A RED MARKUP: The test has begun for the House Ways and Means Committee (W+M); can Republicans stay unified around this tax bill while they debate major provisions? Once Chairman Kevin Brady starts modifying the bill, he opens the door to vested interests everywhere (adoption credit, energy credits, SALT). Still, some things will change before it is voted on Thursday. Brady has already introduced an amendment on carried interest after Treasury Secretary Mnuchin vowed to fix it and despite active conversations about adding the provision, W+M is leaving repealing the Obamacare mandate to the Senate. They still have three more days of debate and opposition to each provision is only strengthening.
CLASS WARFARE: A real issue for Speaker Paul Ryan and W+M Chair Kevin Brady is trying to balance fairness in the bill. Any provision that looks like it disproportionately favors the rich will get bad press. President Trump and his Administration have made the middle class a priority. Treasury Secretary Steve Mnuchin promised that the wealthy would get no benefits. Yesterday, the House Congressional scorekeeper said that is not the case for the House's bill. The bill provides ups and downs in federal collections that result in a net benefit for everyone including the wealthy. This is mostly going to be a PR (see WH Press Secretary explain here) game, not a math game. Few provisions will change, though some temporary ones which lead to increased taxes for the middle class down the road, may be made permanent.
A LEAGUE OF THEIR OWN: The Senate Finance Committee is working on their own bill at a feverous pace to keep up with the House and says it will be released this Thursday or Friday. The Senate version is sure to be different from the House in order to adhere to their strict rules. Several Senators have already come out against the House bill and are looking for major modifications. Senators Marco Rubio (R-FL) and Mike Lee (R-UT) want to expand the child tax credit significantly. Senators James Lankford (R-OK) and Bob Corker (R-TN) are worried about debt. Senator Tom Cotton (R-AR) is insistent on the Obamacare mandate repeal. So what does it take to get them all on board? We think it will start with a higher bottom bracket rate, an estate tax repeal phase-in, stricter pass-through guardrails, and other provisions to stop the wealthy from taking advantage of the system.
MADE IN CHINA 2025: President Trump has been gunning for China’s trade practices since the day he took office and this visit is no different. Trump and Trade Secretary Robert Lighthizer are adamant that they can negotiate better deals for both countries when they work individually with them, directly referring to the Trans-Pacific Partnership a massive multilateral Asian trade deal that Trump blocked. The two blame unfair U.S. trade policies for economic deficits and view China’s goal to be the lead producer of all cutting-edge technology as a threat. They are working against “Made in China 2025” and are focused on open trade meaning fair trade.
TRADING PLACES: President Trump asked Japanese officials and manufacturers to increase auto production in the U.S.. While Japan produces millions of cars and buys billions of dollars worth of U.S. auto parts, Trump wants more. Domestic production and national security have been talking points of Trump’s since long before the election - and they are not stopping now. Trump, who has a close working relationship with Japanese Prime Minister Shinzo Abe, alluded to more in-depth talks later about the auto industry – eyeing the $70 billion more we import in Japanese cars than export in American ones.
EVENT REPLAY | TAX REFORM BLACK BOOK: IS IT REAL THIS TIME?: Macro Policy Analyst JT Taylor and Health Policy Analyst Emily Evans held an in-depth presentation on tax reform. They provided a comprehensive overview of House Republicans' tax reform package including significant provisions, political obstacles, the timeline to passage, and the probability of success. If you missed it, get the replay details here.
EVENT: CONFERENCE CALL ON US SOLAR TARIFFS CASE WITH FMR CEO OF SOLAR ENERGY ASSOCIATION: Our Senior Energy Analyst Joe McMonigle writes Trump wanted trade tariffs. The ITC just recommended tariffs on Chinese solar panels as Trump visits China Wednesday. Read the full piece here.
WAR PROBABILITY IN KOREA ASSESSED AS 7 ON A 10 SCALE: Our Senior Defense Analyst Emo Gardner writes that military officials see a very near term "fork in the road" in the potential path to war in Korea. Read the full piece here.
TRUMP REQUESTS $5.9B MORE EMERGENCY SPENDING. BA, LMT, RTN, NOC TO GAIN: Our Senior Defense Analyst Emo Gardner writes that POTUS has requested $4.7B in emergency spending for missile defense and ship repair and $1.2B for new AFG strategy. Read the full piece here.
