Happy Wednesday!
Donald Trump sparred with Black journalists at an event in Chicago today, where he questioned Vice President Kamala Harris’s racial identity and falsely suggested she had misled voters. “I don't know, is she Indian or is she Black?” Trump said. “I respect either one, but she obviously doesn’t because she was Indian all the way, and then all of a sudden, she made a turn, and she went, she became a Black person.”
Harris’s mother is Indian American and her father is Black.
The former president’s comments came during a combative interview in response to being asked whether he believes Harris was a “DEI hire,” as some Republicans have said. Asked that question again, Trump said, “I really don’t know. I mean, I really don’t know. Could be. Could be.” Trump also called himself “the best president for the Black population” since Abraham Lincoln.
Afterward, the Trump campaign lashed out at the media, claiming that Trump wants to unite the country but “media elites” want the country to stay divided. “President Trump alone can fix our economy, secure our border, clean up our streets, save our schools, and end the endless wars, and if you believe in these same goals, he welcomes your support in the election,” Senior Advisor Lynne Patton said in a statement. “Today’s biased and rude treatment from certain hostile members of the media will backfire massively.”
The White House called Trump’s remarks “repulsive,” and a Harris campaign spokesman pushed back on the Republican’s claims about seeking to unify the country: “Donald Trump has already proven he cannot unite America, so he attempts to divide us.”
Here's what else is happening.
Bipartisan Pair of Senators Take Aim at Cost of Child Care
Sens. Tim Kaine of Virginia and Katie Britt of Alabama introduced a pair of bipartisan bills Wednesday intended to make child care more affordable by expanding tax credits and deductions while also creating a grant program to boost pay for care workers in order to attract and retain employees in the sector.
Both Kaine and Britt call the challenge of finding affordable child care a national crisis with widespread economic effects. “This crisis is holding our families, workers, and economy back, and I’m proud to be introducing a bold bipartisan proposal to tackle it head on,” Kaine, a Democrat, said in a statement.
Their news release announcing the legislation says that the cost of child care has climbed 220% over the last three decades, according to a 2022 analysis, and more than half of American families live in areas suffering from stark shortages of child care options. The toll: more than $122 billion in annual economic losses, according to one analysis published last year.
“The duo made a strategic choice to hone in on a tax solution, hoping they can convince colleagues to add child care measures to a big tax bill expected next year when the Trump tax cuts expire,” Punchbowl News reports.
The senators’ Child Care Availability and Affordability Act would boost the size of the Child and Dependent Care Tax Credit — not to be confused with the similarly named Child Tax Credit — and make it refundable so that lower-income families can get the full benefit, up to a maximum of $2,500 for families with one child and $4,000 for those with two or more kids. The bill would also increase the deductibility of dependent care expenses from $5,000 to $7,500 and significantly increase a tax credit for employers that provide child care for their workers, raising the limit from $150,000 to $500,000 and offering even more for small businesses.
The proposed Child Care Workforce Act, meanwhile, would set up a grant program for states and localities to supplement low pay for child-care workers, aimed at reducing turnover and increasing the supply of employees in the sector.
Britt, a Republican, emphasized to reporters that a goal of the legislation is to allow and incentivize people to work, helping to boost the economy. “We're not creating an entitlement here,” she said, according to Axios, preemptively addressing a potential GOP concern.
Fed Signals Rate Cuts Could Start Soon
The Federal Reserve said Wednesday that it is seeing more evidence that its battle against inflation is producing the desired results, a sign that rate cuts could be on the agenda at its next meeting in September.
Concluding its two-day meeting for July, the Federal Open Market Committee said it will maintain its key interest rate at a two-decade high range between 5.25% and 5.5% for now. But thanks to a steadily improving outlook, rate cuts are now coming into view.
“In recent months, there has been some further progress toward the committee’s 2% inflation objective,” the FOMC said in a statement. “The committee judges that the risks to achieving its employment and inflation goals continue to move into better balance.”
The FOMC said that while inflation is still “somewhat elevated,” it has eased over the past year, especially in the last few months. At the same time, job gains have “moderated” and unemployment has started to creep higher, while remaining relatively low.
At a press conference, Fed chief Jerome Powell said the central bank would continue to look carefully at the economic data as it considers its next move. “The question will be whether the totality of the data, the evolving outlook, and the balance of risks are consistent with rising confidence on inflation and maintaining a solid labor market,” he told reporters. “If that test is met, a reduction in our policy rate could be on the table as soon as the next meeting in September.”
