THE TICKER

Want more stories like this? Sign up here.

At worst for Republicans, Sen. Marco Rubio’s opposition to their tax package sinks the bill. If he remains opposed, as does, say, Sen. Bob Corker (R-Tenn.), only one more Republican defection would mean failure. Much more likely, leaders reach an accommodation with the Florida Republican that satisfies his demand for expanding the child tax credit. 

But at best, Rubio’s last stand is ensuring the tax debate concludes on a politically sour note for his party. His gripe, after all, is with the measure’s stinginess toward the working class even as it strains at the seams with goodies for corporations and the wealthy. 

Indeed, other last-minute changes Republicans have been considering appeared primed to tilt the package further in that direction. At one point Thursday, as they scrambled to make the bill’s budget math work, Senate Finance Committee Chairman Orrin Hatch (R-Utah) said they were looking at moving up the expiration date for individual tax cuts — a change that would siphon more from lower-income workers. As my colleagues Jeff Stein, Erica Werner and Damian Paletta write in their latest report on the state of play: 

“The additional revenue is needed because Republicans are seeking to lower the top tax rate paid by the wealthiest Americans, ratchet back proposed curbs on the deductions of state and local taxes, and scale back proposed tax rules for investment income. All of these changes are expected to add more than $200 billion to the cost of the bill, which is one reason GOP leaders have said they don’t have much flexibility to address Rubio’s demands.”

Rubio has explicitly presented the zero-sum choice his leaders have made to sweeten the deal for the wealthiest over the neediest. He reemphasized the point Thursday: 

Polls show Americans mostly think the bill skews its benefits to the well-heeled. More than three-quarters of respondents to a CBS News survey this month said it would benefit corporations, while less than a quarter said it would help their own family (and 69 percent said it would help the wealthy.) And a USA Today-Suffolk University poll released Sunday found 64 percent said the wealthy will get the most benefits, while just 17 percent said the middle class will. 

I wrote in this space yesterday about some of the dials Republican negotiators could twist to raise more revenue from corporate interests, eating into their benefit from the rate cut at the heart of the bill.

For industries that pay a particularly high effective tax rate under the current system, however, the bill looks like a major winIncluded in that group: big Wall Street banks. Richard Ramsden, who heads up coverage of the financial sector for Goldman Sachs, made the case in a new episode of the firm’s podcast, released Thursday. He said the tax bill was a major topic at a financial services conference he just hosted that brought investors together with finance executives: 

“Banks, though, do benefit disproportionately in some ways in that 90 percent of bank earnings are domestic, and banks actually do have relatively high tax rates. So there was a very healthy debate around what is the impact of corporate tax reform going to be, not just on the banks themselves but on the broader economy … There's obviously a lot of details that still need to be ironed out. But it would have a fairly significant impact on overall bank earnings, at least in the short run … On our estimates, you'll probably see a 15 percent uplift, at least in the short run, in terms of the overall earning power of the sector.”

Jake Siewert, Goldman’s head of corporate communications and the host of the podcast: “So in other words, their tax rate drops from the low 30s down to 20, and it goes straight to the bottom line.’

Ramsden: “Yes, at least initially. Over time, the banking system is very competitive; banking is a very commoditized industry, so you would expect to see some of that benefit eroded through increased competition over time — but in the short run, it would have a material earnings uplift for the banks that we cover, at least.”

And what would banks do with the windfall? Some of it, Ramsden said, would be reinvested. And some would go to shareholders:

“There are shareholders who frankly would like to see some of the capital returned to them so that they can invest in other areas that are growing quicker. I do think what you will see as a first order is that banks will look to increase their dividend payout ratios. Again, if you look at the largest banks, their dividend payout ratios are between 30 to 35 percent. If you look historically, banks paid out closer to 45 percent of their earnings in the form of a dividend. And I do think over the next few years, banks are looking for opportunities to grow their dividends as a way of providing a better yield to shareholders.”

The assessment calls to mind the now-famous scene last month at the Wall Street Journal’s CEO Council meeting featuring Ramsden's former Goldman colleague Gary Cohn, now the president's top economic adviser. When a Journal editor queried the crowd of executives about how many would invest more if the tax bill passes, only a few raised their hands, prompting Cohn to ask, “Why aren't the other hands up?”

Critics seized on the moment as a refutation of the argument from Cohn and others that the tax package’s benefits will trickle down to a broad base of Americans. In an opinion piece this morning, Bloomberg CEO Mike Bloomberg identifies Cohn as a friend and says he can answer his question: "We don't need the money."

The former New York City mayor continues: "Corporations are sitting on a record amount of cash reserves: nearly $2.3 trillion. That figure has been climbing steadily since the recession ended in 2009, and it's now double what it was in 2001. The reason CEOs aren't investing more of their liquid assets has little to do with the tax rate. CEOs aren't waiting on a tax cut to 'jump-start the economy' -- a favorite phrase of politicians who have never run a company -- or to hand out raises. It's pure fantasy to think that the tax bill will lead to significantly higher wages and growth, as Republicans have promised. Had Congress actually listened to executives, or economists who study these issues carefully, it might have realized that."

MARKET MOVERS
World shares were lower on Thursday after concern from investors over potential obstacles to Republican's tax overhaul and a slate of policy meetings from major central banks in Europe.
Reuters
The first six months of Brexit negotiations were the easy part. With EU leaders in Brussels set to formally agree Friday that May has complied with their conditions, there are already signs that EU unity has hit its high watermark.
Bloomberg
MONEY ON THE HILL

TAX FLY-AROUND: 

Republicans hunt for revenue. NYT's Alan Rappeport and Thomas Kaplan: "Among the potential ideas being discussed on Capitol Hill to pay for the bill is allowing the tax cuts for individuals to expire even sooner than the 2025 date already stipulated in the Senate bill. Another idea under consideration, according to Senator Thom Tillis, a North Carolina Republican, is raising the tax rate on profits that companies have parked overseas as a way to pay for the bill. 'We’re literally trying to squeeze about $2 trillion in tax reform into a $1.5 trillion box and that’s been a problem,' Senator Ron Johnson, a Wisconsin Republican, who held out on supporting the initial version of the Senate tax bill until it gave more generous tax breaks to 'pass through' businesses."

McCain, Cochran face health problems. CNN's Ted Barrett and Phil Mattingly: "Republican leaders in the Senate are keeping a close eye on the health conditions of two senior members -- John McCain of Arizona and Thad Cochran of Mississippi -- ahead of a crucial vote on the GOP tax plan next week. Both have missed votes this week, though party leaders expect the two senators to be in position to vote for the tax bill, which could happen as early as Monday. 

McCain, who announced he had brain cancer this summer, was hospitalized this week 'for normal side effects of his ongoing cancer therapy,' his office said in a statement Wednesday night. 'Senator McCain looks forward to returning to work as soon as possible,' the statement said, though it did not include any details on the timing of his return. Cochran had 'an outpatient procedure Monday afternoon to address a non-Melanoma lesion on his nose,' his spokesman Chris Gallegos told CNN. 'The procedure was more extensive than expected, but the senator is doing well and available now for votes if needed.'"

Medical expense, grad student breaks survive. The Post's Heather Long: "Andrew Devendorf has contacted Sen. Marco Rubio's office every other day for the past month to beg the Florida Republican to make sure Congress's final tax bill doesn't make graduate school unaffordable for him and 179,000 other PhD students in the United States. Rubio has emerged as a potential swing vote on the tax bill, giving him possible leverage as Republicans finalize their plan with the goal of getting legislation to President Trump's desk by Christmas. It looks like Devendorf's efforts paid off. Tuition waivers for graduate students are expected to remain tax-free. The medical deduction, which helps 8.8 million Americans with severe conditions like Alzheimer's, is also expected to remain."

Johnson Amendment lives on. More from Heather: "In a minor win for Democrats, they say the final GOP tax bill will not include a repeal of the Johnson Amendment, a change that would have allowed religious institutions and all nonprofit entities organized as 501(c)3s to endorse political candidates... Trump promised to 'totally destroy' the Johnson Amendment at the National Prayer Breakfast in February. Getting rid of it has been a priority of some spiritual leaders, especially in evangelical circles that have typically leaned Republican. The tax bill that passed the House in November scrapped the Johnson Amendment entirely for all non-profits, but the Senate bill did not, setting up a difference that had to be ironed out in this final week of negotiations."

Growth may vanish fast. Bloomberg's Catarina Saraiva: "Private-sector economists and Federal Reserve policy makers aligned this week over how the tax plan being finalized in Congress will boost the U.S. economy: temporarily, and not by much. Economists increased their growth forecasts for this year and next by 0.1 percentage point in a Bloomberg survey published Thursday, compared to a similar survey last month. While this may seem minuscule, many had already incorporated in their forecasts changes to the tax code, which have been high on Republicans’ priority list.

