Research Credit Expansion Bill, Banking Crisis, and Presidential Veto
Tax Policy/News:
March 17: Hassan Reintroduces Research Credit Expansion Bill
U.S. Senators Maggie Hassan and Todd Young reintroduced the bipartisan American Innovation and Jobs Act to support research and development investments by innovative small businesses and startups.
Currently, companies and startups investing in R&D can claim tax incentives that help them to invest in developing new, innovative products that lead to additional jobs and a stronger economy.
The bill reverses a change in the 2017 tax law that limits companies from fully deducting R&D investments each year.
"For 70 years, America supported innovation through common sense tax policy. It worked. The 2017 tax law prevented companies from fully using R&D tax deductions each year, but thankfully, Senators Hassan and Young are crossing the aisle and stepping up together to restore a bedrock tenet upon which much of our innovation economy rests," said Jake Reder, Cofounder, and CEO, Celdara Medical in Lebanon, New Hampshire.
The bipartisan American Innovation and Jobs Act supports innovative businesses and helps create jobs by Restoring incentives for long-term R&D investment by ensuring that companies can fully deduct R&D expenses each year Raising the cap over time for the refundable R&D tax credit for small businesses and startups Expanding eligibility for the refundable R&D tax credit so that more startups and new businesses can use it The bipartisan bill is part of Senator Hassan's continued efforts to support innovative businesses in New Hampshire and across the country.
Senator Hassan successfully pushed to include the doubling of the refundable research and development tax credit for small businesses and startups in the Inflation Reduction Act.
As Governor of New Hampshire, Senator Hassan doubled the supply of state R&D tax credits and made the credit permanent.
Economic News/Policy:
March 21: How the banking crisis throws a wrench into Fed rate-hiking
Some bankers and analysts think the Federal Reserve may take a break from its rate hikes after the failures of several banks in the U.S. and Europe.
The Federal Open Market Committee (FOMC), the Fed’s rate-setting panel, is set to meet Tuesday and Wednesday before announcing whether it will go ahead with another rate hike, which had been seen as nearly inevitable only a week ago.
“We expect the FOMC to pause at its March meeting this week because of stress in the banking system,” Goldman Sachs analyst Jan Hatzius and others wrote in a Monday note to investors. "While policymakers have responded aggressively to shore up the financial system, markets appear to be less than fully convinced that efforts to support small and midsize banks will prove sufficient. We think Fed officials will therefore share our view that stress in the banking system remains the most immediate concern for now," they wrote.
A number of influential market commentators wondered Monday whether the Fed should take a break from its rate hikes until the banking sector settles down.
“Don’t just do something: sit there,” economist Paul Krugman wrote online Monday morning, adding that the current financial instability was “good reason to pause and wait for more information unless you’re deeply worried about Fed credibility.” "The banking mess is, as far as I can tell, sufficient reason for the Fed to pause until we know more," he wrote.
Banks borrowed another $153 billion from the Fed's primary credit discount window, which exists to handle short-term cash shortages, and $12 billion through the Bank Term Lending Program, the emergency facility set up to protect deposits across the banking system.
The question is how much of that money actually makes its way into the economy in the form of new loans to businesses and households, which can act as a stimulus and add to inflation, and how much is simply being used to prevent bank runs and make sure people can keep withdrawing their funds.
Despite the collapse of one of Europe's largest banks Credit Suisse, the European Central Bank charged right ahead with its own program of quantitative tightening last week, hiking rates last week by 0.5 percentage points.
March 19: Economy Week Ahead: U.S. Interest Rates and Housing Market in Focus
Tuesday: The National Association of Realtors reports sales of previously owned homes in February. Existing-home sales fell 0.7% in January from the prior month, the 12th straight monthly decline.
Canada’s statistics agency releases February inflation figures. Consumer prices rose 5.9% in January from a year earlier, down from the previous month’s 6.3% rise.
