The analysis concludes Biden’s plan would raise $2.8 trillion over the next decade from higher taxes on businesses, corporations and the wealthiest households. Over that time, AEI projects the higher taxes would reduce economic growth by a relatively modest 0.16 percent.

The plan would “make the tax code more progressive,” AEI’s Kyle Pomerlau and Grant Seiter write. And after slightly crimping growth in its first decade, it would “reduce debt-to-GDP in the second decade, leading to slightly higher GDP. However, in the long term, his plan would not raise enough to stabilize debt-to-GDP and would lead to a 0.18 percent smaller economy.”

The macroeconomic drag the AEI model anticipates roughly aligns with other analyses from the Tax Foundation and the Penn Wharton Budget Model, Pomerlau notes. In other words, rolling back most of the Trump tax cuts wouldn’t bring about the economic Armageddon the Trump campaign has depicted.

Neither would it jack up taxes on every American. 

Vice President Pence made that claim during his debate with Sen. Kamala Harris (D-Calif.),  Biden’s running mate, last week. The AEI analysis finds the top 1 percent of taxpayers would see a 14.2 percent hit to their after-tax income next year. The rest of the top 5 percent would face a small uptick in their burden. But everyone else would receive an after-tax income bump. The largest such increase, of 11.3 percent, would go to the bottom 10 percent, thanks to a temporary expansion of the child tax credit, according to AEI.

The analysis finds that starting in 2030, the Biden plan would impose “modest” tax hikes on the bottom 95 percent of earners, which it attributes to higher taxes on businesses. That would appear to violate Biden’s pledge not to raise taxes on anyone earning less than $400,000 a year.

And AEI is not alone in reaching that conclusion — other studies, including by Penn Wharton and the Tax Policy Center — find a similar effect in part for the same reason: They figure raising taxes on corporations produces a trickle-down effect, whereby those companies help alleviate their heavier tax burden by cutting workers’ wages.

Biden advisers argue the logic doesn’t hold up. They point to assumptions the same models made about how companies that benefited from the Trump tax cuts would share that wealth by raising workers’ wages. The dynamic didn’t materialize when taxes were cut, so it’s questionable whether it should apply when they are raised.

Further, Biden advisers argue, “the models often do not take into account the impact of a variety of tax credits Biden has proposed — or spending programs aimed at the bottom half of the income spectrum — which might mitigate the theoretical impact of the corporate tax increase,” per Post Fact Checker Glenn Kessler.

Investors so far aren’t sweating the specter of a corporate tax hike.

Goldman Sachs, for example, has estimated Biden’s tax plan would cut 12 percent from the earnings per share of the S&P 500 next year. Yet the firm’s economists say a Democratic sweep on election day would prompt them to upgrade their forecasts.

“The reason,” Goldman economist Jan Hatzius wrote in a note last week, “is that it would sharply raise the probability of a fiscal stimulus package of at least $2 trillion shortly after the presidential inauguration on January 20, followed by longer-term spending increases on infrastructure, climate, health care and education that would at least match the likely longer-term tax increases on corporations and upper-income earners.”

Indeed, as Michael Cembalest, chairman of market and investment strategy for JPMorgan Asset Management, writes in his latest note, “Rising Democratic Sweep odds have not derailed the S&P 500 rise; if anything, a brief decline in such Sweep odds in early September actually coincided with a minor setback in the equity market’s advance.”

Latest on the federal pandemic response

Mitch McConnell plans to hold a vote on a narrow relief plan.

But that bill appears to be dead on arrival in the House: “The Senate Majority Leader announced that the Senate will take up a narrow economic relief bill when it comes back in session next week. Trump immediately undermined the move, writing on Twitter: ‘STIMULUS! Go big or go home!!!’” Jeff Stein and Erica Werner report.

“The clashing messages were a stark display of GOP disunity just three weeks before the November election, as Senate Republicans balk at a $1.8 trillion relief package Treasury Secretary Steven Mnuchin has offered to House Speaker Nancy Pelosi. Trump, though, has suggested Republicans should agree to an even bigger deal than what Democrats have offered.”

  • The details: “The new bill will cost roughly $500 billion and will include provisions to extend enhanced unemployment insurance and the small business Paycheck Protection Program, as well as money for hospitals and schools, among other things.”

Pelosi slammed CNN’s Wolf Blitzer when he challenged her over the speaker’s opposition to the $1.8 trillion deal: “There are Americans who are being evicted from their homes, they can’t pay the rent. Many Americans are waiting in food lines for the first time in their lives,” Blitzer said as he opened the interview, Erica Werner reports. “Can you look them in the eye, Madame Speaker, and explain why you don’t want to accept the president’s latest stimulus offer?”

  • “I hope you’ll ask the same question of Republicans about why they don’t really want to meet the needs of the American people,” Pelosi replied. “We represent these people, I have for over 30 years represented my constituents. I know what their needs are; I listen to them,” she said. “And their needs are not addressed in the president’s proposal. So when you say to me, ‘Why don’t you accept theirs’ — why don’t they accept ours?”

By the end, it was just awkward:

Pocket change

JPMorgan beats analysts’ profit estimates as bank earnings season begins.

