President Trump’s Schedule (EST):
11:00 AM:  Meets with Treasury Secretary Mnuchin;
11:45 AM:  Daily intelligence briefing;
12:30 PM:  Lunch with Secretary of State Pompeo;
  1:55 PM:  With Mrs. Trump, meets with Czech Prime Minister Babis and Mrs. Monika Babisova; 
  4:00 PM:  Meets with Acting Defense Secretary Shanahan; and
  5:00 PM:  Participates in a photo opportunity with the 2019 Senate Youth Program.

“Hoyer Working on Spending Caps With Senate GOP.”  Yesterday afternoon’s CQ Roll Call led with:
House Majority Leader Steny H. Hoyer said if lawmakers cannot agree on a plan to raise the fiscal 2020 spending caps quickly, he hopes to strike an agreement with the Senate allowing appropriators in both chambers to begin marking up spending bills with agreed to defense and nondefense allocations.“I’d like to have Senate and House agree on the numbers,” he told CQ, referring to a process where both chambers would pass a resolution to “deem” spending allocations that would be enforceable under congressional rules.Hoyer, D-Md., said Wednesday he has discussed the joint effort with Senate Republican leaders and they might be amenable to it. “I think they want to get this work done,” he said. “They don’t want to see a shutdown. They don’t want to see a dysfunctional appropriations process.”Senate Appropriations Chairman Richard C. Shelby, R-Ala., on Wednesday confirmed that talks with Hoyer were underway about deeming topline numbers so appropriators can start writing their fiscal 2020 bills. “We’ve been talking about that,” Shelby said, adding that approach “would be in lieu of the other,” meaning a spending caps deal. “That’s why we’re pursuing it.”But Hoyer also played down expectations. “It’s easy to talk about it and then when you really get down to doing it, it’s more difficult,” he said. “But that’s certainly my objective.”Congress probably can’t reach an agreement on raising the spending caps, so deeming resolutions, minibus appropriations, and continuing resolutions will probably be the way to avoid another government shutdown on September 30th.  I doubt we’ll have another shutdown because members learned how politically damaging the last one was.

Infrastructure:  Hoyer said:
The President said he’s for infrastructure, the Republicans have said they are for infrastructure investment. We’ve said we are for infrastructure investment. Therefore you would conclude that we could get this done, right?  Well, that would be, of course, not the case because getting infrastructure done means paying for it and while everybody wants to invest in infrastructure it is more problematic from many perspectives of how you pay for that.That’s the hangup.  I expect the House to pass an infrastructure bill this spring with a gas tax increase, but it’s unlikely the Senate would swallow that without changes Democrats would not accept, e.g. lowering the longstanding practice of devoting 20% of gas tax receipts to mass transit.  I remain optimistic that a compromise can be found that, with sufficient White House pressure, could be enacted.

“Brady Laments France Digital Tax Proposal.”  Yesterday, House Ways and Means Ranking Member Kevin Brady (R-TX) stated:
My view has remained consistent: new taxes targeted at cross-border digital services directly target U.S. companies.  If France goes through with this tax, it would result in double taxation and violate longstanding norms, spurring a reaction in the United States that could very well include a review of American tax and regulatory policies to ensure a level playing field in global markets.  The EU abandoned a similar proposal in December, and I strongly urge the French to do the same.Treasury Secretary Mnuchin and Congress have repeatedly warned that any targeting of U.S. firms will meet with retaliation.
“Taxing Transactions a Few Too Many Times.”  Yesterday’s Tax Foundation analysis led with:
Yesterday, Representative Peter DeFazio (D-OR) and Senator Brian Schatz (D-HI) introduced the Wall Street Tax Act, [press release] which would create a financial transactions tax of 0.1 percent on stocks, bonds, and derivatives.  The bill, which would “generate billions in revenue, while addressing economic inequality and reducing high risk and volatility in the market,” includes several cosponsors, including Representative Alexandria Ocasio-Cortez (D-NY) and 2020 presidential candidate Senator Kristen Gillibrand (D-NY). Policymakers should be wary about adopting a financial transactions tax.Sweden implemented such a tax in 1984 and repealed part of it in 1990 and and the rest of it in 1991 as described in this Wikipedia article.  Such a tax just drives financial transactions offshore a bad idea.

