Happy Wednesday! We’re struggling with our March Madness bracket. Who are you picking?
Here’s what’s going on while we wait for the text of the new spending package … and for the basketball games to start.
With a Spending Deal Reached, Congress Tries to Beat a Shutdown Deadline
With a government shutdown deadline just over two days away, congressional appropriators have yet to release the text of their spending bill, raising the level of uncertainty about whether they’ll be able to pass the package in time or whether the prolonged process will stretch into the weekend.
House Speaker Mike Johnson said he expects the text to be released later tonight, but Rep. Henry Cuellar of Texas, the top Democrat on the appropriations subcommittee responsible for drafting the Homeland Security funding bill that has been a major sticking point, told The Hill that it could take until early Thursday.
The timing matters because House Republican leaders have committed to a rule allowing members 72 hours to review legislation before a vote. Johnson told reporters Wednesday that lawmakers are looking to speed up the process — he could, for example, waive the 72-hour requirement. He added that he does not believe another short-term funding patch will be needed to avert a shutdown. He and other House members are reportedly pushing for a vote on Friday, which may still be too late to avoid a brief shutdown given the potential complications that could prevent a quick vote on the Senate side.
Johnson and Democrats have both started touting the wins they say they have achieved in the spending bills, with the two sides making some competing claims. “Republicans have touted funding cuts in areas like foreign operations and diversity, and Democrats have boasted investments in childcare and domestic programs, while fending off GOP-backed so-called ‘poison pill’ riders,” The Hill reports.
The bottom line: This appropriations “minibus” is expected to pass, but the process might drag on past the Friday midnight deadline. We’ll be back with details about the package after the text is out.
CBO Projects Major Run-Up in National Debt
The latest long-term outlook from the Congressional Budget Office shows a big increase in the national debt over the next 30 years, with publicly held debt rising to 166% of gross domestic product by 2054.
That’s actually an improvement over the long-term outlook released in June 2023, which estimated that the debt-to-GDP ratio would hit 181% by 2053. The CBO said the change in the outlook was due to “stronger growth of the potential labor force over the next 10 years, largely driven by increased net immigration, and faster capital accumulation over the next 30 years.”
The reductions in spending imposed by the Fiscal Responsibility Act of 2023 also played a key role.
Still, the increase in debt will likely be one for the history books. Debt as a percentage of GDP is projected to hit 107% by 2029, surpassing the peak seen during World War II.
One particularly notable aspect of the outlook is the rising cost of interest payments on the national debt. The CBO now estimates that interest will be the largest single line item in the federal budget by 2051, and by 2054, the cost of interest payments as a percentage of GDP will rise to 6.3%, roughly twice the current level.
Fiscal watchdogs said the latest data should prompt lawmakers to act. “This is yet another reminder that politicians put political priorities ahead of the long-term health of the country,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said in a statement. “There is no way to look at these eye-popping numbers without realizing we need to make a change.”
Biden Announces a Major Chip Deal
President Joe Biden on Wednesday announced that his administration is awarding Intel nearly $20 billion in grants and loans as part of a push to revitalize the United States semiconductor industry and reduce reliance on manufacturing facilities based largely in Taiwan.
The new agreement, one of the largest federal investments to subsidize chip manufacturing, includes up to $8.5 billion in direct grants and $11 billion in loans provided under the 2022 CHIPS and Science Act. That law provided $39 billion for semiconductor manufacturing subsidies and $11 billion for research and development.
“It’s a smart investment,” Biden said of the latest package. “And that’s being paired with over $100 billion from Intel, including $30 billion in Arizona and $30 billion in Ohio. It’s among the largest private-sector investments ever in the history of Ohio and Arizona.”
The administration says the funds will help create nearly 30,000 jobs and support the building or expansion of Intel facilities in Arizona, Ohio, New Mexico, and Oregon. Biden made the announcement during a visit to Intel’s Ocotillo campus in Chandler, Arizona, a key election swing state. A portion of the funding will be used to build two factories and modernize a third in Chandler, outside of Phoenix.
