Infrastructure week is back! — The weird situation at OCC — PPP gains questioned

From: POLITICO's Morning Money - Monday Mar 29,2021 12:05 pm
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By Ben White and Aubree Eliza Weaver

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Quick Fix

Infrastructure week is back! — President Joe Biden heads to Pittsburgh on Wednesday to both tout the American Rescue Plan and lay out his plans for a large infrastructure spending package that would be the first dose of what the White House hopes is $3 trillion more in federal spending over the next year or so.

The White House won’t put a timetable on the spending because they have not yet worked out their legislative strategy including when and how to use their remaining two shots at the budget reconciliation process. Biden wants to go big — including tax hikes on corporations and the wealthy to cover costs — but he also is not yet ready to fully nuke the Senate filibuster. Maybe he’ll get there. But he’s not there now. And at the moment it seems like the president would like to execute some of his biggest agenda items without ending the legislative filibuster.

This means to get most of his agenda through, Biden and the White House will have to go for reconciliation and the 51-vote margin in the Senate. The good news for the West Wing is they have a willing vote in Sen. Joe Manchin (D-W.Va.) to do a big infrastructure bill coupled with rolling back some of the Trump tax cuts on higher earners while bumping the corporate rate back towards 25 percent. Doesn’t mean they are home free on a partisan infrastructure bill. But it’s a strong place to start.

Via Compass Point’s Isaac Boltansky : “This speech will focus primarily on physical infrastructure, which is only one part of what is expected to be a ~$3 trillion package that includes tax changes, green energy investments, manufacturing on-shoring incentives, and a number of provisions under the ‘Social Infrastructure’ umbrella …

“We remain bullish on additional infrastructure spending in 2H21, and a number of the ‘Social Infrastructure proposals have a high likelihood of inclusion in the next reconciliation vehicle, but we caution that the road to enactment for this package will be both longer and bumpier than what we experienced with the $1.9T package that was signed into law earlier this month.”

Other things the wealthy should watch : The White House has its eyes on stepped-up basis, capital gains treatment in general, pass through income and carried interest, among other things. When officials like CEA member Jared Bernstein say they are looking to tax wealth building transactions at higher rates, they are not messing around. A more progressive tax code is among the Biden team’s highest first term priorities. So get ready for it.

GOOD MONDAY MORNING — Happy Monday everyone! It’s MM’s birthday on Wednesday so be nice this week. Somehow we will turn 39 yet again! Amazing. Email me on bwhite@politico.com and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on aweaver@politico.com and follow her on Twitter @AubreeEWeaver.

 

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Driving the Day

Monday may be slightly quiet but a big week ahead with Biden’s infrastructure speech on Wednesday. … FSOC on Wednesday holds its first meeting under Treasury Secretary Janet Yellen with topics including “climate change and its potential impacts on financial stability.” …

On Thursday, White House chief of staff Ron Klain speaks with POLITICO Playbook co-author Ryan Lizza at 9 a.m . … Jobs report on Friday at 8:30 a.m. expected to show a strong gain of 635K with unemployment down to 6.0 percent and average hourly earnings up 0.2 percent …

THE WEIRD OCC PROCESS — Continues to be a bit of a puzzle why the White House has not nominated UC Irvine’s Mehrsa Baradaran. Something is clearly going on but not clear what it is. Via Cap Alpha’s Ian Katz: “There has been no announcement from the White House. Thirty-four members of the Congressional Black Caucus sent a letter to President Biden last week urging him to nominate Baradaran.

“Now it’s being reported that there are other high-profile candidates: Former Deputy Treasury Secretary and Fed Governor Sarah Bloom Raskin; former SEC Commissioner Kara Stein; and Atlanta Fed President Raphael Bostic. All three have been seen as top contenders for prominent administration or regulatory positions. We think Bostic, and perhaps Raskin, would be on a fairly short list of candidates for Fed chair if Jay Powell isn’t back after his current term ends in February 2022.”

Our Zach Warmbrodt: “Rep. Jamaal Bowman and 33 members of the Congressional Black Caucus are urging … Biden to pick … Baradaran to lead the OCC, arguing she would be a ‘transformative’ appointee. The lawmakers said economic and racial injustices have been exacerbated by Covid-19 and that “we need an OCC leader whose values are fully aligned with the needs of working people.”

NEW FROM THE AGENDA —Katie Bach and Zeynep Ton in a new op-ed up this a.m. on POLITICO Agenda: “To the disappointment of many on the left … Biden’s Covid-19 relief package did not include an increase in the federal minimum wage, dimming the prospect of setting a national wage floor at $15. But there is another step the administration can take to push companies to pay more: disclosure.”

PPP GAINS QUESTIONED — Also via Zach: “When the Senate on Thursday voted to extend the nearly $1 trillion Paycheck Protection Program, there were few dissenters for a pandemic-relief program that lawmakers say has sustained tens of millions of small-business jobs.

“Yet many economists say the jobs claim is exaggerated. And in reality, almost a year after the popular program's launch, Congress, the Biden administration and even small-business advocates have no firm estimate of how many jobs it saved. Federal watchdog agencies say the data isn't available, and academics offer a wide range of estimates for how much the extraordinary influx of spending — $961 billion was appropriated for PPP — supported the economy during the pandemic.”

Markets

LARGE BLOCK TRADES THAT CAUSED SELLING RAISES QUESTIONS ABOUT CAUSE — Reuters: “A number of large block trades on Friday which investors said caused big drops in the stocks of a clutch of companies has raised speculation about what was behind them, with Goldman Sachs said to be a bank involved in the sales.

"Shares in ViacomCBS and Discovery tumbled around 27 percent each on Friday, while U.S.-listed shares of China based Baidu and Tencent Music plunged during the week, dropping as much as 33.5 percent and 48.5 percent, respectively, from Tuesday’s closing levels. “

TRADERS ARE ‘GLUED TO THEIR SCREENS’ AND SET FOR VOLATILE OPEN — Bloomberg’s Jan-Patrick Barnert, Filipe Pacheco and Divya Baljiji: “Global traders are bracing for what’s shaping up to be one of the most anticipated opens for U.S. equities in months following an extraordinary $20 billion wave of block trades Friday that rattled investors worldwide.

BOND BULLS CHARGE AHEAD — WSJ’s Sam Goldfarb: “The yield on the benchmark 10-year U.S. Treasury note, a key driver of interest rates across the economy, topped 1.7 percent earlier this month for the first time since the start of the coronavirus pandemic, settling Friday at 1.658 percent.”

Markets

GET READY FOR BIGGEST JOBS SURGE IN MONTHS — Bloomberg’s Reade Pickert: “The U.S. labor market shifted into a higher gear in March as the nation made progress in an effort to put the pandemic in the rear-view mirror.

"Economists project a government report will show the largest employment increase in months as vaccinations increase and economic activity, including robust manufacturing, picks up. The median estimate in a Bloomberg survey of economists is for the unemployment rate to fall to 6 percent as nonfarm payrolls rise 643,000.”

PANDEMIC ACCELERATES RETIREMENTS, THREATENING ECONOMIC GROWTH — WSJ’s Amara Omeokwe: “The proportion of older workers participating in the labor force is hovering at its worst level since the onset of the coronavirus pandemic, raising the prospect that many of these Americans may have permanently left the workforce, potentially impairing future economic growth.

“The labor force participation rate — the proportion of the population working or seeking work — for Americans age 55 and older has fallen from 40.3 percent in February of 2020 to 38.3 percent this February — representing a loss of 1.45 million people from the labor force.”

BIDEN ECONOMIC PLAN TO FOCUS FIRST ON INFRASTRUCTURE — AP’s Hope Yen: “Biden will lay out the first part of his multitrillion-dollar economic recovery package this week, focusing on rebuilding roads, bridges and other infrastructure, followed by a separate plan later in April addressing child and health care. White House press secretary Jen Psaki confirmed on Sunday the administration’s plans to split the package into two legislative proposals”

PATH FROM CLINTON TO BIDEN TAKES U-TURN ON DEBT, TRADE AND MORE — AP’s Josh Boak: “When Bill Clinton spoke of how to build a bridge to the 21st century, it was to be constructed with balanced budgets, welfare recipients who found jobs and expanded global trade. Three decades later, President Joe Biden is dealing with harsh 21st century realities and his approach has been the exact opposite: Borrow to spur growth, offer government aid without mandating work and bring global supply chains back to the United States.

 

THE LATEST FROM INSIDE THE WEST WING : A lot happened in the first two months of the Biden presidency. From a growing crisis at the border to increased mass shootings across the country while navigating the pandemic and ongoing economic challenges. Add Transition Playbook to your daily reads to find out what actions are on the table and the internal state of play inside the West Wing and across the administration. Track the people, policies and emerging power centers of the Biden administration. Don’t miss out. Subscribe today.

 
 
For Your Radar

TRANSITIONS — Alisha Sud will be associate director at the Milken Institute’s FasterCures Center. She most recently was an analyst at Albright Stonebridge Group. …

Liz Hipple will be a senior policy analyst at the Joint Economic Committee. She previously was senior policy adviser at the Washington Center for Equitable Growth.

 

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Ben White @morningmoneyben

Aubree Eliza Weaver @aubreeeweaver

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