Steven Mnuchin, Treasury Secretary Nominee (Nov. 30)

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Today, President-elect Trump announced that he will tap Steven Mnuchin for Treasury Secretary.  Not a particular  surprise — chair of the Trump campaign’s fundraising team, member of Yale’s Scull & Bones, and an early favorite for the position — Mnuchin and his political and policy views are nevertheless mostly a mystery outside his Wall Street circle.

To fill out this picture, we consider Mnuchin’s career, his preparation to head the Treasury, his chances for Senate confirmation, and what can be discerned about his and Treasury’s policy priorities from tax reform to Dodd-Frank.

Best,

Dana

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Who is Steven Mnuchin?

Mnuchin has deep ties to Wall Street. Throughout his career, he has worked in many of the most important fields and companies in large-scale global finance, and built up a network of connections and friends in this sector.

His resume includes:

  •  Goldman Sachs_Trader:

in 17 years working the fixed-income trading desk at Goldman, leading the divisions of mortgage trading, as well as treasury and other government bonds, Mnuchin eventually rose to become partner and chief information officer before leaving to firm to start his own ventures.

  •  Hedge Fund Manager:

Founder and chief executive officer of Dune Capital, a hedge fund based out of Los Angeles.

  •  Hollywood Impresario:

Film financier and producer, played substantial roles in financing films such as the X-Men franchise and executive producing films like “American Sniper” and “Mad-Max: Fury Road.”

  •  2008 Angel/Vulture Investor

Assembled a group including long-time friend George Soros to buy IndyMac, a California Mortgage provider which failed in 2008 and secured FDIC insurance against any losses on the new venture.

  •  and in Foreclosure:   Mnuchin served as Chairman and CEO of the newly named OneWest Bank.  Under his leadership, the bank expanded rapidly and developed a reputation for aggressive foreclosure during the recession, closing on more than 36,000 homes.  Mnuchin later sold the bank to CIT and doubled his investment; he remains on the bank’s Board.

Though he has extensive Wall Street and business experience, Mnuchin has no political experience — this marks his first  venture into the world of policy.  He has said that his experience working in finance and banking has given him the experience and insight necessary to head the Treasury and that he knows what is needed to boost growth and help small and mid size businesses.

Senate Confirmation:   Highly Likely

Mnuchin seems an odd choice at first blush as Trump’s choice for Treasury Secretary in view of his campaign rhetoric  and populist critiques of the banking and finance industry, particularly hedge-fund managers and Goldman Sachs specifically.  His confirmation hearings will likely make for interesting and important debates on Goldman’s influence, the Volcker Rule and other cornerstones of Dodd-Frank, as well as the role of hedge fund managers and the carried interest loophole.

Mnuchin does face challenges to his nomination.  Democrats plan to hammer Mnuchin on his time at OneWest Bank. Mnuchin faced several suits alleging discrimination in lending.  During his tenure, the bank was notorious for aggressive foreclosures tactics, and was accused of discriminatory lending and foreclosure practices.  Some, including Sens. Sanders and Warren of calling Trump’s appointee, a current hudge fund manager and former partner and Goldman Sachs hypocritical.

  •  Trump’s Campaign Finance:  During his time as chair of the campaign finance team, the campaign was accused of illegally soliciting foreigners, including members of foreign governments. This is a directly violation of FEC rules, and could potentially lead to jail time if found done purposefully by a jury.
  •  Conflict of Interest:  Manuchin could face conflict of interest problems. If H.R. 6392 or a similar bill were to pass, he would be responsible for oversight of regulations on a bank where he is currently a Board member.

But despite these concerns, it is not yet clear that Mnuchin will face any substantial roadblocks in his Senate confirmation.  His appointment has met with favorable reactions from key Republicans and the business community and he appears to have the support needed to carry him at this point.

Secy. Mnuchin:  Policy Implications 

While many of Mnuchin’s positions are relatively unknown, there are several indicators that hint at what economic policy would look like with Mnuchin running Treasury.  Mnuchin has recently described his economic policy as lower taxes, less regulation and fairer trade deals, echoing the President-elect’s ideas and policy proposals.

  •  Taxes:  In a statement today, Mnuchin promised that Trump’s administration will put forward the largest tax cut since Reagan.  Mnuchin was a key architect of Trump’s tax plan, which calls for massive tax cuts that will equal almost $6 billion dollars.  He has also said that he will not rule out tax cuts to the rich, but that they will be off-set by closing loopholes in the tax code
  •  DFA Targets:

—  Risk Retention/ QM Rules:  Manchin has described Dodd-Frank as overly complicated and harmful to lending“ and that his number on priority will be to strip back this provision of the Dodd-Frank Act.  The only provisions of DFA that directly constrain lending activity for policy reasons are the Qualified Mortgage and Risk Retention rules for mortgage originators.  Bank loans have rebounded strongly since enactment of DFA in 2010.

