The Hill’s Morning Report — Is the economy turning around?

by Alexis Simendinger and Kristina Karisch - 07/13/23 6:25 AM ET

FILE – A man shops at a supermarket on July 27, 2022, in New York. (AP Photo/Andres Kudacki)

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The Federal Reserve will raise interest rates twice more in 2023. Or maybe not. Inflation is way down compared with a year ago. But not enough. The labor market is incredibly resilient. But too tight. A mild U.S. recession is inevitable. But perhaps not this year.

Is there anyone who looks at the current economic data with predictive clarity? That may be the murkiest question of all.

While financial markets lean on instincts and economists drill for data, consumers are left with gasoline and eggs as their crystal balls. Those necessities may tell Americans a lot about their wallets, but economists strip out food and energy when calculating core inflation.

On Wednesday, the government reported that the Consumer Price Index cooled significantly in June, opening a door to some of the most hopeful news since the Fed began trying to tame rapid price increases 16 months ago (The New York Times and Bloomberg News).

The core inflation index, on a monthly basis, climbed at the slowest pace since August 2021. Investors celebrated. Stocks soared. The White House exulted, calling the result “Bidenomics in action.”

Fed officials, reluctant to overreact to snapshots in data rather than trends, have signaled in recent weeks that they’re likely to hike rates again at the central bank’s meeting later this month after pausing last time. Inflation last summer exceeded 9 percent. It was 3 percent in June. The Fed insists there’s still a way to go to achieve a target goal of 2 percent.

“They don’t want to unleash animal spirits too quickly here and have everyone go bananas,” Julia Pollak, chief economist at ZipRecruiter, told the Times. But by November, “it may be clear in the data that their job is done.”

🏠 Consumer advocates say American banks are losing interest in approving mortgages for inexpensive homes, writes The Hill’s Daniel de Visé. The result is a patchwork of risky lending products that expose the most vulnerable homebuyers to unregulated transactions that can leave them indebted and homeless. A Senate committee met Tuesday to discuss the bad players, a group one senator said “should have a special place in hell.”

▪ CBS News: How high will mortgage rates climb? Experts weigh in.

▪ CNBC: “Mortgage rates won’t go back down to 3 percent in my lifetime,” says one real estate expert. Here’s why.

Related Articles

▪ The Washington Post: TSA facial recognition scanning at airports is supposed to be voluntary. Even Sen. Jeff Merkley (D-Ore.) had trouble on his way to catch a flight.

▪ The Associated Press: Test scores show U.S. students slipping further behind academically in the past school year.

▪ The Hill: Reading for fun plunges to “crisis” level for U.S. students.

▪ Forbes: Higher education is now the most politically polarized institution in America, on par with the presidency.

▪ NPR: Microsoft says Chinese hackers breached email, including U.S. government agencies.

▪ The administration published its July National Cybersecurity Strategy Implementation Plan (envisioned as a long-term project).

LEADING THE DAY

➤ CONGRESS

FBI Director Christopher Wray fired back at GOP critics Wednesday during a House oversight hearing, telling Republican lawmakers from Florida and Texas, who assert the bureau is biased against conservatives, that their constituents don’t seem to think that’s the case (The Hill).

“We have more applicants from the state of Texas annually in the last several years than any other state in the country, and I think that speaks very well of the view of Texans about the FBI,” Wray told Judiciary Committee member Rep. Wesley Hunt (R-Texas).

The comments came as Wray navigated hours of questions about the credibility of the bureau, The Hill’s Rebecca Beitsch and Ella Lee report. Wray, a Trump appointee, was at times aided by Democrats who sought to defend the FBI’s actions by highlighting wrongdoing by former President Trump or his associates. Still, the blurry fault lines were on display as some Democrats attacked the FBI’s handling of the Trump classified documents investigation and the bureau’s spy tools. Wray received one rare thank you from a Republican for his work.

Rep. Ken Buck (R-Colo.) thanked Wray for his work in “protecting law-abiding Americans from the evil that exists all around us,” adding, “You’re still a registered Republican, and I hope you don’t change your party affiliation after this hearing is over.”

The director’s responses were some of the most pointed he’s delivered on Capitol Hill. In his opening remarks, he nodded to the work of a small FBI bureau in Ohio — one that happens to be in the district of Judiciary Committee Chairman Jim Jordan (R-Ohio), one of the bureau’s fiercest critics.

