| | | | | |  | | 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 subscribers 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 agenda has a big problem: The economy — Generally speaking, when you want to fundamentally overhaul the economy and dump in trillions of dollars in federal spending – funded by big tax hikes – you do it when the economy is spiraling downward and desperate for federal help. FDR's Great Depression fighting "New Deal" is perhaps the best example. President Joe Biden faces enough trouble pushing through his $4 trillion-plus spending plans given the one-vote margin for Democrats in the Senate. But his case is dramatically complicated by the fact that the economy is already roaring ahead from the depths of the Covid-19 decline. And it's set to rocket well into next year as long as vaccinations continue at their current pace and new strains do not emerge. Biden is likely to benefit from this economic rebound. And he can rightfully take some credit given his administration's far more organized Covid response and the initial stimulus package. But selling a much larger federal expansion and tax hikes is going to be a massive lift given current growth rates and the threat of destabilizing inflation. Yes, we are beating this drum again . But you are going to hear more center-left economists starting to worry about it in the very near future. Dumping giant buckets of gasoline on an already hot economy is usually a recipe for price-spike disaster. Ultimately, the White House may be fine with doing a more modest infrastructure bill. And Democrats could cruise into 2022 with economic winds at their backs. But they also risk over-shooting on policy in a massive way, handing Republicans easy weapons to do what the out-party usually does in initial midterms: Kick the incumbent White House party's butts. High Frequency Economics' Rubeela Farooqi: "The economy started the year on a solid footing, expanding 6.4 percent at a seasonally adjusted annualized rate … "Apart from a 33.4% bounce in the third quarter of last year, after the initial pandemic-related lockdowns eased, this was the fastest pace of growth since a 7.0% surge in Q3 2003. … GDP remains below pre-pandemic levels but is moving closer towards that threshold. … We are forecasting a double-digit growth rate for the current quarter, which should lift GDP above the pre-recession level." How big is Biden trying to go? Really big — Pantheon's Ian Shepherdson: "Biden's $1.8T American Families Plan, together with the $2.3T infrastructure plan, and the $1.9T Covid relief bill, amount to nothing less than attempt to push the United States towards a European-style social democratic model. ... Six trillion dollars is a lot of money, even when spread over 10 years; it amounts to 2.8% of current GDP per year." GOOD FRIDAY MORNING — Happy weekend, everyone! 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. | | | | | | President Biden heads to Philadelphia where he will deliver remarks at an event marking Amtrak's 50th Anniversary (yes, the dude loves Amtrak) … Personal income and spending at 8:30 a.m. expected to rise 20.0 percent (post Covid) and 4.2 percent, respectively … Univ. Of Michigan consumer sentiment at 10:00 a.m. expected to rise to 87.5 from 86.5 BIDEN TAX HIKE DETAILS — Our Bernie Becker: "Biden's proposed top individual income tax rate of 39.6 percent would hit income above around $452,700 a year for individuals, according to a White House official. "For married couples, the 39.6 percent rate would start at $509,300 in income, and could hit some individuals who make less than the $400,000 Biden has repeatedly cited for triggering a tax hike. The official said those thresholds were based on the tax brackets from before the 2017 GOP tax law, which cut the top individual rate from 39.6 percent to 37 percent. The new brackets would be for the 2022 tax year." LABOR FORCE ALREADY POPPING BACK — Our Rebecca Rainey: "Businesses and the White House in recent weeks have warned that they are combating a labor shortage despite the millions laid off due to the coronavirus pandemic, creating potential political friction for … Biden as he pushes Congress to advance his trillion-dollar spending proposals to gas up the economy. "While the labor market is certainly not flush with workers … recent economic indicators suggest that concern over a mass deficit of workers is likely overstated. The number of people newly applying for unemployment benefits fell again last week to a new pandemic low … And the total number of workers on unemployment rolls also dropped, suggesting that people may be finding jobs or returning to work after being laid off." | | | | JOIN TUESDAY FOR A CONVERSATION ON SMALL BUSINESSES POST-COVID-19: About one in six small businesses closed their doors since the pandemic began. The small businesses that remained open are getting by with fewer employees after laying off workers or a hiring freeze. What is ahead for small businesses in 2021 as they try to weather the ongoing economic uncertainty? And how does President Biden's $1.9 trillion coronavirus relief package intend to support small-business owners? Join POLITICO for a virtual conversation on what small businesses need to survive and thrive beyond the Covid economic crisis. REGISTER HERE. | | | | | | | | STOCKS END HIGHER, S&P 500 SEES ANOTHER RECORD HIGH — AP's Damian J. Troise and Alex Veiga: "Stocks overcame a midday stumble on Wall Street to close broadly higher Thursday, driving the S&P 500 to another record high. "The benchmark index rose 0.7 percent after having been down 0.2 percent earlier. Communications companied helped power a big part of the gain, led by a sharp rise in Facebook following the company's latest quarterly report card. Banks also helped lead the rally, outweighing a pullback in health care and technology stocks. Treasury yields were mixed." In fact, stocks are off to best start to a presidential since the Great Depression — WSJ's Karen Langley: "The stock market closed out President Biden's first 100 days in office on Thursday with its best start to a presidential term since the days of Franklin D. Roosevelt. The S&P 500 has risen 11 percent since Mr. Biden's Jan. 20 inauguration. "The index recorded its strongest performance since the start of Mr. Roosevelt's first term in 1933, when it surged 80 percent after a spectacular crash in the Great Depression, according to a Dow Jones Market Data analysis. By comparison, the S&P 500 rose 5.3 percent in the first 100 days of President Donald Trump's term in early 2017 and on average has gained 3.2 percent over that period in presidential terms since Herbert Hoover's in 1929." | | | |   | | | | | | ECONOMY'S STRONG START SIGNALS A STELLAR YEAR — NYT's Nelson D. Schwartz: "The economy picked up speed last quarter, shaking off some of the lingering effects of the pandemic as consumer spending grew, bolstered by government stimulus checks and an easing of restrictions in many parts of the country. "The Commerce Department reported Thursday that the economy expanded 1.6 percent in the first three months of 2021, compared with 1.1 percent in the final quarter last year. On an annualized basis, the first-quarter growth rate was 6.4 percent." BIDEN TAX PLAN LEANS ON BANKS TO HELP FIND UNREPORTED INCOME — WSJ's Orla McCaffrey and Richard Rubin: "Part of the funding for President Biden's $1.8 trillion American Families Plan hinges on a beefed-up reporting requirement for banks designed to identify unreported income. "The proposal would require banks to report annual account inflows and outflows to the Internal Revenue Service. The requirement would also extend to peer-to-peer payment services such as Venmo but wouldn't require individuals and businesses to report any additional information to the government" POLL: MANY REPUBLICAN VOTERS AGREE WITH BIDEN THAT 'TRICKLE-DOWN ECONOMICS' HAS FAILED — Reuters' Chris Kahn: "A majority of Americans support measures favored by President Joe Biden to substantially redistribute U.S. wealth, according to an Ipsos poll for Reuters released on Thursday, including tax hikes on the wealthy and a higher minimum wage. "The national opinion poll also found that Republican voters were divided over the 'trickle-down economics' championed by their party's leaders since President Ronald Reagan some 40 years ago. In his speech to Congress on Wednesday night, Biden attacked trickle-down economics as an idea that has never worked. The poll was conducted after the speech." | | | | 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. | | | | | THE ECONOMY IS (ALMOST) BACK, BUT IT'LL LOOK DIFFERENT — NYT's Neil Irwin: "There have been a lot of strange economic numbers over the last 14 months, as the world has been whipsawed by the pandemic. But one particular line of the first-quarter G.D.P. numbers released Thursday stands out even so. "Americans' spending on durable goods — cars and furniture and other goods meant to last a long time — rose at a stunning 41.4 percent annual rate in the first three months of the year. Enjoy your Pelotons and Big Green Eggs, everybody. The central reality of the economy in 2021 is that it's profoundly unequal across sectors, unbalanced in ways that have enormous long-term implications for businesses and workers." PRIVATE EQUITY AND HEDGE FUNDS, FACING NEW TAX BURDEN, PREPARE THEIR DEFENSE — WSJ's Miriam Gottfried and Juliet Chung: "Some private-equity firms and hedge funds are pushing back against a proposal from … Biden to end the carried-interest tax advantage these types of firms enjoy. "Hedge funds and private-equity firms are among those that would be affected by Mr. Biden's proposal, given his plan would get rid of lower rates on long-term capital gains for high-income households and end what the administration calls the "carried-interest loophole." The moves would mean investment managers would no longer be allowed to pay a lower rate on a substantial portion of their compensation." FORBES PURSUES SPAC TALKS — Reuters' Joshua Franklin, Echo Wang and Krystal Hu: "Business news and information publisher Forbes Media LLC is in talks to go public through a merger with a special purpose acquisition company (SPAC) as it attracts new acquisition interest, people familiar with the matter said" | | 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. | | | | | | | Follow us on Twitter | | | | Follow us | | | | |
No comments:
Post a Comment