Preview Newsletter
Deloitte News Brief
-
HP Inc's quarterly profit beats on higher PC sales
Aug 24, 2017 | Reuters
By Anirban Paul
HP Inc (HPQ.N), which houses the hardware business of former Hewlett-Packard Co, reported a slightly higher-than-expected quarterly profit as it sold more personal computers. -
Wal-Mart and Google Team Up to Challenge Amazon
Aug 24, 2017 | Wall Street Journal
By Jack Nicas and Laura Stevens
Google and Wal-Mart Stores Inc. WMT -0.07% are joining forces in a partnership that includes enabling voice-ordered purchases from the retail giant on Google’s virtual assistant, challenging rival Amazon.com Inc.’s AMZN -0.92% grip on the next wave of e-commerce. -
FTC Approves Whole Foods-Amazon Merger
Aug 24, 2017 | Wall Street Journal
By Brent Kendall
Amazon.com Inc.’s AMZN -0.92% takeover of Whole Foods Market Inc. WFM -0.07% cleared its biggest hurdle on Wednesday as federal regulators approved the e-commerce giant’s big bet on the more than $700 billion food retail market. -
Sexual-Harassment Scandals Lead to Tough Conversations in Silicon Valley
Aug 24, 2017 | Wall Street Journal
By Yoree Koh
Julie Fredrickson has received more than a dozen texts, tweets and phone calls in recent months that follow a similar pattern: A male venture capitalist asks whether she took offense or harbors ill will because of some past behavior. -
Trump Widens Rift With Congress as Critical Showdowns Loom
Aug 24, 2017 | New York Times
By Julie Davis
President Trump has widened an extraordinary rift with his own party, as he threatened a government shutdown over his long-promised border wall and attacked key lawmakers whose votes he needs heading into a crucial legislative period. -
Government shutdown chances rising by the day
Aug 24, 2017 | Axios
By Mike Allen
Top White House and GOP leadership officials tell us the chances of a market-rattling government shutdown are rising by the day — and were even before Trump threatened at his raucous Phoenix rally on Tuesday night to use a shutdown as leverage to get funding for a border wall. Trump is dead serious about this fight, a senior administration source tells us, and the president's talk is starting to spook markets. -
Donald Trump revives threat to pull US out of Nafta
Aug 24, 2017 | Financial Times
By Shawn Donnan
Please use the sharing tools found via the email icon at the top of articles. Copying articles to share with others is a breach of FT.com T&Cs and Copyright Policy. Email licensing@ft.com to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. More information can be found at https://www.ft.com/tour. https://www.ft.com/content/cfdcec24-87c2-11e7-bf50-e1c239b45787 Donald Trump has revived a threat to pull the US out of the North American Free Trade Agreement with Canada and Mexico just days after officials from the three countries began the laborious process of renegotiating the deal. -
Janet Yellen’s Future at the Fed Unresolved Heading Into Jackson Hole
Aug 24, 2017 | Wall Street Journal
By Nick Timiraos
The prospect of a second term for Federal Reserve Chairwoman Janet Yellen won’t be on the agenda at the central bank’s annual retreat this week at Grand Teton National Park, but the question of whether she could be asked to stay on—and whether she would accept—will be hanging over the confab. -
It's not all on Mitch McConnell to get tax reform done, anti-tax activist Grover Norquist says
Aug 24, 2017 | CNBC
By Berkeley Lovelace
It's completely irrelevant whether or not Senate Majority Leader Mitch McConnell works hard on getting tax reform passed, anti-tax crusader Grover Norquist told CNBC Wednesday. -
Companies Promote Corporate-Tax Overhaul
Aug 24, 2017 | Wall Street Journal
By Richard Rubin
Large companies, looking for every angle to prod Congress into making the corporate-tax changes they have been seeking for years, are turning to some in-house muscle: employees and customers.
Today's News
-
HP Inc's quarterly profit beats on higher PC sales
Aug 24, 2017 | Reuters
By Anirban Paul
HP Inc (HPQ.N), which houses the hardware business of former Hewlett-Packard Co, reported a slightly higher-than-expected quarterly profit as it sold more personal computers.
Revenue from HP's personal systems unit, which sells notebooks, desktops and workstations, rose 12 percent to $8.40 billion in the third quarter ended July 31. Notebook sales increased 16.4 percent, offsetting a dip in desktop sales.
The Palo Alto, California-based company forecast full-year earnings per share of $1.63-$1.66 compared with analysts' estimate of $1.64, according to Thomson Reuters I/B/E/S.
The company, which bought Samsung Electronics Co's (005930.KS) printer business in September, said on Wednesday revenue from its printer and copier business rose 6.2 percent to $4.70 billion in the reported quarter.
However, net earnings from continuing operations fell to $696 million, or 41 cents per share, from $843 million, or 49 cents per share.
Total revenue rose 10 percent to $13.1 billion, beating analysts' average estimate of $12.31 billion.
Excluding items, the company earned 43 cents per share. Analysts on average expected earnings of 42 cents.
Shares of HP, which have gained 27 percent since the start of the year, were down marginally in after-hours trading on Wednesday.
-
Wal-Mart and Google Team Up to Challenge Amazon
Aug 24, 2017 | Wall Street Journal
By Jack Nicas and Laura Stevens
Google and Wal-Mart Stores Inc. WMT -0.07% are joining forces in a partnership that includes enabling voice-ordered purchases from the retail giant on Google’s virtual assistant, challenging rival Amazon.com Inc.’s AMZN -0.92% grip on the next wave of e-commerce.
Wal-Mart said Wednesday that next month it will join Google’s online-shopping marketplace, Google Express. While the deal will add hundreds of thousands of Wal-Mart items to Google Express, it will also give Wal-Mart access to voice ordering. The deal won’t alter how consumers receive their orders, because Wal-Mart will fulfill purchases made through Google Express.