“The work the men and women of the FBI do to protect the American people goes way beyond the one or two investigations that seem to capture all the headlines,” Wray said.

The Washington Post: FBI chief Wray: “‘Insane’ to say I’m biased against conservatives.”

Meanwhile, House consideration of the annual defense authorization bill is likely to be kicked into next week as House Republicans battle over which hot-button-issue amendments will get votes on the floor, write The Hill’s Emily Brooks, Mychael Schnell and Mike Lillis. The extended timeline is just the latest reflection of the challenges facing Speaker Kevin McCarthy (R-Calif.) and GOP leaders as they race to iron out internal differences and unite as a party to pass their top policy priorities with a pencil-thin majority in the lower chamber. While the bill cleared its first procedural hurdle Wednesday, the way forward is far from clear.

Up to now, the focus of the divisions has been on issues related to spending, as members of the hard-right Freedom Caucus have jousted with more moderate Republicans over the size and scope of the federal government. The current fight is different, focused on culture war issues like abortion and “wokeness,” which have split the ideological wings of the conference and extended the debate on the National Defense Authorization Act (NDAA), which GOP leaders had hoped to pass this week.

Beyond the NDAA, House Republicans are tucking abortion restrictions into government spending bills, giving lawmakers a way to show their anti-abortion bonafides without putting the difficult issue to a direct vote. The Hill’s Aris Folley and Nathaniel Weixel report that the moves are likely to set up a clash in the Senate, as Democrats are vowing to block poison pill provisions, and even some Republicans acknowledge the bills will need to be bipartisan.

▪ The New York Times: The GOP’s far right seeks to use the defense bill to defund the Ukraine war effort.

▪ Axios: McCarthy defends Rep. Marjorie Taylor Greene (R-Ga.) amid Freedom Caucus drama.

▪ Roll Call: Bipartisan measure aims to thwart cross-border human trafficking.

▪ The Hill: A think tank leader charged with acting as an unregistered agent of China and other serious felonies — and who previously made bribery allegations against the Biden family — is the latest fodder for Republicans who say the Justice Department is being politically weaponized.

➤ POLITICS

Did GOP presidential contenders get smart advice about trying to prosper in the crowded Republican primary by tossing the political equivalent of Nerf balls at Trump?The Hill’s Bret Samuels writes that aspirants who claim they really want to shake up the White House race — including Florida Gov. Ron DeSantis (R), Sen. Tim Scott (R-S.C.) and former South Carolina Gov. Nikki Haley, who served in the Trump administration — might need to catapult flaming boulders at the contest’s leading Republican if they hope to go the distance next year. At least that’s the view of some political pundits. The August debate in Milwaukee was supposed to set that stage, except Trump is now expected to skip the event.

“When postmortems of the ’24 GOP race are written: #1 will be the bad advice nearly all candidates got to not go after Trump,” Alyssa Farah Griffin, a former Trump White House official, tweeted. “Fear of alienating Trump voters materialized in candidates failing to stand out in any real way, while also failing to weaken their chief opponent.”

Sen. Joe Manchin (D-W.Va.) — who says he’s pondering a presidential race and has not committed to seeking reelection amid a Senate challenge from GOP Gov. Jim Justice in a deeply red state — will participate Monday in a town hall sponsored by No Labels in New Hampshire (The Hill). When asked about a third-party White House bid, Manchin told CNN, “Everything is on the table. Nothing is off the table.”

2024 roundup: Republicans support early voting next year, a practice they once vilified. The turnabout defies Trump, who tells voters without factual evidence that “Election Day” versus “election month” ensures more secure ballots (The Washington Post). … What’s at the heart of Chris Christie’s GOP presidential bid? He has a dream. Detractors say he doesn’t have a prayer (The Washington Post). … Would DeSantis compete as a running mate on a ticket with Trump if he lost the GOP presidential primary? “I don’t think so. I’m not a No. 2 guy,” he responded during a Wisconsin radio interview (NBC News). … Biden favors frequent potshots aimed at Sen. Tommy Tuberville (R-Ala.), who’s holding up Pentagon promotions and praising infrastructure funding that he voted against (Politico). … The next wave of abortion rights ballot measures looks different than the last (Vox).

Trump world: Former Trump lawyer Rudy Giuliani — who has been recommended for disbarment in Washington, D.C., based on his legal actions on behalf of the former president — is elsewhere accused of failing to turn over key evidence as part of a defamation lawsuit filed by two Atlanta election poll workers who have asked a federal judge to impose “severe” sanctions on the former New York City mayor (Politico). … The Justice Department is taking the unusual step to try to block a Trump deposition in a lawsuit brought by fired FBI officials Peter Strzok and Lisa Page. It’s complicated (CNN).

IN FOCUS/SHARP TAKES

➤ ADMINISTRATION & NATO

President Biden’s high-profile diplomatic trip to the NATO summit in Europe has exposed some cracks in the U.S.’s relationship with Ukrainian President Volodymyr Zelensky, who said a lack of urgency to include his country in the alliance would only allow Russia to “continue its terror.” Biden has hit the brakes on NATO accepting Ukraine into the alliance as the war-torn country has been vying for a membership, writes The Hill’s Alex Gangitano. Biden took to Vilnius to assure other world leaders that a country engaged in a war with Russia wouldn’t be accepted as a member — citing the mutual defense agreement that a war with a NATO ally is a war with all.

That point was reiterated later by national security spokesman John Kirby, who said the inclusion of Ukraine “isn’t likely” while acknowledging there are frustrations. Biden’s comments on Ukraine not being ready to join NATO were some of his clearest yet on the matter, and other alliance leaders agree. Biden said Wednesday after a one-on-one meeting with Zelensky that the Ukrainian president understands NATO membership for his nation is “not relevant” at this time.

When asked in Europe how long it will take for Ukraine to join NATO, Biden responded, “I think until the war is over. But, look, the one thing Zelensky understands now is that whether or not he’s in NATO now is not relevant as long as he has the commitments that … guarantee his security, along with a number of other NATO countries.”

▪ Reuters: NATO allies offer Ukraine security assurances.

▪ Politico EU: Zelensky puts a brave face on lackluster NATO membership signal.

▪ Bloomberg News: NATO is papering over the cracks after Zelensky loses his cool.

The NATO summit this week delivered yet another blow to Russian President Vladimir Putin, The Hill’s Brad Dress reports, with allies standing as united as ever against his war in Ukraine while announcing efforts to expand the alliance and boost defense spending. The most punishing setback for Putin came on the eve of the summit, when Turkish President Recep Tayyip Erdoğan hashed out a deal to admit Sweden into NATO after more than a year of resistance. Erdoğan’s reversal not only expanded the borders of the western security alliance — it also signaled the Turkish leader is moving closer to the west and away from Putin.

▪ Politico EU: No Champagne for Swedes at NATO yet, PM says. (They did celebrate with a beer.)

▪ Reuters: China lashes back at NATO criticism, warns it will protect its rights.

After a whirlwind trip to Lithuania, Biden is in Finland today, where he will meet with President Sauli Niinistö and participate in a summit with Nordic leaders. Finland is NATO’s newest member, having joined the alliance earlier this year (The Associated Press and Yle).

OPINION

■ One Republican strategy that isn’t paying off, by Thomas B. Edsall, columnist, The New York Times.

■ The great Ron DeSantis campaign train wreck, by Edward Luce, U.S. national editor and columnist, Financial Times.

WHERE AND WHEN

The House will meet at 10 a.m.

The Senate will convene at 10 a.m.

The president has begun his day in Helsinki, Finland, where he plans a bilateral meeting with Niinistö at 1 p.m. local time. Biden will participate in a group photo with Nordic leaders at 2 p.m. local. Biden will participate in the U.S.-Nordic leader’s summit at 2:15 p.m., then hold a joint news conference with Niinistö at 5:30 p.m.. Biden will then depart Finland at 7:40 p.m. local and return to the White House by 9:35 p.m. ET.

Vice President Harris will travel to New York City to headline a campaign reception at 5:30 p.m.

Secretary of State Antony Blinken departed the NATO summit in Lithuania to head to Jakarta, Indonesia, through Saturday to participate in the annual U.S.-ASEAN foreign ministers’ meeting, East Asia Summit foreign ministers’ meeting and the ASEAN regional forum.

Health and Human Services Secretary Xavier Becerra travels today to New York City for three events to mark the anniversary of the introduction of the 988 Suicide and Crisis Lifeline. At 9:15 a.m., he will join forces with Homeland Security Secretary Alejandro Mayorkas and Small Business Administration head Isabella Casillas Guzman for a roundtable and press briefing at the New York Marriott Marquis. At 11:15 a.m. at Comunilife in the Bronx, Becerra will join a roundtable with local and federal officials. At 2 p.m. in the Bronx, the secretary will tour vocational VIP Community Services.

First lady Jill Biden will be in Atlantic City, N.J., to speak at the National Governors Association summer meeting at 1 p.m. about workforce training programs that help high school and community college students.

Economic indicator: The Bureau of Labor Statistics at 8:30 a.m. will release the producer price index for June. The Labor Department will report at 8:30 a.m. on claims for unemployment benefits filed in the week ending July 8.

ELSEWHERE

➤ INTERNATIONAL

Hours after Russian Wagner Group leader Yevgeny Prigozhin began a short-lived march on Moscow, the country’s domestic security service detained several high-ranking military officers, including Gen. Sergei Surovikin, head of aerospace forces, The Wall Street Journal reports. Surovikin, known as General Armageddon for bombing campaigns he waged in Syria, is being held and interrogated in Moscow. The Kremlin’s effort to weed out officers suspected of disloyalty is broader than publicly known.

“The detentions are about cleaning the ranks of those who are believed can’t be trusted anymore,” a source told the Journal.

Andrei Kartapolov, the head of the Russian Duma’s defense committee, said Wednesday that Surovikin is “taking a rest,” when pressed by a reporter, adding “he is unavailable right now” (The New York Times).

The Times previously reported that U.S. officials believe Surovikin had advance knowledge of the mutiny but do not know whether he participated. In the days since, intense speculation has surrounded his whereabouts, only one of the many lingering mysteries about the coup. Despite a deal announced by the Kremlin, under which Prigozhin was supposed to head to Belarus to avoid prosecution, the Wagner Group leader appears to remain in Russia.

▪ Reuters: Russian hackers lured embassy workers in Ukraine with an ad for a cheap BMW.

▪ The Associated Press: Russia’s threat to pull out of Ukraine grain deal raises fears about global food security.

🎣 Along Sri Lanka’s 1,056 miles of coasts and lagoons, artisanal fishermen cast and gather their nets several times a day. Nearly half of the country’s animal protein intake comes from fish, which is close to three times the global average. The exact style of net employed and method of fishing varies among villages, born from generations of experience, but palpable differences in tide patterns and fish catches from climate change have complicated the work (Al Jazeera).

“Seas have become rougher, which means fishermen either have to take time off or risk their lives,” said Aruna Maheepala, a socioeconomic and aquatic resources senior scientist at the National Aquatic Resources Research and Development Agency.

▪ The Associated Press: France’s anti-immigration far right gets boost from riots over police killing of a teenager.

▪ The New York Times: How a peaceful country became a gold rush state for drug cartels. In Ecuador, an intelligence official said: “People consume abroad, but they don’t understand the consequences that take place here.”

THE CLOSER

Take Our Morning Report Quiz

And finally … It’s Thursday, which means it’s time for this week’s Morning Report Quiz! Inspired by the summit this week in Lithuania, we’re eager for some smart guesses about the North Atlantic Treaty Organization.

Be sure to email your responses to asimendinger@digital-stage.thehill.com and kkarisch@digital-stage.thehill.com — please add “Quiz” to your subject line. Winners who submit correct answers will enjoy some richly deserved newsletter fame on Friday.

What year was NATO founded?

1956
1949
1933
1945

Which NATO member doesn’t have a military of its own?

Denmark
North Macedonia
Iceland
Canada

NATO’s Article 5 specifies an armed attack on one member nation is considered an attack on all. What is the only time Article 5 has been invoked?

During World War II
During the dissolution of Yugoslavia
During the Bosnian war
After the 9/11 terrorist attacks against the United States

Which two countries jointly applied for NATO membership in 2022?

Austria and Switzerland
Finland and Sweden
Belgium and the Netherlands
Spain and Andorra

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