Tag: news

Submitted by Ronn Blitzer via LawNews.com,

Information leaks from within the federal government led to the revelation that now-former National Security Adviser Michael Flynn spoke to the Russian ambassador about U.S. sanctions against his country soon after President Obama announced them. Flynn’s communication has led to speculation that he may have broken the law by talking to a foreign government about a dispute without U.S. authority. He was asked to resign after word got out that he lied to Vice President Mike Pence when he insisted that he didn’t discuss the sanctions with the ambassador.

But to President Donald Trump, the big story is that we know the story. Flynn was caught by U.S. intelligence officials after they wiretapped his communications with the ambassador. They also made transcripts of the conversations, but it wasn’t until that information mysteriously found its way to the Washington Post that anyone knew about it. On Twitter and in public statements, Trump has railed against the leaks, which the Post has only attributed to “current and former U.S. officials,” and heads will roll if he learns who’s behind them. As it turns out, the law is on his side. However, these leaks are notoriously hard to prosecute and are rarely pursued. But, if there are, here’s what could happen to the culprits.

First, there’s the prohibition against disclosure of classified information. This is the obvious one, since any publication of classified material to an unauthorized party is illegal. Under the Espionage Act, 18 U.S.C. § 798, a person guilty of this can end up in prison for 10 years and face a fine. If the leaks involved classified information that was sent to members of the press, the source could end up behind bars if they’re caught. Opponents of Hillary Clinton argued that she violated this with her handling of emails on a private server, but the FBI determined they did not have a strong enough case to prosecute. As LawNewz.com contributor Philip Holloway wrote, the information regarding Flynn’s wiretapped phone calls is Signals Intelligence (SIGINT), which is highly classified, so if one of the “current and former U.S. officials” is identified, they could be in trouble.

The form of the leaks could also determine whether additional charges appropriate. If information was merely spoken to a reporter, that’s one thing, but if actual files or physical materials were transferred, then 18 U.S.C. § 641 could kick in. That law says that anyone who steals or provides for another person’s use “any record, voucher, money, or thing of value of the United States or of any department or agency” is guilty of a crime. If a source of a government leak turned over a physical record, they could face 10 years in prison and a fine for it.

In addition to laws against revealing certain information, if the President discovers a source behind a leak, they could face additional charges if they lie about it. Besides perjury, which applies to anyone who lies under oath, false statements or covering up material facts in a federal investigation, either by the Department of Justice of Congress, can lead to five years in prison.

However, one thing to keep in mind is how rare these type of prosecutions are.  Of all prior administrations, President Obama was the most aggressive when it came to prosecuting leakers. According to a report from the Committee to Protect Journalists, six government employees, plus two contracts including Edward Snowden, were the targets of felony criminal prosecutions for leaking information. Prior to Obama, there were only three such prosecutions in history! And the prosecutions themselves are no easy task. For example, Jeffrey Sterling, a former CIA employee, was charged under the Espionage Act and it took the feds five years to get a conviction. Sterling was sentenced to 3 1/2 years behind bars. The case involved a seven year legal fight over whether James Risen, a New York Times reporter, would be forced to identify his confidential sources and testify.

Of course, none of this matters if Trump doesn’t discover any of the sources behind the leaks. Lately, that seems to be the only information not getting out of the White House.

via http://ift.tt/2lCDdMW Tyler Durden

Around noon today, retail stocks jumped after Axios reported that Trump’s econ advisor Gary Cohn was opposing a House version of the Border Adjustment Tax, giving hope to retailers who were battered following yesterday’s Reuters interview in which Trump said that he supports “some form” of border tax. 

The result, as we observed earlier, was a  mirror image of yesterday’s retail selloff, “as now the market no longer has to fear Trump’s tweets, but his staggering position reversals, now coming inside the span of a day.”

In retrospect the market had nothing to fear, because shortly after its origianl report on BAT, Axios followed up with a second report, according to which the White House denies the original report on Cohn’s BAT statement, and says that Trump’s position is unchanged from what he said yesterday.

“There is no daylight between Gary Cohn and the President. His comment was taken out of context as it was part of a broader conversation about the proposals that are connected to border adjustability. At no point during this conversation did Gary make a statement of support or opposition to the House border adjustability plan.”

Axios adds that the White House declined to make audio of Cohn’s comments available to Axios, citing the agreed-upon confidentiality of Cohn’s remarks.

While it is likely that the XRT has again tumbled on the news, at this point neither we, nor anyone else car, and we will simply wait for the next fake news market moving event before posting any more charts.

via http://ift.tt/2mtOPiV Tyler Durden

A close look at the ’86 tax reform shows why tax reform may not get done this year. As BofAML's Ethan Harris notes, "we are skeptical." Significant tax reform creates winners and losers, which may make it hard to find a "coalition of the willing."

Via BofAML,

Is it a done deal?

By some accounts, tax reform is more or less a done deal. After all, Republicans control both the executive and legislative branches of government so reform could pass without one Democrat vote. In particular, Republicans can use the “reconciliation” process to avoid a filibuster and pass a plan with just 51 votes in the Senate. House Republicans already have a specific plan and the President has already suggested a less fleshed out alternative. The leadership in the House is planning to focus first on repealing the Affordable Care Act (ACA), then writing the tax reform bill after the spring budget passes and enacting the plan by the August recess.

We are skeptical: even with the Republican sweep last fall, tax reform could prove taxing. Any reform requires that some groups give up hard won tax breaks in exchange for lower rates. This creates a complex web of winners and losers, causing splits both across parties and within parties. Here, we draw nine history lessons from the 1986 tax reform.

Nine reasons tax reform is tough

#1 A proclivity for Swiss cheese: The US political system, with the strong influence of lobbyists, seems to have a natural tendency to add complications to the tax code. Loopholes had been steadily added to the tax system in the run-up to 1986 reform, and loopholes have been creeping back into the tax code ever since the reform. Also recall that the ’86 reform put the top rate at 28%, but it has since climbed back to 39.6%. Turning our “Swiss cheese” tax system into “American cheese” will likely be difficult.

 

#2 Less compelling: Tax reform in 1986 had strong appeal to members of both parties. Republicans could point to the very high top tax rate of 50%. Democrats could point to a growing array of loopholes that mainly favored the rich. Top on that list was the ability to use losses from real estate and other “passive” income to offset salaries and other “active” income. The challenge we see today is that there are fewer loopholes to fill, making reform a much harder sell to Democrats.

 

#3 United leadership: A consistent theme from the people who worked on the 1986 reform was the importance of having a strong team of leaders committed to the process. Indeed, during key moments in the ’86 negotiation, Reagan stepped in to offer strong support for the effort. A lot of the work was done behind the scenes by a “gang of seven” Republican and Democratic Senators. Each had a strong stake in the success of the effort. Given the current partisan atmosphere in Congress, passage may require almost no defections by Republican members. We also wonder if the President and Republican leaders in the Senate and House will be able to present a united front against attempts to reintroduce loopholes.

 

#4 Deficit neutral: President Reagan made clear he wanted a deficit neutral plan and that is what he got. The 1986 law was considered deficit neutral even in static estimates; that is, without accounting for any stimulus to the economy. The idea of deficit neutrality was a way to bring discipline to the negotiations: any time someone pushed for reinstating a tax break they were pressed to offer a substitute. By contrast, the estimated 10-year deficit impact of the current House proposal is between $2.4tr (Tax Foundation) and $3.1tr (Tax Policy Center). The plan is only roughly deficit neutral using the aggressive dynamic scoring of the Tax Foundation. This could raise concerns from deficit hawks, including a number of Republicans.

 

#5 Corporate finance: Getting the ’86 bill through required trade-offs. The cuts in personal tax rates were partly paid for with increases in corporate taxes and several of the tax changes tended to discourage capital investment. In addition, on the personal side, the ’86 reform raised the tax rate for capital gains to match the 28% personal rate and created limits on IRAs. In other words, it is hard to “pay for” a “pure” tax plan that does not involve some growth-unfriendly elements. This could pit purists on taxes against purists on the budget deficit.

 

The other four lessons are about how hard it is to get a “coalition of the willing.” This requires balancing deficit concerns, views on the progressivity of the tax system, views of which industries and states should be favored, and attitudes toward international trade.

 

#6 Corporate complexity creates conflict: Compared to current proposals, the ’86 reform involved a relatively simple trade-off of lower tax rates for reduced loopholes. Today, House Republicans are attempting a deeper reform. Four changes in the corporate code are particularly notable in this respect: border adjustment, immediate expensing of capital, elimination of the net interest deduction and the repatriation tax. Each of these changes creates winners and losers, will likely be subject to intense lobbying pressure and could split support even within the Republican Party.

 

#7 Income distribution: A key selling point for the 1986 reform is that it did not attempt to alter the progressivity of the tax system—the impacts were roughly the same for lower- and upper-income people. By contrast, using “static” scoring, today’s House plan creates much bigger cuts for upper income families than for low income families. For example, after-tax income for the average family goes up only 0.7% to 2.4%, but 5.3% to 13.4% for the top 1% of families, according to the TF and TPC respectively. The benefits are more equally shared under dynamic scoring by the Tax Foundation, but not for other aggressive scorers. This will make it hard to get advocates of progressive taxation to support the proposal.

