US Stocks Prefer Big Bad Wolf Of Recession To Goldilocks
By Mark Cudmore, Bloomberg Markets Live reporter and analyst
US stocks are trading positively since Friday’s US data due to raised hopes for rate cuts, not on some Goldilocks narrative. It’s important the driver is clear as there are different implications.
The NFP jobs data was indeed a so-called Goldilocks report: an increase in the labor force and lots of new jobs added, particularly in the private sector. Wage inflation not only fell sharply, but with the bonus of revisions lower to prior wage increases. For those who believe that the US can bring inflation back down to target without a hard landing, it was about as good as you could get. It suggests that the economy can cope with the policy-tightening seen, so it should have resulted in curve-steepening and equities getting a bid. And that’s exactly what we got… BOOM! All makes sense.
But wait… We then got the big bad wolf of the ISM report. It was horrible data. The headline came in at 49.6 (recession territory) versus 55 forecast, and 56.6 prior. The new orders component was even more traumatic at 45.2 versus 56 prior. Not helped by the fact that the more backward-looking factory orders data released at the same time missed expectations and revised the prior figures lower too. Oh, and the final durable good print was slightly softer, as well. Recession alarm bells blaring loudly. The bit of the ISM report that stayed very high was the prices paid component — uh-oh, stagflation sounds?
So you’d think that stocks would hate that? No! Quite to the contrary, S&P 500 e-minis only rallied 0.6% on the Goldilocks NFP jobs data, but then managed a further 1.8% before Friday’s close on the stagflationary ISM report, while the dollar slumped.
What gives? Well, US 2-year yields collapsed by a further 16 basis points after the ISM report, and it was that hope for easier monetary policy that fueled stocks. Which is fine in isolation, but does undermine any suggestion that Friday’s moves were about a Goldilocks scenario.
It also means that, if you’re wondering what would upset stocks most in the short-term, it’s anything that undermines the prospect of easier policy, more so than data that confirms a US recession. Personally, I think they probably should fear a recession too, but that’s a story for another month.
Controvery Swirls Over Mystery ‘3-Page Addendum’ To House Rules Package
Update (1445ET): There’s word of a ‘much-fabled 3-page House rules addendum’ circulating throughout certain GOP offices in which McCarthy reportedly agrees on everything from the 20-holdout demands on everything from strategy on the debt ceiling, to committee assignments.
Via Axios‘ Andrew Solender:
At least one GOP office apparently has the much-fabled 3-page House rules addendum.
“We’re taking a look at it … we’re just going through it,” Rep. Ken Calvert, a Steering Committee member, tells @Axios
Asked if members have received a copy: “I don’t know if everybody has.”
there’s also a secret three-page addendum that McCarthy and his allies hashed out during several days of grueling negotiations with the House Freedom Caucus. This pact includes the most controversial concessions McCarthy made in order to become speaker – three seats on the Rules Committee for conservatives, freezing spending at FY2022 levels, a debt-ceiling strategy, coveted committee assignments and more.
* * *
How that Rep. Kevin McCarthy (R-CA) has been elected Speaker of the House, his first order of business is presiding over the Republican rules package for the 118th Congress.
That said, in order to finally win the gavel after 14 failed votes, McCarthy had to make massive concessions to a group of 20 holdout Republicans, including the ability for just one member to vote to vacate the speaker’s chair.
In a Sunday night tweet, Rep. Matt Gaetz (R-FL) tweeted “This is what we’ve been fighting for,” in relation to seven bills that the holdouts were able to include in the rules package, which is expected to be put to a vote on Monday.
1) A bill to cut some of the additional funding that was made available to the Internal Revenue Service (IRS).
2) A bill to authorize the secretary of Homeland Security to turn away people crossing the border illegally.
3) A bill that includes prohibiting the secretary of energy from sending petroleum products from the Strategic Petroleum Reserve to China.
4) A tough-on-crime bill that includes amending the Omnibus Crime Control and Safe Streets Act to direct the district attorney and prosecutor’s office to report to the attorney general.
5) A bill to require a national instant crime background check system to notify U.S. Immigration and Customs Enforcement and other law enforcement agencies when information surfaces that a person present in the United States illegally may be trying to obtain a firearm.
6) A bill to prohibit taxpayer funded abortions.
