The first edition of this newsletter, back on June 6, declared the border adjustment tax dead. Apparently it was lying in state for a long time. On Thursday, lawmakers finally buried it. 

“We had a healthy debate on that provision,” House Ways and Means Committee Chairman Kevin Brady (R-Tex.) told reporters Thursday. “But in order for us to unify, it was important to set it aside for now.”

That turned out to be the most concrete development from a 603-word statement of shared principles that tax negotiators from the House, Senate and administration issued Thursday. That it amounted to an act of subtraction indicates how meager their consensus is so far. 

The pressure on President Trump and the GOP congressional majority will only ratchet up now that the Senate's health-care overhaul push died a somewhat surprising death in the wee hours of the morning, thanks to Trump's old nemesis, Sen. John McCain (R-Ariz.). He and Sens. Lisa Murkowski (R-Alaska) and Susan Collins (R-Maine) cast the votes to defeat the "skinny repeal" of Obamacare and shut down the debate, for now. GOP leaders -- and the president -- are going to be even more desperate in the aftermath for a substantial win.

But they have yet to figure out how to pay for a major tax rewrite as the demise of border adjustment — the brainchild of Brady and House Speaker Paul D. Ryan (R-Wis.) — shows, marking the end of the tax debate’s first lobbying battle. That the defense won points is another discouraging sign for the overall effort at a sweeping rewrite of the tax code pushed by the Trump administration and the GOP cogressional majority. The offense so far has failed to take the field. In the case of the BAT, a coalition of national retailers, oil refiners and the Koch political network sunk a proposal that Ryan and Brady advanced in part because they believed it most evenly spread the pain of raising a ton of money, about $1 trillion, to pay for lower tax rates across the board. 

Vox's Jim Tankersley: 

As a tax rewrite proceeds, the revenue-raising challenge remains.Tax writers agree they are still aiming for a permanent overhaul of the code, which means they must find money to cover the cost of slashed rates and any new incentives they add to goose growth. But the White House has yet to marshal a concerted effort from the broader business lobby that can wall off the project from the next assault it will face from targeted industries. (The administration is coordinating more closely withe Koch network on the matter, with Treasury Secretary Steven Mnuchin set to appear Monday at an event with leaders of the organization.)

Wall Street Journal’s Richard Rubin: 

Likely targets aren’t waiting to see specifics before unlocking their armories. Among them are those businesses who together stand to pay an extra $1.5 trillion over ten years if Republicans eliminate the deduction for interest paid on debt. That write-off benefits a range of interests, from private equity firms, which use debt to finance buyouts, to farmers who rely on credit to buy everything from land to seeds. 

The House GOP plan unveiled last summer proposed tying repeal of the deduction to a new break for investments in physical assets. And the statement negotiators released Thursday appeared to echo that aim by calling for “unprecedented capital expensing.” Brady told reporters that means they want to push “toward more than is in the tax code today, and as far as we can, because that drives productivity, wages and economic growth.” The joint statement didn’t mention scrapping the deduction for interest on debt. But lobbyists for sectors that would be pinched are nervous enough that they’re planning to wage a campaign against the proposal over the August break. 

If the fate of the BAT is any indication, a muscular defense from those who stand to lose a lot will overwhelm disorganized pushback from those who have a harder time measuring what they stand to gain. Brady on Thursday took the blame for the defeat of border adjustment, telling the Wall Street Journal that “we had as full a debate as you can have on a new tax idea and we simply didn’t make the case. I simply didn’t make the case.” The Ways and Means chairman can only do so much.

For a sweeping tax code rewrite to stand a chance in the fall, the Trump administration will need to step into the breach in a way it hasn’t — and maybe can’t. 


A silver lining for Republicans in the collapse of their Obamacare repeal push early this morning: Their failure to advance the House-passed health-care package means they can retrofit that bill as a tax-code overhaul. They may have to call on that option. The GOP still has no clear path to passing a budget, which the party needs to unlock reconciliation rules that will allow them to approve a tax overhaul without Democratic votes. "There’s still not enough votes to pass it,"  Rep. Mark Meadows (R-N.C.), who chairs the conservative House Freedom Caucus, told reporters Thursday. Some Republican budget experts believe if GOP leaders can't find the votes for a spending blueprint, their best bet will involve repurposing the House health-care bill, which Republicans already voted to fast-track using reconciliation rules. 

