Legislative Update, Monday, October 24

Policy Makers Events: 

U.S. Senator Tom Carper will be the featured Policy Makers speaker for November:

Monday, November 7, 2022, 11:30 a.m., Hilton Wilmington-Christiana, 100 Continental Drive, Newark, DE 19713. http://business.ncccc.com/events/details/policy-makers-lunch-with-senator-tom-carper-6054?calendarMonth=2022-11-01

Commerce Department Data Indicate a Global and Economic Slowdown

NOTE: For more information on the state of the U.S. and global economies, join us at the Chamber’s 11^th Annual Economic Development Luncheon, this Monday, October 31, at the Chase Center on the Riverfront which will feature Vanguard's Senior International Economist, Andrew J. Patterson, CFA, an expert in global economics and investment strategy. http://business.ncccc.com/events/details/11th-annual-economic-development-luncheon-5969?calendarMonth=2022-10-01  

Recent data released by the U.S. Department of Commerce’s Bureau of Economic Analysis (BEA) indicate both a global and domestic decline in economic activity. 

• U.S. Gross Domestic Product (GDP) contracted by 0.6 percent in the second quarter, following a 1.6 percent decline in the first quarter.
  • According to the BEA, the decrease in real GDP reflected decreases in private inventory investment, residential fixed investment, federal government spending, and state and local government spending, that were partly offset by increases in exports and consumer spending.
  • The decrease in private inventory investment was led by a decrease in retail trade (mainly “other” general merchandise stores). The decrease in residential fixed investment was led by a decrease in "other" structures (specifically real estate brokers' commissions). The decrease in federal government spending reflected a decrease in nondefense spending that was partly offset by an increase in defense spending. The decrease in nondefense spending reflected the sale of crude oil from the Strategic Petroleum Reserve, which results in a corresponding decrease in consumption expenditures. Because the oil sold by the government enters private inventories, there is no direct net effect on GDP. The decrease in state and local government spending was led by a decrease in investment in structures. The increase in imports reflected an increase in services (led by travel).
     
• Trade in International Goods and Services declined by $67.4 billion as of August.
• International Transactions declined by $251.1 billion in the second quarter.
• According to Wall Street Journal, S&P Global said its composite output index for the U.S., which includes services and manufacturing activity, fell to 47.3 in October from 49.5 in September, its second-fastest pace of decline since 2009 excluding early 2020 at the start of the Covid-19 pandemic. An index below 50 signals contracting economic activity while above 50 signals growth.
• Brisk inflation and weakening growth are creating some difficult choices for policy makers. Rising inflation is leading key central banks to consider additional interest rate increases, which will slow growth further. 

Core Inflation is at a 40-Year High

The U.S. Department of Labor’s overall consumer price index for September indicates that inflation has increased to 8.2% over September 2021, 

Core inflation, excluding energy and food, is at a 40-year high. The U.S. Department of Labor’s core consumer price index rose to 6.6% in September, the largest increase since 1982. The month-over-month increase from August was 0.6%. 

Core services pricing rose 9.9% versus September of last year. The Social Security Administration has announced a benefits increase of 8.7% for 2023. A slight inflationary effect is expected from the Social Security increase. 

Grocery prices have increased by 13% relative to September of last year. This was exacerbated by a 30.5% increase in the cost of eggs and a 24.2% increase in the price of flour and mixes. 

In September, the Federal Reserve implemented its fifth rate increase since March, by increasing the benchmark federal funds rate by 0.75% bringing it into a range between 3% and 3.5%. 

A massive expansion in the money supply arising from trillions in additional federal spending during the pandemic, strong consumer demand post-lockdown, supply chain issues, the war in Ukraine and its effect on energy supplies and grain prices, and pre-existing inflationary pressures have combined to create the most inflationary environment since the recession of 1982.

On an annualized basis, GDP has fallen by 1.1%. 

The General Election is November 8! 

The General Election will be held on Tuesday, November 8. A list of all candidates on the ballot in Delaware can be found at https://elections.delaware.gov/services/candidate/genl_fcddt_2022.shtml.. 

• Early voting is available this year. Should you choose to vote early, there are sites in all three counties. Early voting begins on Friday, October 28. Information on early voting locations and hours can be found at https://elections.delaware.gov/information/elections/votinglocations.shtml#ev-sites.
• If you choose to vote at the polls on election day, you can look up your polling place at the following link https://ivote.de.gov/VoterView.
• Information on voting by absentee ballot can be found at https://elections.delaware.gov/services/voter/absentee/index.shtml
• Contact information for the Department of Elections in Dover, and in all three counties, can be found at https://elections.delaware.gov/locations.shtml. 

