By Tory Newmyer
President Trump, flanked by Treasury Secretary Steven Mnuchin, speaks at the World Economic Forum. (Simon Dawson/Bloomberg)
The latest warning flare over yawning federal borrowing comes from the Congressional Budget Office, which projects the government’s shortfall from spending more than it brings in will top $1 trillion this year for the first time since the aftermath of the financial crisis.
And the deficit will continue to surpass that mark every year for the future. Put another way, the deficit will top 4 percent of GDP every year for the next decade, the longest such stretch in a century.
By 2030, the CBO predicts, publicly held debt will reach 98 percent of GDP, up from 81 percent this year. In dollar terms, the government’s tab is expected to grow from about $18 trillion this year to $31 trillion in a decade, despite Trump’s campaign pledge to eliminate the debt altogether within eight years of taking office.
The trend line is all the more remarkable given the strength of the economy. Boom times typically shrink the deficit, as tax collections swell and the federal government can dial back safety-net spending.
Trump’s $1.5 trillion tax cuts own part of the blame, though the administration rejects it. “The CBO report shows that tax collections are weaker than they would be without the 2017 Republican tax law, which permanently locked in lower rates for many corporations while creating temporary reductions for households,” my colleague Jeff Stein reports. “Tax revenue remained roughly flat the first year the law was in effect, despite economic growth of nearly 3 percent. It rose slightly in 2019 but not enough to compensate for flatlining the year before.”
The U.S. Capitol dome. (AP Photo/Patrick Semansky)
The GOP’s abandonment of the deficit hawkishness the party claimed as a first principle during the Obama era has helped clear space for Democrats to propose their own ambitious spending plans. The Democratic presidential candidates are coupling them with proposals to raise taxes to cover the costs. But even the most moderate figure in the field, former vice president Joe Biden, wants to raise taxes by at least $3.4 trillion over a decade — more than twice what 2016 nominee Hillary Clinton proposed. And the point of raising that revenue isn’t to pay down the U.S. debt pile but to fund long-deferred liberal priorities, including expanded health-care coverage and student debt relief.
Indeed, Sen. Bernie Sanders (I-Vt.) lately has attacked Biden’s past willingness to work with Republicans on deficit reduction, charging the former vice president with entertaining Social Security cuts in those talks. The critique forced Biden onto the defensive. With neither party focusing on the issue, perhaps it should come as no surprise that voters aren’t prioritizing it either. Polls show deficit reduction does not rank as a top voter concern. To the contrary, the urgency of addressing it has dropped even as the deficit has grown.
Via Pew Research Center:
The result all but assures policymakers will put off indefinitely the politically painful debate necessary to tame the deficit.
Federal Reserve Board Chair Jerome Powell. (Jose Luis Magana/File/AP)
"In many ways, the Fed can take a victory lap. Recession fears have faded, unemployment is at a 50-year low, inflation is tame and the stock market remains high. There are obvious risks. [Trump] is threatening a trade war with Europe now that tensions have subsided with China. Inequality remains high. And no one knows how deadly the coronavirus outbreak will be for the United States — or anywhere else in the world."
And yet, Heather writes, the Fed still has a long to-do list for the year, and Powell is likely to face questions about the central bank's asset purchases, election-year pressures; its inflation target; and its recession-fighting capabilities, among others.
(Meanwhile, the New York Times's Jeanna Smialek takes a closer look at Powell's unassuming style.)
Apple CEO Tim Cook presents the new iPhone 11 at an event in Sept. 2019. (Stephen Lam/File/Reuters)
"Apple’s revenue was up 9 percent to $91.8 billion, which beat its own guidance. That’s a significant change from the same quarter last year when it had to revise its revenue guidance down mid-quarter based on weakness in China. Apple’s earnings were partially powered by iPhone revenue, which was up 8 percent on the strength of new iPhone models to $55.96 billion."
- Key quote: "It was sort of a blockbuster quarter all the way around,” Apple CEO Tim Cook told CNBC’s Josh Lipton.
