The Cutting Edge

The Federal Reserve on Wednesday cut its short-term interest rate for the first time in four years—a sign that the central bank no longer views inflation as the economy’s primary challenge. 

The Fed’s Open Market Committee approved a cut of 50 basis points (a 0.5 percent reduction in interest rates). In a statement, the committee said that the move was made due to “greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance.”

“After four years of upheaval, the U.S. now seems to have low inflation, low unemployment, and solid economic growth,” concluded The Wall Street Journal‘s Greg Ip, who applauded the Fed’s move. The stock market seemed similarly pleased by the change.

The rate cut should mean some relief for consumers looking to make big purchases. Rates for mortgages, car loans, and other forms of borrowing are determined, in part, by the Fed’s target rates. Lower mortgage rates could indirectly help bring more supply to the housing market, which is good news for prospective buyers, The Washington Post reported.

With unemployment ticking upward in recent months—it has been at least 4 percent since May—an interest rate cut could also be viewed as the Federal Reserve pivoting away from a sole focus on getting inflation under control. After all, the Fed has a dual mandate to keep both inflation and unemployment low. But Federal Reserve Chairman Jerome Powell seemed to downplay that in his remarks on Wednesday, saying that the job market is “in solid condition. And our intention with our policy move today is to keep it there.”

Claiming credit? President Joe Biden (remember him?) is “is set to declare on Thursday that the economy has finally reached a turning point he has long sought,” reports The New York Times. It’s a turning point that may have arrived sooner if Biden’s policies hadn’t contributed to the recent period of inflation.

On the flip side, former President Donald Trump appears likely to cast the Fed’s move as a worrying sign of a wobbling recovery—or as part of a conspiracy against him, naturally. “To cut it by that much, assuming they’re not just playing politics, the economy would be very bad,” Trump said Wednesday, according to Reuters.

No cuts here. The House of Representatives voted Wednesday to block a bill that would avert a government shutdown when the fiscal year ends on September 30.

Like in every other year, Congress has to pass a new budget (or a continuing resolution) by the dawn of the new fiscal year on October 1. And just like happens in almost every year, lawmakers have failed to do that. The razor-thin Republican majority in the House means that Speaker of the House Mike Johnson (R–La.) has to keep his entire caucus in line—yes, it’s okay to laugh—or get bipartisan support for any spending bill.

In this case, he got neither. Democrats nearly unanimously opposed the continuing resolution that would have funded the government through March 28, and 14 Republicans voted “no” for good measure. The main objection to the bill had nothing to do with the federal budget and was mostly about language that would require proof of citizenship as part of voter registration processes in the states. However, existing federal laws already prohibit noncitizens from voting, and despite claims made by former President Donald Trump (and others), election data show that noncitizens are not committing rampant voter fraud.

Wait, why is Congress putting a hot-button election policy issue into a spending bill? Good question! That’s the real story here, and one that reveals a major reason why Congress can’t seem to budget well.

Regardless of whether you view the voting measure as essential or silly and redundant, it should obviously pass or fail on its own. Bundling it into the continuing resolution was meant to tempt right-wing Republicans into voting for the bill, even though they want to see spending cuts that were not included.

Rep. Thomas Massie (R–Ky.) laid out the “insincere and unserious” process during a speech on the House floor Wednesday. (He voted “present” on the continuing resolution.)

Today we will vote on a continuing resolution that will fund all of government in one bill and doesn’t cut one penny.

I spoke on the House floor this morning to urge my colleagues not to participate in this unserious and insincere political theater. pic.twitter.com/ir0AaZSm4Y

— Thomas Massie (@RepThomasMassie) September 18, 2024

Congress should stop playing games and start getting serious about budgeting better.

More explosions in Lebanon: Hezbollah militants in Lebanon were targeted in a second wave of attacks on Wednesday, as hand-held radios and walkie-talkies detonated. At least 20 were killed and more than 450 were injured, according to The New York Times.

Israel has not claimed credit for the attacks in Lebanon, but the Pentagon is reportedly preparing for a possible Israeli ground invasion of its northern neighbor. Yoav Gallant, Israel’s defense minister, seemed to suggest as much on Wednesday. “The center of gravity is moving from Gaza to the north through the diversion of resources and forces,” he said. “We are opening a new phase in the war.” 

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Scenes from Virginia: Hung Cao, the Republican challenging two-term Sen. Tim Kaine (D–Va.) in the blue-ish state this November, is reportedly handing out some unusual campaign swag:

Sen. Rick Scott is hanging out with Va. GOP Senate nominee Hung Cao today. Polls show Ds looking pretty strong there

Cao says polls showing Harris up in Virginia are off, calls it a toss up state and says Northern Virginia is going to surprise people. And he’s handing out these pic.twitter.com/p2CJhT5B2N

— Burgess Everett (@burgessev) September 11, 2024

Cao is running an unorthodox campaign, even by the too-online standards of the contemporary GOP. And he seems to struggle with geography. But at least he’s got a sense of humor—and I’ll admit to chuckling every time I see a “Farmers for Hung Cao” sign along the side of the road.

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QUICK HITS

• The FBI believes Iranian hackers were behind the theft of emails from former President Donald Trump’s campaign.
• Three things to know about Sean “Diddy” Comb’s sex-trafficking indictment.
• While campaigning in New York on Wednesday, Trump proposed capping credit card interest rates at “around 10 percent.” Worth noting: The president does not have the power to control credit card interest rates. And if such a law was passed, it would likely prevent low-income Americans from qualifying for credit cards, hurting the very people it is meant to help.
• New data suggest overdose deaths are finally on the decline.
• Shameless plug: Check out the latest episode of Reason‘s Why We Can’t Have Nice Things podcast, which dropped this morning.

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Source: https://reason.com/2024/09/19/the-cutting-edge/