— Volcker Rule:   Mnuchin has said that the Volcker rule is also overly complicated and plans to review the rule after Trump takes office.

—  Title 1/Regional Bank Regs:   Mnuchin has said that he knows how to encourage loans to small and mid scale companies, and that ensuring that banks are lending is going to be a big focus, that the best way to ensure banks are lending is to cut regulation.  He has implied that his time at OneWest also gives him extensive insight into what large regional banks need to succeed and how to encourage lending at that level.

  •  Carried Interest:  As an architect of Trump’s tax plan, it appears that he will be in favor of closing out carried interest, however when questioned about it he has remained neutral and avoided the question.

A Political and Market Rally at the Close (Nov. 7)

Mike and Co.,
Greeting from North Carolina, where HRC will take the stage within minutes at the campus of NC State in Raleigh, the last rally of the campaign, to make the closing argument in her bid for the presidency.
With less than 24 hours before the last polls close, we take a moment to review some of the policy areas covered here over the course of the nasty, brutish, and long campaign where common ground was found as well as others where a mandate is in the balance should the Secretary be elected President tomorrow.
Today, for the first time in nine trading sessions — since right before the FBI Director announced the Bureau had to review the 650,000 new emails discovered — the markets saw a massive gain of two percent, following his announcement yesterday that the emails merit no legal reprisal or prosecution.  Call it the Comey correction.
In between the two announcements — when Trump called the kerfuffle “bigger than Watergate” — were nine days that may cost Democrats seats in Congress.  But yesterday’s announcement may have  halted any Trump momentum in its tracks.
Best,
Dana
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Tax Policy

Here is where the candidates ended up on the most prominent tax policy questions of the campaign:
  • Personal Income Taxes | HRC proposes adding a 4 percent surtax for those earning more than $5 million. Trump has proposed reorganizing the current tax brackets into three tax brackets, with rates at 12, 25 and 33 percent
  • Estate Taxes | HRC has proposed increasing the top estate tax rate to 45 percent and lowering the exclusion valuation to $3.5 million. Trump has proposed repealing the estate tax
  • Corporate Taxes | Trump has proposed lowering the top corporate rate to 15 percent, while HRC has said she would like to increase taxes on corporations, without outlining a specific target rate
Perhaps the most intriguing area where common ground was forged this year was on the subject of the earned interest tax credit, now considered bedrock policy.
 
Spending
 
•  Debt / Deficit 
 
The national debt was a muted issue in this election cycle.  Voters did not ask and candidates did not answer the question of what if anything to do about the national debt, $18 trillion and growing.  HRC says investments in the middle class will boost productivity while Trump says tax cuts and deregulation will permit innovation and risk.  Most economists agree that sustained periods of growth at Chinese or Trumpian rates are not attainable, sustainable, or, frankly, relevant or worth the price in debt.  It drew a yawn this year.
HRC’s plan will likely keep the national debt at current levels.  Trump’s tax cuts will add trillions (three or ten trillion dollars) to a growing debt burden.
•  FY17 Budget Negotiations
As October recess neared and legislators were eager to adjourn and get on the trail, Congress passed a continuing resolution that expires December 9.   It included key compromises:
  • Republicans relented and appropriated $170 million for Flint water crisis relief
  • Louisiana and other states were given $500 million in flood relief, a key Republican priority
  • $1.1 billion in Zika relief funding was provided to Puerto Rico, after Democrats forced Republicans to remove partisan rider language that would have stopped funding for Planned Parenthood
  • The SEC will continue to not require companies to disclose their political donations, a Republican victory
Only one of the twelve appropriation bills  passed this year.  GOP House leadership hopes to use “minbuses” to finish the FY2016 budget during the lame duck session, only 12 legislative days long.
Passing spending bills and restoring regiment fiscal order was a priority for Speaker Ryan this year, but it does not seem he will reach his goal.  His back up plan is to finish defense and national security related appropriation bills, and pass a CR to resolve all other federal spending. Democrats have said such a strategy is unacceptable, and that they would prefer one large omnibus.
Infrastructure 
After Congress passed a six-year infrastructure bill (with three years of appropriated funding) in 2015, both presidential candidates promised to continue to invest in infrastructure upgrades in 2016.  It’s unclear whether the two candidates propose their plans in addition to, or as modifications to, the legislation passed in 2015. For example, HRC has proposed a $275 billion investment infrastructure, which includes $25 billion to set up a national infrastructure bank, $20 million to reauthorize the BAB program, and $230 billion to invest in tangible projects.
Neither candidate has specified how to pay for such an investment.   Congress is currently debating whether or not to use a tax holiday to pay for infrastructure in FYs 2019-2021 or to include funding in the normal appropriation process.
The Fed
At the beginning of the campaign, it was unclear when or how the Fed would raise interest rates above historically low levels. Part of the answer depended on how well, and quickly, the economy would continue to recover in the last two years of the Obama administration. Now, Janet Yellen is more than hinting that rates will rise in December, but that decision could depend on how markets respond to the outcome of the election.
Trump harshly criticized Yellen for keeping interest rates low to hide a “fake” economic recovery.  HRC, appropriately, has not commented on or sought to influence the monetary policy of the Fed, a non-partisan, non-political institution that may never get credit for risking its independence by stepping in where a gridlocked Congress could not to save the American, and maybe the global, economy.

