Treasury Secretary Steven Mnuchin and House Speaker Paul D. Ryan (R-Wis.) say the president will sign a comprehensive revamp of the tax code into law by the end of the year. But roughly 98 percent of businesspeople aren’t convinced.
Corporate skepticism of the GOP’s tax ambitions comes blaring through in a survey the accounting firm Deloitte released Tuesday. Only 2.4 percent of the 3,100 business, tax and finance professionals the firm surveyed said they are very confident the party will meet its goal of overhauling the code by the end of the year; 16 percent said they are somewhat confident, while 74 percent described themselves as doubtful or not at all confident. (The survey wasn’t a scientific poll; rather, the firm asked participants in a July webcast to answer several questions on their predictions for the tax debate.)
Such sentiments about President Trump’s signature economic priority roughly align with broader public attitudes toward the president's leadership. A pair of polls from CNN and CBS this week show Trump’s overall job approval rating has sunk below 40 percent. According to the CNN survey, 73 percent say they trust “noting at all” or “just some” of what they hear in official administration communications. Only 5 percent say they trust “almost all” of it.
Similarly, 5 percent of the businesspeople Deloitte surveyed believe the Trump administration can achieve its stated goal of lowering the top corporate tax rate to 15 percent. And 70 percent think that rate is more likely to end up somewhere in the low 20s, along the lines of what House Republicans have described.
Jon Traub, who heads Deloitte’s tax practice, appears to be slightly more bullish about progress on taxes than the respondents to his firm’s survey. “I’d put myself in the category of doubtful,” he tells me. Traub notes the poll constructed the question narrowly, by asking only about the chances for a wholesale rewrite of the code, and one that’s accomplished by the end of the year.
A former top staffer on the House Ways and Means Committee, Traub puts a greater probability on action by broadening what qualifies to include a simple rate cut, even one that only makes it to the president’s desk next year. Like many others close to the debate, he predicts congressional Republicans will get something done in order to avoid heading into the midterm election with nothing to show for their majorities.
But business leaders aren’t just dubious that Republicans can move their agenda. They are also showing signs they’ve begun to tune out the entire process.
As the Wall Street Journal’s Ben Eisen reported earlier this week, just 12 percent of second-quarter earnings calls so far have mentioned the Trump administration, down from 49 percent six months ago. “A new president’s agenda will often stir much discussion, and it’s not surprising that it dies down over time,” he writes. “But the declining mentions of Mr. Trump suggests that Washington hasn’t turned out to be the key driver of the economic and business outlook that some thought it might right after the election.”
And here again, business sentiment tracks with popular opinion. Americans report very different feelings about the economy than they do about the president, with 69 percent telling CBS the national economy is “very good” or “fairly good,” up from 55 percent in December. If the divergence has any historical precedent, it isn’t obvious. Most recently, George W. Bush’s approval ratings wallowed below 40 percent in Washington Post-ABC polling just before the 2006 midterms, despite a 4.4 percent jobless rate. But the public at the time had an overall sour view of the economy, with 53 percent rating it “not so good” or “poor.”
This, despite the fact that Trump has taken credit regularly for the economy and rising stock market, most often on Twitter. Here's the latest example:
There’s a long way to go until the 2018 midterms. Bread-and-butter economic issues are often a driving force in how Americans vote, whether or not they give the president credit or blame for the economic situation.
But should an anti-Republican wave start building next fall, it’s tough to imagine voters will be swayed by a temporary tax cut into returning the GOP to the helm of Congress.
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— Goldman Sachs sees a likelihood Congress waits until the last moment to pass a debt limit increase next month — and then may only do so on a short-term basis. Goldman economist Alec Phillips writes in a Wednesday note to clients that Republicans are likely to try pairing a hike of the federal government's borrowing authority with an extension of government funding that's also due at the end of September. But he sounds less than confident in the outcome: "Overall," he writes, "the outlook for the debt limit feels a bit more uncertain this year than it did the last time around in 2015, in light of the new political dynamic under unified Republican control of government, a new President whose approach to the issue is not yet clear, and a number of substantial policy debates, like tax reform and ACA repeal, in the background."
A veteran House Republican appropriator and Budget Committee member, meanwhile, says it's unlikely the lower chamber can pass the so-called clean debt hike that the Trump administration is now rallying around. Reuters: Asked if the House would act to pass such a bill when lawmakers return to Washington next month, Rep. Tom Cole (R-Okla.) said 'probably not clean.' 'Most Republicans want to do something to lower the trajectory of the debt,' Cole, a member of the House Appropriations and Budget committees, told MSNBC's 'Morning Joe' program."
The Treasury bill market is starting to register investor unease over the debt limit. CNBC's Patti Domm: "The Treasury bill that comes due in October has been selling off, and is currently yielding more than the bills that mature in September and November, amid concerns the government would hit the debt limit at the beginning of October and not have funds to pay investors. While Congress is expected to act to raise the debt ceiling — the legislative cap on how much the government can borrow — it isn't expected to forego its usual drama."
— The labor market continues picking up steam, with job openings jumping to a record high in June. Reuters's Lucia Mutikani reports: The monthly Job Openings and Labor Turnover Survey, or JOLTS, released by the Labor Department on Tuesday also underscored labor market strength that will likely encourage the Federal Reserve to continue tightening monetary policy despite benign inflation and concerns about consumer spending. 'Companies are running out of workers to hire to do the job or even train to do the work, and this is a ticking time bomb for economic growth,' said Chris Rupkey, chief economist at MUFG in New York. 'Today's JOLTS data bring a September meeting balance sheet unwind announcement a little closer to reality.'... Economists are optimistic that tightening labor market conditions will spur faster wage growth. Annual wage growth has struggled to break above 2.5 percent, contributing to inflation persistently running below the Fed's 2 percent target."
Minneapolis Fed President Neel Kashkari continues to make the case that the central bank should hold off rate increases until inflation shows greater strength. In the meantime, he's calling out businesses that complain about a "skills gap" holding back hiring while they refuse to offer workers higher wages. "If you're not raising wages, then it just sounds like whining," Kashkari told a Rotary Club meeting in Sioux Falls, S.D. on Monday.
— Trump promised massive spending to rebuild the nation's crumbling infrastructure and help put more people back to work. Instead, so far, investments in public works have continued a long slide. Binyamin Applebaum of the New York Times reports: "Such spending equaled 1.4 percent of the nation’s economic output in the second quarter of 2017, the lowest level on record, according to Census Bureau data. In West Virginia, where President Trump on Thursday touted a vague $1 trillion infrastructure plan, public works spending has fallen for five straight years... The deterioration of the nation’s infrastructure has raised widespread concerns about safety, quality of life and the impact on economic growth. Politicians in both parties have declared the issue a priority. So far, there is no sign of a solution. In 34 states, spending on government construction projects was lower last year than in 2007, adjusting for inflation. The trend has continued this year. Public construction spending in June was 9.5 percent lower than during the same month last year."
— The Dow just pulled off a feat not seen since the Eisenhower administration: It climbed for 10 straight days twice in one year. CNBC's Rebecca Ungarino reports: "On Tuesday after President Trump issued a warning to North Korea regarding the country's nuclear program, the Dow gave back its mild gains, and closed the day 33 points lower. In early Tuesday trading, the Dow hit a new record high of 22,167. Eddy Elfenbein, portfolio manager at AdvisorShares, called the historic string of winning sessions 'pretty impressive,' but added that 'these are actually pretty baby steps as far as the up days for the Dow. So in aggregate, we're not talking about a rip-roaring rally; it's just that they've all been consecutive.'"
A day of nuclear saber-rattling that transfixed the world seemed like a good opportunity to point out that defense stocks have doubled the gains of the broader market since the election. Josh Brown:
— At least one investor sees the market's solid run petering out. Billionaire bond guru Jeffrey Gundlach is betting on the S&P 500 dropping 3 percent by the end of the year. If that happens, he expects to earn 400 percent, CNBC reports: "He said that in his firm's analysis, volatility is so low that it can make a big return by buying put options — bets for a decline — on the S&P 500 for December. 'It's not really a bear call on the S&P 500. It's more of a bull call on volatility,' he said."
