Republicans scored a major win for their business allies when they ushered tax bills through both the House and Senate that chopped the corporate rate to 20 percent. 

Now, the GOP is on the verge of handing back part of that signature achievement as negotiators prepare to hash out differences between the two chambers’ plans. Top Republicans on Wednesday acknowledged they are contemplating raising the rate to 22 percent — a concession apparently necessary to help pay for other must-do adjustments. 

From my colleagues Damian Paletta and Erica Werner

No decisions have been made. The White House has been resistant to making this change, but President Trump said casually on Saturday morning that the 22 percent corporate rate might be necessary. Each percentage point that is added back to the corporate rate would free up around $100 billion in revenue over 10 years. Still, White House officials have tried to stress to Congress in the past two days that their strong preference is to keep the corporate rate at 20 percent. Senate Finance Committee Chairman Orrin Hatch (R-Utah) said he too was resistant to raising the rate. 'Not as far as I’m concerned,' he said. 'It’s still 20.'

But something has to give.

The White House and Senate Republicans managed to agree on permanently slashing the corporate rate by 15 points, yet they have to harmonize other key differences in their respective bills. Senate Republicans, for example, decided at the last minute to preserve the corporate alternative minimum tax, which the House bill scrapped. The move saved the Senate version $40 billion — but it also had the unintended consequence of effectively trashing breaks, treasured by businesses, that encourage growth-inducing investment. Corporate lobbyists have launched a blitz to convince Senate Republicans to adopt the House approach:

(Not everyone's ready to bend on the corporate rate. From CNBC's Ylan Mui:)

And Republican leaders are looking to give more relief to those in high-tax states such as New York, New Jersey and California facing the potential of a higher IRS bill from new limits on the write-offs for state and local taxes. 

There are lots of dials negotiators could twist to find the money to fund those fixes. And for months as GOP tax-writers assembled their bills, maintaining the lowest possible corporate rate led the priority list at the Trump administration’s insistence.

Indeed, Trump himself — channeling advice from supply-siders such as Stephen Moore and Larry Kudlow — campaigned for an even lower rate of 15 percent, a change that would have cost $2 trillion. When he accepted the 20 percent figure Congressional Republicans settled on, his team declared it to be a red line. 

But on Saturday, inexplicably, the president backed off it in remarks to reporters before leaving the White House on a trip to New York. The corporate rate, he said, “could be 22 when it comes out, but it could also be 20. We’ll see what ultimately comes out.” Sen. Marco Rubio (R-Fla.), for one, who failed to convince colleagues to bump the rate up to 20.94 percent to expand the child tax credit, registered frustration: 

And Senate Majority Leader Mitch McConnell (R-Ky.) dismissed the idea of a 22 percent rate to Damian over the weekend. "That would be a major change," he said. Leaders of the House Freedom Caucus, meanwhile, long have declared any corporate rate north of 20 percent to be a nonstarter.

But lobbyists working the issue say that Trump’s extemporizing sealed the deal. “As soon as he opened this mouth on this, you could predict this was going to happen,” one tells me. Another said while corporate interests won’t publicly sulk, the change would place the package at the limit of what many regard as worthwhile: “Anything above that becomes meaningless to detrimental.”

Trump has largely hugged the sidelines as the substance of a package that could help define his first year in office took shape. But it's a testament to the urgency Republicans feel to rush the package to his desk that the president's offhand Saturday morning remark could help substantially alter such a central party priority.

Clarification: Bloomberg has updated a story quoted in Tuesday's Finance 202 about special counsel Robert Mueller's subpoena of Deutsche Bank records. The correction notes those records were for President Trump's associates, not for his and his family's accounts. 

It’s the season for investment banks to try to predict the future in credit markets. The ritual is trickier than usual this time.
While global stock valuations are relatively high on an historical basis, a “remarkably benign” macroeconomic environment means equities can keep rising, according to Goldman Sachs Asset Management.
Prime Minister Theresa May is not giving up. In the latest twist to the Brexit saga, she is preparing another proposal to submit to Ireland within 24 hours in a dash to meet the European Union’s cutoff.


Senate Republicans name conferees. They are: Hatch; Senate Majority Whip John Cornyn (R-Tex.); John Thune (S.D); Rob Portman (Ohio); Tim Scott (S.C.); and Pat Toomey (Pa.).

