The Washington PostDemocracy Dies in Darkness

The Finance 202: Trump speech will bash rigged system. But tax outline would benefit 1 percent.


with Paulina Firozi


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President Trump is set to open a fall debate over taxes with a populist sales pitch for a bill that doesn’t yet exist. 

Republican tax negotiators aimed to spend August forging agreement on a sweeping rewrite of the code. Outwardly, at least, they’re wrapping the month with more questions than answers. So when the president appears today in Springfield, Mo. — a state he carried by 19 points, and home to vulnerable Democratic Sen. Claire McCaskill, who is up for reelection in 2018 — his speech will strike political chords without diving into details. 

My colleague Damian Paletta, previewing the address this morning, quotes one administration official who says, “Trump is going to try and tap into a view among many Americans that “the economy is rigged – that it only benefits a very small [number of] wealthy and well-connected few…The president is going to really hammer on that.”

Set aside the advisability of delivering a tax speech while, 600 miles to the south, the people of greater Houston brace for more of Tropical Storm Harvey’s ongoing, life-threatening havoc. The credibility of the speech is another matter. 

Here’s Politico’s Ben White and Tara Palmeri on the populist argument Trump will make for whatever may be forthcoming from congressional Republicans: 

The speech is expected to frame the issue around wiping out some deductions that benefit mostly higher-income taxpayers, making the U.S. corporate system more globally competitive and simplifying the individual system. He is expected to discuss lower rates for middle-income taxpayers as an instant pay raise for everyday Americans, while arguing that lowering the corporate tax rate would make it easy for companies to expand — improving Americans' quality of life.

All of those features may indeed make it into the Republican tax proposal. But it also appears likely, based on the moves that GOPers have made in the debate so far, that they plan to revise the code in such a way that its shifts more of the burden away from wealthy earners.


  • Treasury Secretary Steven Mnuchin committed the administration to not cutting taxes for the rich during a CNBC appearance last November. Earlier this summer, however — after Democrats seized on the statement and attempted to brand it the “Mnuchin rule” — he disavowed it.  “You made it a rule, I didn’t make it a rule,” Mnuchin told Sen. Ron Wyden (D-Ore.), during testimony before the Senate Budget Committee. “I have walked it back from the CNBC interview.”
  • Senate Majority Leader Mitch McConnell (R-Ky.), another member of the Big Six group that’s been meeting privately for months to hash out details of a plan, earlier this month affirmed Republicans would seek to go it alone on the overhaul, without Democratic support. And he identified the deal-breaker: A letter from 45 Democratic senators insisting an overhaul not add to the deficit or ease the tax burden of the top 1 percent of earners. Since McConnell has already expressed support for a revenue-neutral tax rewrite himself, the particularly offending Democratic demand would seem to be the party’s opposition to easing the wealthy’s load. 
  • Likewise, House Ways and Means Committee Chairman Kevin Brady (R-Tex.) recently told Bloomberg he has reached out to Democrats but won’t rule out tax breaks for the top 1 percent, because “it’s all about growth.”
  • As noted here last week, a Tax Policy Center analysis of the plan the administration outlined in April found it would be “highly regressive,” with 40 percent of its benefits pooling among the top 1 percent, while top 0.1-percenters would see their after-tax income jump by an average of $1.4 million. 
  • Republican negotiators already agree on some points, including a full repeal of the estate tax, which the administration called for in its plan. The levy applies to estates worth more than $5.49 million, a rare enough breed that it will only touch an estimated 5,200 people in the country this year. (National Economic Council director Gary Cohn jokingly dismissed concerns over the cost of the repeal in a meeting with Senate Democrats earlier this year by saying, “Only morons pay the estate tax,” according to the New York Times.)

Bloomberg’s Max Abelson vividly captured the tax-cutting dreams of the Wall Street donor class earlier this month. He laid out how, during the Obama era, captains of industry fashioned themselves as deficit scolds, calling for steep cuts to entitlement spending for the good of the nation’s fiscal health.

Now that deficit spending stands to land back in their pockets in the form of tax cuts, the same figures are lining up to evangelize about the economic benefits of lower rates. Here’s one scene from the story:

Beyond the top executive suites of the biggest banks, support for cuts can be even more full-throated. Inside the 21 Club, one of Wall Street’s favorite hangouts, a few dozen executives, money managers, and other businesspeople gathered in August at a reception thrown by two groups that despise high tax rates: the Committee to Unleash Prosperity and FreedomWorks, co-founded by the billionaire Koch brothers. Standing in a brown Brioni pinstripe suit with a martini in his hand, Alfred Angelo, an investor based in New Jersey, gestured to the other guests. “We’re those villainous people,” he said. “Nobody put me on this Earth to pay for everybody’s health plan. I know that sounds like Scrooge or somebody. But this is the real world.”

The crowd made its way to a private dining room, where Kevin Brady ... called for busting up the Internal Revenue Service and creating the “lowest rates on business in modern history.” He dazzled the guests—at one point, one really did say the word “wow” out loud.

Yet by most accounts, the GOP tax project remains badly behind schedule.

Advocates hoped to build a steady drumbeat of support over the August recess. Instead, the cheerleader-in-chief spent the month ripping open a painful national wound over race while antagonizing his would-be Republican allies on Capitol Hill.

And with a fall calendar already overstuffed with must-pass business — including a Harvey relief package that will likely include tax provisions — makeup work on a tax revamp is poised to slip further. (Brady, for his part, maintains it won't further be further delayed.) 

A presidential signing ceremony this year now looks remote at best. One presidential address won’t repair the damage. As one Republican Senate aide tells me about Trump’s speech today, “If he’d done this 10 times over the last month we’d be in a lot stronger position than we are now.” 


— The case for how Harvey, by adding yet another messy, expensive item to lawmakers' September to-do list, will make next month that much harder is self-evident. Goldman Sachs sees it differently.

In a note to clients Tuesday, Goldman economist Alec Phillips argues the storm's devastation ramps up the political pressure to act. He sees the storm as easing the tasks of keeping the government open and raising the debt limit, and he's dropping the probability of a shutdown from 50 percent to 35 percent.

But the risk persists: "That said, a shutdown or delayed debt ceiling hike is still clearly possible," he writes. "The President continues to raise the possibility of a shutdown if the border wall is not funded, and the upcoming extension of spending authority is likely to be temporary, potentially pushing the risk of a shutdown later into the year"

The sustained assault that Harvey is inflicting on the Texas coast will test the resilience of the energy industry concentrated there.

"The hurricane did what terrorists could only dream of and take a third of U.S. refinery capacity off line for days on end,” Michael E. Webber, deputy director of the Energy Institute at the University of Texas at Austin, tells the New York Times. “Over the long term, the energy sector will have to consider the costs of additional hardening of the infrastructure on the Gulf Coast versus moving to a different location like the Eastern Seaboard.”

More from the Times: "The full implications are potentially even larger. The environmental fallout could worsen, and if oil and natural gas prices spike because refineries and pipelines are crippled, renewable energy sources like wind and solar power, along with electric cars, could get a major lift. The United States could be forced to import more gasoline and other refined products. And a chemical industry that has been expanding rapidly because of cheap natural gas from shale fields could be slowed, or even stalled."

Harvey's devastation has sharpened the focus on the National Flood Insurance Program, in limbo in Congress as its expiration looms and poised to run out of money without an extension of its borrowing authority.

My colleague Mike DeBonis reports: "The program is set to expire Sept. 30, and no new policies can be written after that date unless Congress acts to extend it. Claims on existing policies, which can see payouts up to $350,000, are also at risk as the program approaches a $30 billion borrowing limit that experts say Harvey’s toll could quickly breach ... Even before stormwaters swept across metropolitan Houston, debate on how to restructure the NFIP exposed fissures in Congress that crossed traditional partisan lines, pitting conservatives who want to scale back the government costs for the program against lawmakers from flood-prone regions wary of jacking up their constituents’ premiums."

Trump's budget called for slashing programs that help state and local governments prepare for and recover from disasters like Harvey.

My colleague Lisa Rein reports: "The cuts proposed by the Trump administration would slice away funding for long-term preparedness efforts, many of them put in place to address the sluggish federal response to Hurricane Katrina in 2005... Trump officials recently struck down an Obama administration rule requiring building projects in line for federal funding to strongly consider climate change risks — for example, by elevating structures in flood zones away from the reach of rising water. The goal of the Obama rule was to mitigate the costs to taxpayers of damage claims under the federal flood insurance program... But Trump officials say that removing the rule streamlines the approval process."

Harvey Costs Projected to Rise to $42 Billion (Bloomberg)

Market thinks Fed could hold off on rate hikes for another year — at least (CNBC)


Fallout from the storm and an increasingly treacherous standoff with North Korea are presenting twin leadership challenges to Trump at a shaky moment in his presidency.

The Post's Ashley Parker and John Wagner call it "a real-time proving ground with tens of thousands of lives in the balance." More: "In some ways, Trump faces both a higher and lower bar when it comes to how the nation will assess his handling of the tropical storm and North Korea’s decision early Tuesday to launch an intermediate-range ballistic missile over Japan and into the Pacific Ocean. 

"Trump is a president who has no major accomplishments on Capitol Hill outside of the appointment of a new Supreme Court justice, is still under siege over his associates’ dealings with Russia during the campaign, is fighting an open war with his own Republican Party and is embroiled in a simmering feud with key members of his administration following his response to the white supremacist violence in Charlottesville. An effective response to either crisis could allow Trump to demonstrate an ability to govern that has remained elusive during the turbulent first months of his administration. But for many of the same reasons, skepticism also abounds."

Even in visiting hurricane-ravaged Texas, Trump keeps the focus on himself (Jenna Johnson)

How to Get Rich in Trump’s Washington (New York Times)


— Koch Industries already demonstrated anew its potency with Republican lawmakers by helping ice the border adjustment tax that House Speaker Paul D. Ryan (R-Wis.) hoped to make a centerpiece of a comprehensive tax overhaul.

Now, Koch is circulating a report that puts a thumb on the scale for cutting the corporate tax rate from 35 percent to 20 percent — instead of settling for a higher rate while paying for full and immediate expensing, a priority of House GOP leaders. The report, prepared by Clark Hill, argues that a lower overall rate provides more economic bang for the buck. 

Banking lobbyists are zeroing in on Sen. John Neely Kennedy (R-La.) as one of a handful of swing votes who could decide the fate of the Consumer Financial Protection Bureau's arbitration rule. So far, he's not tipping his hand

Bloomberg's Elizabeth Dexheimer reports: "The new rule would make it easier for customers to sue financial institutions, and banks have spent millions to keep arbitration as the required venue for dispute resolution instead. Lawmakers have a limited window of time to change the provision, and because the GOP’s Senate majority is slim, Kennedy, a lawyer and former Democrat who pitches himself as a folksy Washington outsider, could be the one to cast the deciding vote."

(Kennedy has other, more pressing priorities vying for his attention. For one, he said Tuesday he plans to push ahead with legislation to revamp the National Flood Insurance Program, Politico reports.)

Rep. Mark Walker (R-N.C.), who leads the conservative Republican Study Committee, wants a debt- ceiling hike paired with stricter eligibility requirements for Medicaid.

CNBC's Ylan Mui reports: "The committee is still considering whether to seek other spending reforms as well and will discuss their priorities with GOP leadership next week. But the committee represents more than half of the Republican lawmakers in the House — endangering any bill that does not have its full support. 'We're very aware and understand the ramifications, and we want to make sure that we don't default,' Walker told CNBC. 'But at some point … we have to look at specific reforms to make sure that we're being fiscally responsible.'"


House Financial Services Committee Chairman Jeb Hensarling (R-Tex.) wants to know if and when CFPB director Richard Cordray is leaving his post to run for Ohio governor. The Hill's Sylvan Lane: "Hensarling, who has overseen GOP attempts to scale back the CFPB’s power and independence, wrote that the recent bureau actions 'suggest that your personal political ambitions may be informing decisions you are making' leading the nonpartisan agency."

White House Won’t Require Firms to Report Pay by Gender, Race (WSJ)


Expedia CEO Dara Khosrowshahi has accepted an offer from Uber to become its chief executive. He tells the Wall Street Journal he's got a "budding" relationship with ex-CEO Travis Kalanick. “I think there’s mutual respect there,” he said.

It’s Official: Warren Buffett Made About $13 Billion on Bank of America Deal (WSJ)

Britain Looks to Address Inequality With Executive Pay Measures (New York Times)



  • President Trump will travel to Missouri to talk tax reform.
  • The American Enterprise Institute holds an event on retirement income.

Coming Up

  • The Brookings Institution holds an event on “Building a secure and inclusive global financial ecosystem” on Thursday.
  • The House Homeland Security Subcommittee on Emergency Preparedness, Response and Communications holds a hearing on the future of FEMA on September 6.
  • The Urban Institute and Brookings Institution Tax Policy Center hold a discussion on “Tax Policy and the Immigrant Experience” on September 7.
  • The National Economists Club holds a discussion on "What Will Make Economics Professors Succeed or Fail in the Future? The Discipline at a Crossroads” on September 7.
  • The New York Times hosts the first event in its TimesTalks D.C. series featuring House Speaker Paul D. Ryan on September 7.

President Trump tells a cheering crowd: “Texas can handle anything”:

"What a crowd, what a turnout," President Trump said as he addressed people in Corpus Christi, Tex., on Aug. 29 while touring the damage from Hurricane Harvey. (Video: The Washington Post)

President Trump to Harvey responders: ‘The world is very impressed with what you’re doing':

President Trump congratulates responders for their rescue efforts amid historic flooding in Texas. (Video: The Washington Post)

How presidents react to natural disasters:

President Trump visited Texas Aug. 29, after Hurricane Harvey struck parts of the state. Here’s how his predecessors handled natural disasters. (Video: Victoria Walker/The Washington Post)

Politicians react to Harvey's devastation:

As waters keep rising from Hurricane Harvey, President Trump, administration members and Texas officials weigh in on the federal government's role. (Video: Jenny Starrs/The Washington Post)

GOP lawmakers are directly criticizing Trump:

After President Trump's rhetoric on the Charlottesville violence inflamed more criticism, a handful of GOP lawmakers are speaking out while many stay silent. (Video: Jenny Starrs/The Washington Post)