BIG BLUE RIPPLES: Virginia gave Democrats their first major victory last night since President Trump was elected a year ago and turnout appears to have trumped what we saw in the 2016 presidential election - where urban/suburban Northern Virginia helped secure Hillary Clinton’s victory. Ed Gillespie was the first Republican to run on Trumpism without Trump, as polling for months indicated his low approval numbers would be a drag on the ticket - despite what Trump claims. Actually, candidates on both sides of the aisle are running populist, independent, anti-establishment campaigns. Perhaps a more impactful election near term - the next Governor of New Jersey will also be a Democrat switching back after eight years of Republican rule. Meaning, if Senator Bob Menendez (D-NJ) is forced from his seat due to his corruption trial, he will likely be replaced with a Democratic nominee - keeping the current Senate balance. Democrats swept the board coast-to-coast last night on anti-Trump, energizing the party for 2018 (and depressing the Republican donor class), but one major change looms between then and now - tax reform.
TAX DAY TWO: Lobbyists are in a frenzy over their special interests in the tax bill with only one day to go before a Ways and Means Committee (W+M) vote and access to the most key staffers and Representatives has been limited. Yesterday, conservative groups made headway on restoring the adoption credit - as a significant piece of pro-life legislation, but a Democrat is the one who introduced the amendment to Committee. Another bipartisan movement is brewing to keep the tax exemption on municipal bonds - which are used in public-private partnerships, a critical funding method for infrastructure. Infrastructure is expensive, but it controls a lot of grass-root level politics. Right now, the only power lobbyists have to reach W+M members is through constituents - if a client influences votes they are getting through - get this done or don’t call me.
GAME ON: House Republicans and Democrats are debating what amendments are worth debating as W+M talks heat up. Yesterday, a Republican Representative from Arizona began corralling support to draft an amendment to make the tax plan retroactive. He wants the growth to begin in 2017. And the carried interest debate is not over. Treasury Secretary Mnuchin is working on getting an amendment introduced that addresses taxes on capital gains, not just the time frame as Chair Kevin Brady's did. And the Obamacare mandate repeal won’t go away with Rep. Jim Renacci (R-OH) throwing support behind it, however, Brady still wants to leave that up to the Senate. The battles are starting to heat up, and the legislation then has to go through the House (as soon as next week), and then more difficult terrain in the Senate - where the likes of Sen. Ted Cruz (R-TX) is promising a bill without a single tax hike.
SENATE BILL TOMORROW: The Senate bill will be very similar to the House’s, Finance Committee Chair Orrin Hatch (R-UT) was just as involved as Brady in the Big Six’s tax framework – the guidelines for both bills. But the Senate has stricter budgeting rules and more moderate political plays. By following the critiques from Senators so far, we can guess what changes may be made. They have concerns about repealing the estate tax, tax hikes, or the lack of expansion in the child tax credit. But for Hatch it’s a math game – he is looking to pay for the major cuts and that could include eliminating SALT deductions altogether, phasing in or delaying the corporate rate cut, reshaping income bracket thresholds, fixing the carried interest or even capping pretax contributions in 401(k)s.
WHAT HAPPENED TO BUMP STOCKS: It took less than a month for the sale of bump stocks to come back after the massacre in Las Vegas and gun sales have only increased in that time as the NRA warns about looming gun control efforts. However, after this Sunday’s horrific tragedy, Members of Congress on both sides of the aisle are looking into gun reform. In the House, Republican leadership is advocating for stricter enforcement and national cohesion in gun sales, while in the Senate John Cornyn (R-TX) is introducing legislation to make purchasing a gun more difficult. The politics of it - the NRA is untouchable with the strongest local presence of any lobby - and their profits follow - mass shootings have not hurt gun sales, in fact they’ve helped and given the way the civilian who engaged the shooter is being treated by the president that will only be truer this time.
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.
CALL INVITE: UPDATE FROM THE FORMER US/UN COMMANDER IN KOREA: Our Senior Defense Analyst Emo Gardner wants you to join us on Thursday, 16 November at 10 AM ET to hear the four-star former commander of US/UN forces in Korea provide an up to date assessment. Get the details here.
SAUDI SATURDAY: GEOPOLITICAL RISK SPIKE & TRUMP’S CLEVER PUSH FOR ARAMCO IPO: Our Senior Energy Analyst Joe McMonigle writes that power consolidation is a sign that the King may soon abdicate to Crown Prince early next year. But we see no change in Saudi oil policy. 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.
