The tax overhaul’s big debut week got off to a rough, early start over the weekend.
The National Association of Home Builders announced Saturday that it would oppose the package after talks with House Ways and Means Committee Chairman Kevin Brady (R-Tex.) toward a homeowners tax credit collapsed. And the group plans to be unsparing. “We will do everything we can to defeat this thing,” NAHB chief executive officer Jerry Howard told my colleagues Mike DeBonis and Damian Paletta.
The home builders' lobby calls on membership across the map and deep pockets in Washington — making its opposition to the tax bill consequential in its own right. The development is also a preview of the politically treacherous stretch ahead for a Republican Party in desperate need of a breakthrough legislative victory and giving itself mere weeks to wrest one from a project that touches every corner of the economy.
The wrangling with the homebuilders provides a roadmap for how quickly the process can go south on Republicans. Mike and Damian lay out what happened:
Howard and Brady’s aides spent weeks working together to add to the bill a “homeownership tax credit,” which essentially would have replaced the mortgage-interest and property-tax deductions, combining both benefits into a new tax credit …
The homeownership credit had some buy-in from the White House and congressional tax writers, but leaders including Ryan were wary of threatening the bill’s passage by reneging on a pledge that they had made for weeks to scores of lawmakers, according to a person familiar with the negotiations — that the mortgage interest deduction would remain intact.
“Chairman Brady and his staff and [NAHB] worked hours and hours on it and we were very excited about that concept, and all of the sudden on Friday we were told that concept would no longer be considered,” Howard said.
After Brady communicated that the changes would not be made, top NAHB officials held an emergency conference call on Saturday and agreed unanimously to oppose the bill after months of reserving judgment, a spokesman for the organization said. Now, the group is preparing a public campaign against the bill, with plans to mobilize members in congressional districts across the country.
Rewriting the tax code, it turns out, means twisting a giant legislative Rubik’s cube: Each attempt to solve a problem potentially creates new ones. To date, only a small circle of Republicans has been privy to the puzzle-solving, part of a deliberate strategy, as the Wall Street Journal’s Richard Rubin explains:
The plan is to keep the tough trade-offs in the bill secret until after Halloween, then reach Thanksgiving with bills passed by the House and Senate and hit New Year’s Day with a bill on Mr. Trump’s desk. That’s close to financial-crisis speed, pushing Congress into a kind of emergency lawmaking mode it typically uses only when inaction means cataclysm.
Last week, House Speaker Paul Ryan (R-Wis.) talked about the challenge ahead as the effort graduates from a concept to bill text and the imperative of keeping Republicans on board. When they unveil the first draft of their bill Wednesday, the pressure will be on GOP leaders to limit defections off Capitol Hill, as well.
If the home builders get a lot more company, Republican tax-rewriting ambitions could be chopped down in an even bigger hurry than the one the party has set for itself.
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BREAKING: The New York Times just reported that Trump's former campaign chairman, Paul Manafort, and his former business associate, Rick Gates, have been told to surrender to federal authorities. "The charges against Mr. Manafort, President Trump’s former campaign chairman, and Mr. Gates, a business associate of Mr. Manafort, were not immediately clear but represent a significant escalation in a special counsel investigation that has cast a shadow over the president’s first year in office," Matt Apuzzo writes. "Mr. Manafort had been under investigation for violations of federal tax law, money laundering and whether he appropriately disclosed his foreign lobbying." (More on the Russia probe below)
— Singer in the wringer. Paul Singer, the New York hedge fund billionaire and one-time committed Never Trumper, helped fund the opposition research that ended up exploring Trump's alleged Russia ties — a revelation made public Friday by a New York Times scoop. Shortly thereafter, Axios's Jonathan Swan reports, former White House chief strategist Stephen K. Bannon called President Trump and told him he was going "off the chain" to destroy Singer: "Trump agreed with Bannon that it needed to be done, according to two sources familiar with the conversation. (Though [Swan was] also told that Trump has since told at least one other person that Singer is "on the team" — suggesting that maybe he's telling everyone what they want to hear.) ...
Bannon told Trump he had been looking for a long time 'to set things right with Singer and his entire crew,' according to a source familiar with the conversation. Since the NYT story broke, Bannon's right-wing media outlet, Breitbart News, has been relentlessly attacking Singer and calling on politicians who've taken money from him to return the donations."
Singer's name shouldn't come as a bolt from the blue. Swan reports that a source close to the billionaire claims he had never heard of Fusion GPS, the firm that later commissioned the now-infamous dossier, "until they became a subject of news reports related to Trump and Russia."
