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Fed Rate Cut: Election Shake-Up?

Plus, a gift 85 years in the making

September 20, 2024

The Flag

Good morning and Happy Friday! Here are the Flag’s Top Five stories that should be on your radar to start the day:

  • US: Senate will move stopgap funding bill as government shutdown looms (The Hill)

  • World: Israeli military strikes Hezbollah targets as Nasrallah responds to wave of device blasts in Lebanon (NBC News)

  • Business: JetBlue to open airport lounges in New York and Boston in battle for big spenders (CNBC)

  • Technology: European Union moves to compel Apple to open up operating system to rival tech (AP)

  • Sports: Yankees clinch playoff spot after Julio Rodríguez's baserunning disaster (Yahoo Sports)

And of course, some good news: Chinese American family meets descendants of the Black couple who rented to them when no one would.

BECOME A FLAG BEARER

👀 Sunday Sneak Peak: You know the 50 states—well, almost. There was one more, hiding in the shadows of the Revolution, gone before you could even say ‘statehood.’ Uncover the mystery of Franklin—sign up to learn the full story. Want the whole bizarre tale? Become a premium subscriber for the full scoop.

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Left: Ranked-Choice Disaster, Harold Meyerson, American Prospect

Right: Green Agenda Punishes Lower-Income Households the Most, James Lynch, National Review

Right: Test Scores Show Why Families Are Fleeing Public Schools, Editorial Board, New York Post

ECONOMY

Fed Rate Cut: Election Shake-Up?

Today’s Top Story: On Wednesday, the Federal Reserve cut interest rates by 50 basis points, lowering them to 4.75%-5%, the largest reduction since 2008. This move sparked debate: right-leaning critics, including Trump, see it as politically motivated to aid Harris in the election while left-leaning commentators argue the cut was necessary due to high rates and would not significantly impact the election outcome.

Reporting from the Left: Stocks jump Thursday after Federal Reserve’s jumbo-sized rate cut (CNN)

Reporting from the Right: Federal Reserve cuts interest rates by half-point; first rate reduction in four years (Fox Business)

LEFT-LEANING SENTIMENT

This Was Necessary, Not Political

The Top Argument From The Left: There Was Nothing Political About the Fed’s Big Interest Rate Cut, Peter Coy, The New York Times: “Was it “political” for the Federal Reserve to cut interest rates less than two months before the presidential election, as Donald Trump has charged? Not a bit. Not cutting rates is what would have been political. … The nub of the argument that the Fed was trying to help the Democrats is that lower rates might help the economy grow a little faster, which would in principle help the candidacy of Vice President Kamala Harris, since her party controls the White House. Trump referred to the expected rate cut as ‘political stuff”’ during a town hall in Michigan this week. Earlier this year, in an interview with Bloomberg Businessweek, he said that an interest-rate cut by the Fed is ‘something that they know they shouldn’t be doing.’ Trump’s argument doesn’t hold up to scrutiny, though. If the members of the Fed committee had really wanted to help Harris get elected, they would have started cutting earlier, since it takes at least half a year, and possibly much longer, for changes in interest rates to affect the real economy. Unfortunately, sometimes not being political is going to look political.”

Honorable Mention #2: Trump, Harris Angle to Gain Political Edge From Fed Rate Cut, Nancy Cook and Hadriana Lowenkrown, Bloomberg.

RIGHT-LEANING SENTIMENT

A Politically Motivated Decision

The Top Argument From The Right: This is the Fed's 50-basis point gift to Kamala Harris, Larry Kudlow, Fox Business: “The Fed's 50-basis point gift to Kamala. That's the subject of the riff. 48 days before the election and it looks like Fed Chair Jay Powell just gave Kamala Harris a 50-basis point gift by slashing their target rate by half of 1%. This may well put the central bank smack in the middle of presidential politics – something they pledged not to do. Now, in light of a modest decline in commodity prices and longer term interest rates, along with a softening in the labor market, a 25-basis point cut would seem to be justified in economic terms, with no political overtones, but a 50 bps super-cut sounds a lot like the ultra-liberal Democratic senators Elizabeth Warren, Sheldon Whitehouse, and John Hickenlooper, who were jawboning the Fed to lower interest rates by 75 basis points. Not to mention, with 48 days until the election, there is no reason the Fed couldn't have waited for their next meeting – in 49 days – and announced the rate cut the day after the election. Holding it off for 49 days would've had no economic impact, but it would've completely taken politics out of this whole story.”

Honorable Mention #1: It’s Too Close to the Election for the Fed to Cut Rates, Michael Toth, The Wall Street Journal.

Honorable Mention #2: How the Fed interest rate decision could have ‘significant’ impact on Harris, Christian Datoc, Washington Examiner.

FLAG THIS

Harris Closing Gap on Economic Trust

Recent polling from Morning Consult has found Harris has successfully addressed the "trust gap" on economic issues, now matching former President Trump with 46% of voters expressing confidence in her economic handling.

A subsequent FT-Michigan Ross survey reveals Harris has a slight edge over Trump post-debate, with voters increasingly favoring her over President Biden on economic matters. Despite 33% of voters believing we are in a recession and 28% expecting one next year, Powell confirms that the U.S. economy is growing steadily, with recent rate cuts aimed at sustaining this growth (Axios).

Do you agree with the Fed's decision to cut rates?

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WATERCOOLER

King Becomes Queen, Lizard Helmet, PysiCat

On This Day in 1973, in a highly publicized “Battle of the Sexes” tennis match, top women’s player Billie Jean King, 29, beats Bobby Riggs, 55, a former No. 1 ranked men’s player. Riggs (1918-1995), a self-proclaimed male chauvinist, had boasted that women were inferior, that they couldn’t handle the pressure of the game, and that even at his age he could beat any female player.

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