Instead, the conservative group expects that there will be a three-month continuing resolution, preventing the government from shutting down and keeping current spending levels in place, albeit with certain restrictions.
The Hill

Randy Quarles, Trump's pick to serve as the Fed vice chair for supervision, wants to make the annual stress tests applied to banks more transparent — a change that the industry has long sought. Quarles, who if confirmed will become the central bank's point person on banking regulation, testified before the Senate Banking Committee on Thursday in his first step toward confirmation. The Wall Street Journal's Andrew Ackerman and Ryan Tracy report: "The remarks suggested Mr. Quarles, if confirmed, would be willing to go further than his predecessor, former Fed governor Daniel Tarullo, in publishing more information about how the tests are run. Industry officials have long demanded more details, in part to avoid embarrassing failures. Mr. Tarullo resisted disclosing certain information, saying it could allow banks to game the exams... Mr. Quarles, who was testifying alongside Joseph Otting, Mr. Trump’s pick for the comptroller of the currency, also called for “some refinements” to the postcrisis rule book for Wall Street, which he said has broadly made the financial system safer."

He said he's open to tweaking the Volcker Rule but declined to weigh in on what size a bank should be to qualify for extra regulatory scrutiny. 

Quarles encountered some heat from Democratic members of the panel. Sen. Elizabeth Warren (D-Mass.) grilled him over what she called a "30-year career spinning through the revolving door in the private sector." Business Insider's Pedro Nicolaci da Costa says Quarles, "a former Wall Street lawyer and Treasury official, was visibly shaken as Warren dug into him with all the details of his career that appeared to go against the role he’s now tasked to take on."

As an executive at the Carlyle Group, the private equity firm, Quarles profited from two banks rescued by the federal government, a detail that Reuters reports could cause him some heartburn in his confirmation. 

Meanwhile, across the Capitol, Treasury Secretary Steven Mnuchin told House Financial Services Committee members that he is working with other regulators to ease enforcement of the Volcker Rule and wants to lift the threshold for which financial firms qualify as too big to fail. “The biggest problem with the Volcker rule is its complexity and regulatory overlap,” Mnuchin said, according to the Wall Street Journal. “We need to make sure that banks understand how the regulation works.” More from that report: "The Treasury secretary also urged Congress to move quickly in raising the threshold at which banks are labeled as “systemically important financial institutions.” The threshold is currently $50 billion in assets, and raising it would provide some regulatory relief to community and regional banks that argue they didn’t cause the financial crisis and shouldn’t be subject to the increased oversight."

Mnuchin's appearance featured some testy exchanges with Democrats. First, he tangled with Rep. Maxine Waters (D-Calif.), the panel's ranking member: 

Later, things got chippy with Rep. Keith Ellison (D-Minn.):


— The Finance 202 is a family newsletter, so it's hard to know how to relate the episode of Real White House Aides of the Trump Administration that played out Thursday as a key Trump priority was heading toward a make-or-break vote in the Senate. Newly installed White House communications director Anthony Scaramucci, not yet a week on the job, offered up a searingly vivid indictment of two administration rivals — Reince Priebus, the chief of staff, and Stephen K. Bannon, the chief strategist — in an on the record interview with the New Yorker's Ryan Lizza.

The Post's Jenna Johnson, Phil Rucker and David Nakamura report: "Scaramucci called Priebus a 'fucking paranoid schizophrenic, a paranoiac' and claimed that the former Republican Party chairman will 'be asked to resign very shortly' in a sweep that he warned could eventually involve much of the staff. The New Yorker interview gave voice to the profane intensity of the warring West Wing factions that has defined much of Trump’s early administration — but the level of candor and raging frustration Scaramucci expressed yet again stunned a Washington political class that has become increasingly inured to the unorthodoxy of this White House."