But other reporting indicates that Singer had a preexisting relationship with the firm, having hired them in 2014 as his hedge fund, Elliott Management, fought the Argentine government over billions of dollars in lapsed debt payments. Trump himself may have known that the GOP money man kicked off the research — or he suggested as much last week. "I think I would know, but I won’t say," he said at an impromptu press conference outside the White House last Wednesday. "If I were to guess, I have one name in mind. It will probably be revealed."
Singer has scrambled to reconcile with Trump since his election, contributing $1 million to the inauguration, among other Trump initiatives. That's likely because in addition to being an active Republican donor with clear preferences for the direction the party takes, Singer also has business interests in Washington. His fund currently employs a pair of lobbying firms to work on a range of issues, including — according to their lobbying disclosures — hedge fund regulation, bankruptcy, distressed debt, Dodd-Frank’s so-called resolution authority and other financial services rules.
Separately, Singer last year joined with Trump confidante Carl Icahn and fellow hedge fund titans William Ackman of Pershing Square, Daniel Loeb of Third Point, and Barry Rosenstein of Jana Partners to form a new lobbying coalition promoting shareholder activism. That group, the Council for Investor Rights and Corporate Accountability, has mostly flown below the radar, but lobbying reports show it remains active.
Which is to say: If Bannon wants to mess with Singer, the investor's agenda in Washington offers some opportunities.
— Powell pulls ahead. In the Fed chair horse race, Jerome Powell has now taken a clear lead with the finish line in sight this week. Bloomberg's Jennifer Jacobs and Saleha Mohsin: Trump "stoked the sense of drama surrounding his choice for the next Fed chairman Friday as he tweeted out a video teasing an announcement he said would come next week. The president is leaning toward appointing Federal Reserve Governor Jerome Powell to be the next chairman of the Fed, according to three people familiar with the matter.
Trump amped up the anticipation Friday with this reality TV-ready Instagram post:
— Deregulation downgrade. The finalists span a range of thought on monetary policy, but unlike the president deciding among them, they share a belief in the merits of regulation. The NYT's Binyamin Appelbaum: "Powell, the Fed governor whose candidacy is said to be backed by Treasury Secretary Steven Mnuchin, participated in the construction of the current rules, and he has defended the bulk of the changes made after the 2008 financial crisis as necessary safeguards for the broader economy. In an appearance in June before the Senate Banking Committee, Mr. Powell described Mr. Trump’s regulatory plan as a 'mixed bag,' adding, 'There are some ideas that I would not support.' The other names on Mr. Trump’s short list are also not champions of deregulation. Janet L. Yellen, the current Fed chairwoman, is a vocal proponent of regulation, while John B. Taylor, a Stanford economist, is primarily a critic of the Fed’s monetary policy."
CapAlpha's Ian Katz on Powell's regulatory approach: "In general, we think Powell as chairman would hold many views in common with Randy Quarles, the new vice chairman for supervision. Their agreement would facilitate the softening of some Fed rules. Even if Powell isn’t nominated as chair, he will likely be an important Quarles ally on regulatory issues. Powell clearly has a more deregulatory bent than say, Yellen or Stanley Fischer. But he isn’t as lenient as the Treasury report on banking regs that was released in June."
— Will a perp walk cuts off the tax parade? Politico's Matthew Nussbaum: "An expected indictment Monday from the special counsel probing Russia’s meddling in the 2016 election leaves President Donald Trump facing a politically perilous week as his White House juggles unveiling significant tax legislation, announcing its pick for Federal Reserve chair and launching a 12-day-long foreign trip. Administration allies scrambled over the weekend to downplay the significance of the expected revelation of the first charges in special counsel Robert Mueller’s probe, which CNN first reported were approved by a federal grand jury Friday. Trump, however, seemed to be struggling to stay focused on what was already shaping up to be a momentous week on the policy front, tweeting his frustration repeatedly on Sunday."
Those tweets, in case you missed them:
Never seen such Republican ANGER & UNITY as I have concerning the lack of investigation on Clinton made Fake Dossier (now $12,000,000?),....— Donald J. Trump (@realDonaldTrump) October 29, 2017
...the Uranium to Russia deal, the 33,000 plus deleted Emails, the Comey fix and so much more. Instead they look at phony Trump/Russia,....— Donald J. Trump (@realDonaldTrump) October 29, 2017
..."collusion," which doesn't exist. The Dems are using this terrible (and bad for our country) Witch Hunt for evil politics, but the R's...— Donald J. Trump (@realDonaldTrump) October 29, 2017
...are now fighting back like never before. There is so much GUILT by Democrats/Clinton, and now the facts are pouring out. DO SOMETHING!— Donald J. Trump (@realDonaldTrump) October 29, 2017
All of this "Russia" talk right when the Republicans are making their big push for historic Tax Cuts & Reform. Is this coincidental? NOT!— Donald J. Trump (@realDonaldTrump) October 29, 2017
— Smokescreen. With Mueller closing in, Trump and his Republican allies in Congress are seeking to change the subject — to Hillary Clinton. The Post's Karoun Demirjian and John Wagner: "Trump and Republicans in Congress are demanding new scrutiny of Hillary Clinton’s actions as secretary of state, potentially jeopardizing investigations of Russian meddling in the 2016 election just as the probes are closing in on Trump’s inner circle. In the span of a week, House and Senate Republican leaders announced two investigations into Obama-era decisions involving a uranium deal that increased Russia’s share of the U.S. nuclear market — and another into how the FBI handled Clinton’s use of a private email server while she was secretary of state."
