SALT Is on the Table

You probably know that the Freedom Caucus can (and often does) blackmail the House speaker. One of the downsides of that is that it shows everyone else that blackmail works. Now, the few remaining moderate House Republicans have picked up the scent. There aren't a lot of them, but in a House that is temporarily 217-215, it takes only one moderate to sink a bill. It's tough work, but someone has to do it, and it appears that Rep. Mike Lawler (R-NY) has appointed himself to do the job.

Lawler's issue is the limit on the deduction for SALT (State And Local Taxes). Prior to Trump v1.0, federal taxpayers could deduct the full amount of money they paid to state and local governments under the theory that money should not be taxed twice. The 2017 tax cut bill limited that deduction to $10,000 for two reasons. First, it raised some money to pay for the tax cuts to millionaires and corporations. Second, it sent (most of) the bill to well-off people in blue states with high taxes. From Trump's point of view, taxing affluent highly educated suburban voters, who lean Democratic these days, to pay for his tax cuts for millionaires was delicious and irresistible.

The problem for him now is that some of those taxpayers have made it clear to their representatives that they want the cap lifted in the new tax bill, and woe be to any representative who votes for a bill that doesn't lift the cap. Lawler represents Rockland and Putnam counties, which have median household incomes of $104,000 and $83,000, respectively, well above the national average of $71,000. His constituents expect him to deliver. Same is true for other Republicans elsewhere in well-off districts in New York and California.

Trump is not going to give in to Lawler. First, lifting the cap will increase the deficit, which will cause the deficit hawks to swoop in and block the bill. Second, the President-elect just loves punishing his "enemies," and doing it financially to large numbers of them at once is too good to give up. Opposition to lifting the SALT cap from the deficit hawks is already clear. Rep. Chip Roy (R-TX) has said lifting the cap will make deficit reduction much harder and reducing the deficit is his priority.

But Lawler isn't going to give up and Trump needs his vote. Also, Lawler is thinking about running for governor in 2026 and getting the SALT cap lifted would be a huge boost for him. It will be a clash of two very determined people, with opposite agendas. Lawler knows very well that if Trump refuses to budge, he can vote against the bill and kill it. In that case, the 2017 law will expire and the SALT cap will vanish and we get the status quo ante. If that happens, Lawler's constituents will consider him a hero. This puts Trump in a bind: Refuse to lift the cap and be done in by Lawler and the moderates or get rid of it and be done in by Roy and the deficit hawks. This Republican vs. Republican warfare is not something Trump is used to and trying to blame it on the Democrats is not likely to impress the voters since Republicans have the trifecta.

Lawler and other SALTy Republicans met with Trump at Mar-a-Lago over the weekend to discuss matters. No deal was announced, but after the meeting Trump did tell House Republicans to come up with a fair number. This suggests that Trump is open to raising the $10K cutoff to some higher number but not to infinity. Finding a number acceptable to Lawler and the moderates and also to Roy and the conservatives could be quite a task since a lot of money is involved here. This topic may actually test Trump's claim that he is a great dealmaker. (V)

Bannon Is at War With Musk

Steve Bannon is ramping up attacks on Elon Musk, who is the poster boy for the elites Bannon hates with a passion. The H-1B skirmish was only the beginning. Bannon is clearly intending to use his influence and audience to cut Musk down to size. He gave an interview with the Italian newspaper Corriere Della Sera recently. Here is a Google translation of the first thing he told the paper:

I will get Elon Musk kicked out by the time he gets inaugurated. He will not have a blue pass with full access to the White House. He will be like everyone else. He is a truly evil person. Stopping him has become a personal issue for me. Before, since he put up so much money, I was ready to tolerate it. Not anymore.

Even if Google translate didn't get it perfectly, the gist is pretty clear. Even for a non-Italian speaker, "È una persona davvero malvagia" makes the point.

Bannon later said: "Why do we have South Africans, the most racist people on earth, white South Africans... making any comments at all on what goes on in the United States?" He also said that Musk wants to implement techno-feudalism on a global scale.

