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Moneybeat: McCarthy wins playing hot potato


WORLD Radio - Moneybeat: McCarthy wins playing hot potato

Republican handling of the debt ceiling drama secured real policy wins

House Speaker Kevin McCarthy speaks at a news conference on Wednesday, May 31, 2023 Associated Press Photo, Jose Luis Magana

MARY REICHARD, HOST: Coming up next on The World and Everything in It: the Monday Moneybeat.

NICK EICHER, HOST: It’s time to talk business, markets, and the economy with financial analyst and adviser David Bahnsen. He’s head of the wealth management firm The Bahnsen Group and he’s here now.

David, good morning!

DAVID BAHNSEN: Well, good morning, Nick, good to be with you.

EICHER: All right. Now we can say the debt-ceiling debate is behind us, or we could say the debt-ceiling debate is only two years away, meaning we’ll do this again either under a new Republican administration or a possible second term of Biden-Harris.

Now I know that strictly speaking this is not so much a debate over economics. It’s almost purely about political performance and policy choice. So let’s talk about that aspect, let’s talk about winners and losers. What do you take away from all this?

BAHNSEN: I have a couple takeaways. I think that speaker McCarthy handled himself very well; I think he did some unexpected things. He was able to balance a number of different interests.

I do understand that a lot of people wanted him to get more out of this. But I frankly, think he got more than I expected. I mean, at the end of the day, the Republican Party does not have the White House, they do not have the Senate, and they have the House by a very, very small minority, and so to get your caucus to hold together while having to play with a really, really hot potato in threatening that you won’t approve the new debt ceiling in trying to get other things accomplished. It hasn’t gone well in the past when others have tried it.

And you almost certainly have a media working against you that is really antsy to blame you for anything negative that goes down. I think he was able to hold his caucus together in that way and yet still extract some concessions that I think are more than just symbolic. Some of the things that they got done by trying to freeze spending in place and the amount that they would have grown otherwise in terms of certain expenditures getting a work requirement in for able bodied people taking food stamps: These are good concessions that were not on the legislative table. I think that’s a good thing politically for some of the causes that I happen to believe in.

The other takeaway is that we are in need of a balanced budget amendment. We don’t have to worry about how much debt we take if everything we spend is paid for. And I think the idea of rightsizing the government and eliminating this constant deficit spending (which pushes the national debt into the stratosphere) needs to be addressed.

EICHER: On the balanced budget amendment, is there anything about the surprising ability of Republicans to wring some concessions out of the Democrats on spending, anything at all that gives you any hope that fiscal responsibility in the form of a BBA has a chance now?

BAHNSEN: First of all, the two things are totally separate because this entire thing had nothing to do with balancing the budget, it was just simply a way to cover the spending that they had already committed to. And there really wasn’t any conversation through the political machinations of the debate about a balanced budget amendment. Even if there were such a conversation it would require a President to sign it into law, and this President and the one before this one have had no regard at all for a balanced budget. And frankly, neither did the two before them as well. It’s been a very long time since there’s been an appetite for balancing the budget.

The notion that permanent deficit spending—not war time, not emergency, but permanent deficit spending—where you’re debating about whether or not you’re going to do 600 billion or 1.8 trillion of deficit spending has been the lay of the land for a long time. You have had presidents where the deficit in one year went from a trillion down to 500 billion, and they would talk about what fiscal hawks they were and how fiscally responsible it was that they lowered the deficit for one year: Only spending $500 billion more than we have. So that’s how far we are along, Nick, from a real place of dealing with balanced budget.

And I think it will take more of a right-wing penetration of federal government and it will take people on the right actually caring about it and taking it seriously to change things. Most importantly—and we have talked about this on the podcast before—it will take a serious approach to entitlements. The notion of anybody ever balancing the budget without a really realistic moral and fiscally prudent approach to Social Security, Medicare, Medicaid and health care commitments is ridiculous.

EICHER: And then before we wrap up today, with so much of the news economy taken up by debt-ceiling talks and votes, what are we not talking about that we should be?

BAHNSEN: I think that the unemployment report that came out on Friday was fascinating because we saw a significantly higher amount of new jobs created than people had anticipated. But again, the data was not quite so simple: The unemployment rate did tick higher because there were 130,000 new people in the labor participation force. And yet, with 330,000 new jobs created—almost double would have been expected—it was clearly a very robust jobs number.

But the household survey went down; it showed 300,000 jobs lost. So we were getting a little conflicting data in there. And then the average hours worked dropped 0.1 hours. So not by a huge amount, but you’re not seeing a greater amount of hours worked. And in fact, you’re down to a 12 or 13 year low in average hours worked, even as a really record number of people have jobs. So that’s why I say it was a mixed bag.

It continues to confound people that think inflation and jobs are supposed to be working against each other. You have seen the inflation rate drops substantially and yet not seen unemployment go up in response. And you’re seeing wages haven’t gone higher at the lower end.

But then that rate of growth has really, really slowed. It has not proven to be what they call a wage price spiral, whereby people making more money lead other prices to end up going higher; as yet that has not happened. So I think it’s for those who are sitting around waiting for a lot of people to lose their jobs, and that will be the signal that the Fed has to pause. The job market continues to look very good.

EICHER: David Bahnsen is founder, managing partner, and chief investment officer of The Bahnsen Group. His personal website is . His weekly Dividend Cafe is found at

David, thanks, I hope you have a great week!

BAHNSEN: Thanks so much, Nick.

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