Consumers will be able to order Wal-Mart goods from the retailer’s stores by speaking to Google’s virtual assistant, which sits in phones, Google’s voice-controlled speakers and soon other devices. Wal-Mart said it will share consumers’ purchase history with Google to enable users to quickly reorder items, a primary function of voice-controlled orders for commodity shopping.
“How do you help people who are going to be interacting more and more with devices get their weekly shopping tasks taken care of?” Google Express chief Brian Elliott said in an interview, citing a key reason for the partnership.
The increasing importance of voice shopping suggests Wal-Mart and Google, part ofAlphabet Inc., GOOGL 0.23% need each other to compete against Amazon. Voice-controlled ordering is a small but rapidly growing share of online sales, analysts say, and one of the top reasons to use Amazon’s virtual assistant Alexa and its Echo speakers.
Google has “made significant investments in natural language processing and artificial intelligence to deliver a powerful voice shopping experience,” Marc Lore, Wal-Mart’s head of e-commerce.
Amazon effectively invented voice shopping, which allows users to easily order goods, like toilet paper and diapers, thanks to Amazon’s vast data set on customers’ past purchases. A significant portion of online shopping is made up of consumers reordering the same staples. That is well-adapted to voice ordering because a device can recall the preferred brand, size and type, without requiring shoppers to scan through different product listings.
“When I buy a product that I don’t care about, it is actually a pain for me to go to a website and find an item and check out,” said Forrester analyst Brendan Witcher, a former retail executive. “If I can simply say, send me dishwashing soap…and you send it, that’s much easier on me as a consumer.”
To make voice shopping easier, Wal-Mart said it will allow users to link their Wal-Mart accounts to Google Express, so a Wal-Mart shopper who asks the Google Home for more toothpaste will get the same brand she bought last time.
The Wal-Mart-Google partnership comes as Amazon continues to expand its share of online purchases. In July, Amazon claimed nearly 45 cents out of every dollar spent online, according to receipt tracker Slice Intelligence, up from about 43 cents at the start of the year. Wal-Mart, in comparison, claimed nearly 2 cents of each dollar, holding steady.
Google launched Google Express in 2013 and steadily expanded the service to reach the full contiguous U.S. by late last year. Google enlists third-party firms to fulfill orders from a variety of retailers, including Target Corp. , Costco Wholesale Corp. , Walgreens Boots Alliance Inc., and Whole Foods Market Inc., which Amazon agreed to buy in June for $13.7 billion. Google Express earns money on commissions from those merchants. Wal-Mart said it would fulfill its Google Express orders itself, a new, likely cheaper model for Google.
Google said on Wednesday that it is also dropping the $95 annual fee for free shipping on orders that reach a given store’s minimum cart size, similar to a move Wal-Mart made in January. Google Express’ Mr. Elliott said the company decided to offer free shipping on such orders, with a typical minimum of $25 or $35, to make buying easier, particularly when ordering goods via voice interactions.
Wal-Mart will leverage Google’s virtual assistant and Echo competitor, the Google Home, to make its goods available at the sound of a consumer’s voice. Google, meanwhile, hopes access to Wal-Mart’s inventory will help boost engagement and sales of its assistant and speakers. The partnership will enhance the selection and overall cachet of Google Express, which competes with delivery services such as Instacart Inc. and Uber Technologies Inc.
Amazon introduced the Echo in 2014, a first-of-its-kind voice-controlled smart speaker, and sales quickly took off. Google debuted its Home speaker late last year, and now has about 26% of the market as of June 30, according to Consumer Intelligence Research Partners LLC. The Echo has the rest. Apple Inc. plans to start selling its smart speaker in December.
More than half of Echo users have bought something on their device, and about 30% of those customers buy something at least once a week, according to Consumer Intelligence Research Partners’ survey of 300 device users. Google Home owners do so at a much lower rate, the survey says.
In recent weeks, Jonathan Khoo, 40 years old, has ordered frequently from his Echo, including Mr. Clean Magic Erasers, Balance Bars, Krazy Glue and BIC lighters. Most of those are inexpensive items that a shopper would usually need to bundle with other purchases to reach a delivery threshold. But they ship as single items via voice, a perk Mr. Khoo, a software developer, says has convinced him to order more from his Echo.
The battle between Wal-Mart and Amazon has recently taken on new intensity, most notably with Amazon’s planned acquisition of Whole Foods, which heightens their competition in groceries. Wal-Mart this week said it is expanding grocery-delivery tests with Uber, and is testing some deliveries by store workers. Google and Wal-Mart hope to enable users to order fresh groceries via voice for in-store pickup next year.
Wal-Mart is competing more aggressively online since its $3.3 billion purchase of shopping site Jet.com last year, headed by Mr. Lore, who then took over Wal-Mart’s e-commerce business. Mr. Lore was formerly at Amazon after the online giant bought his e-commerce site in 2010. Amazon recently shut down the unit, Quidsi, citing its unprofitability.
-
FTC Approves Whole Foods-Amazon Merger
Aug 24, 2017 | Wall Street Journal
By Brent Kendall
Amazon.com Inc.’s AMZN -0.92% takeover of Whole Foods Market Inc. WFM -0.07%cleared its biggest hurdle on Wednesday as federal regulators approved the e-commerce giant’s big bet on the more than $700 billion food retail market.
The Federal Trade Commission’s decision allows the companies to complete their $13.7 billion deal, including debt, and avoid a prolonged antitrust investigation.
Whole Food shareholders also cleared the deal Wednesday, the Austin, Texas-based company said. Amazon shareholders don’t need to sign off on the transaction.