All economists surveyed in a separate November poll said that any assumed impact from tax-code changes would be a positive one on their 2018 growth forecast. The median forecast boost was a 0.28 percentage-point increase. Economists have increased their growth estimates for next year to 2.5 percent, from 2.3 percent at the start of this year. The private-sector estimates are in line with the Federal Reserve’s."

Pence delays Israel trip. Politico's Matthew Nussbaum and Seung Min Kim: " Vice President Mike Pence began planning a Christmastime trip to Jerusalem weeks before President Donald Trump decided to upend decades of U.S. policy by formally recognizing the city as Israel’s capital. The visit, which Pence announced at a ceremony for the 70th anniversary of the United Nations vote establishing Israel as a sovereign state, was designed not just as a move to reaffirm ties with a key ally but as a victory lap for Pence, who was instrumental in lobbying Trump to stick with his campaign promise on Jerusalem. But Pence on Thursday delayed the trip by three days, bowing to the reality that he can’t go anywhere until Trump’s top priority—tax reform—gets a Senate vote, expected to happen early next week."

Shutdown showdown rekindled. The Post's Mike DeBonis and Ed O'Keefe: "House Republican leaders filed a government funding bill late Wednesday that bows to the wishes of conservative lawmakers but is widely seen as unpassable in the Senate because of Democratic opposition.The move sets up a showdown between the two chambers and the two parties ahead of a deadline of midnight Dec. 22 to avoid a partial government shutdown.

The House bill provides funding for the military through the end of the fiscal year on Sept. 30, 2018, and temporarily extends all other government funding until Jan. 19. The legislation also includes a GOP-written reauthorization of the Children’s Health Insurance Program and federal funding for community health centers. What it does not include are any of the top priorities for Democrats, including provisions dealing with the immigration status of “dreamers,” funding to subsidize premiums in the insurance markets created under the Affordable Care Act, more money to combat the opioid addiction crisis or any increase in spending levels for nondefense agencies."

Ryan, short-timer? Politico's Tim Alberta and Rachael Bade: "Reveling in the afterglow [of the November tax vote in the House], Ryan remarked to several colleagues how this day had proven they could accomplish difficult things—and that next year, they should set their sights on an even tougher challenge: entitlement reform. The speaker has since gone public with this aspiration, suggesting that 2018 should be the year Washington finally tackles what he sees as the systemic problems with Social Security, Medicare and Medicaid. Tinkering with the social safety net is a bold undertaking, particularly in an election year. But Ryan has good reason for throwing caution to the wind: His time in Congress is running short.

Despite several landmark legislative wins this year, and a better-than-expected relationship with President Donald Trump, Ryan has made it known to some of his closest confidants that this will be his final term as speaker. He consults a small crew of family, friends and staff for career advice, and is always cautious not to telegraph his political maneuvers. But the expectation of his impending departure has escaped the hushed confines of Ryan’s inner circle and permeated the upper-most echelons of the GOP. In recent interviews with three dozen people who know the speaker—fellow lawmakers, congressional and administration aides, conservative intellectuals and Republican lobbyists—not a single person believed Ryan will stay in Congress past 2018."

For what its worth, Ryan laughed off the story, per the Washington Examiner.

TRUMP TRACKER

Dead trees. The Post's Phillip Bump: "In an attempt to make his regulation-slashing interesting, Trump on Thursday participated in an event meant to visualize the growth of regulations in the American government and, further, his efforts to eliminate that “red tape.” The result was Trump standing next to one small and one giant pile of paper — a giant pile which our obsessive analysis reveals as almost certainly too giant to accurately make Trump’s point. There’s one bit of context worth pointing out: America is much bigger now than it was in 1960. That year, the country’s GDP was about $3 trillion in 2009 dollars, compared to about $17 trillion now. The population was about 179 million, compared with 332 million. That sort of growth might be expected to similarly see some growth in regulation."

RUSSIA WATCH: 

Operation Mueller Shield. The Post's Karoun Demirjian: "Senate Republicans are scrambling to shield special counsel Robert S. Mueller III from mounting GOP fury about new evidence that members of his team were biased against President Trump, as factions of the party charge that his entire investigation is tainted. The stakes are high: If the GOP moves to hold Mueller accountable for his former subordinates’ actions, it could enable Trump to order his ouster and cripple the inquiry he has run examining Russian interference in the 2016 presidential election and whether the president’s campaign coordinated with the Kremlin to tilt its outcome in his favor.

