THE TICKER

Trump’s populist agenda is in retreat, most markedly on the centerpiece of his tax rewrite: a so-called border adjustment tax or BAT.  The BAT’s causes of death are multiple, and an autopsy offers some important insights into the state of an economic agenda that’s largely failed to launch. 

First, let’s recap. Helped by populist-in-chief Stephen K. Bannon, candidate Trump promised to even the score for those left behind by the erosion of the country’s once-mighty manufacturing base. But he’s pursued the goal only fitfully in office, largely abandoning the project of jawboning American executives into keeping jobs in the United States; flip-flopping on his campaign-trail pledge to label China a currency manipulator; and backing off talk of blowing up the North American Free Trade Agreement, seeking to renegotiate it instead. The sole nod to the Bannon wing in the White House of late has been the decision to withdraw from the Paris climate accord.

Bannon championed the BAT, which proponents argued would help level the playing field for American exporters and their workers by slapping a new levy on cheap foreign imports. House Speaker Paul D. Ryan (R-Wis.) and House Ways and Means Committee Chairman Kevin Brady (R-Texas) made rare common cause with Bannon on the idea, talking up its potential to raise roughly $1 trillion in new revenue over a decade that could go toward slashing tax rates. And Trump early in the year appeared to embrace the concept since it would subject our trading partners’ exports to the same treatment they impose on American products. 

Publicly, Ryan and Brady maintain that the BAT remains a keystone of the tax package they’re assembling, even if it needs significant reworking. Ryan said in a late May interview with Axios that, "of course," he could envision a tax revamp that doesn't include the provision. But the pair has sought to put the burden on BAT opponents to come up with a replacement that generates as much revenue.

Others close to the process, on both sides of the argument, privately agree that the proposal has flatlined.

Here are some reasons why:

1. Inside the administration, Trump’s Wall Street heavies are running the show, for now. 

Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn, early skeptics of the BAT, hardened into opponents as the potential for the new system to rattle global markets became clearer. Champions of the tax argued it would strengthen the dollar, thereby offsetting price hikes on imported goods that major retailers like Walmart and Target warned would result (which could have the effect of hurting Trump voters).

But many Wall Street analysts weren’t convinced. In a March 28 note to clients, Bank of America analyst David Woo called the assumptions of currency appreciation “unrealistic and implausible” and said even if they were realized, they could bring “unintended consequences that would negate and possibly overwhelm any economic benefits associated with the BAT” -- including by slashing the value of American-owned foreign assets, diminishing the foreign earnings of American-based multinationals, and hurting commodity producers.

Mnuchin echoed those concerns in a CNBC interview on May 23: “One of the problems with the border adjusted tax is that it doesn't create a level playing field. It has very different impacts on different companies. It has the potential to pass on significant costs to the consumer. It has the potential of moving the currencies.” 

Watch him here: 

The Treasury secretary made the comments at the same time as the Ways and Means panel was convening its first hearing on the border-adjustment proposal. And in case his point was lost on lawmakers, Mnuchin made the rounds on Capitol Hill that afternoon. In closed-door meetings with three different groups – the conservative Republican Study Committee, the even more conservative House Freedom Caucus, and Ways and Means Committee Democrats – the Treasury secretary said the proposal was holding up progress on the broader project of a tax overhaul and that it was time to move on. Mnuchin noted he was speaking not only for himself but for Trump, as well, sources in two of the meetings said.

2. The Trump administration and Speaker Ryan are not working well together.

Mnuchin’s Hill visits – word of which he knew would leak – were a rebuke to the Wisconsin Republican, whose career ambition is to streamline the tax code and who invested significant political capital in the BAT as the best way to achieve it.

The Treasury secretary made the move out of frustration with Ryan, two sources familiar with his thinking said. Mnuchin believed the two had come to an agreement that the BAT wasn’t politically feasible, but the speaker continued his advocacy for it. The administration lost confidence in Ryan’s ability to wrangle his own ranks after the collapse of the first health-care measure in March.

And though Ryan and Brady embraced the White House tax principles when Mnuchin and Cohn rolled them out in April, the two Trump hands conducted their own back-channel outreach on the issue to subgroups in the House Republican Conference. (The principals continue communicating, and Mnuchin and Cohn will be back on the Hill this afternoon for their third private huddle on the issue with Ryan, Brady, Senate Majority Leader Mitch McConnell (R-Ky.) and Senate Finance Committee Chairman Orrin G. Hatch (R-Utah)). 

3. House Republicans themselves remain deeply divided.

There appears to be enough opposition from GOP tax writers to keep a package that includes the BAT from passing out of committee. At the hearing, Target CEO Brian Cornell testified that the proposal would cause the company’s tax rate to leap 40 percent. Still, considering the priority that Brady has placed on it, it was bracing to see Rep. Erik Paulsen (R-Minn.), who once worked for Target and now represents its corporate headquarters, join three other Republicans in suggesting he couldn’t support the BAT in its current form.

