- The Chamber supports the bipartisan infrastructure bill and opposes the reconciliation bill. The two should not be linked.
- Even though consumers' feelings about the economy dropped last month, people continued to spend.
- Raising taxes on companies doing business overseas will hurt American workers.
- Stock buybacks benefit all shareholders by increasing liquidity and reducing volatility.
- The Federal Reserve wants to hear from small businesses about their financing needs.
DEVELOPMENTS THAT MATTER
Chamber Fights for Infrastructure Bill and Opposes Damaging Tax and Spend Bill
Neil Bradley, Chamber Executive Vice President and Chief Policy Officer, appeared on C-SPAN
today to discuss the infrastructure and reconciliation bills before Congress.
We support the bipartisan infrastructure bill: “The Chamber is a strong supporter of the bipartisan infrastructure bill that invests trillions of dollars in our roads, bridges, broadband, and replacing lead water pipes. That bill got 69 bipartisan votes in the Senate. It was supposed to get a standalone vote in the House of Representatives last week. We want to see that bill pass,” Bradley said.
- Why it matters: “We supported it because America is long overdue in making investments in our infrastructure, whether it's congestion on our highways, potholes on our city streets, the lack of rural broadband for millions of Americans across the United States, or literally we still have lead pipes that bring water into people's homes, schools and daycare centers that are literally poisoning them. It's good for America, good for American families and it deserves to become law.”
We oppose the reconciliation bill: “Whether we're talking about $2 trillion or $3.5 trillion, you're talking about a record level of government spending,” Bradley said. “That's going to contribute to inflation, higher prices for consumers, and it's partially funded by punitive taxes, both on investors, on small businesses, and midsize and large businesses in a way that we believe will destroy the current economic recovery.”
- “We need to get America back working again. We need to get control of inflation. This bill would take us in the exact opposite direction.”
We absolutely oppose linking the two bills: “The President and the Democratic leadership sought to link the bipartisan infrastructure bill to the partisan tax and spend reconciliation bill. We oppose that linkage, and we're not going to change our position on reconciliation just because of our support for infrastructure.”
Bottom line: “I hope that the President and the Democratic leadership come to the realization that linking to these two bills only means that nothing gets done–that we don't replace those lead water pipes or fix those deteriorating bridges,” Bradley warned.
Consumer Spending and Inflation Rose in August
Data from the Bureau of Economic Analysis
(BEA) from last week showed that spending rose 0.8% in August. Many expected much less growth, or even a decline. Spending dropped more than originally estimated in July, falling by 0.5%, though. Also encouraging was that spending on services rose 0.6%. Many feared that the surge in Delta would cause consumers to spend much less on services.
Why it matters: Fears of a rapidly deteriorating economy may have been premature. Even with a shocking drop in consumers’ feelings about the economy, they continued to spend last month.
But: Inflation rose again–0.4% on the month and 4.3% on annual basis. That means in real terms spending rose 0.4%. PCE inflation is the Fed’s preferred measure of price changes. It has leveled off the last few months, however it remains at an elevated level. The slowing of the rise is good news, but if inflation persists at this level for a long period the Fed will have to address it, likely by raising rates and wringing liquidity out of the financial system.
Be smart: Persistent supply chain issues make deciphering what is happening with prices increasingly difficult. Higher prices because of backed up supply chains are not necessarily because of inflation. Supply and demand suffice as an explanation. However, the longer the backups remain, the more the impact they have on prices looks inflationary and more permanent rather than temporary.
- Income and savings also rose in August. Income rose 0.2%, and wages and salaries rose 0.5%. Business income dropped 1.5% though.
- Savings decreased 6% compared to July, but Americans still socked away $143 billion in August. That is about $40 billion over the pre-pandemic average. Americans continue to build savings to support consumption in the coming months.
Bottom line: This was a surprising report given the delta headwinds in August and fears of a much worse outcome. There are certainly weaknesses in the report, but given what the numbers could have looked like, we’ll take it.
—Curtis Dubay, Senior Economist, U.S. Chamber of Commerce
Raising Taxes on Doing Business Internationally Makes No Sense
The Biden administration wants to raise the “existing global minimum tax while simultaneously imposing another, redundant global minimum tax,” writes Chamber Senior Economist Curtis Dubay on Above the Fold.
Why it matters: Raising taxes on U.S. multinational businesses will hurt American workers through fewer jobs and lower wages.
- President Biden wants the international community to apply a global minimum tax on multinational businesses from all countries. The rate on that tax would be 15%.
- At the same time the Biden administration has proposed to raise the existing global minimum tax U.S. businesses already pay, the Global Intangible Low-Tax Income (GILTI.) The House Ways and Means Committee included many of those increases in the reconciliation bill currently moving through Congress.
Bottom line: The Biden administration and Congress should scrap the reconciliation bill and start over with a new approach that does not significantly raise taxes on American businesses.
New Chamber Study: Stock Buybacks Benefits All Shareholders
Why it matters: The report finds that the use of stock buybacks allows managers to increase stock liquidity and reduce volatility, helping to stabilize prices. This benefits shareholders—including retail investors—regardless of whether they buy and sell stock in their own accounts or participate indirectly through investment in retirement accounts.
Our take: “Fifty percent of Americans are invested in the stock market and stock buybacks, like dividends, are a critical means to distribute earnings,” said Tom Quaadman, Executive Vice President of the Chamber’s Center for Capital Markets Competitiveness.
Take the Federal Reserve’s Small Business Credit Survey
Calling all small businesses! The Federal Reserve needs your input.
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- Ahead of Jonathan Kanter’s nomination to serve as Assistant Attorney General for Antitrust, the Chamber and 22 organizations sent a letter to the Senate Judiciary and House Judiciary Committees outlining the importance of maintaining current law on mergers and acquisitions. Changing them, the letter warns, would do lasting damage to our economy and consumers.
- “We’re pleased the administration is taking a step forward by articulating its China strategy,” Chamber Executive Vice President and Head of International Affair Myron Brilliant told The Wall Street Journal. “Engagement with allies is important, but it can’t just be engagement with allies. Direct engagement with China is essential.
- Last week, C_TEC filed comments with the Office of Science and Technology Policy and the National Science Foundation on an implementation plan for the National Artificial Intelligence Research Resource, which looks to bring together government data and computing resources to allow scientists and researchers to develop breakthrough discoveries and technological and scientific advancement.
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