| | |  | BY BEN WHITE | | With help from Joanne Kenen
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A trader works on the New York Stock Exchange floor. | Nicole Pereira/New York Stock Exchange via AP | AHEAD OF THE CURVE — This week, a very wonky event took place in a corner of the U.S. bond market. The “yield curve,” which sounds a lot sexier than it is, “inverted.” Or one of the most closely watched yield curves did. Oh my. Some economists and financial Twitter nerds (of which I am one) exclaimed: “This means a recession is coming soon!” Well, maybe. But it’s far from a lock and there are a lot of “recession indicators” telling a different story. What happened in the bond market this week needs just a brief explanation. So please bear with us for the following use of a few boring words. On Tuesday, for a flicker of a moment, the two-year Treasury bond yielded more than the 10-year bond, a phenomenon which in the past has preceded many recessions. Ordinarily, investors unsurprisingly demand higher returns on their money when they commit it for a longer time period (10 years) than a short one (two years). When that reverses, it can mean bond investors think growth may be stalling out. So everyone went fairly bonkers for a few hours on Tuesday, waving their “Recession Warning” flags. But this particular yield “inversion” is but one of dozens of indicators followed by Wall Street and the economists at the U.S. Federal Reserve, whose two main jobs are to maintain maximum employment and keep inflation at a reasonable level around 2 percent. It’s not even an especially reliable indicator. It just happens a lot. Joseph Brusuelas, chief economist at consulting firm RSM US, even refers to it as the “two-year, 10-year fallacy,” noting that following it closely would more or less always make you fear imminent recession. “I always like to say that the 10-year/two-year spread has predicted 21 of the last 3 recessions,” Brusuelas told Nightly. Several economic indicators do suggest that we might see a recession in the next year or so. The Fed has begun a campaign of rate hikes to fight persistent, nasty, Covid-related inflation. Consumer confidence is softening. People’s views on the economy are quite dour. A lot of the dismal views are driven by soaring energy prices, which rose 3.5 percent in February. Both regular gas and diesel prices keep shooting higher. But other indicators, including some favored by the Fed, are much less worrisome. Here are a few to amaze your friends at parties when you shrug off the latest inversion and show you know better. Other bond yields — Comparing three-month yields to 18-month yields, or 10 years to three months, “both imply sustained growth compared to the inversion of the 10-year/two-year spread,” Brusuelas said. He added, “That is consistent with the strong labor market and solid consumer spending.” Veteran investor David Kotok of Cumberland Advisors emailed a similar sentiment: “I’m not very concerned. … If you look at longer-term bond spreads,” he said, “the curve is not flat.” So. Never mind. Economic growth — This one may seem obvious. It’s how we ultimately measure recessions. But what the economy is currently doing helps inform the timing of any upcoming recession. The economy grew a sharp 6.9 percent in the fourth quarter of 2021, continuing the bounce back from Covid. Early this year is likely to bring a sharp pullback, with estimates of first quarter growth around 1 percent as all of the drawbacks from the Omicron wave show up. Most consensus forecasts have perhaps one negative quarter next year, but probably not enough for a real recession. Employment — There’s a big structural problem in the labor market right now: Around 2 million workers expected to return to the labor force as Covid waned have not yet returned. But the jobless rate is still quite low, at 3.8 percent. And monthly jobs reports remain strong, at 678,000 in February and another half million expected in March. The stock market continues to march higher, for the most part, and corporate profits haven’t rolled over from recent strong gains. There is a great deal of demand in the economy. If labor market participation begins to heal, that should ease inflationary pressure on the Fed — because it would likely ease pressure on rising wages as well as push labor supply closer to demand levels. It’s certainly not obvious from the strength of the labor market that a recession is near. Welcome to POLITICO Nightly. Reach out with news, tips and ideas at nightly@politico.com. Or contact tonight’s author at bwhite@politico.com, or on Twitter at @morningmoneyben.
