Assessing the Autumn 2024 Budget

Economic

Summary:

Last Wednesday saw a landmark Budget, the first delivered by a Labour government for 14 years.

In Labour’s 2024 Autumn Budget, Chancellor Rachel Reeves confirmed changes to the UK fiscal rules. How are these changes beneficial and in what ways could they have gone further?

In a packed House of Commons, the Chancellor confirmed the two changes to the fiscal framework that she had announced a week earlier in the Financial Times and at an IMF meeting in Washington DC, namely a ‘stability’ (or deficit) rule and an ‘investment’ (or debt) rule. The former states that the current budget must move into balance by 2029-30 and from thereon must remain in balance by the third year of the rolling forecast, while the latter states that debt as a share of GDP must fall by 2029-30 of the rolling forecast.

This reform of the fiscal framework rests on a redefinition of public debt, replacing Public Sector Net Debt (excluding the Bank of England) with Public Sector Net Financial Liabilities (PSNFL). This debt measure encompasses all government financial assets and liabilities (liquid and illiquid), including funded pension schemes, student loans, and equity in private companies, but excluding non-financial assets such as buildings and roads.

Adopting a broader measure of debt is a step in the right direction and the more permissive fiscal rules will allow more public investment, helping to improve UK productivity growth. But the debt target remains arbitrary and makes the instrument of policy the objective of policy. Using PSNFL (or “persnuffle”) – will continue to restrict public investment by not leveraging the value of fixed assets on the government’s balance sheet, nor allowing enough time for public investment to generate returns through higher GDP. The government has widened the fiscal straitjacket rather than throwing it off.

Where we would like the government to go further is to provide a clear strategy that raises public investment over time to some 4-5 per cent of GDP to fill the gaps that lead to a structural deficit. Such a commitment is only credible if it is combined with a rigorous evaluation of progress and the establishment of a national development bank of scale with operational independence to appraise, allocate and assess the performance of public investment projects.

Another reform we have advocated for some time is greater transparency and accountability for economic policy making, which means that the Chancellor takes responsibility for progress made in pursuing objectives such as shared prosperity but also for when policies fall short. We need both an independent assessment of where the national economy is at and a State of the Nation’s Economy address in which the Chancellor explains how the Budget helps improve the country’s economic and social performance and what other policies are required to get us there.

Rather than raising the rate of income tax, corporation tax or VAT, the Chancellor has opted for a 1.2 percentage point rise in the rate of employer National Insurance Contributions (NICs). How do you expect this to impact the UK labour market?

Employer National Insurance Contributions – or NICs as they’re often called – are effectively a tax on employment. They represent a wedge between the wage the worker expects to receive from the employer and the actual cost to the employer of paying that worker. So, a rise in employer NICs represents a rise in the cost of employing workers.

As with any rise in costs, the employer has three choices. First, they could absorb the increased costs by allowing their margins to fall. But with profit margins falling over the past year or so, it’s not clear that firms have the room to do that. Second, they could raise prices, pushing up inflation. Third, they could look to cut their labour costs. What this means is a combination of lower wages and lower employment.

Given how hard it is to cut wages, firms would be most likely to look to cut employment over time by cutting back on their hiring. This would make it harder for unemployed workers to find jobs and, so, the rate of unemployment would rise. But over time, firms will also be able to pass on some of the increase to workers in the form of lower pay increases than would otherwise have been the case. So, we would eventually see both higher unemployment and lower real wages than would have been the case without the rise in employer NICs.

NIESR colleagues have used our macoreconometric model, NiGEM, to simulate the effects of the employer NICs increase. Their results are reported in our response to the Budget. They found that, over the next five years, the rise in employer NICs would result in a 0.1 per cent fall in GDP and a 0.1 percentage point rise in the unemployment rate. Although these effects might seem small, it is important to note that the NICs rise will affect some industries more than others. In particular, it will have larger effects where labour represents a higher proportion of total costs. Given that, we might expect the increase to adversely affect the hospitality and services sectors more than other sectors. In addition, the increase in costs resulting from the increased employer NICS will also particularly affect exporters, as UK firms’ costs will rise relative to their foreign competitors.

How will the government’s decision to keep personal income tax thresholds frozen until 2028/29 affect UK households?

Part of the new government’s economic inheritance was lower living standards, especially for the bottom 40 per cent of the United Kingdom’s population. In Nuffield-funded work on living standards we did in the run-up to the General Election, we found that living standards – measured in a way that reflects household composition and housing costs – have dropped by nearly 20 per cent for the poorest 10 per cent. That’s because low-income households spend a larger share of their budgets on essentials such as energy, housing and food than middle- or high-income households and prices for those essentials have gone up by much more than real wages.

Against this backdrop, we regret that the government will keep personal tax thresholds frozen for another three and a half years. This policy means that low-income households will pay more tax than they would have if the personal allowance of £12,570 was uprated in line with inflation. They will keep less of their earned income while simultaneously spending a larger proportion of their household budget on essentials. Using our household-level model LINDA, we have calculated that if the personal allowance had increased in line with inflation since 2020, it would have risen from £12,570 to £15,301.60. This means, for instance, that the new National Living Wage (NLW) of £12.21 would result in an annual full-time wage of £22,107.92, net of the basic tax rate. In reality, NLW earners will receive £21,561.60, that is, £546.32 less per year. Therefore, the higher rate of the NLW does not make up for the ‘fiscal drag’.

