♪ opening music ♪ ♪ <Gavin> Welcome to This Week in South Carolina.

I'm Gavin Jackson.

Big news this week in the 1st Congressional District as Katie Arrington announced she will challenge fellow Republican and incumbent Representative Nancy Mace in the June primary.

Both received key endorsements this week and Representative Tom Rice from the 7th Congressional District has his own fight in the primary.

We recap all this with Meg Kinnard from the Associated Press and a look at the latest job numbers and the economy with University of South Carolina Economist Dr. Joey Von Nessen, but first, more from This Week.

A key moment following seven years of work and days of debate took place Wednesday evening in the State Senate.

The vote on Beaufort Republican Senator Tom Davis' conservative Medical Marijuana bill.

The vote came after marathon sessions with lawmakers hashing out minor details on the bill that will allow folks with specific illnesses verified by a doctor to obtain oil for vaporizing and THC edibles for two weeks at a time.

>> If we pass this bill, it doesn't mean that a year from now, the same group of people is going to come back and pass recreational marijuana and you cannot have a ballot initiative to make marijuana recreationally legal in this state.

You don't have to go through the Chambers and be signed by a Governor and...I can just say this, I will never support legalizing the recreational use of marijuana.

So having said all that, I'll just conclude by saying that I do intend to vote for this bill.

<Gavin> Davis said the 28 to 15 vote with 17 Republicans for and 10 opposed has him hopeful it can move in the House.

>> Actually, there's a few more senators for the bill than I thought.

I mean there were some that kind of kept their paddle dry as they said they were sitting...in the Senate and listening to arguments back and forth, and no matter how many times I went up to them and ask them how they were leaning.

They would say I'm listening and taking notes, and it turns out that they were and I was very pleasantly surprised.

For instance, at the end of the day to see the Majority Leader Shane Massey vote yes, to see Sean Bennett in the Lowcountry in Dorchester vote yes.

Richard Cash is probably one of the most socially conservative members in the State Senate vote yes.

What that says to me is that people were engaged.

They were listening.

They were challenging their assumptions and their pre-conceived notions of things.

And again, I think it really showed the Senate at its best.

<Gavin> One former Republican House lawmaker Katie Arrington is giving the 1st Congressional District another shot, this time to unseat incumbent Nancy Mace, like she did Mark Sanford, who she also said didn't support President Trump enough.

>> Let's be honest, Nancy Mace is a sellout.

She sold out the Lowcountry.

She sold out President Trump.

She is more interested in becoming a mainstream media celebrity than fighting for the people she's supposed to represent.

<Gavin> Arrington received Trump's endorsement and Mace had this to say about her challenger when asked if Arrington supports Trump more.

>> ...well, I don't know that it actually is.

I actually worked for President Trump in 2016.

I traveled across and worked in several different...states to help him get elected in 2016.

One of my opponents ...was not was not there early on, and I was and I've agreed with him on his policies... <Gavin VO> The 1st Congressional news ramps up will...already be a very busy primary season.

Joining me now to discuss the latest developments on the 2022 South Carolina campaign trail is Associated Press Politics Reporter Meg Kinnard.

Meg, welcome back to This Week in South Carolina.

>> Hello, it's so good to be back with you.

Thanks for having me.

<Gavin> Yes.

Great to see you too, Meg.

Let's get right into it.

Talk to us about the big news coming out of the 1st Congressional District race that we saw this week.

Talk about Nancy Mace and Katie Arrington now.

<Meg> There have been a lot of developments.

So, try to keep up.

First off, we had an endorsement from former Governor Nikki Haley coming out in support of Congresswoman Mace.

That was something that had kind of been rumored was going to be in the works, but, for anybody who remembers the relationship between those two, that dates back quite a while.

It was of note, certainly something for the former Governor to be wading into in her home state, something that we're all going to be paying attention to, and then subsequent to that, another expected move.

We had Katie Arrington, former state lawmaker here in South Carolina, who made a run for the seat in 2018, famously knocking off then Congressman Mark Sanford from the GOP primary, formally announcing that she was entering this year's GOP primary.

This is not a rematch, really, but it is certainly some familiar characters that all of us who've been looking at the first and are familiar with South Carolina politics, in general, recognized.

Then after that another expected move, former President Donald Trump gave his official endorsement to Katie Arrington.

That was something that had been reported last week even before she was an official candidate, but he came out this past Wednesday, saying that he wasn't going to be endorsing Nancy Mace again, as he did in 2020, but he was coming out in support of her primary opponent.

So, there have been a lot of developments, a lot of tea leaves that we can read into, but it has certainly been a busy race to cover this particular week.

>> And what do you think?

Why all of a sudden, ...what's the big push here?

Why did this all happen?

You know, within days of each other?

We saw Nikki Haley endorse Mace.

We saw Arrington jump in the race.

We saw Trump endorse.

Like you said, all these things happening just this week alone, and this comes after the 7th Congressional District endorsement of Trump for Russell Fry, which we'll talk about in a moment, but just really explosive growth, right now when we're talking about these primary races.

>> This is starting to be that time of year when people are paying attention to these primaries.

We don't have elections until June.

Filing doesn't even open until next month.

So, a lot of official markers that we need to cross, but certainly in this particular race, this is something that has been on the radar for political watchers for quite a while.

It was in November that former President Trump came out and said that he was not going to be supporting Nancy Mace and pretty much soliciting anyone who would meet his markers to come out and challenge her and committing to giving his support to somebody he felt would be a good challenger to her in a GOP primary.

So it...if you look at all of that, it kind of makes sense that this is the timeframe that we would see that happening.

The former president has been making endorsements in a lot of different races around the country, and for him to be making a statement to putting his flag down in two separate South Carolina congressional races right now.

This is making it all start to heat up, and therefore we'll be expecting even more moves to come in the next couple of months.

>>Can't wait for that.

Of course,you'll be covering it, but I want to ask you, obviously that this is a head to head between Mace and Arrington right now, but talk to us about the proxy war happening below the surface here with Nikki Haley versus Donald Trump.

<Meg> It's pretty easy from a surface level for those of us who cover politics to say, "Okay, we're thinking about 2024.

We're thinking about potential GOP presidential candidates, one of whom could be Nikki Haley, one of whom could be former President Trump, who has yet to really make clear what his plans are."

So, on the surface level, it's easy to say, "Okay, here is a match up in a very crucial early voting state between two Republicans who already have very high name ID, both here and nationally."

But underneath that, a lot of the folks that I'm talking to, frankly, in several different political camps, are saying that it's a little bit deeper than that, that this is the former president's way to be making these moves in the first and also in different districts around the country to try to, in the 2022 elections, elect candidates who will be forming more of a mindset in Congress, and specifically here in the House of Representatives that he would support.

So, it's sort of a preliminary move to the 2024 presidential race, but it's also underneath that, the ...former president's attempt to be forming a Congress that more aligns with some of his viewpoints.

So, again, that's a lot of tea leaves and a lot of different levels.

It's certainly going to be a test to see how much influence the former president has among 1st district voters.

But it's, easy to say this is just a prelude to 2024, but there's a couple different steps to go through before we can really get to that part.

<Gavin> Essentially, kind of building that infantry there in Congress to support him should he run in 2024.

...I want to ask you furthermore about you know, just how this all comes together in terms of, you know, Mace versus Arrington.

You know, they weren't the biggest fans of each other.

We saw that back in 2018, when they were in the Statehouse, kind of factor that in, do you think that this is going to be maybe one of the bloodier primaries we're going to see, not that anyone wants, political infighting, of course, but if this is how the field is set at this point, both of them are very determined people.

They're very strong characters.

You know, you heard Nancy Mace on Washington Journal the other day saying, you know...if someone says about me, you know, I can take a punch.

I can throw a punch essentially, Arrington very much the same character there.

So, do you think that this is just going to be leaving it all in the field unlike what we saw with Arrington versus Sanford, You know, Sanford had like a million dollars leftover in that 2018 primary.

I don't think anything's going to be leftover in this upcoming primary.

What do you think about that?

<Meg> I would say you're absolutely right in terms of nothing being left on the field after this primary is over.

When I talked to Katie Arrington the day of her launch, she said that she had quote, "lessons learned from 2018."

There are a lot of things about that campaign, she said she, in retrospect, would have done differently, and one of those was frankly listening to the constituents in the first about issues most important to them.

She specifically mentioned offshore drilling, which for her in the 2018 campaign was a point of kind of a flip flop, according to a lot of voters when they saw her voicing different stances on that particular issue, which at the time was a very volatile one along South Carolina's coast.

She says now that she is committed to listening to voters, to hearing more substance of what they actually want to see from their representative, And that's something that she's saying that she is not hearing from Nancy Mace.

