It is hard to decipher what’s going on in the mind of US President Joseph Biden as he experiences some speed bumps in his fifth week in office.
Rick Newman, author of four books, including Rebounder and a senior columnist for Yahoo Finance based in New York City, sums up his observations: First, a key policy goal may be dead, for now. Second, a top Cabinet appointee seems sunk. And third, financial markets are getting woozy as a firehose of stimulus money pours into the economy.
Minimum Wage blues
Congress seems likely to pass Biden’s huge stimulus bill in March, but without the $15 minimum wage the Democratic president hoped for. A Senate ruling found that changing the minimum wage does not qualify for passage under the arcane “reconciliation” rules that would allow Democrats to pass the bill with a simple majority vote in the Senate, bypassing the filibuster rules requiring 60 votes.
Boosting the wage from $7.25 to $15 was always a long shot despite the outrage of Senator Bernie Sanders and others in the party.
There would have been a big intraparty fight over the matter if the Senate rules did allow it under reconciliation, as there aren’t even 51 Democrats willing to push the wage that high.
The relief bill might even pass sooner, with less negotiation needed, if the minimum wage battle moves to another venue,
There’s another effort to raise some wages indirectly, by imposing new tax on companies above a certain size that pay workers less than $15 per hour. Senator Ron Wyden (D,Oregon) may try to shoehorn that into the relief bill as a tax, as it could fulfill the reconciliation rules.
It seems convoluted, however, and it’s not clear how many Democrats would support it. If Democrats push for a wage hike through normal legislation, it would require at least 10 Republican senators to join all Democrats in support. Raising the wage to $10 or $11, phased in over time, might be plausible, with the right horse-trading.
Biden seems unperturbed and has seen this coming saying so in recent days. He backs some policy goals of the most liberal Democrats, but it doesn’t hurt him politically if Congress can’t muster the votes to pass them.
Biden won the presidency in 2020 by appealing to moderate Independents, and they’re likely to stick with Biden if his agenda doesn’t veer too far left. So vocally supporting liberal policies unlikely to pass Congress is shrewd, if cynical, politics.
First cabinet sinking
The president also seems likely to suffer his first Cabinet defeat with the imminent withdrawal of Neera Tanden as his nominee for Budget Director. Tanden is a sharp-tongued acolyte of the Clinton dynasty who trolled Republicans during the Trump administration from her perch at a Democratic think tank.
That burned any Republican votes for her nomination. But the real problem was losing the support of Democratic Senator Joe Manchin, a West Virginia conservative who dissed Tanden’s partisan taunts and said she was too toxic for the job.
In 2016, Tanden published one tweet that was modestly critical of the pay package for Manchin’s daughter, Heather Bresch, CEO of drugmaker Mylan. The firm faced controversy at the time for a 400% increase in the price of the EpiPen used to counteract severe allergic reactions.
If Manchin is punishing Tanden for that, he’s extremely thin-skinned, since Bresch endured far worse criticism from elsewhere. Biden will need Manchin’s vote on other key bills, so he’s not likely to wage a Trump-style smackdown against his former Senate colleague.
Biden, however, is pragmatic. Tanden may end up in another administration job that doesn’t require Senate confirmation.
Woozy financial markets
The 10-year Treasury note (TNX) has risen a full point since August, with an accelerated run-up since late January. The surprise march upward of the 10-year Treasury rate after a pullback in stocks seems to signal a warming, and perhaps an overheating, economy is not unprecedented.
But it’s abrupt and unexpected, and it comes amid warnings by some economists that too much fiscal stimulus will cause uncomfortably high levels of inflation later this year and next.
Markets have generally applauded aggressive fiscal stimulus, since it boosts consumer spending and growth and could speed the needed recovery in the job market.
Treasury rates hit record lows in 2020 under Donald Trump, so a return to a more normal range shouldn’t be something to worry about. But investors like to see a gradual rise in rates, not the like a recent barnstorming with the 10-year popping by 35 basis points in barely two weeks, to around 1.5%.
With a lot of unusual moves going on, nervous investors have been selling, buying and selling some more. Since Feb. 12, the 10-year Treasury has risen by 23%, while the S&P 500 index has fallen by nearly 2%, and the tech-heavy NASDAQ (IXIC) is down almost 5%. Rising rates might be telling the market that inflation is coming, for real, as consumers flush with stimulus cash bid up prices. The Federal Reserve might not be able to stop it.
