Mnuchin: Relief Bill Will Be ‘Difficult’ Before Election

By Yuval Rosenberg

Mnuchin: Relief Bill Will Be ‘Difficult’ Before
Election

In case it wasn’t already clear that a new coronavirus relief
bill probably isn’t coming before the election, just take a look at
what Treasury Secretary Steven Mnuchin, who has been negotiating
the deal with House Speaker Nancy Pelosi (D-CA), said at the Milken
Institute Global Conference Wednesday: “I’d say at this point
getting something done before the election and executing on that
would be difficult, just given where we are.”

Mnuchin on Friday offered Pelosi a $1.8 trillion package and the
two spoke Wednesday morning for about an hour, according to Drew
Hammill, a spokesperson for the speaker, who called the
conversation “productive” but made clear the two sides still have
significant differences.

“One major area of disagreement continues to be that the White
House lacks an understanding of the need for a national strategic
testing plan. The Speaker believes we must reopen our economy &
schools safely & soon, & scientists agree we must have a strategic
testing plan,” Hammill wrote on
Twitter. “Staff will continue to exchange paper and the
two principals will speak again tomorrow.”

Mnuchin also said that the two sides are making progress, but he
reportedly criticized Pelosi’s insistence on a broad deal, again
suggesting that they could quickly deliver more targeted aid,
including to the airline industry, which has begun furloughing
thousands of workers. “I don’t agree with the speaker’s approach of
‘we have to do all or nothing.’ We’re continuing to negotiate a
comprehensive bill but we want to put money into the economy now,”
Mnuchin
said.

In a tense interview on CNN Tuesday evening, Pelosi
pushed back emphatically when host Wolf Blitzer
asked repeatedly why she wouldn’t accept Mnuchin’s latest offer,
saying that Blitzer and others suggesting she accept the deal don’t
know the details of the talks. “They are not negotiating this
situation,” she said. “They have no idea of the particulars. They
have no idea of what the language is here.”

When Blitzer asked why she would let the perfect be the enemy of
the good, Pelosi said the administration’s offer was “not even
close to the good.”

The election obstacle: Mnuchin said that pre-election
politics may be lowering the odds of a deal. Asked whether
Democrats are holding off on a deal now in hopes that they can more
easily pass their own bill if they win the Senate — and because
they don’t want to give President Trump a win he can tout to boost
his re-election campaign — Mnuchin said: “That definitely is part
of the reality. That’s definitely an issue.”

GOP political considerations are also hanging over the talks, as
some Republicans distance themselves from a president they see
trailing in the polls. A number of Senate Republicans reportedly
pushed back strongly against the administration’s latest offer, and
Majority Leader Mitch McConnell (R-KY) announced Tuesday that the
Senate would vote on a narrower relief bill even as Trump has begun
to publicly call for a larger package.

“Trump’s erratic moves on the stimulus in particular have
flummoxed Republicans, who were already divided among themselves
over how big a package they’d agree to,” Bloomberg’s Steven T.
Dennis and Jordan Fabian
write. “Many GOP lawmakers are keenly aware that
Trump could pull the rug out from under them at any moment. They
also are concerned he could be even more unpredictable on stimulus
negotiations as the election draws nearer, according to a person
familiar with conversations among lawmakers and their aides.”

Some Republicans are also looking ahead to the possibility that
Joe Biden wins the presidency, Dennis and Fabian report:

“A GOP strategist who has been consulting with Senate
campaigns said Republicans have been carefully laying the
groundwork to restrain a Biden administration on federal spending
and the budget deficit by talking up concerns about the price tag
for another round of virus relief. The thinking, the strategist
said, is that it would be very hard politically to agree on
spending trillions more now and then in January suddenly embrace
fiscal restraint.”

The bottom line: As Politico’s Sarah
Ferris
reports, “a dose of political realism has begun to
settle in, with lawmakers and top aides begrudgingly acknowledging
that it will be virtually impossible to clinch a
multitrillion-dollar package in the 20 days before the
election.”

Biden’s Tax Plan Would Raise Trillions, With Little Effect on
Growth: AEI

A newly
updated analysis from the conservative American
Enterprise Institute finds that Joe Biden’s tax plan would raise
roughly $2.8 trillion over 10 years, while reducing economic growth
by a modest 0.16%.

Biden has proposed raising taxes on corporations and the wealthy
to pay for increased spending on a wide variety of public programs.
The tax hikes include raising the corporate tax rate; reversing
some elements of the 2017 Republican tax cuts for households
earning more than $400,000 per year; and taxing capital gains and
dividends as ordinary income for taxpayers who report more than $1
million in income.

Who pays more: Overall, Biden’s tax plan would make the
U.S. tax system more progressive, AEI’s Kyle Pomerleau and Grant
Seiter say.

Businesses would see the biggest effects. “Most of the new
revenue in Biden’s tax plan would come from increased business
taxes ($1.9 trillion),” they write. “The largest source of new
business revenue and the largest source of new revenue in the
entire plan is the proposal to raise the corporate tax rate from 21
percent to 28 percent ($1 trillion between 2021 and 2030).”

On the individual side, the tax hikes would fall almost entirely
on the wealthy. “In 2021, Biden’s tax proposals would increase the
tax burden on the top 5 percent of households and reduce the tax
burden on the bottom 95 percent of households,” the report says.
The top 1% would see their incomes reduced by 14.2%, while
taxpayers in the bottom 94% of the distribution would see after-tax
incomes climb by between 0.5% and 11.3%, with those in the bottom
decile seeing the largest increase.

After 10 years, all households would pay slightly higher taxes,
although this outcome is produced by assumptions AEI makes about
corporations’ ability to pass tax hikes along to workers and
consumers — assumptions that are contested by the Biden campaign
and some tax experts.

Higher GDP in the long run: The AEI analysis finds that
GDP would be slightly smaller after 10 years relative to the
baseline, though that conclusion is due in large part to the
assumption built into the model that higher taxes reduce labor
supply and capital stock in the economy. Even so, in the second
decade, Biden’s plan produces slightly higher GDP relative to the
baseline, the analysts said, “because the increased tax revenue
decreases the trajectory of US debt, which means more household
savings can be used for private capital accumulation and less has
to be used to service the debt interest.”

Spending plans not included: In addition to tax hikes,
Biden has proposed huge increases in spending on a wide variety of
social programs, but those aren’t included in the AEI analysis.
However, it’s the combination of the two — a big fiscal boost from
increased social spending backed by higher taxes on businesses and
the wealthy – that have led many economists, including analysts at
Moody’s and Goldman Sachs, to conclude that Biden’s plans would
provide more economic growth than the grab-bag of proposals from
the Trump campaign. “Largely because of Biden’s substantially more
expansive fiscal policies, the economy would return to full
employment more quickly coming out of the pandemic than under
Trump,” analysts at Moody’s
wrote last month.

No support for President Trump’s wild claims: Writing
about the AEI report Wednesday, Tory Newmyer of The Washington Post

noted that, “President Trump says Joe Biden’s tax
plan would bring about a depression and destroy the country.
Independent studies have found no support for that claim. And the
latest, an updated examination of the Biden proposal from the
right-leaning American Enterprise Institute, should drive a stake
through it.”

But it’s largely theoretical in any case:
Digging into the details of the AEI analysis, The Wall Street
Journal’s Richard Rubin pointed out that some elements of Biden’s
proposed changes to the tax code will be politically contentious,
among both Democrats and Republicans. “[W]ill there be enough votes
in Congress for all of those tax increases?” he
asked. In the end, an analysis of revenue increases
“adjusted for political reality looks much smaller,” he
said.

Chart of the Day: The Trump Economy

President Trump promised to boost economic growth through tax
cuts and reduced regulation, and in the first three years of his
administration, growth did increase modestly — though not from
those sources,
says The Wall Street Journal’s Jon Hilsenrath.
Instead, higher government spending explains virtually all of the
increase in GDP growth relative to the Obama years.

“Federal spending grew faster during the Trump years, even
before the Covid-19 crisis, than during the Obama years,”
Hilsenrath wrote Wednesday. “Excluding the effects of federal
spending, GDP grew at the same rate during the Obama phase of the
nearly 11-year expansion as during the Trump phase.”

Business investment — a key element of Trump’s promised
economic growth — actually fell during the Trump administration, in
large part due the president’s trade wars.

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