In short, the lowest 10 per cent of earners will face an extra burden of about £600 per year. Thus, ‘fiscal drag’ reduces living standards. And because it reduces consumption, ‘fiscal drag’ is likely a drag on growth.

To what extent do you think this budget will unlock the economic growth that this country needs?

The new government has made economic growth its number one priority. This follows years of low growth and near stagnant productivity. But reversing this trend is a lot easier said than done! To a large degree, it is out of the government’s control. To increase productivity growth, we need to see technological advance and, perhaps more importantly, new innovation that makes use of new technology in ways that add to economic output and the quality of all our lives. The best thing the government can do in all of this is to create a strong economic environment for technological progress to occur. In practice, this means investment in infrastructure and research and development – which supports the ability of firms to source the materials they need, produce their goods and services, and distribute these out to wherever the demand is – investment in the health and skills of the labour force, and provision of support for private investment through appropriate rather than excessive regulation as well as tax incentives and subsidies.

In that light, the Budget certainly represented a step in the right direction. A number of public investment projects were announced, for example improvements to the Trans-Pennine railway and the completion of HS2 between Old Oak Common and Euston, as well as £20 billion worth of government R&D. In fact, the government is expecting to invest a total of around £35 billion on economic infrastructure in 2025-26. The Chancellor also announced a much needed £22.6 billion increase in day-to-day spending in the NHS as well as a £240 million ‘Get Britain Working’ package. This spending ought to have some effect in reducing inactivity due to ill health and so increase the UK labour force, which in turn should help growth. But I suspect this effect is likely to be small. In terms of incentivising private investment, the ‘Corporate Tax Roadmap’ should provide a boost by reducing uncertainty, enabling firms to plan their investment without needing to worry about surprise changes in taxes or regulation. In addition, the maintenance of Full Expense Accounting, the higher Annual Investment Allowance of £1 million, and R&D tax reliefs, should all help to create the right conditions for private investment, and so economic growth, to flourish.

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Daily News

Economic

[Quick Facts]

Trump says he spoke to Zelensky, still planning Putin call.

The Federal Reserve cuts interest rates by 25 basis points.

S&P Global: Trump is unlikely to impose full tariff plan.

The Bank of England cuts interest rates by 25 basis points to 4.75%.

WSJ's Timiraos: Fed may revise its baseline scenario in December.

[News Details]

Trump says he spoke to Zelensky, still planning Putin call

U.S. President-elect Donald Trump said that he has had approximately 70 phone conversations with world leaders since winning the election. However, Russian President Vladimir Putin was not among them, though he still intends to speak with him. "I think we will talk," Trump said in an interview on Thursday.

During his campaign, Trump promised to call Putin immediately after winning the election and to broker a peace agreement with Ukraine. He has repeatedly hinted that he hopes to reduce or stop U.S. support for Kyiv, suggesting that Ukrainian President Zelensky may need to accept territorial losses to end the war.

The Federal Reserve cuts interest rates by 25 basis points

On November 7, the Federal Reserve announced it would lower the target range for the federal funds rate by 25 basis points to 4.5%-4.75%, marking the second rate cut in this cycle after a 50 basis-point reduction in September. Its monetary policy statement indicated that, despite low unemployment, "labor market conditions have generally eased," and inflation continues to approach the Fed's 2% target. Risks to achieving employment and inflation targets are roughly balanced. When considering further adjustments to the federal funds rate target range, the committee will carefully evaluate incoming data, changing outlooks, and risk balances.

Later, Fed Chair Powell said at a press conference that uncertainty about the outlook limits the Fed's ability to project monetary policy. While the Fed has gained confidence in lowering rates, it is not the right time for extensive forward guidance. As it approaches a neutral rate, slowing the pace of rate cuts may become necessary. The Fed is moving towards a more neutral stance. When discussing the impact of the U.S. election, Powell said the election would not affect policy in the short term.

S&P Global: Trump is unlikely to impose full tariff plan

In a report released on Thursday, S&P Global noted that U.S. President-elect Trump promised to impose a 10% tariff on all imports and a 60% tariff on Chinese goods, which might only be a starting point for negotiations. According to the report, although it is unlikely these tariffs would be implemented at these levels, a 10% universal tariff could raise U.S. inflation by as much as 1.8 percentage points if it were. The report added that this would cause inflation to spike in the first year rather than have a sustained effect, potentially reducing output by up to one percentage point.

S&P noted that raising tariffs on Chinese goods to 60% could push inflation up by as much as 1.2 percentage points and lower output by around 0.5 percentage points. S&P said it might downgrade the U.S.'s current AA+ rating within the next two to three years if political developments strain U.S. institutions or endanger the dollar's status as the primary reserve currency, or if the U.S.'s already high deficit increases further.

The Bank of England cuts interest rates by 25 basis points to 4.75%

On November 7, the Bank of England voted 8-1 at its November policy meeting to lower the benchmark rate from 5% to 4.75% as expected, with only committee member Mann opposing the cut. Mann preferred to keep the rate unchanged. This is the second rate cut this year by the Bank of England, following a reduction in August as inflation eased.

The monetary policy report noted continued progress in controlling inflation, particularly as external shocks fade and domestic inflationary pressures gradually ease. Following the release of the budget, both inflation and growth expectations have risen, so future rate cuts should be gradual.