If Bannon is genuinely set on having Donald Trump ditch Musk, it will set up a battle of the titans. Bannon is a multimillionaire, but not on Musk's scale, of course. But Bannon has access to Trump's base via his podcast and has the ability to label Musk as one of the elites that Trump was hired to get rid of. He has the power to turn Trump's base against Musk.

So far, Trump hasn't had to choose between Musk (whose actual usefulness is over now that he is not needed for campaign donations) and Bannon (who has a lot of influence with the base). If Bannon keeps up his attacks and calls for Musk to be kicked out of the DOGE pen, Musk will probably fight back. He is not one to let this sort of stuff slide. That battle could end up forcing Trump to go with one or the other. Dumping either one could have serious consequences for Trump, but if the attacks get louder, he might soon have to choose and disown one of the two, consequences be damned. (V)

National Energy Council Is in Disarray--Even before It Is Launched

Those people who expected chaos in Trump v2.0 are probably not going to be surprised, at least if some initial signs are any indication (e.g., see above for example 1). Now on to example 2. One of Donald Trump's pet projects is a National Energy Council, to be chaired by Doug Burgum (R-ND), the outgoing governor of a state that produces a lot of oil. Burgum has also been designated as Secretary of the Interior, where he will play a big role in deciding whether to drill for oil in National Parks and other federal land.

But even before the NEC has fired up, it is in trouble. To start with, the acronym NEC has already been claimed by the National Economic Council. Next, neither Burgum nor anyone else knows what the Council's mission, authority, budget, or staff will be. Trump has said it will report to Stephen Miller, who has no knowledge of, or interest in, energy. He is focused like a laser on immigration. Turf wars are expected, since in the past, that other NEC, as well as the NSC, played a big role in energy policy. Are they going to give up their power lightly? Don't count on it.

Even Burgum's role is in doubt. Trump's nominee for Secretary of Energy is Chris Wright, a climate-change denier who is CEO of the second largest fracking company in America. Unlike his predecessor in Trump v1.0, Rick Perry, Wright knows that the Dept. of Energy doesn't have much to say about energy (its major mission is storing America's nuclear weapons). As someone with a background in actual energy production, he is envious of Burgum. Trump could make him co-chair, but that would rankle Burgum, a billionaire who was promised the whole job, not half the job.

In short, Trump thought of something—a national energy council—but didn't think it out carefully and as a result it could very well fall flat and upset a lot of people, including one or two of his cabinet appointees. This could well be prelude to more chaos in the future as Trump tends to do things on a whim without thinking them out well. Then he leaves others to clean up the mess (and to take the blame). (V)

Republican Lawmakers Are Afraid Trump Will Throw Them under the Bus

While we are on the subject of Donald Trump changing his mind on a whim (and then passing the buck with any fallout), he did it regularly in Trump v1.0, on many topics, including immigration, entitlement programs, health care, LGBT rights, and more. He trashed bills that he asked for and attacked representatives who voted for them. More recently, he has flip-flopped on the TikTok ban, marijuana, vaping, crypto, and SALT.

All of this has put members of Congress in a bind. If he announces a plan and they go public saying how wise and brilliant the plan is, he could change his mind in a flash and then throw them under the bus for supporting yesterday's plan, which he changed because the last person he talked to didn't like it. One senior Republican said: "The puppies who've not been around him are in a state of glow; the senior members are in intestinal knots, waiting to see what happens. Because you don't know what he's going to do." On the other hand, incoming Press Secretary Karoline Leavitt knows exactly what he will do: "He wants to ensure all of these policies that help all Americans are done as quickly as possible to undo all of the damage from the last 4 years." Right. That should give all the members of Congress clear guidance on what to do.

The consequence of all this is that the puppies will jump up and down and wag their tails every time Trump announces something. The old folks will keep quiet and wait to see how things develop. After the puppies have experienced how Trump actually operates, they may become more cautious, as well. The trouble with this approach is that on controversial issues, it is necessary to get the public behind Trump's plans and if many members of the House and Senate adopt a wait-and-see attitude toward everything, it may be difficult to build a groundswell in favor of whatever it is that Trump wants. (V)

Jack Smith Resigns to Deny Trump the Pleasure of Firing Him

It wasn't exactly news, since Jack Smith had already announced that he was going to resign from the Department of Justice before Jan. 20, but he resigned on Friday. Still, it was newsworthy enough to make the news as far away as Ukraine. He was hoping to go out in a blaze of glory with Trump in prison. Instead he went out in a footnote to his final filing saying that he was separated from the DoJ on January 10.

