The Senate budget also authorizes lawmakers to blow a gaping hole in the deficit, roughly twice the size of the 2009 stimulus package that 38 then-Senate Republicans opposed, despite earlier pledges to offset its cost. The House version prescribed a deficit-neutral approach, but House Republicans now are likely to accept the Senate plan in the interest of accelerating work on a tax overhaul.
“I applaud the Senate for passing a budget,” Speaker Paul Ryan (R-Wis.) said in a statement. “This action keeps us on track to enacting historic tax reform that will mean more jobs, fairer taxes, and bigger paychecks for American families. We want Americans to wake up in the new year with a new tax code, one that is simple and fair.”
My colleague Elise Viebeck lays out the next steps that Republican leaders are already negotiating:
House and Senate leaders — with White House encouragement — were in discussions about making last-minute adjustments to the Senate budget resolution that would allow them to bypass having a conference committee that could drag on for weeks. If House leaders were pleased with the Senate changes, they could simply vote on the precise language in the final Senate resolution, allowing them to pivot directly to the tax-cut negotiations in the coming weeks.
And President Trump has been personally lobbying House Republicans this week to swallow the Senate budget to speed up the process. He tweeted praise of Senate Majority Leader Mitch McConnell (R-Ky.) after passage, and marked the occasion again this morning:
Thursday’s foreshortened vote-a-rama had more to do with positioning than tax policy. Nevertheless, Senate Republicans demonstrated unity they’d do well to bottle as their push enters a make-or-break series of weeks.
No GOP senator broke ranks to side with Democrats as the minority offered a series of amendments aimed at extracting maximum political pain. Those included an amendment from Sen. Heidi Heitkamp (D-N.D.) that would prevent tax increases on people making less than $250,000 a year and another from Sen. Sherrod Brown (D-Ohio) to reward “patriot” employers that invest in American jobs.
Significantly, one change Republicans did adopt would allow lawmakers to bust through spending caps to boost defense spending, a key win for defense hawks like Sen. John McCain (R-Ariz.). Politico: “Under the amendment, the Pentagon's fiscal 2018 budget could be increased to $640 billion — without offsets — if lawmakers reach a deal to raise the current spending caps.”
Now comes the hard part: Actually writing a tax bill.
|You are reading The Finance 202, our must-read tipsheet on where Wall Street meets Washington.|
|Not a regular subscriber?|
— Powell ahead to head the Fed. Politico's Ben White, Victoria Guida, and Josh Dawsey: "Federal Reserve Governor Jerome Powell is the leading candidate to become the chair of the U.S. central bank after President Donald Trump concluded a series of meetings with five finalists Thursday, three administration officials said. The officials cautioned that Trump, who met with current Chair Janet Yellen for about half an hour on Thursday, has not made a final decision. Powell, known as Jay, has been heavily favored by Treasury Secretary Steven Mnuchin, who is leading the Fed chair search for Trump."
— Yellen meets with Trump. CNBC's Jacob Pramuk: "Janet Yellen left the White House on Thursday afternoon following a meeting with President Donald Trump about her possible reappointment as Fed chair... Trump entered Thursday's meeting holding drastically different views of the Fed chair than he held before he took office. Last month, Trump said he respected Yellen and cheered the stock market's success. Those comments were a far cry from Trump's remarks about the Fed chair when he was trying to win the White House. In a September 2016 CNBC interview, Trump accused Yellen of trying to help then-President Barack Obama by maintaining near-zero interest rates. Trump said she should be 'ashamed.'"
Why not Yellen? Given Yellen's success, reflected in the market performance Trump revels in touting, why would he risk rocking the boat by replacing her? Here's one thought: Trump simply can't resist the lure of putting his own stamp on the institution. His business history shows this instinct at work. Amid his rocky career in real estate, he demonstrated a habit for letting his vanity sabotage his longer-term self-interest. Consider this anecdote from a Fortune profile last year:
By late 1996, Trump Hotels was struggling, but the company was offered a boost. The Rank Group, owner of the Hard Rock chain, proposed an investment in the Castle that would have helped reverse the declining fortunes at Trump Hotels. Rank, which had just opened a Hard Rock Cafe at the Taj, first discussed purchasing a 50% interest in the Castle for as much as $350 million, valuing the property at $180 million more than Trump paid for it. Rank wanted to rebrand the property simply as the Hard Rock. But at the last minute Trump demanded that his name stay on the property and that it be renamed the Hard Rock at Trump’s Marina. Rank walked, and the stock price of Trump Hotels continued to dive. Trump told Fortune that he remembers nothing about any negotiations with Rank.
