Fed Chair Powell will testify at 10 AM EST before the House Financial Service Committee. Watch the hearing live here. I will forward a transcript as soon as it becomes available.
Debt Limit: CBO estimated Treasury will run out of cash in September or October. Yesterday’s 4-page Congressional Budget Office report described the present law debt limit, which will reset on March 2, after which Treasury will use “extraordinary measures,” basically reducing trust funds to fund the government for the next several months. CBO estimated “Treasury will probably run out of cash near the end of this fiscal year or early in the next one.” See this 73-page 2015 GAO report for details of the 2013 experience.
“More than 100 House Democrats to unveil ‘battle-ready’ Medicare-for-all plan as 2020 election looms.” Last night’s Washington Post article led with:
More than 100 House Democrats plan to unveil a new “Medicare-for-all” plan Wednesday to provide government health insurance to every American, according to a copy of the bill provided to The Washington Post, as a number of Democratic-leading presidential candidates for 2020 feud over the party’s health-care platform.
Rep. Pramila Jayapal (D-Wash.), co-chair of the Congressional Progressive Caucus, is expected to release legislation Wednesday that incorporates key policy demands of single-payer activists, aiming to overhaul the U.S. health-care system even faster and more dramatically than legislation proposed in 2017 by Sen. Bernie Sanders (I-Vt.).
Jayapal’s Medicare-for-all would move every American onto one government insurer in two years, while providing everyone with medical, vision, dental and long-term care at no cost. Similar proposals have been projected to increase federal expenditures by at least $30 trillion but virtually eradicate individuals’ health spending by eliminating payments such as premiums and deductibles. About 30 million Americans do not have insurance, while tens of millions more are “underinsured,” meaning they cannot afford or do not seek care, according to the nonpartisan Kaiser Family Foundation.
This is very unlikely to pass the Senate or to be enacted before 2021, but a sweep of Congress and the White House in the 2020 election would probably lead to enactment of a scaled-down version of this.
President Trump’s schedule (EST):
11:10 PM: Meets with the Vietnamese Communist Party General Secretary and
the President of Vietnam at the presidential palace in Hanoi, Vietnam;
11:45 PM: Signs commercial trade agreements;
12:15 AM: Meets with Vietnam’s Prime Minister;
6:30 AM: Greets North Korean dictator Kim Jong-un;
6:40 AM: Meets one-on-one with Kim Jong-un; and
7:00 AM: Has dinner with Kim Jong-un.
All times are Eastern Standard Time, 12 hours behind Vietnam time.
“Trump Undermines Top Trade Adviser as He Pushes for China Deal.” Yesterday’s New York Times article led with:
WASHINGTON — President Trump has signaled that he is moving toward peace with China in a trade standoff that has rattled markets and businesses globally. But as he backs off his threat to impose higher tariffs, the president’s relationship with his own trade negotiator is now showing signs of strain.
The situation has left Mr. Trump’s trade representative, Robert Lighthizer, who is both an ardent supporter of the president and a longtime China critic, in an uncomfortable bind. While broad tariffs on Chinese imports brought Beijing to the negotiating table, Mr. Trump has grown impatient with the talks, and a consensus is growing in Washington that Mr. Trump will ultimately accept a weak deal.
And despite the lack of a transformative arrangement he once promised, the president has begun dangling the idea of a “signing summit” with President Xi Jinping of China at Mar-a-Lago, Mr. Trump’s Florida resort. As a result, the president is undermining Mr. Lighthizer as he tries to pressure China to make big concessions.
“Trump is certainly doing his negotiating team no favors by undercutting them in public,” said Eswar Prasad, a trade expert and the former head of the China division of the International Monetary Fund. The president’s actions, he said, “weakens rather than fortifies Lighthizer’s leverage.”
On Wednesday, Mr. Lighthizer will testify before House lawmakers, where he will have to credibly defend a pact that is shaping up to be less ambitious than he might have hoped.
USTR Lighthizer will testify at 10 AM today before the House Ways and Means Committee, live here. I have long predicted that President Trump would cut a deal with China that avoids additional tariffs and which eventually backs down from existing tariffs.
“Drug Makers Try to Justify Prescription Prices to Senators at Hearing.” Yesterday’s New York Times article led with:
WASHINGTON — Pharmaceutical executives, testifying before Congress, could not readily explain on Tuesday why the prices for many brand-name prescription drugs were much higher in the United States than in other developed countries.
