with Brent D. Griffiths


President Trump is preparing a new tax cut package. Don’t expect it to define 2020.

The Trump administration and Republican lawmakers are in the early stages of writing a new set of proposed tax cuts, hoping to bolster the president’s economic message ahead of the 2020 presidential campaign, as I reported yesterday with my colleagues Erica Werner and Josh Dawsey.

But it is far from clear whether “tax cut 2.0” will play a meaningful role in the 2020 election, as Republicans are still struggling to convince the public of the merits of the GOP's tax cut 1.0.

Republicans had high hopes for their first tax package when it was approved narrowly by Congress and signed into law by Trump at the end of 2017. 

The law, which had been discussed for years by conservative budget wonks such as then-House Speaker Paul Ryan (R-Wis.), represented the biggest overhaul of the nation’s tax code in several decades. It slashed taxes for corporations from 35 percent to 21 percent; transformed the nation’s international tax system; and expanded a number of tax deductions and credits, among other changes. 

But the party's push for a second round of tax cuts is only the latest sign their first one may have not yielded the political windfall Republicans hoped. GOP congressional candidates in the 2018 midterm elections largely chose not to highlight the $1.5 trillion tax law they approved at the end of 2017, instead focusing on issues such as immigration and crime. 

The Wesleyan Media Project found health care, jobs and immigration all came up in more pro-GOP television advertisements than the tax law. And there’s evidence the tax issue does not do that much to jazz up the GOP base: Polling ahead of the midterms by Reuters found Republican voters regarded immigration — rather than taxes or even the economy more generally — as the “most important” issue. 

“Tax cut messaging was not a big factor for Republicans in 2018,” said Kyle Kondik, a political analyst with the University of Virginia’s Center for Politics. “And I doubt it will be in 2020.”

Republicans still argue their plan helped encourage business spending and would have done more to juice economic growth without the U.S.-China trade war. But at least so far, the legislation has largely failed to emerge as a chief selling point of its Republican authors. 

Larry Kudlow, the president’s top economist and a former television commentator, probably is aiming to change that with the new tax cut plan. Kudlow has been tapped to lead the effort surrounding the new set of tax proposals, but the details remain unclear. 

What could be in the new package? Rep. Kevin Brady (R-Tex.), the top Republican on the tax-writing House Ways and Means Committee, said the key will be to make permanent some of the provisions in the 2017 law that are set to expire, such as the increase in child tax credits.

“We are having those discussions with the White House, we’ll be engaging with them further, and we’ll have discussions with Republicans, too, in the House about what we think the most pro-growth elements can be the most pro-innovation,” Brady said.

Republicans could also try pushing a plan to lower taxes on capital gains — an idea favored by Kudlow but not included in the 2017 law — or push the corporate rate even lower, said Michael Linden, a tax expert at the Roosevelt Institute, a left-leaning think tank critical of the GOP law. The White House has also floated a payroll tax cut, although that effort was later ruled out.

“They’re a one-trick pony, so they keep coming back to the same thing: ‘I guess we didn’t get credit for the first bad tax bill, so we’re going to try another,’" Linden said.

CORRECTION: Yesterday's note quoted Federal Reseve chairman Jerome Powell as saying the Fed "does not see any evidence that business investment will weaken further.” In fact, he said the central bank doesn't "see any evidence of that" in response to a question about whether the recovery will weaken further. 


Stocks fall as trade worries dampen banner week: “October salvaged its reputation as one of the most troubling months for investors. All three major U.S. stock indexes slid on Thursday, the last day of the month. The declines derailed a week of record-breaking gains powered by unexpectedly strong earnings and yet another interest rate cut, courtesy of the Federal Reserve,” my colleagues Taylor Telford and Thomas Heath report.