Jobs, Good Wages, and Statistics (Nov. 4)

Mike & Co.,

Today marked the last new national economic data that voters will see before the elections on Tuesday and they have proved very good for the country.  Today’s BLS data indicated important proof of a strengthening recovery that redounds to HRC’s advantage.

Below we outline the most important details of the job report, as well as the disconnect between what the numbers say about the economy and attitudes of the American workers.

Best,

Dana

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Today, the BLS released its monthly jobs report. The bottom lines:

  • the economy added 161,000 jobs in October, slightly below the expected 175,000
  •  the 73rd consecutive month of job growth
  •  nationally, unemployment dropped to 4.9 percent, a level not been seen since before the crisis
  •  wages increased by 10 cents, bringing the annual wage rate growth to 2.8 percent, the highest it has been since 2008

Numbers and perceptions

While the economy has been substantially  and quantitatively improving in recent years, many Americans disbelieve the facts,

an October Real Clear Politics poll found  that 62.6 percent of Americans believed that the country is on the wrong track

  •  a Gallup Poll from the end of October  found that 59 percent believed that the economy is actually getting worse
  •   a Huffington Post poll found that 45.9 percent disapproved of President Obama’s handling of the economy
  •   CNBC poll found last month that 73 percent of Americans felt insecure about the overall economy, however 80 percent of these respondents also said that they felt secure in their own personal financial future.

These figures may indicate that many Americans do not feel that the economy as a whole is stable, even if they personally are.  It could also be the case that economic recovery for some has been slow, or even nonexistent, even as the economy writ large has recovered. Urban centers, for example, have recovered faster than rural areas where Trump has seen substantial populist support.

Another part of this may be because some Americans do not trust the government data to be accurate. According to CNBC, over 25 percent of people do not believe government data.

Trump has capitalized on this belief by stating according his own estimates, unemployment is close to 10 percent, almost double that of the official numbers. However, these estimates are higher because Trump’s estimates count many part time workers as unemployed, whereas the BLS does not

When asked in early June by CNN who would better handle the economy, voters preferred Trump (51 percent to HRC (43 percentage ).   In late July, HRC took a 50-48 advantage on the same question.  In early September, Trump had an overwhelming lead on the question (56 percent to 41).  In a last poll asking the same question conducted last week, Trump had a 51 percent to 47.

Campaign Implications •. With the election so close and today’s jobs numbers are a helpful reminder of the durability and steadiness of the American recovery.  The large numbers who still feel job insecurity despite his economy and don’t believe that it is is getting better suggests that the public doesn’t know how far the economy has come in terms of job creation.   But the dissatisfied know that wages and purchasing power have been stagnant — in fact, they are still below 2008 levels

In the last days of the campaign, it will be vital to stress the wage gains this year –faster since before the recession — and that unemployment has decreased to pre-recession levels.  Keeping focus on “fair economy” rhetoric helps too, including promises of help for areas. D regions of the county that have not fully recovered.  Emphasizing that Trump’s business record has not always generated fair jobs, or many jobs, is also important. Most importantly, exposure of these numbers can also undermine Trump’s claims of a paltry recovery, and the loss of good paying jobs.

Recess Roundup Part II (Oct. 17)

Mike & Co.,

Recent election news cycles have included precious little on a number significant fiscal and financial policy developments since Congress adjourned to go campaign.  These developments  may not be getting as much media attention as Trump’s gaffe du jour right now.  But some will get more eventually.

We outline below a number of the key developments crowded out of the presidential campaign spotlight and address their relevance to the campaign and beyond.

Best,

Dana

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  •   Child Tax Credit Plans Compared

Last week, HRC proposed an increase the child tax credit from $1,000 to $2,000 a year for each child up to age four, doubling the existing tax credit passed in the Bush tax plan, which itself was an increase from the Clinton administration’s original $500 child tax deduction.

The major difference between HRC’s plan and  Trump’s  child care subsidies is that the HRC plan will benefit lower income Americans.  The Trump plan allows income tax payers could deduct up to the average cost of child care in their state, but excludes individuals earning over $250,000 and families earning over $500,000.  But because the bottom 45 percent of income earners do not pay income tax, the benefit would favor upper middle class citizens.

