The economy will be a big theme in President Biden’s State of the Union address tonight, which is set to be broadcast from Capitol Hill starting at 9 p.m. ET. He’ll take the podium as inflation shows signs of slowing, as well as a blowout jobs report that put the unemployment rate at its lowest level since 1969. GDP growth has also beat expectations, but remains under pressure amid concerns about a recession, while the current debt ceiling battle also threatens to derail any economic progress and the broader financial markets.
Counter offer: According to the White House, Biden will call for “reducing the deficit through additional reforms to ensure the wealthy and largest corporations pay their fair share.” He’ll specifically renew proposals like enacting a tax on billionaires’ unrealized investment gains, as well as quadrupling the 1% excise levy on corporate stock buybacks, which was passed as part of the Inflation Reduction Act of 2022. Many of those plans are likely to be dead on arrival, however, given prior opposition from moderate Democrats and the GOP in control of the U.S. House following November’s midterm elections.
“While [the] 1% [buyback tax] may not sound like much, it adds up,” wrote SA Marketplace author High Yield Investor. “This is especially true considering the fact that buybacks have become a more and more popular method of returning cash to shareholders in recent years. To the degree that the new stock buyback tax actually deters stock buybacks, capital allocators are likely to instead use the money to reduce debt and/or increase dividend payouts – both of these uses of cash would be beneficial to dividend stock investors.”
Not the only speech to watch: Fed Chair Jerome Powell will speak at the Economic Club of Washington on Tuesday for the first time since his FOMC decision-day presser. It’ll be interesting to hear the remarks, especially regarding how the central bank views Friday’s blockbuster jobs report and what that will mean for monetary policy going forward. On Monday, Treasury Secretary Janet Yellen told ABC’s Good Morning America that “you don’t have a recession when you have 500K jobs and the lowest unemployment rate in more than 50 years.”
Now read: Federal Reserve could hike rates higher than prior projections: Atlanta Fed’s Bostic