Wednesday: The Federal Reserve announces its latest interest-rate decision following a two-day meeting. The central bank is confronting banking-industry turbulence and still-high inflation. Fed officials will also release updated projections of interest rates, inflation, unemployment, and economic output, and Chair Jerome Powell holds a news conference.
The U.K.’s Office for National Statistics releases February inflation figures. Consumer prices rose 10.1% in January from a year earlier, a slower rate of inflation than the previous month’s 10.5% rise.
Thursday: The Bank of England announces its latest monetary-policy decision. The central bank has signaled that it might pause interest-rate increases soon, but that further rises are also possible if inflation threatens to be high for longer than expected.
The Labor Department reports the number of worker filings for unemployment benefits in the week ended March 18. Initial jobless claims fell in the prior week, showing the U.S. labor market remains strong.
The Commerce Department reports the number of new homes sold in February, which make up about 10% of the housing market.
Japan’s statistics agency releases February inflation figures. Core consumer prices rose 4.2% in January from a year earlier, the fastest pace since September 1981. Japan defines core prices as all prices excluding fresh food.
Friday: S&P Global releases March business-activity surveys of purchasing managers from around the world. The February surveys showed activity improved in China, the U.S., and the eurozone.
The Commerce Department releases February figures on demand for long-lasting goods. New orders for durable goods fell sharply in January from the prior month, following a monthly increase in December, reflecting volatility in the aircraft sector.
ICYMI:
March 20: Biden issues first veto, taking on new Republican House
President Joe Biden issued the first veto of his presidency Monday in an early sign of shifting White House relations with the new Congress since Republicans took control of the House in January - a move that serves as a prelude to bigger battles with GOP lawmakers on government spending and the nation's debt limit. In a video released by the White House, Biden said he vetoed the measure because it "Put at risk the retirement savings of individuals across the country."
His first veto represents a more confrontational approach at the midway of Biden's term in office, as he faces a GOP-controlled House that is eager to undo parts of his policy legacy and investigate his administration and his family.
The veto could also help calm some anger from environmentalists who have been upset with the Biden administration for its recent decision to greenlight the Willow oil project, a massive and contentious drilling project in Alaska.
"In his first veto, Biden just sided with woke Wall Street over workers," House Speaker Kevin McCarthy, R-Calif., tweeted on Monday.
Just three Democrats in Congress - one in the House, and two in the Senate - supported Republicans in the matter, making it unlikely a two-thirds majority in both chambers could be assembled to overcome Biden's veto.
Though Biden swiftly vetoed the investment resolution, other measures coming from Capitol Hill in the weeks and months ahead could be a tougher call for the White House.
March 15: ‘Unfortunate and wrong’: Angry taxpayers respond to latest bank bailouts
The alacritous rescue of depositors at Silicon Valley Bank and Signature Bank by the federal government over the weekend is getting a cynical and frustrated response from taxpayers.
Many of the people who The Hill spoke to for this article are nervous that the financial system could be crashing around them again — and angry that rich venture capitalists can get a speedy bailout from the government while expanded social services and loan forgiveness seem to be forever out of reach.
Who is paying for the bank bailout?: In a history of the savings and loan crisis posted on its website, the FDIC refers to the episode as a “disaster,” a “debacle” and a “massive public policy failure.”
While taxpayers aren’t yet technically on the hook for the SVB and Signature collapses, since depositors were paid out of a fund administered by the FDIC that banks pay into, their money is still at risk. A push for less regulation: Silicon Valley, Signature banks lobbied hard to loosen bank rules.
Lawmakers take aim: Warren blames Congress for ‘entirely avoidable’ bank failures: Mercury Robertson, who works as a resident assistant at a dormitory at the University of Texas in Austin, told The Hill that she can see the frustration that bank bailouts bring about in the students she helps to support and counsel.