7) A bill to amend Title 18, United States Code, to prohibit a health care practitioner from failing to exercise the proper degree of care in case of a child who survives an abortion or attempted abortion. –Epoch Times
“When we come back, our very first bill will repeal the funding for 87,000 new IRS agents,” McCarthy said on Jan. 7, shortly after being elected Speaker, adding that Republicans “believe government should be to help you, not go after you.”
In a recent letter, House Majority Leader Steve Scalise (R-LA), said that legislation is “ready to go” which will be brought to the House floor over the next two weeks. According to the Epoch Times, the House rules package largely mirrors Scalise’s list.
According to Scalise’s letter, the first bill, dubbed the Family and Small Business Taxpayer Protection Act (pdf), aims to revoke some of the additional IRS funding that Democrats passed as part of their Inflation Reduction Act that the agency plans to use for tax enforcement.
With the first bill, Republicans are targeting what Scalise said was “tens of billions of dollars allocated to the IRS for 87,000 new IRS agents.” That figure is in dispute, with the Biden administration saying much of the money would go to non-enforcement staff like customer service.
Another bill Scalise put in the schedule is the Strategic Production Response Act (pdf), which would prohibit non-emergency drawdowns of the Strategic Petroleum Reserve without a parallel plan to boost energy production on federal lands.
Republicans have been highly critical of President Joe Biden for ordering the release of oil from the strategic reserve, arguing that it was a ploy to win votes ahead of the midterms by trying to lower pump prices.
Biden, for his part, has insisted the release was meant to stabilize global oil markets amid Russia’s invasion of Ukraine and the ensuing energy price shock, as well as trying to lower prices for Americans amid decades-high inflation, of which a major component is the cost of energy.
Scalise has scheduled another related bill, called Protecting America’s Strategic Petroleum Reserve from China Act (pdf), which would restrict the energy secretary from selling oil from the strategic reserve to China.
Another bill is the Prosecutors Need to Prosecute Act (pdf), which would allow the public to see how many cases prosecutors are declining to prosecute, along with the number of criminals released onto the streets and the number of offenses committed by career criminals.
On border security, Scalise put forward a bill called the Border Safety and Security Act (pdf), which would give the Department of Homeland Security (DHS) the power to turn away people crossing the border illegally in order to gain “operational control” of the border.
Another bill, called the Illegal Alien NICS Alert Act (pdf) would require the National Instant Criminal Background Check system (NICS) to notify U.S. Immigration and Customs Enforcement and relevant local law enforcement if someone trying to buy a firearm is an illegal immigrant.
One bill, called the No Taxpayer Funding for Abortion and Abortion Insurance Full Disclosure Act (pdf), seeks to make the Hyde Amendment permanent and prohibit federal funding for abortions as well as funding for any insurance plans that include on-demand abortion.
Another bill, called Born-Alive Abortion Survivors Protection Act (pdf), would ensure that infants born alive after a failed abortion would receive the same legal protection and health care as a newborn.
McCarthy’s Concessions
Besides the bills, McCarthy had to make numerous concessions to win over the holdout Republicans, including giving the Freedom Caucus members seats on the powerful House Rules Committee, taking a hard line on the debt limit, and reducing spending.
While it normally takes 218 votes—a majority of the House—to become speaker, that threshold can be reduced if members are absent or merely vote present.
It’s precisely this maneuver that gave McCarthy his coveted win, as six Republicans voted “present” instead of “yea” in the final vote: Reps. Andy Biggs (R-Ariz.), Lauren Boebert (R-Colo.), Eli Crane (R-Ariz.), Matt Gaetz (R-Fla.), Bob Good (R-Va.), and Matt Rosendale (R-Mont.).
In a 20-minute speech following the vote, McCarthy laid out his priorities for the 118th Congress, including securing the southern border, combating “woke” indoctrination in American schools, and unleashing domestic energy production.
“We must get America back on track,” he said. “We’ll hold the swamp accountable.”
Used-Car Prices Record “Largest Annualized Decline In Series’ History”
Cox Automotive reported that its Manheim Used Vehicle Value Index (MUVVI), which tracks the auction prices of used cars, plunged the most on record in December from a year ago as the auto market cools.
MUVVI increased 0.8% in December from November and rose slightly to 219.3, but was down 14.9% from a year ago. “This was the largest annualized decline in the series’ history,” Manheim wrote in a statement.
Despite the most significant yearly decline on record, used car prices at auction houses remain 14% below record highs.
