Heard on the Hill
There’s nobody left in Washington
Congress adjourned last week after both the House and the Senate passed a continuing resolution extending the current level of funding for the federal government through December 16.
Senators and Members of Congress are back in their home states and districts. The legislative process is taking a hiatus while the voters have their say in the political process. I’ll take a shot at summing up and looking ahead.
“It’s the economy, stupid.” (James Carville, 1992)
Inflation continues unabated, even after the Federal Reserve recently raised interest rates by 75 basis points for the third consecutive time. The Personal Consumption Expenditures Price Index climbed 6.2% over the year through August, which was higher than the 6% economists predicted.
The Federal Reserve knows it has to slow down the economy to get at the pain of inflation. However, the Federal Reserve also knows that slowing the economy will cause pain – and here’s proof. The U.S. Labor Department reported on Tuesday that job openings fell to a seasonally adjusted 10.1 million in August from 11.2 million in July.
Inflation and a slowing economy are hurting Americans. But the hurt isn’t over because rising interest rates will also bite into the federal budget.
My colleague Congressman Erik Paulsen wrote in the July 13th edition of This Week that the total federal gross interest expense will rise to or exceed the current defense budget of $746 billion. Unfortunately, his prediction has already come true. The Wall Street Journal reported on September 29th that our gross interest expense hit $88 billion in August, which calculates to $1.06 trillion a year. Erik also predicted in that same article that future spending priorities would be crowded out by interest payments on the debt. Unfortunately, that prediction will also come true.
I had an off-the-record discussion recently with an individual with great experience in economics, housing, and finance. He said that “our situation is simple – and sad. The current inflation rate is 8.3%. The Federal Reserve wants to get the inflation rate down to 2%. There’s more pain to come.”
The Coming Election
Last Wednesday, Senator Ben Ray Lujan (D-NM) was on the floor of the Senate and accidentally referred to Minority Leader Mitch McConnell as the Majority Leader. Senator McConnell quietly laughed and replied, “I haven’t given up hope.”
Republicans in the House and the Senate started the cycle with high hopes of flipping both chambers. The momentum was there until the Supreme Court’s June abortion decision, and then you could feel air going out of the balloon. However, since Labor Day there’s been a slight Republican rebound which is reflected in better polling for generic republican candidates as well as specific candidates.
The political column Fivethirtyeight, owned by ABC News, uses statistical analysis to predict the probability of election results. Their September 30, 2022 report says “…Democrats are slightly favored to hold the Senate, and the Republicans are slightly favored to win the House.”
Nate Silver, who created the forecasting model for Fivethirtyeight, offered five reasons why Republicans may do even better than his numbers indicate.
- The fundamentals still ought to be pretty good for Republicans
- The issue environment could get better for Republicans
- Republicans could overtake Democrats in advertising
- Republicans are more likely than not to have an enthusiasm advantage
- There’s still some reason for Democrats to be concerned about the reliability of the polls
Some closing thoughts and things to watch
Democrats want the election to be about democracy, the Supreme Court abortion decision, and the January 6 conflict at the Capitol. Republicans want the election to be about the economy, crime, and illegal immigration.
We are in a hyper-partisan environment, so partisan enthusiasm levels should determine turnout numbers. That said, campaigns in Pennsylvania and Ohio are watching to see if ticket splitters make up a key part of the turnout.
Campaigns throughout the country are holding their breath waiting for an October surprise – some event or perceived event that tilts the tiles and creates or decreases momentum going into the home stretch.
The view of most experts is that Republicans will retake the House, and the Senate is up for grabs. Senator McConnell said last week that “…Republicans have a 50-50 chance of retaking the Senate, but it is really going to be close either way.” But he certainly hasn’t given up hope.