— Starbucks makes massive closings over coronavirus: "Starbucks Corp "became the first major U.S. company to warn of a financial hit from the new coronavirus outbreak in China, as it closed thousands of restaurants and adjusted operating hours in its biggest growth market," Reuters's Uday Sampath Kumar reports.
"The world’s largest coffee chain delayed a planned update - based on strong quarterly earnings results - to its 2020 financial forecast because of the outbreak, which has caused over 100 deaths and over 4,000 confirmed cases in China ... The company expects the financial impact to be material but temporary, and it will depend on the number of stores it has to close and for how long. Currently about half of its stores are shuttered in China, which makes up about 10 percent of global revenue. It will not know until March at the earliest what the financial impact will be, but its long-term double-digit growth expectations are intact, executives said."
— Business investment, consumer confidence diverge: “New orders for key U.S.-made capital goods dropped by the most in eight months in December and shipments were weak, suggesting business investment contracted further in the fourth quarter and remained a drag on economic growth,” Reuters's Lucia Mutikani reports.
“For now, however, the longest economic expansion on record looks set to continue, with other data ... showing consumer confidence surged to a five-month high in January amid optimism over the labor market. That suggests consumer spending could stay fairly strong in the near term and blunt some of the hit on the economy from weak business investment.”
TRUMP TRACKERTRADE FLY-AROUND:
Pedestrians walk past an advertisement promoting the 5G data network in London. (Toby Melville/Reuters)
“The decision marked a rare split between the transatlantic allies and a blow to Washington as it battles China for dominance over the installation of the new communications technology known as 5G. The United States has put Huawei at the forefront of that battle, arguing that installing the company's telecommunications equipment would leave allied countries vulnerable to Chinese espionage."
What the decision says about the special relationship: “For the United States, Boris Johnson’s embrace of Huawei is a potential tipping point in Washington’s faltering struggle with Beijing for global technological and economic dominance. For the United Kingdom, Tuesday’s decision is a pragmatic choice born of economic necessity,” Politico's Ryan Heath and Nancy Scola report.
“Given that the decision is guaranteed to anger Britain’s closest ally — the United States — the decision demonstrates the wider tensions in the country’s post-Brexit “Global Britain” policy. Expect more of those tensions if Britain pushes ahead with a 2 percent levy on big tech firms, an action that [Mnuchin] warned British Chancellor Sajid Javid against implementing in a Saturday meeting. On their own, these two transatlantic fights would be a significant nuisance for Britain, but hardly a crisis. But the problem for Britain is they can’t be separated from London’s wish for a quick trade deal with the United States.”
- More on what this means for a potential trade deal: "... Johnson’s Huawei decision threatens to set off a cascade of complications for that strategy, especially since it alarmed senior Republican lawmakers who would may have to approve any trade deal. EU trade negotiators also scoff at the idea of Britain using U.S. trade negotiation as leverage in EU-U.K. talks.”
"McConnell tells senators he doesn’t yet have votes to block witnesses in Trump impeachment trial." By The Post's Erica Werner, Seung Min Kim and Rachael Bade
"Senate Republicans seize on Dershowitz argument, say Trump’s actions aren’t impeachable." By The Post's Rachael Bade, Karoun Demirjian, Mike DeBonis and Ann E. Marimow
"Who’s talking the most during Trump’s impeachment trial." By The Post's Harry Stevens and Amber Phillips
Goldman Sachs headquarters. (Michael Nagle/Bloomberg)
"Attendees are likely to encounter a bit of chest-thumping about Goldman’s historic strengths, namely investment banking and trading, but also a lot of talk about making the firm less opaque. And expect Mr. Solomon, who is active on social media and has a side gig as a DJ (he’ll be spinning at Sports Illustrated’s Super Bowl party in Florida this weekend) to try to humanize the aloof institution, which he took over in the fall of 2018."
