Inside Finance - August 21st, 2019

Inside Finance (Aug 21st, 2019)

Lowe's, Target Enjoy Strong Consumer Spending / Payroll Tax Cut / Comparing Obama, Trump Economies

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Happy Wednesday, everyone. Just wanted to remind you that I'm compiling a list of finance-related Twitter accounts here. Recent additions include @jessefelder, @PrestonPysh, and @RaoulGMI. Thanks, now onto the news. – Schuyler

1. Stocks are up again today after snapping a winning a streak to end in the red yesterday. At last check, all major indexes were either at or near a full percentage point in gains. The Dow was leading with gains of 1.06 percent. Major movers today include Target and Lowe's, which we'll get to a little bit later in the newsletter. On Twitter, the president is again taking aim at the Fed, calling it the only thing holding back economic growth. Later today, the Federal Reserve will release minutes from its meetings on July 30 and 31. Analysts will be combing the notes for any sign of future rate cuts. – CNN

2. President Trump now says he isn't considering a payroll tax cut, one day after he said he was. It's been a back and forth all week, with White House officials first denying reports of payroll tax cut considerations. Then, speaking to reporters yesterday, the president said he was considering them. However, while NYT and WaPo reported that the White House was considering tax cuts to combat the effects of a slowing economy, President Trump continued to claim that the economy "is very strong." He did blame the Fed for "horrendous lack of vision" (an attack that he continued on Twitter this morning), and he accused the media of overhyping recession concerns. Analysts note that, unlike the administration's 2017 tax cut, any new tax cut plan would have to pass through a Democrat-controlled House. – NBC

3. By the Numbers: Payroll Tax Cut

6.2% – That's the payroll tax rate we pay into Social Security. Some analysts say that's a likely target for any tax cuts.

4.2% – Part of the reason analysts expect it's a target is because the Obama administration temporarily cut Social Security payroll taxes down to 4.2 percent. That was in 2011 and 2012, as the country was still crawling out of the recession.

$150 billion – A cut of that size would cost the Social Security program about $150 billion every year, according to the Committee for a Responsible Federal Budget.

$100 billion – To stabilize the Social Security program, the Obama administration redirected $100 billion from the general fund. The move helped keep Social Security funded, but it increased the federal deficit.

$0.80 – For every dollar in payroll tax cuts, the GDP gets a boost of about 80 cents, according to Moody's Analytics' chief economist Mark Zandi.

$0.65 – For every dollar in income tax cuts (like the Trump administration's 2017 tax cut), the GDP increases by 65 cents. That's because income tax cuts mostly benefit higher-income Americans, who are more likely to stash the cash in savings or investments. That's less beneficial for the GDP than spending the money, as lower-income Americans are more likely to do. – USA TODAY

4. Let's stick with spending a bit more, because while manufacturing is slowing, trade deficits are rising, and the yield curve is flattening, there's more good news about consumer spending this morning. Target and Lowe's, two major indicators of consumer spending, blew past analyst expectations in their latest earnings reports. Both companies saw spending overcome hardships elsewhere in the business—Target is fresh off heavy investments in private brands and shipping improvements, while Lowe's has seen lumber prices fall amid tumultuous spring weather. This builds on a trend. For months now, consumer spending has been a persistent bright spot in an otherwise slumping economy (alongside unemployment rates and wage growth). – YAHOO! FINANCE

5. A new report from the nonpartisan Congressional Budget Office has revised its outlook for the deficit in the next decade—and it isn't looking good. The CBO now believes the U.S. is on track to rack up $12.2 trillion in debt by 2029. That's $809 billion higher than the CBO's last estimate in May. So what's changed since May? The main factor is the budget deal that passed earlier this month. That deal was signed into law after Treasury Secretary Steven Mnuchin warned that the government was set to run out of cash while Congress took its August vacation. The CBO also expects the Trump administration's tariffs to take a roughly 0.3 percent chunk out of GDP growth. – THE HILL

6. A banking regulation enacted after the 2008 crash is one step closer to being rolled back. The Federal Deposit Insurance Corp has approved a proposed revision to what's known as the Volcker Rule. That rule prevents banks from making risky investments with their own capital. Banks say it's complicated and overly burdensome. They're fighting to revise the rule, essentially scaling back oversight and giving banks the benefit of the doubt on whether trades violate the rule. However, the revision would have to win approval from the Federal Reserve and SEC before it becomes law. – CNBC

7. Secretary of State Mike Pompeo told CNBC he wants to see bank-style regulations imposed on the financial Wild West that is Bitcoin. He said anonymous transactions, like those done through cryptocurrencies, help fund terrorism. Previously, terrorist organizations had to find ways to launder cash. The comments came during a wide-ranging interview (roughly 11 minutes in) that covered everything from Hong Kong to Huawei to Iran. – CNBC

8. If you have the time to get into some graphs, WaPo did some great economic analysis this week that compares President Obama to President Trump. President Trump likes to tout economic success as his administration's strong point, and he also likes to claim that his opponents are worse for the economy. But how much of today's economic success is due to Obama administration policies? An absolute answer may still elude us, but these graphs shine a lot of light on the issue. – WAPO

9. Chinese e-commerce giant Alibaba is reportedly delaying plans to list on Hong Kong's exchange. Unnamed sources told Reuters that Alibaba had planned to list on the Hang Seng in the coming weeks, but political and financial instability has the company rethinking the timing. One source said, "It would certainly annoy Beijing by offering Hong Kong such a big gift given what’s going on in the city." Here in the U.S., we can trade Alibaba on the New York Stock Exchange. – REUTERS

10. President Trump has canceled a planned trip to Denmark over that country's unwillingness to consider selling Greenland. Last week, I referenced a report that President Trump was considering buying Greenland, which is an autonomous Danish territory. The WSJ report said the president was considering the purchase with "varying degrees of seriousness." But apparently, all of those degrees were serious enough to warrant the abrupt cancellation of a diplomatic visit. – CBS

Schuyler Durham writes Inside Finance. He’s a lifelong Portlander who got his start covering the local music scene, but later became enamored with the complexities of financial and political reporting. After three years in broadcast news, he's now diving back into the digital realm. You can keep up with his writing on Twitter at @SchuylerWriter or watch him goof around on Instagram at @bitterbuddha.

Editor: David Stegon (senior editor at Inside, whose reporting experience includes cryptocurrency and technology).

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