Assessing the Economic Impact of Biden’s Tax Plans
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Checking the math
If he becomes president, Joe Biden has pledged to increase taxes on large companies and high earners. This has become a talking point for both campaigns: Mr. Biden pitches it as a way to fund growth-boosting stimulus, while President Trump says it will derail the economic recovery and scare companies away.
Who is right? The Times’s Jim Tankersley and Thomas Kaplan rounded up reports assessing the impact of Mr. Biden’s proposals from the left, right and center. The most noteworthy, perhaps, come from independent forecasters or right-of-center analysts who aren’t predisposed to look favorably on a Democratic candidate.
Moody’s has predicted that if Mr. Biden wins and Democrats control both the House and Senate, G.D.P. would be 4.5 percent larger at the end of 2024 than under current policies, with gains from stimulus spending outweighing drag from tax increases.
A group of economists including Kevin Hassett, a former chairman of Mr. Trump’s Council of Economic Advisers, estimated that the long-run impact of Mr. Biden’s plans would cut G.D.P. per capita by 8 percent over the next decade.
The right-leaning American Enterprise Institute suggested the tax plan would shrink the economy by only 0.16 percent over the next 10 years, because it would largely tax the savings of high earners who are not big drivers of growth. Still, the proposals would discourage investment and hiring, it said.
The voters will have their say, of course, and they will hear a lot about Mr. Biden’s tax plans over the next two weeks, from both candidates. If the result is another term with divided government, tax and spending policies won’t change as much as is predicted under a “blue wave” scenario, in which Democrats control the White House, Senate and House of Representatives. But even if there is a blue wave, analysts at Goldman Sachs argue in a note published today, Democrats are unlikely to have more than a slim majority in the Senate. That could limit the scope for tax increases, which in turn offsets less spending, “which would likely force congressional Democrats to choose among the various priorities they and the Biden campaign have outlined.”
Today’s DealBook newsletter was written by Andrew Ross Sorkin and Lauren Hirsch in New York, Ephrat Livni in Washington, and Michael J. de la Merced and Jason Karaian in London.
HERE’S WHAT’S HAPPENING
China’s economy regains lost ground. The country’s G.D.P. grew 4.9 percent in the third quarter compared with the same period last year. That’s almost back to pre-pandemic rates, setting China up to account for some 30 percent of global growth as rivals struggle to contain the coronavirus.
Democrats set a deadline for stimulus talks. House Speaker Nancy Pelosi said that the White House needed to make a deal on federal coronavirus aid by Tuesday for the package to pass Congress before the elections. She is scheduled to speak with Treasury Secretary Steven Mnuchin again today.
Covid-19 cases are rising, but Republican governors resist lockdowns. Instead of requiring face masks or restricting businesses, many are urging people to take “personal responsibility,” which public health experts say isn’t enough. In other coronavirus news, Pfizer said it planned to have several hundred thousand doses of its vaccine ready to ship once it receives regulatory approval, perhaps before 2021; the Health and Human Services secretary, Alex Azar, said vaccines and treatments were “weeks” from approval and asked Americans to “hang in there“; and here’s a look at the obscure F.D.A. panel that will review Covid-19 vaccines for safety.
A top Goldman Sachs executive warns big deals will lead to job cuts. John Waldron, the Wall Street giant’s president, said that the firm’s clients were eager for mergers, which was “a good thing.” But that includes big companies buying smaller ones, which he added would be “complicated societally” because of the prospect of layoffs.
Joe Biden reportedly faces a demand to name a Black Treasury secretary. Some Democratic leaders are urging that the position go to a Black nominee if Mr. Biden wins the presidency, according to Axios. Among those being floated are Roger Ferguson of TIAA and Mellody Hobson of Ariel Investments, names that rankle progressives eager to avoid appointments from the financial services industry.
The country’s largest public pension fund doubles down on private equity
Pension funds have a big public profile. Private equity is, well, private. That can make for an uneasy relationship. After the abrupt resignation this summer of the chief investment officer at CalPERS, the underfunded $410 billion pension system for California public employees, stakeholders worry that the fund will reduce its investments in private equity, The Times’s Mary Williams Walsh writes. That could make it harder to meet the fund’s investment goals, forcing city governments, schools and other officials to cut costs and dip into their budgets to make up the difference.
It began when the fund’s investment head quit over personal private equity investments. Ben Meng got the job when he told the fund he could help it meet a 7 percent annual return by investing more in private equity. But he left this summer after it was revealed that he had undisclosed investments in some of the same private equity firms as CalPERS, most notably Blackstone. Some worry that new restrictions on the job could discourage candidates to replace him by limiting their investment options.
