Marketplace - What will a GOP-ruled Congress do with Trump’s magnum opus?

Episode Date: December 5, 2024

Many provisions of the Trump administration’s 2017 Tax Cuts and Jobs Act are set to expire next year. That means the incoming Republican-controlled House and Senate will have the privilege of agonizing over which parts to renew and how to pay for them. Plus: Community colleges push up graduation rates, the advantages of owning your own small-business space, and are holiday shoppers buying the sale hype along with the goods?

I mean, the calendar is kind of a construct, right? Especially at this time of year. From American public media, this is Marketplace. In Los Angeles, I'm Kyle Resnall. It is the 4th of December today. Good as always to have you along, everybody. It is technically Wednesday, but some degree of day of the week confusion will be forgiven. Seeing as how there are still Cyber Monday branded sales floating around out there two days on, and I'm pretty sure I saw a Black Friday ad yesterday. I don't know about you, but this onslaught of deals, deals, and more deals, I personally

find kind of tiring. But what does that matter for retailers, I suppose, as long as it gets us to keep on spending? Marketplace's Kristin Schwab looks at the pervasive message of get it before it's gone. I got an email from a clothing brand this morning. Last call, up to 50% off, really ends tonight. But I wouldn't be surprised if the deal doesn't really end tonight.

The whole buy now or else thing feels like the boy who cried wolf. Sucharita Kadali, a retail analyst at Forrester, says this increasingly anxious messaging comes from an anxious place. Retailers this year, if anything, I think they felt more pressure. Pressure because consumers are still feeling shaky about the economy. And this year it's an unusual Christmas because Thanksgiving was so late.

In any case, the urgent messaging is working. Between Thanksgiving and Cyber Monday, Americans spent more than $41 billion online, up 8.2% from last year, according to Adobe Analytics. Record sales, even though Black Friday deals started like a month ago. The words are taking on new meanings. Ji Zheng, a marketing professor at the University of Maryland, says Black Friday is now just a proxy for big sale. Thing is, that message could begin to water down the effectiveness of the sales season itself and train consumers to hunt. So shoppers are becoming smarter and they have more options to exercise their

spending power. More options because stuff is on sale all the time. And that raises the bar for good deals, says Aaron Wilson, who leads retail practice at Boston Consulting Group. What we're seeing is kind of a magical number around 30% discount. Less than that, and shoppers might not splurge, which has fed into this frenzy of Black Friday and Cyber Monday all season long, making the actual occasions less precious. Here's Sucharita Kedali again.

That's essentially what I've discovered is I was like a holding off on like buying like placemats and I'm like, these prices are no better than they were three weeks ago. And even if you do miss a sale, there's always one around the corner as close as New Year's Day. I'm Kristen Schwab for Marketplace. On the general theme of economic activity, the Fed's beige book was out today. It's eight times a year, anecdotal and often quirky look at what's happening out there. Two items of note from the Cleveland Fed, quote, several restaurateurs reported higher sales, which one attributed to workers return to the office. So that.

Also from the Federal Reserve Bank of St. Louis, this, a holiday decorator noted that their wealthy clients were opting to decorate without using their services and were not purchasing new decor as they usually do. Wall Street today, there was actually a little bit of holiday cheer. We'll have the details when we do the numbers. There's a theme of sorts that's been coming up in a lot of our coverage lately, a corollary to our rule that even if the economic headlines are robust, it just doesn't matter if people aren't feeling it in their day-to-day.

And economic growth is pretty robust, thanks in large part to strong consumer spending and related, a strong labor market. Still though, things feel off. You talk to small business owners and they're likely to list some familiar symptoms of the pandemic hangover, right? Higher costs, high interest rates, lower profit margins, and some degree of uncertainty

about where the economy is headed. That said, some small business owners do have advantages that can help them mitigate that uncertainty. One of those advantages, owning their own shops. Some small business owners do have advantages that can help them mitigate that uncertainty. One of those advantages? Owning their own shops. Marketplace is Justin Ho has that one. Jason Nager's first restaurant opened in a rented space in Southern Maryland back in

2007. In 2015, when he decided to open a new place, he had a different plan in mind. The attempt all along was to just prove the concept and know that we're going to get in and be successful and then one day purchase the doin'. It's called Brick Wood Fired Bistro and it focuses on modern American food, craft beer, bourbon and Neapolitan style pizza. And after a couple years of leasing its space, he did purchase the building. Neger says he was excited to start building up equity instead of paying a landlord. He also felt more emboldened to invest in upgrades. We did a full kitchen overhaul. We've done

significant upgrades to our bar area. We put in a different entry exit for our carryout. Negros says those upgrades were crucial during the pandemic, especially since carryout became a big part of the business. And when he opened the third restaurant a couple of years ago, no lease. Owning it from day one gave us the confidence to perform the necessary upgrades and do the build out that we wanted. Not every business can afford hundreds of thousands, if not millions of dollars to buy a building. But Laureln Wilson, the owner of an accounting and wealth management company

called Lookahead Advisory says if business owners can make it work, they should. Every time a client's come to me and been like, hey, I'm looking at buying a building to host my business in. The first thing I say is, okay, let's run these numbers. Let's run this cash flow and see how we can make that happen. Wilson says businesses get more tax advantages from owning property than even homeowners do.