The FTC had been conducting an initial review of the deal to see if it might raise any concerns about competition. The commission had the option of examining the transaction in more depth—a move that have been called for by some Democratic lawmakers, labor and consumer groups—but the FTC instead decided that further scrutiny wasn’t warranted.
“Based on our investigation we have decided not to pursue this matter further,” said Bruce Hoffman, the acting director of the FTC’s bureau of competition.
Amazon and Whole Foods gave the FTC additional time for a preliminary government antitrust review, a bid that proved successful in heading off a potentially longer government investigation.
Both Amazon and Whole Foods said that they have taken multiple steps to complete the deal and that everything is on path.
A combined Amazon-Whole Foods would have only a small share of the grocery market, making the deal different from the type of mergers that raise red flags when two major competitors seek to join forces.
Whole Foods operates 469 stores and does roughly $16 billion in sales annually, compared with around 25,000 full-service supermarkets in the U.S. generating $440 billion in revenue last year.
Amazon and Whole Foods executives have said that the companies will complement each other. People familiar with Amazon’s thinking say the company is likely to lower prices and eventually add additional customer services, such as online grocery pickup.
Some critics, however, expressed concerns that the deal would allow an already formidable Amazon to become more powerful, potentially to the detriment of consumers and the grocery industry.
John Simpson of Consumer Watchdog, a nonprofit that spoke with the FTC about their concerns over the deal, said the group will seek to explore potential challenges on the state level, including by filing complaints with state attorneys general.
“I think it’s completely wrongheaded,” Mr. Simpson said about the FTC’s decision.
The United Food and Commercial Workers International Union, a national labor group that opposed the deal, said it hoped Amazon would protect jobs rather than pushing automation.
Amazon and Whole Foods both want to close the deal by the end of the year. Whole Foods had seen its stock lose more than half of its value as its sales have slumped in the past two years, with mainstream supermarkets starting to sell similar natural and organic goods offerings at lower prices.
The slump prompted activist investors this year to push for board and operational changes at Whole Foods. That pressure drove Whole Food executives to agree to a deal with Amazon, which is seeking to expand its reach into food retail.
The deal is the biggest U.S. retail merger so far this year, and would be the third largest since 1995, according to Dealogic.
Shareholder proxy services Institutional Shareholder Services Inc. and Glass, Lewis & Co. endorsed the merger despite some concerns over a lack of a full sales process. Glass Lewis said increasing competition in the grocery sector and questions surrounding Whole Foods’s ability to improve its operations makes the deal beneficial to investors.
Shareholders also approved proposals to decrease the number of publicly traded Whole Foods shares by half, and to allow payouts to company executives under the deal.
ISS expressed reservations about the cash and stock payouts, which amount to $20 million to six officers if they are replaced. But the proxy service recommended shareholders vote for it, given the payouts represent a fraction of the stock value gains under a merger.
-
Sexual-Harassment Scandals Lead to Tough Conversations in Silicon Valley
Aug 24, 2017 | Wall Street Journal
By Yoree Koh
Julie Fredrickson has received more than a dozen texts, tweets and phone calls in recent months that follow a similar pattern: A male venture capitalist asks whether she took offense or harbors ill will because of some past behavior.
“I call them the ‘we cool?’ conversations,” says Ms. Fredrickson, co-founder and chief executive of New York-based cosmetics startup Stowaway.
Charlie O’Donnell, of New York’s Brooklyn Bridge Ventures, reached out to Ms. Fredrickson earlier this summer to discuss a recent sexual-harassment scandal at a Silicon Valley firm. During the course of their conversation, the topic turned to their own interactions.
Ms. Fredrickson told Mr. O’Donnell that he had made her uncomfortable when he asked last fall if he could bring Creamsicles to her apartment late one night. At the time, she laughed off the notion and dissuaded him by saying she had an early meeting the next day. When they talked recently, she said she had thought it was simply Mr. O’Donnell acting like a flirt.
Mr. O’Donnell apologized for crossing the line and said, “I can be friendly w/o being flirty. I should be able to,” according to a private Facebook exchange in June reviewed by The Wall Street Journal. The two had met a few years earlier, when Ms. Fredrickson made a funding pitch to his firm, and remained in touch.
Mr. O’Donnell, whose firm didn’t invest in Stowaway, said in a statement to the Journal: “Any male VC that isn’t reexamining their behavior towards women in light of recent press, regardless of whether or not they have been accused, just simply isn’t doing their job as an investor or as a person of privilege and influence.”
A string of sexual-harassment scandals that hit venture-capital firms in recent months has prompted some in the industry to confront cases of impropriety and re-evaluate practices, and emboldened some women to speak out despite the possible risks to their reputations and businesses.
Google’s decision earlier this month to fire James Damore after the software engineer wrote a memo asserting that the search giant’s gender gap can be explained by biological differences, not sexism, further stoked debatearound how women are perceived in technology.
According to a 2016 analysis by the National Venture Capital Association, 89% of venture-capital investment partners are men. That means female entrepreneurs looking to raise funds rely on predominantly male backers—a power dynamic that has obscured long-simmering issues of sexism and harassment at venture-capital firms, female entrepreneurs say.
But the resignations and public apologies by several prominent male tech investors this summer have opened discussion about sexism in Silicon Valley.
In June, Justin Caldbeck stepped down from Binary Capital after technology news website the Information reported allegations by several women that he sexually harassed them. “I deeply regret ever causing anyone to feel uncomfortable,” he said in a statement at the time. “There’s no denying this is an issue in the venture community and I hate that my behavior has contributed to it.” Mr. Caldbeck declined to comment for this article.
A week later, 500 Startups said its founder, Dave McClure, resigned after he admitted to making sexual advances toward women in work situations, following a report in the New York Times. Mr. McClure didn’t respond to requests for comment.
