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Senate Republicans are attempting the legislative equivalent of a carrier deck landing for their tax plan this week, bringing a complex piece of machinery moving at breakneck speed to an abrupt stop.

There’s little margin for error, and lots of ways it could get ugly. 

Adding to the high-stakes gambit, GOP leaders are racing to tweak the package to lock in majority support. The party can only spare two defections, but at least six Republican senators harbor serious reservations. My colleague Damian Paletta has the story on the last-minute changes:

  • For Sens. Ron Johnson (R-Wis.) and Steve Daines (R-Mont.), negotiators are looking to boost the 17.4 percent deduction the bill hands pass-through businesses up to 20 percent; 
  • For Sen. Susan Collins (R-Maine), among others, they’re considering adopting the House version’s compromise on the proposed elimination of the state and local tax deduction — by allowing taxpayers to write off $10,000 in local taxes from their federal burden; 
  • To help even the playing field between corporations and pass-through businesses (and generate some more revenue for the plan), leaders are exploring limiting the ability of corporations to deduct their state and local taxes. 

RonJohn argues cutting taxes for small businesses would bolster the economy. But it's not that simple:

Here’s Damian on the three-dimensional problem-solving: 

Together, the requests put Republican leaders in a difficult position, as they attempt to accommodate individual holdouts on a one-off basis without losing other members or creating a situation in which the bill collapses under the weight of disparate demands… 

The total size of the tax plan cannot be more than $1.5 trillion over a decade, so adding new benefits could force Republicans to find ways to raise additional revenue. Presently, they only have roughly $80 billion in wiggle room to use, a small sum because many of the changes would be spread out over 10 years.

Keep in mind that Collins also has raised concerns about the Senate bill’s repeal of the Affordable Care Act’s individual mandate. She has indicated she wants the chamber first to adopt a pair of bipartisan bills aimed at stabilizing insurance markets and controlling costs — neither of which are so far in line ahead of the tax package.

And leaders still need to sweat a handful of deficit hawks — namely Sens. Bob Corker (R-Tenn.), Jeff Flake (R-Ariz.), and John McCain (R-Ariz.), who have yet to commit to the bill. In a report released Sunday, the Congressional Budget Office warned that congressional number crunchers haven’t had time to produce a full macroeconomic analysis of the measure’s impact. 

The Senate Budget Committee on Tuesday is set to take the final step before the bill hits the floor, marrying it with a measure that authorizes drilling in the Arctic National Wildlife Refuge, a key priority for another potentially iffy Republican senator, Alaska’s Lisa Murkowski. (Another heads-up from Damian: “Johnson is on the budget panel, and he could demand changes by Tuesday in order to win his vote. If he blocks the tax bill in the Budget Committee and is joined by Sen. Bob Corker (R-Tenn.), who has raised separate concerns, the package could quickly die.”)

Then comes 20 hours of debate on the bill, and, possibly, a vote-a-rama on amendments to it. Senate Majority Leader Mitch McConnell (R-Ky.) has said he wants to wrap work on the measure by the end of the week. His team faces extra pressure from the rest of the GOP’s to-do list: With 12 legislative days to go until Christmas, among other things, lawmakers are also hustling to forge agreement on a government spending bill in order to avert a shutdown, while reauthorizing a children’s health insurance program and approving a new round of hurricane relief funding. 


— Leadership crisis at the CFPB. The bureau’s acting director, Leandra English, is suing to keep President Trump's pick from assuming control of the financial watchdog, plunging the stewardship of the Dodd-Frank legacy agency into chaos. The Post’s Renae Merle writes that in the suit English calls herself the agency's "rightful acting director," and asked for a restraining order to block Trump from naming White House budget chief Mick Mulvaney to the post: "‘The President’s purported or intended appointment of defendant Mulvaney as Acting Director of the CFPB is unlawful,’ the lawsuit says.”