Governor Andrew Bailey said at a press conference that the bond sell-off was mainly due to forced liquidations of short-term bets by investors. Previously, the market was reluctant to take active positions due to the uncertain outcome of the U.S. presidential election. That may now be over.

WSJ's Timiraos: Fed may revise its baseline scenario in December

Nick Timiraos, a Wall Street Journal reporter, commented on the Fed's November rate decision, noting that Fed officials now face the question of whether the election results could meaningfully alter economic demand or inflation, potentially requiring a different policy path. Officials will not change their policy stance until they understand Trump's proposals on tax, tariffs, and immigration. But if Republicans control both houses of Congress, they may start revising the baseline scenario at the December meeting.

[Today's Focus]

UTC+8 10:45 – Reserve Bank of Australia Assistant Governor Jones Speaks

UTC+8 20:15 – Bank of England Chief Economist Pill Speaks

UTC+8 23:00 – U.S. UMich Consumer Sentiment Index Prelim (Nov)

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JanusHenderson

Economic

Stocks

Investors have spent much of 2024 trying to make sense of the U.S. election and the implications for markets. Now they’re getting answers — and quickly: Donald Trump has secured a second term as president, the Senate majority has flipped to Republicans, and the race for control of the House remains tight. It’s a strong victory for Republicans and a win for equity markets as election uncertainty gets removed.

On election night, U.S. stocks were clear beneficiaries. S&P 500® futures rose as votes were being tallied, as did contracts tied to the Russell 2000 Index, the benchmark of small-cap U.S. companies. The positive momentum spread globally, with select ex U.S. markets also rising as the election outcome crystalized.

Trump is viewed as supporting lower corporate tax rates, deregulation, and industrial policies that favor domestic growth, all of which could provide more stimulus to the U.S. economy and benefit risk assets. These policies could also lead to a stronger dollar, which would be a boon for U.S. small-cap firms with a domestic focus. During the 2016 election, the S&P 500 Index gained nearly 5% from the day before the presidential election through the end of the year in what became known as the Trump rally.1 We expect a similar trend could play out this time around, too.

Implications for markets

Longer term, though, history shows equity markets are more likely to be indifferent to whichever party is in power. A Republican-led White House and Congress has been just as likely to see positive equity returns as a Democrat-led or divided government (Figure 1). That’s because over the long term, what tends to matter most for stock returns are not elections but factors such as corporate earnings, economic growth, and interest rates.

A Win for Republicans Boosts US Stocks_1

The good news on that front: All have been trending positively in the U.S. In the third quarter, the U.S. economy grew at an annual rate of 2.8%, continuing a more-than two-year run of expansion.2 In September, the Federal Reserve kicked off a rate-cutting cycle that could continue into next year should inflation remain contained. And earnings for the S&P 500 are projected to rise ~15% in 2025, up from an estimated 9% for 2024.3

Next steps for investors

That’s not to say the election is inconsequential. We will get the first measure of the new government early next year, when lawmakers must agree to raise the debt limit (the total amount of debt the U.S. is allowed to accrue, as determined by Congress) or risk the country defaulting on its obligations. Meanwhile, the 2017 Tax Cuts and Jobs Act — which was signed into law under Trump and reduced tax rates for individuals and corporations — is set to expire by the end of 2025.

To that end, we could see bouts of volatility if a Republican mandate results in extreme measures. Trump, for example, has proposed not only extending the 2017 tax cuts but adding to them, which could exacerbate an already ballooning federal deficit. He has also promised to impose tariffs of as much as 60% on imports, which could work to fan inflation and lift Treasury yields. And markets that could be on the losing end of trade policies, such as China, could weaken.

We think the reality will be nuanced. For example, while fears exist about the impact of tariffs on non-U.S. markets, in aggregate, we believe they are overblown as they relate to Europe. We also think a strong dollar is generally quite positive for European and Japanese exporters. We covered other potential implications earlier this year, highlighting that areas such as financials might get less stringent regulatory oversight under Republican leadership and that a Trump administration could walk back tax credits for wind, solar, and electric vehicles.

Still, policy doesn’t always match campaign rhetoric, and even among Republicans, there are divisions on key issues. As such, we’d encourage investors to stay focused on bigger themes that have proven to be major drivers of markets lately. These include innovation in healthcare, productivity growth from artificial intelligence, and the rise of new manufacturing hubs in emerging markets. Ultimately, these and other trends, which look set to play out for years to come, could have more influence over which stocks outperform over the long term than any one election.

To stay updated on all economic events of today, please check out our Economic calendar

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WELLS FARGO

Economic

Tariffs & Taxes to Dominate the Post-Election Policy Outlook

Election Day 2024 finally has come and gone. Although the outcome of every race has not yet been determined, the outlook for control of Congress and the White House has become considerably clearer. Donald Trump has been elected President of the United States, becoming just the second person to serve two non-consecutive terms as president (Grover Cleveland was the first person to accomplish this feat. Cleveland was elected in 1884 and 1892).

In the Senate, Democrats entered the election with a 51-49 seat majority when including the three independents who caucus with the Democrats. Republicans picked up Senate seats in West Virginia, Ohio and Montana, with several more contested seats still undecided. Republicans appear destined for a majority of at least a few seats in the upper chamber of Congress, although this is not yet finalized. In the House of Representatives, Republicans possessed a 220-212 majority going into election night (three seats are currently vacant). Although some races are still too close to call, it appears more likely than not Republicans will hold onto their majority in the lower chamber of Congress. If realized, this would result in Republican control of both chambers of Congress and the White House for the first time since 2017–2018.

