The bridge and the economy

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Mar 27, 2024 View in browser   By Zachary Warmbrodt 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 The collapse of Baltimore’s Francis Scott Key Bridge is threatening to leave behind economic ripples for months to come. MM has a quick rundown of key issues to watch. The most immediate impact is the disruption of the Port of Baltimore, which has suspended vessel traffic until further notice as debris is cleared. The port is a major economic hub that handled 52.3 million tons of foreign cargo worth $80.8 billion last year, per the Maryland Port Administration. It’s the busiest U.S. port for car shipments, handling 847,000 cars and light trucks in 2023, and is also a gateway for coal exports. The rerouting of logistics may be felt across the country and hike costs along the way. Ryan Petersen, CEO of the supply chain management firm Flexport, told MM that ships being rerouted to other East Coast ports could trigger congestion. He said it could also be another factor that drives shipments to the West Coast, in addition to problems in the Red Sea and the Panama Canal and looming labor negotiations with East Coast maritime workers. “I think you’re going to see months of impact from this and probably throughout the year as volumes shift to the West Coast,” he said. But economists expect the macroeconomic impact will be contained. JPMorgan Chase’s Michael Feroli and Daniel Silver wrote Tuesday afternoon that it will likely have minimal implications for vehicle inflation. While Baltimore is the top port for vehicle imports, they said many more cars are shipped over land from Canada and Mexico. Vessels are already being diverted to other East Coast ports, and some auto companies have Baltimore terminals outside the area choked off by the bridge collapse, they added. The local economy may feel it the most, RSM US chief economist and principal Joe Brusuelas told MM. Workers involved in the operations of the port may experience a reduction in hours and temporary layoffs. The Baltimore Banner reports that an estimated 140,000 jobs are linked to the port, on top of the more than 15,000 people directly employed there. “When I take a look at this, there is a negligible impact on the U.S. macro economy but there will be a notable impact regionally,” Brusuelas said. Longer term, the big question is what it will cost to rebuild and how it will be paid for. President Joe Biden says he wants the federal government to cover the entire cost of reconstruction and that he expects Congress to support him. It’s not a sure bet amid heightened political tensions over spending. Brookings Institution fellow Joe Kane told MM that the floor for reconstruction is more than $500 million, based on the bridge’s $110 million price tag nearly 50 years ago adjusted for inflation. It could easily cost more than $1 billion. “We’re not just talking about a small bridge over a creek,” he said. “We’re talking about a 1.6-mile, elevated bridge over water in a very busy harbor area. As the complexity goes up, so do the costs.” Large transportation projects are often federal, state and local responsibilities. In terms of Washington support, Kane said there are many varieties of potential federal funding that could come into play, including DOT and disaster-related money. Beyond reconstruction, there will also be questions about how Maryland will raise revenue to fund the new bridge’s operations. Our colleague Anthony Andragna has a rundown on the funding state of play. Sen. Chris Van Hollen (D-Md.) is indicating that federal transportation agencies will not wait for congressional action before providing funds for rebuilding. Lawmakers will separately have to assess whether existing money in fiscal 2024 spending legislation might be sufficient. If not, the White House would likely make a request to Congress. “It's going to cost an enormous amount of money to rebuild that bridge,” former Transportation Secretary Ray LaHood told our E&E colleagues Tuesday. “Congress is going to have to do a special appropriation to pay for that. There's no money set aside to build a structure like that right now.” A team of reporters across the POLITICO newsroom has more on the potential impacts of the bridge disaster. It’s Wednesday — Send tips to zwarmbrodt@politico.com.   A message from Electronic Payments Coalition: CRS: NO EVIDENCE THAT DURBIN-MARSHALL CREDIT CARD BILL WOULD HELP CONSUMERS OR SMALL BUSINESSES The independent Congressional Research Service (CRS) is the latest organization to release a report questioning whether the Durbin-Marshall Credit Card Bill would help consumers or small businesses. CRS echoed an earlier report by the Richmond Fed noting that consumers failed to see any meaningful cost savings because of similar legislation imposing routing mandates and price caps on debit card interchange. Learn more HERE.   