— GOP divided on monetary policy. Add it to the list. The Wall Street Journal's Kate Davidson: "GOP efforts to subject the Fed to more scrutiny and limit its discretion gained traction in the wake of the financial crisis, especially in the House, and Republicans hammered Fed officials over why they continued to keep interest rates so low, saying the policy hurt savers and distorted markets. Now, with the prospect of a Republican-led tax cut and faster economic growth on the horizon, some in the party are wary of a choice that could disrupt markets or cut off growth by lifting rates higher to keep inflation under control...
The split is reflected in the slate of candidates Mr. Trump has homed in on as he nears a decision. On one side are two vocal Fed critics, Stanford University economist John Taylor and former Fed governor Kevin Warsh who have chastised the central bank for its easy-money policies and called for changes to the way officials make and communicate decisions—views that align closely with the Fed’s conservative GOP critics. On the other side, two Fed policy makers, Chairwoman Janet Yellen and governor Jerome Powell, a Republican, have favored a gradual approach to reversing the Fed’s crisis-era stimulus programs—policies that most Democrats and moderate Republicans have supported."
— Trump to the Hill. The Post's Paul Kane: "President Trump will attend the Senate Republican weekly luncheon next week, hoping to forge unity ahead of their battle to rewrite the tax code. It will be Trump’s first visit to the Capitol to meet with Senate Republicans, after hosting many lawmakers of both parties at the White House... Next week’s behind-closed-doors meeting will also follow some increasingly hostile comments from some Senate Republicans, particularly Sens. Bob Corker (Tenn.) and John McCain (Ariz.), the chairmen of the Foreign Relations and Armed Services committees, respectively, toward Trump’s capacity for being president."
— Tiberi exit frays nerves. "Rep. Patrick J. Tiberi (R-Ohio), a member of the House Ways and Means Committee, announced Thursday that he would leave Congress early next year to enter the private sector, jolting GOP leaders as they scramble to pass legislation to rewrite the U.S. tax code — one of President Trump’s signature campaign promises," The Post's Bob Costa writes. "Tiberi’s decision underscores the mounting challenge facing House Speaker Paul D. Ryan (R-Wis.) in retaining veteran Republican lawmakers, many of whom have grown weary of the tumult and stumbles that have come to define the Trump era on Capitol Hill... As a senior member of the House’s tax-writing committee, Tiberi is positioned to exert significant influence over his party’s tax overhaul, especially since its specific provisions are largely unwritten. But his willingness to leave the House by late January, perhaps amid an intense GOP push on taxes, raised questions about its fate."
— Writing the bill. Republicans have set a highly aggressive schedule but haven't made some basic decisions on the policy. The New York Times's Jim Tankersley: "The swift pace to complete, release and quickly vote on a tax cut is aimed at leaving little time for the type of dissent that has scuttled previous tax proposals... Republicans have been meeting for weeks in closed-door sessions to debate details of the tax plan, including two half-day retreats for House members late last month. House leaders will hold two smaller-group sessions next week, scheduled to last three to four hours each. The speed is striking — and strategic — for tax legislation that lobbyists believe could span 1,000 pages. Republicans hope the breakneck pace will help hold their narrow Senate majority together against what will almost certainly be a deluge of lobbying and Democratic criticism."
The Wall Street Journal's Richard Rubin lays out the steps from here to the president's desk.
— SALT counter-assault. Bloomberg's Craig Gordon: "Republican tax writers are considering a compromise measure that would allow individuals to keep deducting the cost of the property taxes they pay while eliminating a larger tax break for their other state and local taxes, according to a GOP member of Congress. The measure is aimed at appeasing roughly two dozen Republican House members from high-tax areas who have raised concern that eliminating the state and local tax break entirely would hurt taxpayers in their districts. The Congress member who described the proposal asked not to be named because the discussions are private."