Because the dust has not yet settled on the election, we will not rush into any major forecast changes today. We will publish our 2025 Annual Economic Outlook (AEO) in about two weeks (November 21), and the AEO will contain an in-depth discussion of our post-election forecast for the U.S. economy. We will also be hosting a webinar that same day to discuss our annual outlook. But for now, we will walk through our preliminary thoughts on the recent election results and their implications for the U.S. economy.

Tax & Spend Policy

As a candidate, Donald Trump expressed support for a variety of new tax & spend policies. Some of these proposals came with concrete details, while others were more high-level and vague in nature. The Committee for a Responsible Federal Budget (CRFB), a nonpartisan think tank in Washington, D.C. that covers fiscal policy issues, published an exhaustive analysis attempting to quantify the costs and savings of Donald Trump’s campaign proposals. The table below summarizes this analysis, with the “high” and “low” estimates representing the range of potential outcomes depending on what exactly one assumes when nailing down the specifics of each proposal. In the CRFB’s central estimate, the cumulative budget deficit would increase by $7.75 trillion over the 10-year period starting in FY 2026 if all of Donald Trump’s proposals became law. If realized, this would amount to approximately 2.6% of U.S. GDP per year. Note that this estimate of $7.75 trillion would be in addition to the roughly $22.1 trillion cumulative budget deficit that the Congressional Budget Office (CBO) already projects the federal government will incur over the next decade under current law.

Figure 1

Of course, the table above shows a very broad range of estimates that contain a significant amount of uncertainty. Furthermore, just because a candidate proposes something does not mean it necessarily will become law. More often than not, most of a candidate’s campaign proposals do not make it over the finish line. Determining exactly what will become law in the immediate aftermath of an election is probably a fool’s errand, but what we can do is share the policy areas where we feel the most and least confident.

Republicans seem intent on extending the expiring parts of the 2017 Tax Cuts and Jobs Act (TCJA) that are scheduled to lapse at the end of 2025. We discussed the outlook for the TCJA and its potential economic implications in a recent report, and we would suggest our readers check out that report for a deeper dive into the outlook for U.S. tax policy. We feel reasonably confident Republicans will extend most or all of the TCJA, and an extension is already in our economic forecast. As a result, a full extension enacted some time next year, should that occur, would not have an impact on our forecasts for economic growth, inflation, the federal budget deficit, etc. Note also that a simple extension of the TCJA would not impart a fiscal impulse to the economy. Individual income tax rates would not be cut from their current levels. Rather, TCJA extension would prevent tax rates from rising back to their pre-2017 levels.

What about other, new tax cuts? We are more uncertain about the outlook for tax policy beyond TCJA extension. Some additional tax cuts seem probable in our view, although how large they are and what specific taxes are cut is difficult to say. As a starting point, the original TCJA cost $1.5 trillion on net over 10 years. New tax cuts of this size in addition to TCJA extension probably would lead us to upwardly revise our forecasts for real GDP growth and inflation by a couple of tenths of a percentage point in 2026 and 2027, all else equal.

Perhaps additional tax cuts could be even larger than this, but we note the fiscal realities at present are different from what they were in 2016 when Donald Trump last took office. Just extending the TCJA and leaving spending on its current trajectory would leave the gap between revenues and outlays historically wide in the years to come (Figure 2). Interest rates are elevated compared to the 2010s, and the United States is already running the largest structural budget deficit among its G7 peers (Figure 3). Furthermore, bear in mind that tax policy is an area where Congress will be involved heavily in the policymaking process. The president cannot unilaterally change federal income tax rates. This is in contrast to tariffs, the topic to which we turn next.

Figure 2

Figure 3

Trade Policy

During the campaign, President-elect Trump vowed to impose a 10% across-the-board tariff on America’s trading partners with a 60% tariff levied on China. As we wrote in a report we published in July, these tariff increases, if implemented shortly after Inauguration Day on January 20, would impart a modest stagflationary shock to the U.S. economy. Our model simulations show that the core CPI inflation rate next year would shoot up from its baseline value of 2.7% to 4.0% (Figure 4).1 The unemployment rate would rise from a baseline of 4.3% to 4.6% (Figure 5). If trading partners retaliate with their own equivalent tariffs on American exports—60% in the case of China and 10% for everyone else—the jobless rate rises even further to 4.8%. Under this scenario, U.S. real GDP would grow by a sluggish 0.6% in 2025.

Of course, President-elect Trump may decide not to impose tariffs so quickly upon taking office. He may reconsider given the potential drawbacks of the levies, or the administration may use the threat of tariffs as a negotiating tactic with foreign governments. The president also may decide to exempt certain products and/or countries. However, given Trump’s frequent mentioning of tariffs during the campaign and his previous use of levies in 2018–2019, which affected more than $400 billion of American imports, we advise readers to take the president-elect’s threats of tariffs seriously if not literally. Moreover, over the past few decades Congress has delegated significant powers to the president to act unilaterally in regard to trade policy. Therefore, the president would not need congressional approval to impose significant tariffs on America’s trading partners.