The reservations don’t end there. Rep. Jim Jordan (R-Ohio), a House Freedom Caucus co-founder, called the BAT dead. “The White House doesn’t like it, members don’t like it, employers don’t like it, and it’s bad for families who are going to have to pay more for the car they buy at Honda and the clothes they buy for their kids when they’re headed back to school,” he said in an interview.

4. The anti-BAT lobbying forces have outgunned the proposal’s private-sector boosters at every turn.

A retail-driven coalition called Americans for Affordable Products – which now counts over 500 members, from Abercrombie & Fitch to Zulily – began mobilizing the day after Trump’s election. Joining with automakers, oil refiners, and the Koch brothers network, its initial strategy focused on keeping the White House from embracing border adjustment while laying the groundwork to kill it in the Senate. But the March collapse of the Obamacare repeal effort in the House moved the group onto even more aggressive footing: If GOP leaders in the lower chamber couldn’t keep their soldiers in formation on health care, there was no reason to believe they’d fare better in the tax debate.

Drawing from the playbook that business interests used to kill the BTU tax in 1993, the coalition began arguing to House Republicans that they shouldn’t risk such a politically dicey vote for a measure going nowhere in the Senate. “We said, ‘You’re going to own this thing forever,’” one retail lobbyist involved in the effort said.

The coalition isn’t declaring victory. Instead, they’re aiming to keep the pressure on Ryan and Brady to formally drop the BAT. The group went up on the air with its first cable ads last week while lawmakers were back in their districts. This week, it’s flying 60 small-business owners into Washington to continue pressing the case on the Hill. 

Here's the bigger problem for Republicans: the dynamics revealed by the BAT’s failure portend poorly for a comprehensive rewrite of the tax code.

The current Congress only includes 15 lawmakers — five senators, 10 House members — who were serving in 1986, the the last time a major tax package passed. The remainder just got a live-ammunition demonstration of why it’s taken so long to repeat the trick. 

Big, complicated projects demand disciplined leadership, starting at the top. President Trump has the benefit of an all-GOP Congress, but he hasn't forged consensus within his party on the path forward. Neither has the administration called on natural allies in the business community to build a public case for reform. 

“We can’t organize ourselves,” one strategist involved in the process says. “We can be the stereo system that makes the music louder, but we can’t make the music.”

So far, the tax process has produced some noise and no music.

MARKET MOVERS

-- As knotty and potentially painful as the tax debate remains, Republicans on both ends of Pennsylvania Avenue would love it to be their top concern. Of course, it isn't, by a longshot. The party is bracing for the Thursday testimony of former FBI director James B. Comey, and Trump is further fraying GOP nerves with erratic tweets about the London terrorist attack, my colleague Robert Costa writes

White House officials hoped to keep the focus Monday on the rollout of the administration's infrastructure program. That plan, the promise of which helped rally markets after Trump's election, remains largely undefined (one element includes privatizing air traffic control -- here's an analysis of what that would mean). And whatever bipartisan appeal it held at the beginning of the year has evaporated

But it also felt like a footnote on a day that Trump bracketed with missives on the urgency of reinstating his travel ban, following the Saturday night killings on London Bridge:

--Even Trump loyalists are fretting about his penchant for indulging distractions. "Every day and moment he spends on anything other than a rising economy is a waste that disrupts everything,” former Trump campaign adviser Barry Bennett tells Costa. 

Marc Short, the White House director of legislative affairs, put a slightly different spin on it, telling reporters in a Monday briefing that it is the investigations themselves into possible links between Russian operatives and Trump campaign that is detracting from the administration's legislative agenda. 

Still, he said, the White House expects a Senate vote this summer on a health-care overhaul, in time to the post-Labor Day work period to overhauling the tax code:

--And Short backed other administration officials' recent calls for Congress to lift the debt ceiling before quitting town for the August recess. But he sidestepped the question of whether the White House will demand the hike free of spending cuts or other policy riders:

-- If Short's projections sound overly optimistic based on past performance, that may be because he's taking a page from his boss. Bloomberg's Toluse Olorunnipa notices a pattern whereby Trump promising action on everything -- from overhauling the tax code to announcing his decision on the Paris accords -- in "two weeks." More often than not, that deadline for action comes and goes unmet. 

In the case of the tax plan, Trump originally announced back on Feb. 9 that his administration was "way ahead of schedule" and would be releasing "something phenomenal" with two or three weeks. The White House released a one-page outline 11 weeks later. 

