Interest Rate Increases, Climate Change, and Monkeypox

Tax Policy:

July 25: With Social Agenda Stalled, Democrats Prepare to Approve Billions in Corporate Tax Credits

Democrats' ambitious social agenda under President Joe Biden included child tax credits paid directly to families and support for green energy investment, among many other things, but like most of their plans, those programs have fallen by the wayside.

Instead, Democrats are preparing to vote for $24 billion worth of tax credits intended to boost high-tech chip manufacturing in the U.S., part of a $76 billion package benefiting that industry. Some Democrats emphasize that the tax credits are a matter of national security, ensuring that the country can manufacture a key piece of technology while boosting the economy.

Still, the relatively quick agreement on the contours of the semiconductor bill reminds some Democrats of what could have been with their larger spending package, if they had been able to win the cooperation of conservative members of their caucus like Sen. Joe Manchin.

"The ease with which lawmakers are moving the break contrasts with Democrats' struggles with their reconciliation plans, though the semiconductor plan violates many of the conditions Manchin had laid down for that legislation," Faler writes, citing the bill's failure to cover all of its costs, as Manchin had insisted for the social spending bill.

On top of that, the supposedly temporary tax breaks could end up sticking around. "As we know, there are a few temporary tax credits - they tend to get extended into eternity," Brady said.

Build Back Better Act/Spending Bill:

July 24: Democrats scramble to squeeze priorities into the budget bill

The collapse of plans to include climate and tax legislation in a bill Democrats can pass this summer through the Senate with 51 votes has set off a scramble among Democrats to squeeze other priorities into the package.

Senate Budget Committee Chairman Bernie Sanders wants to expand the prescription drug reform language to cover more medications. The competing priorities will come crashing into each other over the next two weeks as Democrats make a final push to pass a budget reconciliation package before the August recess.

In reviving negotiations earlier this summer, Democrats had hoped the reconciliation package would include climate and tax provisions and were negotiating the components with Sen. Joe Manchin.

Senate Health, Education, Labor, and Pensions Committee Chairwoman Patty Murray is eager to get the funding in the reconciliation bill because Republicans say there's little chance of passing another COVID-19 package under regular order, even though Schumer and Sen. Mitt Romney negotiated a $10 billion compromise measure in March.

Sanders is making a push to expand the prescription drug reform package to give Medicare more negotiating authority to lower the costs of a broader range of drugs.

Senator Bob Casey, who represents a Senate battleground state that could determine whether Democrats keep the Senate majority, said he still wants to include money for long-term home health care.

Economic News/Policy: 

July 25: Warren: Fed chief threatening ‘surprisingly strong economic recovery’

Sen. Elizabeth Warren writes in a new op-ed that Federal Reserve Chair Jerome Powell's efforts to control inflation risk "Triggering a devastating recession" and jeopardizing the country's "Surprisingly strong" post-pandemic economic recovery.

"Rising costs are an urgent problem, and interest rates play a key role in maintaining price stability. But urgency is no excuse for doubling down on a dangerous treatment," Warren wrote in The Wall Street Journal.

As inflation hits 40-year highs, the Fed has hiked interest rates in an effort to curb rising costs and is expected to announce still more increases. Powell's interest rate increases will likely trigger a "Brutal" recession, Warren added, noting Republicans will try to combat it by cutting taxes and easing regulations for corporations and for the rich.

First nominated to the Fed board by then-President Obama and elevated to chairman by then-President Trump, Powell was renominated by Biden last year. Warren has opposed Powell's renomination from the start, saying he "Failed as a leader" and ignored a "Culture of corruption" in his office.

Sheldon Whitehouse and Jeff Merkley wrote in a joint statement last year that "President Biden must appoint a Fed Chair who will ensure the Fed is fulfilling its mandate to safeguard our financial system and shares the Administration's view that fighting climate change is the responsibility of every policymaker. That person is not Jerome Powell."

July 25: Fed Prepares Another Rate Increase as Wall Street Wonders What’s Next

Central banks around the world have spent recent weeks speeding up their interest rate increases, an approach they've referred to as "Front-loading." That group includes the Fed, which raised interest rates by a quarter-point in March, a half-point in May, and three-quarters of a point in June, its biggest move since 1994.

The quick moves are meant to show that officials are determined to wrestle inflation lower, hoping to convince businesses and families that today's rapid inflation won't last.

After Wednesday's expected move, the Fed's main policy rate would be right at what policymakers think of as a neutral setting: one that neither helps nor hurts the economy.

Keeping inflation expectations in check is paramount because consumers and companies might change their behavior if they expect quick inflation to last. Investors are increasingly betting that the Fed might lower interest rates next year, presumably because they expect the central bank to set off a downturn.

