Economics
The A to Z of US politics
Published
9 months agoon
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Abolitionism The movement to end slavery in America. -
Abraham Lincoln The 16th president, known for winning the civil war against the Confederacy and abolishing slavery. He was assassinated at Ford’s Theatre in 1865 by John Wilkes Booth, an actor and Confederate sympathiser. The Economist covered the crime, calling it “perhaps the greatest and most lamentable” event, possibly since Waterloo. Read our editorial leader from 1865. -
Absentee voting Ballots that are not cast in person, usually by post (“mail-in ballots”). The practice in America dates back to the 17th century, before independence, and was adopted on a large scale for soldiers during the American civil war. It became politicised after Donald Trump falsely suggested, in the lead-up to the 2020 presidential election, that it led to rampant fraud (proven voter fraud is vanishingly rare). In the wake of Mr Trump’s defeat some states, such as Georgia and Texas, passed laws restricting absentee voting. Read our article from 2021 on America’s battle over election laws. -
Affordable Care Act (ACA) Flagship legislation passed by Barack Obama (often called “Obamacare”) that expanded health-care coverage. It created exchanges so that eligible Americans could purchase, at subsidised rates, private health-care plans, and it expanded Medicaid eligibility in most states. The original law included the “individual mandate”, which required people to pay a tax penalty if they did not have basic health-care coverage. That part was repealed in 2017, under Donald Trump. Read our explainer on why Republicans hate Obamacare. -
American court system State courts hear cases involving violations of state law; federal courts hear cases involving violations of federal law or the constitution. They have similar tripartite structures: trial courts (called district courts in the federal system) are courts of first hearing. A party dissatisfied with the trial court’s ruling can ask a state appellate court, if one exists, or federal court of appeals to review the decision. That ruling can then be appealed to a state supreme court, or America’s Supreme Court, which also adjudicates disputes between states—though it accepts just a fraction of cases. -
American Indian law A term that covers the relationship between federal and state governments and the governments ofNative American tribes, or “nations”, as well as the laws enacted by tribal governments. Tribes recognised by the federal government hold the power—granted by treaties and acts of Congress, among other rulings—to govern themselves (subject to federal law) and have Indian tribal courts, which deal with everything from environmental protections to criminal justice. In 2022 we wrote about Oklahoma’s tussle with Indian tribes. -
Amicus brief Formally titled an amicus curiae (“friend of the court”) brief, these are filed by parties with a strong interest in the outcome of a legal decision but who are not part of the case. For instance, in 303 Creative LLC v Elenis, in which the Supreme Court held that Colorado could not compel a Christian website-designer to create wedding websites for gay couples because she claimed that doing so would violate her religious beliefs, amicus briefs were filed by, among others, the Freedom From Religion Foundation, which argued that religious beliefs should not be used to deny equal service to gay couples; and the Catholic League for Religious and Civil Rights, which argued the opposite. -
Attorney-general The attorney-general is the head of the Department of Justice and is America’s top federal law-enforcement officer. Despite being part of the executive branch, attorneys-general do not—or at least should not—serve the president’s political goals; they typically enjoy much greater independence than other cabinet officers. Read our Lexington columnist on Merrick Garland, President Joe Biden’s attorney-general.
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Battleground state A competitive state in the presidential election. Because such states are typically crucial for winning a majority in the electoral college, candidates usually invest a lot of time and money campaigning in these places. In 2024 states such as Arizona, Georgia, Michigan, Nevada, Pennsylvania and Wisconsin are up for grabs, and will decide the election. -
Bidenomics Used to describe President Joe Biden’s particular brand of economic policy (he insists the term came from the media and not his own camp). Mr Biden likes to say its defining characteristic is to grow the economy “from the middle out and bottom up”, a woolly summation of what is often in effect industrial policy, funded substantially by deficit spending. Mr Biden argues it will create jobs, cut emissions and boost manufacturing. Read our Briefing from 2022 that assesses Mr Biden’s plans. -
Bill Laws begin as bills: pieces of legislation introduced in either chamber of Congress. Once introduced, a bill goes to the relevant committee, where members debate and, if necessary, alter it. If a majority of the committee approves the bill, it goes to the entire chamber for debate, discussion and voting. If a majority of the chamber approve, it goes to the other chamber to undergo a similar process. If the second chamber passes the bill, differences between the two are worked out, and it then goes to the president. If he signs it, the bill becomes law; if he vetoes it, it returns to Congress, which can override the veto with a two-thirds vote in each chamber. -
Blue Dog Democrats A caucus of moderate Democrats, united by dedication to national security and fiscal conservatism. In its heyday around 2009 it had more than 50 members. By 2024 it had ten. Read our article from 2009 on the influence of the Blue Dogs. -
Borking Obstructing the confirmation of presidential appointees, usually by digging up unflattering bits about their past. The term comes from Robert Bork, whose nomination to the Supreme Court was derailed when Senator Ted Kennedy seemed to attack him on his values rather than his qualifications. -
Brown v Board of Education A Supreme Court case from 1954 that struck down the “separate but equal” doctrine that had sanctioned segregation in public schools. In practice it took years for schools to desegregate, and the process was sometimes violent. In an infamous example, in 1957 President Dwight Eisenhower ordered federal troops to escort black students—who were heckled and spat on—into an all-white high school in Little Rock, Arkansas. -
Budget reconciliation Reconciliation allows the Senate to pass bills that change federal revenue, spending and the debt limit with a simple majority, rather than the usual 60-vote threshold required to break a filibuster. Republicans used it to pass Donald Trump’s tax cuts in 2017; Democrats used it to tweak the Inflation Reduction Act in 2022. Rules governing what can be passed through reconciliation are complex, and the process can generally be used just once each year. -
Bush v Gore A Supreme Court case from 2000 that controversially helped to determine the outcome of the extremely close presidential election between George W. Bush and Al Gore. The ruling shut down a manual recount in Florida, and in effect made Mr Bush president. See also hanging chads.