It wasn't for lack of trying. Smith gave it his all. He did everything by the books, which slowed down the process of handling his two cases, one about the coup attempt in D.C. and one about the stolen documents in convicted felon Donald Trump's bathroom in Florida. He had ironclad evidence of lawbreaking in both cases, but ran into bad luck in both of them. In the coup attempt case, the Supreme Court ruled that a president is kind of like a king and can't be prosecuted for doing things related to his job. In itself, that might not have killed the case, but it certainly slowed it down. If Kamala Harris had won the election, Smith would have just plodded along and probably gotten a conviction, however long it took. In the documents case, Judge Aileen Cannon just decided on her own that the special prosecutor law is unconstitutional, even though no other judge thought so in the 50 years it has been around. Smith was unlucky to have drawn a Trump-appointed judge who decided on day 1 to do everything she could to help Trump in the hopes he would later promote her.

Now the tables are turned and Trump might well ask his new AG-designate, Pam Bondi, to prosecute Smith. That could be interesting in itself. Bondi acts like a big Trump fan, but she was also attorney general of Florida and knows the rules. Will she be willing to do something that she knows is unethical and possibly illegal (i.e., indict someone she knows very well has not committed any crime)? As a general rule, the DoJ does not like to bring cases unless it thinks there is a greater than 95% chance of getting a conviction from a jury. She might try to stall by saying she is working hard to collect evidence so she can get a conviction and keep Trump on the line for years until he forgets about the whole thing. If she does bring a case, that would be an opportunity for Smith to display all the evidence he has against Trump to show that he was following the law because there was solid evidence of crimes Trump committed. That might not work out well for Trump, but he never thinks things through. (V)

The Washington Post Gives Endorsements/Disendorsements to Trump Appointees

The Washington Post took a lot of flak for refusing to endorse in the presidential race because owner Jeff Bezos thought it would hurt his businesses. The Post lost 300,000 subscribers (about 12%) as a result. Nevertheless, it was willing to take a stand on which cabinet and cabinet-level appointees should be confirmed and should not be. Donald Trump is not likely to be pleased that the Post is arguing that some of his choices are awful.

The Post wrote that most of Trump's nominees are acceptable. After all, a president is generally allowed to assemble his own administration unless the nominees are truly unfit for office. All but two nominees for the actual cabinet got a thumbs up symbol. The two who got thumbs down are Pete Hegseth (Defense) and Robert Kennedy Jr. (HHS).

About Hegseth, the Post wrote: "The former Fox News anchor lacks the temperament and moral fiber required to lead the Pentagon. He persuaded Trump to pardon accused war criminals and has a well-documented history of womanizing and heavy drinking, though he says he'll give up the bottle if he gets one of the most sensitive and powerful jobs in the world."

About Kennedy, it wrote: "With bird flu on the rise, now is not the time to put an anti-vax conspiracy theorist in charge of public health." Short and sweet. But even if bird flu were not on the rise, measles and polio could soon be the killers they once were before vaccinations halted them in their tracks.

The recommendations for two of the others are pretty weak, though. For Linda McMahon as Secretary of Education, it wrote: "The other co-chair of the president-elect's transition team led the Small Business Administration during Trump's first term." Her qualification for leading the SBA was reasonably legitimate: She and her husband Vince McMahon ran a small business (WWE) and turned it into a medium-size business. She understands business. But what in her past says she knows anything about education, other than the fact that she once went to a school?

The recommendation for Kristi Noem (Homeland Security) reads: "Dog jokes aside, she has served in Congress and two terms as governor of South Dakota." OK, she is an experienced politician and has run a small state bureaucracy. Homeland Security is a sprawling enterprise, including the Coast Guard, Customs and Border Protection, FEMA, the Secret Service, Immigration and Customs Enforcement, the TSA, and many more agencies. Other than some time helping on the family hunting lodge, the former South Dakota Snow Queen has been in politics her whole life and has no experience in anything even vaguely related to law enforcement. Maybe a good friend put in a word for her.