The Manheim Used Vehicle Value Index was down 14.9% from a year ago. This was the largest annualized decline in the series’ history. The non-adjusted price change in December was a decline of 1.9% compared to November pic.twitter.com/cB3X1N8jAY
Manheim wrote that all eight segments of the used car market recorded lower seasonally adjusted prices year over year in December. They noted, “vans had the smallest decline at 12.0%, followed by pickups, sports cars, and compact cars at 12.2%, 12.6%, and 13.5%, respectively.”
Cox chief economist Jonathan Smoke recently explained, “new inventory is finally starting to build, and that’s producing momentum in new retail sales, but that momentum appears to be at the expense of used retail. Especially it’s the traditionally used car buyer that’s most impacted by payment affordability.”
Cooling of the used car market comes as the interest rate paid for used car loans hits the highest rate in more than a decade, sparking a price affordability crisis for buyers.
During the virus pandemic, Americans used the most debt to fund record car prices — fast-forwarding to today, used car prices have dropped, and the economy is weakening, which might signal recession. We outlined last month the US could be on the cusp of a crushing auto loan crisis, unleashing a wave of repossessions and loan defaults.
The good news is that runaway inflation in 2021 and 2022 is cooling. Remember when soaring car prices were the leading indicator of red-hot inflation prints? Now the opposite is happening.
Rep. Mike Rogers (R-Ala.) offered his regrets to Rep. Matt Gaetz (R-Fla.) on Jan. 8 for a tense confrontation during the heated House speaker vote on Friday evening.
“I regret that I briefly lost my temper on the House Floor Friday evening and appreciate Matt’s kind understanding,” Roger, the incoming chairman of the House Armed Services Committee, wrote via Twitter on Sunday.
“@RepMattGaetz and I have a long and productive working relationship, that I am sure will continue,” his post reads.
It came after Gaetz said that the Alabama congressman “has my forgiveness” in an interview, adding that he looks forward to their future collaboration.
“Of course in a late night moment of high drama, people can have moments of frustration,” Gaetz told Fox News earlier that day. “Mike Rogers and I have a six-year productive, working relationship. We’re going to work together wonderfully going forward.”
“I don’t think there should be any punishment or reprisal just because he had an animated moment,” Gaetz added. “He has my forgiveness.”
.@RepMattGaetz and I have a long and productive working relationship, that I am sure will continue. I regret that I briefly lost my temper on the House Floor Friday evening and appreciate Matt’s kind understanding. https://t.co/8GmbJHO3cK
The confrontation occurred shortly after the 14th failed vote, during which Gaetz, one of the remaining GOP holdouts, switched his vote to “present.”
Rogers, a supporter of Rep. Kevin McCarthy (R-Calif.), came over to Gaetz before jabbing his finger at the leading rebel. Videos and photos captured show Rogers was physically restrained from behind and pulled back by Rep. Richard Hudson (R-N.C.).
“I was just exasperated that Matt was treating McCarthy so badly,” Rogers told the New York Post on Saturday, saying that he was about to turn away when Hudson grabbed him.
Rogers added that the whole thing was “really a big nothing burger.”
During the next and final round of voting, Gaetz along with five other holdouts voted “present,” allowing McCarthy to secure the speakership by a 216-212 vote.
Not ‘About Me or Kevin’
Like other GOP holdouts, Gaetz said his opposition to McCarthy was nothing personal.
“[T]his has never been about me or Kevin McCarthy. It’s about the American people. And the American people want to know that the rules of the House of Representatives would never allow something like this terrible, horrendous omnibus bill to ever pass ever again,” the Florida Republican told Fox News on Friday.
“It’s been about draining the swamp; making this a more honest, transparent, open place,” Gaetz said.
The lawmaker expressed his appreciation for McCarthy’s good faith to meet the demands that the 20 conservative holdouts pushed for. He said: “We’re at the stage right now where I’m running out of stuff to ask for—read the bills, have a balanced budget, have a broader plan. Kevin McCarthy is agreeing to all these things.”
McCarthy made numerous concessions to rebels who blamed him for not being conservative or tough enough to counter President Joe Biden’s agenda, including lowering the threshold for a lawmaker to issue a motion to vacate to allow members to oust the House speaker, allowing a vote to impose term limits on members of the chamber, and restricting a debt limit increase.
Following the final vote, McCarthy wrote on Twitter, “I hope one thing is clear after this week: I will never give up. And I will never give up for you, the American people.”
