📰✍️ Introducing: The Inflation Reduction Act
Happy Hump Day everyone,
The inflation report came in at 8.5% this morning! This sounds high but was lower than expected. The biggest reason for the drop was that gas prices are now -7.7% from the previous month. The market is currently reacting quite positively to this news, but we’re not out of the woods yet. However, it is a good sign that perhaps inflation peaked in June and is now slowly cooling off.
I hope you enjoy this week’s Hump Days!
- Humphrey, Rickie & Tim
In the Markets
Featured Story
Hundreds of billions of dollars were voted on by the Senate in a bill that passed on climate change and healthcare programs. The bill dubbed the Inflation Reduction Act, barely passed the Senate on Sunday with Vice President Kamala Harris offering the tie breaking vote to make it 51-50. After a year of frustrated efforts to advance President Biden’s agenda, Democrats unified around certain elements the agenda to pass this bill. Let’s dive further.
The bill includes tax incentives for reducing carbon emissions, allots ~$80B to the Internal Revenue Service, extends subsidies for health insurance under the Affordable Care Act and seeks to allow Medicare to negotiate the price of select prescription drugs such as capping the cost of insulin at $35 a month and mandating free vaccines. What’s more, along with a new 15% corporate minimum tax, it creates a 1% tax on company stock buybacks. On the climate side, the bill aims to incentivize channeling billions of dollars to wind, solar and battery developments. Consumers could also receive subsidies for energy efficient products, as well as the extension of a $7,500 tax credit to buy electric vehicles.
Democrats claim earlier versions of the bill, prior to some last-minute changes, would raise roughly $740B in revenue and spend roughly $430B of that over a decade. Congress’s non-partisan scorekeeper could not produce a final analysis of the bill’s budget impact so those figures could be subject to change. President Biden, whose approval rating has been hurt by rising inflation, praised the passage of the bill saying it fulfills his pledge to lower costs for families and not raise taxes on households making <$400,000 a year.
Republicans did pose concerns however, acknowledging that the proposed taxes would not raise taxes directly on middle-class households but higher business taxes could add costs elsewhere in the form of smaller profits for shareholders or lower wages paid to workers. They also argued that the climate and tax package would do nothing to cool inflation and would hurt the economy.
The bill will still need to clear the narrowly Democratic House in a vote scheduled for Friday. Although, the bill is likely to be approved with the backing of Speaker Nancy Pelosi (D., Calif.) and progressive caucus leader Pramila Jayapal (D., Wash.).
Weekly News Roundup
4.2M People Quit Jobs in June Despite Recession Worries (CNBC)
The labor market posted 10.7M new job openings in June, down from 11.3M in May. Although, despite the drop in June, there are roughly 1.8 open jobs for every person who is unemployed. Interestingly, 4.2M people voluntarily quit their jobs in the face of recession concerns but data suggests they may be hired into jobs quickly as the national unemployment rate held steady.
RH: Data hasn’t come out suggesting the age of the people who were quitting but time’s are changing. Young people have been conditioned by the job market that the grass really is greener on the other side. More needs to be done on retaining employees if companies want continuity down the line.
HY: Even crazier is that right now we have the largest amount of people ever that are working two full-time jobs.
Senate Passes Democrats’ Climate, Healthcare and Tax Bill (WSJ)
The senate passed a bill spending hundred of billions of dollars on climate and healthcare programs while raising taxes on large, profitable companies. Vice President Kamala Harris put in the tie breaking vote to pass the legislation 51-50. The bill offers tax incentives for reducing carbon emissions, seeks to allow Medicare to negotiate the price of some prescription drugs, and extends subsidies for health insurance under the Affordable Care Act.
FBI Searches Trump’s Florida Home Mar-a-Lago in Document Investigation (WSJ)
Donald Trump’s Mar-a-Lago home in Palm Beach, Florida was searched by FBI agents as part of an investigation by the Justice Department into aspects of Trump’s final days in office and his handling of classified information. Officials can face up to five years in prison for removing classified materials to an unauthorized location. This investigation is separate from the Jan. 6 investigation.
RH: Trump is currently in the middle of multiple investigations and lawsuits surrounding his time in office and his business practices, further hurting his case for a 2024 re-election.
HY: Speaking of the 2024 election, Trump is currently the favorite to win it at 20.55% according to the Presidential Betting Odds by Action Network.
Chart of the Week
We got encouraging news today that inflation is slowly coming down. The Fed still has to raise rates and recession risks are still quite high, however.