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10 minutes ago
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The 2026 campaign has already kicked off, with ads focused on Medicaid, Trump tax cuts
By Helen Coster and James Oliphant NEW YORK (Reuters) -Residents of Columbus, Indiana awoke last week to a yellow billboard purchased by the Democratic National Committee blaring: 'Under Trump's Watch, Columbus Regional Health is Cutting Medical Services." Meanwhile, the National Republican Congressional Committee, which oversees races for the U.S. House of Representatives, this month launched a digital ad campaign touting President Donald Trump's tax cuts and blaming Democrats for spiking inflation. As members of Congress return to their home districts for the August recess, the Democratic and Republican parties are launching ad blitzes centered around the tax-cut and spending bill Trump signed into law on July 4, in an unofficial start to the 2026 midterm election campaign. Democrats are focusing their message around access to healthcare, three party operatives and three officials from allied groups told Reuters. Republicans are countering that the tax provisions will put more money in voters' pockets – particularly wage workers and seniors, four party operatives said. The bill makes permanent Trump's 2017 tax cuts and funds his immigration enforcement crackdown, while reducing health care and food aid. It devotes $170 billion to immigration enforcement while cutting $1.1 trillion from Medicaid and other public health programs and $186 billion in food assistance. The nonpartisan Congressional Budget Office estimated that 10 million people would lose their health insurance by 2034 as a result of the bill, and that the tax provisions and increased immigration and military spending would increase the federal deficit by $3.4 trillion over the next decade. "How voters feel about Trump and the economy may be the most important factor next fall - but so is how voters feel about the Republican response to their concern," said Jacob Rubashkin, a nonpartisan analyst with Inside Elections. Republican strategists concede that Democrats, who campaigned against the bill while it was working its way through the Republican-controlled House and Senate, are starting with an upper hand in messaging around the legislation. But they say they have plenty of time to sell the bill's benefits. "We will use every tool to show voters that the provisions in this bill are widely popular,' said Mike Marinella, a spokesman for the NRCC. And the party has a cash advantage. The RNC had $81 million in cash at the end of June, according to Federal Election Commission data, compared to the DNC's $15 million during the same period. The DNC has trailed the RNC in fundraising in the first half of the year at the same time as it has deepened its financial commitments, spending in every state, FEC disclosures show. The RNC also enjoys a huge asset in a sitting president who is still holding fundraisers for big-ticket donors. 'At the end of the day, Democrats got a jump start on messaging,' said a Republican Senate operative who asked to remain anonymous to discuss party strategy. 'They have won the battle. Now we have to focus on winning the war.' Republicans can only afford a net loss of two of the 220 seats they hold in the House to maintain control. In the Senate, they have a 53-47 advantage. "CRITICAL OPPORTUNITY" The messaging battle, largely focused on battleground states and districts, is key to defining the bill in the minds of voters. 'The bill is currently unpopular, and there's been a lot of conversation among Republicans about how to refocus on the more popular aspects and use the upcoming recess to sell the bill to skeptical voters,' Rubashkin said. According to a Reuters/Ipsos poll, conducted last month as the bill was moving through Congress, some 64% of registered voters oppose cuts to Medicaid and food stamps in return for lower taxes for everyone. Democrats are seizing on that sentiment, pushing the idea that Republicans have taken away healthcare to pay for tax giveaways for billionaires. The DNC has purchased billboards in a handful of Republican districts facing reduced services and shutdown of rural hospitals and health facilities. 'Republicans threw working families under the bus to fund tax cuts for the wealthy, and we'll never let them — or voters — forget that,' said DNC Deputy Communications Director Abhi Rahman in a statement to Reuters. 