T&I TALK: Now that the dust is just starting to settle (ahem) from the aftermath of the absurd government shutdown, the buzz in Washington is beginning to focus on the viability of infrastructure legislation once the various and sundry fiscal cliffs are exhausted. Elements of the Administration’s plan have been circulating in Washington for months, and an early draft was leaked and has been making the rounds on K Street. The draft proposal relies heavily on private activity bonds, but comes up short on how it will leverage a smaller pool of funds; according to Senator Jim Inhofe (R-OK), one of the Senate’s top transportation and infrastructure advocates, the draft “included few new details and did not clearly lay out how to leverage a relatively small amount of federal money.” President Trump has his sights set on passing an infrastructure passage this year but his only path forward will require considerable support from Democrats - and they may not play ball if regulations dealing with the environmental and labor are reversed – a prerequisite to garner the support of conservatives unlikely to be keen on spending ~200-250B on the heels of a costly tax package. The White House plan does not currently include plans for a tax hike, but there appears to be a little softening on this issue on the Republican side of the aisle compared to past cycles when we told were flat out that a gas tax was a non-starter. With Americans about to see some benefits from tax reform, some gas tax proponents feel that this could be a unique time to strike.
HITTING A WALL: Reacting to progressive pushback over his shutdown strategy, Minority Leader Chuck Schumer took border wall funding off the table casting an early shadow over negotiations a mere 24 hours after the government reopened. And throw in last night’s tweet by President Trump – “no wall, no DACA,” and we’re off to the races. With 15 days to go until the next CR deadline, it appears as if the only hope of a compromise on DACA rests again with the bipartisan group of “centrist” Senators.
CALIFORNIA DREAMIN’: The Democrat’s path to recapturing the House this fall may well begin in the Golden State with Republicans looking to make up a lot of ground to between now and November 6. For starters, there are no high-profile or serious Republican candidates in the races to either replace term-limited Governor Jerry Brown or oppose Senator Diane Feinstein potentially setting up showdowns with only Democrat candidates in the mix – and no Republican on the ballot. That would upend Republican turnout throughout the state already impacted by population growth said to favor Democrats in a number of Republican Congressional districts. The Republican answer (we suspect you’ll be hearing this many, many times in the coming months): the phrase Speaker Nancy Pelosi.
PREPA-RING FOR AUCTION: With Puerto Rico’s debt hitting $71 B and recovery from Hurricane Maria still lagging, Governor Ricardo Rossello is scheduled to deliver a new fiscal package to the U.S. territory’s federal Financial Oversight and Management Board today. In that plan, Rossello will call for the assets of Puerto Rico’s electric utility (PREPA) - now faced with over $9 billion in bond debt - to be privatized over three phases. The Oversight Board will need to review and certify Rossello’s fiscal plan by February 23, 2018.
PROGRAMMING NOTE: We’re traveling tomorrow and Friday and will be back on Monday morning. We’re still reachable, so please email us if you have questions.
DEFENSE QUARTERLY EARNINGS: Pentagon Outlays Up 11.4% Y/Y, 6.4% Q/Q Auspicious for LMT, BA, RTN, et al. Our Senior Defense Analyst General Emo Gardner writes DoD investment outlays Oct-Dec were up 11.4% Y/Y and 6.4% Q/Q, auguring excellent Q4 defense company earnings reports. Read his piece here.
PART II: GOVERNMENT SHUTDOWNS JUST AIN'T WHAT THEY USED TO BE | NEXT STEPS. Our Senior Health Policy Analyst writes that Medical Device and Insurance Taxes get another reprieve; CHIP funded for six years; but what about Medicare extenders? Read her note here.
PAKISTAN AND THE U.S.: AT THE FORK? Read General Dan Christman's latest missive on the U.S. state of play in Pakistan here.
SAUDI MINISTER TALKS ABOUT KEEPING PRODUCTION CUT BAND TOGETHER IN 2019 AMID RISING U.S. PRODUCTION: Our Senior Energy Analyst Joe McMonigle believes this U.S. production narrative will dominate the discussion at least through 1H 2018 and weigh on prices. Read his note here.