White House backs Mulvaney. More from Renae: “To bolster the administration’s position, the White House also shared a letter that Mary E. McLeod, CFPB’s general counsel, sent to the senior leadership of the agency on Saturday, arguing that Trump has the authority to name the acting director. ‘I advise all Bureau personnel to act consistently with the understanding that Director Mulvaney is the Acting Director of the CFPB,’ McLeod said in the letter.

The White House has said it expects both Mulvaney and English to show up to work Monday morning. Mulvaney would be the acting director, while English would be his deputy, administration officials insist. There is a lot at stake for the CFPB, which now has 1,600 employees and has long been a target of Republican critics who say the agency needs to be reined in. Mulvaney has called the agency a 'joke' and advocated for it to be dissolved."

And here's what Trump had to say about it over the weekend:

Sen. Elizabeth Warren (D-Mass.) — who launched her political career by forging the idea for the agency and advocating its creation — weighed in, too:

Another voice for English: Michael Barr, the Obama-era Treasury Department's former assistant secretary for financial institutions:

NYT's Binyamin Appelbaum:

From Rob Blackwell, editor-in-chief of the American Banker:

Background on English, via Renae: "English has served in various positions within the CFPB, the Office of Personnel Management and the Office of Management and Budget. According to several people who know her, English, who attended New York University and the London School of Economics, has typically gravitated toward operational positions rather than policy jobs and has been able to rise through the ranks because of her steady leadership skills.

She was part of a small team at the Treasury Department that helped launch the CFPB, including establishing early relationships with small banks. 'It felt like we were engaging in retail politics a little bit,' she said in a 2014 Washington Post interview. 'Time after time, we would go into a room, especially with community bankers, and you could just feel instantly that they were very skeptical, nervous, not expecting us to be friendly. And by the time we walked out, the tone had completely changed.'

English eventually rose to be the agency’s chief of staff. Cordray promoted her to deputy director on Friday and said she would temporarily take his place."

Vox's Matt Yglesias:

Long game unchanged, says Compass Point's Isaac Boltansky: "There is seldom this level of drama in the federal bureaucracy, which multiplies the commentary and conjecture surrounding the situation, but the longer-term leadership realities for the CFPB remain unchanged. Beyond the succession sensationalism and constitutional conundrums, the fact remains that President Trump will nominate the next CFPB Director. Under new leadership, the CFPB's rulemaking efforts will grind to a halt and its enforcement agenda will dramatically diminish."

(Though it's a short-term mess: "Who is showing up to work on Monday? It is unclear at this point who will be running the CFPB on Monday morning. At this point, it appears that both Deputy Director English and OMB Director Mulvaney will walk in the door on Monday morning with the expectation of running the CFPB. We haven’t the faintest clue how that specific interaction will unfold, but our sense is that it could be a muddled mess... From a practical perspective, our sense is that the CFPB may limit its rulemaking and enforcement activity in the near-term as the leadership uncertainty could be used to battle Bureau actions in the courts.")



Punching down. The Post's Heather Long: "The Senate Republican tax plan gives substantial tax cuts and benefits to Americans earning more than $100,000 a year, while the nation’s poorest would be worse off, according to a report released Sunday by the nonpartisan Congressional Budget Office.

Republicans are aiming to have the full Senate vote on the tax plan as early as this week, but the new CBO analysis showing large, harmful effects on the poor may complicate those plans. The CBO also said the bill would add $1.4 trillion to the deficit over the next decade, a potential problem for Republican lawmakers worried about America’s growing debt...

By 2019, Americans earning less than $30,000 a year would be worse off under the Senate bill, CBO found. By 2021, Americans earning $40,000 or less would be net losers, and by 2027, most people earning less than $75,000 a year would be worse off. On the flip side, millionaires and those earning $100,000 to $500,000 would be big beneficiaries, according to the CBO’s calculations."

