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TWO WEEKS NOTICE: Defense Hawks and the Freedom Caucus reached a deal in the nick of time with House Speaker Paul Ryan to extend the CR to December 22 and prevent a government shutdown. The deal was reached without the help of Democrats despite the inclusion of reauthorizing funding for the Children’s Health Insurance Program. Democrats wanted a deal on DACA, funding for the opioid crisis, and relief funding for natural disasters. Speaker Ryan is sure to need help from the Democrats on a long-term spending deal and Democrats know they can get bipartisan legislation by forcing a vote in 2017. This is just the first step in what’s bound to be a protracted and complicated battle - Ryan still has to secure defense spending, raise the budget caps, renew year-end expirations (tax and Medicare extenders), and get the votes for FY18 - likely requiring an additional extension just days before Christmas.
CHUCK AND NANCY BURY THE HATCHET - UNTIL THEY NEED IT: Congressional leadership is working on a year-end spending deal with President Trump, despite Democratic leaders promise to oppose a short-term extension and fight to have DACA legislation completed by the end of 2017. Leadership is looking to make a deal on budget caps set by the Budget Control Act of 2011. Historically, Republicans are opposed to increased discretionary spending, but this year they want to revamp the military and increasing budget caps is the means necessary to do so. Some Congressional conservatives are pushing for mandatory spending cuts to balance the costs; others like Speaker Ryan are working to get Democrats on board to push a deal over the edge.
RYAN DELIVERS: Ryan is coming through for those fiscal hawks, promising to tackle mandatory spending reform in 2018. The House plans not to eliminate, but to revamp, shrink, and modernize the U.S. welfare, Medicare and Medicaid systems - a sentiment echoed by Trump on the Hill two weeks ago, but a far cry from his campaign when he promised not to touch said entitlement programs. Many Republicans wanted to include spending cuts in the tax package to make up for lost revenue, but leadership didn't want to complicate the existing delicate balance. Republicans are speculating reform would begin with a stimulus followed by a sharp phase-out of funding to move people out of the systems and increase competition in the marketplace.
SLOW AND STEADY: The Administration has quietly been reforming all federal agencies by putting leaders in place who previously discredited those same agencies. They are scaling back the hiring of political appointees and making jobs difficult for career staff. Additionally, they have a regulatory task force in every agency working to shrink the size of the bloated federal government. The hearings on the Hill yesterday shed light on their progress, though gave little information on the planned provisions which will shape the regulatory landscape. The Department of the Interior, Environmental Protection Agency, and the Office of Financial Research are expecting major overhauls in 2018. Not to mention the CFPB - where the deputy director is mounting a challenge to run the agency for the second time in two weeks.
CALL INVITE: TAX REFORM FOR INDUSTRIALS & MATERIALS SECTOR (CAT, DE, TSLA, UAL, TXT, USG/VMC, APD, ETC): Please join Hedgeye’s Industrials & Materials team with Jay Van Sciver today, December 8, 2017 @ 10:00 AM EST for a black book presentation on tax reform. Get the details here.
ORACLE HAS GOOD DAY IN COURT AGAINST GOOGLE (ORCL, GOOGL): Our Senior Telecom Analyst Paul Glenchur wrote that we give the edge to Oracle as it seeks billions in licensing fees from Google for the Android mobile operating system. Read the full piece here.
REPLAY: SIZZLE, OR FIZZLE? FINANCIALS TAKEAWAYS FROM THE HOUSE AND SENATE TAX PLANS: Hedgeye’s Financial Services team featuring Josh Steiner and Jonathan Casteleyn hosted a presentation on the latest implications of the tax reform proposals on the Financials sector. Get the replay here.
#ACA2.0 | NOVEMBER ADP HEALTH CARE EMPLOYMENT +2.3%: Our Senior Health Policy Analyst Emily Evans writes that we remain broadly SHORT Health Care in the Hedgeye Health Care Position Monitor. REad the full piece here.
TWOFER! TAX REFORM BECOMES HEALTH CARE REFORM | HCA, THC, SBRA, HCP, SYK, MRK, PFE, HOLX, CRL, CERN: Our Senior Health Policy Analyst Emily Evans and JT Taylor write merging tax reform with ACA reform has extensive implications for all corners of the health care sector. Read the full piece here.