Still, there is no guarantee that there will be a rate cut in September, as the FOMC statement made clear: “The Committee does 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.”
What the experts are saying: The Fed has now taken a “baby step” toward the rate cut that analysts are betting will occur in September, Omair Sharif of the Inflation Insights research group said in a note to clients. "I expect that further good news on the inflation front in July should set up the Chair to deliver a more meaningful signal that a rate cut in September is very likely," he wrote, per NBC News.
RSM Chief Economist Joseph Brusuelas said he expects the Fed to cut rates by 25 basis points in September, and then again by the same amount in December. Economic data cited by the FOMC “strongly implies that the Fed is now prepared to reduce a policy rate [that] is too restrictive for an economy that has an inflation rate at 2.5% and is steadily moving toward the 2% target,” Brusuelas wrote. “We are confident that the Fed will reach its target next year.”
While the Fed’s analysis was welcome in most quarters, sending stocks higher and pushing bond yields down, some analysts were disappointed that the central bank wasn’t moving more aggressively to help boost a slowing economy.
“The finish line is in sight and it would be tragic for the Fed to stumble and fall, with one-tenth of a mile left in the marathon, which is what I think they would be doing if they don’t start cutting,” said Bharat Ramamurti, a former economist in the Biden White House, per the Associated Press.
Ramamurti’s comments highlight the unavoidable political context of the decision facing the Federal Reserve. Some Republicans are already accusing the central bank of being too dovish in what they say is an effort to help the Biden administration by boosting the economy. At the same time, some Democrats are accusing the Fed of moving too slowly to cut rates, in order to appease conservatives.
Powell pushed back against those accusations on Wednesday. “Anything we do before, during, or after the election will be based on the data,” he said.
Quotes of the Day
“I believed that we were going to actually do something on the budget, on the spending bills. That’s what we were told last year. When Kevin [McCarthy] became speaker, that didn’t happen. And we were told it’s going to happen this year, and if it didn’t happen, we’re gonna stay through August. That’s not happening.”
– Rep. Andy Biggs, a Republican member of the Freedom Caucus from Arizona, expressing frustration to The Hill over the failure of the GOP-controlled House to pass all 12 appropriations bills this summer, as promised by Speaker Mike Johnson. “Don’t say that stuff to me if you don’t mean it,” Biggs added.
“In the end, there’s lots of money to be made, no matter who leads the country. Neither of the two parties, and none of the candidates, are talking about scaling back the Pentagon’s budget.”
– Roberto J. González, a professor of anthropology at San José State University, talking to The American Prospect about the growing relationship between Silicon Valley and the Pentagon.
Fiscal News Roundup
- Trump Accuses Harris of Deciding to 'Turn Black' During a Combative Panel With Black Journalists – NBC News
- Trump’s First Try at Pivoting to Harris Blows up in His Face – Politico
- Trump and GOP Turn Border Policy Blame Toward Harris – Roll Call
- Trump and Harris Bash Each Other Over Outdated Health Insurance Positions – CNN
- United Auto Workers Union Endorses Harris' Bid for US President – Reuters
- About 8 in 10 Democrats Are Satisfied With Harris in Stark Shift After Biden Drops Out – Associated Press
- Harris Is Calibrating Her Policy Pitch for Going to Battle With Trump – Associated Press
- Washington Prepares for the ‘Super Bowl of Tax’ – New York Times
- Johnson Faces Frustration From Hard-Liners on Spending Issues – The Hill
- Fed Opens Door to September Rate Cut if Inflation Stays Cool – New York Times
- Biden Kicks Sweeping Student Debt Relief Plan Into Gear – Washington Post
- President Biden Is Moving Forward With Another Student Debt Relief Plan—You Have Until August 30 to Opt Out – CNBC
- Ukraine Receives First F-16 Fighter Jets to Bolster Defenses Against Russia, a US Official Tells AP – Associated Press
Views and Analysis
- Trump Win Would Spark Constitutional Fight Over Spending Power – Paul M. Krawzak, Roll Call
- Presidential Race Brings Out Silicon Valley’s Military Contractors – Naomi LaChance, American Prospect
- How Trump’s Ideas Could Seriously Mess With Your Financial Life – Rebecca Patterson, New York Times