I hope one thing is clear after this week: I will never give up. And I will never give up for you, the American people. https://t.co/uLqPKa1maZ
El Paso Initiated Massive Migrant Cleanup To Hide Crisis During Biden Border Visit
The two-year-long White House coverup of the ongoing illegal immigration crisis is perhaps one of the biggest political frauds of the decade. After Joe Biden recently dared to blame Republicans for the chaos at the southern border rather than his own reckless amnesty policies and his attempts to end Title 42, he embarked on his very first visit to the region since entering the Oval Office. His primary destination? El Paso.
El Paso has become an epicenter of illegal immigration in the past few months, likely because it is a Democrat run border city which engages in sanctuary policies. The El Paso Mayor, Oscar Leeser, kept the door wide open for supposed amnesty seekers until the city ran out of money for welfare provisions and finally declared an emergency despite pressure from the White House not to.
Biden has long ignored the state of affairs on the border, forcing conservative governors to bus thousands of migrants to Democrat cities like New York and Washington DC in order to make a point. Though the White House has pretended to be oblivious to the plight of border states, it is becoming clear that the administration has been well aware of the crisis for some time. In preparation for Biden’s visit, El Paso has undergone a miraculous transformation from humanitarian disaster zone to squeaky clean and secure.
Below, we can see before and after examples of how much can be accomplished to stop illegal immigration when Joe Biden’s image is on the line – El Paso has become a completely different city in the span of two weeks:
The city streets have been cleared of most migrants and their makeshift sidewalk beds.
A border wall has been quickly built from cargo containers and barbed wire to deter migrant caravans. Local reports note that the new wall has been very effective in stopping the flow of illegals. Also, national guard and border patrol units have been deployed in a show of force.
The expedited removal of illegal immigrants in preparation for Biden’s visit showcases the reality that the border situation can be dealt with and that it would be far easier than the White House claims. The only rational conclusion that can be made at this stage is that Biden simply doesn’t want to secure the border. Biden walked the existing wall with border agents before quickly jetting to Mexico City, and briefly met with Texas Governor Greg Abbott, who only received notice of Biden’s plans a day before his arrival.
Biden continues to claim that he has been working to solve the illegal immigration issue “from day one” and blames congress for refusing to “take action.” In reality, illegal immigrant encounters plummeted after the enforcement of Title 42 in 2020, and then exploded again right after Biden took office. Biden’s insistence on amnesty benefits and far easier citizenship for illegals has encouraged an endless rush of over 5 million migrants in the past two years. The sterilization of El Paso before his visit suggests that Biden has no intention of ever being honest about the terrible state of affairs and will maintain his open border policies regardless.
NY Fed Survey Finds 1-Year Inflation Expectations Drop To 5.0%, Lowest Since July 2021
With long-term inflation expectations (those 3-Years ahead or more) peaking more than a year ago, and even shorter inflation expectations – at least according to the NY Fed Survey of consumers – now sliding after hitting a record high 6.8% in June and dropping alongside 2Y breakevens which recently hit the lowest level in 2 years, wiping out two years of gains…
… it is hardly a surprise that the latest just released NY Fed survey showed a continued drop in inflation expectations, as median one-, three-year-ahead inflation expectations decreased to 4.99% from 5.23% – one month after plunging more than 0.7% from October’s 5.94% print – the lowest since July 2021, while 3-Years dipped to 2.99% from 3.00%; 5-year inflation expectations, which the NY Fed tracks only periodically, posted a modest increase from 2.32% to 2.42%. In August, this ad hoc series hit its lowest level yet, dropping to just 2.0%.
Median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—was unchanged at the short-term horizon and decreased at the medium-term horizon to the lowest level since April 2021.
Separately, the median home price growth expectation increased fractionally to 1.3% after dropping to 1.0% from 2.0%, the lowest reading since May 2020 a decrease which was “driven by those in the South census region.” Despite this increase, home price growth expectations remain subdued relative to their pre-pandemic levels. Also, a 1% increase which is laughable when 30Y mortgages are about 5-6%…
… while labor market expectations paradoxically remaining very strong (apparently no tech workers were surveyed)…
… although a sliver of concern about the labor market could be found in the survey’s job separation expectations, which rose to 12.6%, the highest since Nov 2021, even as the probability of voluntarily leaving one’s job was unchanged.
Yet nowhere was the self-delusion more evident than in household income growth expectations, which jumped to a new record high of 4.6% from 4.5%. Not surprisingly, the increase was driven exclusively by respondents with no more than a high school education.
