Wednesday is Fed day, the first Federal Open Markets Committee (FOMC) meeting of 2024. As is custom, the Fed will release a statement by the FOMC at 2:00pm, and then at 2:30 Chair Powell will have a press conference. Both the statement and the Chair’s carefully prepared comments are designed to set expectations on rates going forward. While there has been much discussion on rate cuts this year, no Fed official has given any indication that a cut will happen at this meeting. However, Fed watchers hang on every word the Chair says at the post-meeting presser so expect market reaction as the Chair speaks.
The next meeting of the FOMC will be March 19/20.
The Border and Supplemental Spending
Congress continues to look for a formula that will allow them to act on the Supplemental Spending Bill that has been proposed by the White House to send money to Ukraine and Israel. Money for both US allies appears to have the votes to pass if the legislation can make it to the floor of the House and Senate for a vote, but Republicans have to date insisted that the Supplemental also include strong measures to protect the Southern border.
A Bipartisan group of Senators has been holding talks for weeks to find a compromise and there appears to be a growing view that a deal is near. However, the politics of border legislation have been complicated by the involvement of former President Trump, who after last week’s New Hampshire primary win became the presumptive Republican nominee. In this position it is likely that legislative leaders will want to take their cues from their nominee. Trump and many of his supporters are anxious to attack Biden and Democrats for inaction at the border as illegal immigration sets new records each month. As a way to highlight the disorder House Republicans appear ready to move to impeach Homeland Security Secretary Mayorkus, an action that hasn’t occurred in 150 years and will go no place in the Democratic Senate.
The impeachment will be a side show as leaders in Congress, the White House, and former President Trump all position themselves over the next few weeks to determine if both a border policy and aid to Ukraine and Israel can get Congressional approval.
Budget deadlines: 3/1 and 3/8
While Congress tries to navigate the challenging issues of the border and funding Ukraine and Israel, they also need to pass spending bills for the entire government where action is needed if a government shutdown is to be avoided. Two deadlines have been created by Speaker Johnson: March 1 and March 8.
The government operates with 12 large areas of spending, and each has its own appropriation bill. To date Congress has not passed one of the 12 bills. Over the weekend there were reports that staff had reached some broad agreements on what the “top line” spending would be for the 12 spending bills, but final decisions await return of Members this week. With both the House and Senate in session for the next few weeks the hope is that some of the spending bills can be passed.
Tax Bill
The House and Senate tax writing committees are working on a bipartisan tax package that would slightly expand and extend the child tax credit that gives relief to low-income families, and also business provisions to extend the Research and Development (R&D) tax credit along with extending tax provisions that allow for the accelerated deduction of expenses for plant and equipment. These are tax provisions that are set to expire this tax year.
The bill passed the House tax writing Ways and Means Committee two weeks ago on a vote of 40YES to 3NO. All three NO votes were from Democrats who wanted to see bigger benefits for the child tax credit provisions. However, there is opposition from Republicans in high tax states such as NY, NJ and CA who want the opportunity to offer an amendment to expand the state and local tax deduction SALT as part of this tax bill. Expanding the deduction is a non-starter for most Republicans and the question for the Speaker and his team is whether they can pass the bill with some of their most conservative Members voting NO.
Leadership hopes that the strong bipartisan vote in committee will lay the groundwork for passage in the next two weeks. Some conservative Republicans are growing upset that Speaker Johnson is passing bills with Democratic votes to replace NO votes from Freedom Caucus Republicans. The business community is anxious to get the tax provisions on the books in time for the current tax filing season.