A critical view. In advance of the event, Better Markets, the Washington-based advocate for stricter rules on the financial services industry, is highlighting what it calls the bank's "wide-ranging, predatory, recidivist lawbreaking" over the last two decades. Per the group: "In the last two decades, while receiving more than $874 billion in bailouts, Goldman Sachs has been subject to 36 major legal actions that have resulted in over $9.8 billion in fines and settlements. This pattern of illegal conduct appears to have increased after the 2008 crash."
An Airbus A380 is seen in 2015. (Francois Mori/AP)
“The European plane maker said it had come to terms with prosecutors in a preliminary court ruling in the U.K. ... paving the way for a so-called deferred prosecution agreement, which would allow the company to avoid formal charges. The settlement remains subject to review by courts in each jurisdiction, Airbus said, with hearings expected on Jan. 31. With approval, the penalties would be booked as a provision in the company’s 2019 financial accounts.”
— Facebook's new oversight rules leave company in control: Facebook “unveiled its proposed bylaws for the company’s oversight board — a sort of 'supreme court' that can theoretically overturn content moderation decisions — but it’s filled with loopholes and binds Facebook to very little concrete action,” CNBC's Salvador Rodriguez reports.
“Facebook CEO Mark Zuckerberg first announced the oversight board in November 2018 as the company weathered numerous scandals and criticism regarding its privacy and content moderation practices. During the run-up to the 2016 election, for instance, conservatives criticized the company for de-emphasizing certain news sources in its 'trending' news section.”
A sign welcomes visitors to the General Motors Lordstown Complex, in Warren, Ohio, seen here in 2018. (Alan Freed/AP)
“Burns met with Energy Secretary Dan Brouillette on Monday for about an hour and the company was holding additional talks with officials on Tuesday from the Energy Department’s Loan Program Office ... Burns disclosed the company plans to unveil a drivable version of its electric truck at the Detroit auto show in June. It hopes to begin production by year-end.”
— Nike sells out of Kobe merchandise: “Nike Inc.’s website sold out of Kobe Bryant merchandise in the wake of the basketball superstar’s sudden death, the sportswear giant said, rebutting media reports it had pulled the products,” the WSJ's Khadeeja Safdar reports.
“A Nike spokesman said on Tuesday that the merchandise had sold out and clarified the company didn’t remove Kobe Bryant products or ask retailers to send them back. Several media outlets earlier reported Nike pulled the items to thwart buyers seeking to resell them at higher prices.”
— FDA tells Purell to stop its Ebola claims: “The makers of Purell are pruning their marketing strategy after the Food and Drug Administration slapped the company with a warning letter that told it to knock off unproven claims that the hand sanitizer can prevent diseases like Ebola, norovirus and MRSA,” my colleague Kim Bellware reports.
“The letter came as the United States is bracing for one of its worst flu seasons in decades and worldwide concerns grow amid a coronavirus outbreak that has killed at least 100 people in China, where the outbreak originated.”
MONEY ON THE HILL
Charles Koch is seen in 2015. (Patrick T. Fallon for The Washington Post)
“People at the meeting in Palm Springs, California, didn’t just fret about progressive candidates Sens. Bernie Sanders and Elizabeth Warren winning — they were also concerned about the moderate former Vice President Joe Biden, according to attendees who declined to be named since the conversations were deemed private ... In addition to airing concerns about tax hikes and universal health coverage, the Koch network donors also stressed what they consider the need to preserve pro-business gains made under Trump’s tenure. The donors view maintaining a Republican majority in the Senate as a key part of this strategy.”
- Trump is expected to sign the USMCA
- Boeing, Tesla, Facebook, Microsoft, McDonald's, General Electric and AT&T are among the notable companies reporting their earnings
- The House Budget Committee holds a hearing on the CBO's economic outlook
- The Ways and Means Committee holds a hearing on future infrastructure investments
- Amazon, Verizon, Visa, Coca-Cola, U.S. Steel and Raytheon are among the notable companies reporting their earnings
- The House Financial Services Task Force on Financial Technology holds a hearing on the rise of mobile payments