JT TAYLOR: CAPITAL BRIEF - JT   Potomac banner 2


  • 10 days - until NFIP and CR to fund the government expire
  • 14 days - until the Alabama Senate election
  • 17 days - until Christmas recess
  • 17 days - until the end of year expirations (tax extenders, Medicare extenders, FISA)
  • 17 days - until their self-imposed tax timeline
  • Looming: DACA, debt ceiling (December 8 expiration, extended to January with extraordinary measures), and Iran deal legislation deadline

HERDING CATS: Republican leadership is confident they will pass a tax package by the end of this week. Unlike the remarkably disciplined House process, Senate Majority Leader Mitch McConnell and Finance Chair Orrin Hatch (R-UT) are busy modifying their draft legislation to secure the votes of a number of wavering Republicans. So far, only two Republican Senators have come out against the package - Ron Johnson (R-WI) and Steve Daines (R-MT) - both over concerns that the bill does more for corporations than small businesses. McConnell and Hatch are already working on a fix to the pass-through provision to accommodate them - all while keeping one eye sharply focused on the price tag. Senators Bob Corker (R-TN), Jeff Flake (R-AZ) and James Lankford (R-OK) have said they will not vote for a bill that raises our national debt and are looking at a “trigger mechanism” that would change tax rates to offset costs if the economic growth assumed does not materialize. Meanwhile, the Senators who frequently appear on leadership’s watch-list - Rand Paul (R-KY), John McCain (R-AZ), and even Susan Collins (R-ME) - have all sent positive signals they will get to yes.  

SO WHAT’S LEFT: The CBO score once again says the bill favors the rich over the poor, but with $100 Billion in deficit wiggle room - Senators are looking at ways to change that message. They are considering matching the House’s SALT provision allowing $10K in property deductions, reforming the pass-through provisions, and eliminating a corporate SALT deduction. President Trump insists the benefits will come to the working class citizens that elected him. He met with the Senate Finance Committee yesterday and will be on the Hill today to rally Republican votes. Cynics may think that anti-Trumpers will vote against it just to spite him, but we don’t see that happening. The need to pass something before the start of midterm season trumps any personality fights. If McConnell can win over Johnson and Daines, pacify the moderates, and keep fiscal hawks at bay - they will have a tax package Friday.

THE FAST TRACK: The Senate Budget Committee is holding a vote on the tax bill using reconciliation language today to pave the way for the tax reform package to hit the floor tomorrow. McConnell is expected to call the vote Wednesday, beginning “vote-a-rama” with hundreds of amendments thrown into the ring (provisions to watch: political contributions from churches, infrastructure funding tools, and Obamacare stabilization measures). The Senate will debate for 30 hours and expects to hold the final vote Friday. McConnell and Hatch are expected to introduce one major amendment that fixes any mathematical issues and outstanding provisions. If all goes as planned - the Senate will pass the bill Friday and go to a Conference Committee with the House next week. Though they only have one week in Conference before recess - leadership can hold the Chambers in session until Christmas to give them time to vote on a final package.




UNDERCOVER BOSS?: If you want to know who the director of the CFPB is, don’t go looking on their website as that page has been strategically taken down. Pictures of Trump-appointed Acting Director Mick Mulvaney walking into the CFPB with donuts buzzed around the internet yesterday. Mulvaney directed all employees to ignore any direction from Leandra English - who was promoted to Deputy Director upon former Director Richard Cordray’s exit. English says the natural line of succession makes her the Acting Director. She sent her weekly staff emails as well as briefed members on Capitol Hill about her transition plan. Former Representative Barney Frank (D-NJ), author of the bill that created the CFPB, says there's no question - they wrote the legislation to protect the CFPB from typical political processes and thus English should be Acting Director. English also filed suit against Mulvaney’s appointment. Trump, the CFPB General Counsel, and the DOJ believe Mulvaney to be Director and plan to fight what we see as a winning battle.

THE BLACKLIST: Companies who operate in Israel’s West Bank settlements are preparing for the downfall to come if the United Nations (UN) releases a list of companies who operate in the region. The UN Human Rights Council is compiling a list of Israeli and international companies, many American, that impact Palestinians. Companies have remained silent, but President Trump and the Israeli government are working feverishly to prevent the list (which they see as a smear campaign) from being published. The so-called “blacklist” could deter future investment and spook investors in the companies.

NEUTERING NET NEUTRALITY: The FCC under Chairman Ajit Pai plans to repeal the strict net neutrality rules adopted just two years ago in the Obama Administration. It will be a sweeping victory for cable operators and telecom carriers, creating opportunities to explore upstream monetization agreements and implement service innovations. Ending common carrier treatment of broadband forecloses the risk of rate regulation as operators raise broadband prices to offset the loss of legacy video subscribers.  Court challenges will follow, but the edge goes to the FCC in defense of the upcoming order. Republicans hope a bipartisan net neutrality effort can establish a predictable regulatory strategy to environment in the long run but Democrats are not yet willing to engage.  

VIENNA DISPATCH: SHALE’S SHADOW LOOMS OVER OPEC MEETING: Our Senior Energy Analyst Joe McMonigle wrote OPEC hits the pause button on the rush to a full year of cuts amid concerns about U.S. shale rebound. Read the full piece here.

RIDING OUT #ACATAPER IN MANAGED CARE? CMS TAKES AIM AT PART D PLANS: UNH, CVS, HUM, ESRX , AET, ATHM: Our Senior Health Policy Analyst Emily Evans wrote that CMS is edging up to a proposal to require a portion of $25B in drug manufacturer rebates to be passed on to Part D plan members. Read the full piece here.

GENERAL DAN CHRISTMAN - SAUDI SHAKE-UP: Our Senior Advisor Dan Christman wrote that the moves by Saudi Arabian Crown Prince Mohammed bin Salman (MBS) over the last three weeks have been nothing short of tectonic. Read the full piece here.

INSIDE THE SUPREME COURT: Our Senior Telecom Analyst Paul Glenchur will be inside the Supreme Court next Monday as they hear arguments in the case about State’s rights to regulate sports betting. Stay tuned for more information on a call with our gaming and lodging team.

BUDGET ENDGAME APPROACHES: RESETTING THE BOARD: Our Senior Defense Analyst Emo Gardner wrote that appropriators have produced a draft 2018 Defense bill, but the numbers still don't add up. A deal will happen, but not until after Christmas. Read the full piece here.

FCC REPEAL OF STRICT NET NEUTRALITY RULES (CMCSA, CHTR, T, VZ, CTL, ATUS): Our Senior Telecom Analyst Paul Glenchur wrote that as anticipated, the GOP-controlled FCC will repeal strict net neutrality rules in mid-December, a sweeping win for cable ops and telcos. Read the full piece here.