Washington’s work pace usually accelerates the last six weeks of the year. None of the unique challenges of 2021 has changed that rhythm. Sentiment is sour about many subjects and is not sparing national elected officials, which we think contributes to a bipartisan urge to demonstrate relevancy.
Fiscal
The House of Representatives this morning will pass a nearly $1.7 trillion version of President Biden’s social programs and offset. The Senate process on the reconciliation ramps up in December and likely will revise the House’s work. Our core view remains that the president will receive legislation in the range of $1.5 – $1.9 trillion fulfilling the fiscal piece of his first-year economic agenda before Christmas.
On the debt ceiling, late week commentary from senators of both parties portends negligible risk, if any, of default. Republican leadership, including Senate Minority Leader Mitch McConnell, suggested a possible path to avoid a second reconciliation bill to raise the debt limit. McConnell and Majority Leader Chuck Schumer met yesterday and agreed to keep talking. The meeting raises several questions related to the timing, the level of an increase or possible further suspension, the price of GOP cooperation, and whether that price is acceptable to Senate and House Democrats.
FY22/23 appropriations could be a topic in debt limit negotiations, either numerically or procedurally. Appropriators have had a tentative agreement on topline funding for several weeks, but Senate ranking member Richard Shelby held back the final agreement, presumably to use as leverage in negotiations of contentious issues such the debt ceiling.
Bank Regulation
President Biden’s statements imply Federal Reserve Board nominations would come before Thanksgiving. We stand by our numerous reiterations of Jerome Powell and Lael Brainard leading a restructured US central bank, and the president’s decisions to fill out the Board will not cause credible consternation over qualifications (see our pervious notes Next Fed Board Game and Banking on Differentiation). We believe the Fed will be fully reconstituted by the end of next quarter, if not sooner.
The confirmation hearing for Biden’s nominee to the Office of the Comptroller of the Currency ended yesterday without a vote. The very straightforward Senator Jon Tester said he had concerns but did not say he opposed Saule Omarova. We continue to expect a 12 – 12 Senate Banking Committee vote and nearly equivalent 51 – 50 Senate floor vote to confirm her next month.
Competition Policy/Inflation
The Biden administration’s most tangible empathetic acknowledgment of inflation’s effect on American’s pocketbooks and minds came yesterday during a Federal Trade Commission (FTC) session on possible anti-competitive practices of large retailers and their suppliers. The FTC voted to postpone until November 24 a vote on a potential study of supply chain disruptions. The day prior, the president asked the Commission to investigate reports of price gouging at the gas pump.
Quarter-end
Lawmakers will end the year as it began by focusing on the social and economic effects of the pandemic. The quarter-end policy schedule features President Biden’s economic and macroprudential regulation agenda. It has implications for monetary policy, as well as the inflation consequences of a knotted global value chain. The White House and other Democrats surely hope for a flurry of year-end action, coupled with the possibility of better public sentiment next quarter. That combined with sustained strong economic results might create political momentum beneficial to averting worst-case midterm election outcomes.
