This group could decide the election

 

Gordon L. Weil

A dozen people will meet behind closed doors next month and make a decision that will heavily influence the presidential election and might even decide it.

They are not politicians. They are a group of almost anonymous economists and bankers who will set the interest rate affecting everything from mortgages and housing to credit cards and pensions. 

Its decision will have an immediate and nationwide impact. That’s more real change than most economic policy actions by the president.  And it could also determine the election.

The group bears a technical sounding name: the Federal Open Market Committee or FOMC.  But its effect is hardly technical.  It is coldly practical, and its decision will cascade through the economy the minute it is announced at two o’clock on the afternoon of September 18.  This will come at the end of the only FOMC meeting scheduled before the elections.

The FOMC is poised to lower interest rates.  That’s a big deal and is expected to be politically popular.  Coming while a Democratic president holds office, the lower rates could boost the Democrats’ election chances.  Yet the decision will be a judgment based on economic factors, information available to the public, and not on politics.

The FOMC supports the Federal Reserve, which has two major tasks – keeping employment high and inflation low.  It’s a balancing act, because promoting one goal can produce negative results for the other.

Many people have faced a higher cost of living and assign blame to high interest rates.  Whatever the underlying factors, a majority holds President Biden responsible, with inflation being a key contributor to his unpopularity.  Lower rates and resulting lower prices could boost the chances of Kamala Harris.

Donald Trump has been an advocate of lower interest rates, a position that has political appeal.  He has come to dislike the rate policy of Jerome Powell, the person he had appointed as the Fed chief.  Recently, Trump has favored waiting to lower rates to deny political help to the Democrats. 

Trump backers have suggested that presidents ought to take part in setting interest rates.  If the president played such a role, it would be like their having a say in Supreme Court decisions.  Now, the president’s role with both the Supreme Court and the Federal Reserve Board consists of appointing their members. 

Presidents are supposed to keep away from these economic decisions.  Otherwise, short-term politics can seriously harm the national economy.  Leading central banks around the world, like the Fed, are kept independent of political leaders by law. 

The Federal Reserve has traditionally kept its distance from presidential politics, especially following a major crisis about 50 years ago when Fed policy got too close to a campaign. Since then, they have been a carefully reserved Reserve.

The FOMC is composed of twelve members:  the seven members of the Board of Governors of the Fed, appointed by the president for 14-year terms, plus five representatives of regional Federal Reserve banks.  The FOMC votes are made public, and, unlike the Supreme Court, there is remarkable agreement among the members, no matter their political affiliation.

Following the Great Recession of 2008 and the Covid crisis beginning in 2020, employment fell, eventually leading the FOMC to stimulate the economy by setting interest rates at zero.  Then, as the economy improved, it raised rates to block inflation by slowing business investment. 

Its policy worked.  First, unemployment was sharply cut.  Then, the FOMC raised rates back to traditional levels.  Price increases have slowed, but so has employment growth.  

Here’s where politics comes in.  People had grown accustomed to the low interest rates used to stimulate the economy.   When the FOMC increased rates, it intended to slow economic growth and reverse inflation.  But many people liked low rates, so grew unhappy with the FOMC interest policy.

The Fed has tried to bring about what is called a “soft landing.”  In dealing with both employment and inflation problems, it had to avoid pushing too hard either way, because it wanted to avoid a recession.  That’s a tough challenge, not always popular, and it seems to be working.  But the Fed has struggled to get the right timing for its moves.

If, by its decision in September, the FOMC lowers costs in the economy, almost everybody will take that as good news.  Their new optimism, probably accompanied by higher stock market values, could have a political effect.  With Trump now holding a slight lead on his ability to handle the economy, it could help Harris.

The cut won’t be huge, either a quarter or a half percent, but it will produce lower costs for people and businesses.  In this short campaign, that could be a big influence on how people vote.  Let’s see how the hot politics of a cold economic decision play out.

Harris, Trump promises depend on Congress

 

Gordon L. Weil

Promises, promises.

Presidential candidates make them.  Voters complain that they don’t keep them.

Promises reveal a candidate’s political views, but often they cannot be kept.  Keeping them most likely depends on the president’s party winning majorities in both the U.S. House and Senate. 

This year, the presidential election takes place alongside races for all 435 House seats and 33 Senate seats.  The results of those 438 other federal elections may reveal as much about national policy in the next couple of years as the outcome of the contest between Kamala Harris and Donald Trump.

Right now, the balance of power in both houses of Congress is close and is expected to remain tight.  Currently, the House has 220 Republicans and 212 Democrats with three vacancies.   In November’s election, 21 seats are rated as toss-ups, so House control is up for grabs.