POCKET CHANGE

First Daughter Ivanka Trump tweeted a quote from a speech that Federal Reserve Chair Janet L. Yellen delivered at Brown University last month: 

And some reporters noted that her father is mulling whether to keep Yellen atop the central bank when her four-year term as chair end in February: 

The president has sent mixed signals about Yellen. He was harshly critical of her on the campaign trail but has been complimentary since:

-- Ivanka's brothers, meanwhile, are debuting plans for a new chain of middle-market American hotels that appears to draft off the branding behind their father's campaign. The line, called American Idea, will push the Trump Organization's footprint beyond the luxury properties for which it's known and into new corners of the map, with the first properties popping up in Mississippi, Jonathan O'Connell writes

Here are some more good reads:

Technology is where the big profits and big love are, according to a Barron’s survey.
Thomas Heath
MONEY ON THE HILL
A decade ago, the first inklings of the coming recession emerged as a housing bubble fueled by scant regulation, low-interest rates and easy credit gradually began to crater and soon would take the rest of the economy along for the painful ride.
Kevin Freking | AP
While a House bill expected to be passed this week has little chance in the Senate, some of its individual provisions could be enacted by Congress, including one aimed at banks' systemic threshold.
American Banker
THE REGULATORS

-- Senate Democrats can dust off their briefing books on OneWest Bank, the second coming of failed mortgage lender IndyMac that now-Treasury Secretary Mnuchin once chaired. Trump has nominated Joseph Otting, a former lieutenant of Mnuchin's at the bank, to run the Office of the Comptroller of the Currency, the regulator that oversees more than 1,000 lenders, including Wall Street giants, Bloomberg reports

If confirmed, Otting would be in position to help lead the administration's efforts to ease rules on the industry. His pick will allow Democrats to renew their charge that Trump is picking financial crisis profiteers to police the beat. The party hammered Mnuchin during his confirmation hearings over OneWest's foreclosure practices. And as CEO of the bank, Otting arguably had more of a hands-on role in the company's operations. 

More from the executive branch:

There’s a relaxation in the approach to occupational safety and business is getting a bigger voice, while hard-won victories for safety advocates are being reversed.
New York Times
The high court unanimously decided that the federal government must abide by a five-year statute of limitations.
Robert Barnes
DAYBOOK

Today:                         

  • The House Rules Committee will have a hearing on the Financial CHOICE Act at 5 p.m.
  • The Senate Banking Committee will hold a hearing on the nomination of Kevin Hassett to serve as the Chairman of the Council of Economic Advisers and Pamela Hughes Patenaude to serve as Deputy Secretary of Housing and Urban Development. The hearing will begin at 10 a.m.
  • Brookings Institution is hosting an event on Dodd-Frank at 9:30 a.m. Panelists for the discussion include former Fed chairman Ben Bernanke.
  • CATO Institute is hosting its banking summit in Charlotte, N.C. The summit begins at 10 a.m.
  • The Peterson Institute is hosting a book launch for “Currency Conflict and Trade Policy: A New Strategy for the United States.” The event begins at 12:15 p.m.
  • President Trump will highlight is $1 trillion infrastructure plan with a series of events that began on Monday, billed as “infrastructure week.” He began the events with an announcement Monday that he will propose a plan to privatize the nation's air traffic control system.

Coming up:

  • The House will begin this week debating the CHOICE Act, the sweeping bill by House Financial Services Committee Chairman Jeb Hensarling that would roll back much of the Dodd-Frank Wall Street Reform Act.
  • The Treasury Department is expected to release a report reviewing Dodd-Frank this week
  • Senate Finance Committee will hold a hearing on the nominations of Eric D. Hargan to be Deputy Secretary of Health and Human Services, David Malpass to be Under Secretary of The Treasury, and Brent James McIntosh to be General Counsel for the Department of the Treasury. The hearing will begin at 10 a.m. on Wednesday.
  • A Senate Appropriations subcommittee will hold a hearing on Wednesday with Education Secretary Betsy DeVos on the proposed 2018 fiscal budget.
  • A Senate Appropriations subcommittee will hold a hearing on Wednesday with HUD Secretary Ben Carson on the department’s proposed 2018 fiscal year budget.
  • Trump is expected to visit the Ohio River on Wednesday to discuss waterways and more of his broad infrastructure plans, John Wagner reports.
  • The House Appropriations Committee will hold a budget hearing with Labor Secretary Alex Acosta on Wednesday morning.
  • The House Appropriations subcommittee holds a budget hearing with HUD Secretary Ben Carson on Thursday morning.
  • The Consumer Financial Protection Bureau is set to have its advisory board meeting on Thursday.
  • The House Financial Services subcommittee will hold a hearing on virtual currency on Thursday.
  • The Senate Banking Committee will hold a hearing on economic growth  and the “Role of Financial Institutions in Local Communities” on Thursday.
  • The Wilson Center will host an event on Thursday with Canada’s Premiers on the future of North American Trade. The event begins at 12:30 p.m.
  • The Energy and Commerce Committee hold a hearing Thursday morning on their “Disrupter Series” on “improving Consumer’s Financial Options with Fin Tech.”
THE FUNNIES

Toles: "Donald Trump doesn’t have any regard for the political climate, either":

BULL SESSION

People are already thinking about 2020:

See reporters ask about the whereabouts of Sean Spicer:

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Stephen Colbert talks "covfefe:"