THAT WAS EASY: Senators are heading home for the holidays having checked off every mark on their Thanksgiving tax list. On the heels of a major House floor victory 227-205 (with a number of Republicans from the New York, New Jersey, and California delegations voting against it), the Senate Finance Committee advanced their tax package with more discord than the House process. Finance Chair Orrin Hatch (R-UT) reiterated their goal to pass the Tax Cuts and Jobs Act in the full Senate the week they return from the break and have a law by the end of the year. However, he and Majority Leader Mitch McConnell have a lot to wrangle - starting with a score that shows taxes going down for millionaires, but raising for many middle and upper-middle class families.
KEEPING SCORE: The most difficult balance for the Senate Finance Committee was to work within the confines of their budgetary rules. To satisfy those rules, Hatch introduced a modified mark that sunsets a majority of individual provisions. Months ago several Senators went on the record against temporary reforms, but for Hatch keeping business provisions permanent and the corporate rate low was more important than permanent individual cuts. Other key provisions include repealing the Obamacare mandate, preserving the mortgage interest deduction, eliminating the SALT deductions, and raising the threshold for the estate tax. Here is a look at the major revenue lost and offsets:
NOW THE HARD PART: Republican leadership is on edge after the comments from Senator Ron Johnson (R-WI) against the Senate tax package. They are moving as quickly as possible to prevent opposition from growing and strengthening. Moderate Senator Susan Collins (R-ME) was pacified with the estate tax deal, but she has already raised concerns with regard to the Obamacare mandate repeal. And, despite being coaxed by an Alaskan drilling provision, Senator Lisa Murkowski (R-AK) looks to be uneasy with the Obamacare provision as well - as both she and Collins were critical votes against a full Obamacare repeal. Outside of moderates, fiscal hawks are worried about the real costs of revenue cuts without spending cuts competing with the growth wing worried about temporary reforms not driving economic growth. One day at a time.
(MORE) GOOD NEWS ON THE ECONOMIC FRONT: “Don't hold your breath on mainstream political media reporting this #GrowthAccelerating news,” writes Hedgeye CEO Keith McCullough. Another day, another multi-year high in domestic data #accelerating. Take a look below. U.S. Industrial Production (IP) accelerates to a three-year high at +2.9% year-over-year (y/y) growth with industrial activity normalizing in October after the hurricanes suppressed activity in August and September. Following this (as well as yesterday’s U.S. Retail Sales report of +4.6% y/y growth in OCT) our predictive tracking algorithm for U.S. Real GDP growth here in 4Q17E ticks up to +2.49% YoY/+2.66% QoQ SAAR.
TRUMP’S TO-DO LIST: With the president returning to the states right in the middle of two crucial tax reform votes - Congressional leaders were preparing for his typical distractions. Instead, President Trump’s demeanor on the Hill was upbeat and in sync with his fellow Republicans on Capitol Hill. Trump took the opportunity to pivot and lobby for Administration goals like infrastructure, health care, and welfare reform - all said to have received an overwhelming response.
CALL TODAY: U.S. SOLAR TARIFFS ON CHINA WITH FORMER CEO OF SOLAR ENERGY ASSOCIATION: Join our Senior Energy Policy Analyst Joe McMonigle for a conference call TODAY, November 17 at 2 PM ET. Trump wanted trade tariffs. The ITC just recommended tariffs on Chinese solar panels as Trump returns from China and Asia trip. Get the event details here.
CALL MONDAY: OPEC MEETING PREVIEW WITH FORMER OPEC PRESIDENT AND ALGERIAN OIL MINISTER: Join our Senior Energy Policy Analyst Joe McMonigle for a conference call Monday, November 20 at 2 PM ET. OPEC will decide whether to extend its production cut and for how long at the upcoming Nov 30 OPEC Meeting in Vienna. Get the event details here.
CALL INVITE: RUINED PUNCH BOWL? ACA REPEAL MAKES INEVITABLE APPEARANCE IN TAX REFORM: Join our Senior Health Policy Analyst Emily Evans Tuesday, November 21 at 10 AM ET for the latest on implications of changes to the ACA on tax reform and vice versa. Get the event details here.
CALL REPLAY: UPDATE FROM THE FORMER U.S./UN COMMANDER IN KOREA: On the heels of President’s Trump trip to Asia, our Senior Defense Analyst Emo Gardner invites you to hear the four-star former commander of U.S./UN forces in Korea provide an up- to date assessment. Get the replay here.
CALL REPLAY: MACRO TAX REFORM UPDATE: If you missed Hedgeye’s Macro team on their latest update on Tax Reform. Get the replay here.
EVENT: HEDGEYE AT OPEC – JOIN US FOR A PANEL AND RECEPTION IN VIENNA ON OPEC’S NEXT STEPS: Our Senior Energy Analyst Joe McMonigle is hosting a panel in Vienna on November 29 on OPEC’s next steps, geopolitical risks and oil markets. Get the details here.
SINCLAIR BROADCAST GETS AN FCC BOOST (SBGI, TRCO, NXST, FOXA): Our Senior Telecom Analyst Paul Glenchur writes that the FCC will adopt new rules helpful to Sinclair, but the deal for Tribune still has issues. Read the full piece here.
MOSCOW MYSTERY OR OPEC PLAYBOOK: MIXED MESSAGES FROM RUSSIA IS ABOUT RESETTING EXPECTATIONS: Our Senior Energy Policy Analyst Joe McMonigle writes that Russia is now openly hesitant about ANY cut extension. OPEC is resetting expectations. A three-month extension is better than no extension. Read the full piece here.