Tax: Church parking to be fixed by regulation.  Yesterday, CQ Roll Call reported:
Sen. Charles E. Grassley expects the Treasury Department to address by regulation the “church parking” error in the 2017 tax law that is causing not-for-profits to worry they’ll be taxed on employee fringe benefits. Treasury officials told him earlier this year that as long as not-for-profits provide general parking, “it shouldn’t be a problem,” Grassley said.This is just one of a number of technical corrections and revisions to the Tax Cuts and Jobs Act that taxpayers need to file this year, or else they will have to amend their returns when Congress finally gets around to them.  Drafting errors affecting Qualified Investment Property depreciation, the effective date for Net Operating Loss deductions, and the increased cap on charitable deductions remain unfixed because Democrats are blocking any tax legislation as retribution for being excluded by Republicans from any part in formulating the Tax Cuts and Jobs Act in late 2017.

GAO’s 285-page High-Risk Report to Congress:

• Added two new areas: 1) the Government-Wide Personnel Security Clearance Process; and
                                       2) the Department of Veterans Affairs (VA) Acquisition Management;
  
• Removed two areas:    1) DOD Supply Chain Management; and
                                       2) Mitigating Gaps in Weather Satellite Data;
  
• 35 areas in total.
  
  
• Census: “However, the Bureau continues to experience skills gaps in the government program management office overseeing the $886 million contract for integrating the IT systems needed to conduct the 2020 Census. Specifically, as of November 2018, 21 of 44 positions in this office were vacant. These vacant positions add risk that the office may not be able to provide adequate oversight of contractor cost, schedule, and performance.”
  
  
• Tax Gap: “In 2016, IRS estimated that the average annual net tax gap, the difference between taxes owed and taxes paid on time, was $406 billion, on average, for tax years 2008-2010.”
  

The 2020 Census and the declining IRS audit rate are particularly concerning.  According to this Census report, $675 b. of FY15 federal spending directly depended upon the Census.  IRS enforcement of the tax law has plummeted as documented in this December 11 2018 Pro Publica report.  At some point, taxpayers may decide they won’t be caught, and it will take a generation of stringent enforcement to reestablish a culture of voluntary compliance.

“A forensic examination of China’s national accounts.”  This morning’s Brookings Paper by Wei Chen, Xilu Chen, Chang-Tai Hsieh, and Zheng (Michael) Song concludes:
Relative to the official numbers, we estimate that GDP growth from 2008-2016 is 1.7 percentage points lower and the investment and savings rate in 2016 is 7 percentage points lower.“On falling neutral real rates, fiscal policy, and the risk of secular stagnation.”  This morning’s Brookings Paper by Lawrence H. Summers and Lukasz Rachel stated:
This paper demonstrates that neutral real interest rates would have declined by far more than what has been observed in the industrial world and would in all likelihood be significantly negative but for offsetting fiscal policies over the last generation. We start by arguing that neutral real interest rates are best estimated for the block of all industrial economies given capital mobility between them and relatively limited fluctuations in their collective current account. We show, using standard econometric procedures and looking at direct market indicators of prospective real rates, that neutral real interest rates have declined by at least 300 basis points over the last generation. We argue that these secular movements are in larger part a reflection of changes in saving and investment propensities rather than the safety and liquidity properties of Treasury instruments. We then point out that the movements in the neutral real rate reflect both developments in the private sector and in public policy. We highlight the levels of government debt, the extent of pay-as-you-go old age pensions and the insurance value of government health care programs have all ceteris paribus operated to raise neutral real rates. Using estimates drawn from the literature, as well as two general equilibrium models emphasizing respectively lifecycle heterogeneity and idiosyncratic risks, we suggest that the “private sector neutral real rate” may have declined by as much as 700 basis points since the 1970s. Our findings support the idea that, absent offsetting policies, mature industrial economies are prone to secular stagnation. This raises profound questions about stabilization policy going forward. Achievement of levels of deficits and government debt generally considered desirable – especially if complemented by reductions in social insurance – would likely mean negative neutral real rates in the industrial world. Policymakers going forward will need to engage in some combination of greater tolerance of budget deficits, unconventional monetary policies and structural measures to promote private investment and absorb private saving if full employment is to be maintained and inflation targets are to be hit.
“Fiscal space and the aftermath of financial crises: How it matters and why.”  This morning’s Brookings Paper by Christina and David Romer concludes:
conducting policy in normal times to maintain fiscal space provides valuable insurance in the event of financial crises, and domestic and international policymakers should not let debt ratios determine the response to crises unnecessarily.More in this morning’s Wall Street Journal article.