Biden’s Fed: To Brainard, or not to Brainard

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Nov 19, 2021 View in browser   By Ben White Presented by eBay With help from Renuka Rayasam Federal Reserve Governor Lael Brainard speaks at a Federal Reserve Board meeting. | AP Photo/Jacquelyn Martin GOOD NIGHT, SWEET POWELL? Sometime early next week, President Joe Biden will (probably) end weeks of speculation and delays and announce whether he will renominate Republican former private equity executive and Donald Trump pick Jerome Powell to serve another term as chair of the U.S. Federal Reserve, arguably the most important economic job on the planet, and which is now conducting some of the most delicate policy in its 108-year history. Or, less likely, Biden could surprise and delight the left by announcing he plans to dump Powell in favor of Democrat and current Fed governor Lael Brainard. In major policy areas, Brainard seems little different from the current chair. Both are "dovish" on interest rates, meaning they want to keep them low even as inflation is rising. But her surprise elevation would send a massive signal about exactly who Joe Biden is and how he governs. The Fed decision pulls at competing threads within Biden's own personality. It pokes at fissures in the Democratic Party. And the Fed's performance in the coming months — as inflation soars, Covid lingers and Biden's ratings on the economy drop — will help determine Democrats' chances in 2022 and 2024. The president has at least appeared to pull something of a Hamlet routine on the Fed pick, delaying a decision that looked to come weeks ago. So why the intense agita befitting Shakespeare's tortured Prince of Denmark over what is usually kind of a wonky exercise? Because if Biden sticks with Powell, who is popular on Wall Street and enjoys apparent universal GOP support along with some moderate Senate Democrats, he will highlight his penchants for bipartisanship, continuity, experience and general normalcy. This would be "Bipartisan Infrastructure Plan" Biden. Modest, steady and mostly scorned on the Democratic left. If the president pulls the shocker and goes with Brainard, he'll suggest he's more willing to smash traditions and follow the lead of Republicans, who have been dumping Democratic Fed chairs with regularity in recent years (see: Trump tossing Janet Yellen). This would be the "Build Back Better Biden," more akin to Franklin Delano Roosevelt or Lyndon Baines Johnson, pushing a nearly $2 trillion, and economy re-shaping, social spending plan and tossing out a perfectly reasonable Fed chief. While similar on interest rate policy, Brainard is significantly more progressive these days than Powell on using Fed tools to address issues like climate change and economic inequality. Progressives also think she'd be tougher on the bank regulation side. So her nomination would set off a wave of pleasure on the left. Keeping Powell and installing Brainard as vice chair while filling some other open Fed seats with Democrats would probably keep the left from going nuts. There's been a limited lobbying campaign for Brainard, partly because she was once seen as a fairly conservative Democrat and partly because the Senate math is so hard for her confirmation. But keeping Powell would be a disappointment to many Democrats, including some in the West Wing who support Brainard. And there are other economic and political factors going into the decision. Should Biden stick with Powell, he will fully own Powell's policies and have no one to blame should inflation persist through next year, some argue. "I do think it's a major political error to renominate Powell," veteran Wall Street analyst Richard Bernstein tells Nightly. "If Biden renominated Powell, then Biden owns inflation. By not doing so, the previous administration and their Fed Chair own it." That may be a stretch. Any sitting president and majority party get blamed for the economy on their watch. But it's also a point you hear from senior Democrats close to the White House and pushing for Brainard. Their argument: Lump Powell in with Trump, blame him for inflation and let a new chair gently bump up rates as needed and then claim victory should inflation ease up as supply and demand begin to match up again in the pandemic's wake and bottlenecks of boats filled with goods start to get where they are going on time. There is a flipside to this argument: If Biden does make the change and inflation gets worse and lasts even longer under Brainard, then Biden and Democrats are going to be fully cooked on inflation and should expect brutal defeats in the midterms. Gobble gobble. Welcome to POLITICO Nightly on the eve of Thanksgiving Week. Reach out with news, tips and side dish ideas at nightly@politico.com. Or contact tonight's author at bwhite@politico.com, or on Twitter @morningmoneyben. Ben used to write the Morning Money column and misses daily repartee with readers. Nice ones, anyway. A message from eBay: Americans casually selling things online are just trying to make ends meet and new tax regulations could make it even harder. Starting in 2022, a single transaction over $600 – the new reporting threshold – could land small-time sellers with a 1099-K tax form. eBay believes Americans shouldn't receive unnecessary and confusing tax forms for selling used or pre-owned goods. Learn more about eBay's position on raising the 1099-K threshold and lifting the burden on Americans.   