Damn the polls, tax cuts ahoy. The Post's Paul Kane weighs in on the political dynamic at the center of the Republican tax push: Party leaders are urging action on the bills as a political necessity even as polls show the measures are broadly unpopular. From PK: "In pushing so hard, Republicans are betting they can sell this plan to the skeptical public once the legislation is signed into law by President Trump and workers see a boost in take-home pay. They are not dismissive of the polling, but they believe they can make the legislation popular enough next year to save their congressional majorities in the midterm elections...

Republicans have been circulating data, polling and focus group feedback to win back the public on a traditional GOP issue. The key moves are talking about workers seeing more money in their paychecks and not focusing on large macroeconomic theory. 'As a stand-alone, tax reform is a moderate priority, but in its ability to impact the economy, jobs and wages, it is a huge priority,' David Winston and Myra Miller, co-founders of the Winston Group, a Republican polling firm, wrote in a July memo."

Thune: We can change it. Politico's Kelsey Tamborrino: "The Senate's No. 3 Republican said Sunday there'll be "plenty of opportunities" to change the tax-cut bill once it moves to the Senate floor, likely as early as this week. 'We're going to have an open process on the floor of the United States Senate, where people can offer amendments,' Sen. John Thune of South Dakota said on 'Fox News Sunday.' 'Those amendments can get debated and voted upon. So, there [will] be plenty of opportunities to change the bill in the direction that some of our senators want to see.'

— Moran on the fence? The Topeka Capital-Journal quotes the Kansas Republican at a town hall meeting over the weekend: “Sometimes Kansans tell me, ‘Just do something.’ The goal is not to just do something. The goal is to do something better than what we have… I’m also cognizant of what people saw happen in Kansas. The issue of tax cuts would be easier if you actually had faith that Congress would hold the line on spending. It’s two components. It’s how much revenue you take in and how much money you continue to spend.”

Mnuchin urged to stay off the Hill. Politico's Annie Karni and Eliana Johnson: "Some Republicans on Capitol Hill have started to distance themselves. House Speaker Paul Ryan earlier this month asked the White House not to send Mnuchin to the Hill to talk with Republican lawmakers about the bill, according to two people familiar with the discussions — though Ryan has praised the Treasury secretary’s ability to improve the legislation itself.

'There were some testy conversations' between Ryan and Mnuchin, according to a White House official — in particular, over Mnuchin’s attempts at bringing lawmakers on board. He approaches them, the official said, 'with a certain arrogance.'... Several Republicans say the political pressure for congressional Republicans to pass a bill is so great that any self-inflicted wounds from the Goldman duo are unlikely to matter much."

The president himself, per his Sunday tweeting, is dividing his attention between his tax plan and the Russia probe encircling his administration: 

— Escape from New York. Bloomberg: “Republican proposals in both the House and Senate would drive up taxes for many high-earners in the New York City area. By eliminating the deduction for most state and local taxes, an individual making a yearly salary of $1,000,000 -- a figure not uncommon in the financial industry -- would owe the Internal Revenue Service an additional $21,000, according to a preliminary analysis by accounting firm Marcum LLP… No one interviewed for this story would talk openly about making plans to move, but Goldman Sachs Group Inc. is estimating that New York City alone could lose as much as 4 percent of its top earners if the bill becomes law. In Florida, where there’s no state income tax, there’s the sense that this is a great opportunity to lure disgruntled tax refugees."

Religious bargaining chip. NYT's Ken Vogel and Laurie Goodstein: "For years, a coalition of well-funded groups on the religious right have waged an uphill battle to repeal a 1954 law that bans churches and other nonprofit groups from engaging in political activity...Among the changes in the tax bill that passed the House this month is a provision to roll back the 1954 ban, a move that is championed by the religious right, but opposed by thousands of religious and nonprofit leaders, who warn that it could blur the line between charity and politics. The change could turn churches into a well-funded political force, with donors diverting as much as $1.7 billion each year from traditional political committees to churches and other nonprofit groups that could legally engage in partisan politics for the first time, according to an estimate by the nonpartisan congressional Joint Committee on Taxation.

