DealBook Briefing: 2020 Democrats Are Split Over How to Reboot the Economy

June 27, 2019

Good Thursday morning. Breaking: China reportedly plans to give the U.S. a set of preconditions for a trade deal, according to the WSJ. More on that below. (Was this email forwarded to you? Sign up here.)

Jim Watson/Agence France-Presse — Getty Images

2020 Democrats couldn’t agree on how to overhaul the economy

The Democratic presidential contenders who participated in last night’s debate agreed that President Trump’s economic policies were hurting America. But they differed — sometimes sharply — on how to fix it.

• Senator Elizabeth Warren wants the government to clamp down on oil and pharmaceutical companies, and to replace private health insurance with single-payer care.

• Senator Amy Klobuchar expressed doubts about liberal policies like single-payer health care and instead called for modest alternatives such as an optional government-backed health insurance plan.

• Senator Cory Booker said that he felt strongly about “the need to check corporate consolidation,” but stopped short of endorsing Ms. Warren’s call to break up tech giants like Facebook and Google.

• Beto O’Rourke struggled to respond to a question about how high he would raise the marginal tax rate for the wealthy, saying only, “I would support a tax rate and a tax code that is fair to everyone.”

• Representative John Delaney suggested that enacting Medicare-for-all could bankrupt hospitals across the country.

The main economic takeaway is that, according to the candidates, America needs to move leftward on fiscal policies. But they can’t agree on whether proposals like Medicare-for-all are the answer.

Mr. Trump’s campaign responded by arguing that Democrats were proposing “a radical government takeover of American society that would demolish the American Dream so many are gaining access to under the growing Trump economy.”

We’ll hear more from 10 other Democratic contenders — including Joe Biden, Senators Bernie Sanders and Kamala Harris, and Mayor Pete Buttigieg of South Bend, Ind. — tonight at 9 p.m. Eastern.

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Today’s DealBook Briefing was written by Andrew Ross Sorkin in New York, and Michael J. de la Merced and Jamie Condliffe in London.

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Chip Somodevilla/Getty Images

Trump refuses to rule out more tariffs on China

Days ahead of a pivotal meeting with President Xi Jinping of China at the Group of 20 summit meeting in Japan — a potential make-or-break moment in negotiations for a trade deal — President Trump played down the importance of reaching an agreement.

“My Plan B is maybe my Plan A,” the president said in an interview with Fox Business yesterday. “My Plan B is that if we don’t make a deal, I will tariff and maybe not at 25 percent, but maybe at 10 percent, but I will tariff the rest of the $600 billion that we’re talking about.”

He also defended his use of levies, Ana Swanson and Adam Satariano of the NYT write. He argued that they had forced Mexico to capitulate on a deal on immigration and had prompted companies to desert China, at great cost to the Chinese economy.

A deal with China was “90 percent” done before talks collapsed, Mr. Trump said. But he insisted that the U.S. won’t back down from key demands, and still wants provisions like protections for American intellectual property and for China to open its market to foreign companies.

Negotiations are being restarted. “Mr. Trump hosted a call with Mr. Xi last week, while Treasury Secretary Steven Mnuchin and Robert Lighthizer, the top trade negotiator, spoke to their counterpart, Liu He, China’s vice premier, on Monday,” the NYT reports.

But China may play hardball. Mr. Xi reportedly plans to issue a set of preconditions that the U.S. must meet before Beijing would sign a deal, the WSJ reports, citing unnamed sources. They include calling off the Huawei ban, lifting all punitive tariffs and dropping demands that China buy yet more U.S. exports.

So now a lot rests on that G-20 meeting. It’s “widely viewed as a last-ditch effort to get negotiations back on track,” the WSJ writes, adding that “people close to the talks both in and out of the White House are cautioning against overly optimistic expectations for the meeting.”

More: American tariffs on Chinese goods are being dodged as goods are shipped through other Asian countries, particularly Vietnam. And the ideological fight between Washington and Beijing could last for a long time.