Sen. Chuck Grassley (R-Iowa) isn't happy he wasn't picked:

McConnell endorses either/or on SALT. WSJ's Siobhan Hughes: "The Senate’s top Republican endorsed an idea being pursued by California Republicans to allow taxpayers to choose between deducting up to $10,000 in property taxes or state and local income taxes. 'That sounds like a kind of reasonable idea,”... McConnell... said Wednesday on the Hugh Hewitt show. Both the House and the Senate voted to eliminate all state and local tax deductions except for up to $10,000 in property taxes. The property-tax deduction is important in high-tax states like New York and New Jersey. It is less important in California, where income taxes are more important. House GOP leaders would like to get votes from California Republicans, who voted last month for the House bill on the condition that their  concerns would be fixed later."

Individual mandate is good as gone. NYT's Robert Pear and Thomas Kaplan: "House and Senate negotiators thrashing out differences over a major tax bill are likely to eliminate the insurance coverage mandate at the heart of the Affordable Care Act, lawmakers say. But a deal struck by Senate Republican leaders and Senator Susan Collins of Maine to mitigate the effect of the repeal has been all but rejected by House Republicans, potentially jeopardizing Ms. Collins’s final yes vote. 'I don’t think the American people voted for bailing out big insurance,' said Representative Dave Brat, Republican of Virginia, who opposes a separate measure to lower insurance premiums that Ms. Collins thought she had secured."

But could Collins flip? More from the NYT: "Ms. Collins has released a copy of her agreement with Mr. McConnell in which he pledged to support passage of the two measures before the end of the year. His signature was displayed prominently at the top of the first page. But the deal has landed with a thud in the House, where Republicans appear loath to support legislation that they view as propping up a health law that they have pledged to repeal.

'Our members wince at voting to sustain a system that none of them supported,' said Representative Tom Cole, Republican of Oklahoma. The Senate could attach the Alexander-Murray legislation to a government funding measure, hoping that Republicans in the House would be willing to swallow it as part of a measure to avoid a government shutdown. But Mr. Cole said House Republicans would be “very offended” at such an approach."

Erica Werner on Rep. Mark Sanford (R-S.C.) calling the tax bill like it is:

Greenspan sees little growth, dangerous inflation. CNBC's Jeff Cox: "The Republican-sponsored tax overhaul plan will do 'very little' to spur real economic growth but could push inflation dangerously higher, former Fed Chair Alan Greenspan said Wednesday. Greenspan said the GOP plan... instead should focus on reducing the deficit and heading off inflation.

Under the proposal, the corporate tax rate will be slashed from 35 percent to 20 percent while individual rates also will be cut. Analyses of the plan show it could add $1 trillion to the budget deficit, though the White House maintains the tax cuts will pay for themselves through gains in gross domestic product. 'This is a terrible fiscal situation we've got ourselves into,' Greenspan told CNBC's 'Squawk on the Street' in a live interview. 'The administration is doing tax cuts and a spending decrease, but he's doing them in the wrong order. What we need right now is to focus totally on reducing the debt.'"

The Committee for a Responsible Federal Budget updated its analysis of the Senate bill and found it could cost $2 trillion on a static basis:

Dems earn Three Pinocchios for private jet break claim. The Post's Nicole Lewis: "The Republican tax bill, which passed in the Senate during the wee hours of the morning on Dec. 2, contains a provision addressing the way private jets are taxed. Many on the left, who have criticized the GOP tax plan as a benefit to corporations and the super-rich and a burden for the middle class, have seized on this portion of the bill, characterizing it as a tax write-off for private jets... The characterization of the excise tax clause as a tax break is misguided. The provision provides regulatory clarity on a tax that has never successfully been imposed on private jet management companies. In short, the companies can’t receive a break on taxes that were never collected."

Pappy Van Loophole. WSJ's Saabira Chaudhuri: "America’s booze manufacturers have spent decades fighting tax hikes across the country—and wistfully suggesting tax cuts. Amid the Republican push for tax overhaul, the typically squabbling executives and lobbyists from the beer, wine and spirits sectors joined forces. They’re now celebrating the possibility of what they are calling their first federal tax reduction in roughly 150 years. A Senate version of the proposed tax bill includes a two-year provision that would cut federal excise tax on alcohol makers...Different excise rate reductions and credits would also apply to wine- and beer-makers. The biggest winners are smaller brewers, vintner or distillers, who because their volume is low, anyway, would benefit the most from the reduction in excise tax."