The Senate will begin voting as early as midweek on its own version of the sweeping tax rewrite, which the leaves the ban untouched, and differs in other key ways from the House version... Among those on the fence are Senator James Lankford, Republican of Oklahoma, who has expressed concerns about the bill’s impact on the budget deficit but favors ending the 1954 ban. In a possible sign of the horse trading to come to try to secure votes, a spokesman for Mr. Lankford said on Sunday that the senator was working to insert language into the Senate bill to roll back the ban, and believed it had a good chance of being included."

The teacher's break dividing House, Senate. NYT's Erica Green: "The House tax bill, approved this month along party lines, would eliminate the teacher spending deduction in its effort to clean up the tax code, close loopholes and secure bigger tax cuts for all. The Senate bill, which could come up for a vote in the coming days, would double it, to $500. 'The deduction is a small token of appreciation for teachers who make financial sacrifices to benefit their students,' said Senator Susan Collins... who wrote the law that created the educator tax credit in 2002 and now wants to expand it.

The deduction — which reduces taxable income, rather than providing a dollar-for-dollar credit in a tax bill — does not yield a large return for its recipients. The most a teacher could recoup is $100, and most see a return of about $40, a small fraction of the $500 to $600 that surveys have estimated teachers spend a year. But for the more than three million teachers who claim the deduction, it’s still money."


Nine leading conservative economists: Tax bills will boost GDP by 3-4 percent longterm. The group laid out their thinking in a letter to Mnuchin, and the WSJ posted it: "There is some uncertainty about just how much additional investment is induced by reductions in the cost of capital, but based on an extensive body of scholarly research, many economists believe that a 10% reduction in the cost of capital would lead to a 10% increase in the amount of investment. Simultaneously reducing the corporate tax rate to 20% and moving to immediate expensing of equipment and intangible investment would reduce the user cost by an average of 15%, which would increase the demand for capital by 15%.

A conventional approach to economic modeling suggests that such an increase in the capital stock would raise the level of GDP in the long run by just over 4%. If achieved over a decade, the associated increase in the annual rate of GDP growth would be about 0.4% per year. Because the House and Senate bills contemplate expensing only for five years, the increase in capital accumulation would be less, and the gain in the long-run level of GDP would be just over 3%, or 0.3% per year for a decade... In short, there is a substantial body of research suggesting that fundamental tax reform of the type being proposed would have an important effect on long-run GDP."

(Among the signatories: Glenn Hubbard, George P. Schultz, Larry Lindsey, and John B. Taylor.)

"Will These Senators Live Up to Their Own Principles?" NYT's David Leonhardt: "All of the potential swing senators have a problem: This tax bill also contains provisions that betray their stated principles. For McCain, the principle is the Senate itself. His current term is probably his last, given his cancer diagnosis, and he has been making a righteous stand on the behalf of the Senate — that it should aspire to greatness rather than operating as a banana-republic legislature that rams through bills... 

For Collins and Murkowski, the principle is health care. More specifically, it’s decent health care for the working-class families who dominate their home states of Maine and Alaska. The two of them were the most consistent Senate opponents of the bills this year that would have taken insurance away from millions...Then there are Corker, Flake, Lankford and Moran. Their principle is the deficit. 'We don’t want to increase the debt and deficit as a result of tax cuts,' Moran said. If the bill adds 'one penny to the deficit,' Corker said he wouldn’t support it. The current Senate plan adds more than 100 trillion pennies to the deficit in the first decade, according to the official estimate."


The dollar is still king. WSJ's Jon Sindreu and Mike Bird: "It is one of the ironies of the global financial crisis: A decade later, a panic whose origins were in the U.S. has left the dollar more important to the rest of the world than ever before.