Like you're going to be able to deduct, you know, the carrying costs of the property, such as your property taxes, your mortgage interest, utilities you incur. And Wilson says property can be valuable. You know, if you ever want to sell your business or whatnot, like down the road, just because you're selling, you know, your business, which is an asset, doesn't mean you necessarily have to sell your building, which is the asset too. But one of the biggest advantages that comes with owning a space, especially right now, is that it can help a business owner avoid any surprises that can come at the end of

a lease, says Nathan Rogge, CEO of First Pacific Bank in Southern California. You know, you're a construction company and you lease an office slash warehouse space that has a yard for your trucks and your lease comes up in three years. And let's say rents have shot up by then. Whatever the market is, is really going to kind of dictate what your new expenses are going to be. Right. You're you're kind of beholden to what's going on at that time

when your lease comes up. And commercial rents have been rising for retail space, industrial space and even office buildings, according to the real estate data company, Coastar. Rogge says that means when a lease is up for renewal, business owners might have to make some tough decisions. Using my contractor as an example, may have to drive farther, look into other markets because they can't get the space for the price they want.

That kind of uncertainty helped to push Lysandra Everett to buy a new office building for the company she owns in Chesterfield, Virginia called Everett Tax Solutions. I'm not going to have to worry about somebody either selling the property or raising the rent. I get to decide those things. Everett says as a property owner, she knows her monthly payments will be stable for the long run. She says that's a big deal given how volatile her other expenses have been. Whether it is your general liability insurance, the cost of what you're paying your employees, the software that you use to facilitate paying the employees.

So you have to try to control those costs where you can. Everett says she's hoping to hold on to the property for as long as she can so that one day her kids can decide what to do with it. I'm Justin Ho for some businesses. There's also been a whole technological revolution that's been a huge help for a growing number of business owners, generative AI. And while big companies tend to lead the pack in AI adoption, very small businesses, think one to four employees, have been using AI at relatively high rates as well.

That's according to some new analysis from the Census Bureau. Marketplaces' Elizabeth Troval has more now on how those businesses are supercharging their small staffs with AI. Antona Vanisek runs a small insurance agency in Chico, California. It's her, two employees, and AI. Crafting emails, I can get them out quicker.

When people have specific questions I can give them almost like a treatise within the email about very Specific things she's also created chat bots to field questions about health insurance instead of asking HR for that The bot could answer that as well The bot could answer that as well, specific to the company's group health plan, like co-pays, deductibles, you know, how much does it cost to see a specialist. She's gotten so good at AI, her insurance clients are asking her to help them create AI tools. And in Kansas City, Vanessa Juby says her business, Liva, uses AI to support new mothers

at work. All of our content within our platform is delivered via AI. She says AI helps her offer more personalized content at a larger scale. So if you're going to be formula feeding, breastfeeding, if you're going back to work, all of the content is really personalized to you. Roughly one in four small businesses are implementing generative AI as a business tool, according to payroll firm Gusto. Nick Trumper is an economist there. Everybody has parts of their job that just have to happen, right? But might not be the

thing that they were actually hired to do. And GEN.AI allows more time for doing the thing that the employee was hired to do. And Amy Reed with the Texas Gulf Coast Small Business Development Center says she's expecting to see more use of AI, especially for really small firms. I think we're just gonna see them finding that they're creating better prompts so that they're getting better outputs

and using AI on a more regular basis instead of like, oh yeah, I can use AI. She says as business owners get more educated on AI, they're getting past their skepticism and are closer to embracing these tools. I'm Elizabeth Troval for Marketplace. Coming up. Turning the lights on in that place required like full attention and full explanation. Sounds complicated. First though, let's do the numbers. Dow Industrial is up 308 points on this Wednesday, 7 tenths percent, 45,014 for the blue chips. The

NASDAQ grew 254 points. That's 1.3 percent, 19,735. S&P 500 up 36.6%, 6,086. Executives from a handful of airlines testified before the Senate today about seeding fees after a Senate subcommittee found that such fees had earned American, Delta, United, Spirit, and Frontier. It combined 12.4 billion American simoleons between 2018 and 2023. No turbulence in the stock market for them.