Shutdown tensions ease. But Trump fans them. The Post's Mike DeBonis: "Trump raised the possibility of a government shutdown ahead of a meeting with Democrats for a second consecutive week on Wednesday, even as tensions on Capitol Hill appeared to diminish after hard-line House conservatives backed off plans to oppose a short-term stopgap. 'It could happen,' Trump said about a shutdown before a Cabinet meeting, pointing to Democratic demands on immigration policy. 'The Democrats are really looking at something that is very dangerous for our country.'

 op congressional leaders from both parties are set to meet with the president Thursday at the White House as they seek a deal on lifting spending caps that would allow more funding for the military and nondefense programs. Democrats are also expected to bring up a potential deal on immigration that would include protections for at least 790,000 “dreamers,” immigrants brought illegally to the United States as children... By the end of the day, both House leaders and Rep. Mark Meadows (R-N.C.), the Freedom Caucus chairman, predicted Republicans would be able to pass the stopgap Thursday before lawmakers leave town for the weekend."

GOP: Entitlements next. The Post's Jeff Stein has this tough but clear-eyed look around the corner at the impending Republican push for entitlement cuts to address a deficit the tax bill will exacerbate: "Some House Republicans believe that Congress should cut Americans off government anti-poverty programs in part to help grow the national economy. 'For us to achieve 3 percent GDP growth over the next 10 years from tax reform, we have to have welfare reform. We need people who are mentally and physically able to work to get into the workforce,' Rep. Rod Blum (R-Iowa) said. 'In my district, a lot of employers can’t find employees ... Sometimes we need to force people to go to work.'

Other House Republicans similarly argued that there would be 'no excuses' for poor Americans to need welfare once economic growth took hold. 'Once we light this economy up, my brother, there’s going to be jobs for everybody. So there will be no excuses for anyone who can work to sit at home and not work,' Rep. Clay Higgins (R-La.) said. 'If we pass tax reform, we have to have welfare reform. When you have a vibrant economy, there’s no reason for Americans to suffer on welfare.'

The House members' comments reflect one aspect of the thinking that is driving congressional Republicans to say welfare reform may be the party's biggest legislative priority in 2018. President Trump and top Republican officials have signaled prioritizing welfare cuts, including new restrictions on who can receive benefits like food stamps, housing assistance and direct cash welfare for the poor."

More from Stein: "House Speaker Paul D. Ryan (R-Wis.) said Wednesday that congressional Republicans will aim next year to reduce spending on both federal health care and anti-poverty programs, citing the need to reduce America's deficit.

'We're going to have to get back next year at entitlement reform, which is how you tackle the debt and the deficit,' Ryan said during an appearance on Ross Kaminsky's talk radio show. '... Frankly, it's the health care entitlements that are the big drivers of our debt, so we spend more time on the health care entitlements — because that's really where the problem lies, fiscally speaking.' Ryan said that he believes he has begun convincing President Trump in their private conversations about the need to rein in Medicare, the federal health program that primarily insures the elderly. As a candidate, Trump vowed not to cut spending on Social Security, Medicare, or Medicaid."

Debt ceiling hike could ride the spending bill. WSJ's Kristina Peterson and Kate Davidson: "A group of House Republicans is considering pushing to raise the government’s borrowing limit as part of the next long-term spending bill, a move that could help dispatch one of the thorniest issues for GOP lawmakers before next year’s primary elections intensify. Rep. Doug Collins of Georgia, a member of House GOP leadership and the head of a working group of House Republicans on the debt limit, said lawmakers were considering increasing the debt ceiling as part of the bill funding the government for the rest of the fiscal year, known as an omnibus.

GOP leaders are likely to seek to raise the debt limit enough to last at least through next November’s midterm elections, lawmakers and aides said. They will have to act, likely by March, to avoid a default... House Speaker Paul Ryan (R., Wis.) tapped Mr. Collins to lead the group, which started strategizing in mid-October and now meets weekly on the issue."

Fannie, Freddie overhaul revives. Bloomberg's Joe Light: "Lawmakers have a long ways to go before resolving the biggest remaining quagmire from the 2008 financial crisis. But a consensus is now forming around principles for overhauling Fannie Mae, Freddie Mac and the U.S. mortgage-finance system. Senators Bob Corker and Mark Warner have been working on a bill for months, and they intend to start sharing ideas and legislative text with other senators and the Trump administration in the coming weeks, said people familiar with the matter. Their plan would preserve Fannie and Freddie but take steps to make it easier for investors or other companies to create competitors, the people said. The two lawmakers want to introduce a bill by early next year...

