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Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy. | | | | |  | | By Sam Sutton , Kate Davidson and Aubree Eliza Weaver | Editor’s note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our s each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro . Senate Majority Leader Chuck Schumer and Sen. Joe Manchin named their bill the Inflation Reduction Act of 2022. Will it reduce inflation? Maybe, but only a little. And certainly not in 2022. “It's disinflationary, but the disinflationary effects are small – very small – particularly in the immediate future,” said Moody’s Analytics Chief Economist Mark Zandi, whose research has previously been touted by the White House. A Moody's report published on Monday found that the fast-tracked climate, health care and tax bill would cut the Consumer Price Index by less than one-twentieth of a percentage point annually over the next 10 years, with the bulk of those declines coming in the back half of the decade. That assessment lands on the heels of another report from the Penn Wharton Budget Model — whose research is said to be favored by Manchin (D-W.Va.) — which characterized the bill’s long-term inflationary impact as being “ statistically indistinguishable from zero .” With the clock ticking down to the Senate’s summer recess — and Democrats facing intense pressure over skyrocketing costs on everything from food to housing — the research from Moody’s and PWBM won’t offer much ammo to Schumer and Manchin as they push to bring key elements of President Joe Biden’s agenda to the floor before the midterms. Republicans have already started to hammer the West Virginia Democrat over the PWBM’s findings — which also calculated that the bill would reduce the deficit by about $248 billion. Short of creating fast-acting incentives for housing development — particularly rental properties — Zandi said there was little that the Democrats could have proposed to immediately bring down inflation. “Combating inflation, particularly in the near term, is on the shoulders of the Federal Reserve,” Zandi said. “Lawmakers have very few tools at their disposal to try to help on this.” Even so, Zandi said the Inflation Reduction Act includes several proposals that would likely generate meaningful savings for both the federal government and low-to-moderate-income households over the next 10 years. In particular, the bill’s plan to allow Medicare to negotiate the price of certain prescription drugs and enact other drug reforms would reduce the deficit by roughly $290 billion and boost the financial wherewithal of millions of seniors, according to Moody’s. A reduction in CO2 emissions, which Moody’s projects would amount to roughly a 30 percent decline compared to if there are no policy changes, would also generate positive economic outcomes. “It really moves the dial on climate risk and on the ultimate economic loss related to that risk,” Zandi said. “At the end of the day, that may be the single most important aspect of this legislation.” IT’S TUESDAY — Send your questions, plus any tips or story ideas, to kdavidson@politico.com , ssutton@politico.com or aweaver@politico.com .
| | | | 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 . | | | | | | | | Job openings and labor turnover survey released at 10 a.m. … Senate Banking hearing on renters in today’s housing market at 10 a.m. … Senate Small Business committee hearing on the SBA’s Covid disaster loan program at 10 a.m. … SEC Chair Gary Gensler speaks at the agency’s Small Business Capital Formation Advisory Committee meeting at 10 a.m. … Cleveland Fed President Loretta Mester participates in a Washington Post Live virtual discussion at 1 p.m. … St. Louis Fed President James Bullard speaks at 6: 45 p.m. SPEAKING OF HOUSING — POLITICO's Katy O'Donnell: President Joe Biden’s job-approval ratings have sunk across the board, but no group has abandoned him more strikingly than the young adults who helped propel him to the White House. While these voters are frustrated by Washington’s slow action on climate change and student debt, there's another, often overlooked reason for their growing pessimism: The surging cost of housing has hit them harder than anyone else . GRANULAR IMPROVEMENTS — The first shipment of grain departed Ukraine on Monday under a deal with Russia that is set to unlock the European breadbasket’s export channels. While the deal could prove tenuous – Russia bombed Odessa only a day after the U.N. and Turkey brokered the agreement – it could have significant bearing on sky-high food prices. From POLITICO’s Eddy Wax and Sarah Anne Aarup: “This won’t fix the food crisis, but it will certainly help if Ukraine starts pumping out grain again. World hunger has been growing at an alarming rate, and the Ukraine war will likely make it worse … More grain in the market could also mean stable or even lower prices globally .” RESEARCH ROOM — For poor children, living in an area where people have more friendships that cut across class lines significantly increases how much they earn in adulthood, according to an expansive new study based on billions of social media connections, write NYT’s Claire Cain Miller, Josh Katz, Francesca Paris and Aatish Bhatia. “The new analysis — the biggest of its kind — found the degree to which the rich and poor were connected explained why a neighborhood’s children did better later in life, more than any other factor.”