— Kushner to Saudi. Politico's Annie Karni: "President Donald Trump’s son-in-law and senior adviser Jared Kushner returned home Saturday from an unannounced visit to Saudi Arabia — his third trip to the country this year. Kushner left Washington, D.C., via commercial airline on Wednesday for the trip, which was not announced to the public, a White House official told POLITICO. He traveled separately from Treasury Secretary Steven Mnuchin, who led a delegation to Riyadh last week to focus on combating terrorist financing. Kushner was accompanied in the region by deputy national security adviser Dina Powell and Middle East envoy Jason Greenblatt. Greenblatt continued from Saudi Arabia to Amman, Jordan; Cairo; the West Bank city of Ramallah; and Jerusalem, where he was on Sunday."
— Investigating Kushner. CNN Money's Christina Alesci: "The Maryland attorney general is investigating one of the Kushner family's real estate businesses after media reports surfaced earlier this year about allegedly abusive debt collection practices and poor conditions at several of its properties.
Kushner Companies said it is cooperating with Attorney General Brian Frosh, Maryland's top legal officer... A spokesperson for the AG's office declined to comment, citing a policy of not confirming or denying investigations. The inquiry does not mean charges will be filed."
— SALT fix? The Hill's Naomi Jagoda: Brady said on Saturday that he is planning to include a deduction for local property taxes in forthcoming legislation. 'At the urging of lawmakers, we are restoring an itemized property tax deduction to help taxpayers with local tax burdens,' Brady said in a statement. The statement comes just before Wednesday's expected release of a tax bill. In recent weeks, Brady has been meeting with GOP lawmakers from high-tax states to figure out how the bill would treat state and local taxes...
Rep. Chris Collins (R-N.Y.), one of two New York Republicans that voted for the budget, told Bloomberg that he thought Brady's plan to retain the property tax deduction would address lawmakers' concerns. But a coalition fighting repeal of the state and local tax deduction called Americans Against Double Taxation said Saturday that it opposes partial elimination."
— Tossing the playbook. Politico's Brian Faler: "House Republicans are so desperate for a win on taxes that they’re agreeing to proposals that would have caused internal party warfare just a year or two ago. They’re considering forgoing a big cut in the top income tax rate on the rich, offering moderate-income Americans so many tax breaks that many would be excused from paying taxes entirely and passing a potentially 1,000-page tax bill few have seen within a matter of weeks. Last week, they agreed to a budget that ignored their demands for deep cuts in federal spending just so they could pass a tax bill using a special procedure that enables them to move forward without any Democratic votes."
— The 401(k) math. Allan Sloan, in The Post: "Flawed Washington budget math is likely to do serious damage to tens of millions of Americans who are trying to save for their retirements. Given that the number of people earning substantial pensions is shrinking rapidly and Social Security benefits aren’t enough to live on, saving for retirement is essential. That’s why it’s so appalling to see Congress — okay, many of its Republicans — considering a proposal that would hamper the retirement prospects of about 49 million Americans to benefit the heirs of the 5,500 or so estates a year that are currently subject to estate tax."
WSJ's Anne Tergesen: "Some opponents to reducing the tax deduction on 401(k) savings as part of a broad tax overhaul say this move could lead workers to save less when some researchers say Americans need to be saving more for retirement.Not everyone agrees. A number of recent studies that have looked at the effect on savings rates and amounts have come to contradictory conclusions. Republican lawmakers working on the tax overhaul also say they can encourage savings with other incentives. But one thing is clear: According to research by the nonpartisan Employee Benefit Research Institute, workers of all ages and income levels of the roughly 55 million American workers who contribute to the retirement-savings plans would be affected."
— Treasury's tax brain. NYT's Alan Rappeport: "[Justin] Muzinich, a 39-year-old newcomer to Washington, has emerged as a central player in the Trump administration’s tax overhaul effort. The former investment banker and hedge fund manager is the Treasury point man on taxes, accompanying Mr. Mnuchin into “Big Six” meetings with top Republican lawmakers drafting the tax plan and laying out the administration’s positions on which taxes and deductions to cut or preserve. His task is about to get even tougher as the House, which plans to release its bill this coming week, and the Senate begin the difficult process of hashing out the details and negotiating with the administration over the final legislation."
