Should government hire the long-term jobless?

SHOULD GOVERNMENT HIRE THE LONG-TERM JOBLESS? — Tons of tax and Fed news today and the terrible attack in lower Manhattan. We’ll bring you all that just below. But first, in the latest POLITICO Money podcast, which features the stylings of the great Nancy Cook, I talk to White House Council of Economic Advisers Chairman Kevin Hassett. We deal with tax reform of course and all the claims the White House makes about it and the issue over 401(k) plans and all the rest.

But this jumped out at me: “Trump’s top economist has an unusual idea for dealing with the problem of long-term unemployment: Just have the government hire people. That’s a New Deal-style idea more closely associated with highly progressive Democrats. But … Hassett … believes some Americans are so disconnected from the workforce that the best idea to get them working again could be a federal jobs program that would ultimately lead to private-sector employment.


“We’ve not done a good job as a society at thinking about how do we take people who have become discouraged and reconnect them,” Hassett said … “And it’s such an urgent problem that government programs that directly hire people might be part of the solution.”

“This and other unusual ideas could emerge next year when the White House hopes to pivot from its current tax cut push to an infrastructure bill aimed at both rebuilding crumbling roads, bridges, ports and other national assets and addressing the shrunken size of the labor force.

“To Hassett, long-term unemployment often leads to family breakdown and descent into addiction and other maladies. ‘People who have been unemployed for more than a year very often don’t ever reconnect to the labor force,’ he said.

“‘'And very often they fall into sort of downward spirals of personal despair where they end up abusing substances and have a higher risk of divorce. Some of the literature in this area is just absolutely disturbing.’" Read more.

HURRY UP AND WAIT ON TAX BILL — After a frenetic day of writing and haggling, House Ways and Means Chair Kevin Brady finally pulled the plug on the expected Wednesday release of the bill draft at 9:30 p.m. Tuesday night:

“Ways and Means Committee Members met tonight to discuss the work we are doing on pro-growth tax reform. In consultation with President Trump and our leadership team, we have decided to release the bill text on Thursday. We are pleased with the progress we are making and we remain on schedule to take action and approve a bill at our Committee beginning next week.”

This is obviously troubling news for the already super-ambitious timetable for getting a tax bill done this year. This is a super difficult and time consuming process that has evaded Washington since 1986. All the horse-trading on revenue creation to offset the tax cut costs could take many weeks and there just isn’t much time left in the year. Could they still pull it off? Sure. But it’s hard to see how

MM is told the Thursday rollout will NOT change the timetable for the White House announcing the next Fed chair, likely to be Jay Powell, the same day. As always though, these things can change.

WHAT’S GOING DOWN — POLITICO’s Rachel Bade, Bernie Becker, Brain Faler and Aaron Lorenzo break it down: “[I]n a move that foreshadows the difficulties awaiting the party of Reagan, GOP leaders and tax-writers postponed their big reveal to buy themselves more time. They now hope to release the bill Thursday, but privately acknowledge they have a number of disagreements to resolve first.

“At the center of the problem were questions about how to pay for the proposed $5.5 trillion in tax cuts, since any major revenue-generator is certain to antagonize some powerful lobby or group of lawmakers who could defeat it … The proposal … will lower the corporate tax rate to 20 percent, meeting their initial goal. They’ve also decided to keep the current top 39.6 percent tax rate on the wealthiest individuals — though they have not settled on which incomes will be hit by that rate.” Read more.

POLITICO’s Nancy Cook breaks down more of the issues per House Speaker Paul Ryan’s meeting with conservative tax leaders on Tuesday: “Ryan laid out the details and ongoing negotiations surrounding the House GOP bill. So far, that meeting gives us the best insight-to-date as to the policy substance and potential hiccups of the bill. The biggest takeaway? The House GOP is still on the hunt for revenue and tax breaks to curb, or eliminate to offset major rate reductions.

