The Coming Budget Battle Can Change Fed Policy

The Coming Budget Battle Can Change Fed Policy

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Some economists are beginning to worry that a political showdown over fiscal policy in Washington could throw a wrench in the Federal Reserve’s plans to scale back its bond-buying program.

Officials at the central bank are expected to announce a tapering in the $85 billion monthly purchases of bonds at the next Federal Open Market Committee meeting on Sept. 17-18, as long as the economy remains relatively strong. But a battle inside between the White House and Congress could ruin the Fed’s plans.

“While figures on employment, inflation, factory activity and housing are expected to be the main drivers of the Fed’s decision, officials will also be monitoring developments on Capitol Hill,” The Financial Times’ James Politi writes. “Divisions on fiscal policy between Republicans and Democrats have widened, heightening the risk of a possible government shutdown as early as October 1, and even a crisis over raising the U.S. borrowing limit between mid-October and mid-November, possibly leading to another brush with a debt default.”  -  Read more at The Financial Times


McCONNELL REJECTS GOV SHUTDOWN TO KILL OBAMACARE    Senate Minority Leader Mitch McConnell told a hometown crowd in Kentucky on Monday, “Shutting down the government will not stop Obamacare.” This is the first time the top Republican has made public his rejection of a movement led by Sens. Mike Lee (R-UT) and Ted Cruz (R-TX) to shut down the government to defund Obamacare. Republicans are divided over the idea and only 13 lawmakers have signed onto the plan. Others, such as McConnell, point to a Congressional Research report released two weeks ago that found that the president’s healthcare law would receive funding as planned amid a shutdown. -  Read more at The Hill

WH: PATH TO CITIZENSHIP COULD BOOST GDP BY $1.4 TRILLION In its latest push for comprehensive immigration reform, the White House released a new report Tuesday showing that a pathway to citizenship for the nation's 11 million illegal immigrants would add 2 million jobs to the economy and boost gross domestic product by $1.4 trillion over the next decade. -  Read the report here

CLOSING FANNIE AND FREDDIE COULD TAKE FIVE YEARS   Winding down the government-controlled mortgage giants Fannie Mae and Freddie Mac will take at least five to seven years under both the Senate and House legislation. Chairman Jeb Hensarling (R-TX) confirmed during a speech in Dallas Tuesday that his legislation sets out the five-year tapering and allows for another one or two years based on market circumstances. The Senate plan has an almost identical timeline. Taxpayers doled out nearly $188 billion to keep Fannie and Freddie afloat during the financial crisis in 2008. Both entities have since recorded record profits and have returned more than $130 billion to the Treasury Department. -  Read more at The Hill

FURLOUGH SCARE NEVER BECAME REALITY      When sequestration took effect in March, federal agencies warned that they would need to furlough their employees for much of the summer in order to cope with the massive budget cuts. But five months later, nearly all of the major departments have either canceled or reduced furlough days. Education, Justice, Agriculture, Transportation and Homeland Security all received congressional permission to transfer funds and cancel furloughs. Meanwhile, the Defense Department has significantly reduced its furloughs from 22 to six days. -  Read more at GovExec

PRESIDENTS GONE WILD    American presidents are just like us, except they spend their vacations being followed around and scrutinized by the media. From President George W. Bush’s famous Segway wipeout to President Theodore Roosevelt’s bear hunting trips, here are 15 images of presidents on their days “off.” 


Brianna Ehley is the former Washington Correspondent for The Fiscal Times. She is currently a reporter on Politico's health care team in Washington, D.C.