Where everything closed: 

  • “The Dow Jones industrial average … closed down 140 points, or 0.52 percent, eking out a 0.48 percent October gain. The Dow is up 16 percent this year. 
  • The Standard & Poor’s 500 index, which clocked new all-time highs earlier in the week, shed nine points, or 0.30 percent … The broad market finished October up 2 percent, according to Howard Silverblatt of S&P Dow Jones Indices.
  •  The S&P is up more than 21 percent on the year.
  •  The tech-laden Nasdaq Composite barely moved, with a 0.14 percent decline. The Nasdaq was up a respectable 3.66 percent on the month.”

But earnings are erasing fears -- for now: “Investors are breathing sighs of relief that corporate profits haven’t waned as much as feared, giving new life to a stock-market rally that had largely stalled since the summer,” the WSJ’s Gunjan Banerji reports.

“Although earnings are on track to decline for the third consecutive quarter, about 75% of the 342 companies in the S&P 500 that have posted results through Thursday morning have beaten expectations, according to FactSet. That is slightly above the five-year average of 72%. Dozens of companies report through the end of the week.”

  • Who’s leading the charge: “Companies including Intel Corp., Johnson & Johnson and United Technologies Corp. raised their outlooks for the year after posting strong financial results. Intel logged record quarterly revenue, easing concerns about softening demand for its products. Johnson & Johnson said sales of such consumer products as Band-Aid bandages and Tylenol grew, while United Technologies said it expects sales to keep rising.”

Don’t just look at the new job numbers today: “An update on manufacturing activity Friday could provide a much more useful picture of the economy than the October employment report, which is expected to be unusually weak due to the General Motors strike,” CNBC’s Patti Domm reports.

“ISM manufacturing data is expected to show a contraction in activity in October, for a third month in a row. Manufacturing has been at the heart of the economy’s sluggishness, with a drop in business investment a big reason for the third quarter’s sluggish 1.9% growth pace.”

  • Jobs estimate: 85,000. "Economists expect Friday’s U.S. payrolls report will show job growth slumped to a five-month low in October, though it may be trickier than usual to sort out the true underlying trend," Bloomberg's Jeff Kearns writes. "Nonfarm employment increased by 85,000 as private payrolls grew by 80,000, according to the median projection in Bloomberg’s survey. The report is also expected to show the unemployment rate ticked up from a half-century low, rising by a tenth of a percentage point to 3.6%, while annual wage gains accelerated by a tenth to 3%."



Pelosi says House is close to approving USMCA: “The House is on a ‘path to yes,’ House Speaker Nancy Pelosi said about ratifying the agreement, which was signed nearly a year ago, adding that her chamber’s inquiry into whether Trump should be impeached has ‘nothing to do’ with its work on the agreement,” Reuters’s Patricia Zengerle and Andrea Shalal report.

Trump: U.S., China look for new location to sign mini-trade agreement. WSJ's Andrew Restuccia: "Trump said China and the U.S. are in the process of selecting a new site to sign what he has called phase one of a broader trade agreement between the two countries. Mr. Trump had hoped to ink the deal during a November summit of nations from the Asia-Pacific Economic Cooperation group in Chile. But Chilean President Sebastian Piñera announced on Wednesday that the meeting had been canceled amid widening protests in the capital city of Santiago. 'The new location will be announced soon,' Mr. Trump wrote on Twitter on Thursday. 'President Xi and President Trump will do signing!'"

Xi shores up support. WSJ's Chun Han Wong and Philip Wen: "Chinese President Xi Jinping emerged from a Communist Party conclave with a resolute endorsement of his leadership, despite a slowing economy, a bruising trade war with the U.S. and unrest in Hong Kong. The party’s governing Central Committee also signaled a firmer stance on Hong Kong, calling for stronger safeguards for China’s national security in the city—a formulation that some experts say foreshadows new legal powers to squelch dissent against Beijing’s authority."

Meanwhile, the U.S. is struggling to catch up on 5G: “Chinese cellphone carriers will begin offering super-fast, next-generation 5G service on a commercial basis on Friday, a development that the ruling Communist Party says will unleash a technological revolution,” my colleagues Anna Fifield and Wang Yuan report.