Figure 4

Figure 5

Given the uncertainty on the tariff outlook, our forecast will not fully adopt the results that are implied by the model simulations discussed above. These estimates are probably closer to an upper-bound than they are the midpoint of the range of possible outcomes. That said, we are inclined to push up our core CPI inflation forecasts for 2025, currently 2.7%, given the balance of risks. Note that the tariffs would directionally offset the boost to economic growth from tax cuts but would further add to the inflationary impulse from tax cuts for households. Thus, although we may reduce our economic growth forecasts for the next couple of years due to higher tariffs, tax cuts could serve as a mitigating factor. Finally, bear in mind that tariffs increase federal revenues, suggesting that they might help limit deficit widening that would result from extending and expanding the TCJA. Depending on the policies that are ultimately adopted, these changes could increase tariff revenue for the federal government by a few hundred billion dollars per year (Figure 6).

Figure 6

Federal Reserve & Monetary Policy

Our current forecast looks for the Federal Open Market Committee (FOMC) to cut its target range for the federal funds rate, currently 4.75%-5.00%, to 3.00%-3.25% by the end of next year. However, the FOMC may not want to ease policy by that amount if new tax cuts and tariffs cause inflation to shoot higher over the next couple of years. Thus, the risks to our fed funds rate forecast are skewed to the upside (i.e., less easing next year than we currently project).

In our view, it is important to remember that not all sources of inflation are created equal. The FOMC’s reaction function likely would be more hawkish in response to higher inflation from tax cuts than from tariffs. Fiscal stimulus via tax cuts likely would lead to faster economic growth and lower unemployment in the near term, while tariffs would reduce economic growth and increase unemployment. Tighter monetary policy is an effective method for slowing demand growth, but it cannot do much to combat supply-side pressure on inflation from tariffs. Put another way, both tariffs and tax cuts would increase U.S. inflation, but tighter monetary policy is a much more effective remedy for the latter than the former.

During his upcoming four-year term, President-elect Trump will have the ability to reappoint or replace Jerome Powell in May 2026 as the Chair of the Federal Reserve System (Figure 7). Additionally, Trump could reappoint or replace Philip Jefferson as the Vice Chair of the Federal Reserve (September 2027) and Michael Barr as the Vice Chair of Supervision (July 2026). As a candidate, Trump has said that the president should have a say in the monetary policy decisions of the Federal Reserve. Giving the president a vote on the FOMC would require a change in the Federal Reserve Act. We are skeptical that Congress would change the Federal Reserve Act in such a momentous direction. More likely, Trump could nominate individuals to leadership positions on the Federal Reserve Board who are sympathetic to the president’s monetary policy views. Those nominees would need to be confirmed by the Senate. Depending on the qualifications of those individuals, it is an open question at this point whether the Senate would confirm their nominations.

Figure 7

Immigration Policy

President-elect Trump has vowed to secure the nation’s borders and to deport undocumented immigrants, which the Pew Research Center estimates totaled 11 million individuals in 2022.2 The American labor force grew at an annual average rate of 1.6% in 2022–2023, the strongest growth rate in more than 20 years. As we noted in a report we published earlier this year, more than half of this supercharged growth rate was due to “foreign born” workers, many of whom undoubtedly are undocumented. As we also noted in that report, labor force growth is one of the primary determinants of a country’s long-term potential rate of economic growth. Therefore, policies restricting immigration and/or large-scale deportations would lead to slower labor force growth and, by extension, slower potential economic growth, everything else equal. There very well may be valid reasons to adopt such a policy. But, side effects of a policy that restricts immigration and deports undocumented people likely would be upward pressures on labor costs and a detrimental effect on the nation’s potential economic growth rate.

Unauthorized immigration is difficult to measure, but recent data from the Department of Homeland Security show that encounters at the U.S. border, a proxy for undocumented immigration, increased significantly over the past few years (Figure 8). However, monthly data show that encounters at the border have fallen sharply in recent months (Figure 9). Our forecast assumes labor force growth of 0.5%-1.0% in 2025 and 2026, much slower than the 1.6% pace that prevailed in 2022 and 2023. This forecast assumes that immigration into the United States continues to normalize relative to its surge over the past few years.

Thus, even if President-elect Trump uses executive authority to further tighten immigration restrictions, it may have a marginal rather than major impact on our forecast for the U.S. labor force and economy. Much more sweeping policy changes could occur if Congress were to legislate changes to the U.S. immigration system, but it is much harder to make changes to immigration law using budget reconciliation, in contrast to other more directly budget-related policy areas, such as taxes.3 Without budget reconciliation, any such bill would be subject to the 60-vote filibuster threshold in the Senate.

Figure 8

Figure 9

Conclusion: Some Uncertainty Removed, but Plenty Remains

The return of Republican control of Congress and the White House for the first time since 2017–2018 opens the door to potential policy changes that will impact our economic outlook. It goes without saying that there is tremendous uncertainty about what will be enacted over the course of the next two years under President-elect Trump and this Congress. Extending the TCJA seems quite likely, and additional tax cuts seem possible, although the size, timing and specifics are yet to be determined. Directionally at least, policy change along these lines would be consistent with more fiscal stimulus and faster economic growth and inflation over the next few years. If higher tariffs are also enacted, this would further boost our inflation forecasts in the near term, but it would dampen our economic growth outlook. On balance, we think the risks are skewed to the upside for our federal funds target range forecast for year-end 2025, currently 3.00%-3.25%.