Wednesday’s announcement follows three previously announced preliminary funding agreements with semiconductor companies, which totaled about $2 billion. As the administration begins to ramp up distribution of the CHIPS Act money, and private companies look to put billions more into dozens of announced projects, concerns have already arisen over some delays in factory construction and environmental issues. CNN notes that those environmental fears include whether Arizona has enough water to support chip manufacturing in the future.
Fed Sees Stronger Economy, Three Rate Cuts This Year
At the conclusion of its March meeting on Wednesday, the Federal Reserve announced that it will hold its benchmark overnight borrowing rate in a range between 5.25% and 5.5%. The widely anticipated decision means that rates will stay at the multi-decade high reached in July 2023 for at least another six weeks.
Fed policymakers have now kept rates unchanged for five straight meetings. In a statement, the Federal Open Market Committee said it did “not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”
Still, members of the FOMC indicated that they expect to cut rates three times this year, for a total cut of 0.75 percentage points. Their projections show a higher rate of growth for the economy in 2024 — GDP growth of 2.1%, up from the 1.4% estimate in December — and slightly higher interest rates over time, with the long-term “neutral rate” settling at 2.6%, one-tenth of a point higher than previously estimated. Inflation, too, is seen as staying a bit higher, with officials projecting a core inflation rate of 2.6% by the end of 2024, up from the 2.4% estimate previously.
Speaking to reporters after the announcement, Fed Chair Jerome Powell said he thinks the central bank is making “good progress” in bringing inflation back down to its 2% target, while noting that any future changes in policy will depend on data. “We believe that our policy rate is likely at its peak for this type of cycle, and that if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year,” he said. “We are prepared to maintain the current target range for the federal funds rate for longer if appropriate.”
Asked about two recent hotter-than-expected inflation readings, Powell said he thinks they “haven’t really changed the overall story, which is that of inflation moving down gradually on a sometimes bumpy road towards 2%.”
The bottom line: The outlook looks much the same as it did before the Fed’s highly anticipated announcement, though with a bit more of everything, especially economic growth. Fed officials don’t see anything that would interfere with the “soft landing” scenario of declining inflation and no recession.
If you put any faith in the stock market as an indicator, Wall Street traders certainly liked what they heard. The prospect of continued economic growth with no new worries about inflation helped push stocks sharply higher, with the S&P 500 climbing above 5,200 and the Dow Jones Industrials Average rising to a record high over 39,500.
Fiscal News Roundup
- Congress Faces Crunch Time on Government Funding – The Hill
- House GOP Warms to Spending Deal, but Time May Run Out to Dodge Shutdown – Washington Post
- Johnson Touts Border Funding, COVID Cuts as Congress Leans Closer Toward Shutdown Deadline – Politico
- House Dems Tout Their Own Spending Bill Wins. And Some Contradict Johnson. – Politico
- Rand Paul Vows to Hold Up $1T ‘Minibus’ That Must Pass by Friday – The Hill
- GOP Spending Hawks Bash Speaker Johnson’s Minibus – The Hill
- McConnell Dismisses GOP's Bid for Ukraine Aid 'Loan' – Politico
- US Debt Races Toward Record This Decade, CBO Warns – New York Times
- House’s Largest Conservative Caucus Calls for Increase in Retirement Age – The Hill
- Biden Makes Biggest CHIPS Announcement Yet – CNN
- IRS Chief Zeroes in on Wealthy Tax Cheats in AP Interview – Associated Press
- Drugmakers Give Surprising Response to Medicare Drug Price Offers – The Hill
- US Stocks Close at All-Time Highs After Fed Meeting – CNN
Views and Analysis
- How the Threat of a Government Shutdown Became Normalized – Li Zhou, Vox
- Biden’s Dreams of Ending Poverty Crumbled. Will He Get a Second Chance? – Jeff Stein, Washington Post
- Missing From This Year’s Election: Sweeping Health Care Plans – Maya Goldman, Axios
- Key Takeaways From the Fed’s Rate Decision and Powell’s Press Conference – Bryan Mena, CNN
- Here’s How an Immigration Surge Hurts — and Helps — the US Economy – Elisabeth Buchwald, CNN