Good Day For Powell, Bad One For Democrats

L . Thomas Block

Fed Chair Powell got through his Senate confirmation hearing with no misstep and appears headed for Senate confirmation in the next few weeks.  In 2018 the vote on his nomination was 84 to 13 and I would expect another bipartisan vote in support this time as well.  Powell gets high marks in DC for the way the Fed handled the economy during the Covid 19 crisis and will likely be rewarded with a strong vote for his second term.

With the confirmation behind him Powell and the Fed will now focus on the Fed’s critical interest rates decisions.  The FOMC meets in January and March and there is wide expectations that by the March meeting they will be ready to increase rates.

On the political front President Biden and Democrats took several hits on their agenda when Senators Manchin and Sinema expressed their support to maintain the 60 vote filibuster requirement and hence made voting rights legislation that has passed the House dead in the Senate.  There are some quiet bipartisan talks on some smaller voting bills that focus on the role of the Vice President and Congress in counting the Electoral College votes and these ideas seem to be picking up some support but unlikely to move until later this year.

The next big issue for the economy is the February 18 deadline for funding the government with the threat of a government shutdown.  While no hard decisions have been made there is a general consensus that with the continued fragility of the economy as the virus continues to infect large numbers of people, a government shutdown needs to be avoided.

Since October 1, 2021 when the current fiscal year began the federal government has been running on a Continuing Resolution (CR) that merely continues funding government programs at current levels.  This means that spending priorities and dollars aren’t modified to reflect different priorities.  From infrastructure to defense new programs have been approved by Congress but have not received new funding; these changing needs may push Republicans and Democrats to find some compromises that can insure a spending bill by the February 18 deadline.

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