Railroad Deal Could Hit Snags; Recession? What Recession?

TOP CONGRESSIONAL LEADERS, meeting with President Biden yesterday, pledged to quickly move to impose a contract on railroad workers. This has outraged pro-union forces, who could drag this fight well into December.

THE ISSUE BOILS DOWN to whether to grant workers paid sick leave; the present deal doesn't, and some of the railroad unions are prepared to strike if they don't get that benefit. They have several allies in the Senate - including Bernie Sanders, the
Vermont socialist, and Marco Rubio, the Florida conservative.

ARCANE SENATE RULES ALLOW ONE SENATOR to freeze passage of legislation, and Sanders appears eager to block a compromise for several days if it doesn't include paid sick leave. Eventually a bill will pass, but the railroad industry may have to prepare for a brief strike starting late next week.

THIS FIGHT HAS THREE IMPLICATIONS:

1. Biden had an amicable meeting with Kevin McCarthy, Mitch McConnell, Chuck Schumer, and lame duck Nancy Pelosi. The first three will be crucial players next year, and if they can agree on a railroad deal, perhaps they can agree on other issues; a border deal, with immigration reform, will be a top priority in 2023.

2. If a railroad deal takes several days to complete, it will gobble up time that's needed to pass a budget before the Dec. 16 deadline. Still another stopgap continuing resolution will be necessary then, probably lasting until Christmas Eve. The prospect of a delay until early 2023 is very real, which is a major wild card for defense spending and aid to Ukraine.

3. Biden is willing to spend political capital, as we wrote yesterday. He's willing
to take on organized labor, which has supported him unequivocally. So Biden is
willing to take on the Democrats' progressives - a year too late, in our opinion.
* * * * *
RECESSION? WHAT RECESSION? The shopping frenzy on Black Friday made us wonder where the recession is? Economic data - aside from housing - looks surprisingly strong, perhaps because the tidal wave of Washington pandemic aid to states and individuals has not been fully spent.

MORE STIMULUS: Now there's falling gasoline prices, a huge new Social Security cost of living (COLA) hike, still another student loan extension, and generous labor
deals because of an acute worker shortage in the U.S.

IS IT ANY WONDER IF FED CHAIRMAN Jerome Powell may be frustrated? The monetary medicine has not slowed the economy - or inflation - as quickly as he expected. So Powell will have to proclaim in his speech today that more rate hikes are certain. Just because he'll move from 75 basis point moves to 50 basis point moves is hardly a sign that the Fed is becoming more accommodative.

SO THE FED MAY HAVE TO STAY HAWKISH FOR LONGER, until there are clear signs that the economy is slowing. The Washington Post has an interesting piece this morning asking - where's the recession? It doesn't appear to be imminent - just as an end to the rate hikes also doesn't appear to be imminent.

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