Biden taps the rich for his big plans

From: POLITICO's Morning Money - Monday Mar 28,2022 12:02 pm
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POLITICO Morning Money

By Kate Davidson and Aubree Eliza Weaver

Presented by Sallie Mae®

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TAXING THE WEALTHY, TAKE 2 — President Joe Biden is set to unveil his annual budget proposal this morning, and it will include a revamped plan for a wealth tax that could revive the debate in Washington over taxing the 1 percent — or in this case, the top 0.01 percent.

The details: The White House would require households worth more than $100 million to pay at least 20 percent in taxes on a combination of both their income and their unrealized gains in things like their stock portfolios, something that is not currently taxed, our Brian Faler reports. The administration says that would generate $360 billion over the next decade, with half of that coming from billionaires.

“This minimum tax would make sure the wealthiest Americans no longer pay a tax rate lower than teachers and firefighters,” the White House said in a summary of the proposal.

It may still be a tough sell: Rank-and-file Democrats have already rejected similar wealth tax proposals from Sens. Elizabeth Warren (D-Mass.) and Ron Wyden (D-Ore.). The latest plan would also amount to a major change in the tax system and would likely face a constitutional challenge.

Looking ahead:  The plan comes as Democrats are trying to jumpstart their stalled economic agenda, which initially included trillions in new spending on social programs, such as paid leave and early childhood education, as well as green energy investments. Those ambitions have been pared back significantly, but their success still depends upon rallying enough Democratic support for tax increases that will more than offset the new spending over the next decade.

Today’s budget blueprint won’t offer details on what that agenda — which is still being negotiated — might look like, or exactly how it would be paid for. (The new wealth tax proposal is just the latest of many ideas for raising revenue that Democrats have been chewing over for the past year.)

But the administration is leaning into one important message as it tries to woo Sen. Joe Manchin (D-W.Va.) — fiscal responsibility.

“The Budget will show how the strongest economic growth in nearly 40 years, powered by the American Rescue Plan, has put the deficit on track to drop by more than $1.3 trillion this year—the largest-ever one-year decline,” one White House official said. “Through a new Billionaire Minimum Income Tax and other measures, budget policies will build on this progress and reduce deficits by a total of over $1 trillion over the next decade.”

MM sidebar : It’s true that the robust recovery has led to much stronger tax receipts and lower spending on safety net programs such as jobless benefits, factors that are helping bring down deficits . But it’s also important to remember that much of this deficit decline was expected, as pandemic aid programs expired. (Even before Congress passed the American Rescue Plan, the Congressional Budget Office projected the annual deficit would shrink by $1.2 trillion in fiscal 2022, to roughly a third of what it was in 2020. Unfortunately, we won’t be getting a new CBO budget update until May.)

Other priorities: The White House said the blueprint will put more cops on the beat for community policing, fighting gun crime and investing in crime prevention and community violence intervention, the official said. It will also make one of the largest investments in national security in U.S. history to help strengthen the military and meet pressing global challenges, and make other domestic investments to help cut costs for families and advance the agenda the president laid out in his State of the Union address.

Obligatory reminder: White House budgets are aspirational and are almost never (literally never?) adopted whole cloth by Congress, even when the president’s own party controls both chambers.

BIG DATA WEEK AHEAD — After Monday’s budget blitz, we have a string of important economic data releases that could nudge Federal Reserve officials closer to a super-sized interest-rate increase at their next policy meeting.

The Labor Department will release its Job Openings and Labor Turnover Survey data for February on Tuesday, a key measure of labor-market tightness that has been flashing red for months now. We’ll also get an April Fools’ Day employment report on Friday, which is expected to show softer but still sizable payroll gains in March, along with rising wages and a slightly lower jobless rate.

But the biggest headlines will likely come Thursday, when the Commerce Department releases its personal consumption expenditures index, the Fed’s preferred inflation gauge.

A number of Fed officials last week, including Chair Jerome Powell, signaled they are open to increasing their benchmark federal funds rate by a half-percentage point at their May 3-4 policy meeting to help tamp down decades-high inflation.