The sharp criticism in the media led the Trump campaign to revise its proposal to permit up to $1,200 in spending rebates for childcare expenses for low income Americans through the EITC.   The Trump plan is connected to market prices for child care on a state by state basis, reflecting the vast differences in average child care costs between high cost areas (Washington DC : $18,000/yr) and low cost areas (Mississippi : $5,000/yr).

The nonpartisan Tax Foundation estimates that HRC’s plan will cost $199 billion over the next ten years, which is in line with the $150-$200 billion range estimated by the Clinton campaign, a 40.1 percent increase from current policy cost. The Trump campaign says their plan will cost $25 billion over the next decade, but the ambiguities of the plan have prevented outside analysts from providing an accurate cost estimate.

The campaigns offered differing pay-fors: HRC claimed higher income taxes on the richest of Americans would pay for her program while Trump vaguely suggested  eliminating waste in the unemployment insurance program to fund his plan.  HRC’s plan would make the tax credit fully refundable, down from the current $3,000 threshold.

Electoral Implications  | Trump’s child care plan is yet another example of his commitment to Trumped up trickle down, a case of his plans to help his friends while taking advantage of every day Americans.

 

  •   Fed Rate Hike in December?

At a Fed press conference on Friday, chairwoman Janet Yellen outlined several perplexing trends in the labor market which have made determining appropriate monetary policy difficult. The federal funds rate has not been above 0.5 percent since the recession and it is currently fluctuating between 0.25% and 0.50 percent. A rate hike has seemed inevitable for months, and it now seems that it will come in December b

A major issue raised Friday was whether keeping interests rates low encourages adults who are neither seeking employment or working to re-enter the workforce.  Some questioned whether monetary policy is responsible for the relatively slow economic recovery; others blamed demographic shifts and slow productivity growth. Yellen suggested the lack of growth is due to households and businesses holding too much debt to make risky investments with low interest rates.  Despite ostensibly  lunfavorable  investment side indicators, consumer spending increased a seasonally adjusted 0.6 percent in September and 2.7 percent above 2015 levels. Policy makers and academics have also not been able to understand why inflation, hovering at about 1 percent, has been so to increase since the recession.

Election Implications  |  Trump has repeatedly accused the Fed of keeping rates low to hide underlying economic trouble.  HRC has provided relatively little comment about the nonpartisan board, but continuing to defend the growth led by the Obama administration makes sense — September consumer spending increases are additional reasons for optimism.

  •  Puerto Rico:  New Austerity Measures

On Friday, a fiscal control board created by Congress charged with re-ordering Puerto Rican finances declared they would approve all non-ordinary public transactions, including the issuance of debt.  This move came despite Gov. Alejandro Garcia Padilla’s plea to limit austerity measures as Puerto Rico attempts to restructure $70 billion of bond debt.  The board also announced that major public institutions — including the island’s development bank, its largest university, and several utilities — would need to develop independent fiscal plans.

The fiscal oversight board is led by Jose Carrion III, a Republican nominated insurance executive based in San Juan. He is joined by six other board members, three appointed by Republicans and three by Democrats.  The board was created in June when a rare piece of bipartisan legislation prevented creditors from suing Puerto Rico when they began defaulting on their debt. Had they been able to, public services would have been cut quickly and deeply, a grave fear of the Obama administration. But Treasury Secretary Jacob Lew was able to work out a deal with House Republicans, led by Paul Ryan, who feared that not permitting a debt restructure would have made mainland Americans responsible for the debt in the future.

  •   Warren and Progressive Priorities

Friday morning Sen.Elizabeth Warren released a letter to Pres. Obama urging him to remove SEC Chair Mary Jo White. In the letter, Warren accuses White of an “anti-disclosure agenda,” citing her failure to strengthen political spending disclosure requirements on publicly traded companies, which has not been a priority under White’s tenure.  A rider in last month’s Continuing Resolution prevents the SEC from implementing any law on political disclosures, but progressives argue that the rider doesn’t prevent working on a regulation to be implemented after the CR expires.  This is the most recent in a series of grievances  Warren and other progressive groups have had with White, who has previously described the chair’s work as “extremely disappointing.”

While there is little chance that the president will remove White, this is part of a push to remove Obama appointees deemed too close to big business and to give progressives a stronger role in appointments under the next president. Progressives have recently attacked other moderate Obama appointees, including their successful block of Antonio Weiss for Treasury Secretary in 2015. Progressives have also called for the likely new Senate Democratic Leader Chuck Schumer to publicly announce his intent to further regulate Wall Street.

Some have raised a question over the chairmanship of Senate Banking  following the election.  Concerns center around the possible re-election of former Sen. Bayh.  If Bayh regains his seat, he would be the ranking member it chair of the Committee, if seniority is calculated based on cumulative years served, outflanking current ranking member, Sen. Sherrod Brown.

