US Economy Turns Up the Sizzle

Good evening! House Speaker Mike Johnson met with Senate Republicans today as negotiators continue to work toward a deal on border policy that would set up a vote on aid to Ukraine. Johnson, facing increased scrutiny from his conservative members, delivered two key messages to the senators, Politico reports: “that he would call up an extension of government funding through the end of the fiscal year if lawmakers can’t reach a deal, and that he wants to see much of the House’s conservative border bill as part of any potential Senate agreement to aid Ukraine.”

Johnson reportedly also told GOP senators that he does not think he has the votes to pass one large national security supplemental that packages aid for Ukraine, Israel and Taiwan and that his conference prefers to tackle each item separately.

Here’s what else we’re watching.

House Budget Panel Debates Need for a Bipartisan Fiscal Commission

The House Budget Committee held a hearing Tuesday to discuss and debate the pros and cons of several proposals to create a bipartisan fiscal commission to address the national debt and federal deficits. The hearing follows a similar one held last month as backers of a bipartisan, bicameral commission look to build momentum for the idea.

Republicans and budget watchdog groups have embraced the creation of a panel that would be empowered to come up with steps to put the nation on a more sustainable fiscal path. Some Democrats support the idea, arguing that the need is dire and that Congress has thus far failed to act, while others in the party have expressed concerns that any such panel would be used to slash Social Security, Medicare, Medicaid and other programs while providing politicians cover to avoid taking responsibility for those cuts.

House Budget Committee Chairman Jodey Arrington, a Texas Republican, said Wednesday that he believes that debt and deficits are “the most significant challenge facing our nation in the 21st century,” threatening both the U.S. economy and national security.

“I believe this is our generation’s World War and the cost of losing this war will be catastrophic and irreparable,” he said, adding, “I don’t think a fiscal commission is the panacea for all of our financial woes. I just don’t think that there’s a silver bullet. At the end of the day, we have to have the political courage as a body to cut through the brinkmanship, the weaponization, the fearmongering that we get from the outside and the inside, and we have to hold hands, as they say, and move forward with courage.”

Still, Arrington said, a bipartisan commission may be able to provide constructive dialog that leads to some consensus on a more sustainable path.

Rep. Brendan Boyle of Pennsylvania, the top Democrat on the budget panel, expressed skepticism that a commission would work and pointed to a history of failures for similar bodies in the recent past. Boyle also noted that some Republican presidential candidates, including former South Carolina Gov. Nikki Haley, have talked about raising the retirement age. “That's a little like saying, We need to burn the village in order to save it. It just isn't true,” Boyle said.

Boyle also reiterated his view that raising revenue should be the solution to avoiding future Social Security and Medicare benefit cuts. “You can have the greatest, biggest blue ribbon possible and put that on a commission. That won't be a substitute for the fact that ultimately, individuals will have to put up a vote, either saying yes, this is how we're going to raise more revenue, or yes, this is how we're going to enact cuts,” he said. “I'm very clear the side that I come on.”

Rep. Jim McGovern said he is “deeply skeptical” of the commission idea. “First, there is already a bipartisan forum where these kinds of decisions should get made: It's called Congress. And we shouldn't pass the buck to a fiscal commission to do the work that we ourselves don't want to do. If we don't want to do it, maybe we should leave.”

McGovern argued that there are plenty of legislative proposals to address the nation’s fiscal challenges, so the problem lies with lawmakers.

Democratic Rep. Scott Peters of California argued that Congress is clearly not capable of addressing the problem through regular order — and that a plan from a bipartisan commission would be a smart way to erode the leverage of Republicans seeking to slash safety net programs and avoid the threat of automatic cuts in the future. “The best thing that we can do to protect Medicare and Social Security is to act now," Peters said. "A commission gives us a fact-driven venue, instead of some waiting-until-the-last-minute, backdoor, 11th-hour deal between party leaders.”

The budget panel also heard from Republican Sen. Mitt Romney of Utah and Democratic Sen. Joe Manchin of West Virginia, who earlier this month joined forces to propose legislation that would establish a 16-member bipartisan, bicameral commission consisting of 12 elected officials and four outside experts. The commission would be charged with proposing a plan to stabilize the ratio of public debt to GDP over 15 years and improve the solvency of the Social Security and Medicare trust funds. A legislative proposal approved by the commission would get expedited consideration in both chambers of Congress.

