Welcome to Biden budget day: Where's the growth? — Dems pan GOP infra offer — Jobless claims keep falling

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May 28, 2021 View in browser   By Ben White and Aubree Eliza Weaver PROGRAMMING NOTE: Morning Money will not publish on Monday, May 31. We'll be back on our normal schedule on Tuesday, June 1. 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. Quick Fix Welcome to Biden Budget day: Where's the growth boom? — President Biden will roll out his first budget proposal today, reportedly a $6 trillion beast that will see spending and deficits soar to records not seen since World II. Eventually, deficits start to come under control under Biden's proposal but the debt still well exceeds the size of the economy before that. None of this is very surprising since the White House has proposed an additional $4 trillion in spending, beyond Covid stimulus already spent, to enact its "Build Back Better" agenda on infrastructure and families including expanded nursery school and community college along with expanded child credits, green energy investments and all the rest. What's weird about it all is that at least according to our buddy Jim Tankersley's write-up in the NYT, the budget forecasts long term growth at below 2 percent, barely above what we had in the desultory post-Great Recession recovery. But the White House has touted all its giant spending proposals as ways to ignite the economy by boosting productivity and drawing more people, especially women, back into the labor force. So why spend all these gobs of money and further blow up deficit and debt for what seems like almost nothing in faster economic growth? We'll have more on this later Friday, when the budget is officially released, on POLITICO. But here's at least some of why the growth figures will look so tepid… People close to the White House say the economic forecasting used in the president's budget was conducted prior to the formal introduction of the American Jobs Plan and the American Families Plan. While the forecast anticipated some of the proposed spending, they say, it could not account for all of it. They also say some elements of Biden's infrastructure and families plans – such as increased spending on green technology – could stoke the economy more than the budget proposal suggests. But current models cannot account for this potential growth. And the White House wanted to err on the side of caution after President Donald Trump's administration repeatedly issued rosy forecasts suggesting that tax cuts and deregulation would produce years of 3 percent growth or more. The Trump administration hit 3 percent growth in only a single year of his presidency (though Covid hit after that so who knows?) Said one former senior Trump admin official : "This is a giant increase in taxes and spending for apparently not much growth at all. Frankly I have no idea what they are doing. It makes no sense to me at all." GOOD FRIDAY MORNING — Happy Memorial Day Weekend everyone! Get out there and enjoy. Even though the weather looks... bad. MM is dark on Monday and back on Tuesday. 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.   SUBSCRIBE TO "THE RECAST" TODAY: Power is shifting in Washington and in communities across the country. More people are demanding a seat at the table, insisting that 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 in America. 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Thank you to our sponsor, Intel.     Driving the Day Biden rolls out his first big budget proposal… He and Virginia Governor Ralph Northam will deliver remarks at a business in Alexandria "to celebrate the significant progress Virginia has made in the fight against COVID-19" … In the afternoon, the President and the First Lady will deliver remarks at Joint Base Langley-Eustis in Hampton, Virginia before heading to Delaware for the weekend … Personal Income and Spending at 8:30 a.m. expected to show a drop of 14.8 percent and a gain of 0.4 percent, respectively … Univ. of Michigan Consumer Sentiment at 10 a.m. expected to dip to 83.0 from 88.3 MORE BUDGET PREACT — Richard Bernstein, founder of investment advisory firm RBAdvisors: "They clearly don't understand the implications of what they're putting out… The 2 percent trend is real [after inflation] growth. "So, if the think there's only going to be 2 percent trend real growth with a $4 trillion spend, then they must believe either the $4 trillion will be impotent or will result in a lot of inflation and therefore substantial nominal growth instead of real growth." COMING NEXT WEEK: QUARLES LIVE — The US economy is picking up speed, sparking fears of inflation and financial bubbles even as millions are still out of work following the Covid recession. Join Economics reporter Victoria Guida on POLITICO Live on Tuesday, June 1, at 10 a.m. ET for an interview with Federal Reserve Vice Chair of Supervision Randal Quarles to discuss the US economic outlook, how the nation's banks are holding up, and what to expect from the Fed on interest rates and regulations. Register to receive a link to access the virtual interview. DEMS PAN GOP COUNTER OFFER ON INFRASTRUCTURE — Our Marianne LeVine: "Senate Democrats panned the Republicans' latest counteroffer on infrastructure… signaling a bipartisan agreement remains far out of reach. The Democratic opposition rises in response to Republicans' new $928 billion infrastructure proposal … But there's a wide gulf between the GOP and the White House on top lines, with Republicans proposing $257 billion in new spending and the White House's last proffered number at $1.7 trillion. … "The new GOP proposal, which was detailed in a memo sent to the White House, allocates $506 billion for roads and bridges, $98 billion for public transit systems, $46 billion for passenger and freight trail, $21 billion for safety, $22 billion for ports and waterways, $56 billion for airports, among other features." Markets WALL STREET EKES OUT GAIN — Reuters' Chuck Mikolajczak: "U.S. stocks advanced slightly on Thursday, as data showing improvement in the labor market helped bolster expectations in the economic recovery and spurred a minor rotation towards stocks seen as more likely to benefit from the rebound. … "Investors have been closely watching economic data and comments from Federal Reserve officials for signs of runaway inflation and the possibility the central bank may begin to pull back on its massive stimulus measures." JUDGE ALLOWS ROBINHOOD CUSTOMER-PROTECTION CASE TO PROCEED — WSJ's Caitlin McCabe: "A Massachusetts judge on Thursday gave state securities regulators a green light to proceed with their case against Robinhood Financial LLC, ruling that it wouldn't be in the public interest to block an administrative court from hearing allegations that the online brokerage doesn't protect inexperienced investors. "Robinhood, the zero-commission trading platform that has exploded in popularity this year, asked a court last month to issue a preliminary injunction to prevent an administrative complaint brought by the Massachusetts Securities Division from proceeding."   SUBSCRIBE TO WEST WING PLAYBOOK: Add West Wing Playbook to keep up with the power players, latest policy developments and intriguing whispers percolating inside the West Wing and across the highest levels of the Cabinet. For buzzy nuggets and details you won't find anywhere else, subscribe today.     Fly Around LAWMAKERS HIT WALL STREET BANK CEOS OVER FEES — Reuters' Pete Schroeder: "The heads of major U.S. retail banks faced renewed criticism Thursday from Democratic lawmakers who said financial institutions should not have charged Americans billions of dollars in overdraft and other fees during the pandemic. "Testifying before Congress for the second time this week, the CEOs of JPMorgan Chase, Bank of America, Citigroup Inc and Wells Fargo & Co highlighted their banks' efforts to waive fees and offer more affordable accounts after Senator Elizabeth Warren attacked them over the costs." DIMON SHARPENS CRITICISM OF BIDEN'S TAX HIKE PROPOSAL — Bloomberg's Steven T. Dennis: "JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon has twice in this hearing before a congressional committee sharply criticized President Joe Biden's proposed tax hikes, which are aimed at people making more than $400,000 and at corporations. "He has previously questioned them, but today said that that level of tax increases would be four times bigger than the GOP's 2017 tax cuts and called that 'a mistake.'" CITI CEO SAYS BANK RETHINKING REBUFF OF RACIAL AUDIT — Bloomberg's Jennifer Surane and Saijel Kishan: "Citigroup Inc. is reconsidering a shareholder proposal that would require its board to oversee an audit analyzing the firm's adverse impacts on communities of color. "Nearly 40 percent of shareholders voted in favor of such an audit during the firm's annual meeting last month. Even though Citigroup's board recommended investors vote against the proposal and it failed, Chief Executive Officer Jane Fraser said Thursday that the bank is considering it once again." BLACK BUSINESS OWNERS TURNED TO FINTECH TO GET PANDEMIC AID — Bloomberg's Cecile Daurat and Alexandre Tanzi: "Black-owned businesses were much likelier than their peers to use online lenders than traditional banks when applying for U.S. pandemic relief loans, according to a study by the Federal Reserve Bank of New York. "About one in four Black owners seeking a Paycheck Protection Program loan applied to a fintech company, more than twice the rate of Whites, Asians and Hispanics, the New York Fed said in a blog post, part of its Economic Inequality series." JOBLESS CLAIMS DROP TO NEW PANDEMIC LOW — WSJ's Amara Omeokwe: "Worker filings for jobless benefits fell again to a fresh pandemic low, extending a steady downward trend and adding to signs of a healing labor market and a broader, though uneven, economic recovery. Initial unemployment claims for regular state programs, a proxy for layoffs, fell last week to 406,000 from 444,000 the prior week, the Labor Department said Thursday. "That level represents the lowest levels of claims since the coronavirus pandemic's onset last year and the fourth consecutive week claims have reached a new pandemic low. Economists surveyed by The Wall Street Journal had forecast there were 425,000 new claims last week." YELLEN SAYS TREASURY NEEDS MORE FUNDS TO OVERSEE RECOVERY — NYT's Alan Rappeport: "Treasury Secretary Janet L. Yellen warned on Thursday that her agency lacked sufficient resources to oversee an economic recovery that still has 'a long road ahead' and called on Congress to provide her with more funds to oversee a sprawling set of relief programs. "In testimony before a House appropriations subcommittee, Ms. Yellen expressed confidence that the end of the pandemic recession was in sight, but said that the Treasury Department is facing an overwhelming task in disbursing hundreds of billions of dollars of relief money with the same budget that it had a decade ago. The Treasury Department has been central to the federal government's response to the health crisis, funneling stimulus payments and aid to millions of Americans, states, cities and businesses." The recovery is still likely to be "bumpy" though — AP's Martin Crutsinger: "Treasury Secretary Janet Yellen says that the economic recovery is going to be 'bumpy' with high inflation readings likely to last through the end of this year. But Yellen insisted that the inflation pressures will be temporary and if they do threaten to become embedded in the economy, the government has the tools to address that threat."   Follow us on Twitter Mark McQuillian @mcqdc Ben White @morningmoneyben Aubree Eliza Weaver @aubreeeweaver Victoria Guida @vtg2 Katy O'Donnell @katyodonnell_ Zachary Warmbrodt @Zachary Kellie Mejdrich @kelmej   Follow us

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