Power Lunch - Biden’s Budget, and Calling An Audible 03/09/23

Episode Date: March 9, 2023

President Biden is expected to deliver his budget proposal today. The plan includes around $2 trillion dollars of tax hikes. But who will pick up the tab, and what will the money be spent on? We’ll break it down for you from all angles. Plus, Credit Suisse is delaying its 2022 annual report after a “late call” from the SEC. We’ve got the latest details, and all you need to know. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good day, everyone, and welcome to Power Lunch, along with Kelly Evans. I'm Tyler Matheson. Coming up, the Biden budget, President Biden speaking this hour on his budget proposal, the plan is to include $2 trillion of tax hikes. Who will pick up the tab, and what will the money be spent on? We'll break it all down. Plus jobs jitters. The big employment report due out tomorrow, jobless claims jumping today for the latest week, and word about GM about some pretty broad cuts they're trying to make.

Is the labor market finally starting to do? teeter. Before that, let's get a check on markets, which are pretty much at session lows at the Dowdown 258 and so much focus on the banks in particular today. All right, for a little more granularity. Let's bring in Dom Chu. Dom? All right, so Tyler, Kelly, we've got a couple generals in the headlines today. Kelly already mentioned one of them, but we're going to start with General Electric, which is surging in today's trade up over at least 0.6.5 percent, and that's off the best levels of the session, by the way. So the industrial conglomerate, which is in the process of breaking itself up into three separate companies is holding its investor day today, and CEO Larry

Culp reiterated GE's full year earnings guidance. Now, here's what he had to say earlier today on Squawk Box. We think we'll have high single-digit organic growth, will more than double our earnings, and our free cash should be somewhere between $3.4 and $4.4.4 billion this year, up nicely on an adjusted basis versus where we were last year with health care. So in terms of the financial performance, we feel very good. All right, now, GE stock, by the way, has almost doubled. Yes, doubled in value since hitting 52-week lows back in July. So keep it on GE shares.

Also, our second general, General Motors, as Kelly points out, GM stock is down nearly 4% on the session. The automaker is offering voluntary employment buyouts to the majority of its U.S.-based white-collar employees in an effort to trim its workforce and control employment costs. GM expects to take a pre-tax charge of around one and a half billion. billion dollars related to those buyouts. Now, you may recall, this comes right after last week. GM said it would cut 500 salaried positions globally. So General Motors and General Electric, both in the news, GM shares down 4%. Now let's send it over to Christina Parts of Nevelas across the studio for more of the big moves in the banks. Thank you, Dom. Well, one of Crypto's favorite

banks is liquidating and the parent company's stock is getting slammed right now. Silvergate Capital plans to voluntarily shut down its bank following a series of financial challenges, government investigations in the aftermath of the collapse of FTX, which is a large silvergate customer. Shares right now are down 20%. But since Silvergate Bank is or was a traditional bank to crypto exchanges, that has investors worried about the trickle-down effect across the sector. The financial select sector spider ETF, XLF, is tracking for its worst week this year with names like Charles Schwab.

You can see down 10% Zion's down 9.5% right now. shares of SVB, SVB, I should say financial, which operates Silicon Valley Bank, are down. Look at this, 58%. Shares are actually just halted moments ago before going live after it announced a $1.75 billion share sale to help with its cash burn due to declining deposits. Its shares actually hit a low today that we haven't seen since May 2020. Wow. Christina, thank you. Let's get to the big story of the day. Now, President Biden's budget proposal. With us now with the main points and what we can expect to hear is CNBC Senior White House correspondent Kayla Taushie. Kayla, what do we know? Well, Kelly, President Biden is proposing to spend $6.8 trillion in the year that starts in September in his budget that includes the leftover 2020 promises and an even more aggressive campaign to tax the rich.

The White House estimates the federal government will receive $5 trillion in tax revenues and pay $769 billion in interest on its debt. in fiscal 2024. That's a 20% increased from the prior year as the Fed raises rates in a continued and persistent manner. Despite a pledge to lower the deficit by $3 trillion over 10 years, the deficit for fiscal 2024 is projected to swell to $1.85 trillion. A Treasury just moments ago releasing its revenue breakdown for each of the new tax proposals supporting much of this spending, raising the corporate tax rate to 28%. Treasury says would raise $100,000,000, $137 billion this year. Taxing high-income earners and pass-throughs would double receipts to $107 billion. A quadrupled tax on stock buybacks would raise an estimated $20 billion. That's up from $4 billion the government expects to earn this year.

And the administration's plan to restore and raise the child tax credit. That would cost the government $259 billion. Of course, this is the administration's wish list. It will serve as an opening offer to Republicans to negotiate. the spending cuts they've called for. Budget Director Shalonda Young said today, and President Biden is expected to reiterate later this hour, the ball is now in Republicans' court. Kelly and Tyler. Kayla, how much of what is in this budget specifically undoes what we would call the Trump tax cuts of 2017? Well, certainly there are a lot of proposals, like specifically the increased corporate tax rate from 21% to 28%. That's directly taking aim at, you know, one of the core provisions of the Tax Cut and Jobs Act from late 2017 that went into effect the following year.

But it's worth noting, Tyler, that even when that was proposed in the past, it didn't even have support for all of the then Democrats. Notably, Senator Kirsten Sinema from Arizona, who has since changed her registration to independent, was a key critic of any tax raises and went to bat against the administration specifically for that. So just because the Biden administration is proposing these things doesn't mean that they'll go anywhere in Congress, especially since most of the time the budget originates in the House. And of course, the House is now under slim Republican control. Tyler. All right, Kayla, thank you very much. Kayla Taushy reporting from the North Lawn of the White House. For more on President Biden's budget, let's bring in Ben White, Chief Economic correspondent with Politico, also a CNBC contributor.

and Andy Blocker, Invesco Global Head of Public Policy and Head of U.S. Government Affairs. Gentlemen, welcome to both of you. Ben, let me start with you. How much of this is really a legitimate budget proposal and how much of this is the beginning of the Biden platform for re-election in 2024? Good to see you, Tyler. I would say 0% essentially is a real budget document and 100% is the kickoff of his campaign in 2020. As Kayla laid out, none of these Soap the Rich proposals are going to become law in this Congress.

The Biden administration doesn't think they are, and they won't even be taken up, quadrupling the buyback tax, no, raising the corporate tax, no. What's important to note here is the overall leftward shift of the Biden administration as it moves toward re-election and its messaging. A lot of it sounds like pulled from the Trump playbook without Trump's rhetoric, obviously, but the protectionism and soaking the rich sort of stuff, some of that comes from Trump. But what Biden is doing is saying, you know, I'm going to attack where people are upset, and that is on people making too much money and them making not enough money. So there's going to be a lot of that kind of class warfare rhetoric in there,

and they don't expect any of these revenue sources to actually materialize in terms of raising taxes right now. Andy, how do you respond or react to what Ben just said there? And second, let me advance the discussion by asking you, how this complicates or helps or gets started the discussion over raising the debt ceiling. Well, I think Ben is spot on. I think this is fairly much, pretty much a political document. But it does outline its priorities. And it says, hey, I can reduce the deficit without hurting Medicare and Social Security and do it without raising taxes on those making under $400,000. dollars. Dozer is talking with. But what I do think it does, and I think you've hit this yourself,

is it starts the actual drawing of lines in the sand with respect to the debt ceiling debate. We've had meetings at the White House and different discussions, but we really haven't gone in the negotiation. This is the first shot across the bow, and it says, hey, I've got my budget. Over to you Republicans, please show your hand, what are you willing to cut? And so far, the Republicans, as I understand it, have not done that. Am I right? indeed? That's right. They haven't done so far.

They haven't showed their hand. They haven't showed their hand. And even in the state of the union, you saw President Biden pull them out and say, hey, do you really want to cut Social Security Medicare? So I think they're on their heels right now in that. And they're going to have to come together. Look, I think they're going to try to do something. They have the House Budget Committee chair is intent on putting forward a budget.

But then you're also going to have the House Republican Study Committee, the House Freedom Caucus, and kind of all these different budgets from different Republicans. And the tough job is going to be for Speaker McCarthy to bring all those ideas together, get the caucus together, and actually have the Republicans get the 218 to vote on it. Speak to that point, Ben. Speaker McCarthy had such an easy time winning the speakership. This is going to be... So easy.

Very easy. This is going to be no simpler. No. Yeah, Tyler, it's a mess. And they're nowhere on this. and Republicans will call this dead on arrival and not an opening salvo that's worth anything and their time to look at. So we're nowhere on that.

And McCarthy has a incredibly difficult path ahead of him, partly because of the strictures he agreed to when he got the job, including basically one member, can raise an objection to his speakership and bring him down. Somehow he's got a corral 218 to get a debt limit deal through. I think, like in all of these, somehow, some way, 11th hour, it gets figured out, but it's going to be herding cats, snakes, whatever it is metaphor you want to torture to make it happen. And it's going to make us all sweat and nervous in the meantime because they are so far apart on this. I think Republicans have to back off huge spending. That's though. There's not much public appetite for it now. That's more a Tea Party wave thing. But there's still our fiscal conservatives

in there. How they figure out the mix to get the 218 pop the popcorn. I have no idea. Andy, what would you add to that? And we already see, for instance, Treasury bills pricing in, you know, a relatively high rate of default for the U.S. government. Yeah, no, I think Ben's spot on. It's hard to see how we get from here to there, how first the Republicans get to 218. But they need to get to 218 if they're actually going to have a negotiating position. If they don't do that, then President Biden can really put the pressure on the raise the debt ceiling without any kind of budget reforms. But if he gets the 218, that changes the game a little bit, that moves it to the Democrats to say, okay, I've got a plan.

They'll attack all the spending cuts because they're not politically popular right now. but there are a lot, two-thirds of the Senate, are Democrats up for re-election. And once that negotiation starts, you're going to see a lot of Republicans, Tester, Mansion, cinema, just to name a few, who are going to want to do a deal. And so I think pressure is going to be on both sides, but right now all the pressures on the Republicans. Yeah, but you mentioned those three. Those three are Democrats who are going to want to do a deal, right? Tester, cinema, and that's right.

