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Failed border talks foreshadow another shutdown
Bipartisan negotiations to forge a border security deal broke down yesterday, potentially setting up the federal government for another shutdown ahead of a Friday deadline.
What happened? “The impasse appears to center on Democratic demands for a limit on the number of unauthorized immigrants already in the country who could be detained by Immigration and Customs Enforcement officers, according to aides familiar with the talks,” according to the NYT. Republicans wanted an exception to the cap for criminals; Democrats said a proposed 16,500-bed cap left more than enough room for them.
What’s at stake? The last shutdown, the longest in U.S. history, cost the American economy $11 billion and tanked President Trump’s political standing with the public. Another shutdown could cause more economic harm, hitting the I.R.S. just as tax season starts.
What’s next? Lawmakers could pass another short-term spending bill, though many are reluctant to punt on a final budget agreement again. Meanwhile, Mr. Trump is preparing to hold a rally for supporters in El Paso. (Many in the city aren’t happy with that.) But he really has only two choices, according to Axios: shut down the government or declare a national emergency to get border wall money, and “both options are horrible.”
Jeff Bezos is winning his National Enquirer fight, for now
The Amazon founder risked embarrassment by going public with what he said was an extortion attempt by The National Enquirer. So far, he’s scoring big points (“Saturday Night Live” jokes aside).
His disclosure has gotten results. Federal prosecutors are reviewing his extortion claim, the NYT reports, citing unnamed sources. If The Enquirer’s parent company broke the law, it would be in violation of a nonprosecution agreement over its paying hush money to help President Trump in 2016. (A lawyer for the publisher’s chairman said yesterday that the company committed no crime.)
And he’s winning the P.R. battle. At a time when billionaires are reviled, Maureen Dowd of the NYT writes, “the richest dude on earth has managed to come through a traumatic week inspiring admiration.” (Glenn Greenwald of The Intercept counters that it would be odd for Mr. Bezos to gain pity, given that Amazon “is a critical partner for the U.S. government in building an ever-more invasive, militarized and sprawling surveillance state.”)
Where did The Enquirer go wrong? Danny Westneat of The Seattle Times points out that it picked a fight with the head of a company so powerful that it got Seattle to change its tax policies and won $3 billion in tax incentives from New York for office space. “You don’t pressure Amazon. It only goes the other way around,” Mr. Westneat writes.
But Mr. Bezos could still lose. Jon Swartz of Barron’s notes that Amazon shares fell 2.6 percent on Friday. “His hands-on management is considered crucial to the success of the company and anything that pulls his attention away from day-to-day management is at least a concern for investors,” Mr. Swartz writes.
Corporate America is worried about Brexit
Fears that Britain’s withdrawal from the E.U. could roil economies have now officially spread across the Atlantic.
Wall Street has been warned about Brexit’s impact. “With less than seven weeks to go before the U.K. is due to leave the E.U., several S&P 500 groups have for the first time put Wall Street on formal notice of the risks should London and Brussels fail to reach a divorce deal,” the FT reports. Companies like Lockheed Martin, McCormick, Expedia and Cadbury have all spoken out.
Driving the concern are fears that a depressed pound could make American goods unaffordable in Britain, while the costs of imported British goods could rise. There’s also a fear about the broader effect of Brexit on global political and economic stability.
American banks are also nervous. “While U.S. banks want Britain to maintain the closest possible ties with the EU after Brexit, U.K. banks and insurers are anxious they don’t become beholden to new laws made by Brussels,” Bloomberg reports.
More Brexit news: The E.U.’s chief Brexit negotiator, Michel Barnier, said that he “will not reopen” the existing Brexit deal, but is open to reworking the political declaration that accompanies it. The British government is trying to secure an extra two weeks in which to win concessions from Europe by promising lawmakers another vote on Britain’s withdrawal options. And Prime Minister Theresa May has also offered concessions to the opposing Labour Party to break the current impasse in Parliament.
Tax refunds are down, despite Trump’s overhaul
Americans are getting a rude surprise: Their refunds appear to be getting smaller, despite President Trump and Republicans passing a huge set of tax cuts over a year ago.
How big is the drop? “The average refund of $1,865 was 8.4 percent smaller than the average refund in the period last year,” Reuters reports, citing figures from the I.R.S. Heather Long of the WaPo adds that the number of people receiving a refund has fallen by nearly 25 percent so far. (The I.R.S. warns not to read too much into the figures, because this is just part of the data — a result of delayed processing due to the government shutdown.)
Why is this happening? It’s not actually a sign that Americans are paying more in taxes. “People generally got a piece of their tax cut last year gradually in the form of lower withholding on their paychecks,” Joseph Rosenberg of the Urban-Brookings Tax Policy Center told the WaPo.
People are angry nonetheless. The WaPo reports: “People have already taken to social media, using the hashtag #GOPTaxScam, to vent their anger. Many blame President Trump and the Republicans for shrinking refunds. Some on Twitter even said they wouldn’t vote for Trump again after seeing their refunds slashed.”
The next unicorns are boring, and that’s O.K.