'This will define the midterms.' Republicans say the bill's provisions on tips, overtime and Social Security show the party is focused on issues affecting working families. They also point to a $50 billion fund the bill establishes to help rural hospitals. In a memo earlier this month, the National Republican Senatorial Committee encouraged candidates to talk about the bill in personalized terms, highlighting 'service industry workers who will keep more of their hard-earned tips,' 'first responders and critical workers who will keep more of their overtime pay' and 'working parents and caretakers who benefit from increased tax credits for child and dependent care.' Another Republican strategy memo prepared by Tony Fabrizio and David Lee, Trump's pollsters, urges candidates to "lead on kitchen-table issues." The memo was commissioned by One Nation, a super PAC that last week launched a $10-million-plus TV and digital ad blitz playing up the tax features of the bill. The ads will air in states like Georgia and Texas where Republicans are defending seats. Another Republican PAC, Americans for Prosperity, the conservative advocacy group founded by Charles Koch and the late David Koch, will launch a TV and digital ad campaign in key districts next month, said Bill Riggs, a spokesperson for AFP. And the American Action Network is running TV and digital ads in 29 battleground congressional districts in Arizona, California, New York and Pennsylvania, emphasizing tax cuts and border security. "It's a new America, full of hope, thanks to President Trump and House Republicans," the ad intones. 'TRUMP TAX' Democrats, meanwhile, are trying to tie Medicaid cuts to reduced healthcare access and higher costs. The DNC's website claims that the bill will "cost the poorest 10% of households $1,600 a year while raising the income of the richest 10% of Americans by $12,000 a year." Unrig Our Economy, a left-leaning outside group focused on populist economic messaging, is running ads in Iowa, Arizona and Pennsylvania depicting voters voicing frustration at their Republican lawmakers for voting for Trump's bill. 'I'm so angry that Congresswoman Mariannette Miller-Meeks just voted for the largest cut to Medicaid in history to give tax breaks to billionaires,' said one ad running in Iowa, featuring a Davenport resident identified as Maria. The group plans to spend $7 million by the end of the year, according to spokesperson Kobie Christian. On Monday the group launched a 'multi-million dollar' ad campaign focused on the Medicaid cuts in four Texas congressional districts. Protect Our Care, a left-leaning healthcare advocacy organization, said it plans to spend up to $10 million on ads in the first half of next year, largely focused on urging Republican lawmakers to restore funding to Medicaid. 'Republicans won't be able to spin their way out of their parents being kicked out of a nursing home,' said Brad Woodhouse, the group's executive director. Environmental groups are also targeting the bill's rollback of clean energy incentives. Climate Power and the League of Conservation Voters spent $500,000 on an ad pressuring lawmakers in six congressional districts to vote against the bill, claiming that it will increase electricity rates, according to League of Conservation Voters President Pete Maysmith. 'The bill just happened, so let's start communicating with people when it's fresh and happening,' said Maysmith. 'We don't want to show up later and try to pick up that conversation.'
Yahoo
10 minutes ago
- Yahoo
Fed's policy toolkit may be headed for fundamental changes
By Michael S. Derby (Reuters) -A U.S. senator's recent push to strip the Federal Reserve of a key aspect of how it controls interest rates and the battle over who will succeed Fed Chair Jerome Powell point to a future where some of the tools policymakers use to influence the economy come under greater scrutiny. There's no sense of imminent changes in the Fed's monetary policy mechanics. But that may not always be the case, especially as President Donald Trump, a persistent critic of the central bank who wants it to reduce interest rates, prepares to name a successor for Powell, whose term expires next May. The first sign of shifting ground came from Republican Senator Ted Cruz, who last month pushed to end interest payments paid by the Fed on bank reserves parked at the central bank. Ending this practice was also cited, among other back-to-basics proposals, in the influential Project 2025 effort that has helped drive some of Trump's agenda since he returned to power in January. Cruz's effort appears to have gained little traction, but success would upend how the Fed manages interest rates and have major implications for the central bank's large bond holdings. Meanwhile, how the Fed uses bond purchases and its balance sheet to stimulate or restrain the economy is also getting attention. It has been shedding bonds since 2022, but at least one possible Powell successor wants an even more aggressive drawdown motivated by a novel understanding of how the balance sheet affects the economy. TOOL TROUBLE The Fed began paying interest on bank reserves during the global financial crisis in 2008. With its benchmark