| | | PONZI — The SEC announced a new crypto enforcement action against Forsage, which the agency described as “ a textbook pyramid and Ponzi scheme .” Forsage — whose founders were last known to be living in Russia, the Republic of Georgia and Indonesia — allegedly raised more than $300 million by marketing smart contracts through its website and social media platforms. “Forsage is a fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors," Carolyn Welshhans, acting chief of the SEC’s Crypto Assets and Cyber Unit, said in a statement. "Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains." BLOW THE WHISTLE — Bloomberg’s Alex Nguyen: “[New York] Attorney General Letitia James issued an alert on Monday calling for people to contact her office’s Investor Protection Bureau if they believe they have been deceived, or found themselves unable to access their accounts or investments."
| | | WISHFUL THINKING WON’T HELP THE FED BEAT INFLATION — Former New York Fed President Bill Dudley knocks down expectations of a Fed pivot in a new Bloomberg Opinion piece: “Investors have lately become strangely optimistic that the Federal Reserve won’t have to tighten monetary policy much further , bidding up stocks and bonds amid hopes that the Federal Reserve will soon get inflation under control. This wishful thinking is both unfounded and counterproductive.”
| | | BUYBACKS — Stakeholder capitalism was supposed to encourage long-term corporate value by taking the needs of workers, the community and society into account. Buybacks direct windfalls to wealthy shareholders ( and yes, nearly all of them are wealthy ) and seem counter to that philosophy. Now policymakers are asking a question: When multiple stakeholders — employees and shareholders — stand to benefit, who takes precedence? On Thursday, the House passed the CHIPS Act, a $280 billion measure aimed at boosting U.S. competitiveness. Included was a measure that bans companies from using the bill’s funding to execute buybacks. The provision's impact likely will be minimal, but it's a sign of how a once-obscure financial tool has become a mainstream political talking point. When critics labeled CHIPS corporate welfare, the Biden administration pointed to the anti-buyback provision. Even so, in any debate over how to put money to its highest, best use, there’s no one right answer. Trapping excess capital inside a corporation can make big powerful companies even more big and powerful. Boosting the pay of low-wage workers has been shown to have big economic benefits. Sending money to shareholders can help retirees and small business owners. “It’s not a black-and-white issue,” said Tim Doyle, a senior policy advisor to the Bipartisan Policy Center and former Republican congressional aide. “At some point you have to rely on the board and management to be making the right economic decisions.” — POLITICO's Lorraine Woellert DOLLAR STORES — WSJ’s Rachel Wolfe: “ Average spending on grocery products at discount chains increased 71% from October 2021 to June 2022, according to analytics firm InMarket. Over that time period, spending on the same items in grocery stores decreased by 5%. Many large consumer brands—including Walmart and Unilever—attest that their prices aren’t going down anytime soon.” GOVERNMENT WORKERS FEEL INFLATION’S PINCH AS WAGES LAG — WaPo’s Lauren Kaori Gurley: “Government workers — teachers, firefighters, sanitation workers, bus drivers, city government employees — who make up more than 15 percent of the U.S. workforce have seen their wages lag significantly behind those employed by private industry over the past year.”
| | | FinCEN Associate Director of Enforcement and Compliance Alessio Evangelista has left the agency to become a litigation partner at Skadden. The law firm said Evangelista will be advising banks and investment management companies as well fintech businesses and digital asset startups on anti-money laundering investigations, enforcement and compliance matters.
| | | Credit Suisse Group AG handed out more than $300 million in a single month to retain top bankers spooked by years of scandals , losses and an ongoing leadership shakeup. — Bloomberg’s Myriam Balezou Oil prices dropped on Monday as weak manufacturing data from China and Japan weighed on the demand outlook while investors braced for this week's meeting of officials from OPEC and other top crude producers on supply adjustments. – Reuters’s Ahmad Ghaddar [will recheck Brent Crude before EOD] Hedge funds have fresh ammunition to push back against detractors who have long criticized their hefty fees . The firms that charge the most — often the industry’s biggest names — tend to produce better returns over time than less expensive competitors. — Bloomberg’s Hema Parmar
| | | 9:30 a.m.: The Center for Global Development holds a virtual discussion on “Where is the Money for Women’s Economic Empowerment?” 10 a.m.: The Senate Small Business and Entrepreneurship Committee holds a hearing on “Oversight of SBA’s Covid Economic Injury Disaster Loan Program.” 10 a.m.: The Senate Banking, Housing and Urban Affairs Committee holds a hearing on “The Rent Eats First: How Renters and Communities are Impacted by Today’s Housing Market.” 1 p.m.: Cleveland Federal Reserve President Loretta Mester speaks at a Washington Post Live discussion on the Fed’s plan to “tamp down on inflation and the concerns that it could induce a recession.” Did we miss anything? Let Morning Money know about future events: financecalendar@politicopro.com .
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