The nation’s largest bank is setting aside less for loan losses: “The bank posted a third-quarter profit of $9.44 billion, or $2.92 per share, exceeding the $2.23 per share consensus estimate of analysts surveyed by Refinitiv. The firm generated revenue of $29.94 billion, about $1.5 billion more than what analysts had expected, fueled in part by better-than-projected trading results,” CNBC’s Hugh Son reports.

“The key question for the quarter: Whether American banks would show that they’re largely done setting aside money for loan defaults tied to the pandemic. That appears to be the case at JPMorgan, the biggest U.S. bank by assets, which had a $611 million provision for credit costs in the period, compared with $10.5 billion in the previous quarter.”

  • Other takeaways from Q3: “CEO James Dimon said the U.S. government is a big reason consumers and business appear to be in decent financial health … Much of that money is gone, and lawmakers are at an impasse on a second round of stimulus. Dimon said a ‘good, well-designed stimulus package will simply increase the chance we get better outcomes, but there is so much uncertainty we’re not saying that that is definitive,’ ” the Wall Street Journal’s Marie Beaudette reports.
  • The lender is sticking with its plan to build a giant New York HQ: “’We’re building that headquarters for 50 years! It is not a short-term decision,’ Dimon said during a call with reporters after posting quarterly results, Reuters’s David Henry and Herbert Lash report. “JPMorgan will have a lasting shift toward working from home, Dimon said, but he doesn’t know how big the change will be.

BlackRock posts steady climbs for Q3: “The money-management giant’s quarterly profit rose 22 percent as investors turned to its massive lineup of funds across markets,” the WSJ’s Dawn Lim reports.

“The returns are a sign that the world’s largest money manager with $7.8 trillion in assets continues to grow despite all parts of the economy and markets being upended by the pandemic. Its long shadow over the industry is increasingly forcing weaker rivals to play defense.”

Apollo Global Management Inc.’s Leon Black regrets involvement with Jeffrey Epstein: “Black reiterated that he had turned to Epstein for financial matters such as taxes, estate planning and philanthropy, after a New York Times report about the billionaire’s relationship with Epstein, who died in jail after his arrest on federal sex-trafficking charges,” Bloomberg News’s Heather Perlberg reports.

“ ‘With the benefit of hindsight — and knowing everything that has come to light about Mr. Epstein’s despicable conduct more than 15 years ago — I deeply regret having had any involvement with him,’ Black said in the letter to Apollo’s limited partners dated Monday.” 

Market movers

Dow closes more than 150 points lower.

The index snapped a four-day winning streak: “The Dow Jones Industrial Average dropped 157.71 points, or 0.6 percent, to 28,679.81 as Apple shares declined. The S&P 500 slid 0.6 percent to 3,511.93. The Nasdaq Composite dipped 0.1 percent to 11,863.90,” CNBC’s Fred Imbert and Maggie Fitzgerald report.

“The major averages fell to their lows of the day at around 2:30 p.m. ET after U.S. regulators paused Eli Lilly’s late-stage coronavirus trial due to safety concerns.”

IMF warns of “sharp adjustment” in financial markets: “Equity markets could tank in the coming months if the coronavirus crisis persists and the economic recovery takes longer than expected to materialize, the International Monetary Fund warned,” CNBC’s Silvia Amaro reports.

Inflation gauge increases at slowest pace in four months: “The consumer price index rose 0.2 percent from the prior month after a 0.4 percent gain in August. Compared with a year earlier, the gauge increased 1.4 percent, after August’s 1.3 percent rise,” Bloomberg News’s Olivia Rockeman reports.

  • Fed surveys consumers more optimistic about labor market: “U.S. consumers in September became slightly less worried about losing their jobs and more optimistic about their earnings, though the effects of the economic crisis caused by the pandemic lingered, according to a survey released on Tuesday by the New York Federal Reserve,” Reuters’s Jonnelle Marte reports.

Coronavirus fallout

From the U.S.:

  • At least 7,819,000 cases have been reported; at least 215,000 have died.
  • The latest uptick in infections has concentrated in red states, as Philip Bump notes:
  • Herd immunity approach draws White House attention: “Maverick scientists who call for allowing the coronavirus to spread freely at ‘natural’ rates among healthy young people while keeping most aspects of the economy up and running have found an audience inside the White House and at least one state capitol,” Joel Achenbach reports.
  • Trump continues to attack Fauci: “Trump’s long-fraught relationship with Anthony S. Fauci, the nation’s top infectious-disease specialist, ruptured again this week in an ugly public dispute just as U.S. coronavirus cases have ticked past 50,000 per day and with three weeks left in a campaign dominated by the government’s response to the pandemic,” David Nakamura, Josh Dawsey and Yasmeen Abutaleb report.
  • Labor secretary Eugene Scalia’s wife has tested positive: “Trish Scalia and her husband were among hundreds of guests at the Sept. 26 Rose Garden ceremony where at least a dozen people later tested positive and has been dubbed a possible ‘super-spreader’ event … Eugene Scalia tested negative for the coronavirus on Tuesday and has not experienced any symptoms but will work from home as a precautionary measure,” Antonia Farzan reports.