American Airlines rose 2.8 percent. Delta lifted 2 and 7 tenths percent today. This one's bad news for my daughter. Chipotle says it's raising prices 2 percent across the board to offset inflation. That comes after the company tried to keep its menu affordable, even as ingredients cost more. Chipotle gained 4 and 8 tenths percent today.

You're listening to Marketplace merchandise at a discount. So you can snag our popular Marketplace sweatshirt for just $8 a month. Or maybe you and the investor in your life could use some matching glass mugs. That's only $5 a month. We're even offering our brand new Merino wool socks, featuring Kai, David and yours truly for a one time gift of $15. These deals won't last long. It's our way of thanking you for getting your year end donation in a little bit early. This offer expires at midnight on Friday. So don't wait.

Get yours now at marketplace.org slash donate. This is Marketplace. I'm Kai Rizdal. It feels, I know, a little early to be talking taxes. The Internal Revenue Service isn't even going to tell us when it's going to start accepting our 1040s until sometime in January. But really, is it ever too early to talk taxes? Especially this year, because the Internal Revenue Code is going to be at or near the top of the GOP agenda come the change in administration.

A whole bunch of provisions in the 2017 Tax Cuts and Jobs Act, one of, if not the, signal achievements of the first Trump term, they are set to expire in the coming year. And Republicans are oh so keen to set tax policy for the second term. They are set to expire in the coming year, and Republicans are oh so keen to set tax policy for the second term. But even with unified Republican control in Washington, as Marketplace's Kimberly Adams reports, there's going to be plenty for lawmakers to argue about.

The 2017 tax law changed what most American people and businesses owe the IRS every year. It increased the standard deduction so fewer people itemize. It cut the tax rate for corporations and most private businesses. But there was a catch. To lower the overall cost of the law, at least on paper, Congress used some gimmicks. Owen Zidar is a professor of economics at Princeton. The way that the original 2017 bill got passed was they made some of the things expire, particularly the things that they thought might be hard to have people stop, like tax cuts for a broad group of people.

Most of the tax cuts for individuals and some of the provisions for businesses expire at the end of 2025. The new Congress will have to decide which tax changes to extend, plus whether to add some new ones, and of course, how to pay for them. A lot of the tension will be about different groups within the Republican Party, some of whom care a lot more about economic growth, some of whom care about a range of other things. For example, says Samantha Jacoby, deputy director of federal Tax Policy at the Center on Budget and Policy Priorities. Probably the one that might be the most contentious, especially on the House side, is the SALT

cap. That's the limit on how much of your state and local taxes you can deduct from what you owe the IRS. You used to be able to pretty much write off everything you paid. But the 2017 law capped that write-off at $10,000, which effectively raised taxes for people in several, mostly Democratic states. A number of Republicans, particularly those in higher tax states like New Jersey, New York, California, the states that were most affected by the salt cap, want to raise the salt cap or lift it.

Either option would increase the total cost of any new tax legislation. Then there are all the tax-related changes President-elect Trump promised on the campaign trail, says Garrett Watson, a senior policy analyst at the Tax Foundation. Exempting tipped income from income tax, exempting social security benefits from income tax, providing a special deduction for auto loan interest on your tax return that you pay. All of those, of course, are going to have revenue effects. The cost of all these changes together could run into trillions of dollars over 10 years, just renewing the expiring provisions of the 2017 law alone, most of which benefited wealthy

Americans, would cost an estimated $4 to $5 trillion over a decade. To cover the final bill, whatever it turns out to be, Republicans in Congress are reportedly considering cutting Medicaid and food assistance programs. Plus, there's President-elect Trump's favorite word. He's also considering tariffs as one potential offset or revenue raiser for some of these other tax cuts. Although Watson and many other economists say it's not clear how or if that would even work.

The big picture debate that's already percolating among Republicans in Congress, just how much are they willing to add to the deficit to get all this done? Are we going to have a deficit increase? How much will that be? And then what can we fit into it if that's the number that we're okay with? Complaining about the growing deficit was one thing when Republicans were in the minority or in divided government. It's another thing entirely now that they have all the control, but also a whole bunch of the affected constituencies and their lobbyists clamoring for their own special tax breaks.

In Washington, I'm Kimberly Adams from Marketplace. College completion rates are up. They are, in point of fact, the highest they've been in 12 years. There's new data out today from the National Student Clearinghouse Research Center that shows more than 60% of students who started working toward a degree in 2018 have finished. And the real success story here is community colleges offering two year degrees. Marketplace is Kelly Wells spent the day looking at what's going on there. When Rebecca Hansen graduated high school, college wasn't in the cards. She became a cosmetologist instead. My dad was like, this is great.