737 Max jets parked at a Boeing facility in Seattle. David Ryder/Getty Images

A new bug could keep the 737 Max grounded

The F.A.A. said yesterday that it had found another flaw in the jet, and that Boeing must fix it before the airplane can return to service, Natalie Kitroeff and Tiffany Hsu of the NYT report.

Pilots tested erroneous activations of the anti-stall software that’s thought to be the cause of two fatal crashes over the past year, unnamed sources told the NYT. The software pushes down the plane’s nose.

A test pilot couldn’t quickly and easily follow Boeing’s instructions for regaining control of the plane, and rated the failure as catastrophic. The situation tested was unlikely to happen during a typical flight, but the F.A.A. wants it fixed anyway.

The problem is linked to a specific flight-control computer chip, the sources told the NYT. It created delays for the pilot in executing an important step for stabilizing the jet.

“The discovery may erode confidence in Boeing’s assertions, in conversations with regulators, airlines and aviation unions, that well-trained pilots can easily handle a software malfunction based on their understanding of standard emergency procedures,” Ms. Kitroeff and Ms. Hsu write.

More: Boeing won’t rename the 737 Max.

Trump continues attacks on Jay Powell

President Trump wasn’t happy when the Fed didn’t lower interest rates last week, even though the central bank hinted it would do so later this year. And he won’t let the issue go.

“Here’s a guy, nobody ever heard of him before, and now I made him and he wants to show how tough he is?” Mr. Trump said of Jay Powell, the Fed chairman, yesterday. “He’s not doing a good job.”

The timing is, shall we say, odd. Mr. Powell himself suggested on Tuesday that the Fed could lower interest rates if economic conditions worsen — in part because of Mr. Trump’s trade wars.

The president apparently would rather have Mario Draghi, the president of the European Central Bank, in charge. “We should have Draghi, instead of our Fed person,” he said, just days after he criticized Mr. Draghi for trying to prop up the European economy.

And Mr. Trump again discussed replacing Mr. Powell. “I have the right to demote him, I have the right to fire him,” he said, before adding, “I never suggested that I was going to do that.” (The law appears clear that Mr. Powell can’t be fired, but it’s unclear whether he could be demoted.)

Mark Zuckerberg in April Tony Avelar/Associated Press

Mark Zuckerberg wants Washington to do more

At the Aspen Ideas Festival in Colorado yesterday, the Facebook C.E.O. conceded that his company continued to make mistakes — but also said that the government was acting too slowly in its efforts to fix some of the internet’s biggest problems.

Facebook erred in its handling of the fake Nancy Pelosi video, he said. That “was an execution mistake on our side,” he said. “It took a while for our systems to flag that and for fact-checkers to rate it as false.”

The U.S. government hasn’t done enough to limit the effects of issues like election interference, he said. Of Russia’s misinformation campaign in 2016, he said that “the signal that was sent to the world was that ‘O.K. We’re open for business.’ ” The Facebook chief added, “Countries can try to do this stuff and our companies will try their best to try to limit it, but fundamentally, there isn’t going to be a major recourse from the American government.”

But he continued to play down his responsibility. “As a private company we don’t have the tools to make the Russian government stop,” he said. “We can defend as best as we can, but our government is the one that has the tools to apply pressure to Russia, not us.”

Aly Song/Reuters

Huawei employees reportedly worked on Chinese military research

The Trump administration is worried that Huawei is a national security threat because of its close ties to the Chinese government. Now, Bloomberg News reports that its employees have collaborated on research projects with Chinese defense staff, hinting at “closer ties to the country’s military than previously acknowledged.”

• “Over the past decade, Huawei workers have teamed with members of various organs of the People’s Liberation Army on at least 10 research endeavors spanning artificial intelligence to radio communications.”

• “They include a joint effort with the investigative branch of the Central Military Commission — the armed forces’ supreme body — to extract and classify emotions in online video comments, and an initiative with the elite National University of Defense Technology to explore ways of collecting and analyzing satellite images and geographical coordinates.”

But Huawei says it didn’t authorize the research. “Huawei is not aware of its employees publishing research papers in their individual capacity,” a spokesman told Bloomberg. “Huawei only develops and produces communications products that conform to civil standards worldwide, and does not customize R&D products for the military.” (It’s worth noting that the research dates back to 2006.)