The last class of tech companies that gained valuations of over $1 billion, including Uber and Airbnb, remade entire industries. Don’t expect the next wave to be nearly as flashy, according to Erin Griffith of the NYT.
Who are they? They have names like Benchling, Checkr and Zola, and many create software for specific industries — including data analysis systems for farmers and background checks for gig workers.
Why aren’t they as exciting as their predecessors? Ms. Griffith points out that Uber, Airbnb and their peers “built global empires by simply taking existing businesses — like taxis, food delivery and hotels — and making them mobile.” Easy opportunities to disrupt traditional businesses have dried up, forcing new companies to find smaller niches.
But don’t underestimate their potential. “Maybe it’s not as sexy as the companies in the first wave,” the venture capitalist Kirsten Green conceded to the NYT. But Anand Sanwal of the data provider CB Insights said they were still growing fast, adding, “If you are one of those high-momentum companies, investors are going to be beating down your door because there is so much interest in investing in the next big winner.”
The I.M.F. sees an economic storm brewing
Christine Lagarde, the managing director of the International Monetary Fund, warned yesterday of a global economy “that is growing more slowly than we had anticipated.”
She sees four big risks. “Trade tensions and tariff escalations, financial tightening, uncertainty related to Brexit outcome and spillover impact and an accelerated slowdown of the Chinese economy” are all “clouds” on the horizon, she told the World Government Summit in Dubai.
And they could spell trouble. “When there are too many clouds,” she added, it takes just one lighting bolt “to start the storm.”
But the I.M.F. thinks the Fed is playing smart. “The fact that the Fed has put a pause on raising rates is going to provide a lot of support to the economy,” Gita Gopinath, the I.M.F.’s top economist, told the FT. “We endorse the Fed view of having a data-driven approach.”
Trump will push A.I. development — a bit
President Trump is expected to sign an executive order today meant to spur the development and regulation of artificial intelligence, Cade Metz of the NYT writes.
The news: Mr. Trump is to introduce the “American A.I. Initiative,” which aims to better educate workers in the field, improve access to the cloud computing services and data needed to build A.I. systems, and promote cooperation with foreign powers.
Context: “A.I. experts across industry, academia and government have long called on the Trump administration to make the development of artificial intelligence a major priority,” Mr. Metz writes, adding that they are “concerned that China could surpass the United States” in the development of such technologies.
But: “The order does not set aside funds for A.I. research and development,” Mr. Metz adds, “and the administration provided few details on how it will put its new policies into effect.”
Steve Mandel has stepped down as the head of the hedge fund Lone Pine Capital.
Among the reasons Santander rescinded its offer to hire the investment banker Andrea Orcel? Reportedly his desire to attend the World Economic Forum in Davos, Switzerland.
Kristina Salen, a former chief financial officer of the shopping site Etsy, has joined Moda Operandi, a luxury fashion start-up, as its C.F.O.
The English Premier League is looking to America for a successor to its C.E.O., Richard Scudamore. British candidates appear uninterested in the job.
The speed read
• The aluminum-parts maker Arconic plans to break itself up. (WSJ)
• Apollo Global Management is reportedly near a deal to buy Cox Enterprises’s 14 regional TV stations for about $3 billion. (Reuters)
• The medical equipment maker Smith & Nephew reportedly held talks to buy NuVasive, a maker of medical instruments for spinal surgeries, for more than $3 billion. (FT)
• TPG Capital closed its seventh Asia-focused private equity fund at over $4.6 billion. (Reuters)
Politics and policy
• Democratic lawmakers are proposing steep new taxes on the superrich — and the public loves it. (NYT)
• Senator Michael Bennet, Democrat of Colorado and a potential presidential candidate, says that cutting private health insurance as part of Medicare for all is a “bad opening offer.” (Politico)
• President Trump succeeded in dividing Democrats by warning about socialism. (Hill)
• The biggest star of Clive Davis’s exclusive pre-Grammys gala? Speaker Nancy Pelosi. (AP)
• Trade talks between the U.S. and China resume today in Beijing. (Straits Times)
• White House officials have reportedly discussed a summit meeting between President Trump and President Xi Jinping of China at Mar-a-Lago next month to resolve the trade fight. (Axios)
• The trade agreement to replace Nafta faces an uphill climb in Congress. (Axios)
• Huawei has threatened to sue the Czech Republic if the country’s cybersecurity agency does not rescind a warning about the risk the company poses to the nation’s critical infrastructure. (NYT)
• Sprint accused AT&T of false advertising, saying that its rival is incorrectly telling customers that they are receiving 5G data service. (WSJ)
• Tesla may finally be delivering Model 3s, but now it can’t keep up with servicing them. (WSJ)
Best of the rest
• A new activist hedge fund, Impactive Capital, is a rarity: It’s female- and minority-led. (WSJ)
• Household staples, from diapers to baking soda, may get more expensive. (WSJ)
• U.S. colleges raised $46.7 billion in the year that ended last June, led by Harvard with $1.4 billion. (Bloomberg)
• Here’s a rundown of the 100 most sustainable U.S. companies, according to Barron’s. (Barron’s)
• How the Fed’s recent U-turn on rates cascaded through global markets. (NYT)
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