But here is little chance that this will come to pass.  Sources close to Democratic leadership have rejected the idea of Bayh over taking Brown for the Chairmanship, as it would go against the norm to calculate seniority cumulatively instead of concurrently.

Election Implications  |  The progressive  Democrats in Congress, perhaps assuming Democrats gain control of the Senate and seeking to set the agenda for the coming Congress on economic policy. The next president will likely name a new Chair of the SEC and other key agencies.  Sen. Warren and  progressives are seeking to serve notice that they will make noise in this space if need be.  Nominations may be a flashpoint.

  •  Earnings Stripping Regs

Last week, Treasury issued a revised final rule §1.385-2, under regulation 385 of the Internal Revenue Code in “interest stripping” that carved out debt instruments issued by most financial institutions.  The Treasury proposal was targeted at transactions that use inter-affiliate debt to take deductions in a higher-tax jurisdiction and receive the income in a no- or low-tax jurisdiction. The practice is far more pervasive than headlines implied, with implications for ordinary operations of banks of any size.

Treasury carved out an exception to the rule for debt instruments issued by an “excepted regulated financial company,” including insured depository institutions, bank holding companies and certain savings and loan holding companies. Treasury did not lift documentation requirements for regulated entities, but S corporations are exempt from all aspects of the final rule.

Documentation under the final rule is treated as timely so long as it is prepared by the time the filer’s federal income tax return is filed. The final rule also provides a rebuttable presumption for documentation errors provided that covered entities are otherwise in compliance, instead of per se re-characterization of the debt to equity as proposed.  Treasury also delayed the implementation date, with the final rule to come into force only for debt instruments issued on or after Jan. 1, 2018.

2nd Presidential Debate/Econ. & Financial Issues (Oct. 10)

Mike & Co. —

The second Presidential debate last night  focused mostly on personal qualifications, the histories of each candidate, and foreign policy.  But economic issues policy issues, especially tax policy, still came in for their fair share of debate, with heaping portions of demagoguery.  You can find an abridged version of the 2nd debate that covers the below issues HERE.

In keeping with the norm, the majority of Trump’s claims were either poorly substantiated, misinformed or just outright wrong. Below is a summary of the economic topics covered in the debate, with a focus on new and changed policy positions and a fact check of Trump’s interpretations of the record.

Best,

Dana

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Changes and Clarifications in Policy

While the debate offered relatively little in the way of serious economic policy talk, especially from Trump, questions regarding tax policy and energy policy, along with strong moderators who forced Trump to actually answer them, yielded some new insights into both candidates’ economic policy goals.

  • Tax Policy

When asked about how his tax plan would force billionaires like himself to pay their fair share, Trump could only cite his plan to remove the carried interest loophole, along with vague and inaccurate statements about bringing “huge” tax relief to the Middle Class.

Trump for the first time admitted that he had not paid Federal income taxes based on the figures he reported in 1995; however, he refused to specify for how long and claimed he paid millions in other taxes over the last 20 years.

  • Energy Policy

This was the first time Trump directly attacked the EPA, accusing them of killing the energy sector. He has previously attacked regulations on the energy sector, this was his first major attack on the EPA itself. This hints at an intention to either dismantle or weaken the Agency as part of a plan to de-regulate the energy sector.

Trump cited his intention to use the energy sector to “pay off our national debt.” This is the first time Trump has outright said that he will rely on the energy sector to fund the government and pay off the debt. This suggests that Trump’s policy will seek to turn the US into a petrol state, like Russia or Saudi Arabia, whose economy is at the whim of the international energy market.

Fact-Checking Department

Many of Trump’s statements, especially on economics, were simply factually inaccurate. Trump was wrong not just about the current economy and the HRC economic plan, but about basic details of his own economic plan.

  •  Recovery and the Trade Deficit

Trump described the current economic situation as “the worst since 1929” and criticized economic growth at only 1 percent. While growth for this year has only average 1.4 percent by the second quarter, growth last year was over 2 percent growth.

This is not the worst growth the United States has seen, even post World War II, as there have been recessions in every decade where the economy retracted.

Trump also claimed, as he has throughout the election, that the current Trade deficit is $800 billion. This is wrong, the trade deficit as of last year was $500 billion, almost half of Trump’s figure.

  •  Tax Policy

Trump claimed that his tax plan will reduce business taxes to 15 percent. This is untrue. Among the multiple Trump tax plans in circulation, none reduce all corporate tax rates to 15 percent. The plans provide different rates for different types of income, and many types of corporations, including S-corporations are not included at all. Even in his most generous plans, only corporations pay a 15 percent rate across the board, and other business structures pay higher rates based on the type of income generated.

Trump claimed that taxes in the United States are the highest in the world, which is also untrue. While the United States currently has some of the highest corporate taxes in the developed world at 35 percent, taxes in the United States as a proportion of GDP is at 26. This is far below the OECD average of 34.4 percent, and in the bottom third of the most developed countries.

Trump also claimed that the HRC plan will raise taxes on the middle class and his will reduce them. This is untrue according to multiple Tax policy research groups. According to the Tax Policy Center, the HRC tax plan will save most Americans money, consistent with her pledge of not raising taxes on anyone making under $250,000 a year and this is before factoring in other intended tax cuts for low and middle income families. However, the Trump tax plan favors the rich, and while potentially raising the taxes on 25 million Americans and lowering the taxes on the rich by almost 10 percent according to the Tax Policy Center.

Trump asserted that Clinton was not in favor of removing the carried interest loophole, which is untrue. Clinton has said she is in favor of removing the carried interest provision.

VP Debate/Econ. & Financial Issues (Oct. 5)

Mike and Co.,

The VP debate last night did not make much news on the economic policy front.  Perhaps the most resonant moment of the debate came when Sen. Kaine drew the contrast between HRC’s “you’re hired” vision and Mr. Trump’s “you’re fired” trademark reputation.  Kaine also started to scratch the surface on Mr. Trump’s unethical and potentially illegal business and political practices.  We outline the most salient charges below.

Historically, VP debates have had minimal impact.  Such news and impact as this one had we examine below, highlighting key stances taken last night and analyzing noteworthy digressions from previously-stated positions.

Best,

Dana

You can read an abridged version of the debate that covers the below issues here.

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•  Taxes — Pence Over-Compensates 

Pence said the Republican plan calls for across the board tax cuts for “working families, small businesses and family farms” while the Democratic plan advances “a trillion dollars in tax increases.”  When asked about how he would reduce the national debt, Pence cited the strong balance sheets of Indiana but failed to outline how the Trump platform would pay down the debt, instead saying that 3.5 to 4 percent growth under the Trump administration would allow for debts to eventually be reduced.

•  Taxes / Kaine: Middle-Class Relief

Sen. Kaine described HRC’s tax plan as “tax relief to middle class individuals and small businesses and asks those at the very top who’ve benefited as we’ve come out of recession to pay more, by contrasted with his opponents’.  Theirs is designed to benefit wealthy individuals, including Mr. Trump himself, Kaine charged, equating the GOP plan to Bush’s tax cuts that put our economy in to a recession ten years ago. Sen. Kaine pointed out that Donald plan gives the middle class zero in tax relief.

• Jobs / Pence Urges Tax Cuts 

Pence did not spend a lot of time talking about jobs, what sectors growth would come from, or how re-negotiated trade deals would put Americans back to work. Instead, the logic used consistently throughout the debate relied on the standard GOP rationale: decrease taxes on the wealthy, let them generate growth, and the jobs will follow.  Pence did criticize the Obama administration of a “war on coal” — an explicit appeal to blue collar swing voters in battleground states (Michigan, Ohio, Pennsylvania).

  •  Jobs / Kaine: Fair Growth

    Repeating HRC’s aspirations for a fair economy, Kaine called for raising the minimum wage (without listing a number) and equal pay for equal work. With the ability to use past voting records, he noted Pence voted against raising the minimum wage above $5.15 when he was in Congress and has stood against increases in Indiana. This is meaningful because Trump has said he would not raise the federal minimum wage. When Pence tried to tie HRC to the failed policies of the Obama Administration, Kaine successfully defended the state of the economic recovery by citing the creation of fifteen million new jobs, decreased poverty levels, and an increased median income.

    •  Spending / Pence: Status Quo

    Pence did not list any investments other than in the military and in our nuclear arsenal throughout the entire debate. He did suggest the government should make several discretionary spending cuts, most notably to Obamacare healthcare subsidization, but even these positions were vague. On the mandatory side, he vowed to keep promises with American retirees to pay for Social Security and Medicare, without giving any specific ways to reform their long term solvency. Like during national debt deliberations, Pence relies on economic growth to boost government coffers and pay for these entitlement programs. The notion that reduced taxes would increase government revenues has never been accepted by mainstream economists and should remain the main rebuttal to this argument.

    •. Spending / Kaine Details Positions 

    Kaine outlined investments a Democratic administration would make in manufacturing, infrastructure, research and education.  He went beyond HRC’s promise in the first debate to deliver debt-free college, instead calling for “tuition-free college for families that make less than $125,000 a year.”  Questions in the coming days on any perceived disparity between the principles’ policy positions.

On Social Security, Kaine promised to defend the public nature of the program; he suggested increasing the payroll tax cap as a possible mechanism for keeping the program solvent. This position has not been clearly endorsed or refuted by the HRC campaign.  Ambiguity on these  questions is receiving attention.