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Caucus A word ubiquitous in American politics with an unreasonable number of subtly different meanings. They include: meetings held in some states in which party members decide on their choice for their party’s presidential nominee, such as the Iowa caucuses; all the members of a party within a chamber, such as the House Democratic Caucus; and specific groups of Congress members who strategise and tend to vote together, such as the House Freedom Caucus, the Blue Dog Democrats and the Congressional Black Caucus. The meeting of a caucus is also called a caucus. At these, the caucus members are said to be caucusing, a word that also means to be part of a caucus regardless of whether or not actual caucusing is going on. -
Central bank See Federal Reserve. -
Central Intelligence Agency (CIA) The CIA collects and analyses foreign intelligence, and conducts covert operations at the president’s direction. It neither sets policy nor operates domestically. -
Checks and balances Animating concept behind America’s federal government structure. Power is distributed among three branches of government—executive, legislative and judicial—with the aim of ensuring they check each other’s authority. (The term also inspired the name of our newsletter and podcast about American politics.) -
Chevron deference The principle that federal courts should generally defer to regulators’ interpretation of an ambiguous law. Chevron gives government agencies a longer leash: the idea is that as long as they issue “reasonable” rules where a statute is unclear, judges should butt out and let bureaucrats do their work. But since the Supreme Court introduced the doctrine in 1984, in Chevron v Natural Resources Defence Council, justices have winnowed it. In 2024 they may ditch the principle altogether, in a pair of cases involving herring fishermen. Read our article on the cases from January 2024. -
Citizens United A Supreme Court decision from 2010 (in full: Citizens United v Federal Election Committee) that struck down a ban on “electioneering communications”—or political advertisements aired close to elections and paid for by corporations. It found that political spending was comparable to speech, and therefore protected by the First Amendment. A related lower-court decision, Speechnow v FEC, enabled corporations and outside groups to spend unlimited funds on elections, as long as they are not co-ordinating with the campaign. -
Civil-rights movement Non-violent social movement seeking equal treatment for black Americans that achieved legal and legislative successes in the 1950s and 1960s. People such as Martin Luther King junior, Rosa Parks and John Lewis led actions including the Montgomery, Alabama, bus boycott in 1955; the March on Washington, the site of King’s “I Have a Dream” speech in 1963; and protest marches from Selma to Montgomery, where some participants were beaten and jailed. -
Congress Congress is the federal government’s legislature. It debates and enacts legislation, declares war, establishes a budget, appropriates funds and confirms or rejects many of the president’s cabinet-level appointees. It has two chambers: the Senate and the House of Representatives. By reputation the Senate is the “cooling saucer” for legislation created by the more rumbustious House. In practice the upper chamber is frequently no less dysfunctional than the lower. (Recently, though, the House has been markedly more chaotic, as we wrote in October 2023.) -
Congressional committees Groups of senators and representatives assigned to work on specific issues (ie, Armed Services, Foreign Affairs, Appropriations). They consider and recommend legislation (and some draft it) before bringing it to the larger body; oversee federal agencies; and investigate allegations against fellow lawmakers. There are 20 committees in the Senate and 22 in the House, plus four joint committees; these are further divided into subcommittees. A lawmaker from the majority party serves as chair and one from the minority serves as “ranking member”, or vice-chair. The political makeup of each committee mirrors the ratio of the larger body (though the Ethics Committee is bipartisan). Some are “standing”—fixed in the chamber’s rules. Others are “select”, or authorised by a congressional resolution. -
Continuing resolution A stopgap measure that funds the government at pre-existing levels when Congress fails to pass a full appropriations bill by a given deadline. It is meant to be temporary, but in recent decades it has almost entirely replaced the statutory budget process, which helps explain the regular threat of a “government shutdown”. In 2019 we explained why before 1980 the federal government did not shut down.
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DC statehood The seat of America’s capital is a federal district, managed by a city government but under the jurisdiction of Congress (where its residents lack full representation). In a referendum in 2016, residents of Washington, DC, overwhelmingly approved the idea of becoming a full-fledged state, but attempts to induct the District of Columbia into the union have repeatedly failed. Read our explainer on the issue -
Dean scream A speech delivered by Howard Dean, the early front-runner of the 2004 Democratic primaries and a former governor of the state of Vermont, after he lost the Iowa caucus to John Kerry, who eventually became the presidential nominee. In the speech, Mr Dean listed states he expected to win before uttering a high-pitched “Yeah!” A clip of the speech was shown widely on television, but alas, it did not help his chances; Mr Dean failed to win a single primary. In 2004 our Lexington columnist wrote about Mr Dean’s scream therapy. -
Debt ceiling Perhaps the single worst idea in the American political system, the debt ceiling is the amount of money the government is legally allowed to borrow to meet its pre-existing commitments. In other words, Congress has to vote once for a programme or spending commitment, and a second time to finance it. Failing to raise the debt ceiling—as some hardline Republicans most recently threatened to do in May 2023—would amount to America defaulting on its debt. -
Deep state The alleged shadowy network of members of the armed forces, government departments and spy agencies working with non-elected elites. The term was bandied about heavily during the Trump administration, when the president accused bureaucrats in law-enforcement and national-security agencies of supporting his predecessor, Barack Obama, and undermining him. Read our explainer on the deep state. -
Deferred Action for Childhood Arrivals (DACA) A policy introduced by Barack Obama that lets immigrants brought illegally to America as children apply to stay and work in the country, renewable every two years. There are currently about 580,000 beneficiaries, known as Dreamers, who by now have spent most of their lives in America. Donald Trump’s attempt to end the programme was stymied by the Supreme Court on procedural grounds. In 2021 a federal judge held DACA unlawful and blocked new applications, but allowed existing Dreamers to renew their status pending litigation. The case is probably headed back to the Supreme Court. Our Lexington columnist wrote about the need to protect Dreamers in 2022. -
Delegates What a presidential candidate has to win the majority of to become a party’s nominee. In the presidential primaries and caucuses, states and political parties award delegates to the candidates based on how people have voted or caucused; the race is specifically for delegates, not the total number of votes. Those delegates represent their states at the party’s national convention to confirm their choice. If no candidate gets a majority, convention delegates choose through voting. Read our explainer on how America’s presidential candidates are chosen. -
Democratic Party One of the two major parties, the other being the Republican Party. It is synonymous with the colour blue. Ideologically, the modern party is broadly social-liberal and to the left of the Republicans, polling well with university graduates, young people, and black and hispanic voters. It was not always this way: in the party’s early history, it tolerated slavery and excluded black people. The party’s current iteration was significantly shaped by Franklin D. Roosevelt’s “New Deal”, which laid the foundation for the American welfare state and recast the Democrats as the party of progressive reform. Read our review of a book that covers the history of the party, from 2022. -
Director of National Intelligence (DNI) America’s senior intelligence official, and the principal adviser to the president and National Security Council on national-security matters related to intelligence. Her office (Avril Haines is Joe Biden’s DNI) was created following the September 11th 2001 attacks. A bipartisan commission recommended reorganising America’s massive intelligence bureaucracy to boost intelligence sharing and co-ordination. -
Discharge petition A rarely used legislative manoeuvre to bring a bill to the floor of the House for a vote. Normally legislation is drafted and approved by committees (and the leadership of the majority party) before the whole chamber votes on it. But if lawmakers collect 218 signatures, they can bypass that process and “discharge” a bill from a committee without the co-operation of its chair. It is hard to do because it usually requires that some majority-party members disobey their own leadership and join the minority party. Lawmakers have considered using a discharge petition to advance Ukraine aid amid opposition from Republican leadership. -
Dissent channel Formal protocol for members of the State Department to register disagreement with American policy, created during the Vietnam war in 1971. Read our explainer on the dissent channel. -
Dobbs v Jackson Women’s Health Organisation A Supreme Court case from 2022 that allowed states to curb access to abortion, overturning precedent set nearly 50 years earlier by Roe v Wade. As of January 2024, 14 states have banned abortion outright following Dobbs, and sevenmore have imposed limits on abortion of between six and 20 weeks into a pregnancy.
