America’s indecisive economy

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Sep 13, 2023 View in browser   By Sam Sutton Presented by Editor’s note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our subscribers each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro. QUICK FIX Prices probably climbed a lot faster than President Joe Biden might have hoped last month. It probably won’t be as bad as some headlines suggest, but that doesn’t mean it’s good. Surging oil prices pushed the consensus forecast for the consumer price index to a monthly rate of 0.6 percent in advance of the Labor Department's release later this morning. That topline figure — which would be the largest monthly increase since inflation peaked last summer — will belie growing signs that price growth has slowed in other, less volatile parts of the economy. The question for Biden, and for Federal Reserve policymakers, is how much that will matter to consumers. “People can't tell you the price of a gallon of milk or a dozen eggs, but they can sure tell you the price of a gallon of gasoline,” David Kelly, the chief global strategist and head of the global market insights strategy team at J.P. Morgan Asset Management, told your host. “It does have a psychological effect on consumers — as well as actually hurting them.” That might be one reason why the New York Fed reported earlier this week that inflation expectations are rising again. Optimism about household finances — as well as access to credit — faded. Labor markets are starting to soften, even as unemployment hovers near historical lows, and savings amassed during the pandemic are mostly erased. So far, that hasn’t stopped people from spending money. The Bank of America Institute on Tuesday reported that credit card balances for low-income Americans are now exceeding pre-Covid ranges, though some of that pressure has been offset by faster wage growth. But the retail boom that surprised Wall Street in July isn’t expected to get an August encore as summer sales conclude and less affluent consumers pull back. All of this has happened before student loan payments resume and higher child care costs kick in. “The number of people out spending is coming down. Those that are out there spending are spending more,” said Visa Chief Economist Wayne Best, citing recent data from Visa’s Business Economic Insights team. The growing likelihood of a soft landing — as well as the fact August’s annual inflation figure will likely be a fraction of what it was last summer — should provide Biden and Democrats a solid foundation as they move into campaign mode in 2024, former Clinton administration Labor Secretary Robert Reich told MM. Those narratives haven’t taken root, however. Particularly as the administration manages headlines about surging poverty rates — which were expected — and declining purchasing power. “It looks like between the Fed and all of the Biden fiscal policies, there's going to be a soft landing. That's unambiguously good for most people,” Reich said. “But when you ask people — and this is not new — how they're doing? The larger, longer term story figures very prominently.” Democrats “have to think very carefully about how they frame the current moment,” Skanda Amarnath, executive director of worker advocacy group Employ America, told MM. “That optimistic narrative is going to be challenged over the next couple of months,” Of course, one could say the same for economic doomsayers as well, Amarnath added. Any narrative is “not going to feel so decisive at this juncture.” IT’S WEDNESDAY — Send tips, gossip and suggestions to Sam at ssutton@politico.com and Zach at zwarmbrodt@politico.com   A message from BPI: The Fed’s extreme Basel proposal will have real consequences for everyday Americans. These costly new capital rules will create a drag on our economy for years to come and will hurt working families and small businesses. Congress must take action to stop the Basel endgame before it’s too late.   Driving the Day Consumer price index is out at 8:30 a.m. … Sen. Elizabeth Warren, CFPB Director Rohit Chopra and SEC Chair Gary Gensler will speak at a Better Markets conference that kicks off at 9:30 a.m. … The Senate Budget Committee holds a hearing on immigration and the economy at 10 a.m. … House Financial Services holds a CFIUS oversight hearing at 10 a.m. … CFTC Commissioner Kristin N. Johnson will speak on a DeFi panel at the EuroFi conference at 11:10 a.m. … Press Secretary Karine Jean-Pierre; National Security Council Coordinator for Strategic Communications John Kirby; and Council of Economic Advisers Chair Jared Bernstein hold a press briefing at 1 p.m. It’s the final countdown — The United Auto Workers union could go on strike if they don’t reach a labor agreement with the Big Three automakers by 11:59 p.m. Thursday, and left-wing lawmakers are “using their bullhorns to call out the companies and plug the union’s demands,” writes our Olivia Olander.   GO INSIDE THE WORLD’S BIGGEST DIPLOMATIC PLATFORM WITH UNGA PLAYBOOK: The 78th Session of the United Nations General Assembly will jam some of the world's most influential leaders into four city blocks in Manhattan. POLITICO's special edition UNGA Playbook will take you inside this important gathering starting Sept. 17 — revealing newsy nuggets throughout the week and insights into the most pressing issues facing global decision-makers today. Sign up for UNGA Playbook.     