THE TICKER

The Treasury Department on Monday released its long-promised analysis predicting the $1.5 trillion tax cut zooming through Congress will more than pay for itself. The study amounted to a single page and was met with widespread ridicule from economists. 

The analysis, such as it is, teeters on some rickety assumptions, as my colleague Heather Long points out: It projects the economy will sustain 2.9 percent growth over the next decade, a full point higher than the nonpartisan Congressional Budget Office anticipates. And it argues for that claim by stipulating the Trump administration will succeed in enacting several as-yet- unrealized proposals including deregulation, infrastructure improvements and welfare cuts.

The Treasury Department’s inspector general last month launched an investigation into whether political considerations interfered with the analysis — a probe that will continue, the IG’s office confirmed Monday. 

Take your pick of independent analyses refuting Treasury's conclusion, because all of them do. A new look from the Penn Wharton Budget Model on Monday found that even factoring in growth, the Senate bill adds $1.5 trillion to $1.8 trillion to the national debt over a decade. The Tax Policy Center also released a new study that likewise found, accounting for growth, that the GOP package adds $1.5 trillion to the debt over the same period. 

The official congressional scorekeepers at the Joint Committee on Taxation put the 10-year price tag of the House bill at about $1 trillion in an analysis released Monday -- the number crunchers at the friendlier Tax Foundation have pegged the Senate bill’s cost at $516 billion. And 37 of 38 economists across the ideological spectrum surveyed by the University of Chicago Booth School of Business agreed the bill will add to the debt substantially (the 38th misread the question). 

But the Trump administration and Treasury officials are operating in a different realm, one in which the rigors of real-world conditions don’t seem to apply.

Kevin Hassett, chair of President Trump’s Council of Economic Advisers, laid out the magical thinking in a Monday appearance on CNBC. “If you look at the president’s agenda, which includes deregulation and infrastructure and tax reform, it will add about a percent a year in economic growth over the next decade,” Hassett said. “That was apparent in the president’s budget documents last spring, and it’s apparent in the memo that the Treasury put out. And then if you just assume that you get that kind of growth, then you can say, 'Well, how much revenue do we get from that?' ”

From the New York Times's Jim Tankersley:

From former Treasury Secretary Larry Summers: 

If the facts don’t suit your needs, assume a different set of them (the phrase "alternative facts" as coined by Trump adviser Kellyanne Conway tops the Yale Law School's new list of notable quotes of 2017). It’s a strategy the administration has learned from the top down: The president has deployed it with head-spinning regularity since he first stepped on the scene. 

Lately, as accusations of sexual misconduct have torn through power centers from Washington to Hollywood, Trump has divided the ranks of the accused into friends and foes. He credits the accusers of Harvey Weinstein and outgoing Sen. Al Franken (D-Minn.), for example, while dismissing as liars those who have come forward with allegations against him, Senate candidate Roy Moore of Alabama, former Fox News host Bill O’Reilly and others. 

 

Just this morning, he went after Sen. Kirsten Gillibrand (D-N.Y.), who has called for the president to resign over the allegations against him for sexual misconduct:

The official narrative from Team Trump about its alleged Russia ties has evolved in real time to keep pace with rolling revelations from special counsel Robert S. Mueller III’s probe. Just months ago, there was nothing to see here, a fact that would be confirmed imminently by the appointment of Mueller — a “superb choice” with an “impeccable” reputation for honesty and integrity, in the words of former House speaker Newt Gingrich (R-Ga.). Now that Mueller has netted two guilty pleas, two indictments and appears to be nearing Trump’s inner circle, some of the president’s allies say that the special counsel is “corrupt;” that the Justice Department and the FBI need a “cleansing”; that it is Hillary Clinton who should be the target of a special counsel’s investigation; and if the Trump campaign did in fact get help from the Russians, that’s no big deal, and by the way, the president by definition can’t obstruct justice

Trump’s reality distortion field apparently knows no boundaries, so it extends to include his signature domestic priority, too. His tax plan, he has said, would amount to the biggest cuts in history (as a percentage of GDP, it would be the eighth-largest in the past century); will be “so bad for rich people” (the plan skews its benefits toward the rich); and will hurt his personal wealth (experts and nonpartisan analysts agree he stands to fare much better than others because of several provisions). (See The Post's searchable database of 1,628 false and misleading statements by the president here.)

The freedom to edit out uncomfortable facts and rewrite commitments that prove tough to satisfy is evidently appealing. Congressional Republican leaders have made use of it this year as they sought to put bring the tax proposal to life. 

Back in March, House Ways and Means Committee Chairman Kevin Brady (R-Tex.) told Jim Tankersley, then of Vox.com, that the plan would pay for itself by the Joint Committee on Taxation’s accounting: “Deficits matter,” he said. “And so we designed the tax reform in the House to be deficit-neutral, counting on economic growth. Not economic growth judged by us, but by the independent Joint Committee on Taxation. What that means is that over a 10-year period, the tax reform breaks even.” 

In May, Senate Majority Leader Mitch McConnell (R-Ky.) told Bloomberg the plan would “have to be revenue neutral,” because the nation’s debt had reached alarming levels. In that same conversation, however, McConnell indicated House Republican leaders’ preferred method for raising revenue to pay for cuts — the so-called border adjustment tax that would impose a levy on imports — looked like a nonstarter in the Senate. House GOP brass finally gave up on the idea just before the August break. But Republicans never did the painful work of coming up with a replacement for the $1.5 trillion the BAT would have yielded, and neither did they trim their tax-cutting ambitions. 

Rather, GOP tax writers produced a lopsided bill on an accelerated schedule.When the JCT found on a dynamic basis the measure would pile another $1 trillion onto the debt, Republicans attacked the scorekeepers for using “consistently wrong” growth models and “suspect” assumptions. 

The 470-word memo that Treasury issued Monday — the product of a process Treasury Secretary Steven Mnuchin had described as involving a staff of more than 100 people working “around the clock” — fit into this context: Confronting an unfavorable reality, Republicans conjured their own.

In the most immediate sense, the strategy is working. The party appears on track to deliver a finished tax package to the president by the end of the year, meeting a self-imposed deadline that looked laughably ambitious only months ago. Several Senate Republicans voiced concerns about the deficit impact of their bill as it approached a floor vote earlier this month, but only Sen. Bob Corker (R-Tenn.) opposed it. 

Yet the version of the world in which Republicans could soon be toasting a breakthrough achievement looks to be on a collision course with the one in which actual taxpaying voters live.

The newest survey of popular attitudes toward the plan show it remains deeply unpopular. Reuters/Ipsos survey released Monday found it is 17 points underwater with voters. More than half of respondents said it will benefit corporations and the wealthy; 12 percent said it will benefit all Americans. 

And economists are warning against the deficit-financed stimulative jolt it will provide an economy already humming at nearly full employment and full capacity. The tax cuts's effect on monetary policy could come into clearer focus this week, as the Fed kicks off its final meeting of the year today. Investors are looking for signals that the central bank will seek to raise interest rates faster to keep the economy from overheating. 

MARKET MOVERS
The new breed of futures contracts that launched late Sunday became a 24-hour microcosm of bitcoin’s own wild ride this year, marked by technical glitches and surging valuations. The first day left true believers cheering, yet kept many mainstream financial professionals peering uneasily from the sidelines.
Bloomberg
MONEY ON THE HILL

TAX FLY-AROUND:

Final fits. Politico's Bernie Becker, Aaron Lorezno, and Seung Min Kim: "Top congressional Republicans, racing to hammer out a final tax agreement by the end of the week, have yet to make any breakthroughs on a range of key issues. House and Senate negotiators bounced proposals back and forth over the weekend, but said Monday that they still had to find compromises on where to set the corporate tax rate, how to treat millions of businesses that aren’t set up as corporations and how much of a deduction to allow for state and local taxes...

On the House side...Kevin Brady... deflected questions about a slew of potential trouble spots, also including the estate tax, the Alternative Minimum Tax and the fate of an existing law barring churches and other tax-exempt groups from openly politicking. Asked Monday what differences the House and Senate had resolved, Sen. John Thune (R-S.D.) responded: 'Well, nothing really.'...

A compromise measure would still need to be vetted to ensure that it doesn’t violate strict Senate budget rules, a process that may start in the next couple days and could offer clues about what’s in a final deal. And Republicans are facing increased pressure from Democratic lawmakers to slow down the rapid conference process; Senate Democrats on the tax conference committee are demanding at least three public meetings on merging the House and Senate bills. 'We’ve got just a few headline issues. How we land on rate structures, breaks in the brackets are important issues,' said Sen. Tim Scott (R-S.C.), another member of the conference committee. Scott added that negotiators were still grappling with how to 'sweeten the SALT' problem, referring to differences over a state and local tax write-off."