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President Joe Biden receives a fourth dose of the Pfizer/BioNTech Covid-19 vaccine in the South Court Auditorium. | Anna Moneymaker/Getty Images | — Biden receives second booster, outlines new Covid resource site: Biden received his second Covid-19 booster shot today, moments after delivering a speech on the state of the pandemic at the White House . The president’s decision came one day after the FDA authorized a second booster of the Pfizer-BioNTech and Moderna vaccines for adults 50 years and older, and the CDC endorsed the extra shot. During his speech, Biden announced the rollout of a new federal website, Covid.org, that centralizes Covid-19 resources for Americans. Free at-home tests and masks will be available on the website, as will information about local Covid spread and locations for free vaccines. — U.S. to send Ukraine additional $500M, Biden tells Zelenskyy: Biden told Ukrainian President Volodymyr Zelenskyy in a call today that the United States plans to provide Ukraine with an additional $500 million in “direct budgetary aid,” the White House said in a readout of the leaders’ conversation. The announcement comes after Bloomberg reported on Tuesday that the Biden administration was considering providing Ukraine with $500 million in aid and pushing European allies to match its contribution. Reuters reported that the United States and its allies were discussing providing as much as $500 million collectively.
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| | SUBSCRIBE TO NATIONAL SECURITY DAILY : Keep up with the latest critical developments from Ukraine and across Europe in our daily newsletter, National Security Daily. The Russian invasion of Ukraine could disrupt the established world order and result in a refugee crisis, increased cyberattacks, rising energy costs and additional disruption to global supply chains. Go inside the top national security and foreign-policymaking shops for insight on the global threats faced by the U.S. and its allies and what actions world leaders are taking to address them. Subscribe today. | | | | | — Collins will support confirming Jackson, delivering bipartisan SCOTUS vote: Republican Sen. Susan Collins will support Judge Ketanji Brown Jackson for the Supreme Court , delivering Biden a bipartisan vote for his first high court nominee. The Maine senator is the first — and could be the only — Republican to back Jackson’s confirmation. She was widely viewed as the most likely GOP vote for Jackson, the first Black woman nominated to the high court. Biden lobbied Collins for her support, calling the senator to discuss the Supreme Court vacancy at least three times. — Biden weighs phased-out end of Trump-era deportation policy: The White House is planning to revoke a Trump-era deportation policy for migrants arriving at the Southern border, according to multiple people briefed on the plans . And as part of its approach, it is considering phasing out the public health order, Title 42, starting with families and followed by all adults at a later date, according to four sources familiar with the policy change. The decision is not yet final, though administration officials have suggested in private conversations with lawmakers and advocates that a phase out is their most likely path. Earlier this month, the Biden administration announced it would no longer apply Title 42 to unaccompanied migrant children arriving at the U.S.-Mexico border. — Biden eyes using wartime powers for minerals needed in clean energy push: The White House is weighing using wartime executive powers to boost U.S. battery production to help secure supplies for the growing market for electric vehicles and power storage on the electric grid , according to two people familiar with the Biden administration’s thinking. Biden would use the Defense Production Act to help secure U.S. sources of critical minerals that are deemed key components of clean energy technology. While the U.S. possesses many of those minerals, industry and some lawmakers of both parties contend regulations have deterred development and forced the U.S. to rely on supplies from nations like China, Russia, South Africa and Australia.
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| | | | | NO MONEY, MO PROBLEMS — Joanne Kenen , Commonwealth Fund journalist-in-residence at Johns Hopkins School of Public Health, emails Nightly: Early in the pandemic, the U.S. Congress threw billions of dollars at the coronavirus even though the White House didn’t really have a plan. Now, the White House has a plan. But Congress is refusing to throw even pennies. Maybe someday we’ll get this right. Biden is pressing Congress for $22.5 billion for vaccines, treatments and testing. Because even if the worst of Covid is over — and we don’t know that — the virus and its variants are still going to stick around and make people sick. “Congress needs to act now. Please,” Biden said today. “Americans are back to living their lives again. We can’t surrender that now.” By the spring of 2021, after tens of millions of Americans were vaccinated in Biden’s first 100 days, the thinking was that there would be virus hot spots — and that they could be extinguished before they spread all over the place. It wasn’t stupid to think that, but it did turn out to be wrong. Instead of hot spots, we got Delta and Omicron wildfires, and the Biden administration was ill-prepared. Now the administration finally has a plan to protect us against the next variant — and the one(s) after that — while moving toward a more normal mode of living. Unveiled several weeks ago, it’s called Test-and-Treat. Vaccination is also still a big part of it but the word “vaccination” is a lot more provocative than the Halloween-like mantra of “test” or “treat.” Not every public health expert loves every detail of Biden’s proposal; some don’t think it goes far enough. But there’s broad agreement that vaccination, testing and treatment are the core building blocks for getting us out of this mess. “Test. Treat. Prevent. Those are the three pillars of our strategy against every infectious disease on earth,” said David Dowdy, an epidemiologist at Johns Hopkins. But they aren’t free. Not only does the administration need to buy more of the tests, shots and treatments that we have now, but it also needs to invest in the next generation of tests, shots and treatments for unpredictable variants that keep sucker-punching us. “We think we’re done with the virus. We’re exhausted. But that doesn’t mean we’re done,” said Ezekiel Emanuel, a bioethicist and former Covid adviser to the Biden transition, adding that Biden’s $22.5 billion isn’t even enough. “We always seem to not take the lesson – let’s prepare. It’s insane. It’s frustrating,” Emanuel said, adding that Congress wrongly looks at Covid money as spending, not as an investment. The pandemic spending bills have been more partisan under Biden than they were under former President Donald Trump, who sought and received trillions of dollars, if you count economic aid as well as public health spending, even as he promised that the virus would “disappear.” The current stalemate in Congress comes as the Omicron offshoot known as BA.2 is spreading, now making up more than half the cases in the country. Given that so many of us have now either had Covid, or been vaccinated against Covid, or both, public health experts are cautiously confident that overall we as a society have a reasonable degree of protection, for now, against this variant, that it won’t send us hurtling back to the high hospitalization rates and 2,500 daily deaths we saw this winter. But we don’t know how long that protection endures, or how it will stack up against future variants. “We’re in a much better place than we were two years ago,” Dowdy said. “I think that there’s reason for optimism about this current sublineage [BA.2]. … But if there’s anything I’ve learned about this pandemic is its uncertainty. And that’s why you need a plan.” But you also need to pay for the plan. So far the Republicans have basically crossed their arms and refused to budge. They want to use some of the money that’s already been given to states to pay for Biden’s test-or-treating, although the states have plenty of pandemic and post-pandemic challenges of their own to address. Talks are ongoing. A breakthrough — the Congress kind, not the virus kind — may come. If it doesn’t, there’s always wishful thinking. It’s not much of a strategy. But it’s free.
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About 5,000 The number of small businesses the Connected Commerce Council listed in its membership directory before it removed that document from its website late last month. When POLITICO contacted 70 of those businesses, 61 said they were not members of the group and many added that they were not familiar with the organization. The lobbying group funded by Amazon and Google claims to represent thousands of U.S. small businesses as it opposes legislation that would clamp down on the tech industry’s giants. But dozens of those small businesses say they’ve never heard of the Connected Commerce Council. |
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Rep. Madison Cawthorn leaves a House Republican Conference strategy session on Capitol Hill. | AP Photo/J. Scott Applewhite, File | AS THE COCAINE AND ORGIES TURN — Kevin McCarthy is fed up with Madison Cawthorn. The GOP leader said today — after meeting with the North Carolina Republican that morning — that Cawthorn has “lost my trust” due to his repeated actions that were “not becoming” for a congressman. And McCarthy warned the freshman he could face punishment, which could include losing committee spots, if he doesn’t take certain steps to turn himself around, Olivia Beavers writes. Cawthorn enraged wide swaths of his own conference when he recently claimed on a podcast that his colleagues seemingly invited him to an orgy and that he watched at least one fellow lawmaker consume cocaine, claiming that the same member was involved in the anti-addiction efforts. It’s just the latest in a series of controversial remarks Cawthorn has made. “There’s a lot of different things that can happen. But I just told him he’s lost my trust. He’s going to have to earn it back,” McCarthy said.
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