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Earmarks Legislative provisions that direct spending to a particular entity or place, allowing legislators to distribute federal largesse in a targeted way (presumably pleasing their constituents). Sometimes derisively called “pork-barrel spending”, they were banned in the decade to 2021 but have since been reintroduced, with some restrictions. Critics decry them as symbolic of government waste and corruption; proponents argue they are part of the legislative bargaining process and finance critical infrastructure. Read our explainer on earmarks. -
Electoral College Comprises 538 electors, one for every congressional district and Senate seat (and three from Washington, DC, which has no national representatives). For the most part, these electors cast their votes for whoever won their state’s popular vote. (Maine and Nebraska operate differently.) A candidate can therefore win the national popular vote but lose the Electoral College vote, and hence the presidency (this happened in 1824, 1876, 1888, 2000 and 2016). Though many grouse about the college, it is in the constitution. -
Entitlements Cheques that qualifying Americans receive from the government, as a matter of law. The two biggest entitlement programmes are Social Security, the government’s pension scheme, and Medicare, or health insurance for people 65 and older. Their dedicated trust funds are hurtling towards insolvency but are notoriously hard to reform, an undertaking long considered to be a political “third rail”. Unlike government programmes administered through block grants, funding for entitlements is usually not capped—anyone eligible for the benefit receives it. In 2023 we wrote about the struggle to reform entitlements. -
Executive order A declaration by a president or governor, usually related to the management of the executive branch, that often has similar force and function to law. It is not legislation, however: at the federal level, Congress can pass a law overriding it, and at the state level, it is subject to legislative review (depending on the state).
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Federal Bureau of Investigation The FBI is the principal federal law-enforcement agency as well as America’s domestic intelligence and counter-intelligence service. -
Federal government The federal government governs the union of 50 states and various territories from its seat in Washington, DC. It consists of Congress, which makes laws; the president, who executes and enforces them; and the federal courts, including the Supreme Court, which interpret laws according to the constitution. Congress comprises the House of Representatives (the lower house), and the Senate (the upper house). -
Federal Reserve America’s central bank. Its duties include supervising banks, setting monetary policy and maintaining financial stability. It comprises 12 Federal Reserve banks, each responsible for their own regions, and a seven-person board of governors, each appointed to a 14-year term by the president. The Federal Reserve sets monetary policy independently of the president’s preferences. -
Filibuster An artefact of the Senate’s rules allowing unlimited debate, the filibuster is a method of blocking legislation. Bills can pass the Senate with a simple majority of 51, but 60 senators must vote for a “cloture” motion to end debate. Historically, it involved a senator talking for a long time; today the mere threat of filibuster by 41 or more senators serves the same purpose. -
First Amendment Guarantees the right to freedom of religion, freedom of expression, freedom of the press, the right to peaceful assembly and to petition the government. Considered a foundational American principle, questions about its applicability routinely come before the Supreme Court. Does online stalking amount to protected speech or threats? Can editorial decisions by a public-access cable network amount to censorship? The amendment has been in place since 1791, but there is nothing to indicate that the court will run out of new issues to discuss. Read our explainer on whether the First Amendment protects threatening language, and our article on whether it applies to public-access cable. -
Foggy Bottom A neighbourhood in Washington, DC, and a shorthand for the State Department, which has its headquarters there. -
Franklin Delano Roosevelt FDR was a Democratic president whose tenure, from 1933 to 1945, spanned the Great Depression to the second world war. (The 22nd Amendment subsequently limited presidents to two terms.) He passed the New Deal, a series of public programmes and reforms aimed at helping America recover economically. His extremely productive first 100 days in office set an unofficial, and not necessarily helpful, bar for new presidents. Read our article from 2021 on the similarities between FDR and Joe Biden. -
Full Grassley A complete tour of Iowa’s 99 counties, sometimes done by presidential-primary challengers hoping to win the state. It is named in honour of Iowa’s long-serving senator, Chuck Grassley, who undertakes such a mission annually. In the 2024 election cycle Ron DeSantis was the first major candidate to complete a full Grassley, in December 2023.
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Gay marriage When The Economist published an editorial leader in favour of gay marriage in 1996 (which you can read here), and again in 2004 (here), the issue was divisive. As late as 2011 Barack Obama, as Democratic president, opposed it. Just ten years later, Congress—split on pretty much everything else—passed the Respect for Marriage act. It formalised same-sex couples’ right to marry, even if Obergefell v Hodges, the Supreme Court case that legalised the practice, should be struck down by a conservative court (as was the fate of Roe v Wade). Public support for gay marriage has steadily increased from 27% in polls by Gallup in 1996 to 71% in 2023. -
George Washington Founding father, first president and commander of the Continental army in America’s war of independence. Washington, who was officially a member of no party, warned the country against political “factions”. -
Gerontocracy How some people describe America’s democracy, dominated as it is at the top these days by elderly politicians. Joe Biden, for example, is an octogenarian, as is Mitch McConnell, the Republican Senate minority leader. If Donald Trump were to win the 2024 election, he would be sworn in aged 78. Read our data story on America’s old lawmakers. -
Gerrymandering The manipulation of district boundaries for partisan advantage. It has been done by politicians of all stripes since the dawn of the Republic; it gets its name from Elbridge Gerry, who, as the governor of Massachusetts in 1812, consolidated his opponents in just a few districts while giving his party an advantage in most of the others. -
Governor The chief executive of a state. There are also territory governors, who lead American Samoa, Guam, the Northern Mariana Islands, Puerto Rico and the US Virgin Islands. -
Great Society President Lyndon Johnson’s policy programme of 1965, which he sold to the American people as a new republic, free from the ills of the past. It set out his vision for a “great society” which included efforts to improve education, fight poverty, preserve the natural environment, control crime and establish government-funded health-insurance schemes: Medicare and Medicaid. -
Guantánamo A military detention centre set up after the September 11th 2001 attacks at an American naval base in Cuba. The Bush administration argued that people held there were “enemy combatants” and could not be processed in America’s court system. In total it has held roughly 780 people since 2002; 30 remain, tied up in a legal morass. Read our article from 2021 about the interminable trials.
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Hanging chads Circular bits (“chads”) of paper ballots that are not fully punched through (and remain “hanging”) in punch-card voting systems, with the result that the voter’s selection is unclear. This happened in Florida in the 2000 presidential election; hanging chads became the symbol of the disputed recount. Also see Bush v Gore. -
Homeland Security, Department of An executive department created after the attacks of September 11th 2001. Its portfolio includes counter-terrorism, border security and cybersecurity. -
House Freedom Caucus A voting bloc of about 50 far-right Republicans in America’s House of Representatives formed in 2015 by members who considered the leadership of the House (in Republican hands) too amenable to compromise with House Democrats and the Obama administration. They want to cut spending and shrink the government, and will go to extreme lengths to achieve their goals, leading one fellow Republican to liken them to “legislative terrorists”. Read our explainer on the bloc. -
House of Representatives The larger of the two chambers of Congress, the House has 435 members who serve two-year terms. Districts are apportioned to states every ten years, based on the census; states then draw their own districts, which must be roughly equal in population. Until 1929, the House grew in tandem with the population, but that year’s Apportionment Act capped its size. The number of people each member represents has soared, from around 35,000 in 1800 to more than 761,000 today.