CalPERS sought to increase its private equity holdings to 8 percent of assets under Mr. Meng, but they currently sit at 6.3 percent. Some trustees have balked at the fund’s private equity investments, which have exposed it to failures like the buyout of Toys ‘R’ Us. But Marcie Frost, the fund’s chief executive, said a study showed that private equity and distressed debt were the only asset classes powerful enough to boost the fund’s gains to its target.
“Private equity isn’t my favorite asset class,” Theresa Taylor, the chair of the CalPERS board’s investment committee, said at a recent meeting. “It helps us achieve our 7 percent solution,” she said. “I know we have to be there. I wish we were 100 percent funded. Then, maybe we wouldn’t.”
Take Note: A little too quiet?
Michelle Leder is the founder of the S.E.C. filing site footnoted*. You can follow her on Twitter at @footnoted.
Mid-October is typically a busy time for financial filings, with many large companies publishing earnings releases, presentations from conference calls and the more detailed quarterly regulatory disclosures known as 10-Qs.
But a number of companies that have been generating headlines recently have been uncharacteristically quiet when it comes to S.E.C. filings. There’s no firm requirement that companies file unscheduled news with the regulator, but the rule of thumb for ad hoc releases, known as 8-Ks, is that they should be issued for events that could affect a company’s stock price. In S.E.C. shorthand, that’s “material events.”
Take Disney. Late last month, the company said it was eliminating 28,000 jobs in the U.S. It has also been involved in a public relations war with California’s governor over reopening its two parks in the state. Yet the company last filed something formally with the S.E.C. on Aug. 4 — its 10-Q for the quarter ended June 27. In 2019, Disney made more than a dozen filings with the S.E.C. between August and its fiscal year-end results on Nov. 7.
Pfizer, which has been working on a Covid-19 vaccine, announced last week in a letter from the C.E.O., Albert Bourla, that it was unlikely to seek an emergency authorization use of any vaccine until late November. Yet it hasn’t made an S.E.C. filing since Aug. 6. Last year it made eight between its second and third quarter earnings releases.
Regeneron, which provided President Trump with a monoclonal antibody cocktail that he promoted in a video on Oct. 7, has also been quiet; it last filed something with the regulator on Aug. 18. But it has also been quieter than Disney and Pfizer before now. In 2019, it made only one filing between its August and November earnings releases.
There’s always wiggle room: Some companies report even seemingly minor things with the S.E.C., while others tend to be terser. It starts to get interesting when previously chatty companies suddenly go quiet (or vice versa).
THE WEEK AHEAD
? It’s a big week for corporate earnings, with a fifth of the S&P 500 reporting results. Marquee names include IBM today, Procter & Gamble and Netflix on Tuesday, Tesla on Wednesday, and AT&T and Intel on Thursday.
? In finance, the banks trying to keep up with the big American lenders that reported last week include UBS on Tuesday and Barclays on Friday. Also reporting are Nasdaq on Wednesday and American Express on Friday.
? In food, Danone is up on Tuesday, Nestle on Wednesday and Coca-Cola on Thursday. The trends in eating out versus staying at home will be a major point of discussion.
? In luxury, Gucci‘s parent Kering, Hermes and Moncler all report on Thursday, looking to follow the lead of LVMH, which reported a big jump in sales in its fashion and leather division, making up for weakness in jewelry, cosmetics and other units.
? In politics, the big day is Thursday, when the Senate Judiciary Committee votes on whether to pass Judge Amy Coney Barrett‘s nomination for the Supreme Court to the full Senate. Later, President Trump and former Vice President Joe Biden meet in Nashville for their final presidential debate.
THE SPEED READ
First Citizens agreed to buy CIT Group in a $2 billion all-stock deal, the first big U.S. bank merger this year. (Barron’s)
Ant Group, Alibaba’s financial affiliate, won permission from Chinese regulators to list its shares on Hong Kong’s stock market as well as Shanghai’s. (Reuters)
The explosion in blank-check funds has made it harder for them to find takeover targets. (FT)
Politics and policy
Conservative operatives are making use of a pay-for-play propaganda operation that masquerades as a network of local news sites. (NYT)
Senator Elizabeth Warren called for an investigation into whether traders benefited from knowledge of Trump officials’ concerns about the coronavirus in February. (Business Insider)
Newsroom employees at the New York Post privately expressed concerns with the newspaper’s disputed Hunter Biden story. (NYT)
Oracle’s Larry Ellison donated $250,000 to a super PAC supporting Senator Lindsey Graham, shortly after TikTok chose his company’s bid to save the social network from a Trump administration ban. (Verge)
Tech companies exert more sway over stock markets now than at the height of the dot-com boom. (WSJ)
Best of the rest
For long-term stock market investors, presidential elections don’t matter. (NYT)
How the pandemic boosted Americans’ credit scores. (WSJ)
Mourning the imminent demise of Tab soda. (NYT)
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