Yeah, but the Republicans put that pressure once they come together. If they're sure they can come together, they can agree on something, that puts some pressure on the Democrats to play ball. Yeah. In many ways, I've felt over the past couple of years, Joe Manson's most powerful man in Washington. Anyhow, Ben White, Andy Blocker. Thanks, guys. Appreciate it. Thanks, time. Does down almost 300 points right now at Fresh Session Lows.

Could it be headed for a three-day losing streak? Our next guest says, buyer beware. And he'll explain why he's not convinced a recession is fully priced in yet. Plus calling an audible. Credit Swiss delaying its 2022 annual report after a last second call from the SEC. Shares down 4% on the news, but they're trading under three bucks. We've got the latest details when Power Lynch returns. Welcome back as investors gear up for the jobs report tomorrow morning. Jobless claims jumped to 211,000 today, the highest since late December. Also today, General Motors offering buyouts to salaried workers. That's a huge chunk of their workforce. So as these labor market jitters start to go beyond tech, what does it mean for stocks?

David Traynor is CEO of new constructs and investment research firm. David, it's good to have you. And listen, I mean, when's the last time you were bullish, by the way? We're bullish just in pockets. We're bullish around stocks with good fundamentals and attractive valuations. We're just really disciplined about staying focused on those, what we think are safe and smart investments. Safe and smart. And that's kind of what we heard from Alan Boomer last hour.

So are you similarly looking for low valuations, high dividends, that kind of thing? Yeah, we're not so much concerned with dividends as we are with core earnings and cash flow. That's adjusted for all the things companies hide in the footnotes. We think diligence is coming back into favor, Kelly. It's not just about chasing fads and fombo, but doing real work and gaining a competitive advantage by having it. We're going to have to interrupt that conversation because the president is early. He is announcing his 2024, fiscal 2024 budget in Philadelphia, seen as an opening salvo in his reelection campaign.

Let's go to Philadelphia and watch the president. Mom's demand action. We're going to get action. Hey, you know what? His mom's watching, Tina. Tina? I don't know. I wish you were here.

I could meet you, but they say, and they speak in the little bit of an accent in Southern Delaware, talk at you. like is, you know what I mean? You look at that, you say, you've done good with that boy. Congratulations, Mom. Congratulations.

Thank you, man. Please have a seat. Well, you know, I don't know whether you know this or not because of the previous president, Jimmy Wilson. Jimmy, you, Williams,

the only reason I'm standing here is you guys, not a joke, And when I was running with Barack, we were having, things were slowing up a little bit. And I asked for help. You guys got in a bus and got a bus, and you're the reason why I'm standing here. I was vice president then, and I'm president because of you guys. And again, they say, you know, I've told your son, he's got good blood, my dad would say. But thank you all very, very much.

And it's great to be here with Josh, Josh Superior. I predict you he's going to be one of the best governors in history of the state. That's in large part because he married up. And I want to thank Congressman Brendan Boyle for the passport to get into his district. Brendan, you've been a great friend from the time we've been together. Thank you. Thank you. Thank you. By the way, he now leads a Democratic part of the Budget Committee. He's the guy that's going to determine whether or not my budget gets passed.

But, you know, while they couldn't be here, I want to thank Jim Kennedy. He's a good friend, the Mayor of Philadelphia, and two great senators, a great close, close friend, Bobby Casey, and John Federman, who will continue to deliver for the people of Pennsylvania, I believe. John, if you can hear this at all, we're with you, pal. We're with you. Everybody asks why I ever move from Scranton. I move from Scranton because we live five blocks from the Casey's.

You think I'm kidding. I knew as long as his dad was around, I'd never be able to be a senator, governor, in Pennsylvania. And along comes Bobby. Anyway, great, great family and great friends. Folks, here's why I'm here today. For too long, working people been breaking their necks with the economy's left and behind,

working people like you, while those at the top get away with everything and get everything. One of the reasons why I ran for president, and I mean this sincerely, you may remember when I announced this, to the three reasons I was running. One, to restore the soul of America. There's always some decency and honor to the system. And two, to rebuild the backbone of the country, the middle class.

And the middle class does well, the poor have a way up, and the wealthy still do very well. And the third one is to unite the country. Didn't think we could do that. But as we've seen all the talk about we never get any cooperation with the other team. The last two years, we've passed some pretty big things with bipartisan support. You know, I ran to grow the economy from the middle out and the bottom up and not to top down. And I know when I grew up, my dad's kitchen table, not a whole lot trickle down on trickle-down economics into my kitchen table for my dad. That's where I wanted to come here today to lay out the next part of my economic plan.

My budget, my budget I'm sending to Congress today. And if I could hold for just a second, I want to be clear, and I'll be clear to the press as well. The fact is that the Speaker of the House has been. been, he's a very conservative guy, and he has even more conservative group with him. But he and I met early on, and he said, what are we going to do about the budget? And I said, let's make a deal. Let's meet. I said, I'm going to introduce my budget on the 9th of March.

You introduce yours, and we'll sit down and go line by line, and we'll go through it. We'll see what we disagree on, and then fight it out in the Congress. So I want to make it clear. I'm ready to meet with the speaker anytime. tomorrow if he has his budget, lay it down, tell me what you want to do, I'll show you what I want to do, see what we can agree in, or we don't agree on, let's see what we vote on. Now, I'm not going to lay out the entire budget, that would take the rest of the day. But no, it's a detailed budget, but I want to give you the contours of what we're for

and how it's in stark contrast for what appears to be what the other team is for. My dad had an expression. Someone would come up to my dad and say, let me tell you what I value Joe. My dad would say, no, no. Show me your budget. I'll tell you what you value. No, I'm serious.

