We wish all readers a safe and successful Thanksgiving weekend. We’re about to enter the ‘’lame duck” congressional session. Will we have 3 weeks of chaos or clarity?
Let’s look at the electoral and post-election fate of the extreme alt-left and extreme alt-right Members of the House of Representatives. Has there been any attrition of extremists? First, an inventory. Please note that most of these seats (Democrats & Republicans) are in very safe, gerrymandered congressional districts, so that voting out any extremist is difficult given our present electoral system.
Here’s the Democrats.
“The Squad” was the name originally applied by Alexandria Ocasio-Cortez of New York to the four very leftist Members who formed it in 2018. The other three were Reps. Ilhan Omar of Minnesota, Rashida Tlaib of Michigan, and Ayanna Pressley of Massachusetts. Their number later grew to eight. The additions were Jamaal Bowman of New York, Cori Bush of Missouri, Greg Casar of Texas, and Summer Lee of Pennsylvania, who joined after the 2020 and 2022 congressional elections. (“The Squad,” https://simple.wikipedia.org/wiki/The_Squad_[United_States_Congress])
After this 2024 election cycle the is now reduced to six. Jamaal Bowman was defeated in his June 2024 primary, and Cori Bush lost her August 2024 primary.
The Republicans are more complicated.
The original Tea Party gave way to the Freedom Caucus, which was formed in January 2015 by Reps. Jim Jordan of Ohio, Scott Garrett of New Jersey, John Fleming of Louisiana, Matt Salmon of Arizona, Justin Amash of Michigan, Raúl Labrador of Idaho, Mick Mulvaney of South Carolina, Mark Meadows of North Carolina, and Ron DeSantis of Florida (this was before DeSantis became Florida’s governor).
There were 39 Freedom Caucus members as of July 2024, down from a high of 45 in 2022 (“Freedom Caucus,” https://en.wikipedia.org/wiki/Freedom_Caucus). After the 2024 election cycle, the Freedom Caucus is down to 35, with four members retiring, although their seats were all won by Republicans. (“2024 United States House of Representatives elections,” https://en.wikipedia.org/wiki/2024_United_States_House_of_Representatives_elections)
Within the Republican side, are the eight House Members that Speaker McCarthy labeled the “Crazy 8” after they dragged him into interminable haggling over his run for the speakership. McCarthy needed 15 ballots to become Speaker, and then he was forced out nine months later. Rep. Matt Gaetz of Florida was the ringleader of this Crazy 8 bunch, which also included Andy Biggs of Arizona, Ken Buck of Colorado, Tim Burchett of Tennessee, Eli Crane of Arizona, Bob Good of Virginia, Nancy Mace of South Carolina, and Matt Rosendale of Montana. (“Here are the 8 Republicans who voted to oust McCarthy as House speaker,” https://www.cnn.com/2023/10/03/politics/republicans-vote-remove-mccarthy-house-speaker/index.html)
Following his ouster, McCarthy fought back, saying that House Republicans would never be able to “heal” without “consequences” for the Crazy 8. McCarthy has campaigned relentlessly to defeat them. (“McCarthy: House GOP won’t “ever heal” unless there are ‘consequences’ for 8 Republicans who booted him from speakership,” https://www.politico.com/live-updates/2023/11/09/congress/house-speaker-gop-mccarthy-seeks-consequences-00126393)
And McCarthy has been partially successful. Following the election, the Crazy 8 was down to five, with the retirements of Buck and Rosendale and the primary defeat of Good (by a Trump endorsee). And now it is down one more, with Gaetz’s resignation from the House on Wed., Nov. 13, after he was tapped by Trump to be his Attorney General nominee and just days before the House Ethics Committee was slated to release an apparently damning report on Gaetz’s alleged multiple ethics violations involving sexual misconduct, illegal drug use, and accepting improper gifts (“Gaetz resigned days before ethics investigation report was expected,” https://www.washingtonpost.com/politics/2024/11/13/matt-gaetz-ethics-investigation-resign/). Gaetz has withdrawn his name for a Trump announced appointment.
One at a time, the alt left and alt right troublemakers have become targets of more centrist politicians in both parties. Or they may have been targets of replacements who were just as extreme but sensed their vulnerability. Probably some of each is the accurate description.
The next Congress has an enormous plate of issues. And there is the current lame duck session of only a few weeks, with Speaker Johnson’s slim Republican majority already threatened previously with a motion to vacate. That was before the election. Rep. M.T. Greene was the leading culprit in that failed attempt. The next three weeks may be exciting. Remember there is still no budget, only a Continuing Resolution and there is still long defense appropriation.
A final note. Right before the election the credit default swap pricing on the one-year tenor (maturity) of the interest rates had spiked to about 47 basis points. Since the election outcome became clear, the CDS price for a one-year tenor plummeted to 16 bps. Why? IMO, the foreign markets have decided that a Republican-sweep Congress is unlikely to use the credit default threat against itself. Note that the 5-year and 10-year tenors remain elevated.
I will be writing about CDS in a future missive. The key point is that global markets are following all this closely. IMO, the repricing of the world’s view of America’s credit risk is directly due to our politics.
I am scheduled to discuss this issue at the Money Show in Sarasota on December 7 at 11 in the morning. For information, see https://sarasotamms.com/. History: During the Great Financial Crisis 15 years ago, the CDS was a single-digit number for the one-year tenor. That was the pricing before then-Speaker Newt Gingrich launched the first threatened use of credit default in 2011. I will show all this history at the Money Show.
Lastly, in the research for our new book The Fed and The Flu, my co-authors and I examined what happens after epidemics, pandemics and plagues in terms of asset prices, interest rates, markets, wages, and other factors. One of the observations we made is that every plague we examined was followed by a period of disruption in governance, whether an emperor or with form of democracy. And there were numerous examples of “credit events.” So, all of this turmoil is not surprising if our history is examined by looking at the linkages between plagues and economics. Our book tries to do that in depth.
Here’s the website for The Fed and The Flu: http://www.thefedandtheflu.com. We expect to publish in February.