On the other hand, while households expect a spike in income, there are less sanguine about spending, and median household spending growth expectations fell sharply to 5.9% from 6.9% in November: “The decline was broad based across age and income groups .”
Remarkably, despite the worst bear market in a generation, 34.9% of respondents, modestly lower from 35.7% last month, expect stocks to rise in the next 12 months. Then again, 38.9% expected higher stock prices one year ago: that didn’t work out too well.
Looking at various prices, over the next year consumers expect gasoline prices to rise 4.1% from 4.7%; food prices to rise 7.6% (from 8.3)%; medical costs to rise 9.7% (up from 9.6%); the price of a college education to rise 9.2% (down from 9.4)%; rent prices to rise 9.6% (down modestly from 9.8%).
Here are some more findings from the report:
Inflation
Median home price growth expectations increased by 0.3 percentage point to 1.3%. The increase was driven by those in the South census region. Despite this increase, home price growth expectations remain subdued relative to their pre-pandemic levels.
Expectations about year-ahead price changes declined by 0.7 percentage point for both gas (to 4.1%) and food (to 7.6%), and 0.2 percentage point for both college education (to 9.2%) and rent (to 9.6%). The median expected change in the cost of medical care, on the other hand, rose by 0.1 percentage point (to 9.7%).
Labor Market
Median one-year-ahead expected earnings growth rose by 0.2 percentage point to 3.0% in December. The increase was most pronounced for respondents over the age of 60 and those with a high-school education or less.
Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—decreased by 1.4 percentage points to 40.8%.
The mean perceived probability of losing one’s job in the next 12 months increased by 0.9 percentage point to 12.6%, its highest reading since November 2021. Similarly, the mean probability of leaving one’s job voluntarily in the next 12 months increased by 0.7 percentage point to 19.3%. Both increases were most pronounced for respondents over the age of 60.
The mean perceived probability of finding a job (if one’s current job was lost) decreased to 57.5% from 58.2% in November.
Household Finance
The median expected growth in household income rose by 0.1 percentage point to 4.6% in December, a new series high.
Median household spending growth expectations fell sharply to 5.9% from 6.9% in November. The decline was broad based across age and income groups.
Perceptions of credit access compared to a year ago improved slightly in December, but the share of households reporting it is harder to obtain credit than one year ago remains near its series high. Similarly, expectations for future credit availability improved in December, with the share of respondents expecting it will be harder to obtain credit in the year ahead falling.
The average perceived probability of missing a minimum debt payment over the next three months fell by 0.4 percentage point to 11.4%.
The median expectation regarding a year-ahead change in taxes (at current income level) declined by 0.5 percentage point to 4.1%.
Median year-ahead expected growth in government debt was unchanged at 10.1%, its lowest reading since March 2020.
The mean perceived probability that the average interest rate on saving accounts will be higher in 12 months decreased by 0.5 percentage point to 31.9%. The decrease was more pronounced for those with a college degree or higher.
Perceptions about households’ current financial situations compared to a year ago improved in December, with the share of households reporting a worse situation compared to a year ago declining. Similarly, year-ahead expectations about households’ financial situations also improved in December.
The mean perceived probability that U.S. stock prices will be higher 12 months from now decreased by 0.8 percentage point to 34.9%.
More in the full NY Fed survey which can be found here.
Dozen Dead, Over 100,000 Without Power As California Braces For Worst ‘Atmospheric River’ Barrage Yet
A moisture conveyor belt of atmospheric rivers continues to pound storm-battered California as the latest system could be the most severe yet. Power outages plague Northern California, as a dozen people have died across the Golden State in the last two weeks after. At least 3,000 people were evacuated on Sunday.
The National Weather Service described the bomb cyclone, a hurricane-force low-pressure system, and an atmospheric river as the “most potent” yet. Forecasters said the “relentless parade” of “atmospheric rivers” will peak Monday into Tuesday.
NWS said, “two major episodes of heavy precipitation” impacting the Golden State “in quick succession,” along with “two of the more energetic and moisture-laden parade of cyclones that are aiming directly for” the West Coast.
A direct threat to life and property is expected in California on Monday as an extremely impactful and dangerous atmospheric river lashes the state. @JaneMinarWX has the latest on the forecast. pic.twitter.com/ZS2ADeBbxy
“We expect to see the worst of it still in front of us,” Gov. Gavin Newsom warned Sunday. Newsom sent a request to the Biden administration for an emergency declaration to support recovery efforts which was approved this morning.