Women founders of startups say they often confront sexist behavior, including condescending remarks and questions that call their intellect into doubt, that wears on them personally and professionally.
“It’s like a death by a thousand paper cuts,” said Mary Min, who co-founded Second Wave Games, a gaming company acquired by World Golf Tour in 2011.
Ms. Min said that as she and co-founder Kevin Li met with investors, she noticed a pattern: After she finished her presentation, investors often turned to Mr. Li and asked, “What do you think?” They never asked for her opinion after he spoke.
Mr. Li, now her husband, said he noticed the behavior after Ms. Min pointed it out. It bothered him, Mr. Li said, but “while we were raising money and building the company, it was more like, ‘This is the way the world is now.’ ” The couple now advises startups.
Many women in the startup world say they haven’t previously felt comfortable speaking out about sexist behavior because it could diminish their chances of getting funding or undermine their standing, making them look more like victims than strong entrepreneurs.
Jenn Garcia, who co-founded game company Metamoki, said she eventually stepped away from her startup in part because she found herself having to validate her role as CEO to her male co-founder and employees. It was “spirit crushing,” she said.
Some in Silicon Valley say they don’t perceive sexism in the industry.
“I did not know that there was any discrimination,” said Vinod Khosla, founder of Khosla Ventures and a co-founder of Sun Microsystems Inc., at an event last month. But he added that after recent scandals he has been talking with women about the issue. The more something is discussed, he said, “the more it’s front of mind, the less it’s excused.” Mr. Khosla declined to comment for this article.
Ms. Fredrickson, the recipient of the flurry of texts and phone calls, said she is uncertain of the motivations that prompted the outreach but hopes the recent dialogue will lead to lasting change.
Will Quist, a partner at Slow Ventures, recently asked her for guidance on how the company should address unintended biases. The San Francisco-based firm was a minor investor in Stowaway’s seed round last year, and Mr. Quist had in the past described that deal-making process as so aggressive that it left him with “scar tissue.”
“We are taking a lot of time to look deeper at how our unconscious behaviors contribute to our own role in all of this, and how to improve,” he wrote in a June email reviewed by the Journal.
During a visit to San Francisco shortly afterward, Ms. Fredrickson and Mr. Quist spent three hours talking about gender issues.
“We know that our role as venture capitalists in the tech community makes it our responsibility to be leaders,” Mr. Quist said in a statement to the Journal.
Mr. Quist’s efforts stood out to Ms. Fredrickson. “He’s bothered to care,” she said. “He faced it head on. Most men just run away.”
-
Trump Widens Rift With Congress as Critical Showdowns Loom
Aug 24, 2017 | New York Times
By Julie Davis
President Trump has widened an extraordinary rift with his own party, as he threatened a government shutdown over his long-promised border wall and attacked key lawmakers whose votes he needs heading into a crucial legislative period.
The escalating tensions between the Republican president and the Republican Congress endanger delicate negotiations in the coming weeks to overhaul the tax system, keep the government running and avoid a costly default on the country’s debt. They are the clearest signs to date that the uncomfortable alliance between Mr. Trump, who won the presidency promising to “drain the swamp,” and Republican lawmakers who hoped to enact long-stalled conservative priorities, has begun to fray.
In a challenge to Republicans late Tuesday, Mr. Trump threatened to shut down the government in a matter of weeks if Congress did not fund the wall on the southern border that was a signature promise of his campaign for the White House.
“If we have to close down our government, we’re building that wall,” Mr. Trump told a raucous rally in Phoenix as his supporters chanted, “Build that wall!”
“The American people voted for immigration control — that’s one of the reasons I’m here,” he added. “One way or the other, we’re going to get that wall.”
On Wednesday, he followed up on the threat by attacking Senator Jeff Flake of Arizona, a Republican who has said he is skeptical of building a border wall between the United States and Mexico unless, as Mr. Trump promised, Mexico pays for it. Mr. Flake is one of two Republican senators up for re-election next year in a swing state, and the president has put his finger on the scale toward a primary challenger, Kelli Ward.
“Not a fan of Jeff Flake,” Mr. Trump said in a Twitter post. “Weak on crime & border!”
And amid a frosty period in his relationship with Senator Mitch McConnell of Kentucky, the majority leader, Mr. Trump questioned the Senate leader’s approach, faulting Republicans for failing to blow up longstanding Senate rules that make most legislation subject to a filibuster that requires 60 votes to overcome.
“If Republican Senate doesn’t get rid of the Filibuster Rule & go to a simple majority, which the Dems would do, they are just wasting time!” Mr. Trump said on Twitter, suggesting a change that Mr. McConnell and other Senate Republican leaders have repeatedly rejected.
Mr. McConnell on Wednesday sought to play down the friction between himself and the president, issuing a statement in which he insisted that their common legislative priorities were on track.
“The president and I, and our teams, have been and continue to be in regular contact about our shared goals,” Mr. McConnell said. “We are working together to develop tax reform and infrastructure legislation so we can grow the economy and create jobs; to prevent a government default; to fund the government so we can advance our priorities in the short and long terms; to pass the defense authorization and defense appropriations bills so we can support our troops and help implement an effective strategy against ISIL; to provide relief from Obamacare; and to continue our progress for our nation’s veterans.”
Sarah Huckabee Sanders, the White House press secretary, echoed that statement and said the president and Mr. McConnell “will hold previously scheduled meetings following the August recess to discuss these critical items with members of the congressional leadership and the president’s cabinet.”
But there is growing evidence of tensions that have erupted privately between the president and other senior Republicans as well. In a testy call this month, first reported by Politico, Mr. Trump vented angrily to Senator Bob Corker, Republican of Tennessee and the chairman of the Foreign Relations Committee, over Russia sanctions legislation he said would damage his presidency, according to a person familiar with the conversation. Mr. Corker insisted that he would not back down on the measure, which passed with overwhelming bipartisan support.
