| | | | |  | | By Sam Sutton | | 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 5:15 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.
| | Jeff Bezos, Larry Fink and Donald Trump’s Treasury pick Scott Bessent all agree: Turbocharging economic growth is the best route to reining in the U.S.’s massive $36 trillion debt. History is not on their side. Bessent warns that this is the “last chance” for the country to grow its way out of the record debt without becoming a “European-style socialist democracy.” Fink, who heads the world’s largest asset manager BlackRock, urged the incoming administration in an Election Day op-ed to promote artificial intelligence and infrastructure investments to grow the economy and tame the deficit. And Amazon founder Bezos told economic power brokers at the DealBook Summit this month that the only way to solve the problem is to expand the economy by 3 to 5 percent a year while simultaneously trimming annual deficits. “If you can do that, this is a very manageable problem,” Bezos said. As your host reports, that’s a tall order that few modern presidents have managed to achieve for any sustained period. Bill Clinton famously generated budget surpluses while the economy soared at rates of more than 4 percent in the late 1990s. Ronald Reagan brought down deficits in 1984 and 1987 but otherwise ran up the red ink. And Trump himself will face even more significant challenges if he follows through on tax and tariff pledges that budget forecasters say could add $4.1 trillion to $15.6 trillion to the debt over the next decade. Trump promised during the campaign that a combination of lower taxes, more energy production, looser regulations and punishing tariffs would generate “explosive” growth to pay down the debt. And government budgets would shrink by “trillions,” he said, with Elon Musk and Vivek Ramaswamy tasked with tackling government waste. Trump allies are bullish on the president-elect pulling it off. Joseph LaVorgna, a former Trump administration economist who’s now at SMBC Nikko Securities America, argues that Musk and Ramaswamy’s so-called Department of Government Efficiency could eliminate hundreds of billions of fraudulent federal outlays, which would bolster confidence in the country’s trajectory and drive down interest rates in the process. The stock market has surged on the belief that the Trump administration will make the government more efficient, he said, adding that stimulates the economy. “Don't get caught up in the bean counting in the very short term,” LaVorgna said of the naysayers. “Because I don't think it means a whole lot.” But Trump has also vowed that he won’t touch entitlement programs like Social Security and Medicare, which are by far the chief drivers of the debt and are projected to be insolvent by the mid-2030s. Imposing tariffs on imports could trigger reprisals that would harm growth, and even if they didn’t, many economists believe it would take a historic economic boom to meaningfully address the country’s fiscal challenges. “You can't improve this with growth,” said Tom Porcelli, the chief U.S. economist at PGIM Fixed Income. “You'd have to have 5 percent growth for a pretty decent amount of time to have any real notable impact.” It’s MONDAY — You want to talk growth? I’m going to be growing out of my suits if I don’t go on a post-holiday diet [groans]. Dynamic scoring couldn’t keep me in a 40R at this pace [pelted by rotten tomatoes]. Email me tips, suggestions or gossip at ssutton@politico.com.
| | A message from Capital One: Capital One recently announced our historic, five-year, $265 billion community benefits plan in connection with our proposed acquisition of Discover to advance economic opportunity and financial well-being. This plan is twice as large as any other community commitment developed in connection with a bank acquisition and demonstrates that the combined Capital One and Discover will create an opportunity to provide more lending, investment, and services for underserved communities than either institution would undertake individually. Important information: CapitalOneDiscover.com | | | | | Monday … President Joe Biden speaks at the Labor Department at 12:15 p.m. … The Brookings Institution hosts David Byrne, the principal economist for research and statistics at the Federal Reserve Board of Governors, for a virtual presentation on “The Digital Economy and Productivity” at 2 p.m. Tuesday … November retail sales data is out at 8:30 a.m. … The Federal Deposit Insurance Corp. meets at 10 a.m. … The National Credit Union Administration meets at 10 a.m. … Wednesday … November housing starts and building permits data is out at 8:30 a.m. … The Peterson Institute for International Economics hosts a discussion on the BRICS bloc at 9 a.m. … The SEC meets at 10 a.m. to consider the budget of the Public Company Accounting Oversight Board … The CFTC meets at 10 a.m. … Senate Finance has a hearing on the nominations of James Coughlan, Halie Craig and William Kimmitt to be members of the U.S. International Trade Commission at 10 a.m.… The Fed will release its interest rate decision at 2 p.m. …. Fed Chair Jerome Powell will hold a press conference at 2:30 p.m. … The Joint Economic Committee has a hearing on “Trade Wars & Higher Costs: The Case Against Trump's Tariffs” at 2:30 p.m. … Thursday … The second revision of third-quarter GDP is out at 8:30 a.m. … White House National Economic Adviser Lael Brainard speaks at a Brookings event on supply chains at 10 a.m. … The Neighborhood Reinvestment Corp. meets at 2 p.m. … Friday … The Personal Consumption Expenditures index for November is out at 8:30 a.m. … The University of Michigan Consumer Sentiment survey is out at 10 a.m. …
| | | | Billions in spending. Critical foreign aid. Immigration reform. The final weeks of 2024 could bring major policy changes. Inside Congress provides daily insights into how Congressional leaders are navigating these high-stakes issues. Subscribe today. | | | | | Trump’s invisible hand — Eleanor Mueller, Jasper Goodman and Gavin Bade have a must-read story on how Trump’s imminent second term has shaped the debate around lame-duck legislation that would restrict U.S investments in China. Lawmakers and aides are favoring a “light-touch approach” to give Trump wider latitude in his efforts to extract new concessions from Beijing. If the bill is too restrictive, it could challenge Trump’s ability to strike a deal with China. And critically: “The flexibilities Trump will have in the recent draft of the investment bill are also mutually beneficial to financial institutions, tech firms and venture capitalists that have a stake in the Chinese market.” Ticktock, ticktock — Wall Street’s top regulator has been led by a mix of Democratic, Independent and Republican commissioners throughout the last 90 years. Yet, if Senate Democrats fail to push through SEC Commissioner Caroline Crenshaw’s renomination this week, the SEC will be one step closer to coming under single-party control next year, Declan Harty reports. The Senate Banking Committee is set to vote Wednesday on Crenshaw’s nomination for a new five-year term, after a scuttled markup last week. If successful, the panel’s green-light would likely set up an 11th-hour vote in the full chamber to lock Crenshaw in as the SEC’s lone Democrat next year when Trump comes to power. But, if Crenshaw is left hanging, Trump will have the power to nominate his pick to lead the agency — former SEC Commissioner Paul Atkins — for her seat, potentially setting up a three-person commission exclusively consisting of Republican members. The SEC’s musical chairs rarely break out as headline-dominating news — and especially so for minority commissioners. But the Crenshaw seat has many in Washington on edge. Financial watchdogs are fretting about a Democrat-less SEC, a break from long-standing tradition of a bipartisan commission. And the crypto industry is aggressively lobbying lawmakers to vote against Crenshaw, who has been critical of the industry. What Wall Street associates are reading — The WSJ’s Alexander Saeedy has an eyebrow-raising report on how financial services professionals now rely on powerful stimulants to do their jobs. Adderall — along with nicotine pouches and energy drinks — is now de rigueur. “Many of my patients think about taking stimulants just like they would think about taking multivitamins or dietary supplements,” Samuel Glazer, a New York psychiatrist, told The WSJ. “This is much more casual than opioids were 20 years ago.”
| | What’s next for House Financial Services — Jasper interviewed incoming House Financial Services Chair French Hill (R-Ark.) about his plans for the committee with Republicans in control of all three branches. His top priority in the first 100 days will be addressing regulatory burdens placed on community banks. He also plans to focus on the “misdirected oversight and the regulatory priorities of the SEC” and will “see if we can find consensus in the House and Senate on how to craft a market structure for digital assets.” — Hill also told CNBC that House Majority Leader Steve Scalise wants to pass legislation in the first 100 days of the new Congress that would overhaul cryptocurrency regulation, Eleanor reports. — Eleanor also reports that the Republican steering committee voted on Friday to name Reps. Lisa McClain (R-Mich.), Maria Salazar (R-Fla.), Mike Haridopolos (R-Fla.), Marlin Stutzman (R-Ind.), Tim Moore (R-N.C.) and Troy Downing (R-Mont.) to House Financial Services. Dissension in the ranks — Congressional leaders’ failure to reach a deal to include economic aid for farmers in the year-end funding agreement could create a big headache for House Speaker Mike Johnson, Meredith Lee Hill reports. House Agriculture Chair G.T. Thompson (R-Pa.) announced that he would oppose any spending measure if it doesn’t include aid for farmers. The conservative-leaning agriculture lobby American Farm Bureau Federation is urging lawmakers to take a similar tack. As Meredith reports, farm state Republicans were seeking the aid for farmers who are “still reeling from Donald Trump's 2018 trade war, inflation, a delayed five-year farm bill reauthorization and a raft of other economic pressures.”
| | | | Write your own chapter in the new Washington. From the Lame Duck Congress Series to New Administration insights, POLITICO Pro delivers intelligence across 22+ policy areas to help you anticipate and navigate change. Discover how a Pro subscription empowers you. Learn more today. | | | | | | | | You mean he’s going to do what he says? — Corporate leaders are worried that Trump is actually going to follow through on plans to impose high tariffs on goods from China, Mexico, Canada and other countries, The WSJ’s Brian Schwartz reports. His team has told corporate consultants there is “no waving the president-elect off his plans to make liberal use of tariffs” once he returns to the White House. — Still, many in the business world are still bullish. The Chamber of Commerce provided MM with a sneak peak of its fourth-quarter Small Business Index — out this morning — which found that 72 percent of small business owners expect revenue to climb in 2025. A narrow majority of small business owners also said that licensing, certification and permit requirements have made it harder for them to grow their business. Immigration — On the other hand, immigration hardliners are starting to fret that the president-elect won’t deliver on his promise to carry out the largest mass deportation in U.S. history, The WSJ’s Michelle Hackman and Tarini Parti report. Why that matters — Tariffs and immigration restrictions — along with strong economic momentum, lower taxes and residual seasonality — are among the upside risks that could stoke inflation, writes Apollo Global Management’s Chief Economist Torsten Slok. — Another factor? Insurance. Coverage for autos, homes and medical care contributed to a 15 percent of the recent increase in overall consumer prices, economists told WaPo’s Andrew Ackerman and Federica Cocco. — Americans for Financial Reform Education Fund, Public Citizen and other watchdog groups sent a letter to Treasury on Friday calling for the publication of granular homeowners insurance data from the National Association of Insurance Commissioners. Rising insurance costs — and the departure of carriers from certain markets — is “creating an affordability crisis that threatens Americans’ homes, life savings, and the economies of already vulnerable regions,” the groups wrote. “Given the speed at which an insurance crisis is unfolding, comprehensive national data and analysis must be an urgent priority.”
| | | | A message from Capital One:   | | | | | Escalation — Elon Musk ramped up his long-running war against the SEC last week as the regulator weighs bringing charges against the billionaire Trump adviser relating to his $44 billion purchase of Twitter, Declan reports. Musk posted a copy of a letter addressed to agency Chair Gary Gensler claiming the regulator's staff had issued "a settlement demand" requiring Musk either agree to a monetary payment or face multiple charges. — Musk’s involvement with the incoming Trump administration could meaningfully benefit his business empire. Jarrett Renshaw, Rachael Levy and Chris Kirkham of Reuters report that Trump’s transition team is considering nixing a car-crash reporting requirement opposed by Tesla as part of the incoming administration’s first 100 days agenda. — WaPo’s Faiz Siddiqui and Trisha Thadani: “Elon Musk put $277 million into the election. Now he’s $200 billion richer.” Adios — Also from Declan: SEC Corporation Finance Director Erik Gerding will leave the agency at the end of the year. What Bill Ackman’s reading — Michael Stratford reports that the Congressional Budget Office has found that the potential value of Fannie Mae and Freddie Mac to investors “is greater now than it was at the time of the previous analysis.” In a report requested by outgoing House Financial Services Chair Patrick McHenry (R-N.C.), CBO said the government-run companies would have an easier time raising money to meet their capital requirements and pay Treasury for its roughly $190 billion stake in them than the congressional scorekeeper projected back in 2020.
| | A message from Capital One: Capital One’s community benefits plan, as part of our proposed acquisition of Discover, announces a commitment of over $35 billion supporting affordable housing for low- and moderate-income communities and individuals, representing a nearly 30% increase over our planned activities, as well as over $5 billion supporting solutions to challenges LMI communities face, including employment, food accessibility, healthcare, education, and public infrastructure.
Important information: CapitalOneDiscover.com | | | | | | | Follow us on Twitter | | | | Follow us | | | | |
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