While Mr. Powell made clear at his June news conference that three-quarter-point rate increases were out of the ordinary and that he did "Not expect" them to be common, Fed officials have also been clear that they would like to see a string of slowing inflation readings before feeling more confident that price increases are coming under control.

"We at the Fed have to be very deliberate and intentional about continuing on this path of raising our interest rate until we get and see convincing evidence that inflation has turned a corner," Loretta Mester, the president of the Federal Reserve Bank of Cleveland, said in a Bloomberg interview this month.

July 24: Economy Week Ahead: U.S. Growth, Interest Rates, and Wages in Focus

Tuesday: The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas, will show how home prices fared in May amid rising mortgage rates.

Economists estimate that new single-family home sales decreased in June. Those figures will be released separately by the Commerce Department.

The Conference Board’s index of consumer confidence, which measures American attitudes toward jobs and the economy, is expected to have declined in July.

Wednesday: Federal Reserve officials have indicated that they plan to raise the central bank’s benchmark interest rate by 0.75 percentage point—or possibly a larger, full-percentage-point increase—in an effort to tame inflation running at a four-decade high. Chairman Jerome Powell will deliver remarks on the Fed’s decision at a news conference afterward.

U.S. orders for goods designed to last at least three years are expected to have fallen sharply in June, reflecting cooling demand as economic growth slows. The National Association of Realtors is expected to report the number of houses going under contract in the U.S. fell sharply in June.

Thursday: A key measure of economic growth is expected to show that the U.S. economy slightly expanded in the second quarter. The Commerce Department previously reported that the U.S. gross domestic product declined in the opening three months of 2022. The headline GDP figure, which is adjusted for inflation, will likely reflect surging prices and slower inventory growth.

New applications for unemployment benefits are estimated to have decreased slightly in the week ended July 23, after hitting the highest point in eight months the week before.

Friday: Employer labor costs are expected to have eased slightly in the second quarter, providing the Fed with evidence that labor-market pressures, which are pushing up inflation, might be easing. The Labor Department’s employment cost index has advanced at a record pace in recent quarters.

U.S. household spending is estimated to have picked up in June, showing that consumers have kept opening their wallets as they faced historically high inflation and rising interest rates. The Commerce Department’s personal consumption expenditures index reading for core prices—which excludes volatile food and energy prices—is expected to show that price increases accelerated in June compared with the prior month.

Figures from the European Union’s statistics agency are expected to show that the eurozone economy slowed sharply during the three months through June as energy prices surged. Separate data are expected to show that the annual rate of inflation remained at 8.6% in July. The University of Michigan’s final reading of consumer sentiment for July is expected to have remained at the same level that it reported earlier in the month: near a historic low.

July 24: Explaining Fed Interest Rate Hike Of 75 Basis Points

Several Fed leaders are leaning toward a hike of three-quarters of a percentage point, as they did in June, in what would be the fourth rate increase in five months. Fed officials had been hoping that as interest rates rise and supply chains heal, inflation would decline steadily.

Right after the June consumer price index report, financial markets tanked as investors bet that the Fed would decide it needed to ramp up its response and raise interest rates more sharply, which would weigh on Wall Street. Days before its policy meeting in June, the Fed suddenly changed course and indicated that a larger interest rate hike than initially planned was on the table.

Uncertainty about how far the Fed would go this month has been quelled by top officials, including Fed governor Christopher Waller, who said recently that although the inflation data is "a major league disappointment," there are hazards to overreacting.

The Fed's economic forecasts show the unemployment rate rising a bit as interest rates go up - meaning that some workers will lose jobs under the current plan to raise interest rates. Fed officials have said that they want to see progress in the actual economy and that the Fed will not change course on the basis of the ups and downs of the stock market.

July 24: Yellen says economy shows no signs of recession

Treasury Secretary Janet Yellen said Sunday that growing consumer spending, industrial output, credit quality, and other economic indicators don't suggest the economy is in a recession, although she acknowledged that "Way too high" inflation is straining the system.

"This is not an economy that is in recession," Yellen told moderator Chuck Todd on NBC's "Meet the Press."

Businesses and consumers are seeing the economy slow after a rapid growth spurt last year, which brought the labor market back to life after the COVID-19 pandemic, the secretary said. This transitional slowdown is "Necessary and appropriate" given the rapid changes.

"You don't see any of the signs. Now, a recession is a broad-based contraction that affects many sectors of the economy. We just don't have that," Yellen said, but she acknowledged the impacts of uncommonly high inflation numbers.

The Hill's 12:30 Report - Trump's big return to DC Trump removed lines from Jan. 7 speech saying rioters did not represent 'our movement'. She said she expects federal government policies aimed at controlling inflation to be successful, putting downward pressure on record gas prices, rising food costs, and other economic problem areas for everyday Americans, with help from the Biden administration.

July 21: Europe Joins Fight Against Inflation, Raising Rates for First Time in 11 Years

In the first move of its kind in over a decade, the European Central Bank raised its three interest rates half a percentage point, an increase that was twice as large as telegraphed and that follows similar measures taken by the Federal Reserve and dozens of other central banks around the world this year.

In one swoop, the bank ended an eight-year era of negative interest rates - a policy dating to 2014, when the concern was too-low inflation and banks needed to be encouraged to lend more generously.

The bank's deposit interest rate is at zero, but the key policy rate in Britain is 1.25 percent and the Fed's is set to a range of 1.5 to 1.75 percent. Even after the unexpected half-point increase, the bank "Is moving much too slowly toward an interest rate level that is appropriate in view of high inflation," Jörg Krämer, the chief economist at Commerzbank, wrote in a note to clients.

Policymakers raised the deposit rate, which is what banks receive for depositing money with the central bank overnight, from minus 0.5 percent to zero. Analysts are questioning how high the bank can raise rates before the economic outlook deteriorates too much and the bank has to stop.

Ms. Lagarde said on Thursday that the larger-than-expected rate increase didn't change how high the bank expected to raise rates overall, though she didn't say what rate the central bank was aiming to reach.

Global Trade:

July 25: Biden Poised For A Couple Of Big Wins In Congress

"We're close, so let's get it done," Biden said of the bill on Monday. The semiconductor bill is a whittled-down version of a broader bill intended to boost U.S. competitiveness against China that some Republicans opposed.

Biden, who is still in isolation after testing positive for the coronavirus last week, appeared during a virtual event on Monday with CEOs and labor leaders to urge Congress to pass the bill.

Biden advisers said the bills, if they all pass, will help the president draw a contrast between Democrats' agenda and what they portray as an increasingly extreme GOP that is out of step with most Americans on issues ranging from abortion to same-sex marriage to gun control.

On the chips and same-sex marriage bills, he added, "Passing a landmark China competitiveness bill that will create manufacturing jobs across the country and standing up for the fundamental right of every American to marry who they love would be profound bipartisan wins for the county."

The legislative victories that Biden has secured so far - a coronavirus relief package, a $1.2 trillion infrastructure bill that he signed in November, and a modest gun control package that broke a 30-year logjam on the issue - have quickly been overtaken by events, or have been dismissed by many liberals as too small to meet the moment.

Party strategists say that if Biden and Democrats capitalize on the passage of the bills and reinforce the message to voters that they are passing policies that help lower their costs, Democrats could help shift the narrative that they have little to show for their unified control of the government.

Energy and Environmental Policy/News:

July 22: Biden’s New Economic Scorecard: The Price at the Pump

If the administration's efforts to impose a global price cap on Russian oil exports fall through before year's end, White House economists fear that prices could soar higher than they were this spring, to potentially $7 per gallon. White House aides say the high prices are not helping Mr. Biden's efforts to move the country to a low-emissions future.

Mr. Biden, who speaks frequently of growing up in a working-class family where "If the price of gas went up, you felt it," has for months tried to reassure voters that he is doing whatever he can to bring those prices down.

"While there's a lot that goes into setting the global oil and gas price," Jared Bernstein, a member of the White House Council of Economic Advisers, said in a news briefing on Monday, "The historic actions taken by President Biden to address the impact of Putin's invasion of Ukraine have helped and continue to help to increase the global supply of oil and therefore are in the mix of factors driving down the price."

Biden administration officials - even economists who have previously favored steps to raise taxes on fossil fuels - say the high prices are not helping the president's climate agenda. The prices are reinvigorating a push by Republicans for increased oil and gas drilling on federal lands, which Mr. Biden promised to end while campaigning for president.

Aides to Mr. Biden have privately said for months that to keep Americans on board with the energy transition, gas prices need to come down - definitely below $4 a gallon, and hopefully below $3, which was the national average at the start of last summer.

July 20: Democrats’ Dilemma on Manchin: Bash Him, or Bash Big Oil Instead?

Democrats looking to salvage some kind of victory from the smoking ruins of their climate policy have two basic options, political strategists say: slam Senator Joe Manchin, or take the wood to Big Oil. So far, President Biden, a creature of the Senate who prides himself on his bipartisan instincts, has been reluctant to do either.

Enter Manchin, the centrist West Virginia Democrat who toyed with embracing Biden's legislative agenda on climate, only to torpedo it after months of dithering on his end and, frankly, wishful thinking from the White House and its allies.

There's widespread anxiety on the left that young Democrats in particular will be discouraged by Manchin's apostasy and by party leaders' inability to take major action, and might stay home in droves in November.

The president hailed the package, a pared-back version of what had been outlined in the American Jobs Plan, as evidence that U.S. lawmakers could still work across party lines. On Dec. 19, 2021, Senator Joe Manchin III, Democrat of West Virginia, said he would not support the bill as written, dooming his party's drive to pass it.

"There's two kinds of political parties, just like there are two kinds of churches," Begala said, attributing the aphorism to Mark Shields, the late political operative and PBS analyst.

Under fusion voting, a common practice in New York and a few other states, voters can cast their ballots for, say, a Democrat, but do so under the branding of the Working Families Party. Proponents of the system argue that it allows the public greater choices without creating "Spoiler" third parties that siphon votes away from the major parties.

July 20: Biden Announces Plans to Deal With Climate ‘Emergency’

President Biden said on Wednesday that he would expand existing federal programs to help Americans cope with the extreme heat wrought by climate change, even as he faces intensifying pressure to take aggressive action to cut the fossil fuel emissions that are dangerously warming the planet.

Noting the lack of Republican support for his climate proposals, Mr. Biden said, "This is an emergency, an emergency, and I will look at it that way."

Before Mr. Biden spoke on Wednesday, a group standing outside of the Somerset facility greeted the president with a banner stating, "Declare National Climate Emergency."

John F. Kerry, Mr. Biden's international climate envoy, said in an interview that Mr. Biden is "Very close" to taking that step and that the debate within the administration is over when the declaration should be announced and how it should be deployed, rather than if it should be done.

Though Mr. Biden stopped short of the move on Wednesday, the White House appeared to be testing the waters by repeatedly referring to climate change as an "Emergency" in a fact sheet and in the president's remarks. Mr. Biden's slow rollout of new climate regulations on power plants and automobiles has also fueled frustration among many in the Democratic base who say the tumultuous state of the nation requires urgency.

With the Supreme Court's decision to overturn Roe v. Wade, soaring inflation, and now failed climate legislation, Mr. Biden has mostly urged Congress to act and Americans to vote while avoiding sweeping executive action that his administration fears could get tied up in the courts.

ICYMI: 

July 23: WHO Declares Monkeypox A Global Health Emergency As Infections Soar

The World Health Organization on Saturday declared the international monkeypox outbreak a global emergency, a decision that underscores concerns about rapidly spreading infections sparked by the virus. The WHO labeled the coronavirus pandemic a global crisis early in 2020. WHO officials said the global risk of monkeypox is moderate, but that it is high in Europe, where most of the infections have been recorded in an outbreak that ignited in the spring.

The global health agency's announcement was accompanied by recommendations to bolster a coordinated global monkeypox response designed to intensify surveillance, accelerate research into vaccines and therapeutics, and strengthen infection control in hospitals.

Rosamund Lewis, technical lead for monkeypox at the WHO Health Emergencies Program, said monkeypox appears to be concentrated among men who have sex with men because they have more frequent social gatherings and participate in events involving intimate contact with multiple partners.

Because monkeypox belongs to the same family of viruses as the much deadlier smallpox, vaccines and therapeutics stockpiled in the event of smallpox's return can be used to prevent and treat monkeypox. Public health advocates hailed the WHO's decision to label monkeypox a global emergency.

"With monkeypox cases continuing to rise and spread to more countries, we now face a dual challenge: an endemic disease in Africa that has been neglected for decades, and a novel outbreak affecting marginalized communities," Josie Golding, head of epidemics and epidemiology at the global health organization Wellcome, said in a statement.

For Fun: 

July 25: Two Weeks In, the Webb Space Telescope Is Reshaping Astronomy

The image showed thousands of galaxies in a pinprick-size portion of the sky, some magnified as their light bent around a central cluster of galaxies.

One of JWST's much-touted abilities is the power to look back in time to the early universe and see some of the first galaxies and stars. Two teams found the galaxy when they separately analyzed JWST observations for the GLASS survey, one of more than 200 science programs scheduled for the telescope's first year in space.

More early galaxies hide in the image of the galaxy cluster presented by President Biden and studied by Pascale and Mahler.

Now scientists are hoping the telescope will find an absence of heavy elements in even earlier galaxies - evidence that these galaxies contain only Population III stars, the hypothesized first stars in the universe, thought to have been monstrously huge and made entirely from hydrogen and helium. For scientists seeking to understand the structure of galaxies and how stars form within them, JWST has already provided impactful data.

What's most remarkable, she said, is that NGC 7496 is a normal galaxy, "Not a poster-child galaxy." Yet under the watchful eye of JWST, it suddenly comes to life and reveals channels where stars are forming.