The new effort comes as a key Republican lawmaker, House Financial Services Chairman Jeb Hensarling of Texas, said Wednesday he’s open to a government guarantee on some mortgage bonds. In a speech at an event in Washington, Hensarling said he still didn’t like the government having wide involvement in mortgage bonds but grasps the political reality that reform probably would not progress without one. That move from Hensarling, who previously disavowed any government guarantee, could make some Democrats more open to proceeding with an overhaul."

Bitcoin climbed as much as 14.9 percent on Thursday as it surged above $15,000, extending this month’s advance to more than 50 percent. The price of the cryptocurrency touched $15,242.99, a record, according to Bloomberg pricing.
The new name will take effect in February.
Abha Bhattarai


Flynn said Russian sanctions would be "ripped up." NYT's Mark Mazzetti and Michael Schmidt: "Michael T. Flynn, President Trump’s former national security adviser, told a former business associate that economic sanctions against Russia would be “ripped up” as one of the Trump administration’s first acts, according to an account by a whistle-blower made public on Wednesday.

Mr. Flynn believed that ending the sanctions could allow a business project he had once participated in to move forward, according to the whistle-blower. The account is the strongest evidence to date that the Trump administration wanted to end the sanctions immediately, and suggests that Mr. Flynn had a possible economic incentive for the United States to forge a closer relationship with Russia.

Mr. Flynn had worked on a business venture to partner with Russia to build nuclear power plants in the Middle East until June 2016, but remained close with the people involved afterward. On Inauguration Day, as he sat behind the president listening to the inaugural address, Mr. Flynn, according to the whistle-blower, texted the former business associate to say that the project was 'good to go.'"

Jr. grilled. The Post's Karoun Demirjian and Roz Helderman: "Donald Trump Jr. met behind closed doors for roughly seven hours Wednesday with the House Intelligence committee, fielding extensive questioning about contacts he had with Russians during the 2016 campaign.

Committee members queried President Trump’s eldest son about a June 2016 meeting he held with a Russian lawyer after he was told she would provide damaging information about Democratic candidate Hillary Clinton. He was also asked about his contact with WikiLeaks in October 2016, around the time the group was releasing hacked Democratic emails, according to people familiar with the session.

Trump Jr. told the committee that he had not informed his father about his meeting with the Russian lawyer at the time it took place. He also said he had not told Trump that he exchanged private messages with the WikiLeaks Twitter account, according to the people... Trump Jr. told the committee that he did not speak to the president directly in July 2017 as the New York Times prepared to report his meeting with the Russian lawyer for the first time. Instead, he told the committee he had communicated only with Trump communications director Hope Hicks to discuss how to respond to the Times’s inquiries."

Conservatives hammer Mueller. The Post's Devlin Barrett and Sean Sullivan: "Republican activists and lawmakers are engaged in a multi-front attack on special counsel Robert S. Mueller III’s probe of possible connections between associates of President Trump and Russian agents, trying to stop or curtail the investigation as it moves further into Trump’s inner circle. For months, the president and his allies have been seizing on any whiff of possible impropriety by Mueller’s team or the FBI to argue that the Russia probe is stacked against Trump — potentially building the political support needed to dismiss the special counsel. Several law enforcement officials said they are concerned that the constant drumbeat of conservative criticism seems designed to erode Mueller’s credibility, making it more politically palatable to remove, restrict or simply ignore his recommendations as his investigation progresses."

(See this opening segment from Fox News's Hannity last night to get a picture of the effort. It is bananas.)

Courts & Law
It is at least the third time since the president’s inauguration that the Department of Justice has renounced its past positions, some held for decades.
Robert Barnes
Canadian Prime Minister Justin Trudeau said he would consider one-on-one talks with the U.S. on trade with the U.S., if negotiations to update the North American Free Trade Agreement fail.
The presidential son-in-law, whose influence has waned since John Kelly arrived, believes recognizing the Israeli capital won’t threaten his peace deal.