In the face of fierce blowback, Scaramucci said he would temper his language in the future:

And then he offered some qualified regret:

But beyond what the statements revealed about Scaramucci's temperament, some political reporters pointed out how nonsensical his explanation for them was to start with:

The Post's Paul Kane: 

The Post's Aaron Blake: 

The Post's Mark Berman: 

New York Post's Seth Mandel: 

And here was Sen. Chris Murphy (D-Conn.): 

Senate Republicans are using every tool at their disposal to prevent President Trump from firing Attorney General Jeff Sessions. The Wall Street Journal's Byron Tau and Aruna Viswanatha: "Sending the most powerful signal yet that Mr. Trump should back away from such action, the senators said they would try to thwart him through legislation, control of the calendar and the chamber’s parliamentary rules. And, unlike in the health-care and tax debates, Democratic senators are aligning with them in an effort designed not only to protect Mr. Sessions, but also to shield the work being done by special prosecutor Robert Mueller, who was appointed by the Justice Department to examine Moscow’s actions last year and whether the Trump campaign colluded with it. Russia and the president have denied any collusion."

And the Senate GOP isn't stopping there. The chamber overwhelmingly approved a package of sanctions aimed at Russia, Iran and North Korea by a 98-2 vote on Thursday, a margin that guarantees senators would override a Trump veto. The measure is meant to limit Trump's ability to give diplomatic concessions to the Russians and amounts to a startling no-confidence vote in the president by members of his own party. Still, it's not clear whether he will sign it, Karoun Demirjian reports

A pair of Democratic senators are raising new questions about whether investing titan Carl Icahn, President Trump's unofficial deregulatory czar, is using his position to benefit his investment in AIG Reuters' Lisa Lambert: "In a letter to U.S. Treasury Secretary Steve Mnuchin, Senators Elizabeth Warren and Sheldon Whitehouse said Icahn has retained 'his massive business interests' while advising Trump on regulation, including his sizable investment in AIG. The company received a $182 billion taxpayer bailout during the 2007-09 financial crisis, which prompted Congress to call for the designations of non-banks in the Dodd-Frank Wall Street reform law as systemically important. Icahn owned a 4.95 percent stake in AIG as of March 31. Concerned about compliance costs, Icahn had publicly pressed AIG to shrink, and tried to convince the FSOC that AIG no longer qualified for the label. Recently though, after AIG sold some assets and appointed a new chief executive, Icahn has not pushed the issue further."


Rep. John Delaney (D-Md.) is planning to give up his House seat representing western Maryland and eyeing a potential run for president. Delaney is the only member of Congress who's taken a company public. He's also one of the wealthiest, worth an estimated $90 million. 

Thanks to comments made by President Donald Trump, Apple suddenly faces new pressure to build factories in the U.S.
An internal report shows customers with car loans had costly, unnecessary insurance tacked onto their bills, and 274,000 were pushed into delinquency.
New York Times
The Federal Reserve ended a four-year-old enforcement action against M&T Bank Corp., removing a cloud over the Buffalo, N.Y., bank that had restricted it from deal making.

And thus ends “American Heroes” week at the White House. It wasn’t a week that anybody at the White House will want to remember. But that has nothing to do with the theme, which nobody noticed anyway. Here’s how “American Heroes" week performed on Google against the Discovery Channel’s Shark Week, which admittedly benefits from an unfair head start: 


Coming Up

  • The Brookings Institution will hold an event on next steps for the trans-Atlantic alliance on July 31. 

From The Post's Tom Toles: Trump doesn’t really get the difference between rights and wrongs:



Sen. Lindsey O. Graham (R-S.C.) says Trump will have to ‘accept the consequences’ if he fires Sessions:


Here's how Obamacare repeal failed, in two minutes: 

White House Communications Director Anthony Scaramucci's insults Reince Priebus and Stephen Bannon in a profanity-laced interview in the New Yorker:

Watch Stephen Colbert's take on Scaramucci's New Yorker interview: