It's infrastructure week ... again — Jobs report clears up nothing — G-7 leaders strike tax deal

From: POLITICO's Morning Money - Monday Jun 07,2021 12:15 pm
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By Ben White and Aubree Eliza Weaver

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Quick Fix

It's infrastructure week … again — Congress is back this week and it’s once again sort of, kind of deadline time for an infrastructure deal with President Biden still hoping to find agreement with Sen. Shelley Moore Capito (R-W.Va.) and other Senate Republicans. And progressives are likely to grow even more annoyed with the talks and push the White House to punt and try and act unilaterally on its agenda.

Trouble is the other West Virginia Senator, Democrat Joe Manchin, is not really on board with the go-it-alone approach and still thinks a bipartisan deal is possible. Manchin said over the weekend he has “all the confidence in the world” that an agreement could be reached in the next few days. But it's kind of hard to see that, given Capito’s last offer added only $50 billion in new spending to reach $257 billion and the White House has no interest in dipping into previously allocated funds. A giant chasm remains.

CompassPoint’s Isaac Boltansky : “It is unclear how much longer the White House will push for a bipartisan deal … We are still bearish on the prospects for a bipartisan infrastructure package given remaining divides over the scale, scope, and pay-fors ...

“We continue to believe the odds favor the enactment of a multitrillion-dollar spending package with new taxes on corporations, capital, and high-earners offsetting a portion of the total cost.”

The messy jobs market — The May jobs report was kind of muddled mess. Not awful. Not great.Rebecca Rainey and I wrote about it here. The number won't erase concerns about whether generous federal benefits are keeping Americans from rejoining the labor force or whether the Biden administration and Congress need to do more to light a fire under the economy. (More below).

GOOD MONDAY MORNING — Hope fellow East Coasters survived a truly sweltering weekend. MM spent all day Sunday at kid baseball and is now little more than a sunburned puddle. Email me at bwhite@politico.com and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver at aweaver@politico.com and follow her on Twitter.

 

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DRIVING THE WEEK

President Biden on Monday hosts NATO Secretary Jens Stoltenberg ahead of the June 14 NATO Summit in Brussels …

On Wednesday, Biden heads out on his first overseas trip as President, heading to the UK where he will meet with Prime Minister Boris Johnson and then attend the G7 Summit in Cornwall over the weekend before meeting with Her Majesty Queen Elizabeth II at Windsor Castle. From there, Biden heads to Brussels for the NATO meeting …

Senate Banking has a hearing on Tuesday at 2:30 p.m. on “Building A Stronger Financial System: Opportunities of a Central Bank Digital Currency.”

JOBS REPORT SETTLES … NOTHING — Pantheon’s Ian Shepherdson: “The May employment report did not resolve any of the key labor market issues keeping the Fed awake at night. The 559K increase in payrolls was welcome, and it marked a clear improvement on April's revised 278K gain, but it left the economy still 7.6M jobs down from the pre-Covid level, and nearly 11M short of the level we would have expected if the pandemic hadn't happened.

“It would have been reasonable for a casual observer to have expected much bigger increases in payrolls in both months, given the surging near-real-time indicators of demand, consistent with double-digit economic growth in the second quarter. But the record—and rising—level of job openings … indicate that the constraint on payroll growth is lack of labor supply, not lack of demand."

Fly Around

FED’S INFLATION VIEW IS ALL ABOUT THAT BASE — WSJ’s Jon Hilsenrath: “Federal Reserve officials are talking a lot these days about base effects. That relates to how the economy looks now compared with a year ago. Such year-over-year comparisons provide a sense of how the economy is changing over time. Corporate profits are often deciphered based on year-ago comparisons, too.

“The problem is when something screwy happens a year earlier. The base from which a year-over-year comparison is calculated becomes distorted. If a company takes a hit in one year and then gets back to normal the next, it can look like its profits are soaring when in fact they are just getting back on track.”

G-7 LEADERS REACH GLOBAL TAX DEAL AIMED AT ENDING PROFIT SHIFTING — NYT’s Alan Rappeport: “The top economic officials from the world’s advanced economies reached a breakthrough on Saturday in their yearslong efforts to overhaul international tax laws, unveiling a broad agreement that aims to stop large multinational companies from seeking out tax havens and force them to pay more of their income to governments.

“Finance leaders from the Group of 7 countries agreed to back a new global minimum tax rate of at least 15 percent that companies would have to pay regardless of where they locate their headquarters.”

YELLEN SAYS SHE URGED G-7 TO KEEP UP FISCAL SUPPORT FOR RECOVERY, CLIMATE INVESTMENTS — Reuters: “U.S. Treasury Secretary Janet Yellen said on Saturday that she is urging the G7 wealthy democracies and other countries to keep up fiscal support for their economic recoveries and to make investments to fight climate change and inequality.

“In prepared remarks for a news conference after G7 finance ministers met in London, Yellen also praised an agreement to pursue a global minimum tax of at least 15% on corporations as helping to stabilize tax systems while preserving national authority to set tax rates and policies.”

She also said higher interest rates would be a ‘plus’ for the U.S., Fed — Bloomberg’s Saleha Mohsin: “Treasury Secretary Janet Yellen said President Joe Biden should push forward with his $4 trillion spending plans even if they trigger inflation that persists into next year and higher interest rates.

“‘If we ended up with a slightly higher interest rate environment it would actually be a plus for society’s point of view and the Fed’s point of view,’ Yellen said Sunday in an interview with Bloomberg News during her return from the Group of Seven finance ministers’ meeting in London.”

ECONOMY SEES PLENTY OF GROWTH, NOT ENOUGH WORKERS OR SUPPLIES — AP’s Paul Wiseman: “The U.S. economy is sparking confusion and whiplash almost as fast as it’s adding jobs. Barely more than a year after the coronavirus caused the steepest economic fall and job losses on record, the speed of the rebound has been so unexpectedly swift that many companies can’t fill jobs or acquire enough supplies to meet a pent-up burst of customer demand. …

“In many ways, the news has been cause to cheer: The economy grew from January through March at a red-hot 6.4 percent annual pace. And in the current quarter, that pace is thought to be accelerating to nearly double-digits. Yet the full portrait of the U.S. economy is a rather more nuanced one.”

PROPOSED FRAMEWORK AIMS TO GUIDE REGULATORS IN DECISIONS TO CHARGE CHIEF COMPLIANCE OFFICERS — WSJ’s Mengqi Sun: “A proposed framework guiding decisions to bring enforcement actions against financial sector chief compliance officers aims to address growing concern over the individual liability of compliance professionals.

“The proposed framework, released Wednesday by the New York City Bar Association, asks regulators to evaluate 12 affirmative factors and three mitigating factors in deciding whether to charge chief compliance officers for conduct relating to their job-related duties under federal securities laws.”

ICYMI: SEC OUSTS AUDIT HEAD — Reuters’ Katanga Johnson and Chris Prentice: “The U.S. Securities and Exchange Commission (SEC) on Friday said it had removed the head of the oversight board that sets standards for audits of public companies and planned to replace the rest of the board in due course.

“The SEC said in a statement that it had voted to remove William Duhnke III as chair of the Public Company Accounting Oversight Board (PCAOB), a role he has held since January 2018, effective Friday. The other four members of the board will stay on, but the SEC — which oversees the accounting watchdog — is soliciting resumes for those roles.”

BOFA CEO: FLUSH WITH STIMULUS CASH, CONSUMERS ARE SPENDING MORE — Bloomberg’s Yueqi Yang: “Bank of America Corp. Chief Executive Officer Brian Moynihan said consumer spending has surged amid the reopening, much of it fueled by leftover stimulus money. ‘Our consumers have lots of money in their checking accounts,’ Moynihan said Sunday on CBS’s ‘Face the Nation.’

‘They have not spent about 65% to 75% of the last couple rounds of stimulus.’ Spending by consumers at the second-biggest U.S. bank exceeded $1 trillion so far this year, up 20% over 2019, he said.”

 

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