Congress returns for the first time after Biden’s poor showing at his debate with former President Trump. Congress back in DC poses new risks for President Biden as Members will be having direct conversations with each other on the fears and concerns with the President’s ability to campaign and govern during a new four-year term.
From my days as a Congressional aide, I saw first-hand how Members being in the Capitol can change the dynamics of tough issues. They ride together on the subways that connect the office buildings to the Capitol, they catch each other on the floor of the House and Senate and can poke their heads in a friend’s office to take their temperature on an issue like President Biden’s ability to run. They also compare notes on what voters are saying back home.
President Biden will be front and center as European leaders come to DC for the annual meeting of NATO. However, the bottom-line is that this could be a tough week for President Biden as he tries to recover from the bad debate. Most close to the process don’t believe Friday’s interview helped the Biden case, and having worked on US Senate debates it just doesn’t fly that he was tired from travel or that the debate prep went wrong. It is hard to get around the growing concern about the President’s diminished cognitive status. A perilous week ahead for the Biden campaign.
Powell testimony
Federal Reserve Chair Jay Powell will deliver his semi-annual testimony before the Senate Banking Committee and the House Financial Services Committee. The practice of the Chair is to read the same statement at both hearings this Tuesday and Wednesday, but the questions that Senators and Representatives may ask always raises the potential of a market moving answer that was missed by the Fed staff during the practice sessions.
While recent economic data has shown both a decline in inflation and a tightening labor market, the Chair will likely stick to the data driven central theme seen in last week’s release of the minutes from the June FOMC meeting. Fed watchers will be looking for any signs that the next interest setting meeting scheduled for July 30/31 will open the door for cuts when the Fed meets again in September.
Budget
The Congress will continue to work on the 12 appropriations bills needed to fund the government for the new fiscal year that begins on October 1. The House has passed 4 of the 12 bills, but to date the Senate has not acted on one. This week the Senate begins its process when the Senate Appropriations Committee starts preparing bills for the Senate to take up.
Speaker Johnson opposes Congress funding the entire government with one large Continuing Resolution (CR), and hence his push to start the process early. Last year he made his point about one large bill by dividing government funding into two large bills, but this year he hopes to do better. However, with the politics of a Presidential campaign and a wide partisan divide in Congress this will be no easy task.
The House has made the process more challenging by adding policy riders to usually non-partisan budgets such as the Department of Defense and Veterans Affairs. One of the many drawbacks of funding the government via CRs is that spending usually is held constant with the current fiscal year, meaning Defense priorities stay flat. Leaders of both the House and Senate seem willing to drop some of the social issues to fund new DoD systems and weapons and increase spending on Veterans. However, with the House Republican goals of cutting non-defense spending, and the fight over social policy, it is unlikely that a CR for the rest of the budget can be avoided. With the August break fast approaching it should be a busy month on budget issues for Fiscal Year 2025.
