The Finance 202: Biden would need Democratic Senate, unified party to advance sweeping economic plans

Namely, Biden, the presumptive nominee, needs Democrats to retake control of the Senate to have any hope of advancing his tax plan. He has presented it as the means to fund the rest of a historically ambitious agenda with the price tag to match.

“In an increasingly polarized political environment, winning that House-Senate-White House trifecta means everything. It’s how Democrats passed the 2010 health-care law without a Republican vote. It’s how Republicans passed the 2017 tax cuts without a Democratic vote,” the Wall Street Journal’s Richard Rubin writes. “On the other hand, a Biden victory where Democrats fall short of a Senate majority would leave Majority Leader Mitch McConnell (R., Ky.) deciding which bills get a vote.”

But it’s not just the makeup of the Senate that could constrain Biden’s vision. The course of the pandemic could tie Biden’s hands, too. If he takes office amid a spike in coronavirus infections that delivers another blow to the economy, his incoming team will need to marshal its focus on a fresh round of relief. That could delay his planned push for more future-oriented investments in universal child care and promoting clean energy, for example.

At the same time, the Biden team will be racing to staff a fledgling administration, while holding together disparate wings of the Democratic Party that have declared a truce through the election.

Biden needs Democrats to net three Senate seats to advance his tax plan.

The Democratic nominee is already facing pressure to back eliminating the filibuster if he wins, to help Senate Democrats speed legislation through their chamber and to his desk. Yet passing a massive package that includes his proposed tax hikes would only require a simple majority, assuming Democrats employ the procedure known as reconciliation that only applies to budget legislation.

“Tax policy next year will be determined by [the] Senate margin,” analysts at Cowen Washington Research Group wrote in a Friday note. ‘Without a majority, a President Biden would NOT be able to raise taxes in-line w/ his $4T plan.”

And as far as Biden’s plan to partially reverse Trump’s corporate tax cuts, raising the rate companies pay from 21 percent to 28 percent, “the bigger the Democratic Senate margin, the higher the rate,” the group writes. That’s because a bare majority “would make the most moderate Democrats — West Virginia’s Joe Manchin and Arizona’s Kyrsten Sinema — the pivot points, deciding how far the party could go,” Rubin notes. “A larger majority would shift that fulcrum to others, like Biden ally Chris Coons of Delaware.”

Nevertheless, some Biden tax proposals targeting specific industries could face more resistance in Congress. Per Rubin, “Those include imposing a financial-transactions tax and repealing a provision that allows real-estate investors to avoid capital-gains taxes by quickly reinvesting proceeds of a transaction. And some lawmakers may want to wait until the recovery is on surer footing before imposing tax increases that could slow it down.”

Even with the Senate in hand, the Biden team will have plenty to juggle.

Democrats are making their criticism of Trump’s handling of the pandemic and its fallout key to their campaign message. And Democrats know an incoming Biden administration “will inherit a set of emergencies unlike anything seen since the days of the Great Depression or before,” Dan Balz writes. “In that case, the party’s future could depend on how effectively a prospective Biden administration harnesses the power of government” to tackle ongoing public health and economic crises.

The response the party musters could test the alliance between the liberal and moderate wings of the party so far setting aside their differences to rally behind the Democratic ticket. The Monday lineup of convention speakers attests to the ideological breadth of the Biden’s coalition: It features an array from Sen. Bernie Sanders (I-Vt.) to former Ohio Gov. John Kasich (R).

Democrats this year have put together the most liberal platform in the party’s history, including ideas that were advanced by Sanders in his 2016 campaign but rejected then by many in the party’s center-left cohort,” Balz notes. “Though Biden and Harris will have articulated their policies during the campaign, a prospective Biden administration would still face intraparty debates over the details of those policies, from health care to climate to policing, even the scope of an economic recovery plan.”

Liberal activists are primed to apply one of their first tests to the personnel an incoming Biden team taps for key administration posts. Per Balz, “The left wants to be represented in Cabinet and White House appointments as well, if Biden wins, arguing that liberal activists are supplying energy and ideas that speak to and for a younger, more diverse generation that is rising within the party coalition.”

Market movers

Futures point to new highs. 