Grassley highlights problems. CNBC's Jacob Pramuk: "As Republicans rush to jam through a tax bill before year-end, their plan faces two major problems, Sen. Chuck Grassley [R-Iowa] said on Monday. The Iowa Republican said House and Senate negotiators still need to compromise on the treatment of the alternative minimum tax and state and local tax deductions... 'I think I can tell you some problems have come up very definitely with the corporation AMT and even the individual one," Grassley told CNBC's "Squawk Box." He added that 'some compromise has to be worked out' on popular tax breaks used by people in high-tax states like New York, California and New Jersey."

Small investors face hike. WSJ's Michael Wursthorn and Veronica Dagher: "A little-discussed provision in the Senate tax bill could lead to a higher tax bill for millions of individual investors and cause many to unload stocks before year-end to avoid those costs. Under the Senate’s $1.4 trillion tax overhaul, investors would lose the ability to choose which shares they can sell to reduce a position. Instead, investors selling partial stakes in a company would have to unload their oldest shares first, a process known as selling on a 'first-in, first-out' basis. Selling those shares usually brings a higher tax bill if the stock’s price has been rising. Some small investors are fuming that the new rule would cause them to pay much more in taxes."

Manufacturers are pumped. CNBC's Lori Ann LaRocco: "The National Association of Manufacturers said Monday its latest quarterly CEO survey reflects historically high optimism on expectations for the passage of tax reform in Washington. The trade group said CEO optimism — hitting a high mark in 20 years of the survey — should send a message to legislators that failure to enact the bill would be a blow to American business."

What you'll see in your paycheck. CNN Money's Jeanne Sahadi: "If Republicans succeed in passing a tax overhaul by Christmas, the law could mean major changes for your take-home pay -- not all of them welcome. But those changes probably won't be reflected in your paycheck in time for the New Year... The tax overhaul would make fundamental changes to gauging how much tax should be withheld from your paycheck so that you're not left with a big tax bill when you file your federal return. Both the tax bill passed by the House and the one passed by the Senate would double the standard deduction and eliminate personal exemptions. They also would change the income tax brackets and alter various family credits. In addition, some of the once tax-free workplace benefits may become taxable wages. And there may be changes to how much federal tax is automatically withheld on any bonus, commission or other 'supplemental wages.' They've been taxed at 25% since 2007, but that rate may go up to 28% under a new tax law."

Wildfire victims in limbo. NYT's Jennifer Medina:  "In the scorched landscapes of California, a little-noted provision of the Republican tax overhaul has property owners worried about being burned twice: Once by the wildfires that have destroyed thousands of homes, and then again by being denied a tax write-off for their losses. But there is much confusion about the legislation’s actual effects... Both versions of the tax legislation now moving through Congress would take away the deduction for personal losses in wildfires. The House bill would eliminate the casualty loss deduction entirely; the Senate version would retain it only for losses in “federally declared disasters,” and wildfires have hardly ever been so declared... The new tax law would not take effect until 2018. People whose homes were destroyed in 2017 would still be covered by the old law. They would, however, have to tally their uninsured losses and claim them on their 2017 return — the one they must file by April 15, 2018, unless they get an extension."

European finance ministers attack. WSJ's Andrea Thomas and Todd Buell: "The Trump administration’s planned overhaul of U.S. corporate tax law came under attack Monday from finance ministers of Europe’s five largest economies, voicing the growing anxiety among foreign executives and officials that the proposals would give American firms unfair tax advantages. In a letter sent to ... Mnuchin, the finance ministers said the U.S. overhaul contains protectionist measures that could violate double-taxation treaties and breach world trade rules. They zeroed in on several technical points that tax experts say could have greater impact internationally than the proposed headline corporate tax cut—from 35% currently to 20%—that has become the centerpiece of the initiative... The ministers’ letter said some provisions of the Senate and House bills 'could contravene the U.S.’s double-taxation treaties and may risk having a major distortive impact on international trade.' The U.S. is the European Union’s single most important trade and investment partner."