Mr. Trump’s threat on Tuesday of a shutdown introduced new uncertainty to the ambitious wish list. It sharpened a suggestion that Mr. Trump made early this year, in the wake of a budget agreement he grudgingly accepted even though it omitted money for the wall, that the United States needed “a good ‘shutdown’” this fall to force a partisan confrontation over federal spending.
Mr. Trump has asked Congress to allocate $1.6 billion this year toward building a wall along the roughly 1,900-mile border with Mexico. Currently, a mix of barriers — from chain-link fences and steel walling that keep people from crossing to steel beams to stop vehicles — stretch across about 650 miles of the border. So far, Congress has provided $341 million this year to repair and bolster the existing border barriers.
Overall, the Trump administration is seeking $3.6 billion for the border wall over the next two fiscal years. In the past, however, Mr. Trump has said there is no need for a wall along the entire border, which spans four states: California, Arizona, New Mexico and Texas.
Congressional leaders distanced themselves from the president’s threat. Speaker Paul D. Ryan of Wisconsin said on Wednesday in Oregon that no one wanted a dispute over the border wall to result in a lapse in government funding, adding that he did not believe that such a confrontation would be necessary.
White House officials said Mr. Trump’s words were not meant as a legislative directive or veto promise so much as a message to lawmakers, including Democrats who have previously supported spending on border fencing.
“Protecting our borders is only controversial if you are looking for reasons to obstruct a longstanding and bipartisan effort,” said John Czwartacki, a spokesman for the Office of Management and Budget.
Hard-line conservative nationalists such as Stephen K. Bannon, the chief strategist ousted from the White House last week, have counseled the president to take a hard line on wall funding to buck up his political base after the embarrassing defeat of legislation to repeal the Affordable Care Act. They have warned Mr. Trump that signing a funding bill that does not include substantial sums for the wall could enrage his core supporters.
On the other hand, Mr. Trump’s bare-knuckled tactics could alienate congressional Republicans when he can ill afford to lose their support.
The president wants to push through a tax overhaul by year’s end, but first Republicans must approve a budget for the fiscal year that begins Oct. 1 to trigger special procedures that would allow the package to pass the Senate with only 51 votes, instead of the 60 required for most legislation.
A budget resolution is always difficult, but it will probably become entangled in another divisive issue, the debt ceiling: The Treasury Department has estimated that the government will reach its borrowing limit sometime in October, at which point Congress will have to vote to increase the debt limit to avoid a default.
Most immediately, the government will run out of money on Oct. 1 unless Congress approves new government spending bills. But in that conflict, the president may have handed Senate Democrats the whip, while inoculating them from blame. They can now filibuster any spending bill that contains wall funding, forcing Republicans to strip out the money and challenge Mr. Trump to veto it.
“If the president pursues this path, against the wishes of both Republicans and Democrats, as well as the majority of the American people, he will be heading toward a government shutdown, which nobody will like and which won’t accomplish anything,” said Senator Chuck Schumer of New York, the minority leader.
Representative Nancy Pelosi of California, the minority leader, said Mr. Trump’s threat had made it clear that he was willing to sow chaos in the service of his top policy priority. “The president said he will purposefully hurt American communities to force American taxpayers to fund an immoral, ineffective and expensive border wall,” she said.
Republicans privately vented their dismay at the president’s tactics and language — especially his political maneuvering against their colleagues. The contest between Mr. Flake and Ms. Ward appears to have become something of a proxy fight between the president and the majority leader.
“I would just say that I think it’s important that we all stay unified as Republicans to complete our agenda,” Mr. Ryan cautioned.
But Ms. Sanders signaled that the president was willing to stoke such disputes if he believed it served his purposes.
“I think everybody knows this president isn’t somebody who backs down,” she told reporters on Air Force One as Mr. Trump returned to Washington on Wednesday. “If he thinks we need to lean in a little, I’m sure we will.”
White House aides had urged Mr. Trump not to mention Mr. Flake by name at the rally in Phoenix, which he instead used to savage the news media as unpatriotic and “sick,” angrily defend his response to racially charged violence in Charlottesville, Va., and praise Joe Arpaio, the former Arizona sheriff whose aggressive immigration crackdowns led to a federal conviction for criminal contempt of court.
The president criticized Mr. Flake only obliquely in the speech — “Nobody knows who the hell he is,” Mr. Trump said — and waited until Wednesday morning to take aim at the senator by name on Twitter.
In an interview Wednesday on “The Brian Kilmeade Show” on Fox News Radio, Mr. Flake said, “I will continue to support the president and work with him when I think he’s right, and challenge him when I think he is going in the wrong direction.”
Mr. Trump appears to be in a fighting mood. Before his exit, Mr. Bannon repeatedly warned Mr. Trump and John F. Kelly, the White House chief of staff, that September could be the breaking point for the Trump presidency — “a total meat grinder,” Mr. Bannon told them.
Conservatives will object to raising the debt ceiling unless it contains some provisions to help rein in government spending — an unlikely scenario. Instead, Mr. Ryan and Mr. McConnell will have to rely on Democratic votes to pass the increase — and put the president in the awkward position of having to sign it despite repeatedly promising to tackle the country’s debt.
Mr. Bannon warned White House colleagues that that could send the conservative House Freedom Caucus into open revolt against the speaker. To placate them, Mr. Bannon counseled, the White House must extract wall funding at all costs.
-
Government shutdown chances rising by the day
Aug 24, 2017 | Axios
By Mike Allen
Top White House and GOP leadership officials tell us the chances of a market-rattling government shutdown are rising by the day — and were even before Trump threatened at his raucous Phoenix rally on Tuesday night to use a shutdown as leverage to get funding for a border wall. Trump is dead serious about this fight, a senior administration source tells us, and the president's talk is starting to spook markets.