When are you starting college? And I was like, I'm, this is it, dad. I'm never going to college. Like this is my career. But when the youngest of her four kids started school five years ago, she headed to community college to start studying to become a therapist. It just developed me into a much stronger mother,

wife, and community member. Hanson is part of a wave of people heading to community colleges and earning their degrees. Doug Shapiro with the National Student Clearinghouse Research Center cites two things behind the trend. Number one, the sharp decline in enrollment after the pandemic was a wake-up call for community colleges. They needed to focus a lot more on supporting the students that remained and helping them

stay on track to graduation. And number two, there has been major growth in something called dual enrollment. That means high school students who are taking college classes while still in high school. And their completion rates were much higher. Shapiro expects both of those things to continue, so he expects completion rates to keep rising. Bill DeBonn at the advocacy group, the National College Attainment Network, says that is promising news, but there's context to consider rising. Bill DeBonn at the advocacy group, the National College Attainment Network, says that is promising news, but there's context to consider here. At four-year institutions,

an average of more than 60 percent of students graduate within six years. Whereas... Community college sector here is still at 43 percent completion. There's still a lot more room to grow. And even though completion rates are up, enrollments have fallen from their peak in 2010. We do need to think about whether we are getting enough students to start in the first place so that they can benefit from the increased completion outcomes we observe in this data. DeBond says enrollment of 18 year olds is down too. And when high school graduates don't start college immediately, there's a much lower chance that they ever will. I'm Kaylee Wells for Marketplace.

We've been exploring some history on this show lately, housing history specifically. We've done the origins of the ranch house, the college dorm, the mobile home, as well as some of the styles and trends you see all over the housing industry in this economy. But just as our housing has history, so too do we all have history with our housing. Here with today's installment of our series, Adventures in Housing. My name is Melissa Meskew. I'm a writer, among other things, and I lived in New York for 13 years. Everyone that I knew in New York had just nothing but like sob stories about all the, you know, apartments that they couldn't get, having to butter up people that you know to try to get a guarantor, broker's fees, etc.

But I was specifically looking for a sublet. The first one that I checked out was inhabited by an artist, and she had all of her beautiful paintings all over the house. So it was kind of hard to walk around in, but then I went down the street and checked out a different sublet and it ended up being the one that I stayed in. The guy who lived there had lived there for 12, 13 years. I was very happy to keep his place exactly as it was because his weird style was perfect for mine. There was very unusual furnishings and also the place was checked out with the most bizarre

light fixtures. Every single room had a different combination of like a dial, a switch. Turning the lights on in that place required like full attention and full explanation. The guy I rented it from didn't tell me that it was a rent stabilized place. And probably the reason he didn't tell me it was rent stabilized is he fully intended to come back so I would never actually get to see the lease myself. But sometimes I would cross paths with other people in the building who were also paying rent. So I got to hear what their rent was and it was at least

$1,300 more than mine. So that was a real shocker. So that was a real shocker. I always planned to send a postcard to the place after I moved out as a hello to the people that moved in. I don't know its current status. I don't know if it's still a rent stabilized place or not. Maybe it got renovated. Maybe the old parquet floor is gone, but the apartment was really special actually. Melissa Meskew, writer and a former New Yorker. Whether you are loving your current place

or dreaming of someplace place you did once live, tell us about it. Marketplace.org slash Adventures in Housing. So This final note on the way out today. The New York Times does a thing every year. It's called the Dealbook Summit, a day-long interview fest with Dealbook founder Andrew Ross Sorkin sitting down with various business and economic luminaries, which today, for the first time, included Fed Chair Jay Powell. Here is just a taste. There's a guy you probably know who has a sense that your job, he says, it's the greatest job in government. You show up to the office once a month, and you say, let's

flip a coin, and everybody talks about you like you're a god. Yeah. That is President-elect Trump. I know, yeah. So he's right. The part about it being the greatest job, it might well be right. I have to say, I do, as I mentioned, I do love the work, and it's a special place to be surrounded by people who are so dedicated and to know that your work really matters for people. It's a very special honor to do that work. Did you laugh when you heard that? I thought he's partly right there because, but he's not right about the come to work

once every month. Just the flipping of the coin part? That part is, it's not quite, it's not like that. Not like that. Yeah, no. Love my job. I coin part? Yeah, that part is. It's not quite, it's not like that. Not like that. Yeah, no. Love my job. I love my job. I love my job.

Our media production team includes Brian Allison, Jake Cherry, Jessen Duller, Drew Jostant, Gary O'Keefe, Charlton Thorpe, Juan Carlos Dorado, and Becca Weinman. Jeff Peters is the manager of media production, and I'm Kai Rizdal. We will see you tomorrow everybody.