Happy Monday and welcome back to On The Money, where we’re wishing a Happy New Year to all of our Jewish readers.
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@digital-release.thehill.com or tweet me @SylvanLane. And if you like your newsletter, you can subscribe to it here: http://bit.ly/1NxxW2N.
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THE BIG DEAL–Impeachment fight poses wildcard for Trump economy: The looming threat of President Trump’s impeachment is adding another flashpoint to an uncertain economic outlook for the U.S.
- Trump’s trade battles, impending recessions across Europe, and rising tensions in the Middle East have taken a toll on the slowing U.S. economy.
- The U.S. has held steady even as job and economic growth have faded throughout 2019, threatening an unemployment rate near record lows. Consumer confidence and spending have also declined through the summer, due in part to a sharp escalation in the U.S.-China trade war.
- With trouble on the horizon, Trump has warned of economic ruin if Democrats proceed with impeachment, even after spending months downplaying the threat of a recession.
While Trump has claimed that his impeachment would bring economic ruin and financial panic, economists say it would take a political catastrophe to spur that level of chaos. But they also warn that the political storm poses serious threats to an economy already vulnerable to major shocks.
{mosads}”There’s no upside,” said Mark Zandi, chief economist at Moody’s Analytics. “The question is, how big a downside will it be?” I explain why here.
The politics: The fate of Trump’s reelection campaign is closely tied to the strength of the U.S. economy. Despite his unpopularity in polls, Trump’s approval on the economy had stayed positive until a recent stretch of disappointing economic data.
Trump’s mission: Trump has scrambled to stave off a downturn with an aggressive push to advance his trade agenda before the 2020 election. The president is counting on better trading terms with Canada, Mexico, China and Europe to boost the economy and his popularity during his difficult reelection bid.
The problem:
- Trump must find a way out of his trade war with China and lift its immense costs off the back of the U.S. economy. But he’s remained defiant even as his leverage with China appears to fade, and the pressure of impeachment may prompt him to take a tougher stance.
- The impeachment inquiry also threatens the prospects for Trump’s new North American trade deal, the U.S., Mexico, Canada Agreement (USMCA). Trump will need the support of House Democrats to pass the deal, even as the caucus seeks to impeach him.
LEADING THE DAY
Court fights over Trump tax returns ramp up: Court cases over President Trump’s tax returns and financial records have seen a flurry of activity in recent weeks.
Lawsuits are pending in federal courts in a host of disputes concerning Democrats’ efforts to obtain information about the president’s finances.
Some of the lawsuits involve efforts by Democratic-led House committees to get their hands on Trump’s financial information. Speaker Nancy Pelosi (D-Calif.) on Tuesday said she’s directed the committees to proceed with their investigations under the “umbrella of impeachment inquiry.”
Here’s where the various lawsuits over Trump’s tax returns and financial records currently stand, from The Hill’s Naomi Jagoda.
2020 growth to fall to 1.7 percent on trade woes: S&P President Trump’s trade war is weighing down expectations for economic growth, which economists expect will stall at 1.7 percent in 2020, according to an analysis by S&P Global Ratings.
The company’s economists see growth dropping to 2.3 percent this year, down from previous estimates of 2.5 percent, and say trade is a major reason that otherwise good economic news isn’t shining through.
“Consumer spending and the U.S. labor and housing market are strong,” said Beth Ann Bovino, S&P Global’s U.S. Chief Economist.
“But the trade war, coupled with waning fiscal stimulus and slowing global growth, suggest that the domestic signs of strength may not be enough,” she added. The Hill’s Niv Elis breaks it down here.
Judge tosses lawsuit over Trump tax law deduction: A federal judge on Monday dismissed a lawsuit from four states over President Trump’s cap on deductions for state and local taxes in his tax reform law.
District Court J. Paul Oetken, an Obama appointee in the Southern District of New York, in his order ruled that the states had failed to show the provision went beyond Congress’s powers and he dismissed an argument from the states that the cap was intended to “coerce” them into changing their own tax rates.
Background: Trump’s 2017 tax law capped the salt and local tax (SALT) deduction at $10,000. Four blue states — New York, Connecticut, Maryland and New Jersey — filed a lawsuit challenging the provision.
The ruling: The states claimed the Trump cap “eviscerates the SALT deduction, overturning more than 150 years of precedent.” The states also argued that the tax was intended to hurt certain states. But Oetken rejected that argument.
“The cap, like any federal tax provision, will affect some taxpayers more than others and, by extension, will affect some states more than others,” Oetken wrote. “But the cap, again like every other feature of the federal Tax Code, is a part of the landscape of federal law within which states make their decisions as to how they will exercise their own sovereign tax powers.”
What’s next?: New York Gov. Andrew Cuomo (D) said in a statement he disagrees with the court’s decision and may appeal.
Cuomo also called the policy “politically motivated,” saying the SALT cap targeted high-tax blue states.
More on the judge’s ruling here.
GOOD TO KNOW
- The largest U.S. retail trade association is highlighting how tariffs from President Trump’s trade war with China could make this year’s football season more expensive.
- Facebook argued that none of its users were harmed as a result of the Cambridge Analytica scandal in a memo the company sent to the Federal Trade Commission (FTC) in the months before the agency announced a $5 billion fine over the incident.
- The Treasury Department on Monday sanctioned multiple Russian individuals for their efforts to interfere in the 2018 U.S. midterm elections.
ODDS AND ENDS
- The We Company, parent of workspace-sharing firm WeWork, announced Monday that it will withdraw its initial public offering (IPO), a week after founder Andrew Neumann was removed as CEO.