IRS Commissioner, Elon Musk, and Economic Growth

Tax Policy:

October 28: Douglas O'Donnell named acting IRS commissioner

Treasury Secretary Janet Yellen picked Douglas O'Donnell as the new acting commissioner of the Internal Revenue Service on Friday.  O'Donnell has been deputy commissioner for services and enforcement at the agency since April 2021 and is succeeding IRS Commissioner Charles Rettig, whose term ends on Nov. 12.

"I want to thank Commissioner Rettig for his tireless service to the American people across two administrations, and his leadership of the IRS during the difficult and unique challenges posed by COVID-19," Yellen said in a statement.

Before becoming deputy commissioner for services and enforcement last year, he served as commissioner of the Large Business and International Division for nearly six years.

"Deputy Commissioner O'Donnell has dedicated his career to serving American taxpayers through every level of the agency," Yellen added. "His commitment to improving the experience of the American taxpayer will guide his and the agency's work as they continue their efforts to propel the IRS forward during a critical period of modernization. Now more than ever, the IRS has the momentum to transform with service, technology, and workforce improvements that will make it a world-class agency to meet the needs of the American people."

 O'Donnell will be taking the helm of the IRS at a time when the agency has been facing criticism over long backlogs of unprocessed tax returns last tax season.

It is not clear if O'Donnell or another official will be named next year as permanent commissioner of the IRS since the position requires confirmation by the Senate, and control may shift to Republicans after the midterm elections in November.

Despite the challenges of winning Senate confirmation, the Biden administration is reportedly searching for a permanent IRS commissioner to replace Rettig, who has faced criticism from both Republicans and Democrats.

October 28: House GOP lawmakers push permanent tax cuts amid soaring inflation

House Republicans on the chief tax-writing Ways and Means Committee are seeking to make the tax cuts and adjustments enacted in the 2017 overhaul of the tax system permanent, a move economists say would stimulate the economy at the same time the Federal Reserve is trying to rein in demand against 40-year-high inflation. Ways and Means Republicans touted a proposal on Wednesday that would extend tax provisions in the Trump administration's Tax Cuts and Jobs Act.

A write-up of that bill says it "Makes permanent one of the most pro-growth policies in the Tax Cuts and Jobs Act: full and immediate expensing." A write-up of Buchanan's bill says it would "Create certainty for the pro-growth provisions."

"The method of financing is what matters. If it's deficit-financed, that's going to have the highest risk of those tax changes playing into inflation at least in the short run. If it's financed through other means, you're not necessarily going to see that trade-off," Garrett Watson, an analyst with the Tax Foundation, said in an interview with The Hill.

Asked whether the cuts will add to inflation and if Republicans are working in opposition to the Federal Reserve's monetary policy, Ways and Means top Republican Kevin Brady said that economic conditions were improved by the 2017 tax overhaul. Some economists have also noted that deficit-financed tax cuts just brought down the government of the United Kingdom, so the political sensitivity around such measures during a period of increased inflation is high.

"Obviously we've seen what's been happening in the U.K. If you push for unfunded tax cuts in a way that people don't believe will be sustainable, that will be problematic," the Tax Foundation's Watson said.

Economic News/Policy: 

November 1: Here’s why the Fed’s next big rate hike may be its last

The Federal Reserve is on track to issue another massive rate hike Wednesday before slowing down the pace of its battle to fight inflation.

Analysts and economists are confident the Fed will hike its baseline interest rate range by another 0.75 percentage points at the end of a Wednesday meeting. The Fed’s move will mark the fourth consecutive rate hike of a size it once considered “unusually large.”

Fed Chair Jerome Powell is not expected to announce a pause to rate hikes or the bank's intentions for its final policy meeting in December.

“While the headline Consumer Price Index (CPI) has fallen from the 40-year record of 9.1% set in June to September’s 8.2%, that’s still appallingly high,” wrote Dan North, senior economist at Allianz Trade, in a Monday research note. "The Fed's super aggressive path is justified since inflation, which it caused, has not been killed yet. But by the time it is, the Fed will have driven the economy into recession," he continued.

