The bad news about Biden’s good economy

Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy.

Jul 18, 2024 View in browser   By Victoria Guida and Sam Sutton 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 President Joe Biden’s economic pitch to voters should be getting easier. But political turmoil has yanked away the microphone just when he needs it most. After years of analysts declaring that “good news is actually bad news” — because faster GDP and job growth raised anxiety that inflation might linger — the president has been on a hot streak, where good news is actually good news. Annual inflation is getting ever-closer to the Federal Reserve’s 2 percent target — prices dropped from May to June, according to the Consumer Price Index. And Fed officials are sounding increasingly confident that they’ll be able to cut interest rates in September (while never actually putting a firm timeline on it). Indeed, Chris Waller — one of the Fed rate-setting committee’s more hawkish members — gave a speech Wednesday titled “Getting Closer.” “I believe current data are consistent with achieving a soft landing,” he said. “So, while I don’t believe we have reached our final destination, I do believe we are getting closer to the time when a cut in the policy rate is warranted.” That’s on top of signs that the job market is bending without breaking. Unemployment has gradually risen to 4.1 percent from a trough of 3.4 percent, but layoffs are still low. That it’s happened slowly is a key ingredient to the recipe for avoiding a downturn. And joblessness isn’t yet at concerning levels. “It’s ahistorical what we’re observing,” Chicago Fed President Austan Goolsbee told reporters last week. “You don’t see gradual increases in the unemployment rate [like this]. … It looks so different than a normal business cycle deterioration that it doesn’t feel like the beginning of a recession.” There are other economic trends that should make a presidential incumbent salivate, such as a sustained surge in new business creation. In January, the White House said business formation has risen more in the previous three years than at any point in the two decades that the Census Bureau has tracked it. Small Business Administrator Isabel Guzman touted that record in an interview with MM, noting that while the initial bump in business births was a result of the pandemic, the trend has continued. She attributed it to a whole host of factors: people taking part in the Great Resignation deciding to strike out on their own, a shift to suburban communities that changed where and what people wanted to buy, and healthy consumer spending generally. “Clearly, there has to be market opportunity. There has to be the capital available for small businesses,” she said. “And that’s really what the Biden-Harris administration has focused on doing, and especially for underserved communities.” “It is really critical that we get out and talk about these successes,” she added. But the split screen is that voters still strongly prefer Donald Trump to Biden on the economy. And now much of the oxygen is being taken up by questions about whether the president can even continue in the race, an attempted assassination of the former president, and the policies and politics of J.D. Vance, Trump’s chosen running mate. (Vance, after all, is the only new element to either of the two tickets.) Biden’s most recent press conference also put on display how much more comfortable he is talking about foreign policy than in selling his economic record. Meanwhile, one Trump ally is giving the challenger — not Biden — credit for the stock market’s recent gains. Larry Kudlow encapsulated the broader politics of the situation perfectly: “Suddenly, stock markets are mounting a huge spiking rally, and I have to believe it has something to do with Donald Trump’s providential escape from an assassin’s bullet,” he said Tuesday on the sidelines of the Republican National Convention. “Today alone, the Dow is up over 700 points, yesterday over 200 points. I don’t think this is a coincidence.” IT’S THURSDAY — The past month has been absolutely bonkers on the news front. Send tips and suggestions to ssutton@politico.com and @samjsutton.   The CNN-POLITICO Grill has quickly become a key gathering place for policymakers and thought-leaders attending the RNC in Milwaukee. On Tuesday, POLITICO and Bayer convened two conversations: a discussion with Sen. John Boozman (R-Ark.) and Rep. G.T. Thompson (R-Pa.) and an executive conversation with Bayer’s Jessica Christiansen, senior vice president and head of crop science and sustainability communications. The conversations focused on the news of the day in Milwaukee, including deeper discussion centered on the critical challenges faced by the agriculture sector. CATCH UP HERE     Driving the day U.S. leading economic indicators will be out at 10 a.m. … Dallas Fed President Lorie Logan, San Francisco Fed President Mary Daly and Fed Gov. Michelle Bowman are all slated to speak at a conference hosted by the Dallas and Atlanta Federal Reserve Banks that begins at noon … The SEC has a closed meeting at 2 p.m. … Trump will deliver remarks at the Republican National Convention tonight Top Democrats call on Biden to step aside — Rep. Adam Schiff (D-Calif.) called on Biden to “pass the torch” and step aside, Sarah Ferris and Jeremy White report. — ABC’s Jonathan Karl later reported on-air that Senate Majority Leader Chuck Schumer (D-N.Y.) “forcefully made the case that it would be better for Biden, better for the Democratic Party, and better for the country if he were to bow out of the race.” — Film producer and top Biden fundraiser Jeffrey Katzenberg warned the president on Wednesday that donor patience was “wearing thin, and their cash soon will