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Immigration reform No one thinks America’s immigration system is working well, but “comprehensive” immigration reform—exchanging tighter border-security measures for a path to regularised status for those in the country illegally—has eluded Congress for decades. -
Impeachment Punishment delegated to Congress for misconduct by federal officials, including presidents. Any member of the House of Representatives can introduce articles of impeachment; if the majority of the House approves them, the official is then tried by the Senate, with the chief justice presiding if the president is on trial. If two-thirds of the Senate votes to convict, that official is removed from office. Only eight people, all federal judges, have been convicted and removed from office. No president has been removed, and just three have been impeached: Andrew Johnson, Bill Clinton and Donald Trump (twice). Read our review of a book on presidential impeachment, from 2018. -
Independent counsel See special counsel. -
Inflation Reduction Act Joe Biden’s flagship legislation, the name of which Mr Biden regrets. It is most often associated with decarbonisation, but has three broad components: it incentivises green-energy projects; it expands government-subsidised health care and lowers the costs of prescription drugs; and it tinkers with tax codes to raise more money from corporations. Read our explainer on the act’s achievements in its first year. -
Iowa caucuses The first race in the Republican primary contest, and historically the first in the Democratic one, too. While the Republican caucuses work by simple secret ballot, in the Democratic “caucuses”, voters’ choices are public: participants gather in churches or gymnasiums, then organise themselves in groups around the room, sometimes persuading others to join them, to indicate their preferred candidate. This goes on until each group is “viable”, garnering (usually) 15% of participants. After a final count, viable candidates are awarded a proportionate number of “state delegate equivalents”. The outcome of the Iowa contest has set the tone for primary elections in the past: going first gives the winner of Iowa wind in their sails. In 2023, however, the Democratic Party voted to put South Carolina first, in a move aimed at giving more influence to black and minority voters who make up the party’s base. Read our explainer on why Iowa matters so much in the election. -
Iowa state fair An annual event that receives outsize attention in presidential-election years, when primary challengers descend on Des Moines ahead of what traditionally was the country’s first contest. Fair highlights include crop competitions, pork chops on sticks and, of course, a cow sculpted out of butter.
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January 6th insurrection When supporters of Donald Trump, then the departing president, stormed the Capitol to try to prevent Congress from certifying Joe Biden’s win in 2021. The shocking attempt to interfere with the peaceful transfer of power led to Mr Trump’s second impeachment, more than 700 criminal convictions and (directly or indirectly) to at least seven deaths. Read our article on the insurrection from 2021. -
Japanese internment camps Detention centres into which the American army forcibly moved Japanese-Americans living on the west coast, beginning in March 1942 after the attack on Pearl Harbor by Japan a few months before. A month earlier, President Franklin Roosevelt had signed an executive order authorising the army to designate military areas and exclude civilians as it saw fit. Although no ethnic group was mentioned in the order, it sanctioned the internment of 125,000 Japanese Americans on the orders of John DeWitt, an army general. The policy was upheld by the Supreme Court in Korematsu vs the United States in 1944. -
John Adams A founding father and America’s second president. His party, the Federalists, favoured a strong central government, a national bank and close ties with Britain. -
Joint chiefs of staff The senior officials of each branch of America’s armed forces: the Army, the Navy, the Air Force, the Marines, the National Guard and the Space Force. It is headed by the chairman of the joint chiefs, who is by appointment America’s senior military official. The chairman is the principal adviser to the president on military affairs; the joint chiefs have advisory roles only, and no operational command. -
Jungle primary A primary election that includes all candidates regardless of party affiliation, meaning that Democrats and Republicans run against each other. If no one wins more than 50% of the votes, the top two candidates, regardless of party, progress to a run-off. Louisiana has used the setup for Congressional, state and local elections more or less since 1975; a few other states, including California and Washington, use nonpartisan elections with slightly different voting rules.
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K Street A street in Washington, DC, that is home to lobby groups and law firms. Despite many lobby firms actually residing elsewhere, it is still used as a short-hand for lobbying, similar to how Fleet Street is a byword for the British press even though the last reporters left in 2016.
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Labour unions Organised labour in America dates back to the 19th century. But it was in the 1930s, under the New Deal, that unions were legally protected and businesses required to bargain with them. Unions suffered a long decline from their heyday in the 1950s. They are now enjoying somewhat of a bump, although their membership remains below the peak. In 2022 we wrote about how America’s unions are gentrifying. -
Lame duck Describes a lawmaker in the final year of their term, often when their successor has already been chosen. A lame-duck president may feel less constrained by party politics. It can also refer to a session of Congress after its next cohort has been elected. In 2022 we wrote a wish-list for the lame-duck Congress. -
Loving v Virginia A fittingly named Supreme Court case that, in 1967, struck down state bans on interracial marriage.
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Mail-in ballots See absentee voting. -
Massachusetts v Environmental Protection Agency (EPA) A Supreme Court decision from 2007 which ruled that America’s federal environmental agency has the authority to regulate greenhouse-gas emissions. -
Mayor An American mayor is either a ceremonial role usually held by a member of the city council, or an elected executive who operates independently from the council, similar to how the presidency is separate from Congress. In bigger cities, they often lean Democratic (as metropolitan areas usually do) and become a thorn in the side of Republican-led state legislatures. -
Medicaid A joint federal and state programme that covers medical costs for poor people. Eligibility varies by state. In 2018 we wrote about how the Trump administration was reshaping Medicaid. -
Medicare Health insurance provided by the federal government for Americans 65 and older. -
Mr President How Americans address their leader. John Adams pushed for “His Highness”, horrifying Thomas Jefferson.
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NAFTA (North American Free Trade Agreement) A deal signed in 1993 by America, Canada and Mexico to eliminate tariffs between the three countries by creating a free-trade area. It was long a populist punching bag, and Donald Trump (who called NAFTA the “the single worst trade deal ever approved in this country”) renegotiated it during his term of office, renaming it the US-Mexico-Canada Agreement (USMCA). The main, underwhelming change was that a greater proportion of a car’s or truck’s components had to be manufactured in America to qualify for tariff exemption. Read our analysis of the USMCA from 2018. -
Naked ballot Pennsylvania sends absentee ballots to voters who request them along with an exterior “secrecy” envelope. In 2020 Pennsylvania’s supreme court ruled that votes cast in “naked ballots”—mailed back without the extra envelope—would be voided, a consequential decision in a swing state. -
National Security Agency (NSA) America’s signals-intelligence branch. -
National Security Council (NSC) Chaired by the president and including several cabinet secretaries as well as the chairman of the joint chiefs of staff and the director of national intelligence, this is the main forum for national-security officials to discuss policy options and make recommendations to the president. The NSC also has hundreds of staff members, and sits atop a pyramid of committees composed of experts from across cabinet departments. The NSC and the position of national security adviser—the president’s chief adviser on national-security affairs—were both created after the second world war, by the National Security Act of 1947. -
Negative partisanship Identifying strongly against a particular party rather than in support of one. It is closely related to the concept of affective polarisation, the relative hostility felt towards members of the other party, which has risen two-fold since 1970, according to American National Election Studies, a long-running voter survey. At its extreme lies lethal partisanship—endorsing violence against the other group—which a depressing 5-15% of Americans suffer from. In 2021 we wrote about political scientists’ worries about lethal partisanship. -
New Deal A series of programmes and reforms that reshaped American society, passed by Franklin Roosevelt during the Great Depression. They sought to relieve poverty, grow the economy and reform the financial system to prevent another catastrophe. The first New Deal included emergency-relief programmes. The second created the Works Progress Administration, which built infrastructure and employed millions of Americans, and the Social Security Act, establishing a pension scheme and a federal unemployment-insurance programme. -
NIMBYism Stands for “not in my backyard”; the tendency of locals to resist new development.