My expression, my dad would do, show me your budget, I will tell you what you value. Well, folks, let me tell you what I value with the budget I'm releasing today. I value everyone having an even shot, not just labor, but a small business owner. farmers, and so many other people hold the country together who have been basically invisible for a long time.

So the end of the month, after working like the devil, they just have a little bit more breathing room, as my dad would say. After you pay all your bills, you're sitting at that kitchen table right not the last bill, do you have just a little bit of breathing room left? So my budget reflects what we can do to lift the burden on hardworking Americans, and there's more than one way to do that. And that's what brings us to down to everyday cost. How much the things cost?

It's not just whether we're, we brought down inflation seven months in a row. We're going to whip it. But in the meantime, there's other ways to take what is inflation in your budget. I just met, I won't embarrass them by pointing out, I don't have permission, but I just met a woman who has health care costs that are $600,000 a year, $700,000 a month. Well, guess what? How can you possibly deal with that? Well, we just dealt with it, by the way.

We just dealt with it. For example, prescription drugs. We pay more for prescription drugs in America than any other advanced nation on Earth. Let me say that again. In the United States America, for whatever prescription drug you're buying, you're paying more than any other nation on Earth.

It's an advanced nation. We're finally beginning to change it. I've been fighting that for over 30 years. because of the law that I worked on for decades and that I just signed last year we took Big Pharma on and we won for the first time we won

the other team didn't think that's a good idea none of them voted for us they think Big Pharma should be able to make extraordinary profits, exorbitant profits at the expense of the American people that's not hyperbo that's a fact Medicare finally has the power now to negotiate for lower drug prices

And by the way, you know, they've been able to do that at the VA. At the VA, they're able to say, we're only going to pay X amount of dollars for this particular drug that, in fact, the veterans need. The only place that was exempt was Medicare. They couldn't do it for Medicare, but now they can. And it's going to lower prices for seniors. But here's the deal.

Not only, for example, the woman I just mentioned, by the beginning of 2025, she'll not have to pay more than two to pay more than $2,000 a year total amount for drugs. Folks is not just going to save people's lives and save people money, so they don't have to go bankrupt to try to stay alive. It's going to save the government. It's going to reduce the deficit. $160 billion.

These guys keep saying, how are you going to cut the deficit? Well, guess what? if your tax dollars don't have to go out paying all that exorbitant price for Medicare to drug companies, and it's rational, it's going to save $160 billion in tax dollars. Millions of Americans have diabetes. They need insulin literally to stay alive. How many people know somebody who needs insulin for their diabetes? Raise your hand.

Well, they're paying somewhere between $4 and $700 a month now. or were until last month. Well, guess what? That insulin was invented 100 years ago. I mean, yeah, literally 100 years ago, okay? You know how much it cost to make that insulin? $10. You know how much it cost to make it and package it?

$13.50. And charging the kind of money they charge? Well, guess what? Guess what? Now we've lowered, we've lowered the cost of insulin to maximum $35 a month. I was at a town meeting in Northern Virginia last year. A woman stood up and she was, I was, she was a little embarrassed to speak. She said, I have two daughters with diabetes and I can't afford the insulin.

And she talked like that. and she said, and we have to split it sometimes. Can you imagine looking at your son or daughter and knowing you don't have the money to pay for the insulin to keep them alive and healthy? Not a joke. Talk about being deprived of your dignity. Well, God, any more, seniors on Medicare

don't have to pay more than $35 a month, and guess what? when not only cut I thought we should cut it for everybody to 35 bucks a month but my friends and other team knocked it out. I didn't have the votes. I lost by a couple votes.

Well, guess what? Cap and the cost for everybody at $35 months, especially those 200,000 children with type 1 diabetes. Well, here's what happened. Eli Lilly, one of the world's biggest drug companies, just announced

is capping the cost of insulin at 35 bucks a month. Now, how are the rest of these folks going to charge more than that when you can go to Eli Lillian buy it for 35 bucks a month? So folks are going to save a lot of lives, but also it's going to give parents back to dignity that's been deprived because they can't take care of their kid for something that's so basic and so important. But again, the MAGA Republicans want to be.

to take away the law. They want to the things they've announced they want to do away with the inflation reduction act. Okay, well we have a difference in the budget ideas, man, more than budget ideas, but anyway. By the way, how many people, maybe even some of you, you know people who stared at the ceiling last night wondering, God forbid, if I get pancreatic cancer, my wife gets breast cancer, something happens, what's going to happen? How are we going to pay the bills? I can tell the story. My dad would probably be mad my telling him were he alive. We lived in a three-bedroom split-level home. Nice.

I mean, it was a nice home. We were a middle-class family with four kids and a grandpa. And the bed my headboard was against in the room of myself and my two brothers was against the wall. My dad was. My dad was really restless. He could hear it 190. He could hear the bed. And I asked my mom the next morning, what's wrong with dad?