"If we don't fix this mess that our country is in, why, it’s hard for me to imagine a circumstance where America is able to continue to lead the world," Romney said. "If we're spending more on interest than we're spending on defense, then how in the world are we going to keep up with China?”

US Economy Even Stronger in 3rd Quarter Than First Estimated

We knew the U.S. economy was cooking with gas in the July to September period, but new data shows that the fire was even hotter than initially thought.

A revised estimate released Wednesday by the Commerce Department showed that gross domestic product grew at a 5.2% annualized rate in the third quarter, up from the 4.9% rate recorded in the initial estimate released last month. It was the fastest quarterly growth in nearly two years.

Overall, growth was driven by consumer spending, business investment and outlays by federal, state and local governments. The updated report adjusted consumer spending down slightly, from 4% to a still-healthy 3.6%, while raising private investment growth to a 10.5% rate.

“A blockbuster revision to what was already a blockbuster GDP number,” Jason Furman, who chaired the White House Council of Economic Advisers during the Obama administration, said.

At the same time, most analysts agree that growth is cooling. “We continue to forecast ongoing expansion in economic activity, but the pace should slow quite significantly” at the end of the year, said Rubeela Farooqi, chief U.S. economist at High Frequency Economics, per the Associated Press. “We anticipate a deceleration in household spending, not only on payback for an unusually strong third quarter but also from the cumulative effects of monetary policy tightening.”

Slower growth in the fourth quarter could still translate into significant expansion. “Resilience not recession is the R word during this holiday season,” said Joseph Brusuelas, chief economist at the consulting firm RSM. “Heading into the final month of the year the U.S. economy likely expanded at a 3% pace on the back of full employment.”

Map of the Day: Military Keynesianism Redux

As part of its effort to sell a proposed supplemental spending package that includes roughly $60 billion in aid for Ukraine, the White House is highlighting the economic benefits associated with military spending in the U.S.

“Equipment that defends America and is made in America,” President Joe Biden said in a national address last month. “Patriot missiles for air defense batteries, made in Arizona. Artillery shells manufactured in 12 states across the country, in Pennsylvania, Ohio, Texas … You know, just as in World War II, today patriotic American workers are building the arsenal of democracy and serving the cause of freedom.”

The map below, obtained by Politico, shows specific dollar amounts in key states associated with spending on military aid for Ukraine so far. “Pennsylvania has received $2.364 billion in investments to build munitions and tactical vehicles for Ukraine, the most of any state,” Politico says. “Meanwhile, Arizona is a close second with $2.259 billion. Texas and Arkansas received $1.449 billion and $1.478 billion, respectively, while Florida got $1.011 billion.”

Although the effort doesn’t seem to be having much of an effect on Republican lawmakers who have pushed back against providing more military aid to Ukraine, at least one conservative columnist may have taken note. “Here is the best-kept secret about U.S. military aid to Ukraine,” Marc A. Thiessen of The Washington Post wrote Wednesday. “Most of the money is being spent here in the United States. … Of the $68 billion in military and related assistance Congress has approved since Russia invaded Ukraine, almost 90 percent is going to Americans, one analysis found.”

Number of the Day: 77.5

U.S. life expectancy in 2022 rose to 77.5 years, up from 76.4 in 2021, according to data released Wednesday by the Centers for Disease Control and Prevention. But while nearly 85% of the gain resulted from a rebound from the Covid-19 pandemic, the increase was diminished by other factors. As The Washington Post’s Joel Achenbach and Dan Keating write: “drug overdoses, homicides and chronic illnesses such as heart disease continue to drive a long-term mortality crisis that has made this country an outlier in longevity among wealthy nations.”

Fiscal News Roundup

• Johnson Draws Hard Line on Senate's Border-Ukraine Dealmaking – Politico
• Speaker Johnson Singed by a Blast of Conservative Fury – Politico
• Freedom Caucus Softens Its Demands for Steeper Cuts – The Hill
• 10 Senate Democrats Voice Alarm Over Border Security Talks – The Hill
• Ukraine Funding’s Fate Hangs on Thorny Immigration Issue in Senate – Washington Post
• No Conditions on Future Israel Aid Despite Biden’s ‘Worthwhile Thought’ Quip – Politico
• GOP Senators Feel Ambushed by Trump’s Policy Promises – The Hill
• Cigna, Humana in Talks for Blockbuster Merger – Wall Street Journal
• GDP, Inflation Data Bolsters Case That Fed Is Done Hiking – Yahoo Finance
• 10-Year Treasury Yield Falls Below 4.3% for the First Time Since September – CNBC

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