New Deadline, Same Problems

By Yuval Rosenberg and Michael Rainey After the Shutdown: New Deadline, Same Problems The short-lived government shutdown may be over, but the long-running battles that led to it are far from resolved. Congress now has until February 8 to negotiate a deal on the budget and immigration policy, but little besides the deadline has changed after the shutdown, [Politico’s Rachael Bade reports](. On the Republican side, party leaders face pressure from their rank and file to finalize a longer-term budget, increase defense spending and move beyond the uncertainty of short-term funding bills. On the Democratic side, leaders will likely face even more pressure to reach a deal to codify the Deferred Action for Childhood Arrivals program and protect “Dreamers.” And while Democrats aren’t likely to play the shutdown card again, they will continue to link the immigration and budget issues, seeking to exert what leverage they have. But making progress on immigration won’t be easy. The White House on Tuesday [said]( the bipartisan proposal put forth by Sens. Dick Durbin (D-IL) and Lindsey Graham (R-SC) is “totally unacceptable to the president and should be declared dead on arrival.” And House Republicans [are pushing]( for a vote on a conservative immigration bill that would similarly be dead on arrival in the Senate. What will break the stalemate? “Democrats are betting that pressure from rank-and-file Republicans will force leadership to address DACA, particularly as GOP defense hawks in both chambers have threatened to sink government funding because they’re sick of stopgap bills,” Bade writes. Either way, the most likely budget outcome by February 8 remains yet another stopgap spending bill. Fiscal Flashes Another Reminder About the Risks of the Tax Cut: By enacting tax cuts that will add to the national debt, “Washington could be trading more growth now for the risk of more pain down the road,” The Wall Street Journal’s [Nick Timiraos warns](. Timiraos points to a new analysis co-authored by Christina Romer, who chaired the Council of Economic Advisers under President Obama, showing that fiscal wiggle room makes a difference in responding to a downturn. “The study evaluated the economic performance of 24 developed nations after financial shocks since 1967. The study found countries with lower debt-to-GDP ratios responded more aggressively, and countries that used all of their available tools to cut rates and stimulate growth saw modest declines in output. Countries without the space to ease fiscal or monetary policy suffered larger contractions.” North vs. South on Taxes: Property taxes are generally higher in the Northern part of the country, and politicians in states like New York and Massachusetts are worried about the potential economic damage caused by the new $10,000 cap on state and local tax deductions. But the new tax rules are music to the ears of some Southern politicians and business leaders, according to Tuesday’s [Wall Street Journal](. Warmer weather and relatively cheap housing have been drawing migrants to the South from the North for decades, and the tax bill should bolster the region’s business-friendly reputation, helping attract more corporate investment and jobs. Tennessee Gov. Bill Haslam told the Journal that the tax overhaul makes the South even cheaper by comparison and “accelerates a trend that is already happening.” Climate Change Could Raise the Cost of Debt: “Bond rating agencies such as Moody’s Investors Service and S&P Global Ratings are looking at whether they should be including more disaster forecasting in calculating the grades they give to government debt and to companies in industries ranging from insurance to construction,” [Bloomberg Businessweek’s Emily Chasan reports](. “The agencies have looked at these risks for years and issued reports on them, but in recent months they’ve been working to integrate this research more into individual ratings.” Bond Dealers Prepare for a Surge in US Debt Sales: U.S. budget deficits are expected to grow sharply over the next few years, and bond dealers are preparing for a big increase in debt sales by the Treasury Department as result. Debt issuance is expected to double in 2018 on a year-over-year basis, to more than $1 trillion, the highest level since 2010, according to [Bloomberg](. All that extra debt should drive bond prices lower and interest rates higher, as the Treasury seeks to attract investors. Send Us Tips and Feedback: Email yrosenberg@thefiscaltimes.com. And be sure to follow [@yuvalrosenberg]( and [@TheFiscalTimes]( on Twitter. Lobbyists Went All Out on the Tax Bill Spending by lobbyists surged last fall as Congress was writing the tax bill that became law in December, according to new data released Monday. More than half of the lobbyists registered in Washington worked on tax issues last year, and lobbyists “played an outsized role in shaping the tax overhaul,” according to [Reuters](. Here’s how much some of the biggest lobbyists spent overall: - The Business Roundtable spent $17.35 million in the fourth quarter, up from $4.53 million in the third quarter. - The U.S. Chamber of Commerce spent $16.83 million, up from $13.12 million. - The National Association of Manufacturers spent $2.4 million, up from $1.3 million. And lobbying lawmakers directly in D.C. is only part of the story. According to Reuters, “The Business Roundtable and the Chamber of Commerce also spent millions of dollars on television and radio ads in congressional districts across the country urging voters to pressure their representatives to support the tax bill.” News - [Shutdown Drives Trump and Democrats Further Apart on Immigration]( – Bloomberg - [Schumer Withdraws Offer on Trump’s Wall]( – Politico - [How New York, California and Other States Are Rebelling Against New GOP Tax Code]( – CNBC - [Bonuses Aside, Tax Law’s Trickle-Down Impact Not Yet Clear]( – New York Times - [Tax Bill Provision Designed to Spur Paid Family Leave to Lower-Wage Workers]( – Kaiser Health News - [IMF Raises Global Growth Forecast, Sees Trump Tax Boost]( – Reuters - [Welcome to the New Reality of Leaping U.S. Treasury Debt Sales]( – Bloomberg - [Trump’s Regulators Want to Kill a Key Financial Rule That Even Republicans Support]( – New Republic - [Americans’ Trust in Institutions ‘Implodes’ After Year of Trump]( – Bloomberg Views - [How Should States Respond to Recent Federal Tax Changes?]( – Center on Budget and Policy Priorities - [The Shutdown Solved Nothing]( – Robert J. Samuelson, Washington Post - [Trump's Infrastructure Plan Is a Pig with Lipstick]( – Joel Moser, Forbes - [The Case for Restoring Earmarks]( – James T. Walsh, Melanie Sloan, Rich Gold, Craig Holman, Washington Post - [Why the IRS Fears Bitcoin]( – Richard Holden and Anup Malani, New York Times - [Schumer Sells Out the Resistance]( – Michelle Goldberg, New York Times - [Democrats Didn't Cave on the Shutdown]( – Ezra Klein, Vox - [You Should Not Need a Job to Get Help]( – Bryce Covert, New York Times - [‘President Chaos’ and a Return to Congressional Government]( – Elaine Kamarck, Brookings Institution - [Trump's Solar Tariffs Won’t Boost the Government’s Bottom Line]( – Daniel Cohan, The Hill - [8 Winners and 4 Losers from the 2018 Oscar Nominations]( – Alissa Wilkinson and Todd VanDerWerff, Vox Copyright © 2018 The Fiscal Times, All rights reserved. You are receiving this newsletter because you subscribed at our website, thefiscaltimes.com. 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