He said, his company said, no more health insurance. They weren't going to pay for it. Well, guess what? A lot of people are lying in bed at night wondering what they're going to do. They're going to have to sell the house? What do they have to do if one of them gets really sick? Well, thanks to the American Rescue Plan,

which not one single Republican voted for, that I signed in the law as soon as they got to all of us, millions of Americans are millions more of a role in the Affordable Care Act, saving an additional $800 a year for better coverage and better prices. My budget is going to make those savings permanent. We passed them up until now, but they'll expire if I don't get them done again. My MAGA Republicans all voted to get rid of the Affordable Care Act.

They voted to get rid of it over 50 times since Barag passed it. Over 50 times. Well, it is. I think it is shameful. Folks, no one can deny we have a climate crisis. So, we've seen more land, for example. I've been in more helicopter rides these last two years, particularly from Arizona all the way up to Idaho,

all the way in the west coast. More forests have burned to the ground than the entire state of Maryland, this entire size of the state of Maryland. Look what's happening. The Colorado River has become a creek. You have all these environmental problems that are so profound, they're hard to deny. And people are seeing them now, along with extreme superstorms and droughts.

That's why I took the most aggressive action ever, and all of history in any country, to take on the climate crisis, by lowering your home energy bills, which Magri Republicans voted against. We've now gotten the point where it's cheaper to generate electricity from wind and solar than this from coal and or fossil fuels. And I'm from Scranton. Okay, I'm not against coal per se. A lot of people made a living on that way. But we're providing incentives for folks to make the transition. So here's what we're doing.

We're providing you with a tax credit, a tax credit and rebates. if you're buying new energy-efficient appliances. Heat pumps, the new heat pumps, they can heat the whole damn house. No, I'm serious, not a joke. Well, if you need a heater and you need to buy one of this heat pumps, you get a tax credit for doing it. And water heaters, tax credit to weatherize your homes, with better windows and doors.

I gathered together leaders from American auto workers in the South Lawn of the White House, all American manufacturers. And there's two years, a year and a half, two summers ago. And guess what? They all agreed within the next month. It came to me and said, we're going to go all electric. We're going to go all electric. And that's going to save billions of gallons of gasoline burning into the air. It's not only going to save the environment. It's going to help create really good paying jobs. We're providing tax credits for folks who buy electric vehicles to encourage them to do it. We're still going to need combustion.

engines, we're going to still need oil for the next 10 to 15 years, because all of a sudden they're not all going to go away. But all this is going to lower energy costs for families on an average of $1,000 a year and create good-paying union jobs. Jimmy, I told you I was going to be the most pro-union president of history. I've kept my promise. I've kept my promise. And by the way, when we're talking about, we're talking about it.

about the creating jobs. My buddies at the IBW were the strongest support I had this year. Well, guess what? They're going to install 500,000 charging stations all across America. And by the way, the things aren't proposing not to lift the burden off of families in America, it's all going to generate economic growth. That's not all. To support working parents, My budget expands access to affordable child care for millions of families. And it's going to invest in paid family and medical leave, which all of you fought like hell for, so that the U.S. is no longer the only major economy in the world

that doesn't have paid leave. Folks, my budget also invests into elder care and home care. How many of you are like I went through with my mom and my dad, as they got older. They wanted to stay in their own home. It was cheaper to stay in their own home than to have to sell everything and have everything on to go into a home.

Well, fortunately, I live close enough and they could move in with me. But my point is, it's cheaper if we in five provide for the ability for them to stay in their homes. It's not only the right thing to do, but it's cheaper on the taxpayer. All the things are going to,

to help folks go to work, generate economic growth in our nation, and still take care of their families. The point is that every time I talk about things, people talk about it like, this is an overwhelming burden on the taxpayer. It's going to save money for the taxpayers. No, it really does. Save money for the taxpayers and generate growth. That's how the economy grows. That's why I was able to create 12 million new jobs in two years, more than that. More than that. And, you're going to create, than any president in American history has created in four years. We've done in two years with no president's done in four years because of you. But the point is it's good for everybody.

We're not hurting anyone. My budget also restores the child tax credit. You know, when that was in place during the pandemic, guess what? Child poverty was cut in half to the lowest level in all American history. And guess what? Because moms were able to go to work. Moms are able to go out there and make a living.

Folks, we can reduce child poverty and increase child opportunity. Again, it's going to help millions of the parents go to work, knowing the children are being taken care of. And yet, only a few of my Republican friends support it. You know, my wife, Jill, who's a Philly girl. If I didn't root like hell for every Philadelphia team, I'd be sleeping alone. Or you think I'm kidding. Jimmy knows.

Whoa. Anyway, she's in class today teaching. She has an expression she uses, for real. He said, any country that out-educates us will out-compete us. Let me say it again. Any country that out-educates us will out-compete us. For decades, we were the only country in the world. We led the world economically.

We were the only economy in the world that was moving that fast because we were the best-educated public in the world. We started before any other country. Other had higher education, more sophisticated, and a lot of private institutions. But we, everybody in America at the turn of the 20th century, said that we could go to school for free for 12 years. It was a game changer. It was a game changer.

But the rest of the world is caught up. We all know 12 years is not enough to succeed in the second half of the second quarter of the 21st century. Seriously. 12 years is not enough. If we want America to have the best educated workforce, we need to invest in preschool. I'm not talking about daycare. I'm talking about school.