“With this milestone and ambitious usage targets, Chinese authorities are sending a message to the United States that they will not allow the country’s industrial development — especially that of tech titan Huawei — to be stymied … To describe the difference in speeds, analysts say that 4G is like a skateboard while 5G is like a rocket ship, presenting a huge advantage for applications such as video gaming and streaming services. More than 10 million subscribers have responded to cut-rate deals and preregistered for the service, according to state media.”


Fiat Chrysler and Peugeot will be the world’s No. 4 automaker: “Fiat Chrysler and Peugeot owner PSA plan to join forces in a 50-50 share merger to create the world’s fourth-largest automaker, seeking scale to cope with costly new technologies and slowing global demand,” Reuters’s Giulio Piovaccari and Geert De Clercq report.

“The companies said … they aimed to reach a binding deal in the coming weeks to create a $50 billion group with listings in Paris, Milan and New York. PSA’s Carlos Tavares would be CEO and Fiat Chrysler’s (FCA) John Elkann chairman. It was less than five months ago that FCA abandoned merger talks with PSA’s French rival Renault, and the move comes as carmakers grapple with a downturn in their markets as well as hefty investments in electric and self-driving vehicles.”

Ex-WeWork CEO accused of gender discrimination: “Adam Neumann now faces a new legal challenge even after being ousted as CEO from WeWork,” CNBC’s Lauren Feiner and William Feuer report.

“Neumann’s former chief of staff is suing The We Company for allegedly sustaining a substantial gender pay gap, smoking marijuana in front of her and discriminating against her and other women for becoming pregnant and taking maternity leave, among other allegations. The complaint, which was filed Thursday, alleges that former WeWork employee Medina Bardhi received significantly lower pay than her male peers.

  • Wow: “Neumann also allegedly asked Bardhi about her plans to get married and become pregnant during her October 2013 interview, according to the lawsuit, and later referred to her maternity leave as a ‘vacation’ on multiple occasions.”

Ford plans to close Michigan plant after UAW deal: “Ford Motor Co plans to close an engine plant in Romeo, Michigan, as part of a tentative agreement with the United Auto Workers union for a new four-year contract, a source told Reuters,” Reuters’s David Shepardson reports.

“The 600 hourly workers at the plant will be offered jobs at a nearby transmission plant or buyouts, a source said. The UAW said Wednesday the Ford deal ‘secured over $6 billion in major product investments in American facilities, creating and retaining over 8,500 jobs for our communities.’ Ford will close the plant in the future under the UAW agreement. Ford and the UAW declined to comment.”


Billionaire Leon Cooperman steps up his fight with Elizabeth Warren. NYT's Kate Kelly and Shane Goldmacher: Escalating the war of words between Wall Street and Senator Elizabeth Warren, Leon Cooperman, a billionaire money manager, denounced her recent tweet encouraging him to “pitch in a bit more” because of his success in life, saying she sounded like 'a parent chiding an ungrateful child.'

“'However much it resonates with your base, your vilification of the rich is misguided,' wrote Mr. Cooperman, the billionaire manager of the Omega Family Office, in an Oct. 30 letter made public on Thursday. 'For you to suggest that capitalism is a dirty word and that these people, as a group, are ingrates who didn’t earn their riches … and now don’t pull their weight societally indicates that you either are grossly uninformed or are knowingly warping the facts.'"

Warren took to Twitter to respond: 


Treasury to ease rules against inversions. NYT's Jim Tankersley: "The Treasury Department said on Thursday that it was rolling back regulations issued under the Obama administration that were enacted to prevent American companies from moving their official residence abroad to reduce their tax bills. The regulations are no longer necessary, Trump administration officials say, because of changes made in the tax overhaul that [Trump] signed in 2017. The changes reduced taxes on American companies and included provisions meant to discourage these so-called inversions."





A divided House passed a resolution to formally proceed with its impeachment inquiry of President Trump, setting the stage for the first public hearings. (The Washington Post)