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Presented by the Independent Community Bankers of America: Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy. | | | | | |  | | By Ben White and Aubree Eliza Weaver | Presented by |  | | | Editor’s Note: Morning Money is a free version of POLITICO Pro Financial Services' morning newsletter, which is delivered to our s each morning at 6 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro. | | | Biden’s Big Spending Night — President Biden’s 9 p.m. joint address to Congress (don’t call it a State of the Union) will include remarkable pitches for around $4 trillion more in federal spending (American Jobs Plan plus American Family Plan), a staggering sum intended to be paid for in large part by higher taxes on the wealthy, corporations and investors. This would come after Congress already approved over $5 trillion in spending to fight the Covid pandemic and boost the economy. The combined figure represents roughly 35 percent of the ENTIRE current national debt of around $28 trillion. The Family Plan — including universal free pre-school, permanent paid family and medical leave and support for childcare centers, among other things — aims to boost productivity, reduce inequality and reshape the economy in ways not seen since LBJ’s “Great Society.” And much of it is not likely to happen — Biden going huge flips the script on President Barack Obama going relatively small in 2009. And it represents years of work by progressive economists keen to fundamentally reshape an unbalanced economy. But people close to the White House know getting this level of change done with a vanishingly small margin in the Senate is pretty much impossible. Moderate Democrats like West Virginia’s Joe Manchin won’t get behind all of it. And corporate America is prepared to use every bit of leverage it has to block many of the tax hikes, especially what could amount to a near-doubling in the capital gains rate. A smaller infrastructure bill and some restructuring of the corporate tax code remain quite possible. A new “New Deal” really doesn’t, regardless of potential economic merit. The broad-based mandate for it simply isn’t there. And the fact that the economy is already set to run pretty hot for the next year — with inflation expectations at eight-year highs — won’t help sell more giant federal spending. Per one business lobbyist on the approach to moderate Democrats in the Senate: “The president is identifying real issues that deserve lawmakers attention. But these are not cost free actions and if you double the capital gains rate you will obviously get a lot less investment that supports economic growth and the job creation that we are all counting on [Yes MM knows this is disputed; subject for a subsequent column] … “Put all these plans together and you find a number of folks on the Democratic side who really find it jaw-dropping. The White House hasn’t seemed to bother to calibrate at all what can actually get through Congress … What business groups are telling moderate Dems: “The economy is poised to do exceptionally well this year and maybe well into 2022. … It would take a really big, wet blanket to turn that off. But $4 trillion in new taxes just might be a big enough wet blanket to do it.” GOOD WEDNESDAY MORNING — Happy “Not State of the Union” day. And Fed day! Lots of action ahead. Well, not so much by the Fed. 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. | | A message from the Independent Community Bankers of America: Community banker congressional meetings this week: Accounting for roughly 60 percent of Paycheck Protection Program lending from nearly 50,000 locations serving every congressional district, community banks have been financial first responders during the coronavirus pandemic. As part of this week’s ICBA Capital Summit, community bankers are meeting with members of Congress and offering bipartisan legislative solutions to continue moving our nation forward. Read ICBA’s bipartisan agenda. | | | | | | Biden addresses a joint session of Congress at 9 p.m. though many GOP members are on retreat in Florida and won’t be there … The Fed at 2:00 p.m. issues its latest policy statement that is expected to include no changes to rates or the pace of asset purchases. Chair Jay Powell in his presser at 2:30 p.m. is also not likely to break any fresh ground, reiterating that the economy is improving, more must be done and further fiscal stimulus would be helpful. Powell, for his part, will be up for re-nomination in less than a year and is not likely to take issue with the White House unless he absolutely has to … CONFIDENCE ROARS BACK — Another argument against Biden’s plans to juice the economy with another $4 trillion in spending comes from the remarkable surge in consumer confidence which just jumped to a 14-month high as Covid vaccinations spread. And the surge in animal spirits seems pretty widespread, per new Morning Consult data out this a.m.: “[O]ur ‘Tracking the Return to Normal’ series reveals all-time highs in consumer comfort across activities. 