interest rate near zero and the financial system flush with cash from the central bank's bond purchases, this move granted the same control over rates the Fed had when bank reserves were much less abundant. Over time the Fed built out this system and formalized it in 2019. Officials have shown no desire to go back to the pre-crisis system. "The current regime has a number of positive attributes that people I don't think fully appreciate," said William Dudley, a former head of the New York Fed who also managed the implementation of monetary policy when the new system was created. "It makes monetary policy execution really easy" and saves the Fed from active intervention in markets to manage reserve levels. The system, however, has been dogged by criticism that it is an unfair financial sector subsidy. It has also pushed the Fed from a consistent profit maker to a money loser, and the profits it once handed to the Treasury to defray federal deficits are gone until the central bank can clear the red ink. Cruz argued that his push to end the power was ultimately about lowering deficits. But critics contend his goal of a de facto return to the pre-crisis policy system was full of unintended consequences and misunderstandings. Dudley said losses are not inherent to the current rate-control system but arise from the Fed having bought longer-dated bonds as a form of stimulus, creating the current mismatch between income and interest expenses that's led to losses. Powell told a U.S. Senate committee in June that "if you were to want to go back to scarce reserves, it would be a long and bumpy and volatile road." Losing interest rate-paying power could force the Fed to aggressively retire the excess liquidity that its current toolkit relies upon to prevent short-term rates from spiraling out of control. And that would likely mean the Fed would sell a substantial portion of the bonds it now owns. "I understand there is a desire on the part of some to go back to the pre-(global financial crisis) framework for operating monetary policy," said Ellen Meade, a former top Fed staffer who is now an economics professor at Duke University. But the selling of bonds needed to draw down liquidity rapidly would push up real-world interest rates, "so any return to the pre-GFC system will involve macroeconomic pain." BALANCE-SHEET BLUES Even without toying with the Fed's rate-control tools, questions abound regarding how big its bond holdings should be. Since 2022 it has shed more than $2 trillion of bonds, and market participants estimate the reductions will end when the balance sheet drops to about $6.1 trillion from the current $6.7 trillion. Fed Governor Christopher Waller, who has been mentioned as a possible successor to Powell, recently said it's possible that holdings could drop to $5.9 trillion. Kevin Warsh, a former Fed governor who is also said to be on the short list to replace Powell, wants to go much further, and for unique reasons. In recent television interviews, he's laid out a Fed balance sheet vision that would mix rate cuts aimed at bolstering Main Street with aggressive bond holding cuts, which he believes will tamp down Wall Street speculation. "We're skeptical of that policy prescription," analysts at research firm Wrightson ICAP wrote. They noted, however, that Warsh's view "is a vivid reminder that everything in U.S. economic policy will be up for grabs over the coming year." How much is bluster versus real strategy for change at the Fed is unclear. When it comes to recent developments, a lot is tied to "Republicans leaving no stone unturned in their sort of ongoing campaign of pressuring the Fed for easier policy in general," said Derek Tang, an analyst with forecasting firm LH Meyer. "The balance sheet is a very big front for that, because it's sort of where the Fed's rate-setting and portfolio decisions intersect with the amount of fiscal space that the Trump administration has." 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Yahoo
10 minutes ago
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William Watson: Government-managed trade is sure to fail again
Those are some trade deals Donald Trump is shaking hands on — but so far not releasing details about. The U.S. gets tariff-free access to other countries while other countries pay stiff across-the-board tariffs going into the U.S. The U.K. pays 10 per cent, the EU and Japan 15 per cent, Indonesia and the Philippines 19 per cent and Vietnam 20 per cent. What China will pay remains to be determined. It typically pushes back more in response to Trump's jibes and jabs. Perhaps President Xi Jinping read the sections of the Art of the Deal about the need to stand up to bullies. Silly question: If a virtue of tariffs is that they're clean and simple, as the U.S. president always says, wouldn't it be a lot easier to have the same