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Capital Journal
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Good morning from the WSJ Washington Bureau.
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Trump Administration: The president awards the Presidential Medal of Freedom to NBA legend Bob Cousy. Vice President Pence visits a medical device manufacturer in Utah. Secretary of State Mike Pompeo visits Canada.
Jackson Hole, Wyo.: The economic policy smposium hosted by the Kansas City Fed opens. Investors are hoping Federal Reserve Chairman Jerome Powell will provide more insight into his policy approach.
Campaign 2020: Bernie Sanders unveiled a "Green New Deal"-style economic overhaul, Gov. Jay Inslee is ending his White House bid, and former Colorado Gov. John Hickenlooper is running for a Senate seat.
Venezuela: The Trump administration has been secretly talking with top aides of Nicolás Maduro in an effort to push Venezuela’s president from power and clear the way for free elections.
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Video: WSJ's Nick Timiraos explains what pressures are weighing on the Fed chief as he heads to this year's annual central bank conference in Jackson Hole, Wyo.
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Federal Reserve officials saw their move to cut interest rates last month as a “recalibration,” rather than the start of a more aggressive easing cycle, and were reluctant at their latest policy meeting to say how future moves would unfold, reports Nick Timiraos. They also believed uncertainty surrounding the administration’s trade policy wasn’t likely to let up anytime soon, creating a “persistent headwind” for the economic outlook.
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If there's an economic downturn, Washington policy makers see few good options to deal with one, report Rebecca Ballhaus and Nick Timiraos. the Fed has little room to cut borrowing costs to spur spending and investment, and the federal debt is exploding, which could hamstring any efforts to boost growth with tax cuts or spending increases. Democrats and Republicans strongly disagree about how best to rev up the economy.
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President Trump said Wednesday he was no longer looking at tax cuts to bolster the economy amid warning signs of a recession. A day earlier, he said he was considering measures including lowering capital-gains taxes, report Rebecca Ballhaus and Alex Leary.
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The potential capital-gains tax cut floated this week would likely deliver only modest economic benefits, economists say.
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History and headlines suggest Mr. Trump's efforts to place blame on the Fed for any recession is a losing battle. For investors and businesses, the Fed is less of a preoccupation than the trade war for which—for better or worse—Mr. Trump has claimed credit, writes Greg Ip.
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Prattle, a research firm, found trade or tariffs were mentioned 2.6 times as often on earnings calls as the Fed or interest rates since May 2018.
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Of the 20 largest percentage declines in the S&P 500 stock index in the past 12 months, trade was the main, or one of the main, causes in six.
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What Links U.S.-China Trade Talks and the Hong Kong Protests
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A trade dispute between the U.S. and China has been rattling global markets, and massive protests have caused disruptions in Hong Kong. Here's how these two different stories are connected and what it could mean for President Xi Jinping:
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North Carolina Do-Over House Election Will Be a Test of Democratic Momentum
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A redo election next month in a North Carolina congressional district will serve as a bellwether of how political conditions have changed since the midterm election.
In the initial election last fall, Republican Mark Harris beat Democrat Dan McCready by fewer than 1,000 votes in a district President Trump won by more than 10 percentage points in 2016. But state election officials invalidated the results after it emerged that a consultant for Mr. Harris had improperly handled absentee ballots, and called for a new election on Sept. 10.
While Mr. Harris is not running again, Mr. McCready, a Marine veteran, is back in the race. He will now face Dan Bishop, a Republican state senator who was the architect of a widely-derided and later-repealed measure mandating people use public bathrooms corresponding to the sex on their birth certificate. Early voting in the do-over began Wednesday.
Democrats won control of the House in November, so this special election is less politically urgent for the party. But the district cuts through swaths of suburbs outside Charlotte, key terrain for Democrats in their battle for the state in 2020.
If Mr. McCready wins, it will be a sign that the momentum that carried Democrats to victory in the House in 2018 remains strong. But even if he is not ultimately victorious, high turnout and a close margin—especially in the Charlotte suburbs—could still be encouraging for Democrats.
If Mr. Bishop wins by a large margin, it could signal that the energy that fuel Democrats in 2018 is subsiding. It could also indicate that Republican efforts to tie down-ballot Democrats like Mr. McCready to national liberals like Sen. Elizabeth Warren (D., Mass.) could be effective. Or of course, Mr. Bishop could simply be a stronger opponent than was Mr. Harris.
Write to Andrew Duehren at andrew.duehren@wsj.com
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The Trump administration has wrestled with a surge in migrants from Central America. Above, a detention facility in McAllen, Texas. PHOTO: /ASSOCIATED PRESS
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The administration rolled out a plan to detain families crossing the U.S.-Mexico border longer than the 20-day detention limit. If it survives a likely court challenge, the policy change could permit authorities to detain families through the duration of their immigration proceedings, reports Michelle Hackman.
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The policy would effectively supersede the Flores agreement, which prevented the government from keeping children with their parents in immigration detention centers for longer than 20 days.
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From reporter Michelle Hackman:
For the past year, the government has been facing a surge of families crossing illegally into the U.S. The Trump administration has been looking for ways to deter more families from coming. Last summer, they infamously tried a “zero-tolerance” approach: detaining parents indefinitely, with the effect of separating them from their children. Now, they are attempting a new legal strategy that would theoretically allow the government to detain families together indefinitely. It likely won’t stand up in court.
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President Trump said he favors beefed-up background checks for gun buyers on Wednesday, but offered no clarification of his stance amid recent signs he was backing away from stricter rules under pressure from guns-rights activists, reports Alex Leary.
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President Trump accused Denmark’s prime minister of “blowing off the U.S.,” a day after he canceled a trip to Denmark because its leader rejected the idea of selling Greenland to the U.S., report Rebecca Ballhaus and Alex Leary. “I thought the prime minister’s statement that it was an absurd idea was nasty,” he said.
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South Korea said it would withdraw from a pact with Japan to share classified military intelligence, weakening the U.S. alliance network in East Asia and exacerbating tensions that have flared between Seoul and Tokyo in recent weeks over trade and wartime history.
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U.S.-Taliban negotiations to end America’s longest military engagement overseas entered a crucial stage on Wednesday, as Washington’s special envoy arrived in the Gulf state of Qatar for talks, reports Craig Nelson. The talks were expected to resume Thursday.
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The administration is preparing to release its plan to return Fannie Mae and Freddie Mac to private-shareholder ownership, reports Andrew Ackerman. If the proposal is carried out, the firms could return to the way they operated before the financial crisis.
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The SEC voted 3-2 to urge proxy advisers to take more steps to disclose how they craft their shareholder recommendations, reports Andrew Ackerman, a victory for public companies in a longstanding fight to curb the impact of consultants who influence shareholder votes.
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ActBlue is an online site designed to make it easier for small donors to contribute to Democratic campaigns, but it turns out wealthy donors also are finding it easy to use. (Bloomberg)
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California, concerned that a mass shooter brought in guns from neighboring Nevada, has asked that state to tighten up gun restrictions. (HuffPost)
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President Trump's insinuation that Jewish voters are either ignorant or disloyal if they vote for Democrats is anti-Semitism deployed for political gain. (American Conservative)
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This newsletter is a production of the WSJ Washington bureau. Our newsletter editors are Tim Hanrahan, Kate Milani, Troy McCullough and Daniel Nasaw. Send feedback to capitaljournal@wsj.com. You can follow politics coverage on our Politics page and at @wsjpolitics on Twitter.
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