A programming note: We'll be off for Thanksgiving this Thursday and Friday, but we'll be back and better than ever on Monday, Nov. 29. Ask The Audience Nightly asks you: Is there something you really want or need to buy, whether for the holiday season or just an everyday item, that you've noticed is far more expensive or seemingly impossible to get? Send us your responses using our form, and we'll share some answers next week.   BECOME A GLOBAL INSIDER: The world is more connected than ever. It has never been more essential to identify, unpack and analyze important news, trends and decisions shaping our future — and we've got you covered! Every Monday, Wednesday and Friday, Global Insider author Ryan Heath navigates the global news maze and connects you to power players and events changing our world. Don't miss out on this influential global community. Subscribe now.     On the Hill LET'S PASS TWO — Democrats seem to have quickly forgotten, or forgiven, the drama that Joe Biden's social spending and climate bill faced in the House before it was approved this morning . The behemoth bill, were it to become law, would be the most significant restructuring of the social safety net in decades, touching nearly every aspect of American life from universal pre-K to college assistance to elder care. The $1.7 trillion bill now heads to the Senate where it faces two obstacles even more daunting than House Minority Leader Kevin McCarthy's eight-hour, record-breaking speech: Democratic Sens. Joe Manchin and Kyrsten Sinema, whose opposition to the House version of the bill means it will surely be significantly changed in the next few weeks. Nightly's Renuka Rayasam chatted with Senate reporter Marianne LeVine over Slack today about what those changes might be for Biden's priority legislation. This conversation has been edited. What are the next steps for the social spending bill in the Senate? We are expecting that Democrats will begin presenting to the Senate parliamentarian next week. Among the potential parliamentarian sticking points is immigration reform. The House bill includes language that would provide temporary protection from deportation for certain undocumented immigrations. This is definitely a high priority for Senate Democrats, but they also have to deal with passing the defense policy bill, funding the government and raising the debt limit. Senate Majority Leader Chuck Schumer and Senate Minority Leader Mitch McConnell have yet to reach a consensus on how they plan to avoid default, but began talks this week. Manchin also needs to be on board for Democrats to move forward. It's likely that the Senate won't even begin to consider the social spending bill until the second week of December at the earliest. Does Biden have 48 votes for this right now? That is the assumption at the moment. Sen. Bernie Sanders (I-Vt.) hasn't drawn any explicit red lines, but he's made it clear he wants to see parts of the House bill changed. He told my colleagues this week that it was "bad policy, bad politics" to include SALT relief in the social spending bill, given that it amounts to a significant tax break for high income earners. How much is the Senate paying attention to what the House wants? In other words, is there a chance they pass the bill without paid leave, which seems like it will be immediately dropped because of Manchin's opposition, and then that version doesn't get House approval? The Senate at this point is largely operating independently from the House. While Schumer and Pelosi are in close contact, most senators are of the mindset that the House will do its thing and the Senate will also do its thing and that's the way it's supposed to work. House members also seemed resigned to the fact that the Senate will be changing the legislation. No Republicans will be involved in the making of this bill, correct? This legislation has unanimous opposition from Republicans. Democrats, however, will be watching which amendments Republicans offer in the so-called vote-a-rama process. We don't know yet what they will bring up. If they're able to peel off Manchin on some of the amendments, that could drastically change the legislation. From the Health Desk 30 to 40 percent The percentage of American adults newly eligible for Covid booster shots after the Food and Drug Administration cleared both the Moderna and Pfizer-BioNTech Covid-19 booster shots for all adults today. The CDC's independent vaccine advisers endorsed the decision today, unanimously recommending allowing all adults to get the shots. CDC Director Rochelle Walensky quickly endorsed the recommendation following the 11-0 vote, allowing millions more Americans to access booster doses as the holidays approach.   