committee Chair. He now must guide the House Republicans in challenging times with a razor thin 4 seat majority.
Congress must act on the White House request for money needed by US allies Israel and Ukraine, the crisis at the Southern border, and the November 17 deadline for approving government budgets for the new fiscal year.
In the past, Johnson as a Representative has voted against aid to Ukraine, but in his first interview after winning the Speaker’s race to Fox News host Sean Hannity he said that the US can’t let Putin win in Ukraine. However, he expressed support for the Republican position separating Ukraine and Israel. This weekend Speaker Johnson said that the House would pass money for Israel this week, but would pay for the money with cuts in non-defense spending, but to date the proposed cuts have not been made public. Cuts to pay for money for Israel will put Democrats in bind. The cuts will have to be acceptable to more moderate Republicans as Speaker Johnson can only lose four Republicans on a straight party line vote.
While some Republicans in the Senate want to separate Ukraine and Israel, Republican Leader Mitch McConnell continues to support the White House position. If the House passes a Ukraine only bill, the Senate will have to decide whether to act quickly to approve the House passed bill or add money for Ukraine and send it back to the House. In legislative jargon this is called ping-ponging, where rather than have a House/Senate Conference to send each body a compromise bill, the two Chambers amend a bill and send it back for action.
At this point it is far from clear what the House would do if the Senate adds Ukraine to Israel funding; but the move would obviously have strong support from the White House and those in the House who want to see the US resupply Ukraine, as well as show support for Israel in their war with Hamas.
November 17 Deadline
The House Republican battle to choose a new Speaker wasted three weeks that could have been spent passing funding bills and sending the legislative proposals to the Senate. The Speaker deadlock didn’t move the government shutdown deadline, hence the new Speaker is faced with a November 17 deadline just three weeks away and the weekend before Thanksgiving.
Speaker Johnson has reportedly floated the idea to his fellow Republicans that he would like a short-term Continuing Resolution (CR) that would run either to January 15 or April 15. This short-term CR would allow the House and Senate to continue to pass regular order spending bills and hopefully avoid a massive Omnibus Spending Bill that pushes most of the US Government’s spending into one massive piece of legislation. House Republicans have been adamant that they want to avoid these Omnibus Bills that they label irresponsible.
The short-term CR strategy shows how the Office of Speaker may be changing Johnson’s view of governing as he was one of 91 Republicans who opposed the CR put through by former Speaker McCarthy. The current CR passed with a vote of 335 Y to 91 N. 90 of the 91 NO votes came from Republicans. The vote shows the opportunities and risks the new Speaker faces and the challenges in his new role as leader rather than obstructionist.
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