Pensions shadow shutdown fight. Politico's Elana Schor: "The next potential sleeper cause of a government shutdown? Pensions. Congress barely averted a shutdown last year amid a fight over miners’ health care. Now the looming collapse of pension plans for the miners — as well as thousands of Teamster truck drivers and food service workers — is fueling another, even more expensive, round of brinkmanship.

Key Democrats are vowing to fight for a fix as part of any forthcoming deal to fund the government. And they warn that if Congress doesn’t step in soon to forestall the insolvency of several key pension plans — including the massive Central States plan, which covers an estimated 400,000 union workers and retirees — taxpayers risk ending up on the hook for an even bigger multibillion-dollar rescue for the government’s pension guarantee agency.

But it’s far from clear the workers will get their rescue. Conservative Republicans will be loath to provide anything that looks like a bailout, particularly for union workers. And one of the Senate’s leading Democratic advocates for relief, Sherrod Brown of Ohio, is one of the GOP’s top targets ahead of his reelection campaign next year."

Wonkblog
Some Republicans are enthusiastic. Others are wary. But they all agree there are high hurdles to proposing Medicare changes in an election year.
Jeff Stein
POCKET CHANGE
Web-driven comparison shoppers are keeping a lid on inflation and weakening retailers’ pricing power, complicating the Federal Reserve’s deliberations on how much and how fast to raise interest rates.
WSJ
A previously unknown ring of Russian-speaking hackers has stolen as much as $10 million from U.S. and Russian banks in the last 18 months, according to a Moscow-based cyber-security firm that runs the largest computer forensics laboratory in eastern Europe.
American Banker
The bank said the Justice Department was expected to seek dismissal of a case related to money laundering as part of a so-called deferred prosecution agreement.
NYT
THE REGULATORS

Clayton warns against Bitcoin. WSJ's Dave Michaels: "Wall Street’s top regulator on Monday raised alarms about the money flooding into bitcoin trading and other cryptocurrency markets, warning the red-hot corner of less-regulated finance is burning with risk for retail investors. Securities and Exchange Commission Chairman Jay Clayton issued a lengthy statement spelling out his concerns about bitcoin, which the agency doesn’t regulate, and other deals that piggyback off excitement about the cryptocurrency. The SEC has come down particularly hard on initial coin offerings, in which startups raise money—sometimes by soliciting bitcoin—from investors in exchange for giving them a new digital coin that may be traded or grow in value.

'The world’s social media platforms and financial markets are abuzz about cryptocurrencies and initial coin offerings,' Mr. Clayton said. 'There are tales of fortunes made and dreamed to be made. We are hearing the familiar refrain, "this time is different."' Mr. Clayton’s alert came on the same day the SEC intervened to halt a $15 million initial coin offering that it said should have been conducted under the regulator’s longstanding rules for securities sales. Because it wasn’t, investors didn’t get the extensive disclosures that enable informed investment decisions."

Mortgages for Bitcoin. CNBC's Michelle Fox: "Bitcoin is in the 'mania' phase, with some people even borrowing money to get in on the action, securities regulator Joseph Borg told CNBC on Monday. 'We've seen mortgages being taken out to buy bitcoin. … People do credit cards, equity lines,' said Borg, president of the North American Securities Administrators Association, a voluntary organization devoted to investor protection. Borg is also director of the Alabama Securities Commission. 'This is not something a guy who's making $100,000 a year, who's got a mortgage and two kids in college ought to be invested in.'"

Over 30 current and former Democratic lawmakers filed a new amicus brief Monday supporting Consumer Financial Protection Bureau Deputy Director Leandra English to be reinstated as acting director of the agency.
American Banker

RUSSIA WATCH: 

Mueller mulls obstruction. NBC's Carol E. Lee and Julia Ainsley: "Mueller is trying to piece together what happened inside the White House over a critical 18-day period that began when senior officials were told that National Security Adviser Michael Flynn was susceptible to blackmail by Russia, according to multiple people familiar with the matter. The questions about what happened between Jan. 26 and Flynn's firing on Feb. 13 appear to relate to possible obstruction of justice by President Donald Trump, say two people familiar with Mueller's investigation into Russia's election meddling and potential collusion with the Trump campaign.

Multiple sources say that during interviews, Mueller's investigators have asked witnesses, including White House Counsel Don McGahn and others who have worked in the West Wing, to go through each day that Flynn remained as national security adviser and describe in detail what they knew was happening inside the White House as it related to Flynn. Some of those interviewed by Mueller's team believe the goal is in part to determine if there was a deliberate effort by President Trump or top officials in the West Wing to cover up the information about Flynn that Sally Yates, then the acting attorney general, conveyed to McGahn on Jan. 26. In addition to Flynn, McGahn is also expected to be critical in federal investigators' attempts to piece together a timeline of those 18 days."

Judge warns Manafort. The Post's Spencer Hsu: "A federal judge Monday declined to punish former Trump campaign chairman Paul Manafort for helping write an opinion article for a newspaper in Ukraine defending his work there. But the judge warned she would likely consider any similar actions in the future as a violation of the existing gag order barring comments outside court as Manafort faces trial on criminal fraud charges. 'Mr. Manafort, that order applies to you, and not just your lawyer,' U.S. District Judge Amy Berman Jackson said at an hour-long hearing in Washington. 'I’m inclined to view such conduct in the future to be an effort to circumvent and evade . . . my order, as clarified this morning.'

Jackson’s rebuke came after prosecutors with special counsel Robert S. Mueller III last week accused Manafort of editing the piece for the English-language Kyiv Post with a former colleague that prosecutors said had ties to Russian intelligence."

Inside the firm behind the dossier. The Post's Jack Gillum and Shawn Boburg: "Fusion GPS bills itself as a corporate research firm, but in many ways it operates with the secrecy of a spy agency. No sign marks its headquarters above a coffee shop in Northwest Washington. Its website consists of two sentences and an email address. Its client list is closely held. The small firm has been under intense public scrutiny for producing the 35-page document known as the Trump dossier. Senior executives summoned to testify before Congress in October invoked their Fifth Amendment right against self-incrimination, and the firm is resisting a congressional subpoena for bank records that would reveal who has paid for its services.

But hundreds of internal company documents obtained by The Washington Post reveal how Fusion, a firm led by former journalists, has used investigative reporting techniques and media connections to advance the interests of an eclectic range of clients on Wall Street, in Silicon Valley and in the nation’s capital. The firm has played an unseen role in stories that dominated headlines in recent years."

(Among its clients: Theranos and Herbalife; its targets: Google, Amazon, the 2012 campaigns of Barack Obama and Mitt Romney, and Republican Sens. Ted Cruz of Texas and Corker.)

OPINIONS
Opinions
The only way in which Puerto Rico will be able to pay something to its creditors — even a small amount in the distant future — is through economic recovery. And recovery requires not only that payments for debt service be cut in the short term but also that there not be an overhang of large payments in the long run.
Martin Guzman, Joseph E. Stiglitz and Antonio Weiss
CHART TOPPER

The Post's Philip Bump writes a lot of Americans spent 2017 ditching the Republican Party: 

DAYBOOK

Today

  • The House Financial Services Committee holds a markup on various measures.
  • The Wilson Center holds an event on NAFTA.
  • The Washington International Trade Association holds a discussion on agriculture, trade and American leadership.
  • The Heritage Foundation holds an event on NAFTA renegotiations.
  • The House Foreign Affairs Subcommittee on Terrorism, Nonproliferation and Trade holds a hearing on the future of NAFTA.
  • The FDIC holds a teleconference on resources for community banks.

Coming Up

  • The House Ways and Means Oversight Subcommittee holds a hearing on IRS reform on Wednesday.
  • The Bipartisan Policy Center holds an event on low-income tax credit and health on Wednesday.
  • The House Financial Services Committee holds a hearing on “"Examining the Operations of the Committee on Foreign Investment in the United States” on Thursday.
THE FUNNIES

From The New Yorker:

A cartoon by David Sipress. #TNYcartoons

A post shared by The New Yorker Cartoons (@newyorkercartoons) on

BULL SESSION

Kayla Moore, wife of Alabama Senate candidate Roy Moore, accused the media at a Monday rally of saying the couple is anti-Semitic: "I just want to set the record straight while they’re here. One of our attorneys is a Jew!:"

Listen to President Trump's robo-call for Alabama Senate candidate Roy Moore:

On the eve of the election, Democratic candidate Doug Jones urges Alabama voters to put "decency" before political party:

Reporters grill White House press secretary Sarah Huckabee Sanders on President Trump's sexual misconduct denials:

Three of Trump's accusers speak out, again: "This time, the environment's different:"

This 6-year-old made $11 million a year by reviewing toys on YouTube: