On The Money: Powell asserts Fed's independence amid new Trump attacks | House approves $383 billion spending package | CBO projects 'unprecedented' debt levels by 2049 | Democrats struggle with Trump tax law provision
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THE BIG DEAL–Powell asserts Fed independence as Trump blasts central bank: Federal Reserve Chairman Jerome Powell asserted the central bank’s independence in and denounced the “damage” of political influence on monetary policy amid new criticism from President TrumpDonald John TrumpNew EPA rule would expand Trump officials’ powers to reject FOIA requests Democratic senator introduces bill to ban gun silencers Democrats: Ex-Commerce aide said Ross asked him to examine adding census citizenship question MORE.
In a Tuesday speech, Powell insisted the Fed would not let political considerations shape its efforts to foster maximum employment and stable prices as Trump ramps up pressure on the bank to cut interest rates.
“The Fed is insulated from short-term political pressures–what is often referred to as our ‘independence,'” Powell said during a speech to the Council on Foreign Relations in New York.
“Congress chose to insulate the Fed this way because it had seen the damage that often arises when policy bends to short-term political interests.”
The context: Powell stressed that the Fed’s independence makes its crucial for the central bank to listen to “opinions, ideas, and critiques from people throughout the economy” as it reviews the impact of its monetary policy moves.
Powell’s defense of the bank comes after Trump bashed the Fed and asserted that he has the power to oust the chairman in a recent series of tweets and interviews. I’ll fill you in here.
Trump v. Powell: Trump told The Hill in an interview Monday that he has the power to fire Powell but did not plan to do so at this time. The president has also renewed his long-running claim that the Fed has held back the economy from record highs by raising rates four times in 2018
While Trump insists he can fire Powell, legal scholars say he likely lacks the power to oust the chairman.
- Under the Federal Reserve Act, a Fed chairman or governor can only be fired by the president “for cause,” which is considered to be “inefficiency, neglect of duty, or malfeasance in office” per a 1935 Supreme Court ruling.
- Experts say Trump’s gripes with Powell over policy do not likely meet the standard for adequate cause to fire the chairman. Powell has also expressed doubts about Trump’s ability to fire him and has said he would not resign if asked to by the president.
ON TAP TOMORROW
- The House Financial Services Committee Task Force on Artificial Intelligence holds a hearing on AI and the financial services industry, 10 a.m.
- The House Financial Services Committee holds a markup, legislation to be announced, 12:30 p.m.
LEADING THE DAY
US to hit ‘unprecedented’ debt of 144 percent of GDP by 2049: CBO: Federal debt held by the public is on track to hit “unprecedented” levels, rising from the current 78 percent of gross domestic product (GDP) to 144 percent by 2049 if current laws are maintained, according to a new report from the nonpartisan Congressional Budget Office (CBO).
But the report found that if Congress works to wipe out scheduled spending and tax changes currently in law, which include sharp spending drops set to go into effect in 2020 and the expiration of income tax cuts scheduled for 2026, debt would rise to 219 percent of GDP.
The CBO says that such debt increases could pose “substantial risks.”
“The prospect of such large deficits over many years, and the high and rising debt that would result, poses substantial risks for the nation and presents policymakers with significant challenges,” said CBO Director Phillip L. Swagel. The Hill’s Niv Elis breaks down the report here.
- In the CBO’s central projection of 144 percent of GDP, the government would spend more on interest payments than the entire discretionary budget, which includes defense and all domestic programs, by 2046.
- That projection is a point lower than last year, largely because of lower interest rate projections and a drop in emergency spending between 2018 and 2019.
- But Swagel noted that even if interest or productivity projections were to change slightly, debt is still on track to rise precipitously.
Democrats struggle with repeal of key Trump tax provision: House Democrats are grappling with how to address one of their least favorite provisions in the GOP tax law: the $10,000 cap on the deduction for state and local taxes (SALT).
A House Ways and Means Committee subpanel held two hearings on Tuesday about the SALT deduction cap, during which local-government officials and House members argued that the cap hurts residents and communities in their districts.
The hearings come after committee Democrats formed a working group to discuss the issue earlier this year. And lawmakers have offered a host of bills to increase the cap or repeal it all together.
But there are challenges to undoing the cap, since doing so would lower federal revenue and would largely benefit high-income people.
The cap is “the wrong policy, and we need to find a workable solution,” said Ways and Means Committee Chairman Richard NealRichard Edmund NealTrump’s tax returns — DOJ trying to put off the inevitable? Democrats talk up tax credits to counter Trump law House panel approves bills on tax extenders, expanding tax credits MORE (D-Mass.). The Hill’s Naomi Jagoda walks us through the Democratic dilemma.
Houses approves $383 billion spending package: House Democrats on Tuesday passed a $383 billion spending package, finishing work on three-quarters of the annual appropriations bills on its docket ahead of the July Fourth recess.
The package of five funding bills passed in a vote of 227-194, largely along party lines. It includes funds for commerce and justice; agriculture, interior and environment; military construction and veterans affairs; and transportation, housing and urban development.
The legislation’s passage means Democrats have successfully completed work on nine of the 12 annual appropriations bills in their chamber. They are set to pass a 10th bill, covering financial services and general government, this week.
What’s next: They are set to pass a 10th bill, covering financial services and general government, this week. The other two, however, will likely come in July. The legislative branch funding bill was held up because of disagreements over whether Congress should increase its own pay.
The final bill, on homeland security, deals with some of the most toxic issues between Republicans and Democrats: immigration and President Trump’s proposed border wall.
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The Hill’s Niv Elis has more on the bill here and what’s next.
GOOD TO KNOW
- Consumer confidence sunk in June as rising trade tensions fueled concerns about the health of the U.S. economy, according to a report released Tuesday.
- General Motors announced Tuesday that it has invested over $4.2 billion in plants in four states as it prepares to launch its next generation of pickups and SUVs.
- A survey of the nation’s chief financial officers found that they expect economic growth to slow, but not dip into a recession through 2020.
- Consumer advocates are pushing regulators to investigate what they paint as a shadowy online practice where retailers use consumer information collected by data brokers to decide how much to charge individual customers or the quality of service they’ll offer.
- The federal government on Tuesday filed a civil lawsuit against former White House aide Omarosa Manigault NewmanOmarosa Onee Manigault NewmanWhite House hires director of African American outreach after post was vacant for months: report Trump’s nastiest break-ups: A look at the president’s most fiery feuds Donald Trump Jr. inks book deal MORE, alleging that she failed to file a required financial disclosure report after she was fired.
- Apple is on the front lines of President Trump’s trade war as the U.S. considers imposing tariffs on virtually all goods from China, including on popular iPhones and Mac computers.
ODDS AND ENDS
- Bloomberg News: “The U.S. Justice Department has opened a criminal investigation into allegations that chicken processors, including Tyson Foods Inc., Pilgrim’s Pride Corp. and Sanderson Farms Inc., conspired to fix prices.”
- YouTube’s critics are pushing the Federal Trade Commission (FTC) to impose strict penalties for the streaming service’s handling of children’s data after it was reported the agency was in the late stages of an investigation.