We will publish our 2025 Annual Economic Outlook (AEO) in about two weeks (November 21), and the AEO will contain an in-depth discussion of our post-election forecast for the U.S. economy. We will also be hosting a webinar that same day to discuss our annual outlook. We would encourage our readers to tune in after we have fine-tuned our forecasts in the days ahead.

It goes without saying that there is tremendous uncertainty about what will be enacted over the course of the next two years under President Trump and this Congress.

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Justin

Economic

Political

Americans in 10 states cast votes on ballot measures to protect or expand abortion access, and in seven, the measures for abortion rights won. That brings the total to 13 states approving abortion rights referendums since Roe v. Wade was overturned in 2022.

Ballot proposals sailed through on Tuesday not only in blue states like New York and Maryland, but also in red and purple states like Arizona, Nevada, Colorado, and Montana. Missouri, which was the first state to completely ban abortion after Roe fell, is now the first state to overturn a ban. All told, the pro-abortion rights measures passed on Tuesday will expand access for millions of women of reproductive age who live in those states, as well as thousands of others traveling from more restrictive areas for care.

The biggest loss of the night was undoubtedly in Florida, where advocates had raised more than $100 million to reverse the state’s near-total ban on abortion. The ban, which took effect this past spring, has decimated access not only for residents living in the third most populous state but also for people across the South who had been traveling to Florida since Roe was overturned. While a majority of Florida voters backed the proposal, which would have restored abortion rights up to the point of fetal viability — typically between 22 and 24 weeks of a pregnancy — Florida law requires at least 60 percent of voters to approve a ballot measure to pass.

This 60 percent “supermajority” threshold is simply a high bar for any referendum, and Florida’s earned 57 percent. Of all the winning abortion rights ballot measures that have passed in red or purple states since Roe’s overturn, none have reached that 60 percent level. In 2023, Republican lawmakers tried to raise Ohio’s ballot measure threshold to 60 percent precisely to make it harder for a pending abortion rights proposal to pass, and voters rejected the move. Ohio voters ultimately approved their abortion rights measure by 57 percent.

The other losses Tuesday night were in red states, like Nebraska, where voters were confronted with two (intentionally confusing) constitutional measures, and South Dakota, where reproductive rights groups didn’t help campaign for a ballot measure that would have overturned the state’s total ban. The ballot measure failed.

Ballot measures have become a powerful tool over the past 2.5 years, giving voters a direct way to challenge abortion bans and often cutting across partisan divides. Measures in red and purple states have won precisely because they’ve earned votes from individuals who otherwise cast ballots for Republicans, libertarians, or no candidate at all. On Tuesday, for example, voters in Arizona, Missouri, and Montana elected Donald Trump, but still cast their ballots in favor of abortion rights.

Anti-abortion groups were determined to end the clean winning streak of the abortion rights movement this year. The 2022 midterms were “a wake-up call that taught us we have a ton of work to do,” Kelsey Pritchard, the state public affairs director for Susan B. Anthony Pro-Life America, told Politico in the spring of 2023. “We’re going to be really engaged on these ballot measures,” she promised.

And indeed, anti-abortion leaders did lean in much harder this cycle, leveraging a range of new tactics. In Florida, for example, Republican Gov. Ron DeSantis actively attacked the proposed ballot measure for months, using his state agencies to help, including by threatening local television stations with criminal penalties if they aired ads in support of the abortion rights measure.

“Florida Governor Ron DeSantis deserves special recognition for taking the abortion industry head on and setting a new standard for what it means to be a Pro-Life Champion as a state’s chief executive,” said Carol Tobias, the president of National Right to Life, in a statement after Florida’s measure failed.

Still, in the end, proponents for abortion rights nationwide raised nearly six times as much as their opponents, according to a recent campaign finance analysis by the Associated Press. Abortion rights advocates spent more than three times as much as anti-abortion activists on TV, streaming services, radio, and websites, according to the AP.

“While we are disappointed with the Florida ballot measure election results not meeting the 60% threshold, we still saw the majority of Floridians voting in support of abortion access,” said Nourbese Flint, president of the pro-abortion rights group All In Action Fund. “This outcome is a direct result of anti-democratic tactics designed to undermine the will of the people and Floridians’ access to life-saving medical care.”

While organizers for abortion rights ballot campaigns have a lot to feel proud of, even in states that have approved measures, rights will not be restored immediately, and in some cases litigation is likely to follow. In Nevada, voters will need to reapprove their measure in 2026 to formally amend their constitution. Moreover, restoring legal rights is not the same as restoring access, and even in states with favorable laws many women still struggle to afford their abortion care.

Abortion rights looked potent, but it will take time to get a clear sense of what happened

Going into election night, it wasn’t clear how much abortion rights would matter to voters, compared to issues like the economy and immigration and crime. While it was clear it mattered to voters in the midterms, election experts say those voters — known as “high propensity” or “frequent” voters — tend to prioritize different issues from those who vote only once every four years. Roughly 160 million Americans cast ballots in the 2020 election, or 67 percent of the voting-eligible population. By contrast, just 112 million people voted in 2022, or 46 percent of those eligible.

It was also unclear how much ticket-splitting there would be this cycle, as polarization tends to ramp up in presidential elections compared to midterms. We still don’t yet know the gender or racial breakdown for Election Day voters, although early results indicated that women were turning out in higher numbers than men. Women voters make up a slight majority of the voting population, and advocates were banking on women being particularly motivated to protect abortion rights this cycle. We’ll continue to update our coverage as we get more information about how the votes broke down.