Are businesses getting preferential treatment over taxpayers?: An entreaty by businesses in the California tech sector seems to have been a part of what prompted the speedy response from the federal government over the weekend.
Will taxpayers fund the bailout? Here’s who is paying to restore Silicon Valley, Signature Bank deposits: Workers and business owners in other sectors of the economy say they would love to see that kind of attention paid to them.
Albert Zibak, an independent pharmacist in New York, told The Hill that big business interests and their lobbies in the healthcare sector make it hard for his company to compete with the larger chains.
He said the regulatory responsiveness he saw from the federal government on the SVB bank bailout would “definitely” make difference to his business and others like it.
“If the government had a quick response [to our regulatory concerns] like what happened with the financial situation going on right now, it would be a game changer,” he said.
Americans are still angry about the 2008 bank bailouts: Frustration among the public over what is seen as preferential treatment afforded to the financial sector is not new. A Reuters-Ipsos poll from 2013 found that five years after the bank bailouts following the 2008 financial crisis, “Americans [were] still angry with Wall Street.”
A new probe into banking: 5 things to know about the Silicon Valley Bank investigation: The anger ultimately turned into a protest movement known as Occupy Wall Street in 2011, which saw demonstrators camp out for nearly two months in Zuccotti Park near Wall Street in lower Manhattan.
Activist Yotam Marom, who helped organize demonstrations during Occupy Wall Street, told The Hill he viewed the assistance provided to the failed banks as similar to what sparked the protests in 2011, though it’s smaller in scale.
For Fun:
March 17: The ‘Mini Brains’ solving medical mysteries and raising concerns
It may seem like science fiction, but over the past decade scientists have been using stem cells to grow so-called “mini brains.” Researchers prefer the term brain organoids, a collection of human cells in a petri dish that mimics the structure and cell types of our own brains. They’ve been used to study diseases like cancer and Parkinson’s and evaluate potential treatments, but now the research is becoming more sophisticated, and that’s raising big concerns. Could they become conscious? Should we even be experimenting on our own cells?
Alex Ossola: For now, researchers are already starting to work on that brain-computer interface by connecting organoids to things like robots. In 2019, researchers at the University of California, San Diego said they connected brain organoids to a spider-like robot, and that the organoids seem to respond to the outside environment. Arlotta, the Harvard biologist points out that work like this could show researchers something important about how brains learn.
Paola Arlotta: What if we could generate a human brain-computer machine interface, so an interface that could really understand the function of the circuit or the capabilities of the circuits within a human brain organoid? Could we then be able, for example, to understand whether neural networks in an organoid that comes from a patient. Let's say with autism spectrum disorder, would have different learning properties.
Alex Ossola: More sophisticated organoids with input and output could also mean that those ethical questions might not be so settled after all. Insoo Hyun, the bioethicist says he and others will continue to revisit them.
Insoo Hyun: We don't want to be so careful there to say, "Well, there's nothing to see here, folks. Let's move on. Absolutely." We want to have a wait-and-see kind of monitoring approach to kind of see where things head.
Alex Ossola: And it's not just bioethicists who'll be keeping a close eye on this. Hyun and the other researchers I spoke with emphasized that public input will be increasingly important for how brain organoid research develops, and perhaps how it's limited. He compared it to how we as a society agreed to put traffic signs on our roads.
Insoo Hyun: Well, those don't just spring up on their own and in the American democratic system everyday people have a big say and what those science say and where you place them. I'm talking about laws and policies, whether you know it or like it or not, the public is involved in some way with science.
Alex Ossola: Arlotta, the Harvard biologist says that clearly communicating this work to the public is complicated, but it's important for scientists to get it right.
Paola Arlotta: This is work that if it's not described appropriately if we don't really fully understand. Number one, what these organoids are? And number two, why do we do this work, where are we going with this? It could be really misunderstood in a way that will be the treatment not only to science and understanding but actually to the development of treatment for diseases at the moment don't have treatments.