The wild fires in Hawaii pointed out the need for additional FEMA emergency funding. On Thursday the White House released plans for more spending that will include Ukraine and depleted emergency assistance. These funds are contained in a proposed Supplemental Spending Bill that is over $40B. Supplemental funding bills are an often used spending vehicle that allocates money above and beyond previously proposed budgets. In the case of this year’s budget battle the supplemental is funding that goes beyond the proposed budget deal reached by the President and the Speaker.
To try and entice Republican support, in addition to the additional funding for FEMA the Administration included money for enhanced border protection. Additionally the proposed bill could be added to the Continuing Resolution (CR) that is likely to be needed to keep the government operating after October 1 when the Federal government runs out of spending authority. While in past Congresses this strategy often worked, it may not appease conservative Republicans who appear ready to accept a government shutdown as a price to be paid in order to achieve lower government spending.
The center of the action will be in the House where Republicans are pushing for stiff spending reductions, and indeed 70 Republicans voted earlier this year to eliminate spending for Ukraine. Money for the border is not likely to get support from these Members if billions are included for the Ukraine war. Furthermore, many Republicans are pushing against the McCarthy/Biden deal that holds spending level at FY 2023 levels. These Republicans want to reduce spending back to levels established in FY 2022. There are also some Republicans who want to cut funding for the Justice Department that they believe has become too political under President Biden.
The bottom line is that with only a five seat majority Speaker McCarthy can only lose four votes if any action is going to be taken without Democratic support. The other alternative for the Speaker is to turn to a bipartisan coalition that goes against his most conservative Members. The House is not scheduled to return until September 12 leaving only three weeks to adopt a budget or CR. With this limited timeline, and the push for deep budget cuts by conservative Republicans a government shutdown on October 1 seems like a real possibility.
FOMC
Wednesday, August 16, at 2:00 the Fed releases the minutes from the July FOMC meeting. With a growing view that the Fed is likely to pause any rate increase at the September meeting the minutes may show the sentiment of Committee members with respect to future rate policy when they met in July and increased rates by 25bps. As I have written in the past the minutes act as a fact check on Chair Powell’s post meeting press conference.
From a Washington perspective the CPI is the key indicator to watch, it is the number that is most in the news and that the average voter understands. The July number appeared to strengthen the Fed’s hand for a pause at the September meeting but that meeting isn’t until September 19/20, allowing the Committee to see August CPI and employment data as they consider their next rate decision.
Debate politics
During my political days I worked on strategy and debate preparation for US Senate candidates and with that experience I look at the upcoming decision by former President Trump whether or not to participate in the first Republican Presidential candidate debate for the 2024 nomination.
The first Republican debate of the 2024 cycle is on Monday August 23, and to date President Trump has not announced if he will be participating. If I were advising the former President I would be in the camp that he should not participate. At this early point in the process the candidates who aren’t President Trump are vying for the opportunity to be his leading opponent, jockeying to be the Trump alternative. The former President and his legal problems are likely to be a focus, especially with the stance Chris Christie has taken and the increasingly strong language Trump’s Vice President Mike Pence is using to describe the activities of the former President on January 6th.
Attacking Trump and differentiating themselves from the former President is likely to be the focus of the evening, and if I were advising the former President my focus on debate preparation would be defending against the anticipated legal charges and developing his trademark nicknames for his opponents. Remember sleepy Joe and crooked Hillary.
Hate or love President Trump he is an experienced communicator, and his participation would undoubtedly dramatically increase viewership of the debate, and similarly his failure to attend would sharply reduce interest.
Bottom-line in my view there is little to be gained by President Trump if he participates except pleasing Fox News that is airing the debate. With a substantial risk of taking some hits that could stick I would advise the former President to skip the event and make it a try out for being his eventual principal opponent.