across-the-board rate for all countries? And whatever happened to 'reciprocity,' which the White House was big on a couple of months ago? Tariffs of 10-20 per cent for other countries' goods going into the U.S. but zero for American goods entering other countries are hardly 'reciprocal.' Yes, the rates chosen supposedly reflect the amount of procedural protectionism or non-tariff barriers (NTBs) that countries impose on U.S. goods. Except that no systematic study of that in fact much-studied problem has produced numbers that look like the pattern the deals reveal. And of course the U.S. itself is no stranger to NTBs and procedural protectionism. Just ask our softwood lumber industry. What the emerging regime looks like most is affirmative action for American businesses. They evidently can't compete with wily foreigners deploying unfair practices against them. And they're unwilling to abide by the (presumably rigged) decisions of international trade tribunals set up, under U.S. leadership actually, to make sure governments discriminate as little as possible against one another's firms. Even as the Trump administration abolishes affirmative action from U.S. society in general, it imposes it in international trade. Also strange are the commitments by other countries to invest given dollar amounts in the U.S. and to buy given amounts of U.S. goods, especially Boeing aircraft. Japan's going to buy 100 Boeing planes (not clear yet whether doors will be extra) and invest $550 billion in the U.S., with the U.S. somehow getting 90 per cent of the profit on this investment. Details to follow. When we economists teach international trade theory we customarily talk about (to cite the classic example) Portugal selling wine to the U.K. in return for wool. But in the real world, the non-communist parts of it at least, countries generally don't buy and sell goods and services to each other. Rather, people and companies in their millions and billions decide what goods and services to buy and their accumulated choices generate the trade flows we see. That type of trade system accords very well with the traditionally very American view that governments should not run economies, people and businesses should, with the government restricting itself to policing property rights and providing good public services at a reasonable tax price. But now governments, America's included, apparently want to manage the intricate details of the supply chain. In support of the Trump tariffs, some American politicians say it's simply not efficient for car parts to cross the Canada-U.S. or U.S.-Mexico border several times before cars are complete, as sometimes happens. But who are they to say? Since 1965's Canada-U.S. Auto Pact car companies have decided, free of tariffs, how best to put cars together. If it made economic sense to make and assemble all the parts in one location — if that's what maxed out their profits — you can bet that's what they'd do. If they don't do that, it's because that isn't the most efficient way to do things, given costs, technologies and transportation costs. Politicians should stick to matters such as Jeffrey Epstein and let car companies figure out how best to make cars. Why have Americans traditionally resisted government micro-management of the economy? Have a listen to the soundtrack of Hamilton. Because they abhor the concentration of power in a politico-industrial complex. Because not even a stable genius in the White House — not to suggest that's what we have now — would be smart enough to outsmart the combined intelligence and creativity of the entire American population when channelled through price- and efficiency-revealing markets. And, finally, because the invisible hand of competition is the best way to restrain the grasping hand of corruption. Corruption is not unknown in the private sector, of course. Humans are humans everywhere and always prey to temptation. But if you have competition — which in a small country like Canada is often provided by imports and foreign investors — companies or individuals that go astray get punished in the marketplace. And decisions don't get made for political reasons. Donald Trump always says he wants Canadian auto jobs to move to Michigan and Ohio, which, no coincidence, are two battleground states. Every president, not just the transparently venal, will favour places he wants his party to win in the next election, whenever that is. The only way to avoid such corruption is to remove power from politicians and vest it in markets. William Watson: All checks, no balances here in Nastyland William Watson: Our better-funded military will need to be more lethal I do understand such arguments are in disfavour at the moment. I bet the future vindicates them, as it always does. But the process won't be fun. 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