— JPMorgan Chase CEO Jamie Dimon delivered a toned-down, dressed-down follow-up to The Rant on Tuesday in an extended CNBC interview. "America is the best country on the planet. I'm a complete patriot. It is the shining city on a hill. But we should acknowledge our problems and fix them," Dimon said in the live interview from Chicago. CNBC's Jeff Cox reports: "On Tuesday, he softened his rhetoric somewhat but said it's urgent that Congress implements tax reform at a time when the U.S. has the highest corporate rate in the world. And he pressed for education reforms as the Trump administration pushes for apprenticeship programs to teach young people better skills. 'I'm a proud American,' he said. 'What's embarrassing to me is our inability to get infrastructure done properly.'"
Though Dimon denied— in the present tense — that he is interested in running for office, observers noted he sounded like a lot like a potential future candidate. Bloomberg Gadfly's Mark Gongloff:
Jamie Dimon vs Mark Zuckerberg is the 2020 election we deserve https://t.co/byr80AMtHU— Mark Gongloff (@markgongloff) August 8, 2017
— House Democrats are seeking more information about how much the federal government is spending at Trump's properties. AP's Julie Bykowicz reports: "Democrats on the House Oversight Committee on Tuesday asked departments to hand over information about their Trump-related spending by Aug. 25... Their request seeks documents about any payments the departments made to the Trump Organization or any business in which the Trump organization has an ownership stake. Trump hasn't shied away from his homes away from the White House. He's visited his own properties 48 times since his inauguration, including a dozen overnight stays such as the one he's on now, according to an Associated Press tally."
— Trump's pick to lead the Export-Import Bank, former Rep. Scott Garrett (R-N.J.), has faced a withering assault from industry groups that want his nomination pulled. Now the outspoken critic of the bank is getting some support — from nine conservative groups urging the president to stay the course. “It is beyond audacious that the recipients of the Bank’s subsidies believe that they, not the president, can select the person to run the very agency that will hand the goodies out to them," the groups wrote in a letter to Senate Banking Committee Chairman Mike Crapo (R-Idaho). The Hill's Vicki Needham reports: "Crapo has said he supports Garrett to lead the bank. Led by Club for Growth, the groups which include Heritage Action for America and FreedomWorks, argue that the bank represents corporate cronyism and should be overhauled."
— SCENES FROM AN ITALIAN RESTAURANT: The Mooch got a hero's welcome when he turned up recently at Dee Angelo's, an Italian restaurant on Long Island, proof that you can always go home again: "The crowd of diners cheered Anthony Scaramucci’s entrance, and women then flocked over and asked him for pictures with his now-famous aviator sunglasses on."
— The hits keep coming for Wells Fargo (see my writeup yesterday), which now faces scrutiny from the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau for over new revelations it failed to refund insurance money to people who paid off car loans early. The Fed is looking into the matter, as well. Bloomberg's Laura J Keller and Elizabeth Dexheimer have the report.
— A severe economic recession could prompt Fannie Mae and Freddie Mac to turn to taxpayers for a $100 billion bailout, according to the housing finance giants’ federal minder. That’s actually an improvement over last year, when the Federal Housing Finance Agency’s stress test of the two institutions found they could require as much as $126 billion, MarketWatch’s Andrea Riquier reports.
Trump's base is officially crumbilng, writes The Post's Aaron Blake:
- The Economic Policy Institute holds an event on the Regulatory Accountability Act on Thursday.
- The Small Business & Entrepreneurship Council holds an event featuring SBA administrator Linda McMahon on “Modern Infrastructure's Role in U.S. Entrepreneurship & Small Businesses” on Thursday.
- Center for Responsible Lending holds a panel on Fintech and Civil Rights at the Netroots Nation conference in Atlanta, which starts on Thursday.
- Congress is on recess until September 5.
From The Post's Tom Toles: "A negotiated settlement with North Korea faces an unique problem:"
President Trump's approval rating lags even among key supporters:
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Jimmy Kimmel asks: How many Americans know where North Korea is?