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Obamacare See Affordable Care Act. -
Obergefell v Hodges A Supreme Court decision, from June 2015, that recognised the constitutional right to same-sex marriage. Individual cities and states had granted marriage licences to gay couples previously: San Francisco was the first city, in February 2004, and Massachusetts the first state, in May of that year. But other states could ban the practice and decline to honour licences, until Obergefell. -
Office of Management and Budget (OMB) A powerful office within the executive branch whose job it is to understand the mechanics of the federal government, oversee the regulations that other executive agencies create, and produce the president’s annual budget. They explain to the president how to get things done: if the deep state had a core, it would be here. -
Omnibus bill A bill that covers several unrelated topics. It is often created to pass many urgent bills at once, especially when a government shutdown looms and Congress has failed to pass the necessary spending bills. -
Opioid epidemic Opioid overdoses killed more than 600,000 Americans since 1999, and modelling suggests that 1.2m more could die between 2020 and 2029. The source has mutated over time: from opioid pills like OxyContin, prescribed to treat pain, to cheaper heroin, then eventually to fentanyl, a much stronger synthetic opioid. The crisis cuts across classes and states. Here are five books The Economist recommends on the crisis. -
Oval Office Where the president works in the White House. William Taft, the 27th president, extended the West Wing and started the tradition in 1909. Presidents have given notable speeches from it: George W. Bush, after the attacks of September 11th 2001; Richard Nixon, upon resigning; and John F. Kennedy, delivering news of the Cuban missile crisis.
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Pentagon Generally refers to the Department of Defence and its leadership. It is also the pentagonal physical headquarters of the department, located just outside Washington, DC, in Arlington, Virginia. -
Pentagon Papers Report commissioned by the Department of Defence that revealed that America’s war in South-East Asia was more expansive than it had admitted. It was leaked to the press by Daniel Ellsberg, then an employee at the RAND Corporation, a think-tank. The documents began appearing in the New York Times in 1971. A legal battle that reached the Supreme Court ended in a famous victory for press freedom. Read our obituary of Daniel Ellsberg. Read our obituary of Ellsberg from 2023. -
Plurality-winner election An election in which the candidate with the most votes wins, usually in a single-member district such as those used for the House of Representatives. This system is also known as “first-past-the-post” or “winner-take-all”. It means that the outcome of the election might not be the one truly favoured by the largest number of people—a problem so well-known that Lewis Carroll denounced its “extraordinary injustice” in 1873. In 2021 we published a Christmas special on quadratic voting, which could offer a fairer way to vote. -
Political action committee (PAC) A fundraising machine that donates to political campaigns. PACs are subject to fundraising limits; “super PACs” are not. In exchange those less regulated groups must remain notionally independent of any campaign, though co-ordination is rampant. -
Political dynasties America may love an underdog, but it also rewards well-connected families. The second and sixth presidents (John and John Quincy Adams) were father and son; two centuries later, the 41st and 43rd (George H.W. and George W. Bush) were, too. The Harrisons skipped a generation: in 1841 William Henry served just 32 days in office, dying of pneumonia; his grandson Benjamin was elected in 1888. The presidential Roosevelts (Theodore and Franklin Delano) were cousins. Only one Kennedy (John F.) has held the top role, but that still-active political family might be the most famous of all. Read our Lexington columnist’s article on the Kennedys from 2023. -
Pork-barrel spending See earmarks. -
Presidency The president, elected every four years, is the head of state and of the executive branch of government, as well as commander-in-chief of the armed forces. Presidents can veto legislation, conduct foreign policy and issue executive orders. They oversee all cabinet departments, as well as other executive-branch agencies, which include much of America’s regulatory and national-security apparatus. -
Primary election An election preceding a general one, in which voters pick the party’s candidate. “Primary” refers to the overall process in which parties choose their candidates, as well as to specific elections, which—unlike the Iowa caucuses—operate like typical polls. The presidential primaries begin in January of the election year and conclude by summer. -
Progressive Party A short-lived third party in American politics formed in 1912 by Theodore Roosevelt, a former Republican president. Also known as the Bull Moose Party. Roosevelt broke with the Republican Party after losing its presidential nomination to William Howard Taft. The Progressive Party championed his radical ideas, including a social-insurance system, an eight-hour working day and women’s suffrage. Both Taft and Roosevelt lost to a Democrat, Woodrow Wilson, and the Progressive Party fizzled out, though new iterations briefly appeared in 1924 and 1948. -
Public opinion polls Questions asked of a sample of the population to gauge its opinion on political matters. Survey companies, like Pew Research Centre and YouGov (with which The Economist often collaborates), use sampling techniques in an effort to ensure that the subset of people chosen for the poll represent the larger population. Although not all polls are created equal, there are tricks to spot a wonky one. We explained how in 2022.
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QAnon A far-right cult and conspiracy theory headed by “Q”, an anonymous online figure, whose cryptic posts allege that Donald Trump is waging a covert war to save America from an elite cabal of Satan-worshipping paedophiles. The FBI has labelled it a “domestic terror threat”; some of its adherents were among the January 6th rioters.
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Ranked-choice voting In a ranked-choice election, voters rank candidates in order of preference. If none wins a majority of first-choice votes, the candidate with the fewest is eliminated, and the remaining choices on those ballots redistributed in order. This process continues until one candidate has a majority of remaining first-choice votes. Also called instant-runoff voting, this system is distinct from first-past-the-post voting, in which voters cast a single vote for whichever candidate they dislike least. It has been used so far in two states (Maine and Alaska), as well as a number of smaller jurisdictions, including New York City. -
Reaganite Refers to a brand of conservatism created by Ronald Reagan, the Republican president who served from 1981 to 1989. It is usually invoked in contrast with the more populist conservatism of Donald Trump. In brief, it signals support for free-market capitalism, local (rather than “big”) government, and military strength; antipathy for welfare programmes; and a muscular approach against crime. -
Redistricting Every decade, after census figures come out, congressional districts are reapportioned among the states, depending on which have gained and lost population, and redrawn within them. This process is known as redistricting. Per the constitution, districts within each state must be relatively equivalent, but they can vary markedly across states: Delaware’s lone district, for instance, has more than 1m people, whereas Rhode Island’s second has just over 550,000. Districts are not supposed to pack or crack or stack—meaning neither cram nor divide communities—and they should be relatively compact and contiguous. These dictates are often more honoured in the breach than the observance. -
Reparations Compensation for systematic oppression or abuse by the state, as a means to redress injustice. It is primarily raised in connection with Native Americans or black people descending from African slaves, as both communities continue to be affected by past (and present) maltreatment. Forms of reparation have been in use in America since the 1700s, including for the interned Japanese, yet the idea remains perpetually divisive. -
Republican Party (GOP) One of America’s two major political parties (along with the Democratic Party), also known as the GOP, or Grand Old Party. It is associated with the colour red. Founded in 1854 on an anti-slavery platform (Abraham Lincoln was the first Republican president), the party embraced social reform: its platform in 1916 favoured women’s suffrage, strict child-labour laws and decent workers’ conditions. Richard Nixon’s “southern strategy”, in which he appealed to white southerners’ opposition to the civil-rights movement, shifted those voters from the Democratic to the Republican column—turning American politics upside down. Today Republicans make up the American right. -
RINO (Republican In Name Only) A derisive charge—standing for “Republican In Name Only”—levelled against party members perceived to be ideologically misaligned (usually insufficiently conservative) or personally disloyal. A favourite of Donald Trump, the term has a long history: it was used to disparage Theodore Roosevelt, the Republican president from 1901 to 1909. -
Roe v Wade A Supreme Court case from 1973 that recognised the constitutional right to abortion before the point of foetal viability, in effect preventing states from banning the procedure. Abortion remained controversial, and those opposed succeeded in bringing the issue before the court again in 2021. Roe was overturned in 2022. Read our article from then explaining the decision’s significance. -
Rust belt Refers to a region made up of mostly urban parts of the north-east and Midwest, which have seen industrial decline, especially in terms of manufacturing jobs, since the middle of the 20th century. In 2016 Donald Trump’s grievance politics played well in the region. Before the decline, it was known as the factory belt.
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Secession In 1860 South Carolina seceded from the United States, sparking the American civil war. Ever since the South was returned to the union four years later, no state has tried again. But for some it remains a dream. Texas, for example, has nurtured secessionist movements since at least the 1990s; a constitutional amendment to secede was introduced in the New Hampshire legislature in 2022 (it was rejected). These efforts are geographically diverse but they share one thing: all have proved quixotic. -
Second Amendment When invoked today, the term invariably refers to individual gun-ownership rights. In full, the second amendment of the constitution reads: “A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.” The odd grammar has been at the heart of a debate over whose rights the amendment protects. In 1939 the Supreme Court interpreted it to protect a state’s right to regulate guns—an approach known as the collective-rights theory. But the court switched sides in 2008, recognising an individual’s right to own a gun for self-defence in DC v Heller. -
Senate Congress’s upper chamber has 100 members, two from each state, who serve six-year terms, with one-third of the chamber up for re-election every two years. The Senate’s structure overwhelmingly benefits voters from small states, giving Wyoming (with fewer than 600,000 people) equal representation with California (which has more than 40m). The Senate confirms ambassadors, cabinet officials, federal judges, Supreme Court justices and many other political and military appointees. -
Senate confirmation Ambassadors, federal judges, heads of executive-branch agencies and the armed services, most cabinet officials and numerous other presidential appointees—around 1,200 in all—must be confirmed “with the Advice and Consent of the Senate”, as dictated in Article II of the constitution. Few are voted down outright, but increasingly, appointees can sit for months in limbo. And the threat of rejection has led presidents to withdraw controversial nominees. -
Senate majority leader The most powerful member of the Senate, elected internally by the majority power. (Their counterpart is the minority leader.) The majority leader serves as the spokesperson for the party’s positions and schedules business on the Senate floor. For example, in 2016 Barack Obama nominated Merrick Garland to the Supreme Court. Mitch McConnell, then the Republican Senate majority leader, blocked Mr Garland’s bid by refusing to take any action on the nomination before Mr Obama’s term ended. Majority leaders are also the first to be recognised to speak when a bill is being debated—allowing them to put forward amendments before anyone else in the chamber. -
Shadow docket The Supreme Court’s emergency docket, in which decisions are made without oral argument and, typically, with scant explanation and few justices disclosing how they voted. It includes emergency appeals from parties who believe they would be irreparably harmed without quick intervention from the justices. Shadow-docket cases spiked under Donald Trump’s administration, when controversial requests—such as to divert funds to his border wall, ban travellers from Muslim countries and execute federal prisoners—were granted. -
Single-member districts A system in which each district is represented by one person, chosen by a majority or plurality of the voters. It is used by the House of Representatives and state legislatures. -
Social Security America’s federal pension scheme, instituted by Franklin Roosevelt as part of the New Deal. -
Speaker of the House Leader of America’s House of Representatives, which—unlike Senate majority leader—is a role prescribed by the constitution. Its duties, however, are not, and have expanded and contracted with the person on the dais. Under current House rules, the speaker refers bills to committee, recognises members in floor debates and appoints committee chairs. In other words, the House cannot function without a speaker, as underscored by the three-week paralysis that gripped the chamber in October 2023 when it lacked one. -
Special counsel Formerly, “independent counsel”. A semi-independent federal prosecutor appointed by the attorney-general, who heads the Justice Department. The designation insulates the special counsel from the normal chain-of-command in the DOJ, which is important for politically sensitive inquiries. An independent counsel, Ken Starr, investigated Bill Clinton, authoring the report that would set out the case for the president’s impeachment. Jack Smith, the special counsel appointed to investigate Donald Trump, has brought two criminal indictments against the former president. -
State Department America’s foreign-affairs ministry. The constitution gives the president power to conduct foreign relations, and in 1789 Congress passed legislation creating an executive department to facilitate that. It is headed by the secretary of state, a powerful cabinet position. -
State government Each of the 50 states has a state government that mimics the federal one: a state legislature, divided into a lower and upper house (sole exception being Nebraska’s unicameral legislature); a state governor; and system of state courts. States enjoy a fair amount of sovereignty but are ultimately subject to the federal constitution and the Supreme Court. -
Super Tuesday A Tuesday in February or March when up to two dozen states hold presidential-primary elections—the highest number in a single day during an election year. In the primaries candidates win the backing of state delegates who support them at their party’s presidential-nominating convention. On Super Tuesday about one-third of those delegates are usually up for grabs (though as many as half were in 2008)—meaning the results are a good indication of who will become the nominee. -
Superdelegates Most used to describe delegates in the Democratic nomination process who are not pledged to support a specific candidate. Essentially party grandees who can support whomever they want; they might be Democratic senators, representatives, governors, former presidents or other parts of the party establishment. After supporters of Bernie Sanders complained of undue influence in the nomination of Hillary Clinton, however, they are not allowed to vote in the first round at the national convention unless the choice is a foregone conclusion. The Republican Party also has unpledged delegates, sometimes called superdelegates, in some states and territories. -
Supreme Court The only court mentioned in the constitution, the Supreme Court is composed of eight associate justices and one chief justice (though this number is not constitutionally prescribed), all nominated by the president to serve life terms. It adjudicates disputes between states, and also hears, on appeal, cases involving questions of constitutional or federal law. It hears around 100 of the 7,000 cases presented for review each year. The court considers itself above politics—a self-flattering assumption that has grown increasingly hard to countenance. Read our Lexington columnist’s article from 2022 on the politicisation of the court. -
Swing state See battleground state.
