Policy/Legislation
No Smooth Path for Reconciliation Tax and Spend: Roll Call reports that committees in the House of Representatives finished their work on the $3.5 trillion reconciliation package for social spending measures last week, including greenlighting $2.1 trillion in tax increases to pay for it. But there are obstacles that remain in advance of the Sept. 27 target set by House Speaker Nancy Pelosi (D-CA) to vote on the Senate's bipartisan infrastructure legislation, including the reconciliation bill's mammoth price tag and internal tensions over a progressive-backed plan to regulate drug prices and a must-have for some House moderates: raising the limit on state and local tax deductions. The committee's work is being packaged together by the House Committee on the Budget, then heads to the House Committee on Rules, but between now and any floor vote, leaders of the House and Senate are likely to make significant revisions. Politico reports that internal Democratic discord has wounded President Joe Biden’s massive social spending plan, raising the prospect that the package could stall out, shrink dramatically — or even fail altogether.
The Hill reports that Speaker Pelosi has signaled to colleagues in both chambers that she will not put the budget reconciliation package on the House floor for a vote until it’s clear that it can also pass the 50-50 Senate. And The Hill reports that Senate Majority Leader Charles Schumer (D-NY) on Thursday morning announced that the Senate, House and White House have reached a deal on a “framework” to pay for the massive package. White House officials and congressional leaders have agreed to use the House Ways and Means Committee’s tax proposal combined with a few “Senate ideas” that were left out last week. No numbers or specifics were announced.
Biden Pushes Back at Democrats on More Taxes: The Hill reports that President Biden is pushing to prevent congressional Democrats from scaling back his tax proposals, as lawmakers work on a $3.5 trillion social spending package aimed at advancing the president's economic agenda. The White House and congressional Democrats both want to raise taxes on individuals and corporations, and strengthen tax enforcement, to pay for massive spending in areas such as child care, health care and climate. But the legislation that the House Ways and Means Committee approved last week raised some taxes by less than Biden had previously proposed, and left out some of Biden's proposals altogether. It remains to be seen whether the administration can get lawmakers to be more aggressive on tax increases and enforcement, given Democrats' narrow majorities in Congress.
Biden Struck Out With Manchin: Axios reports that President Biden failed to persuade Sen. Joe Manchin (D-WV) to agree to spending $3.5 trillion on the Democrats' budget reconciliation package during their Oval Office meeting last week. Defying a president from his own party — face-to-face — is the strongest indication yet Manchin is serious about cutting specific programs and limiting the price tag of any potential bill to $1.5 trillion. His insistence could blow up the deal for progressives and others. Biden also spoke with Sen. Kyrsten Sinema (D-AZ), who also has expressed concerns about Biden’s tax and spend package. With a 50-50 Senate, Biden cannot lose any Democratic Senate votes. House Democrats cannot lose more than three votes. Manchin is privately saying he thinks Congress should take a "strategic pause" until 2022 before voting on President Biden's huge tax and spend package. Roll Call reports that President Joe Biden held a series of meetings Wednesday with key Democratic lawmakers in an effort to get his economic agenda back on track, but the sessions with leadership, moderates and progressives produced no signs of a major breakthrough. Most crucially, the president didn't resolve the immediate issue dividing Democrats — the timing of passing the first of the two pieces of his economic agenda.
House Carried Interest Changes Tougher Than First Thought: Bloomberg reports that the House Democrats’ plan to limit carried interest -- but not do away with it entirely as President Joe Biden had proposed -- is more restrictive than it first appeared, according to investment advisers and attorneys who’ve examined the details of the proposal. The proposal, which is part of a $3.5 trillion tax and spending package that House leaders say could get a vote by Oct. 1, lengthens the time period investment funds must hold assets to five years, from three years, in order to qualify for carried interest. their proposal includes a host of other changes, including new parameters about when the five-year holding period starts, restrictions on partners entering and exiting the funds and limits on the longstanding tax break on transferring partnership stakes. The changes could mean that some investment funds have to hold much longer than five years to qualify for the lower tax rates, depending on how the Treasury Department implements the change, if it gets enacted.
Debt-Limit Suspension Passes House, Faces Senate Standoff: The Wall Street Journal reports that the House passed a measure Tuesday keeping the government funded until early December and suspending its borrowing limit through 2022, but without having resolved the partisan standoff poised to derail it in the Senate. With less than two weeks before the government’s current funding expires at 12:01 a.m. Oct. 1, the House passed in a 220-211 party-line vote a package unveiled earlier in the day that would fund the government through Dec. 3, 2021, and suspend the debt limit through Dec. 16, 2022. The U.S. Department of the Treasury is currently using emergency measures to cover America’s bills for several months until the debt limit is raised or suspended again. The Senate is expected to vote on the measure soon.
Regulation
Retirement Plan Advisers Expect Labor Department Rules to Boost ESG Options: As the Labor Department mulls a proposed rulemaking on environmental, social and governance investment options by retirement plans, Roll Call reports that advisers say the rules are likely to temper a “chilling effect” caused by the prior administration’s guidance. Advisers say more retirement savers are asking about ESG investing and that the forthcoming rules could place them on equal footing with many retail and institutional investors who examine factors such as environmental sustainability and corporate responsibility on social issues alongside traditional financial metrics.
SEC Finds Gaps in Annual Report Climate Change Disclosures: Bloomberg Green reports that the U.S. Securities and Exchange Commission is getting more specific about what companies should include about climate change in their annual financial reports. The SEC, which regularly scrutinizes corporate disclosures, identified gaps that staff have found in recent filings regarding the impact of climate change and related regulations. Under U.S. rules, companies are required to disclose issues deemed to be material to investors, including those related to climate change.
FINRA To Scrutinize Use Of Social Media, Influencers: FA Magazine reports that the Financial Industry Regulatory Authority (FINRA) is launching a round of examinations that focuses on how brokerage firms use social media and "influencers" to recruit clients. “FINRA is conducting a review of firm practices related to the acquisition of customers through social media channels and how firms manage their obligations related to information collected from those customers and other individuals that may provide data to firms,” FINRA stated in a new exam letter. FINRA President and CEO Robert Cook warned earlier this year upcoming sweep exams would focus on social media. Regulators want to know just how far broker-dealers, their advisors and their hired influencers go on social media to acquire customers and move markets.
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