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| | Federal Reserve policymakers and economists say the U.S. has turned the corner on inflation. Now Vice President Kamala Harris has to sell American voters on how she’ll keep the economy afloat through its aftermath. The labor market is cooling. Banks like JPMorgan Chase and Goldman Sachs are raising their projections for a U.S. recession. More Americans are skipping credit cards and auto loan payments. Delinquency expectations — which reflect the likelihood of a missed minimum payment on outstanding debt — are at the highest levels seen since the peak of Covid-19 lockdowns. Those fissures have formed just as a growing number of economic gauges suggest the Fed’s long-running fight against inflation is near its conclusion. Wholesale prices came in softer than expected last month. The consensus estimate among top economists is that consumer prices climbed by an annualized rate of 3 percent in July — the Bureau of Labor Statistics will provide an update at 8:30 a.m. today — which would be consistent with the slowdown. Why is that a challenge for Harris?: For months, Democrats were selling voters on how their policies had helped keep the economy’s foundation intact despite soaring prices and high borrowing costs. Now, just as inflation hits a point where the Fed can consider lowering interest rates, the foundation is showing signs of strain. “I’m glad I’m not responsible for messaging about the economy,” said Jim Manley, a longtime Democratic strategist and onetime adviser to former Senate Majority Leader Harry Reid (D-Nevada). “You can’t just go out there and tell everyone everything is fine.” “If you try to jam it, they’re going to balk,” he said. Harris will instead try to finesse it in Raleigh, N.C., on Friday, where she’s expected to explain how her administration would reduce costs for middle-class families and address corporate price gouging. The speech could help solidify her surprising rise in the polls against former President Donald Trump when it comes to the economy. Voters have consistently given President Joe Biden weak marks on economic policy, but they’ve been more forgiving of Harris. Meanwhile, Trump will hold a rally in Asheville, N.C., later this afternoon where he’ll attack Harris on the “economic hardships” caused by the Biden administration’s policies, according to his campaign. The economy remains a potential vulnerability for Harris. Most Americans believe the U.S. is already in a recession — it’s not (or, more accurately, probably not). High prices still pose a major challenge for many American families, particularly with regard to essentials like housing. Even if consumer sentiment adjusts to disinflation, voter perceptions of the economy aren’t dictated by price growth. Consider this: As price growth slowed through the first half of this year, the percentage of registered voters who identified inflation as the top issue they’d consider at the ballot box fell from 14 percent to 6 percent, according to NYT/Siena surveys. Larger shares of voters said they cared most about the overall state of the economy — including the labor and stock markets — as opposed to just cost-of-living concerns. Still, all things being equal, lower inflation could make Harris’s economic messaging “simpler and cleaner,” said Tobin Marcus, a former aide who is now head of U.S. Policy and Politics at Wolfe Research. Most people will not face layoffs or wage reductions, and “it’s already too late for [an economic] softening around the margins to be a political problem,” he said. Instead, “the benefit of lower rates is more immediate.” IT’S WEDNESDAY — I’m handing off to Katy O’Donnell for tomorrow’s Morning Money. I’ll be off Thursday to watch the Oakland A’s play in person one last time. Still, send tips to ssutton@politico.com. I’ll be checking email between “Sell” chants.
| | | | A message from Wells Fargo: Wells Fargo seeks broad impact in our communities. As a company, we are focused on building a sustainable, inclusive future for all by supporting housing affordability, small business growth and financial health. We have donated nearly $2 billion to strengthen local communities over the last five years. What we say, we do. See how. | | | | | The Consumer Price Index for July is out at 8:30 a.m. … Deputy Treasury Secretary Wally Adeyemo, White House Domestic Policy Adviser Neera Tanden, director of the Office and Science and Technology Policy Arati Prabhakar, as well as Office of Digital Strategy Director and Deputy Director Christian Tom and Tericka Lambert will host a Creator Economy Conference at The White House … Trump will hold a rally in North Carolina at 4 p.m. … A child tax credit policy race — The Trump and Harris tickets have both embraced child tax credits as a winning policy issue. The difference in their approach is stark, but “regardless of who wins, we're going to have a ticket that has a history of thinking about paid leave and pro-family policy,” Adrienne Schweer, a fellow at the Bipartisan Policy Center, told Eleanor Mueller. As I said — Grocery inflation has cooled considerably, but “many consumers might not be feeling relief, though, because food prices overall have not fallen but have continued to increase, albeit at a slower rate,” The NYT’s Madeline Ngo reports. Stuck in the middle with two — There are Silicon Valley CEOs who are all-in with Trump. There are Wall Street bankers who are embracing Harris. Then there are the executives who are unhappy with either option. The WSJ’s Miriam Gottfried explores the universe of “CEOs and financiers who find themselves without a natural political home this election season.” — Minnesota Gov. Tim Walz, Harris’s running mate, is not a particularly wealthy man. That’s helping him with some voters, but others view financially independent candidates as being less likely to rely on special interest groups for funding, The WSJ’s Joe Pinsker and Veronica Dagher report. — What is Walz’s relationship with the Minnesota business community like? “It’s been tense,” Douglas Loon, president and CEO of the Minnesota Chamber of Commerce, told CNBC’s Brian Schwartz. What Team Harris is reading — WaPo’s Jeff Stein profiled the vice president’s father, Stanford University economist Donald Harris, and how his work helped provide a foundation for the modern Jamaican economy.