too,” Semafor’s Liz Hoffman and Ben Smith report. It’s going around — Hours after Biden told Ed Gordon of BET News that he would consider dropping out if “some medical condition” emerged, he tested positive for Covid-19, Adam Cancryn reports. He canceled a planned speech in Las Vegas at the UnidosUS annual conference. (Separately, The Atlanta Fed also announced that President Raphael Bostic has the virus.) Menendez drama imperils nominees — Sen. Bob Menendez’s legal troubles are putting the nominations of a slate of high-profile Wall Street regulators into limbo, our Eleanor Mueller and Declan Harty report. SEC sues former CEO who helped orchestrate Trump deal — Declan also reports that the SEC is suing the Miami-based financier who helped bring Trump’s social media venture onto Wall Street for allegedly misleading investors. Vance cools on credit card bill — Scoop from Eleanor and Zach Warmbrodt: “Supporters of legislation that’s intended to reduce credit card swipe fees for merchants may have lost a key ally — Sen. J.D. Vance. The Ohio Republican’s staff has told at least two lobbyists that he will not advocate for the Credit Card Competition Act, a bipartisan bill that would target Visa and Mastercard’s dominance over the credit card industry by cracking down on the fees. The vice presidential nominee signed on to the legislation from Sens. Dick Durbin (D-Ill.) and Roger Marshall (R-Kan.) last summer.” SPOTTED at the RNC — Kudlow hosted a dinner of about 20 people in Trump’s economic orbit Tuesday night. Among the attendees were Stephen Moore, Art Laffer and Christopher Giancarlo. Regulatory Corner Cloudy with a chance of systemic risk — Treasury unveiled new guidance for banks on how to manage risks linked to their reliance on cloud computing services, Michael Stratford reports. The documents were produced by a working group of government and industry officials that detail “effective practices” for how financial institutions purchase and manage cloud computing services. The Economy More solid economic news — “Modest” was the word of the day in the Fed’s Beige Book. Economic activity, prices, and wages all climbed at modest rates in most regions. Expectations for the future of the economy were for slower growth over the next six months “due to uncertainty around the upcoming election, domestic policy, geopolitical conflict, and inflation,” according to the report. — Recent inflation data is “getting us closer to a disinflationary trend that we’re looking for,” New York Fed President John Williams told the WSJ’s Nick Timiraos. “These are positive signs. I would like to see more data to gain further confidence inflation is moving sustainably to our 2% goal.” Political risks — For the first time in six months, fund managers surveyed by Bank of America said geopolitical conflicts pose a bigger risk than inflation. Nearly half — 48 percent — view trade policy as the area that’s most likely to be affected by the election. Another 15 percent of those surveyed said it would be immigration. — Just how feasible is Trump’s deportation plan? Economists have warned that Trump’s plan to deport as many as 15 million undocumented immigrants would hammer the economy. It would be nearly impossible to implement, experts told the NYT’s Miriam Jordan. CRYPTO CORNER The Euro risk — Trump’s courting of crypto interests has reignited fears among European policymakers that the industry could threaten their currency, Ben Munster reports. Ever since Facebook floated the creation of Libra, monetary policymakers in Europe have worried that “privately issued currencies, accountable only to foreign firms, could encroach on their monetary powers, loosen their grip on the euro, and increase the risk of financial crashes.” Crypto kerfuffle in Arizona — A Democratic House candidate in Arizona is taking aim at a super PAC backed by the crypto industry after it began spending for one of her primary opponents, our Jasper Goodman reports. Former Arizona state Sen. Raquel Terán on Wednesday blasted the PAC Protect Progress — one of three groups funded by the digital asset industry to elect pro-crypto congressional candidates — after it went on the air with an ad backing her top opponent, Yassamin Ansari. “Republican-funded groups and Trump donors are trying to buy this seat and silence the voices of Latino voters,” Terán said at a press conference. “This is about a blatant attempt by MAGA extremists to meddle in a Democratic primary and boost Yassamin Ansari.” Protect Progress, which declined to comment, is funded by several crypto companies — including the venture capital firm Andreessen Horowitz, whose founders this week said they would begin spending money supporting Trump. Ansari, a former Phoenix city councilor, has pro-crypto language on her website. Terán’s campaign page also includes crypto-friendly language, but she is rated “neutral” by the group Stand with gCrypto because of votes on digital asset legislation in the state legislature.   Understand 2024’s big impacts with Pro’s extensive Campaign Races Dashboard, exclusive insights, and key coverage of federal- and state-level debates. Focus on policy. Learn more.     Jobs report The economic think tank Groundwork Collective has hired Mike Webb as its new deputy director and chief of communications. He previously was senior vice president of media and marketing at the News Literacy Project and vice president of issue advocacy at BerlinRosen Public Affairs.   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

To change your alert settings, please log in at https://login.politico.com/?redirect=https%3A%2F%2Fwww.politico.com/settings This email was sent to rouf@idiot.cloudns.cc by: POLITICO, LLC 1000 Wilson Blvd. Arlington, VA, 22209, USA Unsubscribe | Privacy Policy | Terms of Service