NOW, BACK TO THE BUDGET: The House is expected to vote this week on a conservative budget after months of delays waiting to corral support for the effort. Their bill outlines discretionary spending cuts while increasing defense spending and paves the way for tax reform with reconciliation language. The Senate just released their blueprint, with spending not decreasing until 2019 and with no specific guidance on how to do so. The Senate's bill includes reconciliation language for $1.5 trillion in tax cuts and $1 billion in savings from the Energy Committee. Even if both chambers pass bills early this month to get the ball rolling on tax reform, they will have to reconcile their differences in conference and vote on the agreed upon bill again. If all goes accordingly that will happen in mid-October - but, the first hurdle popped up yesterday when the House Democrats tried to make a deal agreeing to increases in military spending if given equal increases in non-defense spending.
TERRITORIAL BACKLASH: The fight over provisions in tax reform is just beginning and there will likely be a lot of compromises made over the details of which deductions to keep. The first major campaign to take root is against moving to a territorial tax system. The idea is to repatriate U.S. corporate profits by lowering the tax rate on money they have earned overseas when bringing it home. Progressive groups and labor unions fear this will be incentive to move jobs overseas, suppressing wage growth in the U.S. Companies such as Apple, Microsoft, and Johnson & Johnson keep over 90% of their cash abroad to avoid what is currently one of the highest corporate tax rates in the world.
OYEZ, OYEZ, OYEZ: The Supreme Court is back today, kicking off the session with the Wisconsin gerrymandering case. A Wisconsin court found that the district lines adopted by Republicans in 2011 “constitute an unconstitutional partisan gerrymander” because they intentionally “dilute the voting strength of Democratic voters statewide.” The ruling has made it all the way to the high court and is expected to set a precedent for dozens of other cases in other states. The court must decide if it is possible to identify partisan lines and if no amount of partisan bias is truly unconstitutional. The verdict has the potential for redistricting of gerrymandered counties around the country which will take a toll on elections. Stay tuned for our legal catalyst coverage with Hedgeye analyst Paul Glenchur.
SKIP THE CHIP?: Congress missed the expiration deadline for the Children's Health Insurance Program (CHIP), but states aren’t expected to run out of their federal allotment immediately. The House will markup a CHIP reauthorization bill tomorrow and the Senate has released a bipartisan bill, but hasn't scheduled a vote. CHIP insures nine million children who otherwise wouldn't be able to afford health care - it is unlikely they will let the states run out of funding before some (likely temporary) extension is put in place.
TRAGEDY STRUCK: For the second time this year, we are writing about a mass shooting. After the Congressional baseball practice tragedy - our title was a brief moment of unity. Today, it's not the same. This horrific incident in Las Vegas will be a catalyst for many political battles - and impacts span from tourism, security, hospitals, air travel too - yes, guns. Guns stocks rose early Monday morning on the news, but with the industry still one of the strongest lobbies in Washington and with a Republican-run government, it is unlikely they will take a policy hit.
GENERAL DAN CHRISTMAN - NORTH KOREA: "WHERE DOES THIS ALL END?": Our Senior Advisor General Dan Christman wrote that given the hyperbolic rhetoric from both sides of the current North Korean dust-up, it’s only sensible to ask this same question: “Where, and how, does the North Korean crisis end?” Read his full piece to find out here.
CALL REPLAY - DAVID HOPPE: NEXT STEPS FOR TAX REFORM: We held a call with David Hoppe, former chief of staff to Speaker of the House Paul Ryan and Macro Policy analyst JT Taylor as they covered the road ahead for the Big Six’s tax reform plan. Dive into the details on the replay here.
FCC SAYS WIRELESS MARKET IS COMPETITIVE (TMUS, S, VZ, T): Our Senior Telecom Analyst Paul Glenchur writes - the FCC sets a more open tone to potential wireless deals, but clearing a T-Mobile/Sprint deal is still a close call. Read the full piece here.
ETHANOL EXPORTS POLICY CHANGE SPELLS TROUBLE FOR HIGH RINS PRICES AND RELIEF FOR REFINERS: Our Senior Energy Analyst Joe McMonigle writes he is bearish for ethanol producers and blenders, but bullish for independent refiners who spend hundreds of millions to buy RINS for compliance. Read the full piece here.
EVENT: HEDGEYE GOES TO AUSA OCTOBER 10: Hedgeye’s Senior Defense Analyst Lt. Gen Emerson “Emo” Gardner is hosting a defense day in DC followed by a reception. Join Emo in a “booth walk” of the largest land warfare exposition in North America. View over 720 of the world’s most important military hardware suppliers escorted by the man former Secretary of Defense Bob Gates called, “my go-to guy on the budget.” By invitation only.
EVENT: DEPUTY ENERGY SECRETARY AND FORMER OPEC PRESIDENT HEADLINE OCTOBER 11 HEDGEYE ENERGY CONF (NYC): Our Senior Energy Analyst Joe McMonigle is hosting a Hedgeye energy conference in New York City. Topics include regulating pipelines, grid reliability and energy infrastructure in the Trump Administration - as well as an OPEC meeting preview. Get the event details here.