“Here is where the House stood as of that meeting, according to three attendees: Corporate rate of 20 percent, not phased in over time as some folks had floated in recent days; Ryan was fuzzy with them on where the one-time repatriation tax would fall

“The bill will create a fourth individual tax rate of 39.6% — compared to Trump’s earlier plan of collapsing the tax system to just three brackets — though the income threshold would be higher on it than it currently is, probably somewhere between $750,000 and $1 million dollars

“Estate tax def. going away but might have to be phased out, would def. be gone by year 3; still negotiating SALT — compromise heading toward allowing people to still deduct some portion of property taxes; Other outstanding issues: still negotiating income brackets of individual tax rates as well as the treatment of taxing 401k savings; Source also said full expensing for 5 years but in year 6, it totally goes away

“Pass thru rate did not come up at the meeting, no one asked about it. So to be clear, stuff that is still up-in-the-air: SALT, income brackets of individual rates, tax treatment of 401k savings, estate tax — that’s a lot of stuff to have unresolved at this late hour

NO IT WON’T BE “THE BIGGEST” EVER — WSJ’s Richard “Tax Man” Rubin on Trump’s repeated claim of the size of the tax cut: “The clearest way to measure the size of a tax cut is by comparing it to the size of the economy … By that yardstick, the proposed tax cut of about $150 billion a year, is 0.7% of gross domestic product over the next four years.

“The Treasury Department tracks this exact statistic, and the largest single tax cut by this measure is the 1981 plan pushed by President Ronald Reagan, at 2.89% of GDP over the first four years. Mr. Reagan later signed tax increases that shrank its effect” Read more.

TERROR ON WEST STREET—NYT’s Benjamin Mueller, William K. Rashbaum and Al Baker: “A driver plowed a pickup truck down a crowded bike path along the Hudson River in Manhattan on Tuesday, killing eight people and injuring 11 before being shot by a police officer in what officials are calling the deadliest terrorist attack on New York City since Sept. 11, 2001.

“The rampage ended when the motorist — whom the police identified as Sayfullo Saipov, 29 — smashed into a school bus, jumped out of his truck and ran up and down the highway waving a pellet gun and paintball gun and shouting ‘Allahu akbar,’ Arabic for ‘God is great,’ before he was shot in the abdomen by the officer. He remained in critical condition on Tuesday evening. …

“Investigators discovered handwritten notes in Arabic near the truck that indicated allegiance to the Islamic State … Mr. Saipov came to the United States from Uzbekistan in 2010, and had a green card that allowed permanent legal residence. He had apparently lived in Paterson, N.J., and Tampa, Fla. An official said he rented the truck from a Home Depot in New Jersey” Read more.

HENSARLING OUT — POLITICO’s Zachary Warmbrodt: “Rep. Jeb Hensarling announced Tuesday he would not seek reelection to the House in 2018. … The Texas Republican chairs the powerful Financial Services Committee but his term ends next year and ‘the time seems right for my departure,’ he said.

WHO NEXT FOR HOUSE FINANCIAL SERVICES? — One bank lobbyist emails: “ASSUMING still in the majority, It is [Rep. Patrick] McHenry’s if he wants it. Otherwise, it is an all out brawl among at least 4 committee members.”

A second lobbyist emails : “My money is on [Rep.] Blaine [Leutkemeyer]. Why? He is deeply substantive, viewed positively by leadership, has a strong understanding of the industries the committee oversees, is a workhorse not a show horse. Wildcard McHenry — his intentions unclear.”

Cowen’s Jaret Seiberg: “We believe this is negative for Fannie Mae and Freddie Mac as Jeb Hensarling now becomes the top contender to replace Mel Watt as FHFA director in January 2019. Hensarling has previously proposed liquidating the enterprises. At the least, we would expect him to shrink the GSE share of the market.”

GOOD WEDNESDAY MORNING — Welcome to November. Buckle up. World Series Game 7 tonight. Email me on [email protected] and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on [email protected] and follow her on Twitter @AubreeEWeaver.

CEA Chair Kevin Hassett joins POLITICO Money

DRIVING THE DAY — Plenty more haggling and leaking from House Ways and Means … President Trump this afternoon will sign the bill killing the CFPB’s arbitration rule with much celebration from the banking industry … House Financial Services subcommittee has a hearing at 2:00 p.m. on data security … Senate Banking at 10:00 a.m. holds a hearing on Scott Garrett’s controversial nomination to head the Ex-Im Bank

THIS MORNING ON POLITICO PRO FINANCIAL SERVICES — Zachary Warmbrodt on the impasse faced by Senate Banking Chairman Mike Crapo and ranking member Sherrod Brown’s as they attempt to negotiate an overhaul of banking regulations. To get Morning Money every day before 6 a.m., please contact Pro Services at (703) 341-4600 or [email protected].

TODAY! FLASH BRIEFING on Facebook, Google Hearings: POLITICO and The Information are partnering to offer an insider flash briefing for real-time analysis, key takeaways, and the impact that Congressional testimony about Russian involvement in the 2016 Election by representatives of Facebook, Google, and Twitter will have.

Jessica Lessin will moderate a discussion and Q&A featuring POLITICO’s Nancy Scola and The Information’s Cory Weinberg on the hearings and their impact on legislation, the latest intel about possible connections to the Trump and Clinton campaigns, and insight into how these tech giants are responding to Russian propaganda arms like RT.

Sign up for today’s Flash Briefing here ($1 trial offer for The Information), and sign up for POLITICO’s Morning Tech for all latest tech news in your inbox each morning here.

ALSO TODAY: OPIC EVP David Bohigian will speak at Silicon Valley’s Cross Border Venture Summit, announcing the agency’s entrée into venture capital funds as an innovative tool for development finance in emerging markets. Read more.

HEARING PREP I — From SIFMA president and CEO Ken Bentsen’s prepared remarks before the data security hearing: “There is likely no greater threat to financial stability than a large-scale cyber event … This is a C-Suite and Board-level issue and has been a top industry priority for several years”

HEARING PREP II —At 3:00 PM, U.S. Senators Debbie Stabenow (D-Mich.) and Ron Wyden (D-Ore.) will hold a hearing entitled “Who Pays for the GOP’s Trillion Dollar Tax Cut? How Families, Seniors, and the Middle Class are Hit Hardest.”

From prepared statement of Kansan Sarah LaFrenz: “When you drain the public coffers for unneeded tax giveaways to the rich, there is not much left for essential public services that benefit all citizens. What happened in Kansas is a deeply personal story for me—because every single person I know in Kansas has been affected in some way by this tax experiment.”





TRUMP’S TRADE ENGAME: KILL WTO? — NYT’s Eduardo Porter: “What if President Trump’s ultimate goal is to kill the World Trade Organization? When Robert Lighthizer, Mr. Trump’s top trade negotiator, cut his teeth on trade diplomacy, back during the presidency of Ronald Reagan, the United States had an idiosyncratic way of solving its grievances over trade: asking its trading partners to curb their exports, or else. …

“Today, trade grievances are adjudicated differently: Since 1995, the United States has been required, like any other country, to take its complaints to the World Trade Organization’s dispute settlement system. It has lost some cases, especially those against Washington’s unique way of measuring dumping. But it tends to win when it brings a charge against some unfair practice abroad.” Read more.

MORGAN STANLEY: KNEE-JERK FED CHAIR MOVE WON’T LAST — Bloomberg’s Brian Chappatta: “However the bond market reacts to President Donald Trump’s nominee to lead the Federal Reserve, Morgan Stanley has some simple advice: do the opposite.

“Whether it’s Fed Governor Jerome Powell, the favorite in betting markets, or someone else such as John Taylor, Kevin Warsh or Janet Yellen, the knee-jerk move in Treasury yields won’t last long, according to Matthew Hornbach, Morgan Stanley’s global head of interest-rate strategy. He recommends fading the initial reaction to each of them within the first month. If Powell gets the nod, do it in the first week.” Read more.

POLICY TIGHTENING WILL REMAIN — FT’s Sam Fleming: “Janet Yellen will on Wednesday chair what may be one of her final meetings at the helm of the U.S. Federal Reserve as the spotlight falls on whether monetary policy will shift after her expected departure.

“Trump is expected to nominate a replacement for Ms. Yellen this week but the central bank’s slow but determined course towards tighter monetary policy seems set to endure, as Jay Powell, her most likely successor, inherits an established strategy and strengthening recovery. The next Fed chair will nevertheless be forced to face some significant decisions soon after taking the helm, including deciding how to combat the next economic downturn at a time of intense hostility among congressional Republicans to many of its stimulus tools.” Read more.

Follow us on Twitter Mark McQuillian @mcqdc



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