| | | | DON’T MISS OUR AI & TECH SUMMIT: Join POLITICO’s AI & Tech Summit for exclusive interviews and conversations with senior tech leaders, lawmakers, officials and stakeholders about where the rising energy around global competition — and the sense of potential around AI and restoring American tech knowhow — is driving tech policy and investment. REGISTER HERE. | | | | | | | | Schumer to join Crypto For Harris — Senate Majority Leader Chuck Schumer is slated to speak at a virtual event tonight organized by Harris-aligned cryptocurrency advocates, a person briefed on the event tells our Eleanor Mueller. His remarks will come as congressional Democrats continue to lobby their presidential nominee to pursue policies more favorable to digital assets. The New York Democrat said last month that he wants the Senate to pass an overhaul of crypto regulation after he voted to approve an industry-approved reversal of SEC guidance. Democratic Reps. Yadira Caraveo (Colo.), Don Davis (N.C.), Adam Schiff (Calif.), Josh Harder (Calif.) and Ritchie Torres (N.Y.) have also agreed to speak, organizer Jonathan Padilla said, as well as House candidates George Whitesides, Shomari Figures and Sam Liccardo. Also today, advocacy group Stand with Crypto tells Eleanor it will announce a bus tour through swing states like Arizona, Nevada, Michigan, Wisconsin and Philadelphia that will feature policymakers, industry representatives and musical guests. Crypto shells out for Moreno — Jasper Goodman reports that super PACs funded by the cryptocurrency industry will back industry-friendly candidates in three battleground Senate races. That includes in Ohio, where they plan to support Bernie Moreno — the GOP challenger to Senate Banking Chair Sherrod Brown.
| | Surprise, surprise — The NFIB Small Business Optimism Index rose 2.2 points in July to 93.7, its highest reading since February 2022. Still, that’s below the index’s average over the last 50 years, and “inflation remains the top business problem and reports of sales declines outnumber reports of higher sales,” according to an accompanying commentary. “It’s a bumpy road ahead.” — A separate survey from the National Association for the Self-Employed found that 52 percent of small- and micro-business owners are optimistic about their companies’ future, though a majority — 66 percent — classified economic conditions as “fair” or “poor.” First in MM: Small business lending boom — The Biden administration is pointing to data that suggests conditions for small businesses have improved. The Small Business Administration is projecting that BLS data to be released today will show that 19 million new business applications have been filed under Biden. So far this year, average monthly loan counts for Black-owned businesses are nearly triple what was averaged in fiscal 2020, according to data shared exclusively with MM. Average monthly loan volumes have also climbed by roughly double with regard to Latino-owned businesses and women-owned businesses.
| | | | A message from Wells Fargo:   | | | | | Supply side — The White House unveiled several actions to boost the supply of housing, including new funding for the construction of affordable homes and streamlined guidance for federal projects, Katy O’Donnell reports. At risk — Katy also reports that the Federal Housing Finance Agency’s watchdog found that the regulator is vulnerable to hacking. After penetrating the system, the agency’s inspector general reported, “We essentially had unfettered access to the agency’s information technology infrastructure.” A Bay Area newspaper once offered me $36k a year to cover Atherton — The median home price for Silicon Valley climbed above $2 million in the second quarter, a first for any metropolitan area, Bloomberg’s Michael Sasso reports.
| | DC moves — Major private equity firms like Kohlberg Kravis Roberts and Apollo Global Management are forging partnerships with money managers to access the $11 trillion global defined contribution market, Arleen Jacobius of Pensions & Investments reports. Those partnerships will give retail investors more access to private equity investments, but regulators are urging caution. Financial Services hopefuls hit Jackson Hole — House Financial Services gavel contenders Reps. Andy Barr (R-Ky.) and French Hill (R-Ark.) are in Jackson Hole, Wyo. this week for House Speaker Mike Johnson's retreat for heavyweight donors at the Four Seasons, two Republican aides told Eleanor.
| | | | SUBSCRIBE TO GLOBAL PLAYBOOK: Don’t miss out on POLITICO’s Global Playbook, our newsletter taking you inside pivotal discussions at the most influential gatherings in the world. Suzanne Lynch delivers the world's elite and influential moments directly to you. Stay in the global loop. SUBSCRIBE NOW. | | | | | | | | What the Swedes can tell us — Sweden has avoided some of the economic pitfalls that have befallen its European peers, Patricia Cohen reports for The NYT. In addition to 1990s reforms that made computer technology more accessible to everyday consumers, Swedish founders and investors “repeatedly pointed to the crucial role that the country’s expansive social safety net plays in encouraging entrepreneurs to experiment and take risks — despite the high taxes it takes to finance the programs.”
| | | | A message from Wells Fargo: Wells Fargo seeks broad impact in our communities. As a company, we are focused on building a sustainable, inclusive future for all by supporting housing affordability, small business growth and financial health.
In 2023, examples of our work include:
· Donated approximately $300 million to over 3,000 nonprofits in support of housing, small business, financial health, sustainability, and other community needs.
· Opened HOPE Inside centers in 15 markets supporting 57 retail branches to help empower community members to achieve their financial goals through financial education and free one-on-one coaching.
· Launched $10,000 Homebuyer Access℠ grants that will be applied toward the down payment for eligible homebuyers who currently live in or are purchasing homes in certain underserved communities.
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