Congress is set to begin a two-week break at the end of this week. Defense hearings outnumber those on the economy, but inflation and the war in Ukraine are the top two issues on voters’ minds at 30% and 14%, respectively, according to a Quinnipiac poll released March 30 . The Fed and Russia make for unique US electoral and macro risks forcing Congress and the Biden administration to balance election messaging with policy management.
Ukraine/Russia
Ukrainian President Zelensky’s demand that any aspirational ceasefire be a precursor to a more comprehensive European security pact demonstrates this war’s historical significance. By insisting that China join the US, the EU, Russia, and Ukraine in those talks, he commits the major global economic and geostrategic powers. This strikes us as the only method of both ending the war and ensuring peace to the extent that any agreement could bind Russian President Putin and force Chinese President Xi to be the enforcer of any deal.
As global energy costs rise, the International Energy Agency (IEA) said it would release details of its members’ strategic releases this week. US energy security and costs to voters take a leg up in the Washington spotlight this week. Also related to national security, Congress over three days this week holds four bicameral hearings on US cyber capabilities/risks. Risks boost interests usually leading to spending if only to avoid post-event recriminations. We believe the bump in FY22 RDT&E spending will continue into next fiscal year.
Calendar Highlights
Tuesday
9:30 a.m. House Armed Services Committee explores Biden’s FY23 defense budget request. Secretary of Defense Lloyd Austin and Chairman of the Joint Chiefs of Staff Mark Milley will testify. This is one of a half dozen defense hearings this week, including the Senate Armed Services Committee version on Thursday. Elevated national security trends and bipartisan favor for more defense spending remains a support for the sector.
10:00 a.m. House Foreign Affairs Committee considers legislation to prohibit Russian participation in the G7 (at times called the G8 when Moscow was invited). This represents further pressure to complicate Russia’s return to the international community. President Xi said he found the war “regrettable,” however, concern likely to ratchet up globally as Putin signals more, deeper war which ensures additional, sustained sanctions. This war of attrition between imposers and those on whom restrictions are imposed isn’t abating as much of the implementation of March sanctions is nascent.
Wednesday
10:00 a.m. Treasury Secretary Janet Yellen discusses the international finance system during a House Financial Services Committee hearing. Expect some cogent and some inane questions commentary on the dollar, sanctions, and trade.