“It is almost as if the taxpayer has ‘stupid’ written on their face,” Senator Bill Cassidy, Republican of Louisiana, told the seven executives, who faced a barrage of questions and criticism at a three-hour hearing of the Senate Finance Committee.
Mr. Cassidy joined two other Republican senators, Charles E. Grassley of Iowa and John Cornyn of Texas, and all the Democrats on the panel in expressing deep concern about constituents who could not afford the drugs they needed to survive.
Senator Robert Menendez, Democrat of New Jersey, the home to many drug and biotechnology companies, offered what he described as “a friendly warning” to the witnesses. “If you don’t take meaningful action to reduce prescription drug prices,” he said, “policymakers are going to do it for you.”
Bipartisan Rx pricing bills are very likely to pass each house this year. The only question is whether the House and Senate can support the same bill and whether President Trump will sign it. Often members of Congress clamor to vote for bills they hope won’t be enacted because it would cut off campaign finance.
“Drug Middlemen, Patents Next Target After CEOs’ Testimony.” Last night’s CQ Roll Call article led with:
Lawmakers overseeing a high-profile hearing with drug industry executives on Tuesday urged witnesses to avoid blaming other parts of the health system for rising costs. But the drugmakers did just that, and a key Senate Republican indicated that the next step in legislating on drug prices will look at the very entities that the manufacturers blamed.
That doesn’t mean that the drug companies are off the hook.The Senate Finance Committee hearing also provided a forum for lawmakers to promote bipartisan policies that the industry has broadly opposed in the past. The hearing also prompted members of another Senate committee to look more closely at how drugmakers exploit patents to extend their monopolies.
Chairman Charles E. Grassley, R-Iowa, said he was optimistic that this would be the year for drug pricing proposals to move forward.
Non-profit hospitals under investigation by Senate Finance Chair Grassley. That in Monday’s press release and letter to IRS Commissioner Rettig.
“SALT Limit Is Hitting 11 Million Tax Returns, Audit Finds.” Yesterday’s New York Times article led with:
WASHINGTON — President Trump’s decision to cap a popular tax break will hit 11 million filers this year, as they can no longer deduct more than $10,000 in state and local taxes from their federal income taxes.
This cap on deductions — intended to lessen the bottom-line cost of Mr. Trump’s $1.5 trillion tax cut — will mean filers cannot deduct $323 billion in state and local tax payments on their 2018 federal returns, according to a Treasury audit that was released on Tuesday.
The report offers the Trump administration’s first detailed public estimate on the effects of one of the law’s most controversial provisions, which largely affects people in high-tax, Democratic-leaning states like New York, California and New Jersey. While 11 million filers will hit this cap, out of roughly 150 million income tax returns, it doesn’t mean all of their total tax bills are rising.
Other analyses suggest many filers will benefit from different parts of the tax cuts, such as the elimination of the alternative minimum tax and the reduction in marginal tax rates. Additionally, the law doubled the standard deduction that taxpayers may take, along with a host of other tax changes.
The so-called SALT cap is, however, most likely to affect the richest Americans: More than half of the tax increases from the change will fall on the top 1 percent of income earners, according to estimates by the independent Tax Policy Center in Washington.
Before Tuesday, the administration had not disclosed any estimates of how many households would be affected, though it did provide data on the fiscal costs of SALT deductions. The Joint Committee on Taxation and the Tax Policy Center have estimated that removing the cap would cost the federal government as much as $670 billion over the next decade.
“Who Shoulders the Burden of Federal Income Taxes?” Yesterday’s Tax Foundation analysis led with:
As we think about tax policy proposals designed to target specific or narrow groups of individuals, it’s important to understand who shoulders the burden of income taxes under the current system. The federal income tax system is already progressive, with high-income taxpayers paying a larger share of the tax burden under higher average tax rates than lower- and middle-income taxpayers.
Data from the Internal Revenue Service (IRS) shows us who pays federal income taxes. As illustrated below, higher-income taxpayers are responsible for paying a significantly higher share of the tax, and this trend has increased over the past three decades. For instance, in 2016, the top 1 percent of taxpayers paid about 37 percent of federal income taxes, more than twelve times the tax burden of the bottom half of taxpayers.
We see a similar trend when looking at other income percentiles. The bottom 90 percent of taxpayers accounted for about 45 percent of the overall tax burden in 1986, compared to approximately 31 percent in 2016. Conversely, the top 10 percent of taxpayers have seen an increase in their tax burden over the same period, from 55 percent of total income taxes in 1986 to almost 70 percent in 2016.