A toss-up seat is usually one where the representative aligns with one party, while the voters support a presidential candidate of the other party.  Maine’s Second District, represented by Jared Golden, is one of the most Republican districts with a Democratic representative.

Golden is a classic case, like Sen. Joe Manchin of West Virginia, a Democrat who keeps the views of his district always ahead of pure partisanship.  Goldin has made clear why he is a Democrat, but keeps his distance from the Democratic Party, sometimes opposing it on issues supported by most of its House members.

While he has voted against the policies of President Biden more than any other House Democrat, he has not cast the decisive vote to kill a Biden policy. That’s partly because there are other Democrats who share his approach.  In 2021, he refused to back Nancy Pelosi for House Speaker and joined others voting for another Democrat.  Still, Pelosi was elected.

The presidential race could have a major influence on his re-election chances.  Trump expects to carry the district.  Either Golden must continue to convince voters that his loyalty to them is greater than his Democratic ties or Harris must succeed in reducing Trump’s strength in the district.

By not endorsing Harris, Golden has immunized himself from having to support or defend her positions as she announces them, keeping his focus on district interests. Still, as a Democrat, he is sure to get seats on House committees, less possible for a true independent.  His committee roles can be important for Maine.

Golden’s race could be critically important to the Democrats, because they have a realistic hope of winning control of the House.  Their chances in the Senate are far slimmer, so the House could be the barrier to the possibility of full Trump government control.

The Senate now includes 51 Democrats and allies and 49 Republicans. The Democrats have 22 seats up for election this year while the GOP has only 11.   Only two of these seats, both held by Democrats, are considered to be toss-ups.  If they hold those seats, the full Senate would end up split 50-50.  The Vice President breaks ties, so the presidential election outcome matters.

But tie-breaking might not be enough, because the minority party could deny the 60 votes required to end debate and could block most decisions.  The only limit is that the American people have no appetite for a government shutdown resulting from total disagreement, so a band-aid budget could be allowed to pass.

Presidents have gained more power in recent years, but they are not completely free to act.  The courts may restrain them, and the congressional power of the purse may limit how far they can go.  Without congressionally approved spending, they can be at least partially blocked.

After the Democratic National Convention, the campaigns enter into the home stretch of this unusually short race.  The September 10 presidential debate could be a turning point.  Trump might step up his efforts to undermine public confidence in Harris.  As the younger candidate with special appeal to women voters, she could try to push her momentum.

If Trump regained the polling lead, he could have a strong influence either way on the congressional races.  Voters might support Democratic candidates to ensure a balanced or divided government or they might vote Republican to give Trump the full support he needs to keep his promises.

In contrast, a growing Harris lead would mean she had strong momentum.  That could yield her a bigger win, possibly providing a margin that would make it more difficult for the almost inevitable election challenges that would follow a Trump loss.   

If her gains continue, her momentum could help Democrats in toss-up congressional races.  Beyond that, watch to see if any race where the GOP candidate is currently rated as a sure winner becomes a toss-up, which could be a bellwether of a possible Harris victory.

 

Harris’ policies versus Trump’s

 

Gordon L. Weil

During the Democratic National Convention, news analysts repeatedly say that Kamala Harris had better hurry up and define her policies before Trump does it for her, putting her on the defensive.

They start from a false premise.  She has stated these major policy positions:

Reproductive choice (formerly known as abortion rights).  She is outspoken on this key issue and wants a federal guarantee of this right.  By contrast, Trump varies between banning it nationally and state action.

Economy.  She has proposed traditional Democratic pump-priming measures to stimulate housing and jobs.   She wants anti-gouging laws as some states, like Texas, already have. She favors an independent Federal Reserve.  By contrast, Trump favors wealth accumulation, which should be an incentive to striving workers. This is even less than trickle-down.  He would end Fed independence.

Immigration.  She supports bi-partisan legislation, which Trump instructed the GOP to block, so he could later get the credit for it.  She also supports Biden’s immigration controls which are working with Mexican help. Trump wants to deport millions of long-term residents, that would undermine the economy.  Plus, the wall.

Labor unions.  She supports them and their greater role.  Trump would fire people who seek to organize.

Israel-Palestine.  She supports immediate cease-fire, but cannot depart from Biden policy on arms sales.  The country can have only one foreign policy at a time.  Trump supports Netanyahu, so could not broker peace.  This is a loose end for Harris, but you cannot negotiate independently from Biden or by showing your hand publicly.

In a short campaign, the candidates can focus on a few of the most major issues.  They have done so and have contrasting positions.  The pundits should back off. 

Finally, Trump sees America as failing; Harris sees it rising.  It’s the “vision thing.”