February 2 2024
Groundhog Day
1 House passes temporary Child Tax Credit and corporate tax cuts through 2025
2 US Treasury to hold largest-ever bond auctions to plug budget deficit
3 OPINION US Faces a ‘Death Spiral’ of Swelling Debt
4 Commercial real estate gloom prompts deep stock routs for exposed banks
5 Ukraine war update
2/2/1887 First Groundhog Day
see ad astra on x @greg_loving
1 House passes temporary Child Tax Credit and corporate tax cuts through 2025
Critics worry the $78b price tag will become a trillion if made permanent
The House gave broad bipartisan approval on Wednesday to a $78 billion bill that would expand the child tax credit and restore a set of corporate tax breaks, a rare feat in an election year by a Congress that has labored to legislate. The bill passed 357 to 70, with mainstream lawmakers in both parties driving the House’s first major bipartisan bill of the year to passage. Forty-seven Republicans and 23 Democrats voted against the bill.
The package would expand the child tax credit — though a version substantially scaled back from its pandemic-era level — and restore a set of business tax breaks related to research and development and capital expenses. Both would last through 2025. It would also bolster the low-income housing tax credit and extend tax benefits to disaster victims and Taiwanese companies and individuals. The plan would be financed by curbing the employee retention tax credit, a pandemic-era measure meant to encourage employers to keep workers on the payroll that has become a magnet for fraud.
NYT
The measure…now heads to the Senate where lackluster Republican support threatens to sink it over a provision that would allow some people with no taxable income to collect the child tax credit and other concerns.
But the lopsided House vote in favor signals to Senate holdouts that a majority of both parties is in favor of the deal.
Bloomberg
2 US Treasury to hold largest-ever bond auctions to plug budget deficit
The US Treasury will hold some of its largest-ever debt auctions in the coming three months in an effort to fill the yawning federal budget deficit. The Treasury said on Wednesday it would increase the size of auctions at most maturities for the next three months, with two-year and five-year auctions hitting record sizes. The five-year auction in April, for $70bn, would be the biggest ever for debt with a maturity of two years or more. The US has been increasing its borrowing over the past few quarters, as the gap between government spending and tax revenue has grown. The federal deficit stood at $1.7tn last year.
FT
3 OPINION US Faces a ‘Death Spiral’ of Swelling Debt
Black Swan author Nassim Nicholas Taleb said the US deficit is swelling to a point that it would take a miracle to reverse the damage. “So long as you have Congress keep extending the debt limit and doing deals because they’re afraid of the consequences of doing the right thing, that’s the political structure of the political system, eventually you’re going to have a debt spiral,” he said Monday night at an event for Universa Investments, the hedge fund firm he advises. “And a debt spiral is like a death spiral.” Taleb defined the ballooning debt load as a “white swan,” a risk that’s more probable than a surprise “black swan” event. While he didn’t identify specific outcomes in markets, he did say white swans include both the US deficit and an economy that’s far more vulnerable to shocks than in prior years.
Bloomberg
4 Commercial real estate gloom prompts deep stock routs for exposed banks
Banks are facing roughly $560 billion in commercial real estate maturities by the end of 2025, according to Trepp, representing more than half of the total property debt coming due over that period. Regional lenders in particular are more exposed to the industry, and stand to be hurt harder than their larger peers because they lack the large credit card portfolios or investment-banking businesses that can insulate them.
Bloomberg
5 Ukraine war update
EU approves significant, long term funding for war
All 27 European Union countries have agreed on an additional 50-billion-euro ($54bn) aid package for Ukraine, despite threats from Hungary to veto the move.
Michel said the move “locks in steadfast, long-term, predictable funding for Ukraine” and demonstrates that the “EU is taking leadership and responsibility in support for Ukraine; we know what is at stake“.
The EU funding is especially significant as a similar aid package from the US continues to be blocked due to internal political disputes and is further complicated by the presidential election in November.
Al Jazeera
https://www.aljazeera.com/news/2024/2/1/european-union-agrees-on-new-54bn-aid-package-for-ukraine
Ukraine outgunned 3:1 by Russia
Ukraine has warned its allies that it is facing a “critical” shortage of artillery shells with Russia deploying three times as much firepower on the frontlines each day. Defense Minister Rustem Umerov wrote to his European Union counterparts this week describing the massive numerical disadvantage his troops are facing as they try to fight off fresh Russian assaults. He said Ukraine is unable to fire more than 2,000 shells a day across a frontline that stretches for 1,500 kilometers (930 miles), according to a document seen by Bloomberg. That’s less than a third of the ammunition Russia uses.
The EU acknowledged on Wednesday that it will supply barely half of the shells it had promised by a March deadline, resolving to deliver almost 600,000 more by the end of the year. Ukraine needs 200,000 155mm shells per month, the document says. Moscow is on track to get almost twice that amount, according to Estonian estimates, with about a million shells coming from North Korea, .
Bloomberg
Soft coup?
Ukraine’s commander-in-chief refused to step down from his post at a meeting with President Volodymyr Zelensky Monday, according to people familiar with the discussions. Zelensky asked Valeriy Zaluzhny to take on a new role as he seeks to reinvigorate his military leadership following the failure of the Ukrainian counteroffensive against Russia’s occupying forces since the fall. The move also reflects a deepening power struggle at the heart of the country’s war effort. Zelensky’s spokesman said that Zaluzhny has not been pushed out.
Ed. Note: military leaders not obeying their elected civilian leaders could also be called a coup. Zaluzhny is extremely popular, esp. among the troops. He wrote a CNN oped yesterday https://edition.cnn.com/2024/02/01/opinions/ukraine-army-chief-war-strategy-russia-valerii-zaluzhnyi/index.html More to come.
2/2/1887 First Groundhog Day
Have a good weekend!