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Televised debates A fixture of the presidential-election season. Parties stage their own debates in the lead-up to primaries, and then Democratic and Republican candidates face off, usually several times before the election. The first televised debate between candidates, in 1960, pitted a youthful John F. Kennedy against a sweaty Richard Nixon; 60-70m Americans tuned in. Those who listened on the radio favoured Nixon, but viewers thought Kennedy (who ended up winning the election) did better—underscoring the power of the new visual medium. -
The squad A term initially used to describe four women elected to the House of Representatives for the Democratic Party in 2018: Alexandria Ocasio-Cortez, commonly known as AOC; Ilhan Omar; Ayanna Pressley; and Rashida Tlaib. After their election Ms Ocasio-Cortez shared a picture of them on Instagram, a social-media platform, with the caption “Squad”. The name stuck. Since then several other representatives have joined “the squad”. All are on the left of the party and proudly so—even if the party as a whole has fallen out of love with their most radical ideas, such as “defunding the police” and abolishing Immigration and Customs Enforcement. Read our Briefing from 2022 on the Democrats’ struggle to moderate. -
Third parties An umbrella term for parties or candidates that are not Republican or Democratic. They have had limited success in elections; the last time a third-party presidential candidate won any states in a presidential election was in 1968, when George Wallace, a candidate for the American Independent Party which supported segregation, won five states in the South. But they can affect the outcomes of general elections, usually by drawing votes that would otherwise go to one of the two main parties. As of 2023 just three federal lawmakers do not belong to either of the two main political parties; all are senators, registered as independents, and caucus with Democrats (for now). Read our article from 2019 on third-party candidates’ failures. -
Thomas Jefferson (Jeffersonian) Founding father, third president and primary author of the Declaration of Independence. The modifier “Jeffersonian” can apply to democratic ideals (civic duty, self-governance) as well as architecture (basically: neoclassical). Jeffersonian Republicans (also called Democratic-Republicans) favoured strong local governments and a weak federal one. -
Ticket The president and vice-president run on the “same ticket”, meaning they are elected together. In state elections, many governors and lieutenant-governors do, too. Originally the runner-up in the presidential election became vice-president, but that made for chaotic government and only lasted until 1804. The 12th Amendment set out the new protocol, so that electors had to cast separate votes for each office. -
Tribal nations The federal government recognises nearly 600 Native American tribal nations, in a relationship that the Bureau of Indian Affairs, a federal agency, describes as “one between sovereigns, ie, between a government and a government”. More than a third are in Alaska. Tribal governments are in charge of education, law enforcement, health care and basic infrastructure, among other services, for members of their nations. Also see American Indian law
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Uncle Sam Personification of the United States. In an iconic army-recruitment poster from 1917, during the first world war, Uncle Sam points at the reader; the text says, “I want you for U.S. Army”.
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Vice-presidency Vice-presidents today are (sometimes) valued advisers to their presidents; the two run on a “single ticket”. But historically their role was purely legislative: their only constitutional duties are to succeed a president who dies, resigns or is incapacitated; and to preside over and break ties in the Senate. Though 15 vice-presidents have gone on to become president, the office has long been seen as a backwater: John Nance Garner, who spent eight years as Franklin Delano Roosevelt’s vice-president, said the office “isn’t worth a pitcher of warm piss”. -
Voting Rights Act Prohibits racial discrimination in voting. Passed in 1965, it outlawed practices adopted after the American civil war, such as literacy tests, and bars states from drawing electoral-district boundaries that have the effect of diluting black citizens’ votes. The Supreme Court has weakened the act in the 60 years since its passage, including by, in effect, striking down in 2013 a provision that required states with histories of discrimination to get federal approval before they could change election rules.
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Watergate The major American political scandal of the 20th century and a triumph of investigative journalism. In 1972 two reporters from the Washington Post—who met with their shadowy source, “Deep Throat”, in an underground car park—revealed that the Nixon administration had been involved in a break-in at the Democratic National Committee’s headquarters at the Watergate building in Washington, DC. President Nixon later tried to obstruct investigations by the Department of Justice and Congress. As the House of Representatives prepared to impeach him, Nixon resigned. As a result of Watergate, many Americans remain distrustful of government. Political scandals today are often styled as “—gate” (Russiagate, Bridge-gate and, in Britain, Partygate). Read our review of the memoir of Carl Bernstein, one of the reporters who revealed Watergate. -
West Wing Refers to the west wing of the White House. It houses the Oval Office as well as the offices of the vice-president and presidential staff. It is also the name of an iconic American TV series about a fictitious presidential administration. -
Writ of certiorari An order by which an appellate court decides to review a case. A writ of certiorari directs a lower court to produce its decision so a higher court can review it.
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XYZ affair A major scandal of the late 18th century. The revolutionary government of France demanded bribes (payment for the foreign minister, and a low-interest loan for France) to recognise American ambassadors, which they refused. When the French demands were made public, Americans were outraged. Congress passed laws expanding the navy and authorising attacks on French shipping, establishing the principle that it could authorise military action without declaring war.
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YIMBYism Whereas NIMBYs want nothing built in their backyards, YIMBYs say “yes” to development. Preferring high-density development to car-driven sprawl, they have been around for years, but have had limited success in altering planning rules. Listen to our podcast episode about America’s housing shortage.
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Zero-tolerance immigration policy In 2018 Donald Trump’s administration adopted a “zero-tolerance” policy to people caught entering America illegally. Adults were prosecuted, and almost 3,000 children were taken into federal custody before Mr Trump signed an executive order stopping family separation. This policy was nixed under President Joe Biden, and the Department of Justice once again allowed prosecutors to decide on individual immigration cases. Illegal crossings of the southern border remain a contentious issue. Read our article from 2024 on how the border may cost Mr Biden the election. -
Zuckerberg hearings Congressional hearings in April 2018, in which Mark Zuckerberg, Facebook’s boss, testified before the Senate and House of Representatives following a user-privacy scandal. Over two days lawmakers asked Mr Zuckerberg nearly 600 questions, though he dodged plenty of them with a variation on “My team will get back to you”. In the end, the exchanges left many Americans worried that lawmakers had little grasp of how Facebook, and digital communications more broadly, actually worked.
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The columns of Royal Exchange are dressed for Christmas, at Bank in the City of London, the capital’s financial district, on 20th November 2024, in London, England.
Richard Baker | In Pictures | Getty Images
LONDON — U.K. inflation rose to 2.6% in November, the Office for National Statistics said Wednesday, marking the second straight monthly increase in the headline figure.
The reading was in line with the forecast of economists polled by Reuters, and climbed from 2.3% in October.
Core inflation, excluding energy, food, alcohol and tobacco, came in at 3.5%, just under a Reuters forecast of 3.6%.
Headline price rises hit a three-and-a-half year low of 1.7% in September, but was expected to tick higher in the following months, partly due to an increase in the regulator-set energy price cap this winter.
“This upwards trajectory looks set to continue over the next few months,” Joe Nellis, economic adviser at accountancy MHA, said in emailed comments on Wednesday, citing the energy market and “the long-term pressure of a tight domestic labor market.”
Persistent inflation in the services sector, the dominant part of the U.K. economy, has led money markets to price in almost no chance of an interest rate cut during the Bank of England’s final meeting of the year on Thursday. Those bets were solidified earlier this week when the ONS reported that regular wage growth strengthened to 5.2% over the August-October period, up from 4.9% over July-September.
The November data showed services inflation was unchanged at 5%.
If the BOE leaves monetary policy unchanged in December, it will finish out the year with just two cuts of its key rate, bringing it from 5.25% to 4.75%. The European Central Bank has meanwhile enacted four quarter-percentage-point cuts and this month signaled a firm intention to move lower next year.
The U.S. Federal Reserve is widely expected to trim rates by a quarter point at its own meeting on Wednesday, taking total cuts of the year to a full percentage point. Some skepticism lingers over whether it should take this step, given inflationary pressures.
This is a breaking news story and will be updated shortly.
Economics
The Fed has a big interest rate decision coming Wednesday. Here’s what to expect
Published
22 hours agoon
December 17, 2024Federal Reserve Chair Jerome Powell speaks during a news conference following the November 6-7, 2024, Federal Open Market Committee meeting at William McChesney Martin Jr. Federal Reserve Board Building, in Washington, DC, November 7, 2024.
Andrew Caballero-Reynolds | AFP | Getty Images
Inflation is stubbornly above target, the economy is growing at about a 3% pace and the labor market is holding strong. Put it all together and it sounds like a perfect recipe for the Federal Reserve to raise interest rates or at least to stay put.