 

#8 State impacts: While the House proposal retains deductibility for mortgage interest and charity, it ends the deductibility of state and local income and property taxes. Recall that the 1986 reform initially eliminated the deductibility of state and local taxes but in the end only sales taxes were no longer deductible. Elimination of this key deduction, could impact support for the plan in states with high income taxes. Keep in mind that the 10 states with the highest state income taxes send 42 Republicans to the House and 5 to the Senate.

 

#9 Blocked at the border? One of the most controversial components of the bill, even within the Republican Party, is the border adjustment tax. This tax is effectively a tariff on imports and a subsidy to exports. It is critical to the bill because it raises $1.2 trillion in revenues over the next 10 years. Without it, even with very aggressive “dynamic scoring”, the tax bill would significantly increase the budget deficit. On the other hand, it faces considerable questions. It has triggered competing lobby groups: on one side, 100 retailers called “Americans for Affordable Products” oppose the tax; lined up on the other side, 16 companies comprising the “American Made Coalition” support the tax. Senator Hatch, Chair of the Senate’s Committee on Finance, has said he has “questions” on the tax in terms of who will bear it, whether it is “consistent with our international trade obligations,” and its impact in shifting the tax burden across industries. Three other Senate Republicans “have expressed concern that the proposal helps pick winners and losers.”

Nothing is certain but uncertainty

The bottom line is that a wide range of outcomes are possible this year, with very different implications for the economy. At one extreme, tax reform may not pass until very late in the year or not pass at all. This would likely delay any tax-related pick-up in growth and could even undercut current GDP forecasts as uncertainty about what will survive grows. At the other extreme, “tax reform” could devolve into essentially a big “tax cut” with no real attempt to prevent a bigger budget deficit. And in the middle, tax reform could pass, but in a highly watered-down form. Our base case assumes such a result, with legislation passed at year-end that excludes the border adjustment tax and makes up for the lost revenue by watering down a number of cuts. These could include partial rather than full expensing of capital, partial rather than full repeal of the inheritance tax, a less generous standard deduction, a more modest cut in marginal rates, etc.
 

via http://ift.tt/2l8tZV3 Tyler Durden

Via Dana Lyons' Tumblr,

The number of unchanged issues on the NYSE has spiked, often a sign of complacency among investors.

While the price structure and breadth in the stock market remain solid and supportive of higher prices, one area of concern that we have been noting is investor sentiment. Specifically, it is too complacent for our liking. Investors and traders seem to be outright dismissing the notion of risk in the stock market. And while extreme bullishness can persist for awhile, it usually ends up being mis-guided, eventually. One potential piece of evidence of complacency comes from a surprising, and typically overlooked, statistic: unchanged issues.

As opposed to advancing or declining issues, unchanged issues are those that close a particular day at the same price at which they closed the day before. Historically, we have found that, for whatever reason, elevated numbers of unchanged issues often occur near market tops of varying significance. This indifference towards large numbers of shares may be a signal of investor complacency during low-volatility, up-trending markets, i.e., out of sight out of mind. Conversely, low levels of unchanged issues are often emblematic of market bottoms as perhaps elevated levels of fear and awareness create a greater impetus to trade stocks.

Presently, it is the former case, i.e., elevated numbers of unchanged issues, that is relevant. In fact, as our Chart Of The Day reveals, yesterday saw the highest percentage of unchanged issues on the NYSE since 2003, and one of the highest readings since the move to decimalization.

This was not on 1-day wonder either. Unchanged issues on the NYSE have been elevated for some time now. The 21-day (i.e., 1-month) moving average of unchanged issues is also at its highest level since the beginning of 2004. Additionally, this places the series above its upper Bollinger Band on a 200-day lookback period for just the 11th unique time since 2007.  The markers on the chart display the initial readings among the 11 occurrences.

As the chart, and the table below, reveal, such elevated readings are not necessarily an immediate problem. Frequently, they have led to further gains for the S&P 500 in the very short-term. However, those gains were most often eventually erased as the signals consistently lead to sub-par intermediate-term returns.

Will the present case lead to trouble? We cannot know for sure. However, given additional concerns regarding investor sentiment, it would not surprise us to see this signal eventually lead to a hiccup in this ongoing obstinate rally. And while further gains are certainly possible before potential trouble hits, it is important to note that it has now been 2 weeks since the extreme threshold was first breached. Thus, a wake up call may come sooner than later.

*  *  *

Like our charts and research? Get an all-access pass to our complete macro market analysis at our new site, The Lyons Share (plus, sign up by February 28 to take advantage of our special launch deal).

via http://ift.tt/2lEb1re Tyler Durden