More than 130,000 homes and businesses across California had no power on early Monday, according to PowerOutage.us – down from over 400,000 on Sunday after heavy rains and high winds toppled trees and telephone poles.
“We are in the middle of a deadly barrage of winter storms – and California is using every resource at its disposal to protect lives and limit damage,” Newsom said. He added: “We are taking the threat from these storms seriously, and want to make sure that Californians stay vigilant as more storms head our way.”
By Sunday evening, nearly 3,000 people were evacuated from Northern California, with 200 staying in shelters. At least 12 people have died from weather-related incidents across the state in the last two weeks, Newsom said.
The latest forecast shows some areas in Northern California could receive upwards of 10 inches of rain through mid-month. For high elevations, that could mean feet of snow.
Since New Year’s Eve, the state has been swamped with rain. San Francisco has picked up 11 inches of rain in the last 13 days, the most rainfall documented in almost two weeks in records dating back to 1871.
One silver lining to this deluge of rain is that it might help alleviate the state’s drought crisis.
This is also great news for some reservoirs with water levels at dangerously low levels.
And there’s more good news: “Snowpack levels in California’s mountains were at the highest level in 40 years.”
Global warming alarmists (Greta Thunberg) and progressive media outlets might have trouble explaining California’s wettest few weeks since at least the 1800s. They will blame climate change, but the climate has been changing for hundreds of millions of years. So explain that one…
Below is my column in the Hill on the new rules that came out of the negotiations leading to the election of Kevin McCarthy as the 55th Speaker of the United States. As noted below, I did not support the standoff and I do not support some of the changes that came out of the negotiations. Some of these changes were already in the works with McCarthy’s support. Moreover, some of these changes will make it more challenging for the Speaker by returning to prior rules allowing greater opportunity for amendments and floor fights. However, the holdouts were right that things have to change in Congress, particularly in allowing greater deliberation and debate over legislation. Some of these changes could achieve that worthy goal.
Here is the column:
The ascendance of Rep. Kevin McCarthy (R-Calif.) as the 55th Speaker of the United States House of Representatives may have come with all of the spontaneity of a shotgun wedding — but it finally came. McCarthy deserved better than a tortuous three-day floor fight but, then again, he is now second in line to the presidency.
Many of us have great sympathy for McCarthy, who looked like a guy caught in a feedback loop stepping on the same rake over and over again. (For the record, I opposed the floor fight, given the overwhelming support for McCarthy.) However, as is often the case in Washington, the narrative opposing these holdouts allowed for little recognition of what they achieved in McCarthy’s concessions. Indeed, the Washington Post’s Dana Milbank ran a column titled “McCarthy’s fate is irrelevant. The terrorists have already won.”
While Pelosi (D-Calif.) remains the ideal of many in the media, she tolerated little public debate or dissent. She thrilled her base with such infamous performative acts as tearing up a State of the Union Address of then-President Trump. As an all-powerful speaker, she oversaw a series of party-line votes with little opportunity for amendments or even to read some bills.
Many Republicans did not want the Pelosi model of an all-powerful speaker. For these members, the agreement with McCarthy is a type of Magna Carta.
The original Magna Carta, of course, was honored primarily in the breach by King John, who immediately asked the pope to annul it. Yet it was an impressive statement of rights.
No one is seriously suggesting that the GOP agreement is the new Magna Carta, but it is meant to redefine legislative rights — and it could have tangible improvements for the House.
I have worked in the House in various roles since I was a House leadership page in the 1970s and, much later, represented the House in litigation. I’ve watched the body become less transparent, less deliberative, with every passing year.
The Framers saw the House as a powerful forum to address factions in society, a legislative crucible where different interests could be expressed and resolved in majoritarian compromise. The legislative process can inform citizens while exposing legislative proposals to public scrutiny. But that process has been largely replaced with a series of robotic, preordained votes.
Some of these concessions may change that status quo. There are provisions I do not support — yet, we should acknowledge that these changes could also improve the process to allow greater dissent and debate.
Many in the media counter that such changes reduce the speaker’s power, as if the status quo under Pelosi was the optimal legislative model. Yet some changes would empower rank-and-file members to allow for greater diversity of views — not necessarily a bad thing.