The Fed has faced a difficult balance since it began hiking interest rates in March: ramp up rates slowly and risk losing the ability to control inflation or raise them quickly at the risk of bringing the economy to a screeching halt.

Fed officials have decisively chosen the latter, insisting a recession caused by high-interest rates would be less damaging than one caused by its refusal to bring inflation down.

“Committing to slowing down prematurely without seeing meaningful progress on inflation could result in another challenge to the Fed’s credibility if inflation surprises to the upside and [Fed officials] are compelled to backtrack,” wrote economists at investment bank Nomura in a Monday research note. "We believe the Fed will want clear and compelling evidence that inflation has indeed made progress before they commit to slowing the pace of rate hikes," they added.

October 30: Economy Week Ahead: Interest Rates and Jobs Market in Focus

Monday: The European Union’s statistics agency releases third-quarter gross domestic product information and the October consumer-price index. The 19-nation eurozone faces an uncertain outlook from the war in Ukraine and is struggling with high inflation.

Tuesday: The Labor Department releases September figures on job openings, hires, quits, and layoffs. Job openings fell 10% in August to a seasonally adjusted 10.1 million, adding to signs of a labor market losing momentum.

S&P Global and the Institute for Supply Management released October surveys of purchasing managers gauging U.S. manufacturing-sector activity. The data firm will also release manufacturing surveys for Canada, the U.K., India, and Russia. The Commerce Department releases September figures on construction spending, which fell in August for the third consecutive month as residential construction declined.

Wednesday: The Federal Reserve announces its latest interest-rate decision as it attempts to cool the economy and bring down high inflation. The central bank has raised its benchmark federal-funds rate by 0.75 percentage point at each of its past three meetings and is likely to do so again in its November meeting.

Thursday: The Bank of England announces its latest interest-rate decision as the U.K. battles high inflation. The central bank raised rates for the seventh consecutive time at its previous meeting.

The Labor Department reports the number of workers’ filings for unemployment benefits for the week ended Oct. 29. Initial jobless claims have hovered near the 2019 weekly average of around 218,000 in recent weeks, a sign that employers are holding on to workers.

The Labor Department releases third-quarter data on U.S. nonfarm labor productivity and unit labor costs. Productivity declined for the second straight quarter in the April to June period as higher compensation costs weighed on the efficiency of the labor force.

The Commerce Department reports on the U.S. trade balance in September. An early estimate by the department showed that the trade deficit widened that month as exports fell and imports rose.

S&P Global and the Institute for Supply Management released October surveys of purchasing managers gauging economic activity in the U.S. services sector. S&P Global’s initial estimate showed that the services sector contracted in October at a faster pace than the previous month.

Friday: The Labor Department reports on the state of the U.S. labor market in October, including job gains, the unemployment rate, and worker earnings. Payroll growth remained strong in September, and the jobless rate fell to 3.5% from 3.7% in August, matching a half-century low that was last reached in July.

October 28: Inflation and Wages Continue to Climb Rapidly, in Bad News for the Fed

The Federal Reserve's preferred inflation measure showed that price gains remained fast in September, and a gauge of wages it watches closely is climbing quickly.

Economic data on Friday brought troubling news for Federal Reserve officials who are trying to rein in the fastest inflation in decades: Prices are still rising quickly. Wages are rising rapidly too. And the strong consumer demand that is helping to fuel the inflationary fire shows little sign of letting up.

The data, from two separate government reports, wasn’t a surprise and included hints of progress. But it was confirmation of the challenges facing policymakers, and further evidence that their aggressive efforts to constrain the economy are taking time to have a significant effect.

The Fed’s preferred measure of inflation, the Personal Consumption Expenditures price index, climbed by 6.2 percent in the year through September, in line with the increase the month before, the Commerce Department said Friday. After stripping out food and fuel, which can be volatile from month to month, prices increased by 5.1 percent over the past year, a brisker increase than the 4.9 percent in the year through August.

Both of those inflation measures are rising faster than the 2 percent rate that the Fed targets on average and over time.

The fresh employment cost data "Doesn't show much slowdown just yet in strong wage growth, even if we're seeing it in other measures," Omair Sharif, the founder of Inflation Insights, wrote in a research note after the release.