Economists surveyed by Bloomberg expect that PCE inflation climbed 6.4 percent last month from a year earlier, while core prices, excluding food and energy, rose 5.5 percent.

Such a strong core reading “would no doubt reinforce the view of the hawks on the Committee who would like to speed the pace of policy normalization, and it may even cause some of the doves to lean in that direction as early as the May meeting,” Deutsche Bank economists Brett Ryan, Justin Weidner, Matthew Luzetti and analyst Amy Yang wrote in a note to clients.

IT’S MONDAY — Apparently Mother Nature got the whole in-like-a-lion/out-like-a-lamb thing mixed up this month. Here’s hoping she makes up for it in April.

Have tips, story ideas, feedback for us to close out March? Email us at kdavidson@politico.com or aweaver@politico.com, or find us on Twitter @katedavidson or @aubreeeweaver.

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DRIVING THE WEEK

JOLTS data released Tuesday … Philadelphia Fed’s Harker and Atlanta Fed’s Bostic speak Tuesday … Senate Banking hearing on the economic impact of medical debt … House Financial Services hearing on home appraisal bias Tuesday …

Final fourth-quarter GDP data released Wednesday … House Financial Services hearing on oversight of America’s stock exchanges … Richmond Fed’s Barkin speaks Wednesday … House Financial Services hearing on overdraft fees … SEC’s Gensler speaks at virtual SEC discussion on avoiding financial fraud …

New York Fed’s Williams speaks Thursday … February personal income, spending and inflation data released Thursday … March jobs report released Friday … Chicago Fed’s Evans speaks Friday … February construction spending released Friday … New York Fed’s Williams speaks Saturday.

JOIN US: POLITICO BUDGET BRIEFING TODAY — Join us today at 3:30 p.m. as our policy reporters, including this Morning Money author, discuss the president’s budget request and prospects for fiscal 2023. Register now.

FDIC MOVES TO REQUEST FEEDBACK ON BANK MERGERS — Our Victoria Guida: “The Federal Deposit Insurance Corp. on Friday moved to formalize a request for feedback on how it can improve its scrutiny of bank mergers, a document that caused a partisan fight late last year that ultimately prompted the then-chairman to resign.

“The agency is posing 10 questions about the merger approval process, such as the extent to which financial stability should be considered and whether the current rules create a presumption of approval.”

THE HARD TRUTH BEHIND BIDEN’S CYBER WARNING — Our Maggie Miller: “The Biden administration has offered ominous warnings about looming Russian cyberattacks. But another reality is equally foreboding: The U.S. may have too many targets to defend them all.”

The Financial Services Information Sharing and Analysis Center, a global cyber information clearinghouse for the financial industry, has raised the sector’s threat level from guarded to elevated.

“This means that the financial sector is in a state of heightened cybersecurity awareness and is taking extra steps to strengthen cyber defenses,” CEO Steve Silberstein told us last week. “At this time, the sector is not seeing any significant increase of attack activity directly attributable to any origin.”

FED’S BEST HOPE INCREASINGLY LOOKS LIKE A ‘SEMI-HARD’ LANDING — Bloomberg’s Rich Miller: “As the Federal Reserve wrestles with bringing down decades-high inflation, perhaps the best economic outcome it can hope for sounds like a contradiction: a growth recession. That’s a situation where the economy expands more slowly than its roughly 1.5 percent to 2 percent long-term trend and unemployment ticks up, but an outright contraction is avoided. While falling short of the picture-perfect soft landing that Fed Chairman Jerome Powell and fellow policy makers envisage, it’s an outcome that economists like Nobel laureate Paul Krugman see as desirable to help ease persistent price pressures.”

 

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Crypto

HOW GREEN WAS MY BITCOIN — Our Sam Sutton writes: Following President Joe Biden’s executive order on crypto, the Office of Science and Technology Policy is seeking public comment for a report that will detail the climate effects of digital assets. With the U.S. now the global leader in Bitcoin mining — the energy-intensive process that verifies transactions and mints new Bitcoins — many Democrats have raised concerns that the electricity and computational power required to fuel digital asset markets might be hastening global warming. Bitcoin proponents and the mining industry have argued that the industry’s energy demands will encourage investment in renewables and utilize resources that might otherwise have gone to waste. For its report, OSTP is requesting details on the "protocols, hardware, resources, economics, and other factors that shape the energy use and climate impacts of all types of digital assets.”

Energy and climate concerns could emerge as a wedge issue as lawmakers and agencies race to develop a regulatory framework for the crypto industry. Sen. Kirsten Gillibrand (D-N.Y.), who’s working with Sen. Cynthia Lummis (R-Wyo.) on a comprehensive crypto bill, indicated last week that she’d be supportive of policies that would require mining companies to disclose information about their energy footprint. “The environment's important to a lot of people, so I think you do have to address it on some level,” she said.

From CNBC’s MacKenzie Sigalos "Exxon Mobil, the top oil and gas producer in the U.S., is piloting a project to mine bitcoin in North Dakota, according to people with knowledge of the matter … Similar to ConocoPhillips’ mining scheme in North Dakota’s Bakken region, Exxon is diverting natural gas that would otherwise be burned off into generators, which convert the gas into electricity used to power shipping containers full of thousands of bitcoin miners. Exxon launched the pilot in late January 2021 and expanded its buildout in July.”

 

SUBSCRIBE TO NATIONAL SECURITY DAILY : Keep up with the latest critical developments from Ukraine and across Europe in our daily newsletter, National Security Daily. The Russian invasion of Ukraine could disrupt the established world order and result in a refugee crisis, increased cyberattacks, rising energy costs and additional disruption to global supply chains. Go inside the top national security and foreign-policymaking shops for insight on the global threats faced by the U.S. and its allies and what actions world leaders are taking to address them. Subscribe today.

 
 
Ukraine

WHITE HOUSE CAREFUL NOT TO TARGET FOOD COMPANIES AS IT PRESSURES PUTIN — Our Meredith Lee: “A growing global food crisis is forcing the Biden administration to balance its crushing economic campaign against Russia with a gentler approach to major U.S. food and agribusiness companies still operating there — and contributing tax dollars to Russian President Vladimir Putin’s regime. …And now, some of the same Biden administration officials who have been waging a war against ‘Big Ag’ are working with some of those same companies to combat mounting food insecurity around the world.”

ECB’S LAGARDE DOES NOT SEE RISK OF STAGFLATION — Reuters: “The European Central Bank does not expect the war in Ukraine to push the euro zone into stagflation even if it does push up inflation due to higher energy prices and push down growth, President Christine Lagarde was quoted as saying on Saturday. ‘Incoming data don’t point to a material risk of stagflation,’ Lagarde said in an interview with Phileleftheros published by the ECB on its website.”

 

STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president’s ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today.

 
 
Fly Around

NBC TAKES A LOOK AT HISTORIC LEVELS OF FRAUD DURING THE PANDEMIC — Starting tonight, NBC will begin airing a special two-week investigative series on how the government’s spending throughout the pandemic has led to historic fraud and billions of dollars lost to Covid-19 scams. NBC will kick off its series, “The Fleecing of America,” at 6:30 p.m. tonight with Lester Holt’s interview with Michael Horowitz, the DOJ inspector general tasked with overseeing the Pandemic Response Accountability Committee.

The U.S. bankruptcy system is facing a backlash from all three branches of the federal government as big companies and wealthy individuals push the limits of chapter 11 to relieve themselves of legal and financial liabilities. — WSJ’s Alexander Gladstone

As Morgan Stanley was elbowing its way to the top spot in Wall Street’s ruthlessly competitive business of helping investors sell blocks of stock several years ago, rivals at Credit Suisse Group AG added a slide to their pitch deck. The message, according to people who saw it: Don’t trust Morgan Stanley. — Bloomberg’s Gillian Tan

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