From the corporate front:

  • Johnson & Johnson, Eli Lilly pause covid-19 trials for possible safety issues: “Experts say the pauses of trials of vaccines from Johnson & Johnson and AstraZeneca and a treatment from Eli Lilly demonstrate the system to protect participants’ safety is working as intended,” Carolyn Y. Johnson reports.
  • Delta says air travel recovery is far off: “Delta had hoped it would be able to stop bleeding cash by the end of the year. Now the airline anticipates such a scenario won’t happen until spring, even while slashing costs. Delta ended September burning through $18 million in cash a day but expects to cut that to $10 million a day by the end of the year,” the WSJ’s Alison Sider reports.
  • More companies delay return to the office: “In the past week, Microsoft, Target, Ford Motor and the New York Times said they, too, had postponed the return of in-person work to next summer and acknowledged the inevitable: The pandemic isn’t going away anytime soon,” the Times’s Gillian Friedman and Kellen Browning report.
  • AMC says it could run out of cash by year’s end: “The company said it has two ways out of its cash crisis: Either more customers need to buy tickets, or it will have to find new ways to borrow money … But AMC isn’t filling the limited seats it’s offering: Since the U.S. theatrical market reopened in the late summer, it has served more than 2.2 million guests. That represents an attendance decline of 85 percent compared to last year,” CNN Business’s Frank Pallotta reports.
  • Pandemic speeds shift to cleaner energy: “Capital spending on energy this year is set to plunge by 18 percent, as global energy demand is expected to fall by 5 percent in 2020, a pullback not seen since World War II, the Paris-based agency said in its annual report on the future of the industry … Spending on new oil and gas supplies took the largest hits, while renewable energy held up better than any other source, the International Energy Agency found,” the WSJ’s Russell Gold and David Hodari report.
  • The seasonal job is getting a makeover. Filling the holiday crush during the pandemic poses some new challenges: “National chains have long relied on temporary staff during the winter holidays but this year is radically different: As shoppers do more of their spending online and opt for home delivery and curbside pickup, temporary jobs are moving from big-box stores and shopping malls to warehouses and call centers. That shift is leading to changing responsibilities — and in some cases, higher wages and more perks — for workers,” Abha Bhattarai reports.

Trade fly-around

WTO rules EU can tariff $4 billion in U.S. goods.

The ruling comes after a long fight over subsidies for Boeing: “EU officials have said they hope to negotiate a settlement with the U.S., and many observers expect Europe to refrain from levying tariffs quickly. The bloc last year said it had prepared a preliminary list of U.S. products to target in retaliation, if necessary,” the WSJ’s Josh Zumbrun and Daniel Michaels report.

“The jetliner dispute is the longest since the WTO’s inception … U.S. Trade Representative Robert Lighthizer, the top U.S. trade negotiator, said the EU has ‘no lawful basis to impose tariffs’ because the subsidies for Boeing have already been repealed. He suggested the U.S. would consider retaliating if Brussels moved forward with tariffs.”  

The regulators

Wall Street doesn’t know what to make of possible Biden regulations.

The former vice president has changed a lot since his time in the Senate: “Broadly, the Biden campaign’s proposals for the financial sector are being written with an eye to meeting the expectations of the Democratic progressive base without spooking moderates who worry about expanding regulatory powers. Biden in August introduced a plan to forgive hundreds of billions of dollars of student debt, but the proposal includes no changes to federal lending standards that allow households to borrow whatever is needed to cover the cost of tuition,” the WSJ’s Julie Bykowicz and Ted Mann report.

“Wall Street has been generous to Biden’s presidential bid. People working in the securities and investment industry gave his campaign and outside groups backing him about $51 million through the end of August, according to the nonpartisan Center for Responsive Politics. Trump’s campaign and allied groups had raised $10.5 million from securities and investment workers.”

Campaign 2020

Wall Street still has concerns about a contested election.

Biden may hold a large lead, but fears remain: “The notion of a contested election was a focus at a private client meeting held by Goldman Sachs leaders a few weeks ago, according to a person familiar with the gathering,” CNBC’s Brian Schwartz reports.

“A leader at one big bank told CNBC that, if polls hold up, the firm’s risk management team expects to see a shift in sentiment on Wall Street toward not just the anticipation of a sweep by Democrats, but how big a win it could be – and its potential impact on policy.”

Chart topper

How the votes get counted, state by state. 

Here, via JPMorgan’s Cembalest, is a breakdown of how each state processes absentee and mail-in voting. If the election “comes down to Midwestern swing states, it could be a while before a winner is known,” he writes. “The reason: Pennsylvania and Wisconsin share the unholy trinity of (a) inexperience with large amounts of absentee ballots; (b) no pre-election processing of absentee ballots; and (c) being swing states with a large number of electoral votes at stake.”

Daybook

  • Bank of America, Goldman Sachs, Wells Fargo and UnitedHealth Group are among the notable companies reporting their earnings
  • The Labor Department reports weekly jobless claims
  • United Airlines, Morgan Stanley, Walgreens Boots are among the notable companies reporting their earnings

The funnies

Bull session

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