Key Biden aide departs — Our Victoria Guida: “Bharat Ramamurti, a key progressive voice within the Biden administration, is leaving the White House at the end of September, in a move that could shift the power dynamics on economic policy.” Senate Banking lines up execs — Members of the Senate Banking Committee will again hear from the CEOs of Wells Fargo, Bank of America, JPMorgan Chase and Citigroup, among others, Chair Sherrod Brown told reporters Tuesday. The Ohio Democrat said invitees to the now-annual hearing will hail from "the G-SIBS, the ones we had before” plus “one or two” more. A person familiar with the talks said lawmakers are working with the executives to nail down a date. Credit card bill in limbo — There aren't “really any conversations going” about Sens. Dick Durbin (D-Ill.) and Roger Marshall’s (R-Kan.) legislation targeting credit card fees, Marshall told Eleanor on Tuesday. “How to keep the government open, but balance the budget at the same time, is really consuming everybody's thoughts,” the Kansas Republican said. “When it happens, it happens.”   A message from BPI:   Regulatory Corner Full court press — Gensler’s busy day at Senate Banking included a testy exchange with Ohio Republican J.D. Vance over the agency’s investigation into a pending deal by a blank-check company that wants to take former President Donald Trump’s social media platform public. “If you guys use the SEC in such a politically motivated way, eventually you’re going to be out of power, and I have to say turnabout is fair play,” Vance said, Declan Harty reports. — More from Declan: Gensler had a stark warning for lawmakers on the dangers of artificial intelligence, which he views as “the most transformative technology of our time.” “Fraud is fraud. If you’re using AI and you’re doing deep fakes in the market, that’s a real risk to the markets,” Gensler told Sen. Mark Warner (R-Va.). “We have good laws, but these new technologies will challenge those laws.” — Industry groups have already started to push back on Gensler’s attempts to set guardrails around the use of artificial intelligence and predictive analytics. More than a dozen Washington industry groups, including representatives of the life insurance, private equity and hedge fund industries, blasted the agency’s July proposal as “unnecessary, inadequately reasoned and fatally flawed.” The letter, dated Sept. 11, also raises questions about the SEC’s authority to move ahead with the proposed rule. — More than two dozen industry groups including SIFMA, the Bank Policy Institute and the Managed Funds Association, meanwhile, took aim at the SEC’s proposed rule around the safekeeping of investment advisers’ client assets. In a letter to Gensler, the groups called on the SEC to drop the plan as drafted, arguing that it duplicates — and, in some cases, clashes with — existing rules from banking, insurance and other market regulators. — And one more thing, Declan reports that the National Association of Manufacturers is suing Gensler’s agency to block a rule change that might force certain private companies to start making public disclosures. Wall Street groups are getting feisty! — From Victoria: “The banking industry is arguing that independent regulators broke the law by not providing enough information about the reasoning behind elements of a recent proposal raising capital requirements.” Two drink and 15 percent minimum — Our Brian Faler reports on the “nuts and bolts” of the new 15 percent minimum tax. Busted — Donna Murray, the former finance director of the Loan Syndications and Trading Association, was sentenced to 18 months in prison for embezzling about $490,000 from the organization prior to her resignation last summer. Murray’s attorney and the LSTA declined comment.   JOIN 9/19 FOR A TALK ON BUILDING THE NEW AMERICAN ECONOMY: The United States is undergoing a generational economic transformation, with a renewed bipartisan emphasis on manufacturing. Join POLITICO on Sept. 19th for high-level conversations that examine the progress and chart the next steps in preserving America’s economic preeminence, driving innovation and protecting jobs. REGISTER HERE.     The Economy Soft landing? Still possible — The FT: “Goldman CEO says chance of US avoiding recession ‘higher’ than a year ago” The aging unhoused — The WSJ’s Shannon Najmabadi: “Baby boomers, who transformed society in so many ways, are now having a dramatic effect on homelessness. Higher numbers of elderly living on the street or in shelters add complications and expenses for hospitals and other crisis services.”   A message from BPI: Instead of playing politics, the banking agencies should engage in a robust and thorough economic analysis of the proposal's effect. Federal agencies need to go back to the drawing board and ensure that future policy allows working families and small businesses to thrive. To learn more, visit StopBaselEndgame.com.     Follow us on Twitter Mark McQuillan @mcqdc Zachary Warmbrodt @Zachary Victoria Guida @vtg2 Declan Harty @ @declanharty Eleanor Mueller @eleanor_mueller Katy O'Donnell @katyodonnell_ Sam Sutton @samjsutton   Follow us

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