It’s Friday so let’s get right to it!
Johnson Says Senate Border Deal Is ‘Dead on Arrival’
Speaker Mike Johnson on Friday appeared to snuff out any hope that a bipartisan Senate deal combining border changes and foreign aid could also pass the House.
In a letter to House colleagues — who are away from the Capitol this week for a "district work period" — Johnson noted that the Senate "appears unable to reach any agreement," but added that if rumors about the content of the emerging deal are true, "it would have been dead on arrival in the House anyway."
President Joe Biden defended the emerging Senate deal. "What’s been negotiated would – if passed into law – be the toughest and fairest set of reforms to secure the border we’ve ever had in our country," he said in a statement. "It would give me, as President, a new emergency authority to shut down the border when it becomes overwhelmed. And if given that authority, I would use it the day I sign the bill into law."
He said Congress should provide the billions of dollars in border funding he requested to pay for another 1,300 border patrol agents, 375 immigration judges, 1,600 asylum officers and technology to stop fentanyl from entering the country.
"For everyone who is demanding tougher border control, this is the way to do it," Biden said. "If you’re serious about the border crisis, pass a bipartisan bill and I will sign it."
Senate negotiators still hope to unveil the text of a bipartisan deal next week, after months of talks to craft legislation that would tighten border security and unlock support for billions of dollars in aid to Ukraine.
The fate of any such deal has long been in question given the likelihood of opposition from Johnson and his conference, who have insisted that their own stricter border package should be adopted and that any agreement that falls short of that would fail to resolve the crisis and would go nowhere in the House.
Democrats have called the House plan a non-starter and Sen. James Lankford, the lead Senate GOP negotiator, has urged Republicans not to dismiss a potential deal, but Johnson made clear in his letter that he remains deeply skeptical of a compromise with the administration. "I am emphasizing again today that House Republicans will vigorously oppose any new policy proposal from the White House or Senate that would further incentivize illegal aliens to break our laws," Johnson wrote.
He again called on President Joe Biden to take executive action to stem the flow of migrants into the country and said House Republicans will move ahead next week with impeachment proceedings against Homeland Security Secretary Alejandro Mayorkas.
The outlook for any deal also got cloudier in the Senate this week, as conservatives railed against both the rumored contents of the agreement and the negotiation process. Minority Leader Mitch McConnell also acknowledged to his members that presidential politics are undercutting Republican incentive to back a deal, as former president Donald Trump seeks to score campaign points on the border issue. "The politics on this have changed," the senator reportedly told his conference.
The bottom line: It was always clear that passing a border deal through the House would be difficult at best, given Republican border politics and opposition to more funding for Ukraine. Trump’s dominance in the Republican presidential race only heightens that challenge. If or when Senate negotiators issue text of their compromise, the path to passage for any kind of border package and aid to Ukraine remains wholly unclear.
Fed’s Favorite Inflation Measure Drops Below 3%
A measure of inflation closely watched by the Federal Reserve fell below 3% last month for the first time since early 2021, according to government data released Friday.
The personal consumption expenditures price index rose 0.2% from November to December and 2.6% from December 2022 to December 2023, the Bureau of Economic Analysis said. The core PCE index — which ignores volatile food and fuel prices and is thought to provide a better sense of the underlying inflation trend — also fell below 3%, rising 0.2% on a monthly basis and 2.9% on an annual basis. That’s the lowest annual reading since March 2021.
Other inflation measures that focus on the most recent data showed even better improvement. As The Wall Street Journal’s Nick Timiraos noted, the six-month annualized rate of inflation on the core PCE index now stands at 1.9% and the three-month annualized rate stands at 1.5% — both below the Fed’s 2% target rate.
Speaking to reporters, National Economic Council Director Lael Brainard said the data show the economy is making "sustained progress" toward the Fed’s target rate of inflation. "That’s exactly the kind of pattern that would give us confidence that inflation is actually getting anchored back at 2%," she said.
Wall Street analysts tended to agree and quickly turned their focus to the interest rate cuts they hope to see sooner rather than later this year. "The Fed will be welcoming the inflation data," said Lydia Boussour, senior economist at consulting firm EY, per the Associated Press. "It does suggest that inflation is on track and the Fed is well-positioned to start [cutting rates] in a few months."
Charles Evans, who led the Chicago Fed from 2007 until 2023, said he expected Fed officials to be cautious as they plot any rate cuts. "It’s natural for them to be nervous. They’ve worked really hard. They wouldn’t want to lose sight of 2% inflation at the last minute," Evans said, per the Journal. "But at some point, you need to recognize that core inflation really has come down."
Quotes of the Day
"I think the jury’s still out."
– Treasury Secretary Janet Yellen, as quoted at Bloomberg, suggesting that it’s not certain that interest rates will return to their historically low pre-pandemic levels. "There are people who feel quite strongly that nothing fundamentally has changed, and they will eventually settle back," Yellen reportedly said of rates. "But the strength of the economy also suggests that perhaps productivity growth and potential output growth have increased and the level would be higher."
Yellen reportedly said she did not want to express a position on the issue, but she noted that the rate outlook is important because of its implications for the cost of servicing the government’s debt.
"We just lived through a natural experiment testing whether austerity or investment strengthens an economy through troubled times. Bigger investment won by a wide margin. Credit goes to Team Biden for figuring that out."
— Sen. Elizabeth Warren, Democrat from Massachusetts, speaking to Punchbowl News.
Fiscal News Roundup
- Mike Johnson Calls Bipartisan Senate Border Plan ‘Dead On Arrival’ – Bloomberg
- Johnson Fires Warning Shot at Senate Border Talks – Politico
- GOP Looks for Plan B on Ukraine With Border Bill Looking DOA – The Hill
- Speaker Faces GOP Pressure on Tax Deal – The Hill
- Inflation Slowed Further in December as an Economic ‘Soft Landing’ Moves Into Sharper Focus – Associated Press
- Economists Predicted a Recession. So Far They’ve Been Wrong – New York Times
- Cooler Inflation Keeps Door Open for Rate Cuts This Year – Wall Street Journal
- Yellen Says Jury Out on Return to Low-Rate Era, Signaling Shift – Bloomberg
- Dimon Says Wealthy Should Pay More to Fund Low-Income Tax Cuts – Bloomberg
- Senators Challenge Assisted Living Industry Over Wandering Deaths, Poor Care – Washington Post
- Buried in Wegovy Costs, North Carolina Will Stop Paying for Obesity Drugs – New York Times
- Jury Says Donald Trump Must Pay an Additional $83.3 Million to E. Jean Carroll in Defamation Case – Associated Press
Views and Analysis
- A New Lens Into Trump’s Legacy of Adding to the Federal Debt – Philip Bump, Washington Post
- Party Opposed to Immigration Changes Opposes Immigration Changes – David Dayen, American Prospect
- Republican Senator Gives Away the Game on Why They Killed Border Deal – Ellie Quinlan Houghtaling, New Republic
- Why the US Economy Is Doing So Much Better Than the Rest of the World – Elisabeth Buchwald, CNN
- There’s a Lot of Good News for Americans in the Latest Inflation Report – Alicia Wallace, CNN
- America’s Remarkably Resilient Economy – Wall Street Journal Editorial Board
- American Workers Come Out Winners in a Clash Between Economists Over a Curve – Enda Curran, Bloomberg
- Bidencare Is a Really Big Deal – Paul Krugman, New York Times
- Why the House Budget Committee Needed a Health-Care Task Force – McKenzie Beard, Washington Post