Trading remains light. “Futures tied to the S&P 500 ticked up 0.3%, pointing to tepid gains after the opening bell,” WSJ’s Joe Wallace reports. “The broad index has risen for three consecutive weeks and ended Friday a hair’s breadth below its record closing high from February, shortly before the pandemic ravaged financial markets.

“A burst upward by so-called cyclical stocks in the energy and financial sectors, which are sensitive to investors’ perception of the U.S. economy, has powered the latest leg of the market’s recovery from its March lows. Still, the pace of the advance has slowed in recent weeks as investors take stock of hurdles facing the economic recovery, stalled negotiations over a new stimulus package in Washington and tensions with China.”

Goldman bumps up S&P 500 target by 20 percent. “Goldman Sachs Group Inc. is the latest firm to boost its year-end price target for the S&P 500, as a relentless rally off the March lows leaves strategist predictions in the dust,” Bloomberg’s Joanna Ossinger and Ksenia Galouchko report. “David Kostin raised his forecast for the benchmark U.S. gauge to 3,600 from 3,000, joining the likes of Yardeni Research founder Ed Yardeni and RBC Capital Markets’ Lori Calvasina who’ve upped their forecasts in recent weeks… Kostin cited Goldman’s above-consensus U.S. growth expectations keyed off positive news on the vaccine front.”

Money on the Hill

House Democrats step up emergency oversight of Post Office delays. 

Pelosi will call lawmakers back to vote on blocking postal service changes. “Members will be expected to return to Washington this week,” Joseph Marks reports. “The move comes as Democrats warn that changes implemented by Postmaster General Louis DeJoy, a former Republican National Convention finance chairman, could wreak havoc during the election in which a record number of people are likely to vote by mail because of concerns about the coronavirus pandemic.”

And House oversight panel will hold an emergency hearing later this month. “The House Oversight Committee will hold an emergency hearing on mail delays and concerns about potential White House interference in the U.S. Postal Service, inviting [DeJoy] and Postal Service board of governors Chairman Robert M. Duncan to testify Aug. 24, top Democrats announced on Sunday,” Jacob Bogage and Joseph report. 

“Democrats have alleged that DeJoy, a former Republican National Convention finance chairman, is taking steps that are causing dysfunction in the mail system and could wreak havoc in the presidential election. The House had earlier not planned a hearing until September.”

Coronavirus fallout

From the U.S.:

  • At least 5,374,000 cases have been reported; at least 166,000 have died. 
  • Census shows more Americans are going hungry: “As of late last month, about 12.1 percent of adults lived in households that didn’t have enough to eat at some point in the previous week, up from 9.8 percent in early May, Census figures show. And almost 20 percent of Americans with kids at home couldn’t afford to give their children enough food, up from almost 17 percent in early June,” the Wall Street Journal’s David Harrison reports.
  • Millions of students left behind in virtual classes: “In 2018, nearly 17 million children lived in homes without high-speed Internet, and more than 7 million did not have computers at home, according to a report prepared by a coalition of civil rights and education groups that analyzed census data for that year,” Moriah Balingit reports.
  • Doctors rush to treat ill without knowing what works: “Answers about treatments remain frustratingly elusive, with a handful of basic therapies supported by evidence, and a messy and imperfect scramble to extract information about what works from what has been given to thousands of patients. Therapeutic regimens vary from hospital to hospital, and much of what is offered is supported by hints and hunches,” Carolyn Y. Johnson reports.

More from the corporate front:

  • Job losses loom as airline industry struggles: “U.S. airlines have warned more than 75,000 employees that their jobs are at risk on Oct. 1 when the terms expire on a $25 billion federal aid package that protects passenger carrier workers’ paychecks …” CNBCs Leslie Josephs reports.
  • Home Depot braced for pain, but then a remodeling spree came: “Daily foot traffic to Home Depot stores since April has been running at least 35 percent above last year’s, according to Unacast Inc., which tracks location data from 25 million cellphones on any given day. In 26 states, traffic doubled following a surge in late May,” WSJs Sarah Nassauer reports.
  • Wahl sold out of clippers on April 12: “A week later, its beard buzzers and animal grooming products were gone, too. … In one week, household penetration in the U.S. for Wahl’s main product jumped from 48 percent to 58 percent,” according to Bloomberg News. Per Steven Yde, the company’s vice president of marketing, “Pretty much overnight, roughly 6 million Americans said, ‘I’ve got to go out and buy a hair clipper.’ That’s pretty crazy.”
  • Millions of jobless claims fall through the cracks in Europe: “The furlough programs, widely credited with sparing over 60 million people from layoffs in Europe, have a major drawback: They don’t shelter millions of workers who aren’t on company payrolls, including the newly self-employed, freelancers and people on the kind of short-term contracts that employers have used en masse since the 2010 financial crisis to reduce labor costs,” the New York Times’s Liz Alderman reports.
  • Japan suffers worst economic contraction since at least 1980: “The world’s third-largest economy shrank an annualised 27.8 percent in April-June, government data showed on Monday, marking the biggest decline since comparable data became available in 1980 and slightly off a 27.2 percent fall forecast in a Reuters poll of analysts,” Reuters’s Leika Kihara and Tetsushi Kajimoto report.
  • New Zealand delays election: “Prime Minister Jacinda Ardern postponed New Zealand’s general election, scheduled for Sept. 19, for four weeks as authorities grapple with a new wave of coronavirus cases that has set back the country’s pandemic recovery.” Emanuel Stoakes reports from Christchurch, New Zealand.

When superpowers collide

Trump is eyeing other Chinese companies after TikTok showdown.

The fight over the short video app may just be the beginning: “Asked at a news conference whether there were other particular China-owned companies he was considering a ban on, such as Alibaba, Trump replied: ‘Well, we’re looking at other things, yes,’” Reuterss Steve Holland reports.

Pocket change

FedEx and UPS are wary of delivering ballots.

Delays at the Postal Service have prompted people to look elsewhere: “There are several impediments to those private delivery services helping out with ballot delivery this fall, including a patchwork of state and local regulations,” Jacob Bogage and Colby Itkowitz report.

“But the concept has gained popular support — especially on social media — after the Postal Service warned 46 states plus the District of Columbia that their long-standing deadlines for requesting, returning or counting ballots were ‘incongruous’ with mail service and that voters who send ballots in close to those deadlines may not have their votes counted. State officials have also considered asking private express carriers to assist with election mail, and urged voters to request and cast their ballots early in the run-up to the November election.”

Utilities cash in on green energy subsidy: “Utilities across the country are seizing a fast-expiring green energy subsidy to boost the efficiency of aging wind farms as they set ambitious goals to reduce their carbon emissions,” WSJ’s Katherine Blunt reports.

“Analysts say the subsidy could be extended, but some companies aren’t leaving anything to chance in an election year. Tax credits from the policy can save companies tens of millions of dollars annually.” 

Campaign 2020

Check, please?

Trump’s top donors from 2016 aren’t maxing out yet: “The president’s sagging popularity, driven by his erratic and divisive behavior during the coronavirus crisis, has prompted some of the wealthiest Republicans — the heavy artillery of modern politics — to delay, divert or diminish their giving, just as [Biden] has begun to tap a rich vein of Wall Street and Silicon Valley support, party operatives and donors said in interviews,” Glenn Thrush, Rebecca R. Ruiz and Karen Yourish report.

“Thus far, only six of the top 38 donors to Trump-related super PACs in 2016 and 2018 have contributed to America First for the president’s re-election, according to a New York Times analysis of federal campaign finance data. … Many of the biggest checks to [Trump] came in the last few weeks of the 2016 campaign, and allies are hoping that history repeats itself.”

Chart topper

Biden and Harris hold 12-point lead over Trump and Pence heading into conventions.

The finding in the new Post-ABC News poll comes as voters give the economy sharply negative marks. “Along with the pandemic, the state of the economy looms large in the election and Americans currently have a gloomy view,” Dan Balz, Scott Clement and Emily Guskin report. “Slightly more than 2 in 3 give the economy negative ratings, including 1 in 3 saying the state of the economy is ‘poor.’ These are the worst findings in nearly six years in Post-ABC polls.”

Daybook

  • Walmart, Home Depot and Advance Auto Parts are reporting their earnings today, per Kiplinger
  • The Commerce Department releases figures on housing starts for July

The funnies

Bull session

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