But as House Republicans demand that the special counsel face a reckoning over the newly released details of anti-Trump, pro-Hillary Clinton text messages sent between FBI officials Peter Strzok and Lisa Page, Senate Republicans are fighting to preserve Mueller’s ability to steer the Russia investigation to its conclusion. 'There’s all kinds of reasons to believe there’s political interference, and we ought to get to the bottom of it,' Senate Judiciary Committee Chairman Charles E. Grassley (R-Iowa) said, adding: 'I’ve got confidence in Mueller, as far as what he’s doing in the Trump-Russia investigation, and I don’t have any reason to believe otherwise.'"

Music promoter dangled Putin meeting. The Post's Roz Helderman and Tom Hamburger scoop: "About a month after Donald Trump launched his presidential bid, a British music promoter suggested his Russian pop-star client could arrange for the new candidate to meet with Russian President Vladi­mir Putin, according to an email obtained by The Washington Post. The July 2015 offer by publicist Rob Goldstone came about a year before he set up a meeting for Trump’s eldest son with a Russian lawyer who he said had incriminating information about Democratic candidate Hillary Clinton.

Goldstone’s overture came as he unsuccessfully urged Trump to travel to Moscow later that year to attend a birthday celebration for his client’s father. 'Maybe he would welcome a meeting with President Putin,' Goldstone wrote in a July 24, 2015, email to Trump’s longtime personal assistant, Rhona Graff. There is no indication Trump or his assistant followed up on Goldstone’s offer. The invitation is the latest example to emerge of efforts to broker a meeting between the Kremlin and Trump Tower during the campaign."

Trump, Putin talk by phone. Politico's Henry Jackson: "Trump spoke by phone with President Vladimir Putin of Russia on Thursday, talking about how they can work together to resolve the situation involving North Korea’s nuclear program, the White House said. Trump also used the call to thank Putin for “acknowledging America’s strong economic performance in his annual press conference,” according to a White House read out of the call. The leaders talked for about 10 minutes, and national security adviser H.R. McMaster didn’t participate in the call, a White House official said. The call offered fresh evidence that Trump will continue to work with Putin, despite potential political liabilities."

Deutsche Bank flagged Manafort transactions. WSJ's Jenny Strasburg: "Deutsche Bank AG earlier this year flagged around $30 million in potentially suspicious transactions as part of an internal investigation into its role as a conduit for money involving Paul Manafort or people and entities connected to him, according to a person briefed on the matter. The findings, which were discussed inside Deutsche Bank in late spring and early summer, primarily concerned cash flows tied to Mr. Manafort, who for about five months was President Donald Trump’s 2016 campaign chairman, and Mr. Manafort’s former business partner Richard Gates III, the person said...

The discussions at the bank coincided roughly with the appointment in May of Robert Mueller as U.S. special counsel to probe Russia’s meddling in the 2016 U.S. presidential election, according to people familiar with the matter. As scrutiny around several of Mr. Trump’s former advisers was heating up, Deutsche Bank executives were assessing the bank’s role in handling hundreds of transactions that might have involved people in Mr. Trump’s orbit, have originated in Russia, or both, said some of the people familiar with the matter."

POCKET CHANGE
The world’s biggest maker of generic drugs has been squeezed by increased competition and lower prices and is saddled with a large amount of debt.
NYT
Disney has finally chased down Fox, and the Street is declaring it a victory for both sides.
Bloomberg
Introducing seven stock market indexes measuring Trump’s impact on the stock market.
NYT
THE REGULATORS

Net neutered. The Post's Brian Fung: "Federal regulators voted Thursday to allow Internet providers to speed up service for websites they favor — and block or slow down others — in a decision repealing landmark Obama-era regulations overseeing broadband companies such as AT&T and Verizon. The move by the Federal Communications Commission to deregulate the telecom and cable industries was a prominent example of the policy shifts taking place in Washington under President Trump and a major setback for consumer groups, tech companies and Democrats who had lobbied heavily against the decision.

The 3-2 vote, which was along party lines, enabled the FCC’s Republican chairman, Ajit Pai, to follow through on his promise to repeal the government’s 2015 net neutrality rules, which required Internet providers to treat all websites, large and small, equally. The agency also rejected some of its own authority over the broadband industry in a bid to stymie future FCC officials who might seek to reverse the Republican-led ruling."

What it means for you, via the AP: "In the short term, the answer is simple: Not much. But over time, your ability to watch what you want to watch online and to use the apps that you prefer could start to change. Your mobile carrier, for instance, might start offering you terrific deals for signing up to its own video service, just as your YouTube app starts suffering unexpected connection errors. Or you could wake one day to learn that your broadband provider is having a tiff with Amazon, and has slowed down its shopping site in order to extract business concessions."

See how Netflix, Amazon, Facebook, Microsoft, and the telecoms reacted, here

Regulators eye bitcoin. Reuters's Pete Schroeder: "A U.S. regulatory panel on Thursday called for watchdogs to closely monitor risks created by financial innovation, warning that 'fintech' and virtual currencies such as bitcoin threaten to disrupt the traditional financial services industry.The comments from the Financial Stability Oversight Council (FSOC), which monitors potential risks to the financial system, offers a further sign that regulators are looking to bring the likes of bitcoin, online lenders, and distributed ledger technology under their purview. Concerns over a bubble in the global bitcoin market reached fever pitch this week after the virtual currency raced to another record high of $19,500 on Tuesday. 'New applications of technology...can be disruptive and can create risks and vulnerabilities that are difficult to anticipate,' the FSOC wrote in its annual report."

Wyden nudges Treasury. CNN Money's Jose Pagliery: "A U.S. senator is asking the Treasury Department to explain its efforts to ensure that bitcoin is not being used by criminals and terrorists to evade bank regulations. Senator Ron Wyden sent his questions in a letter to the Treasury Department's Financial Crimes Enforcement Network on Thursday. FinCEN, as the unit is called, tracks money laundering and uses sensitive U.S. government intelligence to spy on illicit banking worldwide. CNN received an early copy of the letter. In it the senator says he worries the computerized currency 'could be laundered through trades that occur outside the regulatory framework that applies to current financial transactions.' Wyden is asking asked FinCEN to explain its "authority and capabilities to identify the... owners of virtual currencies," as well as its ability to 'trace and seize' this digital money."

Fight over rules on money funds. WSJ's Andrew Ackerman: "A fight is brewing over whether to reverse rules meant to prevent another crisis-triggered exodus from a corner of the mutual-fund industry, the latest front in a broad push to undo postcrisis regulations. A pending House bill would overturn a 2014 Securities and Exchange Commission requirement that a subsection of money-market mutual funds—those whose shares are held by institutions and that purchase corporate debt or municipal bonds—float in value like other mutual funds. That would allow the funds to return to offering investments with stable, $1 share prices.

Money-market funds are investments designed to be a safe place to park cash temporarily with little risk of taking a loss. For years, they generally offered investors $1 back for each $1 they invested, an expectation that triggered a stampede out of some funds catering to large institutions during the 2008 financial crisis when it became clear investors might get less than a dollar back, called 'breaking the buck.'"

The National Labor Relations Board on Thursday overturned a key Obama-era precedent that had given workers significant leverage in challenging companies like fast-food and hotel chains over labor practices.
NYT
Business
A Treasury Department watchdog has identified $3 million in questionable expenses by housing agencies in the District and 18 states that used federal funds to assist homeowners in danger of losing their properties.
Amy Dobson
OPINIONS
PostEverything
This is a way to meet the challenges faced by our fellow citizens in Puerto Rico. Is there a will?
Jared Bernstein
Opinions
Legislators should bring certainty and security to the lives of children of undocumented immigrants.
Tim Cook and Charles Koch
CHART TOPPER

The math on passing the GOP tax bill keeps getting more complex, The Post's Philip Bump writes. Here are some various situations:

DAYBOOK

Today

  • Bloomberg Government holds a webinar on the status of fiscal 2018 appropriations.

Coming Up

  • The Senate Banking, Housing and Urban Affairs Committee holds an executive session to vote on various Export-Import Bank nominations on Dec. 19.
THE FUNNIES

"Republicans have many new ways to let them eat cake," writes The Post's Tom Toles:

BULL SESSION

The Fact Checker's list of the biggest Pinocchios of 2017

Trump says he 'blew our target out of the water’ on deregulation:

Sen. Sheldon Whitehouse (D-R.I.) shares a clip of one of President Trump's judicial nominees struggling to answer a question from Sen. John Kennedy (R-La.):

Tom Hanks on portraying former Washington Post Editor: ‘I was lucky' to meet Ben Bradlee: