What happens to a dream of a middle-class tax cut deferred? For the Trump administration, evidently, it dries up like a raisin in the sun after the midterms.
President Trump’s late-October promise to push a 10 percent cut for middle-income earners gave up the ghost on Tuesday when Treasury Secretary Steven Mnuchin acknowledged the administration has no plan to pursue it.
“I’m not going to comment on whether it is a real thing or not a real thing,” Mnuchin told Bloomberg News in a roundtable interview. “I’m saying for the moment we have other things we’re focused on.”
Trump appeared to catch his own party off guard on Oct. 20 when he announced during a Nevada campaign swing that the GOP was planning to implement a “very major tax cut” for the middle class before the election. A few days later, he said that Republicans would unveil a nonbinding resolution pledging action on the matter sometime after the midterms. And Mnuchin at the time indicated details would be forthcoming imminently.
They weren’t. Republicans never specified who would benefit, how they would cover its likely multitrillion-dollar price tag, if at all, or how tax writers would block businesses filing on the individual side of the code from taking advantage.
Indeed, the gambit was a transparently political ploy aimed at resuscitating the GOP’s moribund plan to run on the benefits of last year’s tax cut.
That measure, which concentrated its benefits among the richest taxpayers, proved broadly unpopular with voters, and Republican candidates mostly shunned it in their campaigns. Trump floated the middle-class cut proposal amid a pre-midterm torrent of misleading and false claims — including that immigrant riots were breaking out across California, that Democrats wanted to give cars to undocumented immigrants and that Middle Easterners had joined a caravan of Central Americans seeking asylum in Mexico and the United States.
Mnuchin, in the Bloomberg interview, said he wants to focus on working with Congress on some “some minor technical corrections” to the 2017 law.
But empowered House Democrats are more interested in using their new authority to attack the measure. CNBC’s Ylan Mui reports the incoming majority is zeroing in on key aspects of the law and probably will direct attention to public companies such as AT&T and General Motors that laid off workers even as they reaped a windfall. Democrats are also considering rolling back changes to the individual side of the code, such as its cap on state and local tax deductions.
Rep. Richard Neal (D-Mass.), who will chair the House Ways and Means Committee next year, is planning hearings on the law. And Mui reports conservative groups that backed it are gearing up to play defense, with Americans for Tax Reform preparing a campaign for early next year called "Defend 21," referring to the lowest rate in the overhaul for corporations.
House Democrats also plan to shine a light on one decidedly non-middle-class taxpayer, namely Trump himself. Neal is laying the groundwork to obtain the president’s tax returns, a bid Trump is expected to fight, suggesting it could land in the courts.
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— Fed set for a "dovish hike." WSJ's Nick Timiraos: "The Federal Reserve is preparing to raise short-term interest rates by a quarter percentage point after its two-day policy meeting concludes Wednesday, which would be the ninth such move since late 2015. Recent market turmoil has raised some doubts about whether the Fed would follow through on a rate increase, but economic data has been solid enough to justify a move that officials have hinted at for weeks. Rather, the turbulence raises the prospect that revised projections of future rate moves and the outlook for inflation and growth suggest a slower pace of rate increases in 2019...
"Look for Mr. Powell to address worries about a turbulent stock market by pointing to relatively solid economic statistics, few of which are flashing yellow lights... The big question for markets and the Fed right now is how much the recent selloff is due to economic reasons. If the current market scare is overdone, Fed officials don’t want to overreact."
— Stocks steady ahead of Fed decision. Bloomberg's Vildana Hajric and Sarah Ponczek: “U.S. stocks held near a 14-month low on a volatile day that saw the benchmark gauge swing almost 2 percent from trough to peak. Oil tumbled. The S&P 500 Index ended virtually unchanged as investors braced for Wednesday’s Federal Reserve policy decision. FedEx slumped almost 5 percent as of 4:30 p.m. in New York, after a lower profit forecast stoked doubts about the strength of global trade."
Greenspan has another warning for investors. Liz Moyer at CNBC: “Alan Greenspan, the former Federal Reserve chief who called out the tech-fueled rally of the mid-1990s as 'irrational exuberance,' is now giving investors a new warning . . . Greenspan said it was unlikely that the current market would stabilize and then take another big leg higher. 'It would be very surprising to see it sort of stabilize here, and then take off again,' Greenspan said. Markets could still go up, but 'at the end of that run, run for cover.' Greenspan told CNN the bull market is over, pointing to how stocks have fumbled in recent days."
Mnuchin blames the Volcker Rule and high-speed trading. Bloomberg: "Mnuchin blamed volatility in equity markets partly on high-speed trading and the effect of the Volcker Rule, adding that he planned to conduct an inter-agency review of market structure. “Over a longer period of time the market reflects various different economic components but a normal trading day now is a 500-point range. A lot of that has to do with market structure, and that’s something we’re going to take a look at,” Mnuchin said in a roundtable interview Tuesday... Mnuchin declined to comment on other possible reasons for stock turmoil, saying that he didn’t want to make remarks on the economy or broader markets during the Federal Reserve’s policy meeting Tuesday and Wednesday in Washington."
— Oil crashes. NYT's Clifford Krauss: "Oil prices tumbled more than 7 percent on Tuesday, falling to their lowest levels in more than a year, after investors learned that Russia and the United States were pumping a lot more oil than had been expected. The American benchmark fell below $47 a barrel for the first time in 15 months, capping a slide that has brought prices down by more than a third since early October. Bountiful, cheap oil supplies are an unanticipated holiday bonus for American consumers. The average price of regular gasoline has fallen to $2.37 a gallon, according to the AAA motor club, 26 cents lower than a month ago. For most of the year gasoline prices were rising, but the recent decline in oil prices has driven gasoline down by about a nickel a gallon compared with a year ago."
— Both sides gird for a 'hard Brexit.' AP's Jill Lawless and Danica Kirka: “Britain’s government ramped up preparations Tuesday for the possibility that the country could leave the European Union in 101 days without a divorce deal — putting soldiers on standby and warning thousands of businesses and millions of households to get ready for the worst. With the country’s departure set for March 29, it remains unclear whether British lawmakers will approve the divorce agreement that Prime Minister Theresa May’s Conservative government has negotiated with the EU.
“The alternative, a 'no-deal' Brexit, risks plunging the British economy into recession and touching off chaos at the borders. . . . Members of May’s Cabinet agreed to activate all the government’s no-deal plans and advised the public to prepare for disruptions. Ministers insisted the steps were sensible.”
Jay Clayton seeks assurances. FT's Kadhim Shubber: "Jay Clayton, the head of the US Securities and Exchange Commission, has called on the UK and EU to take action to ensure a no-deal Brexit would not cause havoc to global markets. The SEC chair told the Financial Times he would like to see firm commitments to ensure that key market functions can continue without disruption even if the UK crashed out of the EU without securing a withdrawal agreement... ‘Some period of adjustment would be good,’ he said in a phone interview…The comments by Mr Clayton are the latest in a series of warnings issued by US regulators."
— China scrambles to salvage trade truce. The Economist: "China is determined to bring the trade war to an end. The view, once commonly heard in Beijing, that it could outlast America in a grinding tariff battle has given way to the realisation that, as the country with the huge trade surplus, China has more to lose upfront. Optimism that the government could fight on two fronts—taming its heavy debt burden at the same time as taking on America—has also cracked. The economic outlook has darkened. Analysts are debating whether the government will, once again, deploy a big fiscal stimulus to prop up growth.
"So the swagger from a year ago is being replaced by more conciliatory messages. At a recent forum Ma Jiantang, vice-president of a think-tank under the cabinet, emphasised the deep ties between China’s and America’s economies. 'We are inseparable,' he said... China’s peace offering is starting to come together. The government has made or hinted at a series of concessions over the past two weeks.
U.S., China talk ahead of January negotiations. Bloomberg: "China and the U.S. held vice-ministerial level talks on Wednesday to discuss the ongoing trade dispute as they move closer to meeting in January. The two sides spoke by phone according to China’s Ministry of Commerce, and have held several rounds of talks in recent weeks, [Mnuchin] told Bloomberg on Tuesday in Washington. They plan to hold a formal, face-to-face meeting in January to negotiate a broader truce in their trade wars but are unlikely to meet in person before then, Mnuchin said."
Inside Huawei's company culture. Raymond Zhong at the New York Times: “Earthquakes, terrorist attacks and low oxygen levels on Mount Everest could not hold them back. As the Chinese tech giant Huawei expanded around the globe, supplying equipment to bring mobile phone and data service to the planet’s farthest reaches, its employees were urged on by a culture that celebrated daring feats in pursuit of new business. They worked grueling hours. They were encouraged to bend certain company rules, so long as doing so enriched the company and not employees personally . . . Employees at the company and people who have studied it have a name for its hard-charging corporate spirit: 'wolf culture.'
“Now, the company’s aggressive ways have been cast in a new light. The United States has accused Meng Wanzhou, a top Huawei executive and daughter of its founder, of committing bank fraud to help the company’s business in Iran. It is not clear precisely how Huawei’s culture shaped its dealings in Iran. But an intense will to get ahead, which helped propel it to the head of the global market for telecom network equipment, seems to have informed employees’ actions in previous cases that put the company under scrutiny.”
- "Michael Flynn’s sentencing delayed after judge tells the ex-Trump adviser he might not avoid prison time." The Post's Spencer S. Hsu, Matt Zapotosky and Carol D. Leonnig.
“Trump signed letter of intent for Trump Tower Moscow project despite Giuliani insisting he didn’t.” CNN’s Kate Sullivan.
“Mueller appears victorious in mystery subpoena dispute.” Politico’s Darren Samuelsohn and Josh Gerstein.
- "Trump agrees to shut down his charity amid allegations that he used it for personal and political benefit." The Post's David A. Fahrenthold.
— Under pressure, Facebook vows improvements. The Post's Hamza Shaban and Taylor Telford: “Facebook and Twitter on Tuesday were under attack from an array of critics, including the president and civil rights leaders, triggered by revelations from two reports on the long Russian social media campaign to interfere with the 2016 presidential election. The Russians’ segmented messaging and disinformation targeted African Americans in particular, according to the reports for the Senate Intelligence Committee released Monday, prompting the NAACP to urge Americans to abandon the social network. Facebook Chief Operating Officer Sheryl Sandberg said the company needs to do more to advance civil rights . . .
“The reports for the Senate dovetailed with other strains of criticism — including privacy breaches, human rights abuses and a deflection of corporate responsibility — in what experts said marks a critical point in the public backlash against the global social networks."
And it's got a massive new headache. The company gave other tech firms much more access to users' personal data than it has acknowledged, according to a blockbuster NYT report: "The exchange was intended to benefit everyone. Pushing for explosive growth, Facebook got more users, lifting its advertising revenue. Partner companies acquired features to make their products more attractive. Facebook users connected with friends across different devices and websites. But Facebook also assumed extraordinary power over the personal information of its 2.2 billion users — control it has wielded with little transparency or outside oversight.
"Facebook allowed Microsoft’s Bing search engine to see the names of virtually all Facebook users’ friends without consent, the records show, and gave Netflix and Spotify the ability to read Facebook users’ private messages. The social network permitted Amazon to obtain users’ names and contact information through their friends, and it let Yahoo view streams of friends’ posts as recently as this summer, despite public statements that it had stopped that type of sharing years earlier."
From the NYT's Binyamin Appelbaum:
The list of companies with which Facebook shared your private information includes China's Huawei and Russia's Yandex -- which is to say, companies regarded as partners of Chinese and Russian intelligence.https://t.co/PbFP9D4vTj— Binyamin Appelbaum (@BCAppelbaum) December 19, 2018
From Sen. Brian Schatz (D-Hawaii):
The silence from Facebook is deafening. The New York Times has a story that says that PRIVATE MESSAGES were accessible to a bank in Canada and Netflix? I’m trying to be measured and precise with my words here. But I’m a customer as well as a Senator and I’m angry in both roles.— Brian Schatz (@brianschatz) December 19, 2018
— Space X valued at $30 billion. WSJ's Rolfe Winkler, Andy Pasztor and Rob Copeland: “Elon Musk’s rocket company, Space Exploration Technologies Corp., is set to raise $500 million at a $30.5 billion valuation, in a bid to help get its internet-service business off the ground, according to people familiar with the fundraising. The Hawthorne, Calif., company, known as SpaceX, is raising the capital from existing shareholders and new investor Baillie Gifford & Co., one of the people said. The Scottish money-management firm is one of the largest investors in another Musk-led company, Tesla Inc., with about a 7.6% stake in the electric-car maker, according to S&P Global Market Intelligence. SpaceX and the investors have agreed on the financing terms, but the money hasn’t been sent to the company yet, this person said. SpaceX could announce the deal by year-end.”
Musk digging for an antidote to traffic. AP's Amanda Lee Myers: “Musk unveiled his underground transportation tunnel on Tuesday, allowing reporters and invited guests to take some of the first rides in the revolutionary albeit bumpy subterranean tube — the tech entrepreneur’s answer to what he calls 'soul-destroying traffic.' Guests boarded Musk’s Tesla Model S and rode along Los Angeles-area surface streets about a mile away to what’s known as O’Leary Station. The station, smack dab in the middle of a residential neighborhood — 'basically in someone’s backyard,' Musk says — consists of a wall-less elevator that slowly took the car down a wide shaft, roughly 30 feet below the surface... Musk described his first ride as 'epic.'"
— Pfizer, Glaxo Smith Kline to merge healthcare divisions. AP: "Drugmakers GlaxoSmithKline and Pfizer are merging their healthcare divisions, creating a business with combined sales of $12.7 billion. British-based Glaxo will own 68 percent of the joint venture, while U.S.-based Pfizer will own the remaining 32 percent stake. The joint venture will bring together Glaxo’s brands such as Sensodyne, Voltaren and Panadol with Pfizer’s Advil and Centrum. Shareholders have long pressured Glaxo to break itself in two companies — with one focused on pharmaceuticals and vaccines, and the other on consumer healthcare. Glaxo aims to do this within three years."
— Trump folds on border wall, but budget impasse persists. The Post's Erica Werner, Damian Paletta and Seung Min Kim: "Trump on Tuesday abandoned months of strident demands for Congress to give him $5 billion for his border wall, bowing to political reality as Republicans scrambled to avoid shutting down large portions of the government this weekend.
"It was a stunning turnaround from one week ago, when Trump told Democratic congressional leaders during a bizarre on-camera sparring match that he’d be 'proud' to shut down the government to get his wall money. Instead, White House press secretary Sarah Sanders said Tuesday, Trump does not want a shutdown and will identify 'other ways' to fund a wall along the U.S.-Mexico border.
"But the concession by the president, which came after lawmakers from both parties argued that his $5 billion wall plan wouldn’t get through Congress, did not break the impasse that’s overtaken Capitol Hill in the final days of unified GOP control of Washington. Democrats rejected a Republican spending offer made shortly after Trump’s retreat on the wall, and Congress appeared headed toward the lowest-common-denominator solution: a short-term funding extension that would keep the government open for a period of weeks and then hand Democrats the responsibility of passing a more lasting fix once they retake the House majority in January."
- The Center for Strategic and International Studies hosts "Innovation, Partnership, and Self-Reliance: Health Policy Lessons from India’s Bihar State" in Washington on Wednesday.
- Brookings hosts "From Korea to the Congo: Nehru’s India and UN Peacekeeping (1945-1965)" in New Delhi on Wednesday.
- The Senate Committee on the Judiciary holds "hearings to examine a comparative look at competition law approaches to monopoly and abuse of dominance in the United States and European Union" in Washington on Wednesday.
— The New Yorker's Will McPhail:
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