The Hill’s Morning Report — Inflation report roils expectations

by Alexis Simendinger and Al Weaver - 07/14/22 6:26 AM ET

President Biden was in Israel when the Labor Department on Wednesday issued what many called a “shocking” report of 9.1 percent inflation for the year ending in June. The worse-than-expected consumer price index (CPI) sent financial markets reeling, dared the Federal Reserve to be ferocious while raising interest rates and invited the GOP to blame Democrats.

“Inflation is uniquely bad here because our all-Democratic government has made uniquely bad choices,” Senate Minority Leader Mitch McConnell (R-Ky.) said during a Senate floor speech on Wednesday. “Now their answer to picking families’ pockets once is to pick families’ pockets a second time,” he continued, accusing the majority in Congress of backing tax hikes.

▪ The Hill: Five takeaways from the stunning inflation numbers.

▪ The Hill: Democrats push reconciliation as a tool to fight inflation.

Driven in June by rising energy prices, inflation continued to climb at the fastest pace in 40 years across many sectors of the economy, even as analysts and economists rushed to say that July’s inflation situation would likely show improvement. The last time inflation climbed above 9 percent was November 1981 (The Hill and The Washington Post).

In a statement, Biden defended the strength of the U.S. economy, recounted his actions to lower gas prices and said he backed the Fed. He asked Congress to send him pending legislation that would lower consumers’ costs for prescription drugs, energy and insurance premiums.

“In the past 30 days, the average price of gas has dropped by 40 cents a gallon,” Biden said. “That’s breathing room for American families.”

The New York Times: Gas prices, a big inflation factor, are coming down sharply.

Although reasons for high inflation, now a global problem, are complex, the assessment about what Biden alone can do is simple: jawbone. He is nudging companies and ports to fix supply chains, asking domestic and international petroleum producers, including in the Middle East, to pump and refine more oil, and he is implicitly rooting for consumers to spend less.

The central bank says it wants to raise interest rates enough to dampen demand to ease inflationary pressures but not so much that the U.S. economy tumbles into recession. On Wednesday, economists suggested the Fed could raise rates by an aggressive full percentage point this month. Many analysts predict a recession in 2023, if not before.

The Hill: The government has tried to stop inflation. Why isn’t it working?

For most middle-class and low-income households, a rise in prices of 9.1 percent over the course of a year exceeds wage and income gains, especially with the costs of housing. Inflation is a leading complaint among likely voters ahead of the November elections, and Democratic candidates fear their party will be blamed.

Related Articles

▪ The Wall Street Journal: Hot inflation report puts pressure on the Federal Reserve.

▪ CNBC: Bank of America says U.S. will fall into a “mild recession” this year, unemployment to hit 4.6 percent in 2023.

▪ Greg Ip, The Wall Street Journal: Beware wishful thinking about inflation and recession.

▪ The New York Times: Euro falls to equal the U.S. dollar for the first time in 20 years.

▪ Reuters: Bank of Canada surprises with 100 basis point rate hike to tame inflation.

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LEADING THE DAY

➤ CONGRESS

The latest inflation figure also played a meaningful role on Capitol Hill on Wednesday as Sen. Joe Manchin (D-W.Va.) slowed negotiations on a budget reconciliation bill once again, saying following the latest price report that the measure “needs to be scrubbed much better.”

Manchin told reporters he is unsure whether he can agree to anything included in a potential deal other than the prescription drug reform provisions, which has already been sent to the Senate parliamentarian’s office and has the backing of all 50 senators who caucus with the Democrats.

“We know what we can pass is basically the drug pricing, OK, on Medicare,” he told reporters. “Is there any more we can do? I don’t know, but I am very, very cautious.”

“And I’m going to make sure that I have every input on scrubbing everything humanly possible that could be considered inflammatory,” Manchin added. “We can’t afford mistakes in the highest inflation we’ve seen in the last 40 years.”

Democrats have hoped for a deal by the start of the monthlong August recess, but Manchin has refused to abide by that, having indicated that he views the end of September — the end of the fiscal year — as the deadline.

▪ Alexander Bolton, The Hill: Inflation report deals blow to Schumer-Manchin budget talks.

▪ Politico: Talks between Manchin, Senate Majority Leader Charles Schumer (D-N.Y.) on agenda hit a new hurdle: COVID-19 quarantine.

▪ The Washington Post: Biden weighs breaking climate pledges to win Manchin’s support on bill.

▪ The Associated Press: Jan. 6 hearings: What we’ve learned so far, and what’s next.

Elsewhere on Capitol Hill, state officials, abortion rights advocates, and legal and medical experts testified before House and Senate committees about the implications of the Supreme Court striking down Roe v. Wade.

Those testifying relayed to lawmakers about concerns abortion providers are having about breaking state laws restricting the practice and access.

“Today’s hearing is especially important because Republicans are not going to stop with Dobbs,” House Oversight and Reform Committee Chairwoman Carolyn Maloney (D-N.Y.) said. “They are openly planning to impose a national ban on abortion. The damage that would cause is inconceivable” (NBC News).

▪ John Kruzel, The Hill: Battle lines emerge over out-of-state abortion.

▪ The Columbus Dispatch: Columbus man charged in rape of 10-year-old that led to Indiana abortion.

On the international stage, Senate Foreign Relations Committee Chairman Robert Menendez (N.J.) has thrown up a roadblock in front of Biden’s push to sell F-16 fighter jets to Turkey.

Menendez is one of four lawmakers the president needs to sign off on the move, but the New Jersey Democrat has remained steadfast in his opposition, even after Biden made his call to supply Ankara with the jets at the NATO summit last month.

“How do you reward a nation that does all of those things?” Menendez told Politico. “I don’t see it. Now, if they want to start changing their ways, that’s a different story.”

Separately, the panel next week is set to vote on a resolution of ratification for Finland and Sweden to join the NATO alliance.

IN FOCUS/SHARP TAKES

➤ ADMINISTRATION

Biden arrived in Israel on Wednesday for his first Middle East visit since his election and immediately renewed U.S. support for a two-state solution to the Israeli–Palestinian conflict while also talking tough about Israel’s sworn enemy, Iran (The Associated Press).

“The only thing worse than the Iran that exists now is an Iran with nuclear weapons,” Biden told Israel’s Channel 12 during an interview taped before he left Washington. Asked about using military force against Iran, Biden said, “If that was the last resort, yes.”

Today, the United States and Israel are expected to unveil a joint declaration of close military ties and a proposed halt to Iran’s nuclear program.

The Associated Press: This morning, Biden met with Israeli Prime Minister Yair Lapid.

The newsmaking event of Biden’s trip is expected to be his meeting on Friday with Saudi Crown Prince Mohammed bin Salman. Although the president has said energy is not the focus of his discussions while in Jeddah, analysts are asking whether persuading the Saudis to pump more oil would offset criticism Biden is receiving for appearing to renege on his 2019 condemnation of Saudi Arabia as a “pariah” and flagrant violator of human rights. “There is very little social redeeming value in the present government in Saudi Arabia,” Biden said during a presidential debate.

▪ Haaretz analysis: Biden’s boring first day was just what Israel needed.

▪ Ynetnews.com: Biden to announce early Israel-Saudi normalization progress. Riyadh could commit to allowing Israeli Muslims for holy pilgrimage on indirect flights into Saudi Arabia.

▪ The Hill: Why Biden’s Saudi trip could nudge the kingdom on oil production.

▪ The Hill: Progressive lawmakers have introduced amendments to the National Defense Authorization Act that would limit military support to Saudi Arabia.

➤ POLITICS

The Jan. 6 committee was forced to call an audible this week when it decided to add testimony from former White House counsel Pat Cipollone during Tuesday’s hearings, forcing the panel to bump the presentation of some evidence about former President Trump’s ties to violent extremist groups.

Chairman Bennie Thompson (D-Miss.) acknowledged the alteration on Wednesday, saying that investigators wanted to highlight Cipollone’s testimony, which they finally obtained on Friday. As The Hill’s Mike Lillis and Rebecca Beitsch note, the panel left on the cutting room floor evidence tying some of Trump’s closest allies to some of the prominent right-wing groups on the front lines of the Capitol insurrection.

“It was in the original script, but we pulled some back just because of the timing,” Thompson told The Hill about the ties between Trump World and the Proud Boys and Oath Keepers.

▪ Politico: Trump discussing 2024 plans at secret donor dinners.

▪ The Hill: Trump’s 2020 outrage drives fear of “insider” election threats.

Buoyed by its prospects in the 2022 midterms, the GOP is making a play of its own with Hispanic voters, particularly in a number of competitive House districts that are up for grabs come November.

According to The Hill’s Rafael Bernal and Emily Brooks, Democrats are once again declining to invest heavily in their get-out-the-vote operation for Latinos, a group the party has been able to rely on consistently for a number of campaign cycles.

Democrats could be playing with fire this cycle on the issue, as Hispanic voters are likely to play a role in at least a dozen districts later this year.

▪ The Hill: Democrats see Senate as silver lining in dismal election year.

▪ The Wall Street Journal: Lt. Gov. John Fetterman’s (D) health clouds Pennsylvania Senate race.

▪ The Hill: KLAS-TV/The Hill/Emerson College poll: In Nevada, Trump, Florida Gov. Ron DeSantis (R) both would beat Biden.

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OPINION

■ BA.5 should not change how Americans think about living with COVID-19, by Leana S. Wen, contributing columnist, The Washington Post. https://wapo.st/3IAliPA

■ Inflation alarm bells are actually getting softer, by Matthew A. Winkler, editor-in-chief emeritus, Bloomberg Opinion. https://bloom.bg/3azEuR0

WHERE AND WHEN

The House will meet at 10 a.m.

The Senate convenes at 10 a.m. to resume consideration of the nomination of Kate Heinzelman to be general counsel of the CIA.

The president is in Israel, where he met with Lapid and will hold a press conference with him. Biden will participate in a virtual meeting among leaders of Israel, India and the United Arab Emirates. He will meet separately with Israeli President Isaac Herzog and former Prime Minister Benjamin Netanyahu. Biden will attend a reception hosted by Herzog and receive the Israeli Presidential Medal of Honor. The president will greet U.S. athletes and view the opening of the Maccabiah Games.

Vice President Harris will travel to Orlando today and deliver remarks to the 70th Boule of Alpha Kappa Alpha Sorority, and take part in a roundtable with Florida legislative leaders about reproductive rights. She will also make a stop in Tampa at MacDill Air Force Base to meet with servicemembers, as well as CENTCOM and SOCOM leaders.

Secretary of State Antony Blinken is in Israel with the president for meetings in Jerusalem and Bethlehem.

Treasury Secretary Janet Yellen is in Bali, Indonesia, to meet with the Group of 20 finance ministers and central bank leaders.

First lady Jill Biden arrives midday in Boston and will visit military families, veterans service members and others at 2:45 p.m. at Home Base (a Red Sox Foundation and Massachusetts General Hospital program) as part of the White House’s Joining Forces initiative. She will attend a Democratic National Committee fundraiser in Andover, Mass., at 4:45 p.m. The first lady will remain in Massachusetts.

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ELSEWHERE

➤ INTERNATIONAL

Protesters finally left the presidential palace in Sri Lanka on Thursday after the government announced a 5 a.m. curfew in the capital of Colombo for Friday following days of demonstrations over the country’s economic collapse. The departure came after protesters stormed the palace on Sunday, forcing Sri Lankan President Gotabaya Rajapaksa to flee to the Maldives on Wednesday. As of this morning, Rajapaksa has reportedly left the Maldives, having boarded a flight to Singapore (The Associated Press).

In Russia, WNBA star Brittney Griner’s trial resumes today. She has pleaded guilty to drug possession charges and has appealed to Biden for assistance to secure release from detention that began in February (The Associated Press).

Russia, Ukraine and intermediary Turkey are nearing a deal with help from United Nations representatives on moving grain exports from Ukraine through the Black Sea. Russian President Vladimir Putin would have to sign off on any agreement, a big if (The Wall Street Journal).

➤ PANDEMIC & POX

The Food and Drug Administration on Wednesday authorized Novovax’s COVID-19 vaccine, which is made with traditional rather than messenger RNA vaccine technology, for use in adults (Reuters).

The U.S.’s brief lull in COVID-19 deaths has reversed. Last month, daily deaths were falling, though they never matched last year’s low, and deaths are now heading up again. Omicron’s infectious cousins, a public simply fed up with the pandemic and a botched public booster campaign are proving a difficult combination. The seven-day average for daily deaths in the U.S. rose 26 percent over the past two weeks to 489 on July 12. The coronavirus is not killing nearly as many as it was last fall and winter, and experts do not expect death to reach those levels again soon. But hundreds of daily deaths for a summertime respiratory illness would normally be jaw-dropping, reports The Associated Press. Simple, proven precautions are not being taken. Vaccinations, including booster shots for those eligible, lower the risk of hospitalization and death — even against the latest variants. But less than half of all eligible U.S. adults have gotten a single booster shot, and only about 1 in 4 Americans age 50 and older who are eligible for a second booster have received one.

Globally, the World Health Organization on Wednesday reported that between July 4 and July 10, more than 5.7 million new cases of COVID-19 were reported, an increase of 6 percent compared to the previous week and the fifth consecutive week of increasing case numbers.

Vaccine shortages have added to public anxiety around the monkeypox virus, which now exceeds 1,000 confirmed cases in the United States. New York City’s vaccine appointment system crashed this week as city health officials vowed to stabilize access to limited supplies of shots effective against monkeypox (The Associated Press). The virus is spreading primarily among gay men, bisexual men and sex workers. As of Wednesday, New York City had administered nearly 7,000 vaccinations and 336 people in the city has tested positive (confirmed cases jumped by 25 percent from Tuesday). City health officials said they expected to receive 14,500 doses of monkeypox vaccine this week (The Associated Press).

Total U.S. coronavirus deaths reported as of this morning, according to Johns Hopkins University (trackers all vary slightly): 1,023,620. Current average U.S. COVID-19 daily deaths are 342, according to the Centers for Disease Control and Prevention.

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 this weekend’s anniversary of Joe DiMaggio hitting safely in his 56th consecutive game (still a Major League Baseball record), we’re eager for some smart guesses about unbreakable sports records.

Email your responses to asimendinger@digital-staging.thehill.com and/or aweaver@digital-staging.thehill.com, and please add “Quiz” to subject lines. Winners who submit correct answers will enjoy some richly deserved newsletter fame on Friday.

Cal Ripken Jr., known as “The Iron Man,” famously played in 2,632 consecutive games over 17 years, breaking Lou Gehrig’s previous record of 2,130 games. What was Gehrig’s nickname?

1. The Iron Gent

2. The Iron Horse

3. The Iron Yank

4. The Iron Man

The Boston Celtics won eight straight NBA championships from 1959-66, a mark that is unlikely to be matched in major professional sports. How many Basketball Hall of Famers did those teams produce (as a player)?

1. six

2. eight

3. ten

4. 12

In 1961-62, Wilt Chamberlain averaged 50.4 points per game for the Philadelphia Warriors. What player not named Chamberlain holds the highest single-season points-per-game mark?

1. Michael Jordan

2. Kobe Bryant

3. Kareem Abdul-Jabbar

4. Jerry West

Nolan Ryan threw seven no-hitters during his illustrious Hall of Fame career. Who is the only other pitcher to throw at least four?

1. Cy Young

2. Pedro Martinez

3. Randy Johnson

4. Sandy Koufax

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