Uncle Sam might be borrowing too much money to finance all that stimulus. Rising rates might be luring stock investors out of equities and back into bonds.
Yet Biden has certainly faced bigger setbacks.
Airstrikes retaliation for rocket attack
The United States carried out airstrikes in eastern Syria against buildings belonging to what the Pentagon said were Iran-backed militias responsible for recent attacks against American and allied personnel in Iraq.
President Biden authorized the strikes in response to the rocketing in Iraq and to continuing threats to American and coalition personnel there, said John F. Kirby, the Pentagon press secretary, who spoke with reporters traveling with Defense Secretary Lloyd J. Austin III in California.
A rocket attack last February 15 on the airport in Ebril in northern Iraq, killed a Filipino contractor with the American-led military coalition and wounded six others, including a Louisiana National Guard soldier and four American contractors.
American officials said the strikes were a relatively small, carefully calibrated military response – seven 500-pound bombs dropped on a small cluster of buildings at an unofficial crossing at the Syria-Iraq border used to smuggle across weapons and fighters.
The American airstrikes on Thursday “specifically destroyed multiple facilities used by a number of Iranian-backed militia troops, including Kataib Hezbollah and Kataib Sayyid al-Shuhada,” Mr. Kirby said.
“This proportionate military response was conducted together with diplomatic measures, including consultation with coalition partners,” he added. “The operation sends an unambiguous message – President Biden will act to protect American and coalition personnel.”
Troops in Iraq down to 2,500
The United States military has drawn down the number of its troops in Iraq to under 2,500 and has pulled out of several bases there over the past two years. It says Iraq no longer needs the help it did in the past to fight the Islamic State, though American officials have acknowledged that militia attacks also factored into the decision to move troops to bases more easily defended.
Iran has made clear that it intends to retaliate further for the American drone strike in Baghdad in January 2020 that killed a top Iranian commander Maj. Gen. Qassim Suleimani, and a senior Iraqi security official. Days after that strike, the Iranian government tlaunched missile attacks against U.S. forces at the Ain al Assad air base in Iraq’s Anbar Province, wounding more than 100 troops.
The strikes were just over the border in Syria to avoid diplomatic blowback to the Iraqi government. The Pentagon offered up larger groups of targets but Mr. Biden approved a less aggressive option, American officials said.
Biden is hoping to draw Iran into negotiations on reviving a 2015 agreement that restricts Tehran’s nuclear program — one that was abandoned by the Trump administration. That goal led to intense debate within Biden’s national security team over choosing a target that would not spark an escalating military conflict with Iran, officials said.
“The Biden team is saying, ‘Even though we’re highly committed to reestablishing dialogue with the Iranians, we can undertake military strikes at the same time,’” said Michael Knights, an analyst at the Washington Institute for Near East Policy.
The Syrian Foreign Ministry said it “condemns in the strongest terms the cowardly U.S. attack on areas in Dair Alzour near the Syrian-Iraqi border.” In a statement, it said the Biden administration “is supposed to stick to international legitimacy, not to the law of the jungle as [did] the previous administration.”
Tehran has not signaled whether it will respond militarily to the U.S. action, though militia leaders in Iraq have vowed to retaliate for the attack.
Iranian Foreign Ministry spokesman Saeed Khatibzadeh condemned the U.S. strike, calling it “illegal aggression” and a violation of human rights and international law.
Hours after the U.S. attack in Syria, an Israeli-owned cargo ship sailing in the Gulf of Oman near Iran was damaged in an explosion, according to multiple reports. The crew wasn’t injured, but the ship was forced into port for repairs. The incident occurred near where several other ships were damaged in explosions in 2019. The U.S. Navy blamed the incidents on Iran, which denied involvement.
Hot on the button
In Washington, some Democrats were critical of Biden’s decision to carry out an airstrike in Syria without first briefing Congress on the legal rationale, saying it wasn’t clear the attack was authorized under existing authorization for using force.
If this was signal at all, it was business may soon be as usual with the Deep State that Dwight Eisenhower warned about in his farewell address on January 17, 1961. Despite his military background and being the only general to be elected president in the 20th century, he cautioned the nation with regard to the corrupting influence of what he describes as the “military-industrial complex”.
This complex is an informal alliance between a nation’s military and the defense industry supplying it, seen together as a vested interest which influences public policy. A driving factor behind this relationship between the government and defense-minded corporations is that both sides benefit—one side from obtaining war weapons, and the other from being paid to supply them.
Biden was vice-president to Barack Obama who was hot on the button with Iran and Syria