More: Huawei says that it’s in discussions with Verizon and other U.S. companies over royalty payments for use of its patented technology. It is scouring the globe for new suppliers. And it lost a court case in which it accused a U.S. chip designer of stealing trade secrets.

Revolving door

Carl Icahn is seeking four seats on Occidental Petroleum’s board as he escalates his opposition to the company’s plan to buy Anadarko.

Tina Sharkey reportedly stepped down as the C.E.O. of the household goods maker Brandless in March because of conflicts with the company’s biggest backer, SoftBank’s Vision Fund.

Allies of President Trump are reportedly advocating for the removal of Kevin McAleenan as the acting Homeland Security secretary amid the controversy over migrant detentions.

Bill Wehrum, who helped push through pro-coal rules at the Environmental Protection Agency, will resign as the head of the regulator’s air quality office.

Swiss Re has named Russell Higginbotham as the C.E.O. of its Asian reinsurance arm.

The speed read

Deals

• More than $256 billion worth of drugmaker acquisitions have been announced this year. Investors aren’t happy with all of them. (DealBook)

• President Emmanuel Macron of France said he doesn’t think his government needs to lower its stake in Renault, after the administration scuttled the carmaker’s plans to merge with Fiat Chrysler. (Reuters)

• Private equity firms are rushing to spend $2.5 trillion in capital on deal-making. Relatedly, Blackstone has reportedly raised over $12 billion for its infrastructure fund and Warburg Pincus has raised $4.25 billion for a fund focused on China and Southeast Asia. (FT, Bloomberg, TechCrunch)

• The F.C.C. is investigating Sinclair Broadcasting over disclosures it made to regulators as part of its failed attempt to buy Tribune. (Reuters)

Politics and policy

• The Supreme Court moved to limit the power of federal agencies, but refused to overturn two key precedents, to the consternation of four conservative justices. (NYT)

• The Senate passed a $4.6 billion border-funding bill that placed fewer restrictions on the Trump administration than a House proposal, setting up a clash in Congress. (NYT)

• A Senate panel approved a package of bills aimed at lowering the cost of prescription drugs. (NYT)

• The White House has pitched a new $50 billion investment fund for Palestinian projects as a “hot I.P.O.” Palestinians are largely uninterested. (NYT)

• Mark Carney, the governor of the Bank of England, suggested that he would support an interest-rate cut if Britain leaves the E.U. without a deal. (FT)

Trade

• European governments will try to maintain economic ties with Iran through a credit line meant to encourage trade. (WSJ)

• Foreign investment into Britain has fallen to its lowest level in six years. (FT)

Tech

• Google, the University of Chicago and the University of Chicago Medical Center are being sued over allegations that patient data was shared with the tech company without stripping identifiable date stamps or doctors’ notes. (NYT)

• Reddit restricted access to a pro-Trump forum, saying that its users had violated rules prohibiting content that incites violence. (NYT)

• Would you pay $30 a month to check your email? A company called Superhuman is betting so. (NYT)

• President Trump criticized the E.U.’s antitrust chief, Margrethe Vestager, arguing that her actions against U.S. tech companies show that she “hates” America. (FT)

• Speaking of: The E.U. has ordered Broadcom to halt allegedly anticompetitive practices. (WSJ)

• The N.S.A. is said to have improperly collected call and text message records last year — for a second time. (WSJ)

Best of the rest

• Wayfair workers protested the company’s work with detention facilities for migrant children. Is a customer boycott next? (NYT)

• How hedge funds decide which obscure data companies are worth investing in to help them turn a profit. (Business Insider)

• Carlos Ghosn won’t receive unpaid retirement benefits of 4.44 billion yen, or about $41 million, from Nissan. (Bloomberg)

• The biggest refinery on the U.S. East Coast, which suffered a huge explosion and fire last week, will close down. (Bloomberg)

• Wealthy Americans are asking for higher taxes. Why don’t they just start writing bigger checks to philanthropy instead? (WSJ editorial)

Thanks for reading! We’ll see you tomorrow.

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