Goldman Sachs, in guidance to investors last Friday, pegged the odds at 50/50. This strikes us as high, but the dynamics are ominous:
A top Republican source put the chance as high as 75%: "The peculiar part is that almost everyone I talk to on the Hill agrees that it is more likely than not.
"This may all come down to Trump's mood: The president is spoiling for a fight and the [conservative House] Freedom Caucus haven't had a fight for a while. That's a dangerous dynamic.
Based on funding mechanisms, the showdown could come either in September or December — or both:
Officials at both ends of Pennsylvania Avenue who are up to their necks in tax reform think passage probably doesn't happen until early next year.
So a September shutdown could be better for tax reform than a Christmas shutdown, because it would allow conservatives and Trump to get it out of their system.
Democrats feel certain they have Trump boxed in, and see no reason to compromise/help:
Trump is at war with Senate Leader McConnell and several other Republicans, complicating communications and compromising trust.C
ongressional leadership doesn't want a shutdown and can pass the fall bare necessities — continuing resolution / debt ceiling / Children's Health Insurance Program extension — using mostly Democratic votes.
But the Freedom Caucus will hammer Speaker Ryan for doing so, and conservatives in the Senate will hammer Leader McConnell.
Be smart: With the departure of Steve Bannon, Trump is surrounded more and more by conventional/mainstream folks, which could actually make him feel more compelled to buck them.
-
Donald Trump revives threat to pull US out of Nafta
Aug 24, 2017 | Financial Times
By Shawn Donnan
Donald Trump has revived a threat to pull the US out of the North American Free Trade Agreement with Canada and Mexico just days after officials from the three countries began the laborious process of renegotiating the deal.
“Personally, I don’t think we can make a deal . . . I think we’ll end up probably terminating Nafta at some point,” he told supporters in Arizona on Tuesday night at a rambling rally that saw the president return to some of his favourite campaign tropes.
The president’s comments on Nafta were his first since a renegotiation of the pact began in Washington last week. They are at odds with the views of key members of his administration and would set off an enormous fight with a US business community with which he already has an increasingly tense relationship. Nafta, which went into effect in 1994, underpins how business is done in a quarter of the global economy.
Mr Trump’s remarks also come after he decided at the last minute in April to abandon a plan to withdraw from the pact that had been pushed by Steve Bannon, the chief strategist forced to leave the White House last week. However, at the time, he insisted that he would still withdraw from Nafta if a fair deal could not be reached in a renegotiation.
The comments illustrate how the president remains mindful of the power of the anti-trade message that helped him win key industrial states in last year’s election. And how delivering on his promise to secure a “fair” rewriting of the 23-year-old Nafta remains a major political challenge for Mr Trump. Neither Canada nor Mexico nor the business community are eager to see major changes and Democrats are keen to exploit any failure by the president on trade.
Mexican officials gave short shrift to Mr Trump’s remarks. “What we’re seeing very clearly is a negotiating strategy. He’s a man who’s been negotiating all his life with a very particular, singular, aggressive style,” Luis Videgaray, Mexico’s foreign minister, told Radio Fórmula. As negotiations advanced “there will be more speeches, more tweets, more messages of this kind”, he added. “We’re not afraid of a scenario in which the US decides to leave Nafta,” said Ildefonso Guajardo, economy secretary. He has long said that Mexico can fall back on World Trade Organisation rules.
Mr Trump indicated he remained committed to the renegotiation now under way, which officials from the three sides are hoping to complete by early next year ahead of crucial elections in Mexico.“I personally don’t think you can make a deal without a termination but we’re going to see what happens, OK? You’re in good hands, I can tell you,” he said. He also conceded that a US withdrawal from Nafta would cause major disturbances for the US economy, with the US carmakers and other companies having become dependent on regional supply chains. Mr Trump is already facing a revolt from US chief executives over his equivocal reaction to the white nationalist-fuelled violence in Charlottesville, Virginia, earlier this month.
He was forced to disband three business advisory panels after mass resignations of chiefs from prominent US companies such as Intel and Merck. A Nafta withdrawal would also cause a revolt in farm states, many of which supported Mr Trump last year. In an interview with the Financial Times last week the chief executive of Cargill, the world’s largest agricultural commodities supplier, warned that a withdrawal from Nafta would be “destructive” for the US economy.
“For an administration that has talked about their support of the American economy and support of the American worker and support of American jobs . . . to walk away from Nafta would be in diametric opposition to those goals,” David MacLennan said. “It would be destructive to the American worker and manufacturing and [agriculture]. It would be destructive to the American economy.” Mexico’s currency, which collapsed at the start of the Trump presidency but has since recovered, barely registered the latest threat, and was trading 0.3 per cent higher on Wednesday by early afternoon.
-
Janet Yellen’s Future at the Fed Unresolved Heading Into Jackson Hole
Aug 24, 2017 | Wall Street Journal
By Nick Timiraos
The prospect of a second term for Federal Reserve Chairwoman Janet Yellen won’t be on the agenda at the central bank’s annual retreat this week at Grand Teton National Park, but the question of whether she could be asked to stay on—and whether she would accept—will be hanging over the confab.
Ms. Yellen hasn’t said whether she would want a second term if it was offered. Still, some friends and former colleagues say her long record of public service and her devotion to the Fed are clues that she would be disposed to accept a nomination.
The Fed has outlined plans to slowly begin shrinking its $4.2 trillion holdings of mortgage and Treasury securities this fall and to raise rates one more time this year after that. Policy decisions beyond December are clouded by the succession question, and that uncertainty could increasingly weigh on markets, especially because President Donald Trump has indicated he is considering a wide range of potential candidates.