— Cruz’s new favorite clip. The junior senator from Texas on Thursday was showing Republican colleagues this clip of a moment from his Wednesday night CNN debate with Bernie Sanders, set to the Curb Your Enthusiasm theme music:
From former Cruz campaign manager Jeff Roe:
— Garrett’s moment. Former Rep. Scott Garrett (R-N.J.), Trump’s beleaguered pick to head the Export-Import Bank, will finally make a public appearance before the Senate Banking Committee. The panel announced Thursday it will hold a hearing on Garrett’s nomination Nov. 1.
It’s a potentially determinative appearance for Garrett, whose history of criticism of the bank has brought unusual opposition from big business groups, including the National Association of Manufacturers and the U.S. Chamber of Commerce. Panel member Tim Scott (R-S.C.), for example, has said “in order to earn my vote for this position, Mr. Garrett needs to make a clear and public statement that he will not seek to dismantle the Bank and that he will support its reauthorization,” and that he will ask him “pointed” questions to extract that guarantee in his hearing.
— Goldman predicts NAFTA headaches. Goldman Sachs in a research note: "NAFTA negotiations among the US, Canada, and Mexico continue to struggle. At this point, efforts at revising the agreement look likely to be unsuccessful, though a deal is still possible, in our view. If the talks do not result in a revised agreement by early 2018, we believe that the Trump Administration could announce its intent to withdraw from NAFTA...
A NAFTA withdrawal announcement would create near-term uncertainty but would likely have relatively modest economic effects, as the US-Canada trade would be likely to be covered under a prior free trade agreement, and exports to Mexico constitute only 1.2% of GDP. Most estimates of the trade gains from NAFTA suggest that it raised the level of US GDP by less than 0.2%, and some of these gains might have occurred anyway as Mexico has substantially lowered tariffs for non-NAFTA countries since the deal was implemented. That said, tariffs would rise, non-tariff barriers would increase, and some industries could face more substantial disruption. The auto sector would be most affected, as tariffs on some vehicles are still quite high outside of trade agreements and supply chains have been integrated across borders."
— Trump: Maybe FBI paid for dossier. The Post's Anne Gearan and Devlin Barrett: "President Trump suggested Thursday that the FBI may have had a hand in creating an intelligence dossier that alleged ties between Russia and Trump’s presidential campaign. 'Workers of firm involved with the discredited and Fake Dossier take the 5th. Who paid for it, Russia, the FBI or the Dems (or all)?' Trump wrote on Twitter. The compendium of information about Trump, much of it unproven, was produced by a former British intelligence agent last year, mostly before Trump won the 2016 election. Officials have said the FBI has confirmed some of the information and rejected other parts, and caution that it may be impossible to verify or disprove the rest."
— Twitter, Facebook, Google counsels to testify. Politico's Steven Overly: "Twitter, Facebook and Google will send their general counsels to testify at the Nov. 1 hearings before the Senate and House intelligence committees on how Russia may have exploited their sites to influence the 2016 election, the companies confirmed... The internet giants are expected to face questions about Russia-linked advertisements purchased to amplify political, racial and social tensions during the campaign season. They will likely also face scrutiny on the spread of misinformation across their networks and steps the companies are taking to tamp down on future interference."
— Misinformation. CIA director Mike Pompeo declared Thursday that U.S. intelligence agencies agree Russian interference in the 2016 election didn't alter the outcome, "a statement that distorted spy agency findings," The Post's Greg Miller writes. "His comment suggested — falsely — that a report released by U.S. intelligence agencies in January had ruled out any impact that could be attributed to a covert Russian interference campaign that involved leaks of tens of thousands of stolen emails, the flooding of social media sites with false claims and the purchase of ads on Facebook."
— McCain suggests White House subpoena. The Senate Armed Services Committee chairman said his panel may issue one to make the White House’s top cyber security official testify, Reuters reports: "White House cyber security coordinator Rob Joyce did not appear before the committee on Thursday, as requested, to discuss cyber threats facing the United States. His vacant seat drew frustration from lawmakers in both parties."
- The Brookings Institution holds an event on Trump’s deregulatory agenda.
Trump calls Russia collusion story 'a hoax:'
Watch George W. Bush's full 'Spirit of Liberty' speech:
Here's how the Internet reacted to the conspiracy theory that the first lady had been replaced by a body double:
Listen to Trump's conversation with a Gold Star family:
The Daily Show's Trevor Noah takes on President Trump's feuds with Gold Star families: