Congress takes break and Fed releases minutes
- FOMC minutes released tomorrow
- Congress on recess but big issues await action
- Will government shutdown start on March 1?
While Congress may be in recess this week Washington should generate news on Wednesday when the Fed releases the minutes from the January FOMC meeting.
The minutes take three weeks to get approval from all participants and as I have often said they serve as a fact check on the comments the Chair makes at his post-meeting press conference.
At both the post meeting presser and during his 60 Minutes interview Chair Powell expressed skepticism as to a March meeting rate cut. The minutes may shed light as to why he felt confident enough of the Committee’s leaning to go public with the negative sentiment for a March cut. To date Chair Powell has orchestrated unanimous decisions on rate policy, the minutes may give an indication as to whether unanimous decisions will continue or if some of the more dovish Members are getting anxious for a cut.
Congress
Congress has gone home for the Presidents Day break, but funding the government and House action on the Senate-passed Supplemental Spending Bill awaits their return. Plus, the Senate needs to decide if they can proceed with the House-passed tax bill that won approval with a large bipartisan vote of 357 to 70. The bill slightly expands the Child Tax Credit and renews business tax credits for research and capital expenses.
The issue in the Senate appears to be centered on Idaho Senator Mike Crapo who is the ranking Republican on the Senate tax writing Finance Committee. He is reportedly upset that he was not more involved in the bill’s development which was largely negotiated between Senate Finance Committee Chair Oregon Democrat Ron Wyden and House Ways and Means Chair Jason Smith, Republican from Missouri.
Senate Leader Chuck Schumer and the White House would like the Senate to pass the House approved legislation and send it to the President, but Crapo and some other Republicans want the opportunity to offer amendments to the legislation. While the bill has bipartisan support, some conservative Republicans oppose any expansion of the Child Credit, and progressive Democrats want to see the Child Credit expanded. Business groups would like the business-friendly tax provisions approved before the corporate tax filing deadline.
Having lobbied tax bills, I believe there is a chance that business groups could apply local pressure on Republicans to let the bill move and pass before June.
Government shutdown
When Congress returns on February 28, they will only have three days to act before the first of two government shutdown deadlines hit on March 1. The two-tiered process initiated by House Speaker Johnson has March 1 deadline for: Agriculture, Energy, HUD/Transportation, VA and Military Construction. On March 8 the rest of the government including Defense and HHS would shut down without legislative action.
Under the Debt Suspension Bill deal struck between former Speaker McCarthy and Biden there would be a 1% reduction in spending for non-defense programs if spending bills have not been passed by April 30. Some Republican conservatives believe that these automatic cuts may be the road to take and therefore may object to almost any new spending deal. For these Republicans keeping the government open under a Continuing Resolution (CR) would be acceptable as it leads to the April 30 across-the-boards cuts.
At this point it seems close to impossible for Congress to pass spending bills in the three days they will have between their return and the first shutdown deadline. A CR may be the best option if there is a will to avoid a shutdown.
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