Putative contenders for its throne—the euro, the Chinese yuan—have failed to gain global acceptance. It remains the dominant force in world trade. A slow, yearslong decline in the proportion of dollars among the holdings of the world’s central banks, which were trying to diversify, has stopped. And the commercial banks of Japan, Germany, France and the U.K. now have more dollar-denominated liabilities than those in their own currencies.

The dollar dominance is testing the world again: Rules designed to make finance safer have already made dollars harder to come by. To add to the pain, the Federal Reserve is now sucking dollars out of the world’s financial system as it tries to tighten its monetary policy."

Powell on a glide path. WSJ's Josh Zumbrun: "Jerome Powell is likely to sail through confirmation to become the next Federal Reserve leader, even though the process of filling Fed positions has grown increasingly politicized since the days when Ben Bernanke was confirmed as chairman by a voice vote with little opposition. Mr. Powell, now a Fed governor, heads into his confirmation hearing before the Senate Banking Committee on Tuesday having garnered support from Republicans and Democrats, giving him a strong chance of approval without much drama...

In May of 2012, Mr. Powell was approved by a vote of 74 to 21, for a term that ended in January of 2014. Twenty-five Republicans voted for Mr. Powell, but 20 voted against him, along with an independent... Less than two years later, Mr. Powell’s term had already expired. He proved to be a diligent Fed governor who didn’t rock the boat, but rancor over Fed confirmations hadn’t abated. Mr. Obama nominated him for a second term, as part of a package deal with two other Fed board candidates. Mr. Powell was confirmed with 67 yes votes by a Senate with a Democratic majority... Thus, when President Donald Trump began considering this year whom to nominate as Fed chairman, Mr. Powell had a key advantage in the congressional calculus."

(CapAlpha's Ian Katz on what to expect from Powell's appearance before the Senate banking panel on Tuesday: "A few Democrats, including... Warren... and ranking member Sherrod Brown (D-Ohio), may press him to commit against weakening Dodd-Frank-related rules. He’ll express moderate sentiments without committing to much. But even if Powell faces a couple of awkward moments, we expect that he’ll emerge just fine.")

Eye on the ball, from Horizon Investment's chief global strategist Greg Valliere's morning note: "The dominant market story, of course, is the solid economic growth and a lack of significant inflation. We'll get Janet Yellen's take on Wednesday before the Joint Economic Committee, a day after testimony from her likely successor, Jerome Powell. They both may cite some concerns but they cannot ignore the biggest story of all for the financial markets: Goldilocks persists."

Fed officials are set to raise interest rates in December, delivering on their projections at the start of 2017 for three rate increases plus the start of the shrinking of their bond portfolio. But their chance for a repeat in 2018 is clouded by conflicting signals on employment and inflation.
Tufts postponed a Monday event featuring Anthony Scaramucci, a former Trump spokesman, after he threatened to sue a student and the school newspaper for defamation.
Boston Globe
Meredith Corporation, the publisher of Family Circle and Better Homes and Gardens, clinches a deal in an cash transaction valued at nearly $3 billion.
Black Friday and Thanksgiving online sales in the United States surged to record highs as shoppers bagged deep discounts and bought more on their mobile devices, heralding a promising start to the key holiday season, according to retail analytics firms.
Loan growth at banks is slowing, casting a cloud over what was supposed to have been a banner year for financial institutions following last November’s elections.

Coming Up

  • The American Enterprise Institute holds an event on tax reform with House Ways and Means Committee Chairman Kevin Brady (R-Tex.) on Tuesday.
  • The American Enterprise Institute will hold an event on the Bank Holding Company Act on Tuesday.
  • The Brookings Institution holds an event on “Can tax reform include a carbon tax?” on Tuesday.
  • The Senate Banking, Housing and Urban Affairs Committee will hold a nomination hearing on Jerome Powell to serve as chairman of the Federal Reserve System on Tuesday.

From The New Yorker:

Our congratulations. A cartoon by Benjamin Schwartz. #TNYcartoons

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