A message from eBay:   What'd I Miss? — Rittenhouse not guilty in Kenosha murder case: A Wisconsin jury acquitted Kyle Rittenhouse today, siding with the teenager's claims that he acted in self-defense during the chaotic night in Kenosha last summer that left two men shot dead and a third wounded. The case quickly became a political flashpoint during the 2020 presidential campaign and months of protests against police brutality and racial injustice in the wake of the murder of George Floyd by then-Minneapolis police officer Derek Chauvin. — Judge raises doubts about obstruction charges in Jan. 6 cases: A federal judge aired grave doubts today about a key charge the Justice Department is relying on in cases against hundreds of Jan. 6 Capitol riot defendants, raising the prospect of legal turmoil in more than a third of the prosecutions stemming from the violent attack. During a two-hour hearing, U.S. District Court Judge Dabney Friedrich contended that the government is applying a particular obstruction offense in a way that "seems really far afield" from what Congress intended. — White House released Biden's health summary: The report described an active president who is "fit for duty." Biden's health report, issued just a day before his 79th birthday, noted two changes since his last screening was released in 2019: more throat clearing and a change in gait. Both notable addendums can be explained by relatively minor issues.   STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president's ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today.     AROUND THE WORLD AFTER A 30-YEAR WAR — The leaders of Azerbaijan and Armenia will meet in Brussels next month on the sidelines of the EU's Eastern Partnership summit, European Council President Charles Michel announced today. Michel's announcement of the meeting between Azerbaijan President Ilham Aliyev and Armenian Prime Minister Nikol Pashinyan came just days after renewed military clashes between the longtime enemies, David M. Herszenhorn writes. Armenian officials said at least 15 of their soldiers had died in that fighting. A renewed truce was reached Tuesday. A roughly 30-year conflict between Azerbaijan and Armenia over the disputed territory of Nagorno-Karabakh was settled last year after Armenia conceded defeat and surrendered. The capitulation capped a month-long skirmish in which Azerbaijan, backed by Turkey, reclaimed territory long occupied by Armenians who viewed it as the independent territory of Artsakh. But a post-war truce and border agreement, negotiated by Russia and signed this past January in Moscow, has proven fragile. If the meeting between Aliyev and Pashinyan goes forward on the margins of the Dec. 15 summit, Michel will have reclaimed a role for the EU in the long conflict, and potentially upstaged Russian President Vladimir Putin — if only for now. Russian officials have been trying unsuccessfully for weeks to arrange a meeting between the two leaders. Nightly Number 85 minutes The amount of time Vice President Kamala Harris assumed the duties of the presidency today while Biden was under anesthesia for a colonoscopy. President Joe Biden embraces Vice President Kamala Harris as he speaks before signing the $1.2 trillion bipartisan infrastructure bill into law during a ceremony on the South Lawn of the White House in Washington, D.C., on Monday, Nov. 15, 2021. | Susan Walsh/AP Photo Parting Words CONSTITUTION MARKET CLOSES AT ALL-TIME HIGH — Hedge fund billionaire and GOP megadonor Ken Griffin secured a copy of the U.S. Constitution this week with a $43.2 million auction bid that beat out thousands of crypto users who banded together to acquire the extremely rare first-run printing, Zachary Warmbrodt writes. The Citadel CEO, who is also an art collector, plans to loan the document to the Crystal Bridges Museum of American Art in Bentonville, Ark., a free museum founded by philanthropist and Walmart heiress Alice Walton. Citadel confirmed that Griffin made the winning bid at Thursday's Sotheby's auction. Sotheby's said it set a world auction record for any book, manuscript, historical document or printed text. The document was previously in private hands, having last been auctioned in 1988 for $165,000. The auction drew widespread attention this week because of an attempt by the crypto coalition ConstitutionDAO to crowdfund a winning bid. The 17,437 donors coalesced using a decentralized autonomous organization — a kind of computer protocol that has emerged from the digital currency boom. They also had said they would seek a partner to publicly display the document. Griffin's triumph over the group was noteworthy because he has been a vocal skeptic of the utility and value of cryptocurrencies. Did someone forward this email to you? Sign up here. A message from eBay: Americans throughout the country turn to online marketplaces to sell used personal items to make ends meet and keep things out of landfills. A new law passed earlier this year will require millions of them to receive confusing and burdensome tax forms for their sales online, even when they don't owe taxes because they're selling used goods. eBay believes the new low reporting threshold will cause confusion and over-reporting of non-taxable income for millions of Americans already struggling as a result of the pandemic. Congress should protect consumers and increase the reporting threshold for platforms enabling consumer sales of goods. Learn more about eBay's position on raising the 1099-K threshold and lifting the burden on Americans.     Follow us on Twitter Chris Suellentrop @suellentrop Tyler Weyant @tweyant Renuka Rayasam @renurayasam Myah Ward @myahward   Follow us

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