Restoring the ‘Vacate the Chair’ rule
Nancy Pelosi consolidated her power by eliminating a rule that allowed any member to make a motion to vacate the chair, a type of legislative no-confidence vote. Pelosi eliminated the one-member rule and, instead, required a majority of either party to make such a motion. Some Republicans wanted that check on the speaker to be reinstated.
Notably, what has unnerved so many in Washington is that this speakership debate was not just largely public but also unscripted. It was an actual deliberation, conducted in front of the American people. While repellent to many, it just might be something that voters could get accustomed to.
Restoring legislative review and deliberation
The GOP holdouts sought to end massive spending bills moved forward with little time to read the legislation. They want a minimum 72-hour review period and a reduction of massive omnibus bills, to allow members and the public to better understand what is being passed.
The concessions reportedly include “open rules” on all major rules bills, such as appropriations, to allow lawmakers to offer amendments on the floor. It would restore an amendment process that was gutted in recent sessions, benefiting Democrats and Republicans alike.
They would reinstate “Calendar Wednesday,” which permits committee chairs “to bring reported bills directly to the House floor for consideration under an open amendment process, and reform the process by ensuring the same 72-hour notice that is required on all other measures is provided.”
Members want to restore the ability to reduce runaway spending and control increasing budgets and taxes. While one can disagree with some of the provisions, these members are clearly serious about gaining control over the budget. They would reinstate the “three-fifths supermajority in the House to approve any increases in tax rates” and require the Congressional Budget Office to analyze bills’ impacts on inflation.
They also would restore the “cut-as-you-go” (CUTGO) rule, which requires spending increases to be offset by equal or greater cuts in mandatory spending.
They would repeal the “Gephardt Rule,” which treats the debt limit as increased upon passage of a budget resolution. That rule allows members to avoid public debate over increasing a national debt that now stands at over $31 trillion. And they would restore the “Holman Rule” from 1876, permitting members to make targeted cuts impacting federal agency functions and salaries.
These are measures designed to control federal spending — a shock to a system that has abandoned any semblance of fiscal responsibility under both parties.
They also demand commitment to oversight in areas long ignored by Democrats, including the threats posed by China. The House Ethics Committee would have a new process allowing complaints from the public.
All of this challenges a status quo which seems inviolate to many in the media.
Yes, there are demands in the concessions that some of us do not favor. However, we should be honest about the status quo: Today’s legislative system is a mockery of the deliberative process, characterized by runaway spending, blind voting and perfunctory debates. You can dislike or denounce the holdouts while still admitting they have a point — Congress has got to change.
China Signals Surge In Oil Demand With 20% Increase In Refiner Oil Import Quotas
China issued a substantial increase in its crude imports quotas for this year, the clearest sign yet that Chinese refiners are set for a material increase in output – and a surge in demand for oil – as the nation finally moves away from its ridiculous Covid Zero policy.
On Monday, China issued a second batch of 2023 crude oil import quotas, raising the total for this year by 20% compared to the same time last year, according to Reuters and Bloomberg. According to the document from the Ministry of Commerce, 44 companies, mostly independent refiners, were given 111.82 million tonnes in import quotas in this round.
On Monday, China issued a second batch of 2023 crude oil import quotas, raising the total for this year by 20% compared to the same time last year, according to Reuters and Bloomberg. According to the document from the Ministry of Commerce, 44 companies, mostly independent refiners, were given 111.82 million tonnes in import quotas in this round.
Combined with the 20 million tonnes in 2023 quotas granted to 21 refineries in October, that takes the total for this year to 131.82 million tonnes, up from the 109.03 million tonnes issued in the first batch for 2022. The second batch of quotas for 2022 was released in June last year.
Zhejiang Petrochemical Corp, which operates China’s biggest privately-owned refinery site, was granted the largest quota of this batch at 20 million tonnes, on par with last year’s issuance, according to the documents.
Hengli Petrochemical received a quota of 14 million tonnes and Shenghong Petrochemical’s newly started 320,000 barrels-per-day refinery received 8 million tonnes. Hengli won a quota of 4.83 million tonnes in the first batch in October.
Additionally, as Reuters notes, China, the world’s biggest oil importer, allocated some 2023 quotas earlier than usual to shore up the sluggish economy by encouraging refiners to boost operations.
“The issuance is largely in line with market anticipation, and it suggests that Beijing is trying to boost economy by allowing refineries to ratchet up operation,” a Singapore-based oil trader told Reuters.
