SUMMARY
We hosted a virtual policy conference earlier today (replay link Here) focused on the upcoming US elections, the near-term DC policy agenda, China, and cryptocurrency. The following are the core views of the specialists featured today.
DC Policy and Post-Election Policy Outlook
Bill Hoagland – Senior Vice President, Bipartisan Policy Center
A continuing resolution (CR) funding government through December 16, bipartisan, bicameral commitments to Senator Manchin for streamlined energy regulations, and the FY23 national defense authorization (NDAA) will occupy Congress until Members depart for midterm campaigning. Bill believes House Speaker Pelosi and Senate Majority Leader Schumer will fulfill their promise to Manchin this year either on the CR or the NDAA. Student loan relief could move debt limit action into 2Q23, months earlier than estimated in January. On rail strikes, any possible policy intervention requires congressional action. Bill notes that divided government after the midterms will result in what he referred to as VUCA in Washington: volatility, uncertainty, complexity, and ambiguity leading up to the 2024 elections.
Midterms Polling Update
Jacob Rubashkin – Analyst, Inside Elections
Jacob believes that races in Colorado, Georgia, Nevada and Ohio are the four states that are keys to knowing the November 8 Senate implications. The outcomes in Georgia and Nevada will determine who wins the Senate. If Democrats lose both races, they lose control of the Senate. If they split, with a race going to each party, then it would be a push and Democrats retain their current control. Jacob added that if Democrats lose their seat in CO or Republicans in OH, the winning party has a chance at a 2–3 seat majority. Skews in the analysis of 2016 and 2020 polling data leading to off analysis likely had to do with Donald Trump being on the ballots, a factor unlikely to throw off polling this cycle. The economy and abortion remain the top drivers of voter turnout. In keeping with non-US war midterms, international issues will play in very few races. Jacob noted that an exception is Ohio where a large Ukrainian-American population resides in Cleveland. Democratic candidate Tim Ryan has seized on comments made by GOP candidate J.D. Vance downplaying the importance of the war in Ukraine.
All About Xi and the G2 Disconnect
Michael Hirson – new 22V Head of China Research
China’s relationship with Russia likely doesn’t move much after the Xi/Putin meeting on Thursday at the Shanghai Cooperation Conference as the former seeks to maintain the appearance of close ties without risking US sanctions. Most of all, China doesn’t want domestic reactions to the war in Ukraine to destabilize Moscow’s government. Beijing’s stimulus edicts are implemented by local governments which are fiscally challenged by real estate debt; Michael doesn’t foresee massive fiscal easing. Given his consolidation of power, Xi is the most important signal coming out of the upcoming October 16 Party Conference. Crisis in the dysfunctional G2 relationship is “not inconceivable” since each side has miscalculated the other since January 2021. On China’s central bank digital currency influence on global payments, Michael thinks the U.S. State Department worries more than the Treasury Department. The White House is attempting to tamp down the bite in pending legislation to strengthen US/Taiwan ties, which Senate Foreign Relations is set to markup tomorrow (September 14). The risk is that the legislation could inflame US/China relations.
Digital Assets Benefit from Some not All Bank-like Rules
Tim Massad – former chair of the CFTC
Tim concurred with Michael’s assessment of the international financial impact of China’s CBDC, largely due to the closed financial regime protected by Beijing. Tim has heard that of the four digital asset reports due soon from Treasury, the first will address the payments system. The Tornado Cash episode is an example of regulators not fully understanding the devotion to and technology-enabled decentralized culture of crypto participants. That written, Tim is in the camp that the retail pain felt November 2021–May 2022, along with illicit activities are strong drivers of an eventual crypto rulebook. We agree with Tim that Congress likely won’t get there before the courts and regulators.