Data on U.S. House and Senate Mid-Term Elections

Congresswoman Lisa Blunt Rochester (D-Delaware, At Large) is being challenged by Republican, Lee Murphy.  Statewide, as of September 1, the voter registration totals are as follows.: 362,002 Democrats, 209,358 Republicans, 171,136 Unaffiliated, 18,292 Other/Third Party.

As for the rest of the Congressional races on the ballot this year, there is a substantial likelihood that the U.S. House of Representatives will shift to a Republican majority.  All House seats are on the ballot in the various states. Real Clear Politics (which aggregates leading polls and analyzes races) indicates the following:  

• For the Democrats, there are 175 seats which fall into the categories of “safe” (146), “Likely Dem” (19) or “Leans Dem” (10). They project the Dems flipping CA 25 in the “Likely Dem” column.
• For Republicans, they place 225 seats in the categories of “safe” (179), “Likely GOP” (19), or “Leans GOP” (28). They project that the Republicans could flip 22 current Democratic seats, with 5 of those in the “Likely GOP” column and 17 in the “Leans GOP” column. 
• There are 35 seats which are current classed as “Toss-Ups.” Among the “Toss-Ups” are 29 current Democratic seats and 5 current Republican seats.  The threshold to secure a majority is 218 seats out of 435.  

Given the data above, the Republican advantage is clear. An aggregate of polling data as of the close of last week indicates that the in the Generic Congressional Ballot, Republicans lead by 3 points. House races are very local and impacted by how district lines were drawn (most often by state legislatures). This is the first election following the decennial census, so House districts have been redrawn since 2020. 

In the United States Senate, as in every congressional election year, one-third of the Senate is on the ballot. While there is a path to Democrats maintaining their majority, which currently stands at 50-50 with Vice President Harris as the tie-breaking vote, there is a reasonable chance that Republicans will take the majority.  Real Clear Politics indicates the following for the Senate: 

• For Democrats, there are 46 seats which are either “Safe” or not on the ballot.  RCP places 1 seat in the “Likely Dem” column, with 3 more in the “Leans Dem” category for a total of 46. 
• For Republicans, there are 42 seats which are “Safe” or not on the ballot. RCP places 3 in the “Likely GOP” column and 2 in the “Leans GOP” category, for a total of 47.  
• RCP places 7 seats in the “Toss-Up” category. In that group are (*=incumbent, polling data an aggregated based on leading polls):
  • Arizona, Mark Kelly (D)* vs. Blake Masters (R) (Currently Dem), Kelly +2.5 +4.5 (9/30 – 10/17) This race has tightened slightly from +4.5 for Kelly last week.
     
  • Georgia, Raphael Warnock (D)* vs. Herschel Walker (R) (Currently Dem) Warnock +1 (10/8-10/17) This race has also tightened from +3.3 for Warnock last week.
  • New Hampshire, Maggie Hassan (D)* vs. Don Bolduc (Currently Dem) Hassan +3.6  (9/26-10/23) Republican challenger Bolduc has narrowed the lead from +5.8 for Hassan last week.
  • North Carolina, Ted Budd (R) vs. Cheri Beasley (D) (Open Seat, Currently Republican) Budd +3.5  (9/28-10/19) Budd’s lead has increased from +1.5 last week.
  • Nevada, Catherine Cortez-Masto (D)* vs. Adam Laxalt (R) (Currently Dem) Laxalt +0.8 (9/26 – 10/20) Republican challenger Laxalt’s narrow lead declined from +1.7 last week.
  • Pennsylvania, John Fetterman (D) vs. Mehmet Oz (R) (Open Seat, Currently Republican) Fetterman +2.2 10/4 – 10/20) Fetterman’s lead also declined slightly from +3.4 last week.
  • Wisconsin, Ron Johnson (R)* vs. Mandela Barnes (D) (Currently Republican), Johnson +2.7 +2 (10/3– 10/17) Johnson’s lead increased slightly from +2 last week. 

Presidential Approval Rating Data (aggregated):

• Presidential Biden Job Approval (10/9-10/23):   42.5% Approve,    53.9% Disapprove,   -11.4% Spread
• Direction of the Country (10/9-10/20):             26.4% Right Direction,  66.8% Wrong Track, -40.4% Spread