The economy is probably shrinking, according to federal data, but that may not mean we’re in recession. We’ll also look at progress on the semiconductor bill and a pending decision on student loan relief.
But first, a Russian eviction from space.
Welcome to On The Money, your nightly guide to everything affecting your bills, bank account and bottom line. For The Hill, we’re Sylvan Lane, Aris Folley and Karl Evers-Hillstrom. Someone forward you this newsletter? Subscribe here.
Why the GDP decline may not mean a recession
The Biden administration is ramping up messaging that two quarters of negative growth do not mean a recession, bracing Americans for a likely tough economic report on Thursday.
Economists say new federal data could show U.S. gross domestic product (GDP) shrinking between April and June, marking the second straight quarter of contraction. That will likely fuel concerns that the U.S. economy is slipping into recession — if it hasn’t already.
“One quarter can just happen for weird quirky reasons,” Matt Darling, employment policy fellow at the Niskanen Center think tank, said in an interview. “But when two or three happen, you’re like, ‘OK, there’s something going on there.’”
The background: President Biden and White House officials are attempting to avert the political blowback of a recession with the midterm elections just a few months away and are also aiming to prevent a bigger knock on the economy from Americans starting to act like there is a recession.
Economists turn to the National Bureau for Economic Research (NBER), a think tank not affiliated with the federal government, to officially determine when the U.S. is in recession.
A special committee at NBER bases those decisions on a wide range of economic data beyond the GDP reports, including job growth and layoff data.
It can be difficult to know if a recession is occurring until it’s already started, which adds to the stakes and intrigue around the Thursday GDP report. But even as growth slows, the labor market is flashing signs of an economy far from hitting a recession.
Alex Gangitano and Sylvan have more here.
Senate advances bill to boost domestic semiconductor industry
The Senate voted 64 to 32 on Tuesday to advance legislation to provide $52 billion to the domestic semiconductor industry, $81 billion to the National Science Foundation and a 25 percent investment tax credit for semiconductor manufacturing.
The vote brings the semiconductor bill closer to the finish line after more than a year of negotiations.
The bill won’t include a package of trade provisions negotiated by senators last year or more aggressive measures to crack down on Beijing passed by House Democrats.
Senators said that the bill is needed to shore up U.S. supply chains and reduce dependence on Asia for microchips that are used in cars, appliances, weapon systems and electronics.
“A big reason for the inflation we see today is decades of offshoring our supply chains. We need to bring that production back home,” said Sen. Sherrod Brown (D-Ohio). “That’s what this bill is all about, investing more in America, making more in America.”
White House says Biden will make decision on student loans
The White House said on Tuesday that President Biden is mulling whether to extend the pause on federal student loan payments and whether to forgive student loans on a broader scale ahead of a pandemic-related moratorium on payments that are set to resume on Aug. 31.
“He’ll make a decision,” White House press secretary Karine Jean-Pierre said. “I’ll let him speak.”
Speculation around another pause on payments heated up after The Wall Street Journal reported that student loan servicing contractors have been told to not send billing statements.
A Department of Education spokesperson told The Hill that the administration is still assessing whether to extend the payment pause but that borrowers will be communicated with “directly” about the end to a freeze.
Here’s more from Alex Gangitano.
Senate Dems set to roll out funding bills as shutdown threat approaches
Senate Democrats are preparing to unveil sweeping legislation in the days ahead on how to keep the government running for the next fiscal year, even as negotiators already write off chances of the chamber’s annual appropriations bills passing by the current Sept. 30 deadline to avoid a shutdown.
Negotiators say they’re on track to release appropriations bills this week in the upper chamber, after months of hearings and as the House has already passed half of the dozen annual funding bills in recent weeks.
But with roughly two months to go, a lack of an agreement on a top-line number, disagreements over defense funding and prickly legislative riders in areas like abortion mean appropriators have their work cut out for them.
Aris has the details here.
Good to Know
Sens. Pat Toomey (R-Pa.) and Kyrsten Sinema (D-Ariz.) introduced legislation on Tuesday that would exempt small crypto purchases from a capital gains tax.
The pair of lawmakers introduced a bill that would offer an exemption for personal transactions using cryptocurrency of less than $50 or personal transactions that have gains of under $50 from being subject to a capital gains tax.
Here’s what else we have our eye on:
Consumer confidence slipped for the third straight month in July as sky-high prices dampened demand for products and services, according to a new survey.
Sen. Bernie Sanders (I-Vt.) said Tuesday that the prescription drug reform proposal that Democrats plan to move under special budget reconciliation rules is “weak,” noting it covers a limited number of drugs and doesn’t substantially take effect until 2026.
Sens. Elizabeth Warren (D-Mass.) and Alex Padilla (D-Calif.) wrote a letter to Transportation Secretary Pete Buttigieg urging him to crack down on the airline industry as it experiences delays, cancellations and high prices.
That’s it for today. Thanks for reading and check out The Hill’s Finance page for the latest news and coverage. We’ll see you tomorrow.