Ms. Yellen’s term as chairwoman expires in early February. Mr. Trump has said he is considering asking her to serve a second term, though he may not announce his nominee until late this year.
Mr. Trump has said his economic policy director, Gary Cohn, is also in the running for the Fed job. The president has declined to name other possible candidates, but they are likely to fall into two camps—conservative economists such as John Taylor of Stanford University, or nonacademics with a business background, such as Fed governor Jerome Powell or former Fed governor Kevin Warsh.
Ms. Yellen sidestepped questions about the matter when asked by lawmakers recently. “I really haven’t had to give further thought at this point to this question,” she said at a July congressional hearing. She declined an interview request for this article.
People who know Ms. Yellen say even if she were ready to retire when her term as chairwoman ends, her long record of public service suggests she could be persuaded to stay. Given the additional turnover coming among top Fed officials, “it would be a leadership challenge like she’d never had before, but my own instinct—whether she wanted to do it or not—is she would,” said Christina Romer, a friend of Ms. Yellen’s and economics professor at the University of California, Berkeley.
Ms. Yellen has spent more than 16 years as a top Fed official during two stints—a shorter one as a Fed governor before she headed President Bill Clinton’s Council of Economic Advisers in the 1990s, and a longer one that began in 2004, when she became president of the Federal Reserve Bank of San Francisco. She served as the Fed’s vice chairwoman before taking the top spot in 2014.
“It may sound naive, but my impression of what drives her is the mission,” said Robert Shiller, a Yale University economist who is friends with Ms. Yellen and her husband, George Akerlof, a Nobel laureate economist. “I don’t know what decision she would make. Patriotism is a more important motive than people realize.”
Many of her colleagues at the Fed and other central banks say her record managing a gradual withdrawal of the Fed’s extraordinary postcrisis economic support while nudging the economy closer to its goals of maximum, sustainable employment and stable prices warrants a second term. The Fed has raised rates twice this year, after lifting them once in each of the prior two years.
Ms. Yellen also has guided Fed officials toward consensus on plans to reduce its portfolio—so far without sparking the market upheaval triggered in 2013 when her predecessor, Ben Bernanke, signaled the Fed’s intention to slow down bond purchases.
In recent weeks, Mr. Trump has boasted about a range of economic benchmarks, which helps explain why he would seriously consider asking Ms. Yellen to stay on. Stocks have hit new highs this summer despite the risk of less Fed-induced stimulus. The U.S. economy is growing slowly but steadily, and job growth has pushed the unemployment rate down to 4.3%.
Several political strategists, however, are skeptical Mr. Trump would pick Ms. Yellen because some Republicans might fume at her reappointment. Many GOP lawmakers opposed the Fed’s campaign to keep interest rates low, in part because it lowered the costs of new debt amassed during the Obama administration, and they view Ms. Yellen as too closely wedded to postcrisis banking regulation. Ms. Yellen is set to speak about financial stability at Jackson Hole, Wyo., on Friday morning.
Some Trump administration officials believe the Fed kept interest rates too low for too long and took too heavy a hand to regulate financial institutions after the crisis.
During his campaign, Mr. Trump said he didn’t plan to nominate her to a second term, in part because she wasn’t a Republican. He accused her of keeping rates low to help Democrats, which she denied.
But Mr. Trump told The Wall Street Journal last month that he thinks Ms. Yellen has done well. “I like her. I like her demeanor,” he said.
Every president since Ronald Reagan has asked the standing Fed leader to stay in the job at the start of his presidency. If Mr. Trump doesn’t follow that pattern, Ms. Yellen would be just the third Fed leader since 1934 to serve only one term.
Some of Ms. Yellen’s loudest critics recently have been those on the left who say the Fed has been too eager to raise rates. The central bankers’ conference in Jackson Hole began last year with 11 top Fed officials defending their policies to activists from Fed Up, a campaign to urge policy makers to keep rates low. While the group is still critical of the Fed’s rate increases, activists plan to return this year wearing Janet Yellen wigs at a Friday afternoon event urging her reappointment. “Even some of Janet Yellen’s critics can see that it’s the obvious choice,” said Shawn Sebastian of the Center for Popular Democracy, a left-leaning group that organized the Fed Up campaign.
One complication for Mr. Trump’s selection is that unlike other high-profile appointments, such as a Supreme Court justice, there isn’t a ready-made list of experienced candidates with broad appeal to conservatives that also could reliably satisfy Mr. Trump’s stated preference for low interest rates.
Given that preference, “Janet Yellen is the safest choice—the most experienced, friendly, dovish policy maker he could appoint,” said Vincent Reinhart, chief economist at Standish Mellon Asset Management and former head of the Fed’s monetary affairs department.
If Ms. Yellen continued as Fed chief, she would be tasked with forging consensus with several other Trump appointees. Three of seven seats on the Washington-based board of governors sit vacant. Mr. Trump has nominated Randal Quarles, a private-equity executive who served in the Bush administrations, for one of the positions but has yet to name his other two picks. His nominations for all board slots, including the chair, are subject to Senate confirmation.
Ms. Yellen also faces the departure of key allies: Stanley Fischer’s term as Fed vice chairman ends in June 2018, and New York Fed President William Dudley’s term ends in early 2019.
-
It's not all on Mitch McConnell to get tax reform done, anti-tax activist Grover Norquist says
Aug 24, 2017 | CNBC
By Berkeley Lovelace
It's completely irrelevant whether or not Senate Majority Leader Mitch McConnell works hard on getting tax reform passed, anti-tax crusader Grover Norquist told CNBC Wednesday.
"You have three players around the table: The White House, (Steven) Mnuchin, and (Gary) Cohn. They want 15 percent, they want a pro-growth deal, they want a Republican landslide," Norquist said on "Squawk Box."
