President Trump’s schedule (EST):
12:00 PM: Daily intelligence briefing; and
12:30 PM: Lunch with Vice President Pence.
The Senate will return a 1 PM EST today to “resume consideration of the motion to proceed to S.1, Strengthening America’s Security in the Middle East Act of 2019.” Later this week, Majority Leader McConnell (R-KY) plans to take up President Trump’s proposal to end the shutdown, but the seven Democratic votes needed to end the Democratic filibuster aren’t there. The House will return at noon today with votes postponed until 6:30 PM EST on six bills from the Suspension Calendar. Later this week, it will take up another appropriations bill to reopen the government, H.R.648, which the Rules Committee will consider at 5 PM today.
“Chilling Davos: A Bleak Warning on Global Division and Debt.” This morning’s New York Times article cites billionaire investor Seth Klarman’s letter to clients, which has the world’s top investors buzzing. It included the following:
As the post-World War II international order continued to erode, the markets ignored the longer-term implications of a more isolated America, a world increasingly adrift and global leadership up for grabs. …
The seeds of the next major financial crisis (or the one after that) may well be found in today’s sovereign debt levels. There is no way to know how much debt is too much, but America will inevitably reach an inflection point whereupon a suddenly more skeptical debt market will refuse to continue to lend to us at rates we can afford. By the time such a crisis hits, it will likely be too late to get our house in order.
I couldn’t agree more.
“Pessimism Looms Over Prospect of a Sweeping China Trade Deal.” Yesterday’s New York Times article led with:
WASHINGTON — As a critical round of talks with China kicks off next week, the Trump administration is increasingly pessimistic that Beijing will make the kind of deep structural changes to its economy that the United States wants as part of a comprehensive trade agreement, according to officials involved with the talks.
The United States is now weighing whether large Chinese purchases of American goods and more modest economic changes will be enough for a deal to end a damaging trade war between the two nations and help calm volatile markets.
A Chinese delegation led by Liu He, China’s vice premier, will meet with Robert Lighthizer, the Trump administration’s top trade negotiator, and Steven Mnuchin, the Treasury secretary, on Jan. 30 and 31. The two countries are racing to strike an agreement by March 2, a deadline set by President Trump and President Xi Jinping of China.
If no deal is reached by that date, Mr. Trump has said the United States will raise tariffs on $200 billion worth of Chinese goods.
I’ve never expected a sweeping deal. I do expect the March 2 tariff hikes to be avoided and a phased future reduction of existing tariffs.
“Senate to Weigh Trump’s Proposal to End Shutdown, With Passage Unlikely.” Yesterday afternoon’s Wall Street Journal article led with:
WASHINGTON—The Senate this week is expected to vote on a border-security proposal put forward by President Trump that is unlikely to garner enough support to cross procedural hurdles, leaving no clear path forward as the partial government shutdown stretches into its fifth week.
The White House and Republican congressional leaders don’t appear to have crafted any contingency strategy if the president’s proposal fails a Senate vote.
“No idea,” one White House official said, asked about backup plans to end the shutdown. The White House didn’t respond to a request for comment.
Administration officials are working to end the shutdown, but the bad blood between President Trump and Speaker Pelosi continues to impede any progress. Both sides will continue talking past each other until both sides start getting blamed and public reaction forces a settlement.
“The Shutdown’s Impact on the Department of Treasury and American Taxpayers.” Thursday’s 10:30 AM House Ways and Means Committee hearing will feature Treasury Secretary Stephen Mnuchin trying to reassure skeptical Democrats that the IRS can pull of the tax filing season with half its workforce.
I’ll be looking to see how much, if any, damage the shutdown has done to the tax filing season will be admitted by Mr. Mnuchin. Delayed refunds, reduced and less accurate taxpayer assistance, inability to get anyone at the IRS to correct errors or restore stolen identities, inability to process some returns for which the regulations came out in December, and plummeting audits leading to more fraudulent filings are likely in my opinion. Some at the IRS have told me that, because most taxpayers file electronically, they’re hoping TurboTax and other tax software firms can save the day. I continue to expect total refunds to jump $73.5 b. February through May over last year’s level because most taxpayers haven’t adjusted their withholding or estimated payments. The IRS will report weekly statistics starting in February.
Expiring Tax Provisions Listed. Last Friday, in this 17-page pamphlet, the Joint Committee on Taxation listed 50 tax provisions that are scheduled to expire over the next decade and 3 that expired at the end of 2018 and 26 that expired at the end of 2017. It will be interesting to see how many, if any, are retroactively extended this year.
“Trump [Rx] Proposals Could Increase Health Costs for Consumers.” Yesterday’s New York Times article led with:
WASHINGTON — Consumers who use expensive brand-name prescription drugs when cheaper alternatives are available could face higher costs under a new policy being proposed by the Trump administration.
The proposal, to be published this week in the Federal Register, would apply to health insurance plans sold under the Affordable Care Act.
Health plans have annual limits on consumers’ out-of-pocket costs. Under the proposal, insurers would not have to count the full amount of a consumer’s co-payment for a brand-name drug toward the annual limit on cost-sharing. Insurers would have to count only the smaller amount that would be charged for a generic version of the drug.