All the studies have recently shown, this is real. Think about it now. That, you know, you learn, you've heard all these stories that if you come from a broken home or where mom or dad has a drug addiction or there's a real problem, or you don't have books in the house, et cetera. by the time a kid gets the first grade, they will have heard a million fewer words spoken.

Not different words, just spoken. They're not included. Well, guess what? Studies that children go to preschool who go three, four, five, six years, three, four, five years old go to school, not daycare. They increase by nearly 50 percent the likelihood that they'll finish high school and go on to earn a two or four-year degree, no matter what their background is. Because guess what? The brain's still developing. They're still developing.

They're exposed to the same thing other kids are exposed to. They grow. We also know that many families struggle to afford college for their children. That's why we had these things called and some of you may have used them, Pell Grants.

For families earning less than $60,000 a year, they get a Pell Grant to go to college, help them pay for college. Well, the last two years, we've increased Pell Grants by $900. And my budget increases by another $820. It used to be if you went to University of Pennsylvania, I mean, Penn State or University of Delaware, where I went, state schools, the state paid a significant portion

of tuition. They're not anymore. They're not paying anymore. They're paying some, but not much, because they've cut paying for it. Well, guess what? Try paying for college, even at a state institution where you can commute. It's expensive as hell, especially if you're a couple of kids in a family making lessons. 60 grand a year. So it matters a lot. That's President Biden presenting some of the details or highlights in his view of his 24 fiscal 2024 budget in Philadelphia. Our team of reporters have been listening and analyzing what we know so far and we're going to break it down on all angles. Kayla Tauchy at the White House, Robert Frank is here in studio to talk about some of the tax implications.

We've also got Brian Sullivan on and Morgan Brennan on the defense proposals in this multi, multi-billion dollar budget. Kayla, let's begin with you. Give us some of the highlights and put it into a political context for us as if we need it. Well, Tyler, President Biden is trying to tap into the progressive zeitgeist by talking up this very aggressive campaign to tax the wealthy tax high earners and tax corporations like big oil and big pharma, all while billing himself as fiscally conscious and pledging to lower the deficit by $3 trillion over 10 years. He also opened those comments with a call to action for House Speaker Kevin McCarthy saying that he has laid down his markers of the programs that his administration wants to advance in this wish list of a budget,

and now challenging Republicans to put forth their budget as well, saying that he would meet with the speaker as soon as tomorrow if their budget was ready. House Speaker Kevin McCarthy yesterday said that because the white, House took an extra month to release its budget that Republicans would be delayed as a result. But behind the scenes, they're still trying to figure out exactly where there is unity and what proposals they can agree on. But of course, the underlying detail of all of this, Tyler, as you were asking Ben White before, is what this means for 2024. You know, the campaign conjecture is in full swing, especially because of the location where President Biden is speaking today, Philadelphia. That was the headquarters for his 2020 campaign.

And that looked very much like a stump speech and a practice run if we're going to get this likely announcement fairly soon. Tyler. And Kayla, thank you. Robert, we turn to you. And just again to highlight what were some of the first comments he made he talked about Eli Lilly quite a lot on the diabetes issue. He didn't talk a lot about taxes that I heard. I think they can push that one maybe further down. Yeah, he said everyone benefits. Well, those who are paying are not going to benefit. And if we look at this, there are over a dozen tax increases on the wealthy in companies.

You start digging in the details as I have. And you start putting the pieces together. You come up with one clear conclusion, which is that taxing ordinary income is just not enough anymore to fund these programs. They're going to have to start going after assets and investments. And the big one here is capital gains tax. So right now it's a 20% tax on investments held over a year. That goes to 44.6% under that Biden plan. The reason it gets so high is you add the 39.6% new top rate from 37 plus the 5% Social Security and AIT tax.

That brings you to 44.6% on capital gains. That is a huge increase from the current 20%. And then he's got his billionaire tax, which is, of course, a tax on those worth $100 million or more. It had been 20%. It's interesting that he increased that rate to 25% upping the ante to a proposal. Is this on their wealth or on their income? The billionaire minimum on 100 million or more is on their wealth. It's unrealized gains.

So if you have $100 million worth of anything, if it increases in value over the course of the year, even if you don't sell the stock or sell your business or sell your property, any increase during that year will be taxed at a minimum of 25%. So you add these two together, capital gains and this tax on wealth, they are really going after assets and investments. And ordinary income goes up a little bit, but the real money, as they know is in investments and assets. You know, and everybody says this is a pipe dream.

It's never going to happen. He didn't propose it when he had Democratic control the last couple of years. But what you said is so fundamental to all of this, if we're running out of money to pay for stuff. And they say that raising taxes is a pipe dream, then what are we cutting back or where's the money coming from? Where are the deficits going? How are we going to fund these programs? I mean, at some point, I don't care if it's a wish list or not. Like, we have to get there some.

We have to complete this picture somehow. Right. And that to me is the big news here. To complete that picture, income and wage income, which has been the way we generate tax revenue mostly for years, is just not going to do it anymore. You're going to have, whether it's the Elizabeth Warren, Bernie Sanders, Biden, they're all coming to doing the math and saying the only way we get there is through assets and taxing wealth, even if you haven't realized it as income yet.

And maybe that's a good point, Morgan, to turn to you here because I don't know yet what the Republicans will propose. But if you don't have the tax revenue, for instance, to pay for expanded spending, then you start to talk about cuts. And this doesn't feel like the kind of environment where either party is going to be talking about, for instance, defense cuts, which are, I saw the numbers from Kayla earlier, almost 50% of the budget? Yeah. So defense right now is proposed in this budget release that we got this morning to increase top line to $886 billion. That would be a 3.3% increase. It would mean a new record.

Inflation adjusted, it's actually negative. And if you look just at the Department of Defense, it's still a 3% increase. It's actually a little bit less than what analysts were expecting in terms of these proposed numbers. But to your point, this is exactly why defense stocks have sold off since the start of the year, because there is so much uncertainty about the trajectory of defense spending into fiscal 2024 and beyond. That being said, Kelly, we know the world is a more dangerous, more uncertain place. The geopolitical risks have continued to mount. The tensions with China, especially from a national security standpoint, and a technological standpoint, which dovetails back into the military conversation, have continued to mount as well. So there does seem to be this growing sense that defense spending will continue to increase. The question now is by how much, how much when you adjust for inflation, and where specifically is that money going to go? We don't actually get the defense budget breakdowns by service and by program, et cetera, until the beginning of next week.

But nonetheless, this top line number does seem to be a little bit disappointing, at least to investors, which is part of the reason you're seeing those shares actually turn lower with the release of this blueprint earlier today. Brian Sullivan, the president seems in terms of corporations, corporate structures to have two bogeymen, though I should probably use a more gender neutral term these days. One would be big pharma. The other would be big oil. He says he's going to go after federal tax subsidies for oil and gas companies. he says companies have failed to invest in production. Fact-check him here. How long do you have?

As long as you need. You know, again, I want our viewers to understand this is just publicly available information. This is not opinion. I was listening to the president, with all due respect, much of what he was saying was either confused me or I just wasn't sure. I'd like to know just better where the information is coming from. A couple things. He did say that we're going to need oil and gas. kind of repeated state of the union added five years, so we're going to need oil and gas for

at least another 10 or 15 years. By the way, there's no estimate that says that we'll need less than 70 million barrels a day globally over the next 25 years that I can find. Talked about when he uses the term subsidy, and I haven't seen the full budget, so I want to be clear that I want to get it right as well. Everything that I've seen, people have talked to, say that he says we're going to end oil and gas subsidies. What they're referring to, is the tax deductions for investing in drilling new wells, which that's an investment credit, which would be available probably to almost every industry, where you invest in building a warehouse or research and development. Most investment costs are deductible on your corporate taxes.

So it appears that he's interchanging the term subsidy for deduction, but, you know, fine, but it looks like it would kind of carve that out for oil and gas. As we showed the other day, most oil and gas firms last year. Exxon and others paid about 33% effective federal income tax, not knocking Pfizer. They paid 9.6. I only know that because I looked at it a couple of days ago when I was at the conference. And he said that we were lowering home energy bills. Now, I hope that is true down the road.

But I would ask any of our viewers that they can find a bill that has come down because all we've been talking about is nationally how home bills have gone up. So again, I think maybe they're talking about a longer term thing. but yeah, energy is a big part of this. And by the way, he's got this huge decision about this Alaska project, Conoco Philips. That decision is due any time before Friday night. So we'll talk more about on last call tonight.

But again, yeah, I think with energy, there's just a lot of ways to sort of tell the story and, you know, look at the numbers and et cetera. Well, congratulations on last call, which debuted last night, and we will be checking in tonight as well. Brian, thank you. Thank you. I want to turn back to you, Robert,

because I'm not understanding how we get from a 20% capital gains tax rate on sold assets, where you're measuring from the basis to what you sold it at, to a 44% tax rate on that. Yeah. So right now, technically, the very top rate is 23.8% because you add that NIA tax. So you go from 23.8. Then what he's doing is saying, look, capital gains should be taxed at the same rate as ordinary. income. He is raising the ordinary income rate to 39.6%. So that gets you from 23.8 to 39.6. Then he adds the kicker, the frosting on the cake, is that new 5% tax, which the 3.8 to 5%. So you go 39.6 plus

the extra 5%. That's a Medicare tax. That's the Medicare tax. So it goes from 39.6 to 40. So he is fundamentally saying there would be no distinction between capital gains income and regular income. That's right. And he said all along that wealth, wealth should be. tax the same as labor and you know work should be taxed the same as wealth and and that that is putting his budget where his mouth is and saying not only should it be taxed the same but should also be subject to that 5% Medicare tax so that gets you even above the top income rate of 44.6% for long term capital gains. But golly, if you taxed and I have long actually felt this way that income should be income.

Yeah. Okay. I felt this way very strongly. But so if you made all income equal in the eyes of the law, wouldn't you then be able to reduce the rate of tax on all income? If you took all of it, dividend income, capital gains income, carried interest income, salary, W2 income, business, and you threw it all into one pot, why would the tax rate still need to be 44%? Couldn't you lower it? No, because like you say, it would all be taxed the same. There would be no extra incentive not to sell your stock for a period of time.