60% of the public now feels comfortable dining out, a record high since tracking began in March 2020 … 53% of Americans feel comfortable going on vacation, a record since tracking began in April 2020.” ANOTHER APPROACH ON CAP GAINS — RBAdvisors Richard Bernstein emails MM: “When I was at Merrill, I wrote something that proposed a sliding scale cap gains tax rate that would incentivize longer-term risk taking and capital formation while penalizing short-term speculation. “The idea was that 1-year cap gains be treated as income with the tax rate falling a bit each year the asset is held. Eventually, after holding an asset for something like 25 years, the cap gains tax rate would be zero.” FED PREP — Pantheon’s Ian Shepherdson: “How many times today will Chair Powell refer to a post-Covid increase in inflation as likely to be ‘transitory’ or ‘transient’? … He's under no real pressure to shift his stance yet, given that core CPI inflation in March was only 1.6% … “Markets are impatient, but the Fed has not forgotten its collective finger-burning after hiking nine times from December 2015 through December 2018. … Whether wage growth will be so restrained this time around is another question. The surveys already indicate that the labor market—outside the hospitality, travel, and retail sectors—is tighter now than at the peak before the crash of 2008” BIDEN CFPB PICK URGED TO FIX “RACIST” POLICIES AT AGENCY — Our Katy O’Donnell: “Rohit Chopra … Biden’s nominee to lead the Consumer Financial Protection Bureau, told lawmakers last month that racial inequality is ‘reinforced and exacerbated’ by workplace racism. Now, complaints of pay discrimination may be one of the first big challenges he addresses at his own agency. “According to the CFPB's union, Black employees last year were paid a median $20,000 less than white employees. Base pay was lower for employees of color even when job type and experience were the same, the union said in a pay study it conducted in the fall. The problem has plagued the CFPB since its creation under … Obama” GENSLER TO TESTIFY ON GAMESTOP — Our Zachary Warmbrodt: “SEC Chair Gary Gensler is expected to testify on the GameStop stock trading saga at a May 6 House hearing, which would be his first Hill appearance since becoming Wall Street's top cop, sources familiar with the matter said … “The House Financial Services Committee hearing, which has not been formally announced, would be the panel's third focused on GameStop-related trading issues since February.” | | | |   | | | | | | STOCKS END WOBBLY DAY MIXED — AP’s Damian J. Troise and Alex Veiga: “Major U.S. stock indexes ended a wobbly day mixed on Wall Street, keeping the S&P 500 near the record high it set a day earlier. The benchmark index ended down less than one point Tuesday and the Dow Jones Industrial Average closed basically unchanged. “The Nasdaq fell 0.3 percent. It’s a heavy week for earnings reports from big U.S. companies. UPS soared after reporting another surge in delivery volumes. Investors will be watching for news out of the Federal Reserve on Wednesday after its two-day meeting, as well as President Joe Biden’s speech to a joint session of Congress.” SEC MULLS GUIDANCE TO CURB SPAC PROJECTIONS, LIABILITY SHIELD — Reuters’ Anirban Sen, Joshua Franklin and Chris Prentice: The U.S. securities regulator is considering new guidance to rein in growth projections made by listed blank-check companies, and clarify when they qualify for certain legal protections, according to three people with knowledge of the discussions. | | | | JOIN AN IMPORTANT CONVERSATION, SUBSCRIBE TO "THE RECAST": Power is shifting in Washington and across the country. More people are demanding a seat at the table, insisting that all politics is personal and not all policy is equitable. “The Recast” is a twice-weekly newsletter that explores the changing power dynamics in Washington and breaks down how race and identity are recasting politics and policy across America. Get fresh insights, scoops and dispatches on this crucial intersection from across the country and hear critical new voices that challenge business as usual. Don't miss out, SUBSCRIBE . Thank you to our sponsor, Intel. | | | | | TREASURY YIELDS RISE AHEAD OF FED STATEMENT — WSJ’s Sam Goldfarb: “U.S. government bond prices pulled back Tuesday, reflecting the impact of an auction of seven-year debt and the looming conclusion of the Federal Reserve’s two-day policy meeting. "The yield on the benchmark 10-year U.S. Treasury note settled at 1.622 percent, the highest since April 14, compared with 1.568 percent Monday. Yields, which rise when bond prices fall, edged higher in the morning, climbed more steeply heading into the $62 billion auction of seven-year notes and took another turn higher shortly after the auction.” INFLATION EXPECTATIONS HIT EIGHT-YEAR HIGH — Bloomberg’s Vivien Lou Chen: “A bond-market gauge of U.S. inflation expectations soared to the highest level in eight years as oil and metal prices jumped and economic indicators pointed to a strengthening recovery from the pandemic. “The 10-year breakeven rate, a proxy for where investors see annual inflation rates over the next decade, topped 2.4 percent Tuesday — a level not seen since April 2013. Meanwhile, Treasury yields rose across the curve, with the benchmark 10-year rate climbing as much as six basis points to 1.63 percent.” | | A message from the Independent Community Bankers of America: Community bankers and ICBA offer bipartisan solutions: At a time of historic challenge and opportunity, community bankers this week are meeting with members of Congress as part of the ICBA Capital Summit.
Congress is closely divided, but it need not be gridlocked. While saving an estimated 33.7 million jobs through the first round of Paycheck Protection Program lending and serving every congressional district with their more than 700,000 employees, community banks have a track record of working with both parties to craft pragmatic solutions.
During this week’s ICBA meetings, community bankers will discuss bipartisan policy reforms to help continue the economic recovery in urban, suburban, and rural communities nationwide. Read ICBA’s bipartisan agenda. | | | | | | CONFIDENCE IN ECONOMY APPROACHES PRE-PANDEMIC LEVEL — WSJ’s Xavier Fontdegloria: “Consumers’ outlook on the economy has increased for four straight months as vaccination totals rise, businesses more fully reopen. “Consumers’ confidence in the U.S. economy rose sharply in April as more people received vaccinations, stimulus payments reached households and businesses more fully reopened. The consumer confidence index increased to 121.7 in April from a revised 109.0 in March, the Conference Board said Tuesday.” NEW RESTAURANT GRANT FUND EXPECTED TO BE EXHAUSTED IN PRIORITY PERIOD — NYT’s Stacy Cowley: “A $28.6 billion grant fund for restaurants, bars, caterers and other food businesses will open Monday, the government said on Tuesday, offering an extra lifeline to some of America’s hardest hit small businesses. “The Restaurant Revitalization Fund, which was created last month by the $1.9 trillion American Rescue Plan, will offer grants of up to $10 million to replace lost sales. The amount each businesses can receive is generally the difference between its 2019 and 2020 gross receipts, minus certain other federal assistance such as Paycheck Protection Program loans.” RENT CRISIS SPIRALS FOR LANDLORDS AWAITING $47B IN RELIEF — Bloomberg’s Prashant Gopal and Noah Buhayar: “More than a year since Covid-19 lockdowns put millions of apartment dwellers out of work, almost $47 billion in U.S. government rent relief is hitting the streets. For many landlords, it’s coming much too slowly. TRANSITIONS — MICHELE CHANG and MOLLY RITNER have joined the U.S. Economic Development Administration, which is part of the Commerce Department, according to an announcement. The two appointments will work on regional economic developments across the country. | | | | DON'T MISS OUT ON OUR NEW PLAYBOOK DEEP DIVE PODCAST: Washington is full of whispers, colorful characters and little-known back stories that even D.C. insiders might not know. Playbook Deep Dive is a new, weekly podcast that pulls back the curtain on the stories behind the power. From Congress and the White House to bar stools and backrooms, POLITICO's top reporters and Playbook authors bring you the most compelling and confounding stories that explain what’s really going on in Washington. SUBSCRIBE NOW. | | | | | | | | | Follow us on Twitter | | | | Follow us | | | | |  |