"You have the House and the Senate that wants the same thing because they're all running for election in the House in 2018 and a third of them in the Senate. This is the centerpiece, here's what we did."
President Donald Trump has suggested that McConnell should resign if he can't successfully push through the White House's agenda, including tax reform and a "great" infrastructure bill.
On Tuesday, The New York Times reported that Trump and McConnell haven't spoken to each other in weeks, and that their relationship has been conspicuously tense after Trump blamed McConnell for the GOP's health-care failure.
Stocks surged Tuesday after a Politico article said Trump's top aides and Republican congressional leaders have made strides in shaping a major tax overhaul and have "broad consensus" on ways to cut corporate and individual tax rates.
Trump has said the bill could be the "biggest tax cut" in American history.
Norquist, founder and president of Americans for Tax Reform, said the Trump administration's goal of a 15 percent corporate tax rate is possible. He said the White House could run into a few obstacles with the bill.
"There are some limits on how much you can cut taxes for what period," he said. "Some of these tax cuts would be temporary. You can have any tax cuts you want for 10 years under the Senate rules. ... But then in year 11, some or much of it would disappear."
-
Companies Promote Corporate-Tax Overhaul
Aug 24, 2017 | Wall Street Journal
By Richard Rubin
Large companies, looking for every angle to prod Congress into making the corporate-tax changes they have been seeking for years, are turning to some in-house muscle: employees and customers.
Beyond efforts by corporations’ lobbyists and a television-ad campaign run by the Business Roundtable, an association of CEOs, companies are now seeking to rally broader public support for business-tax cuts. They are inviting senior lawmakers to their facilities this summer and encouraging workers to contact their representatives in Congress.
“We believe this issue’s so important that you’ve got to get engaged. We can’t ensure success. We can ensure that our point of view and our customers’ point of view is heard,” David Abney, the chief executive officer of United Parcel Service Inc., said in a brief interview Tuesday.
Business executives, though wary of direct connections with the White House after President Donald Trump’s comments about white-nationalist protesters last week, remain deeply involved in promoting one of his major policy objectives.
Mr. Abney hosted Rep. Kevin Brady (R., Texas), chairman of the Ways and Means Committee, at the company’s global air hub in Louisville and bolstered the chairman’s tax-code pitch. The lower rates and permanent changes Mr. Brady envisions, he said, would encourage UPS to accelerate already-planned domestic investments.
Mr. Abney provided Mr. Brady with a forum to speak to more than 100 employees in an airplane hangar. The lawmaker also fielded questions from Louisville-area business executives that use UPS, toured some of the 155 miles of conveyor belts and saw parcels headed to his hometown’s ZIP Code.
“You leave tax reform just to Washington, it won’t get done,” said Mr. Brady, who was joined by Rep. Andy Barr (R., Ky.) and Rep. Trey Hollingsworth (R., Ind.).
Before Congress’ fall push for a tax bill, Mr. Brady has been busily adding to the 2.5 million frequent flier miles he mentioned to the UPS employees. He visited alcohol makerBrown-Forman Corp. in Kentucky on Tuesday, following a visit to Best Buy Co. in Minnesota last week and a speech at former President Ronald Reagan’s California ranch.
Mr. Brady plans to head to Dallas Wednesday for a similar employee town hall at AT&TInc. and a local Chamber of Commerce event. House Speaker Paul Ryan (R., Wis.), meanwhile, is scheduled to be in Oregon at Intel Corp. on Wednesday before heading to Everett, Wash., Thursday to meet with workers at Boeing Co.
Businesses can have a tough case to make in connecting the corporate-tax cuts they seek with benefits for the broader public.
Companies and Republicans argue that corporate tax cuts would help workers because they would encourage productivity-boosting investments and lead to wage growth in the long run. Treasury Secretary Steven Mnuchin said on Monday that most economists think labor pays 80% of the corporate tax.
Official estimates by the congressional Joint Committee on Taxation and the Treasury Department point in the opposite direction, showing that owners of capital pay 75% to 82% of corporate taxes.
Mr. Abney said he thought UPS employees—more than 300,000 in the U.S.—understood the broader benefits of the tax changes the company seeks.
“We talk to them about how it benefits our customers,” he said. “It will create more packages for us. That creates more jobs and that’s something that every UPSer can understand.”
Bill Samuel, a government affairs executive at the AFL-CIO, said workers should be wary of these arguments from executives and conscious of the ultimate cost.
“They should be skeptical that they’re not hearing the full story,” he said. “They’ll pay for them in decreased services.”
Companies don’t all agree on the details of a corporate tax bill, and their positions are bound to fracture somewhat as soon as Mr. Brady releases legislation, which could happen next month. Mr. Brady said he wasn’t sure yet whether lawmakers and Mr. Trump’s administration would unveil a more detailed framework next or whether he will start by releasing a bill and voting in the committee.
At least for the moment, large companies are united around lowering the 35% corporate-tax rate and lightening U.S. taxes on companies’ foreign income. Both features make the U.S. an outlier among developed nations, which have lowered tax rates and adopted so-called territorial tax systems that generally don’t reach outside their own borders.
The challenge will come as Mr. Brady and other Republicans try to make up the revenue lost from those changes. Mr. Brady said Tuesday that he still wants to limit companies’ ability to deduct interest, an idea that has drawn opposition from parts of the real-estate, finance and agriculture industries.
Companies such as UPS, which is part of a coalition emphasizing corporate-rate reduction, report relatively few federal tax breaks and would likely come out ahead from most forms of a rate-lowering, base-broadening change. Technology companies and pharmaceutical firms, which have prospered in part by booking profits in low-tax foreign countries, have more to lose.
“We think it’s the best opportunity and we’re going to do everything we can to get it passed,” Mr. Abney said.
Today's News
Add recipients
Suggested