Driving the day Graham Steele and Sheila Bair discuss the future structure of U.S. banking in a Peterson Institute virtual discussion at 9 a.m. … Fed Gov. Christopher Waller gives a speech on the economic outlook at an Economic Club of New York reception at 6 p.m. Trump bump — The New York Times reports that shares of Trump Media & Technology Group rose by 16 percent on their first day of trading, valuing the company at $8 billion. That’s larger than Mattel, Alaska Airlines and Western Union – and also 2,000 times Trump Media’s estimated annual revenue. The Visa-Mastercard deal: What’s next — Sen. Dick Durbin and the retail lobby are refusing to back down in their legislative fight against credit card swipe fees even after Visa and Mastercard agreed to cap the charges in a legal settlement. Durbin said the deal, which is expected to save retailers $30 billion, “only provides temporary concessions,” Eleanor Mueller and Michael Stratford report. Merchant groups also said the settlement doesn’t go far enough. Durbin is in a fierce battle with the banking industry over his bill to crack down on the swipe fees. The settlement will allow merchants to charge consumers more for using certain high-end credit cards, such as Chase Sapphire Reserve, according to Bloomberg. In related news, the federal judge in Fort Worth who's handling the banking industry case against the CFPB's credit card late fee cap has set an April 2 hearing date. The hearing will cover a request by the U.S. Chamber of Commerce and other trade groups to pause the rule as the litigation plays out. The judge is also leaving it open to discussion on other pending matters, which would likely include whether to transfer the case to a court in Washington.   SUBSCRIBE TO GLOBAL PLAYBOOK: Don’t miss out on POLITICO’s Global Playbook, the newsletter taking you inside pivotal discussions at the most influential gatherings in the world, including WEF in Davos, Milken Global in Beverly Hills, to UNGA in NYC and many more. Suzanne Lynch delivers the world's elite and influential moments directly to you. Stay in the global loop. SUBSCRIBE NOW.     Economy How the consumer’s doing — Per the AP, the Conference Board says consumer confidence is holding steady despite sinking optimism about the short-term future. The business research group’s survey this month found an uptick in concerns about food and gas prices. Larry Fink’s warning — The BlackRock CEO in his annual letter to investors is trying to rally policymakers and the business world to address a looming retirement crisis as people live longer, Declan Harty reports. “America needs an organized, high-level effort to ensure that future generations can live out their final years with dignity,” Fink says.   A message from Electronic Payments Coalition:   Markets The mortgage pinch, explained — The WSJ has a look at what’s driving the rise in Treasury yields and why they might keep climbing even if the Fed starts to cut interest rates. It’s rough news for homebuyers because the higher yields prop up mortgage costs. “Cuts will come, but it’s going to be later and there’s going to be fewer cuts this year,” said Payden & Rygel chief economist Jeffrey Cleveland. “So that argues for a bit higher 10-year yields.”   A message from Electronic Payments Coalition: CRS QUESTIONS WHETHER DURBIN-MARSHALL CREDIT CARD BILL WOULD HELP ANYONE AT ALL Every member of Congress should read the CRS analysis which discusses the impact the Durbin-Marshall Credit Card Bill could have on small businesses and American families. Report after report has plainly demonstrated that consumers and small businesses did NOT save any money when Congress passed the 2010 Durbin Amendment, imposing new mandates on debit cards. Now, a decade later, why would anyone assume a monumental restructuring of our nation’s secure, worry-free credit card system would yield different results? After considering the facts, the only logical solution would be to strongly OPPOSE the Durbin-Marshall Credit Card Bill. Click HERE to learn more.   Crypto David McCormick, crypto ally — The GOP candidate for Pennsylvania’s U.S. Senate race is making the case that Washington should do more to support the growth of cryptocurrency and blockchain technology. “Let’s not miss the next innovation wave,” the former Bridgewater CEO writes in a Washington Examiner op-ed. He’s backing legislation led by House Financial Services Chair Patrick McHenry that would divvy up digital currency oversight between the SEC and the CFTC.   Access New York bill updates and Congressional activity in areas that matter to you, and use our exclusive insights to see what’s on the Albany agenda. Learn more.       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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