— Up is down. Washington Examiner's Kyle Feldscher: "Ohio Sen. Rob Portman believes the tax reform proposal set to be unveiled this week will actually reduce the federal deficit because it’s going to produce more revenue for the government. Portman told NBC’s 'Meet The Press' host Chuck Todd that he doesn’t see tax reform as just a tax cut, which will reduce the amount of money coming into the federal coffers. Instead, over a long period of time, it will mean more investment in the United States and more jobs in the country."
— Slap on the wrist. NYT's Gretchen Morgenson: "In January, prosecutors concluded one of the last multibillion-dollar settlements related to the 2008 mortgage collapse. The deal, with Credit Suisse, required the bank to pay $2.48 billion to settle allegations that its securities unit had misled buyers of home-loan bundles it had sold between 2005 and 2007. Credit Suisse also agreed to provide $2.8 billion worth of financial relief to troubled borrowers under the settlement by forgiving or modifying mortgages and helping to finance affordable housing projects across the country...
A little more than six months later, it’s worth asking: How tough, really, was the settlement on Credit Suisse? An answer to that question emerges in a new report compiled by the independent monitor hired to scrutinize how Credit Suisse was living up to the terms of the deal. Put simply, some of the settlement’s terms — those involving consumer assistance — were easier on Credit Suisse than aggrieved investors and borrowers may have wanted."
Speaking of getting off easy... Politico's Patrick Temple-West: "Publicly traded companies have been hit with fewer and much less costly penalties by the Securities and Exchange Commission since Donald Trump became president. From February through September, the agency, now headed by Wall Street lawyer Jay Clayton, collected $127 million in corporate civil penalties in 15 cases, according to a POLITICO review of SEC data. That compares with $702 million in 43 cases from February through September 2016."
— Overtime overdrive. Washington Examiner's Sean Higgins: "The Trump administration's Labor Department will appeal a ruling by a Texas court that declared the Obama administration's expansion of the federal overtime rule unconstitutional, reversing a position it held in August when it said it would not appeal the rule. The department will ask that the district court's August ruling by stayed while it establishes a new overtime rule. The Trump administration is still expected to significantly scale back the rule."
— Bad connection. Bloomberg's Todd Shields: "Federal Communications Commission Chairman Ajit Pai is moving to change the Lifeline communications subsidy program in ways that will quash waste and “more efficiently and effectively” help provide internet service to poor people, according to the agency. Critics say the Republican’s proposal will harm the program that benefits 12 million households...The agency votes Nov. 16 on Pai’s plans, which include focusing funding on tribal areas.
From The Post's John Wagner and Scott Clement: "Most think political divisions as bad as Vietnam era, new poll shows:"
The Tax Policy Center holds an event featuring IRS commissioner John Koskinen on Tuesday.
The Senate Committee on Homeland Security and Governmental Affairs holds a hearing on examining the cost, information security and accuracy of the 2020 Census on Tuesday.
The Senate, Banking, Housing and Urban Affairs holds a hearing on various nominations on Wednesday.
The House Energy and Commerce Subcommittee on Digital Commerce and Consumer Protection holds a hearing on “Securing Consumers’ Credit Data in the Age of Digital Commerce” on Wednesday.
The House Financial Services Subcommittee on Financial Institutions and Consumer Credit holds a hearing on data security on Wednesday.
The House Financial Services Subcommittee on Oversight and Investigations holds a hearing on “Examining the Community Development Block Grant-Disaster Recovery Program” on Wednesday.
The Federal Deposit Insurance Corporation holds an Advisory Committee Meeting on Wednesday.
Google, Facebook and Twitter testify before the House Intelligence Committee on Wednesday.
The Consumer Financial Protection Bureau holds its Fall 2017 meeting on Thursday in Tampa, Fla.
The House Financial Services Subcommittee on Housing and Insurance holds a hearing on sustainable housing finance on Thursday.
The National Economists Club holds an event with the American Chemistry Council’s chief economist Kevin Swift on Thursday.
Carter Page testifies before the House Intelligence Committee on Thursday.
The Institute for Financial Markets holds the Smart Financial Regulation Roundtable on Thursday and Friday.
The Heritage Foundation holds an event on reforming FINRA on Friday.
The House Financial Services Subcommittee on Capital Markets, Securities and Investment holds a hearing on “Legislative Proposals to Improve Small Businesses’ and Communities’ Access to Capital” on Friday.
The Washington Examiner holds an event on the tax bill with House Speaker Paul D. Ryan (R-Wis.) on November 8.