A turning point in the fight against inflation

Good evening. A day after escaping another apparent assassination attempt, former President Donald Trump will unveil a new cryptocurrency business tonight. “No major party candidate has ever used his candidacy for personal gain as Trump has during his third run for the White House,” according to CNN. Notes“But this latest effort, launched just 50 days before the election, poses a hornet's nest of ethical conflicts should Trump win in November.”

Vice President Kamala Harris was in Washington, DC, on Monday before visiting Pennsylvania on Tuesday, where she is scheduled to hold an event in Philadelphia.

This week is also expected to bring some major economic news. With inflation cooling – and the labor market slowing – Federal Reserve policymakers are expected to launch a campaign to cut interest rates when they conclude a two-day meeting on Wednesday. Ask is whether they will start with a quarter or half point tee shot.

Here's your Monday update.

Leading White House adviser: US economy at “turning point”

Lael Brainard, former vice chair of the Federal Reserve and now chair of President Joe Biden's National Economic Council, said Monday that the U.S. economy has reached a critical point in the fight against inflation.

“Today we stand at an important turning point,” Brainard said in prepared remarks before the Council on Foreign Relations in New York. “Inflation is returning to normal levels, and it is important to safeguard the important progress we have made in the labor market.”

Brainard's comments come just days before the Federal Reserve announces its interest rate decision. The central bank is expected to begin cutting its interbank lending rate at the end of its meeting on Wednesday. Although Brainard avoided a direct appeal to the Fed – and specifically cited the Biden administration's commitment to Fed independence – a rate cut, likely the first in a series, could boost the economy and help bolster a labor market that is beginning to show signs of fatigue after a remarkable multi-year stretch of strong performance.

Celebrate a soft landing: Brainard reminded her audience that many economists had expressed doubts about whether the Biden administration and the Fed could bring inflation back into the 2 percent target range without significantly slowing the economy and increasing unemployment – the “soft landing” that policymakers have so rarely achieved in the past.

But inflation is now “close to its immediate pre-pandemic levels,” Brainard noted, “while we have the lowest average unemployment of any government in over 50 years and real GDP has grown at an average rate of 2.9 percent per year.”

Brainard said the unexpected combination of falling inflation and strong economic growth suggests that the price instability observed during and after the pandemic was caused by individual shocks – first the pandemic itself, followed by the Russian invasion of Ukraine – that faded over time.

In addition, the fact that the U.S. has recovered stronger from the pandemic despite a rise in inflation that has also been seen in other parts of the world suggests that certain U.S. economic policies have played an important role in the trajectory of the recovery (see chart below). “While we must continue to work to reduce costs, the administration's actions to protect balance sheets and support small businesses, families, workers and communities have played an important role in supporting the broad-based U.S. recovery. Early investments in repairing supply chains, along with ongoing supply-side investments, have helped reduce bottlenecks and price pressures,” Brainard said.

A change of focus: With inflation all but defeated, Brainard urged policymakers to focus their attention on maintaining growth in the labor market and the overall economy. To that end, Brainard pointed to policies passed or proposed by Biden and Vice President Kamala Harris to support middle- and working-class families, including investments in clean energy, programs to lower drug prices, subsidies for new home construction and the expansion of the child tax credit.

Brainard also pointed out that the Biden administration's policies stand in sharp contrast to proposals from Republican presidential candidate and former President Donald Trump, which she said would produce negative results. “This is very different from an approach that would weaken our economy by undermining the independence of the Federal Reserve and the rule of law, increasing the debt by trillions, and imposing a $4,000 sales tax on middle-class families,” she said, referring to Trump's call for higher tariffs on a range of imported goods.

Johnson and Republicans in the House of Representatives are still struggling to agree on a plan to avoid a shutdown

With two weeks to go before the end of the month, which is set to be followed by a government shutdown, Republicans face massive challenges when they reconvene on Tuesday. They will have to get the support they need to pass House Speaker Mike Johnson's plan for a six-month stopgap funding bill that includes the SAVE Act, which would require proof of citizenship from voters registering to vote.

Johnson was forced to cancel a vote on the package last week because of opposition from parts of his own party, including some Conservatives who said they would not support a short-term spending bill. The speaker has reportedly continued to work to win support for his plan, hoping to bring it up again this week. But he may not find the votes he needs because he can only afford to lose four members of his own conference if all MPs vote and Democrats stand united against the plan.

The Democratic-led Senate and White House have already rejected the plan, meaning that at best Johnson could gain some negotiating power – and at worst flirt with a government shutdown just a week before the November election, with no way to force through any concessions. Democrats and some Republicans prefer a shorter-term stopgap solution that would allow Congress to finalize funding for the full year in December before a new administration takes office.

Some hard-line conservatives are skeptical that Johnson is willing to continue the fight, even if it leads to a shutdown. “Some far-right Republicans might support Johnson's plan if they knew he would be willing to shut down the government if the Senate rejected the bill,” write Marianna Sotomayor and Jacob Bogage of the Washington Post. report“But hardliners believe Johnson's dependence on Democrats to pass must-pass bills has already damaged his negotiating position.”

The conclusion: Republicans are stuck because of their internal disputes — and the situation is further complicated by alleged infighting within the GOP leadership team. The Post's Sotomayor and Bogage sum up the situation this way: “House Republicans have been in power for nearly two years — and they still aren't able to resolve the budget problems within their own ranks.” The most likely outcome remains a clean, lasting resolution by mid-December.

Quote of the day

“We are demanding in the House that he be given all the resources he needs, and we will provide more if needed. I don't think it's a question of funding. I think it's a question of staffing. [issue].”

− House Speaker Mike Johnson speaks in a morning interview with Fox News about the recent alleged assassination attempt on former President Donald Trump, which has again raised questions about the Secret Service's protections.

President Joe Biden told reporters on Monday that lawmakers should address the issue. “I want to make one thing clear: The [Secret] The military needs more help,” he said. “I think Congress should address their needs if they actually need more military personnel.”