Leandra English sues. Reuters: "Attorneys for Leandra English, the deputy director of the CFPB on Wednesday filed fresh paperwork challenging... Trump and his pick to lead the consumer watchdog. A judge rejected English’s emergency filing to install her as the agency’s leader, but Wednesday’s new filing sets the stage for her to continue the legal fight in higher courts."

CFPB blow-by-blow. The American Banker put together a slide show of the setbacks suffered by the Consumer Financial Protection Bureau over the last two months ("It was the worst of times, it was the worst of times for the Consumer Financial Protection Bureau.") See it here

Financial regulator dashboard. The people at Hamilton Place Strategies have updated their graphic of who's where in the Trump administration's financial regulatory regime. See it here

Even bigger than net neutrality. The Post's Brian Fung: "The plan by the Federal Communications Commission to eliminate its net neutrality rules next week is expected to hand a major victory to Internet service providers. But any day now, a federal court is expected to weigh in on a case that could dramatically expand the scope of that deregulation — potentially giving the industry an even bigger win and leaving the government less prepared to handle net neutrality complaints in the future, consumer groups say.

At stake is the [Federal Trade Commission's] ability to prosecute companies that act in unfair or deceptive ways. The litigation is significant as the FCC prepares to transfer more responsibility to the FTC for handling net neutrality complaints... If AT&T gets its way in the case, the FTC's ability to pursue misbehaving companies — over net neutrality issues or otherwise — may be sharply curtailed."

Industry has a friend at Trump's Consumer Product Safety Commission. NYT's Sheila Kaplan: "Ann Marie Buerkle, a commissioner at the federal agency charged with protecting consumers from hazardous toys and products, has seldom voted for a mandatory recall, a maximum fine or a tougher safety standard. In more than four years on the Consumer Product Safety Commission, Ms. Buerkle has opposed limiting dangerous carbon monoxide emissions in portable generators; resisted requiring safety technology on table saws; and disagreed with the other Republican commissioner on the five-member board by rejecting fines against companies that delayed reporting hazards to the agency, as required by law.

As President Trump’s nominee to head the agency, she is drawing criticism for her positions. Like some Trump administration officials, Ms. Buerkle is an unabashed supporter of voluntary regulations, and believes that collaboration with manufacturers, rather than levying fines or imposing recalls, is the fastest way to get dangerous products off the market."

They agree! Trump, Warren oppose AT&T deal. NYT's Jennifer Saba: "Trump and Senator Elizabeth Warren make odd antitrust bedfellows. Ms. Warren, the Massachusetts Democrat, says megadeals like Aetna’s $77 billion sale to CVS could kill competition. She also backs the Justice Department’s fight against an AT&T-Time Warner merger and has concerns about past merger remedies. That puts her in the same camp as the president.

She laid out her views on deal making in a speech on Wednesday. AT&T’s $85 billion acquisition of Time Warner, she said, would mean higher prices, fewer choices and worse service for consumers. That echoes Mr. Trump’s antitrust chief, Makan Delrahim, and the Justice Department’s November lawsuit to block the deal, which asserted that the merger would leave millions of television viewers paying more and would slow innovations like video streaming.

Ms. Warren also said past concession agreements that allowed certain mergers to go forward had been 'epic failures.' That almost feels like a hat tip to Mr. Delrahim, who in a speech last month said past behavioral remedies to address antitrust concerns had not worked out as planned and had been difficult to enforce."


"The richest 1 percent now owns more of the country’s wealth than at any time in the past 50 years," writes The Post's Christopher Ingraham:



  • The House Financial Services Subcommittee on Financial Institutions and Consumer Credit holds a hearing on “Legislative Proposals for a More Efficient Federal Financial Regulatory Regime: Part II.”
  • The House Financial Services Subcommittee on Oversight and Investigations holds a hearing on the Office of Financial Research.

Coming Up

  • The FDIC hosts a webinar on the Affordable Mortgage Lending Guide on Friday.
  • The Peterson Institution for International Economics hosts a book release for “Clashing over Commerce: A History of US Trade Policy” on Dec. 11.

From The New Yorker:

A cartoon by @jeremywins. #TNYcartoons

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President Trump claims GDP would be higher "without the hurricanes:"

House Speaker Paul Ryan (R-Wis.) lit up the Capitol Christmas tree at an outdoor ceremony:

Samantha Bee takes on lawmakers' response to sexual misconduct and the Republican tax bill:

The Daily Show on Trump's best words this year: