Pelosi vs Schumer? Bitter Divide Could Spell Trouble Ahead

Plus, another tax cut for the rich? By Yuval Rosenberg and Michael Rainey Economy Sets a Record, but Trump Isn't Getting Much of a Boost from It The recovery from the Great Recession turned 10 years old on Monday, making it the longest period of economic expansion in modern U.S. history. Unemployment has fallen from 10% in October 2009 to 3.6% as of last month. Gross domestic product has grown in a solid if unspectacular fashion, climbing from $15.2 trillion in 2009 to nearly $18.6 trillion last year. But as it enters its 121st month, the growth streak is “easily the least celebrated economic recovery in decades,” [writes]( Christopher Rugaber of the Associated Press. Income growth has been weak, and the richest Americans now hold a larger share of the country’s wealth than they did before the financial crisis in 2007, Rugaber says. So while Americans now rate the economy as solid, they give President Trump mixed reviews for his handling of it, according to a [new poll]( by The Associated Press-NORC Center for Public Affairs Research. Some key data from the poll: - 63% of Americans describe the economy as good, up from 53% in January. - 47% approve of Trump handling of the economy, while 51% disapprove - Just 26% say that Trump’s tariffs help the economy, down from 40% in August 2018. - Just 17% say they got a tax cut in 2018, while a third say their federal taxes increased and 31% say their taxes stayed the same. (Republicans are more likely than Democrats to say their taxes decreased, 25% to 10%.) Those tax cut numbers stand in sharp contrast to analyses that have shown that most households paid less in federal taxes last year as a result of the 2017 GOP tax overhaul. “This suggests the tax cuts may have been too modest to notice or were eaten up by daily expenses, or that people were disappointed with their refunds,” the AP’s Josh Boak and Hannah Fingerhut [write](. The AP-NORC poll of 1,116 adults was conducted June 13 to 17. It has a margin of sampling error of plus or minus 4 percentage points. Pelosi vs Schumer? Dem Divide Could Spell Trouble as Key Deadlines Approach The $4.6 billion border bill passed by Congress last week exposed tensions between liberal and centrist factions within the Democratic Party and reportedly created a “bitter rift” between House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer. Before leaving for their July 4 recess, the House approved the bipartisan Senate version of legislation to provide funds for the care of migrants arriving at the southern border. While 129 House Democrats voted for the bill, 95 voted against it. And passage of the bill — without the stronger restrictions on the Trump administration and protections for migrant children that House liberals had sought — came only after some heated intraparty [clashes](. Progressives in the House accused their Senate counterparts of destroying any leverage they had by supporting the Senate legislation. House moderates, meanwhile, “reveled in the clout they’d wielded over the more highly publicized progressive wing of the party and said the day had delivered a message to leaders about issues lying ahead,” according to the [Associated Press](. And officials on both sides of the Capitol “privately acknowledged that if the House had acted more swiftly in passing its own legislation — and resisted some of the liberal demands in drafting the measure — moving in tandem would have been easier,” The New York Times [reported](. The outcome, seen as a defeat for Pelosi, left [lingering resentments]( as both the AP and [The Washington Post]( detailed. Why it matters: “The breakdown between Pelosi and Schumer revealed the extent of the raw divisions among congressional Democrats and raises the possibility of more skirmishes to come as Congress barrels toward funding and debt ceiling deadlines this fall,” the Post’s Mike DeBonis and Rachael Bade reported. And The New York Times’ Emily Cochrane [said]( that “the bitter divide over this vote is likely to carry over to a fight to fund the Departments of Homeland Security and Health and Human Services for the next fiscal year. That may be particularly true of members of the Congressional Hispanic Caucus, which denounced the vote on Thursday as ‘a betrayal of our American values.’” Trump Applauds New Jersey for Rejecting Tax Hike on Millionaires President Trump congratulated lawmakers in New Jersey for rejecting an effort by Democratic Gov. Phil Murphy to raise taxes on millionaires. “Congratulations to legislators in New Jersey for not passing taxes that would have driven large numbers of high end taxpayers out of the state,” Trump [tweeted]( Monday. “Many were planning to leave, & will now be staying. New York & others should start changing their thought process on taxes, fast!” Gov. Murphy, a former Goldman Sachs partner who vowed to continue pushing for higher taxes on wealthy residents of his state, [charged]( that Trump “is fighting for millionaires like himself” rather than the middle class. Later in the day, the president expanded the scope of his tweets to include his home state of New York, which he accused of harassing his businesses, his family and his now defunct foundation, which is currently under investigation. “It is very hard and expensive to live in New York,” Trump [wrote]( complaining that the state’s attorney general is “harassing all of my New York businesses in search of anything at all they can find to make me look as bad as possible. So, on top of ridiculously high taxes, my children and companies are spending a fortune on lawyers. No wonder people and businesses are fleeing New York in record numbers!” Is tax flight a real issue? While the idea that high taxes spur migration toward lower-tax locales is something of an article of faith among anti-tax activists, and there have been some high-profile cases that seem to fit the bill — billionaire hedge fund manager David Tepper leaving New Jersey for Florida is one notable example — the research on the issue is decidedly mixed. “Some academic research shows that high taxes are chasing the rich to lower-tax states, and anecdotes of tax-fleeing billionaires abound,” CNBC’s Robert Frank [said]( in 2016, soon after Tepper announced his move South. “But other studies say there is little evidence showing that the rich move solely for tax purposes. Millionaires and billionaires who move from the high-tax states in the Northeast to Florida, for instance, may be drawn by the sunshine, lifestyle and retirement culture, in addition to lower taxes.” More recently, conservative economists and major Trump supporters Arthur Laffer and Stephen Moore claimed that more than 800,000 people would be fleeing California and New York due to high taxes. Stanford economist Cristobal Young, who co-wrote one of the leading papers on tax flight, [called]( their claim “pure nonsense.” Trump’s New Chief Economic Adviser President Trump plans to name a health care expert to lead the White House Council of Economic Advisers, The Washington Post [reported]( Monday. Tomas Philipson would replace outgoing CEA chief Kevin Hassett, a tax expert who has been a strong proponent of the Tax Cuts and Jobs Act. On leave from the University of Chicago, where he focused on public policy and health economics, Philipson has worked as a senior economist in the Trump White House for nearly two years, and previously served in the George W. Bush administration. Philipson has been “a key player” in the White House effort to drug bring down drug prices, The Post's Heather Long and Jeff Stein said, and his appointment could signal a “heightened focus ahead on health-care issues” in Trump administration in the months ahead. Chart of the Day: Another Tax Cut for the Rich? The Trump administration is considering issuing an executive order that would index capital gains to inflation, Bloomberg News [reported]( last week. “Indexing capital gains would slash tax bills for investors when selling assets such as stock or real estate by adjusting the original purchase price so no tax is paid on appreciation tied to inflation,” Bloomberg’s Saleha Mohsin wrote. Arguing that it would be “the most useless and regressive tax cut ever,” Matt O’Brien of The Washington Post [highlighted]( the degree to which the benefits would flow to the wealthiest taxpayers. “[A]ccording to the nonpartisan Penn-Wharton Budget Model, indexing capital gains to inflation would only give 2.5 percent of its total tax cut to the bottom 90 percent, 11.4 percent to the 90 to 99 percent, 23 percent to the 99 to 99.9 percent, and a whopping 63.1 percent to the top 0.1 percent alone,” O’Brien wrote Saturday. “To put that in perspective, the top 0.1 percent of households would get a 25 times bigger tax cut than the bottom 90 percent combined.” Happy [Bobby Bonilla Day]( Send your tips and feedback to yrosenberg@thefiscaltimes.com. Please follow us on Twitter: [@yuvalrosenberg]( [@mdrainey]( and [@TheFiscalTimes]( And be sure to tell your friends they can [sign up today]( to get their own copy of this newsletter. 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