When I talked to her and in her launch video, Katie Arrington pointed to several pieces of legislation that Congresswoman Mace has introduced lately, that she said seem to be more about grabbing attention and headlines for herself, rather than representing the constituents.

She pointed to some Big Cat Rescue type bills as well as something about pandas and China, and famously now, I guess, or infamously Mace's Marijuana legalization proposal.

In her video, Katie Arrington, asking is Nancy Mace high?

That was kind of a joke, but, I think she also intended that to grab people's attention and say, Look, this is a congresswoman who's focusing on those kinds of things, not things that you're saying, you, voters in the 1st Congressional District, you really want to see from your representative in Congress.

Yes, their relationship dates back quite a while to their time in the Statehouse.

So, I think that is very safe to say we're going to see a lot of activity and maybe some animosity between those two candidates in particular.

<Gavin> Yeah, and we've, you know, obviously the big thing there too, with Arrington losing this race in 2018, flipping that district Democrat for the first time in more than 30 years, even with President Trump's endorsement during that midterm election there.

It'll be interesting to see how this plays out.

Of course, also, you know, what has Arrington been doing for the past few years, Meg?

It seems like she was working for the DOD doing cybersecurity stuff, but then left under some interesting circumstances.

Can you elaborate on the latest on that?

<Meg> Last year, there were several articles including one I wrote about Katie Arrington, and her time at DOD.

She had been working on a Cybersecurity Initiative, but her clearance for classified information was suspended during an investigation into an inappropriate release of classified information.

That has been ongoing.

There have been several legal machinations by Arrington and also others, and this week, she officially resigned that position.

According to some, it also turns out that her job had actually been technically eliminated before she resigned from it.

So, there's some question as to how exactly that all came out, but she has been working in the Department of Defense realm.

She mentioned to me that she had also helped President Trump work on supply chain issues related to the pandemic, distribution of PPE and other things.

So, she has been working within the federal government and working in Washington, but now she says that she wants to continue working in Washington, but in a different representative way.

<Gavin> Meg, before we jump to the 7th Congressional District, I want to ask you about the leading Democrat in the 1st Congressional events, Dr. Annie Andrews.

What does she do at this point?

...I think she's already starting to fundraise off of this endorsement from Trump because it will definitely...rile up people, especially here in this state and of course, nationally, when it comes to fundraising.

How did she factor into this?

Does she just sit back and watch and fundraise?

What does she need to do at this point?

<Meg> At this point, I think it is safe to say that Annie Andrews could really just kind of let these two candidates take some oxygen out of the room between themselves.

The insertion of former President Trump into the race is absolutely going to get the Democratic base in that district excited and also, frankly, could help someone like Annie Andrews, who's already looking outside the district for some of that fundraising that can be crucial in these kinds of highly watched races.

This will serve to help her do that and activate national lists.

So, at this point, she's sticking to what she has said in her statement, which is you know what, I agree with Katie Arrington, that it's time for Nancy Mace to go home, but I think I should be the one to do it, instead.

<Gavin> Meg, we have a few...minutes left.

I want to ask you about the 7th Congressional.

Obviously, all eyes will be on that Republican primary since that general election will be obviously for the Republican there, because that's how that district goes, but we're talking about Incumbent Tom Rice who voted for the impeachment of Donald Trump for inciting an insurrection on January 6.

He just is getting a big challenger.

He's had this challenger, Russell Fry, a state representative who just got the endorsement from Trump last week.

How is that race shaping up?

What are we going to be watching for there?

>>There's going to be a lot of activity and interest clearly with the endorsement from former President Trump.

We do expect to see the former president here in South Carolina with Russell Fry, as well as now his other endorsee Katie Arrington.

So again, this is really a test for the former president to see how high his own popularity still is in some of these places, the 7th district in Horry County around it is certainly one that has traditionally supported him.

So we would expect that to carry some heft.

There are also a lot of candidates in this race.

Some have departed the race now that the former president is playing a role on behalf of one candidate, but there are a lot of other names, as well and Tom Rice has been there for several terms.

So, he certainly has very high name ID and has several months left to continue making his case to the residents of that district as to why they should send him back to Washington, >>...a lot of money flying around in that race, too, and of course, I know, we talked about filing starting next month for these races in the primaries in June, but there's still a lot up in the air when it comes to if this is actually concrete this point because of...the late filing of these congressional maps that have just been passed into law here.

