CBO’s Budget and Economic Outlook will be released at 10 AM Today Here. Congressional Budget Office Director Keith Hall will hold a press conference at 11 AM. Watch it live on C-SPAN. With a strong than expected second half of 2018, will CBO level adjust going forward or lower its forecast for 2019 beyond because of the shutdown and capacity constraints? We’ll find out soon. I expect CBO’s deficit forecast to rise.
A February 15 shutdown? I don’t expect it. The American public is overwhelmingly against another shutdown, and their elected leaders in Washington, with the possible exception of President Trump, are overwhelmingly against it. There’s an obvious deal to be had: more than $5.7 b. for “border security” and status for Dreamers. President Trump remains unpredictable, but I believe he’s looking for an out that will keep Fox News off the warpath. If Mr. Trump uses a “national emergency” declaration to move funds from the Army Corps of Engineers or elsewhere to fund The Wall, it will be held up in litigation immediately.
“U.S. economy lost at least $6 billion to government shutdown: S&P.” Friday’s Reuters article led with:
The U.S. economy lost at least $6 billion during the partial shutdown of the federal government due to lost productivity from furloughed workers and economic activity lost to outside business, S&P Global Ratings said on Friday.
FOMC will meet January 29-30 with 2 PM Wednesday press conference. I will forward a transcript of Chair Powell’s press conference late Wednesday afternoon as soon as it becomes available.
“Federal Reserve Board appoints Stacey M. Tevlin as director of the Division of Research and Statistics.” That in Friday morning’s Fed press release.
“Expecting a Big Tax Refund? Don’t Be So Sure.” Sunday morning’s Wall Street Journal article led with:
WASHINGTON—The first tax-filing season under the 2017 tax law opens Monday, and there’s a crucial unknown for most Americans: Just how big will their refunds be?
On average, refunds will be larger than usual. But results will vary, and for individuals, refund size is unusually uncertain because of the changes to what Americans owe and to what taxes came out of their paychecks during the year. The partial government shutdown, which left the Internal Revenue Service understaffed as it prepared for filing season, added to the confusion. …
Overall, because of withholding changes, taxpayers already have received most of the law’s $180 billion in individual tax cuts for 2018, but $70 billion to $75 billion will show up in larger refunds or smaller payments this year, according to an estimate by Evercore ISI, a macroeconomic and equity-research firm. That’s an average of $420 per household.
I don’t know who wrote the headline, but the article contained expressions of uncertainty and explanations of the many cross currents under the Tax Cuts and Jobs Act. It also stated that withholding changes have already conveyed most of the tax cut. That flies in the face of this research which shows taxpayers have a strong bias toward overwithholding. Yes, employers adopted new withholding tables, but those tables are designed to avoid underwithholding. Furthermore, nearly 20% of taxpayers, particularly small businesses and those with high incomes, file quarterly estimated tax payments and are not subject to withholding. I still expect tax refunds through May to exceed those of last year by approximately $74 b.
“Tax Filing Season Is Starting, but It May Not Go Smoothly.” Yesterday’s New York Times article led:
Millions of Americans have come to count on tax refunds to fuel their spending in the waning days of winter. But as income tax filing season opens on Monday, a sweeping tax code overhaul and the lingering effects of a government shutdown could squeeze taxpayers’ refund checks and delay them, too.
“IRS will need at least a year to recover from government shutdown, watchdog tells Congress.” Saturday’s Washington Post article led with:
The Internal Revenue Service has told lawmakers it would return from the government shutdown buried in millions of unanswered taxpayer letters, weeks behind schedule on training for workers and in need of hiring thousands of new employees for this tax filing season, according to two House aides.