It is unclear how long Americans can keep up their spending. Despite the strong wage gains, overall personal income barely kept pace with rising prices in September. Many families are spending more by saving less: Americans saved 3.1 percent of their after-tax income in September, less than half as much as they were saving before the pandemic.

October 27: U.S. Economy Returned to Growth in the Third Quarter

Gross domestic product increased 0.6 percent after two-quarters of decline, but key components continue to show an economic slowdown. The U.S. economy grew slowly over the summer, adding to fears of a looming recession — but also keeping alive the hope that one might be avoided.

Gross domestic product, adjusted for inflation, returned to growth in the third quarter after two consecutive quarterly contractions, according to government data released on Thursday. But consumer spending slowed as inflation ate away at households’ buying power, and the sharp rise in interest rates led to the steepest contraction in the housing sector since the first months of the pandemic.

Still, the economy has important areas of strength. The job market is strong, and although hiring has slowed somewhat, layoffs remain low in most industries. Many households were able to build up a cash cushion early in the pandemic - a result of reduced spending and increased government aid - which could help them keep spending even if their incomes stagnate.

Those factors give the recovery a bit of a cushion, but they also make the Fed’s job harder by making the economy less responsive to higher interest rates. At the same time, the Fed can do little to control the prices of oil and food, which are influenced by global events such as the war in Ukraine.

The third quarter was in some sense a mirror image of the first quarter when G.D.P. shrank but consumer spending was strong. In both cases, the swings were driven by international trade. Imports, which don’t count toward domestic production figures, soared early this year as the strong economic recovery led Americans to buy more goods from overseas. Exports slumped as the rest of the world recovered more slowly from the pandemic.

Both trends have begun to reverse as American consumers have shifted more of their spending toward services and away from imported goods, and as foreign demand for American-made goods has recovered. Supply-chain disruptions have added to the volatility, leading to big swings in the data from quarter to quarter.

Few economists expect the strong trade figures from the third quarter to continue, especially because the strong dollar will make American goods less attractive overseas.

Energy/Government Funding:

October 29: Oil companies rake in huge profits amid consumer squeeze

Major oil companies saw profits soar in the third quarter of 2022, continuing a trend of massive industry profits even as Russia's invasion of Ukraine causes soaring prices for consumers. Biden has repeatedly exhorted the industry to lower consumer prices in response to these earnings, particularly since the announcement by the OPEC+ bloc that it will cut oil production.

Democrats in Congress called for a windfall profits tax on big oil companies during the summer, when consumer gas prices hit all-time highs.

"Not in a legal definition, but in most people's minds, what's happening with refined products, profits and margins probably qualifies as a windfall," Tom Kloza, global head of energy analysis at the Oil Price Information Service, told The Hill in an interview.

Patrick DeHaan, head of petroleum analysis at GasBuddy, argued that much of the actual consumer prices are outside oil companies control. "They can decide to raise production or not, and if they raise production that lowers prices, but for now, oil company profits are a sign of the imbalances that exist in oil markets," he said.

At the height of gas price increases over the summer, Rep. Ro Khanna and Sen. Sheldon Whitehouse introduced legislation to impose a windfall profits tax on oil companies, with revenues returned to taxpayers.

ICYMI: 

October 27: Elon Musk Completes $44 Billion Deal to Own Twitter

After months of waffling, lawsuits, verbal mudslinging, and the near miss of a full-blown trial, Elon Musk now owns Twitter.

On Thursday night, Mr. Musk closed his $44 billion deal to buy the social media service, said three people with knowledge of the situation. He also began cleaning the house, with at least four top Twitter executives — including the chief executive and chief financial officer — getting fired on Thursday. Mr. Musk arrived at Twitter’s San Francisco headquarters on Wednesday and met with engineers and ad executives.

Mr. Musk has set some ambitious goals for Twitter, which he has said he will transform into an “everything app” called X. In presentations to investors about the deal this spring, he said he anticipated that Twitter would reach annual revenue of $26.4 billion and have 931 million users by 2028. The company reported $5.08 billion in revenue last year and had more than 200 million users.