The 2024 election certainly won’t end the national debate around abortion. The election of Donald Trump to the White House, and Republican control of at least the US Senate, are setbacks for abortion rights advocates, who had hoped to restore access to care. However, the success of abortion rights ballot measures offers more hopeful signs and reaffirms the unpopularity of many state restrictions, even in states where referendums lost.

“Abortion rights are winnable in pretty much any state at this point,” said Joey Teitelbaum, a pollster with Global Strategy Group who has worked on nine state abortion rights ballot measure campaigns over the last three years. “People have been very clear about what side they are on, and just because a candidate or a ballot measure loses, it does not change that fact.”

Source:Vox

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Warren Takunda

Cryptocurrency

Bitcoin Open Interest (OI) surged to an all-time high as Bitcoin rallied to $75,000 and several analysts suggested there may be more upside ahead.

Bitcoin OI — a metric tracking the total number of unsettled Bitcoin derivative contracts such as options and futures — reached $45.4 billion, representing a 13.3% increase since Nov. 5, when Bitcoin’s price broke through its $73,800 all-time high set in March, according to CoinGlass data. Bitcoin Open Interest Tops Chart After Hitting $75K ‘Sweet Spot’_1

Bitcoin Open Interest Tops Chart After Hitting $75K ‘Sweet Spot’_1

Bitcoin Open Interest reached $45.41 billion on Nov. 6. Source: CoinGlass

OI increases when the number of new long positions opened by buyers or new short positions by sellers is more significant than the number of contracts closed on that day.

Traders don’t appear to expect Bitcoin’s price to retrace to the previous high of $73,679 anytime soon, with $1.26 billion in short positions at risk of liquidation if it does.

At the time of publication, Bitcoin was trading at $75,792, according to TradingView data, and analysts were speculating that the price is in an ideal range.

“Bitcoin is now in the sweet spot of the bull market halving cycle that should top in the $130k to $150K range next Aug/Sep. I measure cycles differently than most,” veteran trader Peter Brandt wrote in a Nov. 6 X post.

Analysts suggest Bitcoin has more room to grow

While Bitcoin reaching all-time highs often raises concerns among newer crypto investors about the asset being overvalued, not all analysts agree.

Crypto analyst Rajat Soni, for one, said it’s still early:

“We are so early in Bitcoin’s adoption that you can still exchange pieces of paper ($, €, £, etc.) for BTC because most of the world thinks fiat currencies are backed by something tangible.”

Echoing a similar sentiment, crypto analysis firm CryptoQuant said that Bitcoin is “not overheated” yet.

“Bitcoin’s new all-time high doesn’t mean it’s overvalued relative to its cost basis,” the firm said in a Nov. 6 X post. Bitcoin Open Interest Tops Chart After Hitting $75K ‘Sweet Spot’_2

Bitcoin Open Interest Tops Chart After Hitting $75K ‘Sweet Spot’_2

Source: CryptoQuant

The analysis firm added that Bitcoin’s Market Value to Realized Value (MVRV) ratio “is still far from peak levels.”

The higher the MVRV, the more it signals to traders that Bitcoin may be overbought. When Bitcoin reached its all-time high of $73,679 in March, the MVRV was around 2.87, according to Bitbo data.

At the time of publication, Bitcoin’s MVRV score was 2.19.

Source: Cointelegraph

Risk Warnings and Disclaimers

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Justin

Political

The 2024 presidential election is over — and Donald Trump is the victor. There is no doubt about the election’s legitimacy: Trump is on track to win the Electoral College by a wide margin, and potentially win the popular vote for the first time.

Yet while the election itself was clearly on the level, what comes next may not be. Having won power democratically, Trump is now in a position to enact his long-proposed plans to hollow out American democracy from within.

Trump and his team have developed detailed plans for turning the federal government into an extension of his will: an instrument for carrying out his oft-promised “retribution” against President Joe Biden, Vice President Kamala Harris, and anyone else who has opposed him. Trump’s inner circle, purged of nearly anyone who might challenge him, is ready to enact his will. And the Supreme Court, in its wisdom, has granted him sweeping immunity from his actions in office.

In nearly every conceivable way, a second Trump administration will likely be more dangerous than the first, a term that ended in over 1 million deaths from Covid-19 and a riot at the Capitol. A predictable crisis — a president consolidating power in his own hands and using it to punish his enemies — looms on the horizon, with many unpredictable crises likely waiting in the wings.

Yet as dire as things are, America has reserves it can draw on to withstand the coming assault. Over the course of the country’s long democratic history, it has built up robust systems for checking abuses of power.

America’s federal structure gives blue states control over key powers like election administration. Its independent judiciary stood strong during Trump’s first term. Its professional, apolitical military will likely push back against unlawful orders. Its politically active citizenry has a proven capacity to take to the streets. And America’s world-leading media will fiercely resist any effort to compromise its independence.

No country at America’s level of political-economic development has ever collapsed into authoritarianism. There are some reasonably close modern analogues, most worryingly modern Hungary, but even they are different in crucial respects.

This is not to make an argument for complacency or naive optimism. Quite the opposite: The next four years will be American democracy’s gravest threat since the Civil War; if it survives them, it will surely do so battered, bruised, and battle-scarred.

But this realism should not be cause for succumbing to despair. As grim as things feel now, it’s possible that — if people take the gravity of the threat seriously — the republic may come out intact on the other side.

