Manchin on a mission

From: POLITICO's Morning Money - Monday Sep 13,2021 12:04 pm

Sep 13, 2021

By Victoria Guida and Aubree Eliza Weaver

Presented by The 1031 Impact Coalition

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Quick fix

Manchin on a mission — Having a majority in Congress ain’t all it’s cracked up to be. Sen. Joe Manchin on Sunday threw another wrench in Democrats’ plans to pass a sweeping spending package through budget reconciliation, telling CNN’s Dana Bash that he’d support a $1 trillion to $1.5 trillion bill, less than half the $3.5 trillion they currently have in mind. That’s something Sen. Bernie Sanders soon after said was “absolutely not acceptable to me.”

But it’s not just the spending that Manchin has an issue with. “The numbers they're wanting to pay for it and the tax changes they want to make, is that competitive? Does it keep us competitive or not? I believe there are some changes made that do not keep us competitive,” the West Virginia Democrat said on “State of the Union.” He also suggested there should be more restrictions around the expanded child tax credit, such as work or education requirements.

The one thing we do know is that this likely means that the topline number can’t be $3.5 trillion. But Democrats argue that this bill is all or mostly paid for through various revenue raisers. So the bigger question is what channels for raising revenue is Manchin OK with?

House Democrats have some ideas, which they circulated Sunday. They’re talking about raising the corporate tax rate to 26.5 percent, above Manchin’s preferred rate of 25 percent, according to a plan from the Ways and Means Committee obtained by POLITICO. They’re also planning to call for a new 3 percent surtax on people making more than $5 million, as well as increasing the top capital gains rate to 28.8 percent from 23.8 percent.

According to the plan, the total revenue raised is $2.9 trillion, which, along with the White House’s estimated $600 billion from growth, “fully offsets the $3.5 trillion package.” It will already be a tall order to reconcile (ha) these two approaches. But that’s not all that’s going on this month.

Democrats are also trying to avoid an economic collapse and a government shutdown. Our Burgess Everett and Heather Caygle report: “There is growing worry among some rank-and-file Democrats that their tunnel-vision mentality on a $3.5 trillion budget reconciliation bill could provoke economic blowback if Republicans hold the line and tank efforts to lift the debt ceiling. And Democrats’ threadbare majorities in Congress are leaving the party with little time to wriggle out of a dangerous economic morass that could overwhelm their other priorities, from voting rights to tax increases on the wealthy to a sweeping expansion of the social safety net.”

IT’S MONDAY — Ben White will be back soon! Send tips to him at bwhite@politico.com or @morningmoneyben and to Aubree Eliza Weaver at aweaver@politico.com or @AubreeEWeaver. And you can always reach me for any economic policy tips at vguida@politico.com.

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Driving the day

TWO FED CHIEFS TO SELL STOCKS AFTER CONTROVERSY — WSJ’s Michael Derby: “The leaders of the Boston and Dallas Federal Reserve Banks said they would sell off individual stocks they own, invest the proceeds in diversified indexed funds or cash savings and cease trading in individual securities.

“The Thursday announcement comes after the Federal Reserve Bank of Dallas this week disclosed that its president, Robert Kaplan, bought and sold millions of dollars in stocks and other investments in 2020. A disclosure from the Boston Fed showed that its president, Eric Rosengren, also was an active trader last year, albeit at a smaller scale. Both men defended their actions as consistent with their respective bank’s code of conduct policies, but said they didn’t wish to create any perception that their trading of securities and investments would conflict with their role in setting monetary policy.”

STABLECOINS COULD FACE CRACKDOWN — Bloomberg’s Jesse Hamilton and Saleha Mohsin: “U.S. officials are discussing launching a formal review into whether Tether and other stablecoins threaten financial stability, scrutiny that could lead to dramatically ramped-up oversight for a fast-growing corner of the crypto market.

“After weeks of deliberations, the Treasury Department and other federal agencies are nearing a decision on whether to launch an examination by the Financial Stability Oversight Council, said three people familiar with the matter who asked not to be named in commenting on closed-door discussions. FSOC has the power to deem companies or activities a systemic threat to the financial system -- a label that typically sets off tough rules and aggressive monitoring by regulators.”

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WYDEN PROPOSES CRACKDOWN ON PARTNERSHIPS, STOCK BUYBACKS — Our Brian Faler: “Finance Committee Chair Ron Wyden (D-Ore.) on Friday unveiled a proposal aimed at making it easier for the IRS to audit partnerships, an area where the agency has struggled. Separately, he and fellow tax writer Sen. Sherrod Brown (D-Ohio) introduced a plan to impose a 2 percent excise tax on publicly traded companies buying back their own stock.

“Together, the proposals — both of which are aimed at the rich — are estimated to raise more than $270 billion, which the lawmakers want to use to defray the cost of a welter of new spending initiatives.”

INVESTORS EYE WOBBLING ENERGY SECTOR AS GAUGE FOR DELTA FEARS — Reuters’ David Randall: “Energy stocks are becoming a popular bellwether for concerns over how deeply the Delta variant of the coronavirus is expected to impact the U.S. economy, as the so-called reopening trade that boosted some parts of the market earlier this year continues to stumble. The S&P 500 energy sector is down 12.3 percent for the quarter-to-date compared with a 3.7 percent gain for the S&P 500, which stands near record highs. That contrasts with the sector’s performance in the first quarter of the year, when it zoomed 29.3 percent on expectations that a vaccine-fueled economic rebound will boost energy demand.”

Fly Around

ANALYSTS WARN STOCK MARKET FACES RISK OF BUMPY AUTUMN — WSJ’s Caitlin McCabe: “After a record-breaking bull run for the U.S. stock market this year, many Wall Street analysts are starting to warn that investors could be in for a bumpy ride in the coming weeks and months. Analysts at firms including Morgan Stanley, Citigroup Inc., Deutsche Bank AG and Bank of America Corp. published notes this month cautioning about current risks in the U.S. equity market. With the S&P 500 already hitting 54 records this year through Thursday — the most during that period since 1995 — several analysts said that they believe there is a growing possibility of a pullback or, at the least, flatter returns.”

BACK-TO-SCHOOL SEASON HAS STOCK SELLERS TAPPING MARKET IN DROVES — Bloomberg’s Swetha Gopinath and Julia Fioretti: “Global equity capital markets are firing on all cylinders, with a raft of listings and billions of dollars in stake sales hitting traders’ screens this week, as sellers rush to take advantage of buoyant prices while they can. September traditionally marks the start of the fall window for stock offerings, and the month is off to its busiest start globally since 2012, with nearly $40 billion of deals priced last week alone, according to data compiled by Bloomberg. Initial public offerings worth billions more are in the market, looking for takers.”

LIBOR TRANSITION STOKES SALES OF RISKY CORPORATE DEBT — WSJ’s Sebastian Pellejero: “Wall Street’s shift away from Libor is fueling sales in the red-hot market for bundles of risky corporate loans. Managers of collateralized loan obligations — securities made up of bundled loans with junk credit ratings — are rushing to close deals ahead of the year-end move away from the London interbank offered rate. The interest-rate benchmark underpins trillions of dollars of financial contracts but was scheduled for phaseout after a manipulation scandal.”

ICYMI: WHITE HOUSE COMPETITION COUNCIL SEEKS LOWER CONSUMER PRICES — AP’s Josh Boak: “A new White House council on U.S. economic conditions held its first meeting Friday, with participants highlighting at least 18 actions taken to help consumers and potentially lower prices. The council, an outgrowth of a July executive order by President Joe Biden, is aimed at refocusing the U.S. economy around the interests of consumers, workers and entrepreneurs. Details about the meeting were provided by two administration officials who spoke on condition of anonymity to preview the gathering. The goal is to foster a more dynamic economy in which competition among companies leads to more transparency, greater choice and potential savings for customers.”

BOFA REVAMPS LEADERSHIP — NYT’s Lananh Nguyen: “Bank of America made sweeping changes to the company’s leadership Friday that elevated several executives, including three women, to senior jobs and all but guaranteed that Brian Moynihan, the chief executive, would remain at the helm of the nation’s second-largest bank for years to come. The company promoted Alastair Borthwick, its current head of commercial banking in New York, to chief financial officer. It also gave more responsibilities to Dean Athanasia, who runs the consumer-banking division from Boston. Lauren Mogensen was elevated to general counsel.”

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