Mr. Musk has suggested that cuts could be necessary to limit Twitter's costs. In recent days, Twitter has tried soothing its workforce, asking them to ignore reports of potential layoffs.

Twitter's performance will be vital as Mr. Musk balances investing in the company's future and paying off the interest on the $12.5 billion in loans he took out to finance the deal. Analysts have questioned whether Twitter can bear the burden of those payments given its patchy profits.

Those loans will also stand as a pain point for the investment banks that cobbled them together, as the market for such loans has dropped precipitously since Mr. Musk announced his bid in April.

Advertisers may also be wary of doing business with Mr. Musk after he denounced the use of advertising on Twitter and said the company should find a different source of revenue. Some advertisers have also been skeptical about their brands appearing alongside risky content that Mr. Musk has said should be allowed on Twitter, while others have preferred to spend money with social networks like Facebook and TikTok.

On Thursday, Mr. Musk sought to quell advertiser concerns with an open letter suggesting some content moderation would continue. “Twitter obviously cannot become a free-for-all hellscape, where anything can be said with no consequences,” he wrote. “Twitter aspires to be the most respected advertising platform in the world.”

For Fun:

October 26: Methuen’s Titan Casket makes a cameo in Taylor Swift’s ‘Anti-Hero’ music video

If you watch the music video for Taylor Swift’s new song “Anti-Hero,” as more than 30 million viewers already have since its Friday release, you might spot an unexpected cameo from a local company during a pivotal scene.

The Methuen-based company, which sells direct-to-consumer caskets, learned this week that one of its products was featured prominently in the video for the single, serving as a hiding place for the singer as a dream sequence plays out on screen.

It's the biggest break for Titan so far, according to Joshua Siegel, the company's co-founder and chief operating officer. A Titan employee and self-proclaimed "Swiftie," who was working the graveyard shift when the video was released, was the first to spot the Titan-branded casket as Swift emerged from it in the video. The employee, noticing details like the casket's copper metallic finish and "Sunburst" pattern on its interior fabric, quickly realized that Swift had been filmed inside of a Titan Orion Series, which according to the company's website is its "Most popular model" and retails for $1,199.

On Friday night, the Twitter account for Taylor Swift Style - a blog that typically points fans toward the earrings, high heels, and sweaters the singer is seen wearing - directed thousands of Swifties to the casket company's product, which came as a shock to Siegel.

Siegel said Titan is open to working with Swift in the future if she would like to become partners in spreading the word about casket affordability and funeral preparedness.

November 1: Spectacular Telescope Image Shows 'Ghostly' Aftermath of Giant Star's Death

The NASA Exoplanets Twitter account became NASA Hexoplanets and NASA Goddard was NASA Ghoul-dard. The James Webb Space Telescope updated its heavenly Pillars of Creation portrait to give off something of a hellish vibe. And on Monday, the European Southern Observatory rounded out the spooky drama with a photo of what it calls the ghostly remains of a gigantic star.

It's a whopping 554 million-pixel image that paints a cosmic marvel, called the Vela supernova remnant, in translucent lavenders, piercing pale blues, and stringy sunset colors. In the spirit of Halloween, might I remind you that a supernova remnant isn't just the leftover corpse of a star. It's sort of the equivalent of chopping up that corpse and sprawling its pieces across space.

Out in space, the remnant probably doesn't quite look so rainbow-like. It's just easier to parse through different astronomical aspects of space pics when we have some colorful dividers. But what isn't technologically enhanced is the way Vela -- named for a southern constellation which translates to "The Sails" -- structurally looks.

Those almost-3D bubbles of dust and gas are real. Every diaphanous streak is expected to be accurate. And the story this tells of the giant star's ultimate demise is, presumably, true.

About 11,000 years ago, a massive star died and unleashed a powerful explosion that caused its outermost layers to shock wave into surrounding gas in the region. As for the dead star itself, the root of this detonation, it's now a neutron star - a stellar body so unimaginably dense that one tablespoon of it would equal something like the weight of Mount Everest. ESO also explains that this particular neutron star happens to be even more extreme than the average one.