Trump Inc. and Foundation

Kaine described the Trump Organization as “octopus-like” with tentacles that reach all over the world, including Russia.  Kaine pointed out that Trump Foundation dollars have been spent on a political campaign for a Florida attorney general, an allegation many in the media view as true. Pence largely ignored these claims and did not take the bait, instead defending Mr. Trump more broadly as being a strong businessman.

Kaine here refers to one of several allegations.  Five of the principal allegations raised, are listed as described or distorted in the media below:

ALLEGATION 1 | Trump claimed the perhaps the largest personal income tax loss to avoid paying taxes, bilking Uncle Sam of almost $1 billion over 18 years

ALLEGATION 2 | Trump has solicited international contributions to his 2016 presidential campaign

ALLEGATION 3 | Trump gave Granny a haircut (and took her savings) when he went bankrupt

ALLEGATION 4 | Trump’s Foundation broke the non-profit minimum payout rule

ALLEGATION 5 | Trump attempted to  influence public office holders with cash, the FLA AG only the most recent of a lifetime pattern if not practice.

We will likely return to these charges and explore in more depth which of these are true, which can be grasped by undecided voters, which are damning, and which may have legitimate political and legal implications for the GOP nominee.

Review of Econ Debate Points (Sep. 28)

Mike & Co. —

The legislative machinery necessary to enact a CR — representing as much progress on the FY17 budget as Congress can make and keep the government running after Friday, the last day of FY16 — has been set in motion.  Adjournment is imminent.  We’ll go over the final CR then.

But the week’s epic political event was Monday night.  Economic policy featured prominently in the first Presidential debate of 2016.  HRC was comfortably in command throughout.

The candidates defended and expounded on their economic policies, tax plans and solutions for job creation and economic development.  Below, an inventory of the major economic policy issues discussed by the candidates, featuring both known and new pieces of rhetoric and policy.

Best,

Dana

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Jobs/Trump:  Nostalgia and Vagueness

The crux of Trump’s plan for increasing the number of jobs in the country relies on a potent mixture of nostalgia and vagueness. For nostalgia, he begins by tapping into the glory days of America’s manufacturing past, lamenting the loss of  jobs to Mexico and the US’s role as a“Piggy Bank to rebuild China.” This position plays on Americans’ fear that the loss of manufacturing jobs over the previous decades has harmed its economic strength on the world stage, striking a strong chord with his white working class demographic in key swing states: Pennsylvania, Ohio, etc.

Trump’s solution offered little beyond a promise to “bring the jobs back.”  In the debate he claimed that the outsourcing of these jobs came from “poorly” negotiated trade deals (NAFTA, CAFTA), and proposed to renegotiate them to give America a better deal.  However, he failed to give specifics on how they will be renegotiated.

Ironically, despite blaming the rest of the world for the US’s economic problems, Trump does not seem afraid of outsourcing when it is to his benefit, as he has repeatedly, and illegally, solicited foreign leaders for campaign contributions.

On job creation, Trump also proposed improving tax competitiveness, and trickle-down economic principles, including dropping the corporate tax rate to 15 percent. His other proposals included bringing back money that is currently held overseas and investing it in the inner cities and other areas. Trump claimed that there is $5 trillion dollars hidden outside the U.S. and lowering taxes would attract this money back into the U.S.  He argued that infrastructure, including plants, airports and roads were suffering and called the US a “third-world country.”

Jobs/Clinton: Targeted Middle Class and Youth

Clinton strategy, in contrast, looked towards the future, focusing primarily on promoting growth through the younger generation and middle class.  Clinton framed her job creation plan as based around investment in key sectors and building a “fairer economy” through investing in infrastructure, advanced manufacturing, innovation and technology, small business and clean energy and improving socio-economic conditions including raise to the minimum wage, paid family leave, closing the wage gap and encouraging profit-sharing business models and debt free college

Taxes/Trump: Slash Like Mad

Trump announced during the debates that his tax cuts were the biggest since Reagan, a false claim not challenged by fact checkers.  Trump’s tax policy is unabashedly trickle-down economic theory, relying on big business to save the economy. His revised plan would lower federal revenue by at least $4.8 trillion dollars over a decade.  Analysts estimate that his proposal to individual income and payroll taxes would cost $2.1 trillion; his plans to cut corporate taxes would cost $2.4 trillion; and his plan to repeal the estate tax would cost $300 billion.

Though every income group would receive an overall tax cut under Trump’s plan, the biggest winners would be in the top 1 percent (5.1 percent average), while some families in the low- and middle-income bracket would actually see an increase from 10 to 12 percent.

Furthermore, repealing the estate tax as he plans to do would net the Trump clan over $5 billion, reinforcing Trump’s richest-takes all system and betraying Trump’s real intentions in tax reform.

Trump said that even more importantly than lowering taxes, his plan would cut business stifling regulations, which business leaders have told him is even more important.  He added to his released plan by specifically saying he was removing the carried interest provision, citing that this would benefit small business and allow business to expand.

Taxes/Clinton:  Fair Share

Keeping with her released plans, HRC stated that her tax plan would raise taxes on the richest portion of the population, as they have been the recipient of the majority of the wealth gained since the recession. She stated that there are many millionaires who support her plan and have called for a higher tax rate on the top earners to “pay their fair share.”  She advocated the implementation of the a multi-millionaire “Fair Share Surcharge” and to close down the loopholes of the “private tax system.”

In what was considered a critical comment during the debate, HRC  underscored the issue of the rich not paying their fair share of taxes when Trump was boxed into boasting that not paying taxes “makes me smart.”  Taxpayers can be excused for thinking Trump is suggesting they are stupid.

HRC further presented her tax plan as one that rewards work, not financial transactions, and was focused on the middle class. HRC said experts have estimated that her tax plan would lead to 3.5 million new jobs and her proposed tax reform measures are estimated to raise revenue by $1.55 trillion.

Spending, Debt and Deficit/Trump:  Slash, Rinse, Repeat 

Trump plan aims to cut taxes and cut spending but his cuts in spending would not remotely offset the revenue loss from his cut in taxes, and would increase debt over the next decade by $5.3 trillion.  Along the lines of taxes, Trump proposes to slash government programs.  His proposed cuts will reduce net spending by $1.2 trillion dollars. The chief target of his proposed slashes are programs like Affordable Care Act and Medicaid, which will reduce spending by $3.2 trillion. He does intend to increase his spending on defense, veterans, and Medicare by $2 trillion.

Spending, Debt and Deficit/Clinton:  Striking a Balance

HRC’s plan counts on an increase in taxes and spending.  Her tax reform would increase revenue by $1.55 trillion, leading to increased spending in college education ($500 billion), paid family leave ($300 billion), infrastructure ($300 billion) and additional health care spending.

Her proposal would increase debt by $200 billion, one 26th the amount Trump’s would.  Clinton spoke out repeatedly against Trump’s tax plan as the exact same thinking that brought about the 2008-2009 crisis.  Trickle-down has proven that it does not work, and returning to the system would do nothing but undo the work that has been done, sending the country back into recession.  HRC projected optimism about the recovery and said that the United States must focus on middle class and broad-based inclusive development development as the key to improving the economy.

The Fed/Trump: Republicanize the Fed

Trump continued railing against Fed Chairwoman Janet Yellen during the debate Monday, emphasizing a claim he’s made a couple times before. He claims that the board is under political pressure from President Obama to keep interest rates low to hide “a big, fat, ugly bubble” that is underwriting the economy.  He accused Janet Yellen and the Fed of keeping interest rates down to raise approval for the Obama administration and Secretary Clinton, and accused the Fed of not doing its job.  Notably, Trump chided Chinese devaluation and perceived inaction by President Obama in his fourth sentence on Monday night; the issue hardly deserves that type of prioritization in the minds of the American people.

The Fed/Clinton: Steady as She Goes

HRC stayed silent on the issue of interest rates, political influence at the Fed, or Chinese devaluation throughout the debate. In future debates, she should look to punish Trump for his position on the Fed by calling out his flip flops on the issue and noting he once called himself a “low interest rate person.” She should also note that Mr. Trump seems to believe the Federal Reserve is just another piece in his political game.

Hillary said she would strongly consider following but not commit to precedent set  and reappoint the Fed chairwoman Janet Yellen.  HRC also stressed that she will leave it to her and her Board to decide when it’s time to raise interest rates.

Economic Recovery/Clinton 

On economic growth, Clinton and Trump have different perceptions of reality, largely a result of their relationship with President Obama.  Clinton claims that the economy is growing strong, but that there is still a long way to go. She claims her plan will generate 10 million jobs over the next four years.  On Monday, Clinton said her plan largely relies on higher education and specifically making it easier to graduate debt-free  This position could be strengthened by emphasizing retraining of the working class individuals Trump is complaining are losing their jobs to globalization.

Economic Recovery/Trump 

Trump did not have much to say about how his plan will contribute to growth. Instead, he focused on claiming that the growth in GDP and drops in unemployment are not based on underlying positive shifts in the economy, but are instead the result of interest rates that have been kept too low.  He said that the recovery has been the weakest ever seen, and that artificially low interest rates have created a bubble to make it appear that progress has been made.

Trump is betting against the U.S. economy.  This isn’t new; he said he rooted for the stock market to collapse in 2008 so he could buy the property on the cheap, or as he called it “good business.”  He argued that the only way to fully get out of the recession was to end Free Trade negotiations and cut corporate taxes to make the United States competitive with China and Mexico.