Global oil futures benchmarks Brent and WTI both gained than $2 a barrel on early Monday trading on optimism for future fuel demand as China dropped its zero-COVID restrictions and began unfettered travel across its borders.
With mortgage interest rates currently hovering around 7 percent, many lenders across the country have seen a resurgence of the mortgage buy-down – a plan that allows potential homeowners to save money on monthly mortgage payments.
The National Association of Mortgage Brokers (NAMB) describes a mortgage buy-down as a type of financing that provides lower interest rates for at least a few years of the mortgage. They typically are offered by the home seller or builder who contributes to an escrow account that subsidizes the loan during the first few years.
In a 2-1 buy-down, homebuyers can save on interest rates for the first two years of the loan, but will pay the full interest rate at the time of signing for the third year. A 3-2-1 buy-down operates under the same principle: lower payments for the first three years and full interest for the fourth year of the mortgage.
“I’ve seen this a lot in the past, and it’s a way for the consumer to be able to purchase the home they want when increased interest rates would make their mortgage payments too high,” Ernest Jones Jr, NAMB board president told The Epoch Times.
“If the buyer is willing to offer the seller more for their home, the seller will sometimes make concessions in the form of a buydown. However, the home still has to appraise for the higher amount.”
For example, if a buyer opts for a 2-1 buydown, the interest rates will be 2 percent below the current rate for the first year, and 1 percent below for the second year before rising to the regular, permanent rate. In the event that the market’s interest rates drop by the third year, the buyer always has the option to refinance.
“Before this recent turn in the economy, most of the time sellers didn’t have to make any concessions,” Jones said.
“People were just rolling in and paying above market prices. Now things are starting to change and sellers may be willing to help buyers more with the purchase, especially if they’re in position where they need to move quickly.”
Builders Are Ahead
Jones explained that seller concessions are limited by the down payment that the buyer makes. On most loans, seller concessions may be limited to 3 percent, unless the buyer puts down 10 to 20 percent.
“I think we may start to see this more with new construction,” he added.
“Builders are in a better position because they control all of the costs.”
Jones noted that a buy-down is not the same as an adjustable-rate mortgage (ARM), where the rate is fixed for a set period of time before adjusting to a variable rate.
Once the market levels out, he said, sellers may be more reluctant to give concessions.
“In areas like Phoenix, where property values shot up substantially over the past two years, the home equity grew very quickly,” said Jones.
“In cities where there has not been so much growth, and in rural areas, you’ll see less of this type of financing.”
Mo Hamideh, branch manager of Nations Lending in Scottsdale, Arizona, has been seeing a lot buy-downs lately.
“Everyone seems to be asking for them, and I think the real estate agents have been overselling it as well,” he told The Epoch Times.
“Buyers are looking for some relief with their monthly payments, but they still have to qualify at the higher payment levels.”
Hamideh and his team cover the entire Phoenix metropolitan area, where new construction is booming. Still, he said, builders have not been able to keep up with the demand for housing. As a result, rents are also on the rise, as people who can’t find the home they want are forced to opt for an apartment. “Like the rest of the nation, we still have an inventory issue here,” he said.
Much of Arizona saw a huge increase in home prices over the past two years, as people from the Northeast and coastal regions of the country looked to western and southern states for more affordable home options. “When interest rates were low, people were paying way over asking prices and waiving home inspections,” recalled Hamideh. “Now things are different, and buyers are actually able to negotiate with sellers.”
‘Just Like a Marriage’
Derek Fertig, senior vice president at Fairway Independent Mortgage Corp. in Fort Lauderdale, Florida, admits that mortgage buy-downs have their pros and cons.
“They’re just like a marriage–for better or worse,” he told The Epoch Times.
“Buyers can save money on their monthly payments for the first couple of years, but once the discounted rate period ends, their monthly payments could end up higher than what they expect. That could be a problem if their income drops since buying the home.”
Echoing Jones’s observation, Fertig said buy-downs have been around for a long time, but the rising interest rates brought them to the forefront this year. Many times, sellers will opt to help buyers with a mortgage buydown rather than reduce the price of their home. “Buyers are basically paying attention to the dollar amount of payments,” he said. “Their biggest concern is, ‘Is this house affordable for me?’ and if not, they won’t make the move.”
By offering credits toward a mortgage buy-down, he explained, the seller doesn’t need to reduce the price of the home, and the buyer is able to more easily afford the payments for the next few years.