Essentially, work would be taxed as well. And many people for years have believed that as an incentive for us to invest, we should tax it at a lower rate. Well, that's the argument for Cabra Gaines tax. This could have a huge. That's right. And this could have huge implications for the market. I would also add that this is all happening at time when federal revenue and state revenue is still at all-time highs. What is going to happen if the economy really turns south? Revenue start, and then we really have to raise taxes.

Well, folks, we have to leave it there last. I digress. I'm sorry. And by the way, inflation has helped a lot with the deficits. We've actually grown our way out of a system. It's all upside down right now. It's all upside down. But thank you all. We really appreciate it, guys, truly. Brian Sullivan, our Robert Frank Morgan Brennan, Kayla Towshi reporting in Philadelphia, where we just heard from the president. Power Lunge, back in a moment. Welcome back to Power Lunch, everybody. Oil down 1% today, right around $75 a barrel. Biggest names in energy gathering in Houston this week. Pippa Stevens is there. Pippa, how you doing?

Hey, Taylor. One of the most hotly anticipated conversations here at Sarah Week by S&P Global was the Energy Secretary Jennifer Grandhomes address. And in her room packed with energy executives, she praised oil and gas companies for their work over the last year. saying the U.S. has become a global energy powerhouse. But she did say there is more for them to do on the clean energy front. Take a listen.

We are still encouraging them to keep production up. They have been, they have exercised capital discipline, as they say, although they have been doing an awful lot of shareholder buybacks, the majors have. And we would love to see some of that be invested in taking advantage of diversifying their energy portfolio. She pointed to European majors like, that have diversified beyond hydrocarbons and said that U.S. companies need to do the same. They have the capital, the knowledge, and the skill set so they need to, and they can play a key

role in the energy transition. She pointed to the IRA as a catalyst calling those incentives irresistible, and she said that she hopes it will, quote, provide the impetus for them to pursue a clean energy strategy. President Biden, meeting with the President of the European Commission. People down there focused on that, PIPA? Yeah, it's a huge topic of conversation and, you know, tensions have been rising ahead of that meeting tomorrow around some of those provisions in the IRA. More specifically on the measures that call for use of domestic content, which European

officials say will come at their expense. But Secretary Granholm told me that she thinks that the administration is working to avoid an all-out trade war, but she said that part of the conversation is bringing some of those supply chains back to the U.S. And she said that other nations are simply jealous of the IRA, but that it's not an either-or scenario. She said that other nations should implement similar legislation and that really it should be a race to the top. Pippa Stevens, thank you so much. Credit Suisse delaying filing its annual report after a last-minute call from the SEC.

Let's bring in CNBC.com banking reporter Hugh Sun. The equity, Hugh, is trading, I think, under $3 at this point. Yeah, you know, it's never a good sign when you can't do very basic things. like file your 10K. And certainly that's the case here. And it has more to do with things that are historical in nature. You know, in their statement, they said this has to do with certain accounting measures that they did, you know, which are potentially incorrect for 2019 and 2020.

So, you know, they're saying there's nothing wrong with their 22 figures. However, they need to go back to the drawing board to actually release an acceptable 10K filing. And that's going to take some time. And certainly that hasn't done the stock any favors, Kelly. Well, and elsewhere, I mean, it's sort of the least scathed bank today. Hugh, what are you hearing about what's happening at Silicon Valley Bank? And the fact that we're seeing banks with a lot of these losses from Fed rate hikes across their portfolios of treasuries and mortgage-backed securities. Yes, Silicon Valley Bank down as unastonishing 55 percent, the last I looked.

You know, there is a lot of pressure. And take a step back. What I see happening is essentially, you know, the banks with the most. exposure to the fraudiest asset classes of the pandemic, that would be startups and crypto, are under the most pressure. So you saw that, obviously, earlier with Silvergate saying that they were basically throwing in the towel, their winding down operations. And in this case, Silicon Valley Bank is under pressure because, you know, their main source of funding here is the VC community. Obviously, they're burning cash. They're sucking up their reserves,

causing a hole in the balance sheet of Silicon Valley Bank and essentially forcing them to sell assets they would prefer not to sell because they're underwater. They're bonds that have decreased in value as the Fed has increased rates. And so this is increasing pressure on Silicon Valley Bank and a few other names that are highly levered, the things that are now suddenly out of favor, Kelly. Also news affecting J.P. Morgan Chase,

Jess Staley, a banker who worked there with apparently some ties to, Jeffrey Epstein. What's the brief thumbnail on that and how much tarnish is going to attend to J.P. Morgan Chase or its CEO, Jamie Diamond. It's hard to say. Certainly, you know, this marks a turn in their case in which for a while they were actually defending Jess Staley, who is their private banking chief, head of it, investment banking, and head of wealth and asset management for a while. So he was a long tenured, multi-decade JPMorgan executive. And certainly, you know, it looks like that they've suddenly decided to turn and basically,

you know, say that he was actually the nexus of problems, that he should have escalated, you know, the reality of his relationship with Epstein earlier. And as a result, that he is exposed to all of the financial downside of this. Absolutely. And that's also including up to $80 million in financial clawbacks on comp. Absolutely. Hugh, thank you so much. Our Hugh's son. We appreciate it. Got the Dow down about 400 points as we hand it over. Thanks for watching, Power Line.