That’s not what is likely to happen, however, when the Federal Open Market Committee, the central bank’s rate-setting entity, announces its policy decision Wednesday.
Instead, futures market traders are pricing in a near-certainty that the FOMC actually will lower its benchmark overnight borrowing rate by a quarter percentage point, or 25 basis points. That would take it down to a target range of 4.25%-4.5%.
Even with the high level of market anticipation, it could be a decision that comes under an unusual level of scrutiny. A CNBC survey found that while 93% of respondents said they expect a cut, only 63% said it is the right thing to do.
“I’d be inclined to say ‘no cut,'” former Kansas City Fed President Esther George said Tuesday during a CNBC “Squawk Box” interview. “Let’s wait and see how the data comes in. Twenty-five basis points usually doesn’t make or break where we are, but I do think it is a time to signal to markets and to the public that they have not taken their eye off the ball of inflation.”
Inflation indeed remains a nettlesome problem for policymakers.
While the annual rate has come down substantially from its 40-year peak in mid-2022, it has been mired around the 2.5%-3% range for much of 2024. The Fed targets inflation at 2%.
The Commerce Department is expected to report Friday that the personal consumption expenditures price index, the Fed’s preferred inflation gauge, ticked higher in November to 2.5%, or 2.9% on the core reading that excludes food and energy.
Justifying a rate cut in that environment will require some deft communication from Chair Jerome Powell and the committee. Former Boston Fed President Eric Rosengren also recently told CNBC that he would not cut at this meeting.
“They’re very clear about what their target is, and as we’re watching inflation data come in, we’re seeing that it’s not continuing to decelerate in the same manner that it had earlier,” George said. “So that, I think, is a reason to be cautious and to really think about how much of this easing of policy is required to keep the economy on track.”
Fed officials who have spoken in favor of cutting say that policy doesn’t need to be as restrictive in the current environment and they don’t want to risk damaging the labor market.
Chance of a ‘hawkish cut’
If the Fed follows through on the cut, it will mark a full percentage point lopped off the federal funds rate since September.
While that’s a considerable amount of easing in a short period of time, Fed officials have tools at their disposal to let the markets know that future cuts won’t come so easily.
One of those tools is the dot-plot matrix of individual members’ expectations for rates over the next few years. That will be updated Wednesday along with the rest of the Summary of Economic Projections that will include informal outlooks for inflation, unemployment and gross domestic product.
Another is the use of guidance in the post-meeting statement to indicate where the committee sees policy headed. Finally, Powell can use his news conference to provide further clues.
It’s the Powell parley with the media that markets will be watching most closely, followed by the dot plot. Powell recently said the Fed “can afford to be a little more cautious” about how quickly it eases amid what he characterized as a “strong” economy.
“We’ll see them leaning into the direction of travel, to begin the process of moving up their inflation forecast,” said Vincent Reinhardt, BNY Mellon chief economist and former director of the Division of Monetary Affairs at the Fed, where he served 24 years. “The dots [will] drift up a little bit, and [there will be] a big preoccupation at the press conference with the idea of skipping meetings. So it’ll turn out to be a hawkish cut in that regard.”
What about Trump?
Powell is almost certain to be asked about how policy might position in regard to fiscal policy under President-elect Donald Trump.
Thus far, the chair and his colleagues have brushed aside questions about the impact Trump’s initiatives could have on monetary policy, citing uncertainty over what is just talk now and what will become reality later. Some economists think the incoming president’s plans for aggressive tariffs, tax cuts and mass deportations could aggravate inflation even more.
“Obviously the Fed’s in a bind,” Reinhart said. “We used to call it the trapeze artist problem. If you’re a trapeze artist, you don’t leave your platform to swing out until you’re sure your partner is swung out. For the central bank, they can’t really change their forecast in response to what they believe will happen in the political economy until they’re pretty sure there’ll be those changes in the political economy.”
“A big preoccupation at the press conference is going to the idea of skipping meetings,” he added. “So it’ll turn out to be, I think, a hawkish easing in that regard. As [Trump’s] policies are actually put in place, then they may move the forecast by more.”
Other actions on tap
Most Wall Street forecasters see Fed officials raising their expectations for inflation and reducing the expectations for rate cuts in 2025.
When the dot plot was last updated in September, officials indicated the equivalent of four quarter-point cuts next year. Markets already have lowered their own expectations for easing, with an expected path of two cuts in 2025 following the move this week, according to the CME Group’s FedWatch measure.
The outlook also is for the Fed to skip the January meeting. Wall Street is expecting little to no change in the post-meeting statement.
Officials also are likely to raise their estimate for the “neutral” rate of interest that neither boosts nor restricts growth. That level had been around 2.5% for years — a 2% inflation rate plus 0.5% at the “natural” level of interest — but has crept up in recent months and could cross 3% at this week’s update.
Finally, the committee may adjust the interest it pays on its overnight repo operations by 0.05 percentage point in response to the fed funds rate drifting to near the bottom of its target range. The “ON RPP” rate acts as a floor for the funds rate and is currently at 4.55% while the effective funds rate is 4.58%. Minutes from the November FOMC meeting indicated officials were considering a “technical adjustment” to the rate.
Economics
Iran faces dual crisis amid currency drop and loss of major regional ally
Published
2 days agoon
December 16, 2024A briefcase filled with Iranian rial banknotes sits on display at a currency exchange market on Ferdowsi street in Tehran, Iran, on Saturday, Jan. 6, 2018.
Ali Mohammadi | Bloomberg | Getty Images
Iran is confronting its worst set of crises in years, facing a spiraling economy along with a series of unprecedented geopolitical and military blows to its power in the Middle East.
Over the weekend, Iran’s currency, the rial, hit a record low of 756,000 to the dollar, according to Reuters. Since September, the embattled currency has suffered the ripple effects of devastating hits to Iran’s proxies, including Lebanon’s Hezbollah and Palestinian militant group Hamas, as well as the November election of Donald Trump to the U.S. presidency.
With the fall of Syrian President Bashar al-Assad amid a shock offensive by rebel groups, Tehran lost its most important ally in the Middle East. Assad, who is accused of war crimes against his own people, fled to Russia and left a highly fractured country behind him.
“The fall of Assad has existential implications for the Islamic Republic,” Behnam ben Taleblu, a senior fellow at the Foundation for Defense of Democracies in Washington, told CNBC. “Lest we forget, the regime ahs spent well over a decade in treasure, blood, and reputation to save a regime which ultimately folded in less than two weeks.”
The currency’s fall exposes the extent of the hardship faced by ordinary Iranians, who struggle to afford everyday goods and suffer high inflation and unemployment after years of heavy Western sanctions compounded by domestic corruption and economic mismanagement.
Trump has pledged to take a hard line on Iran and will be re-entering the White House roughly six years after unilaterally pulling the U.S. out of the Iranian nuclear deal and re-imposing sweeping sanctions on the country.
Iranian President Masoud Pezeshkian has expressed his government’s willingness to negotiate and revive the deal, officially known as the Joint Comprehensive Plan of Action, which lifted some sanctions on Iran in exchange for curbs to its nuclear program. But the attempted outreach comes at a time when the International Atomic Energy Agency says Tehran is enriching uranium at record levels, reaching 60% purity — a short technical step from the weapons-grade purity level of 90%.
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