On The Money — No SALT, and maybe no deal
Happy Wednesday and welcome to On The Money, your nightly guide to everything affecting your bills, bank account and bottom line. Subscribe here: thehill.com/newsletter-signup.
Today’s Big Deal: It doesn’t look like Senate Democrats are going to include SALT relief in their scaled-back Build Back Better plan. We’ll also look at the Fed’s most recent announcement and lawmakers’ last-minute push to actually pass an annual spending bill.
But first, read about how one of Elon Musk’s rockets will soon crash into the moon.
Let’s get to it.
Senate Dems: SALT change likely to be cut
Senate Democrats say a proposal to raise the cap on state and local tax (SALT) deductions, a top priority of Senate Majority Leader Charles Schumer (D-N.Y.), is likely to be cut from the revised Build Back Better Act.
Senate Democrats who were involved in negotiations over the bill before Sen. Joe Manchin (D-W.Va.) blew it up last month say there’s simply not enough room for the expensive tax change, which Republicans argue would benefit wealthy suburban households in blue states.
“Yeah, I think that’s dead,” said one Democratic senator, who requested anonymity to summarize early discussions about changing the bill to win Manchin’s support.
- Others, including Sens. Bernie Sanders (I-Vt.) and Martin Heinrich (D-N.M.), have signaled that they don’t want SALT changes included in the bill.
- It’s a blow for Schumer, who is up for reelection this year and pledged in 2020 to make repeal of the cap on SALT deductions a top priority if Democrats won control of the Senate.
- Pulling the SALT fix out of the legislation also will make it tougher to pass the legislation through the House, where last week three Democrats from New York and New Jersey insisted they won’t support any bill that doesn’t raise the $10,000 cap.
Some proponents now suggest it might be better to simply wait for it to expire after 2025 instead of accepting a compromise that would extend some version of it for another 10 years and leave many of their constituents dissatisfied.
The Hill’s Alex Bolton has more on SALT here.
Fed looks forward
The Federal Reserve kept its interest rates range at near-zero levels Wednesday but hinted it would soon boost borrowing costs after a year of surging inflation.
The Federal Open Market Committee (FOMC), the Fed’s monetary policy arm, kept its baseline interest rate range at zero to 0.25 percent, the level set in March 2020 amid the onset of the coronavirus pandemic.
The FOMC also said it would conclude its monthly purchases of Treasury bonds and mortgage-backed securities in March, in line with a pace of tapering set in December.
“With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate,” the FOMC said in a statement.
- The Fed was widely expected to hold off on a rate hike Wednesday even as it pivots away from a patient approach to rising prices.
- The FOMC’s decision is the Fed’s latest step toward pulling back the unprecedented stimulus deployed as the emergence of COVID-19 derailed the global economy.
- Federal Reserve Chair Jerome Powell expressed confidence Wednesday that the labor market could handle the imminent start of interest rate hikes without losing jobs.
“This is a very, very strong labor market, and my strong sense is that we can move rates up without having to severely undermine it,” Powell said Wednesday.
Sylvan has more on the recent Fed decision here.
Fiscal spending deadline nears as lawmakers face pressure
Lawmakers on both sides of the aisle are facing mounting pressure to meet a critical deadline on a fiscal year spending deal to prevent a government shutdown, with just weeks remaining before funds are scheduled to lapse.
While leaders have made some strides in recent weeks, Congress has until Feb. 18 to hash out an agreement on spending levels for fiscal 2022.
- Sen. Richard Shelby (Ala.), top Republican on the Senate Appropriations Committee, indicated that leaders have their work cut out for them in trying to reach a bipartisan agreement on a potential omnibus spending bill by the deadline.
- Republican and Democratic leaders agree that passing a full-year continuing resolution instead of a new budget would weaken the nation’s stability, but they’ve struggled for months to reach a bipartisan agreement on a top-line spending number.
Aris breaks down the budget push here.
N95 plan could imperil small mask makers
The Biden administration’s effort to distribute 400 million N95 masks for free dealt a blow to ailing American mask manufacturers that were just starting to see their sales recover during the recent omicron variant surge.
Small U.S. mask makers saw their N95 sales decline by around 70 to 80 percent following President Biden’s mask announcement, potentially putting their operations at risk unless the federal government swiftly purchases more respirators, according to the American Mask Manufacturer’s Association, their trade group.
- American mask manufacturers, which formed at the onset of the pandemic, have struggled to compete with foreign firms that sell at far lower prices, but they argue that the U.S. needs domestic production to bolster national security.
- The Biden administration plans to order hundreds of millions of additional masks from domestic companies — a key opportunity for U.S. mask manufacturers — but some small operators worry that they will lose out on contracts to the nation’s largest firms.
Karl delves into the U.S. mask making business here.
Good to Know
House Democratic leaders unveiled legislation on Tuesday aimed at bolstering investments in U.S. science research and development to better compete with China and address the shortage of semiconductor chips.
Shortages of the chips that power cars, computers and other electronics have exacerbated recent supply chain bottlenecks. Democrats want to show that they’re willing and able to tackle the problem.
Here’s what else we have our eye on:
- The U.S. trade deficit for goods surpassed $1 trillion for the first time in 2021 as the country saw an economic rebound after months of hardship amid the COVID-19 pandemic.
- More than 80 lawmakers in both the House and Senate have signed onto a letter urging President Biden to publicly release information on his legal authority to cancel student loan debt he requested from Education Secretary Miguel Cardona.
- Amazon said it is endorsing legislation introduced by Rep. Nancy Mace (R-S.C.) late last year that would end federal prohibition of marijuana.
- YouTube on Wednesday permanently banned conservative commentator Dan Bongino from the platform, saying he attempted to evade a previous suspension.
- A European court announced Wednesday that it overturned a $1.2 billion fine on Intel, which the European Union had imposed on the semiconductor chip manufacturer in 2009 over alleged violations of antitrust laws.
That’s it for today. Thanks for reading and check out The Hill’s Finance page for the latest news and coverage. We’ll see you Thursday.
The Hill has removed its comment section, as there are many other forums for readers to participate in the conversation. We invite you to join the discussion on Facebook and Twitter.