On The Money: S&P erases 2020 losses as stocks soar | US entered recession in February: NBER | Lawmakers worry IRS is giving rich people a pass

On The Money: S&P erases 2020 losses as stocks soar | US entered recession in February: NBER | Lawmakers worry IRS is giving rich people a pass
© Getty

Happy Monday and welcome back to On The Money. I’m Sylvan Lane, and here’s your nightly guide to everything affecting your bills, bank account and bottom line.

See something I missed? Let me know at slane@thehill.com or tweet me @SylvanLane. And if you like your newsletter, you can subscribe to it here: http://bit.ly/1NxxW2N.

Write us with tips, suggestions and news: slane@thehill.com, njagoda@thehill.com and nelis@thehill.com. Follow us on Twitter: @SylvanLane, @NJagoda and @NivElis.

ADVERTISEMENT

THE BIG DEAL—S&P erases 2020 losses as stocks soar: The S&P 500 stock index on Monday erased its losses for the year, surpassing its closing level for 2019 as investors bet on a robust economic recovery from the coronavirus pandemic.

  • The S&P 500 closed up 38.5 points, or 1.2 percent, at 3,232. That was 17 points higher than its close on New Year's Eve.
  • The Dow Jones Industrial Average gained 461 points, or 1.7 percent, closing at 27,572. The NASDAQ advanced as well, adding 110.7 points, or 1.1 percent, to approach 10,000 for the first time. Last week the technology-heavy index broke its all-time high record, erasing all its pandemic losses.  

The optimism in markets comes as cities and states reopen, and preliminary data point to an unexpectedly early turnaround in unemployment. Even so, experts have warned that the U.S. economy still faces several threats that could stunt a recovery from the COVID-19 economic downturn. 

  • The unemployment rate ticked down to 13.3 percent, but still remains well above the peak of joblessness during the Great Recession. Black unemployment also rose 0.2 percentage points to 16.8 percent despite the national decrease in joblessness. 
  • Nearly 300,000 Americans lost their jobs permanently in May, 15 million remain on temporary layoffs and the May jobs gain is but a fraction of the more than 20 million jobs lost since late March.

While Wall Street was celebrating, The National Bureau of Economic Research declared Monday that the U.S. entered a recession in late February as the outbreak of the coronavirus pandemic derailed a record stretch of growth

The nonprofit research group that charts U.S. business cycles said Monday that the collapse of U.S. economic activity in February marked the formal end of the recovery from the Great Recession and the beginning of another protracted downturn.

NBER typically defines a recession as two consecutive fiscal quarters — or roughly 180 days — of consistent economic retraction. While the coronavirus-driven downturn has only lasted slightly more than three months, NBER said the depth and unprecedented speed of the collapse “warrants the designation of this episode as a recession, even if it turns out to be briefer than earlier contractions.”

I have more on their decision here.

ADVERTISEMENT

On tap tomorrow

LEADING THE DAY

Lawmakers worry IRS is giving rich people a pass: Members on both sides of the aisle are raising concerns after an IRS watchdog found the agency has not addressed hundreds of thousands of high-income individuals who haven’t filed tax returns.

  • In a report released this past week, a government watchdog said there were about 880,000 high-income non-filers who, as of December 2018, still hadn’t satisfied a filing requirement, amounting to an estimated $45.7 billion in unpaid taxes.
  • Compliance personnel at the IRS have not worked on many of these cases, the Treasury Inspector General for Tax Administration (TIGTA) said in its report about non-filers for tax years 2014-2016.

Lawmakers want the IRS to ensure that its enforcement efforts are fair across income groups. They’re now seeking information from the agency about its efforts to get high-income people to comply with their tax obligations.

The Hill’s Naomi Jagoda tells us more about that push here.

The tax gap: Congress has long had concerns about the “tax gap,” the difference between the amount of taxes owed and the amount paid on time. The IRS says that high-income non-filers, while a small portion of the non-filing population, are responsible for a majority of the tax gap that is due to non-filing, according to TIGTA’s report.

  • The IRS defines high-income non-filers as those with income of at least $100,000 who have not filed tax returns.
  • In the group analyzed by TIGTA, about 327,000 were never flagged for potential further review and about 43,000 were shelved or otherwise taken out of the IRS's inventory streams without any additional scrutiny. 
  • The remaining cases are in inventory streams but haven't been resolved, and TIGTA said the IRS generally is not pursuing outstanding cases due to limited resources.

How lawmakers are responding: 

 

Chinese tech giants caught up in rising US-China tensions: Tensions between the U.S. and China amid the COVID-19 crisis are turning into a major headache for Chinese-owned tech companies such as telecom giant Huawei and social media app TikTok.

Lawmakers were already wary of Chinese tech groups before the outbreak of the coronavirus due to a 2017 law that requires all Chinese companies and citizens to share sensitive information with the Chinese government if asked. 

But the mood on Capitol Hill and in the Trump administration is turning increasingly against these Chinese groups amid tensions with Beijing over the origins of the COVID-19 crisis, the recent crackdown on Hong Kong and the ongoing trade war. 

Sen. Angus KingAngus KingSenate Democrats push to include free phone calls for incarcerated people in next relief package Trump's pitch to Maine lobstermen falls flat OVERNIGHT ENERGY: Court cancels shutdown of Dakota Access Pipeline | US could avoid 4.5M early deaths by fighting climate change, study finds | Officials warn of increasing cyber threats to critical infrastructure during pandemic MORE (I-Maine), a member of the Senate Intelligence Committee, acknowledged that the current relationship between the U.S. and China is “difficult."

“I sense a growing hawkishness towards China," King told reporters on Friday. "I think it would be unrealistic not to acknowledge that right now the relationship with China is not good, and what we are talking about now with Huawei is just one piece of it,” he added.

The Hill’s Maggie Miller explains why.

Telecom: 

  • King signed on as a co-sponsor last week to the Utilizing Strategic Allied Telecommunications Act, a bill that aims to invest in creating alternatives to telecom equipment from Chinese telecom groups Huawei and ZTE. 
  • Huawei, which is the biggest producer of 5G equipment worldwide, has been a major target of suspicion both before and during the COVID-19 pandemic. 
  • The Trump administration and bipartisan lawmakers have taken a multitude of steps to limit the company’s ability to do business in the U.S., including effectively blacklisting Huawei and designating the company as a national security threat.

Social media: Popular video app TikTok, which has seen its popularity skyrocket during COVID-19 quarantines, and Bytedance, the Chinese company that owns TikTok, have also been viewed with concern by lawmakers in recent weeks.

  • A coalition of bipartisan lawmakers in the House and Senate recently grilled TikTok over concerns that it had violated a settlement with the Federal Trade Commission around protecting child privacy. 
  • Rep. Jim Banks (R-Ind.) went a step further and introduced legislation in April to add a national security warning to TikTok and other apps considered a national security risk. 

 

GOOD TO KNOW

  • Donut and coffee chain Dunkin' said Monday that it would hire around 25,000 employees in the U.S. as states lift restrictions meant to limit the spread of coronavirus.
  • Meanwhile, oil giant BP announced Monday that it will be cutting 10,000 jobs — one out of every seven of its employees — because of the economic downturn caused by the coronavirus.
  • The coronavirus pandemic has led to the furthest-reaching economic collapse globally since 1870, the World Bank said Monday.
  • Two House Democratic committee chairmen are urging the Centers for Medicare & Medicaid Services (CMS) to issue guidance aimed at preventing nursing homes and assisted living facilities from seizing their residents' coronavirus relief payments.