Trump’s scary second-term agenda, explained

We do not know why, exactly, America’s voters have chosen to return Trump to high office. The data isn’t fully in, let alone analyzed in detail. But as murky as the electoral picture remains, certain elements of the policy future are crystal clear. Trump’s own comments, his campaign’s statements, and allied documents like Project 2025 give us a relatively coherent picture of what the agenda will be in the next Trump administration.

Much of it resembles what you’d see from any other Republican president. Trump will appoint corporate allies to lead federal agencies, where they will work to slash regulations on issues ranging from workplace safety standards to pollution. He has already proposed regressive tax cuts without off-setting hikes, which would increase the federal deficit in the same way as President George W. Bush’s fiscal policy did. He will likely take steps to curtail abortion access, end federal police efforts to rein in abusive police, and crack down on federal protections for trans people — all examples of how his agenda would hurt certain groups of people, typically already vulnerable ones, more than others.

Trump’s biggest breaks with his party in traditional policy areas will likely come on trade, immigration, and foreign policy. Trump has proposed a “universal” tariff on imported goods, a mass deportation campaign that detains suspected “illegals” in camps, and weakening America’s commitment to the NATO alliance. These policies would together be a recipe for economic decline, domestic turmoil, and global chaos — at an already chaotic time.

But perhaps the most dangerous Trump policies will come in an area that traditionally transcends partisan conflict: the nature of the American system of government itself.

Throughout the campaign, Trump has proven himself obsessed with two ideas: exerting personal control over the federal government, and exacting “retribution” against Democrats who challenged him and the prosecutors who indicted him. His team has, obligingly, provided detailed plans for doing both of these things.

This process begins with something called Schedule F, an executive order Trump issued at the end of his first term but never got to implement. Schedule F reclassifies a large chunk of the professional civil service — likely upward of 50,000 people — as political appointees. Trump could fire these nonpartisan officials and replace them with cronies: people who would follow his orders, no matter how dubious. Trump has vowed to revive Schedule F “immediately” upon returning to office, and there is no reason to doubt him.

Between a newly compliant bureaucracy and leadership ranks purged of first-term dissenting voices like former Defense Secretary Jim Mattis, Trump will face little resistance as he attempts to implement policies that threaten core democratic freedoms.

And Trump and his team have already proposed many of them. Notable examples include investigating leading Democrats on questionable charges, prosecuting local election administrators, using regulatory authority for retribution against corporations that cross him, and either shuttering public broadcasters or turning them into propaganda mouthpieces. Trump and his allies have claimed unilateral executive authority to take all of these actions. (It remains unclear which party will control the House, but Republicans will be in charge of the Senate for at least the next two years.)

Ultimately, all this executive activity is aimed at turning the United States into a larger version of Hungary — a country whose leadership and policies are regularly praised by Trump, Vice President-elect JD Vance, and Project 2025 leader Kevin Roberts.

Hungary still has elections and nominal free speech rights; there are no tanks in the streets or concentration camps for regime critics. But it is a place where everything — from the national elections authority down to government art agencies — has been twisted to punish dissent and spread the government’s propaganda. Every aspect of government has been bent to ensure that national elections are contests in which the opposition never has a fighting chance. It is a kind of stealth autocratization, one that maintains the veneer of democracy while hollowing it from within.

This is why the second Trump presidency is an extinction-level threat to American democracy. The governing agenda Trump and his allies explicitly laid out is a systematic attempt to turn Washington into Budapest-on-the-Potomac, to deliberately and quietly destroy democracy from within.

Democracy is not lost

It is important to remember that, as dire as things are, the United States is not Hungary.

When Prime Minister Viktor Orbán came to power in 2010, he had a two-thirds majority in the country’s parliament — one that allowed him to pass a new constitution that twisted election rules in his party’s favor and imposed political controls on the judiciary. Trump has no such majority, and the US Constitution is nearly impossible to amend.

America’s federal structure also creates quite a few checks on the national government’s power. Election administration in America is done at the state level, which makes it very hard for Trump to seize control over it from Washington. A lot of prosecution is done by district attorneys who don’t answer to Trump and might resist federal bullying.

The American media is much bigger and more robust than its Hungarian peers. Orbán brought the press to heel by, among other things, politicizing government ad purchasing — a stream of revenue that the American press, for all our problems, does not depend on.

But most fundamentally, the American population has something Hungarians didn’t: advanced warning.

While the form of subtle authoritarianism pioneered in Hungary was novel in 2010, it’s well understood today. Orbán managed to come across as a “normal” democratic leader until it was too late to undo what he had done; Trump is taking office with roughly half the voting public primed to see him as a threat to democracy and resist as such. He can expect major opposition to his most authoritarian plans not only from the elected opposition, but from the federal bureaucracy, lower levels of government, civil society, and the people themselves.

This is the case against despair.

As grim as things seem now, little in politics is a given — especially not the outcome of a struggle as titanic as the one about to unfold in the United States. While Trump has four years to attack democracy, using a playbook he and his team have been developing since the moment he left office, defenders of democracy have also had time to prepare and develop countermeasures. Now is the time to begin deploying them.

Trump has won the presidency, which gives him a tremendous amount of power to make his antidemocratic dreams into reality. But it is not unlimited power, and there are robust means of resistance. The fate of the American republic will depend on how willing Americans are to take up the fight.