There are legal challenges.

There's some precedent going on with the Supreme Court in Alabama this past week.

So, a lot of things moving around.

We still have to watch and wait and see, but I want to ask you really quick, speaking of the courts, we're still under Supreme Court watch for Federal District Judge Michelle Childs who might be...who is on President Biden's shortlist.

Do you have any latest information on that case on that situation and how this is shaping up?

When will we expect the President to make an announcement later this month.

<Meg> We have seen the very earliest stages of the vetting process happening.

This is mostly happening on paper.

This is not in person interviews as yet, but the White House is starting to make some of these steps and has said that the President is reviewing cases not just bios but actual cases that a lot of these judges under consideration have been responsible for.

This takes time.

This takes effort.

It's obviously a huge effort and project really on behalf of a lot of people in the White House, but it is starting as we all know having seen these before once it gets closer once the shortlist are made official, with more than just Judge Childs, there will be so much attention and activity and stuff starts to come out.

So especially for those of us in South Carolina watching Judge Childs, it is very exciting and interesting.

<Gavin> Yeah, especially with the full court press, we're seeing from Senator Graham, and House Majority Whip Jim Clyburn, even with Lindsey Graham saying he has 60 votes to back Childs at this point, if things go the way he thinks they'll go.

So, a lot to watch there.

We'll be watching with you.

Associated Press Reporter Meg Kinnard, thanks for joining us.

>> Thank you.

>>Joining me now to discuss the economy, inflation and more is Dr. Joey Von Nessen.

He's a research economist at the University of South Carolina's Darla Moore School of Business.

Joey.

Welcome back.

<Joey>Thank you, Gavin.

Great to be here.

<Gavin>So Joey, let's jump right on into it.

We got the latest inflation data that came out Thursday, that push consumer prices to an annual rate of 7.5%, which is a 40 year high.

What do you make of this new data?

What should people know about it?

<Joey> Well, fundamentally, this is a reflection of the fact that we are still in a transition from a COVID economy to a post-COVID economy, and that transition is going to take time and take much of 2022 to resolve.

Because basically, if we look at the source of this inflation, it's coming from a mismatch of supply and demand, and we can see that very clearly in the data.

If we look at consumer demand overall consumer spending, it's up about 11%, compared to where we were just before the pandemic began in February of 2020, but on the labor market side, we see employment levels that are still down nationally, roughly 2%, compared to where they were in February of 2020.

So that's a big mismatch between supply and demand.

And of course, the labor shortage is a major reason why we're seeing supply chain disruptions in many markets, and that disruption is what's fueling this high level of inflation...as we move into 2022, that's going to be on the forefront of the Fed's policy decisions is how do we regulate inflation, pull it back down without softening the economic growth that we're seeing and the great recovery that we've seen over the last 18 months.

<Gavin> Joey, with that, how does the Fed navigate that?

Obviously, they've talked about incrementally raising rates, at least committed to maybe three rate increases this year alone?

Should they have started increasing rates before this or do you see that tactic as being appropriate?

How do they walk this tightrope essentially?

>>Well, there's no question that it's appropriate now for them to begin raising rates.

...yes, I think between three and four rates, depending on the specific meeting ...that you look at for their minutes, but certainly multiple rate increases this year.

I think the reason they've been so hesitant and avoided so long is because of these variants that have come through these COVID variants, and the concern about how they may slow the economic recovery.

Fortunately, the jobs numbers that we've seen come out over the last several weeks indicate that, that hasn't been the case with Omicron.

We've seen very strong employment gains in December and January.

So we're off to a great start in 2022.

So, this high inflation metric that has come out this past week, coupled with the strong jobs numbers, I think reinforces that we're going to see more aggressive interest rate hikes in 2022.

<Gavin> Joey, when we pair all that together, we're talking about job increases here, job gains, wage increases that, of course, are getting wiped out because of inflation going up so high.

But can you talk about the stickiness of this inflation right now, when we look at, you know, wage growth going up, as well as inflation?

Does that mean that things are going to stay high longer than anticipated?

<Joey> Yes, I think that as we move into 2022, there are several things going on.

Number one, we will see rate increases from the Fed.

That will have an effect on inflation, and also we're likely to see demand begin to pull back a bit, because part of the surge in demand that 11% increase in consumer spending I alluded to, part of that was due to the fiscal stimulus.

So it was a combination of the fact that we've seen more overall consumer spending in general, as people have gone back to work, coupled with the stimulus checks and enhanced unemployment benefits, and many tax credits, all different parts of the Cares Act, where we've seen dollars that have been spent directly with or provided directly to American households to be spent.

...so when you put those two together a strong labor market and strong fiscal stimulus, then you get high levels of demand.

...So, that stimulus will begin to wane in 2022.

We're already seeing disposable income levels for Americans get back closer to where they were before the pandemic began.

So we combine a pullback in demand with higher interest rates, and that should begin to lead to a reduced inflation rate as we move further and further into 2022.

But do we get back to 2%?

Inflation, which is the Feds target by the end of this year?

At this point, I think that's unlikely.

<Gavin> So, it kind of skews a little bit of your forecast for this year, obviously, you know, it's hard to kind of justify or not justify, but look at where things are, you know, a year out, but two months into this year so far, how do you see that your forecast what you make every year playing out so far with these latest data, <Joey> We still see 2022 looking very good for the US and for South Carolina.

At a national level, we expect that GDP growth will pull back.

So we will see some retraction in demand.

So we're estimating about 4% GDP growth for the year for 2022, down from about 6% in 2021.

In South Carolina, we'll see a similar story where we see strong growth this year, but probably not quite as strong as in 2021.

Again, because rather than having the dual effects of strong fiscal stimulus coupled with a strong labor market, that fiscal stimulus is waning and so we'll see demand levels begin to pare back to levels more consistent with what we were seeing leading up to the pandemic in the 2018- 2019 time period.

<Gavin> So Joey, the Fed's goal is just cool things down a little bit, but how big of a worry is a possible recession?

Is that...in anyone's...thought right now...anyone plan to see that happening?

Could that happen as a result of these rates being raised too fast?

<Joey> I think that's unlikely.

It's certainly a concern.

And I think...that's ...a major factor that the Fed is considering is not to raise rates too quickly, because that would be the extreme outcome.

I think that is unlikely because we're seeing such strong demand now, and we're talking about very incremental rate hikes, and that's why they're looking at doing more rate hikes, for where each rate hike is actually smaller, so they can test the waters, so to speak, and get a feel for how that's going to affect demand overall.

The challenge, the real challenge the Fed is facing is that when they raise rates, that doesn't really address the fundamental problem of the supply side.

So the labor shortages that we're facing and the supply chain constraints, those are not going to be affected by rate increases, and so they've got to be very careful that...when they increase rates that will dampen some demand.

They recognize that those fundamental causes on the supply side is something that they're not addressing.

<Gavin> So to that, Joey, what do employers need to do to recruit and retain these employees who seem to have still a lot of power in this labor market right now?

<Joey> Well, it depends on the market and on the individual employer.

But, generally speaking, we're already seeing signing bonuses being offered, higher rates of pay, in general, which is really the best way to attract more workers as you offer our higher pay and more benefits, and we see that for businesses that can afford to do so.

For those that can't, they're having to adjust their hours, perhaps introduce additional technology or just adjust the way they do business.

For example, restaurants that may not be able to afford to increase wages for their workers, by a large enough margin, may have to resort to doing more carry out and relying less on labor.

So they have to adjust their business model perhaps, employ more automation and more technology and just look at new ways of adjusting how their business works, because...this is a challenge that's not going away.

This is one element...of the current economy that we are in that is likely to outlast this transition.

The workforce shortage that we're seeing now is going to be a problem for businesses for the foreseeable future.

<Gavin> And with 30 seconds Joey, what should we be watching in the months ahead here?

>>Well, I think it really does get back to the Fed, watching - all eyes are on the Fed... certainly going into the summer.

...Will they raise rates beginning in March?

...which I think there's a broad consensus that's very likely to happen, and how quickly will they raise rates again, and what will be the effects on the overall demand for the economy and how will that affect inflation?

So, I think, again, the bottom line is all eyes are on the Fed, at least for the foreseeable future.

<Gavin> All right, we'll be watching.

That's Dr. Joey Van Nessen.

He's a research economist at the University of South Carolina's Darla Moore School of Business.

Joey, thanks as always.

<Joey> Thank you, Gavin.

My pleasure.

>>To stay up to date with the latest news throughout the week.

Check out the South Carolina Lede.

It's a podcast that I host twice a week that you can find on South Carolina public radio.org or wherever you find podcasts.

For South Carolina ETV, I'm Gavin Jackson.

Be well, South Carolina.

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