Now on to cabinet-level officials. Again, all but two get a thumbs up. The first one labeled unacceptable is Russell Vought at OMB. His writeup says: "The Project 2025 contributor plans to violate federal law by ignoring the Impoundment Control Act and not spend money appropriated by Congress. When he had this same job during Trump's first term, he played a key role in holding up funding to Ukraine and then defied a congressional subpoena about it."

The other reject is Tulsi Gabbard as DNI. Her writeup: "The former congresswoman from Hawaii is overly friendly with U.S. enemies and cannot be trusted to be an honest broker when the president makes major national security decisions." Not mentioned is that many people think that she is either an actual Russian asset or, at very least, a useful idiot.

A number of the nominees are way in over their ears or are actively hostile to the mission of the agencies they are to run (e.g., Lee Zeldin at EPA), but if that is what the president wants, he is entitled to it. (V)

House Maps Got Even Better for the Republicans--without Gerrymandering Them

In 2020, in every state where one party held the trifecta and the law allowed the legislature to draw the maps, the legislature drew a gerrymandered map. When doing the gerrymandering, the mapmakers had to decide how aggressive to be. If they made the districts they hoped to win safe, say a 57-43 split in each of "theirs," then they got X districts. If they wanted to be even safer, and make "their" districts 60-40, then they got X - 1 of them. If they were willing to take more risks and make "their" districts 55-45, then they got X + 1 of them, and so on. It was their choice about how aggressive they wanted to be.

The implicit assumption behind gerrymandering is that people will continue to vote the way they did in the recent past. If the mapmakers found a bunch of counties near each other that have been 55-45 recently, they assumed they would continue to be 55-45 the same way and used that information to draw the maps.

The 2024 election upended some of that. Black, Latino, and young voters voted for Trump in larger numbers in 2024 than they did in 2020 or 2016, so some of the assumptions underlying the maps are no longer true. Adam Kincaid, the executive director of the National Republican Redistricting Trust, the GOP's mapmaking expertise center, after the election said: "The battleground map is expanding in favor of Republicans, not in favor of Democrats." His analysis showed that after the election, only three Republican representatives are sitting in districts that Kamala Harris won. Before the election, there were 18 Republicans in districts that Joe Biden won in 2020. This will make it more difficult for Democrats to take back the House in 2026, despite the normal anti-incumbent wave in the midterms.

In contrast, there are now 13 Democrats representing districts Donald Trump won vs. only five before the election. So, the Democrats have fewer easy pickups awaiting them and more places where they have to play defense. In addition, there are a number of districts that were safe for the Democrats that have become competitive.

In an interview, Kincaid also said that the past election has expanded the Republicans' map in multiple ways on account of the Black and Latino voters being more open to voting Republican. He noted that in some places, the change was dramatic. In 4 years, NJ-09 went from Biden +19 to Trump +1. He said that realignments go slow at first and then very quickly. Another interesting district is CA-25, a working-class and heavily Latino district. It went from Biden +15 to Harris +2. There are more.

Democrats think that 2024 was a blip, due to young men voting for the macho Trump over the Black woman and all will be well in 2026 and 2028 when neither Trump nor Harris will be on the ballot. Kincaid thinks the change is more fundamental and won't go away so easily. Of course, how Trump's administration unfolds and how chaotic it is could matter. Trump doesn't understand any of the dynamics involved in the maps, but he does know certain things. For example, if his tax policies give billionaires like Elon Musk a $50 million a year tax cut and give the average worker a $100/mo tax cut, they will cheer him. Democrats think that they ought to be wildly against this because the distribution was so unequal. But Trump understands that voters really like the extra $100 and don't care that under the Democrats, everyone, rich and poor, might have gotten $200/mo. What they know is that Trump gave them an extra $100/mo and they really like that. Of course, other things that Trump does may horrify people who voted for him, but that remains to be seen.

The real question here is whether the underlying PVIs of the districts have changed or whether 2024 was a one-off event due to marginal voters coming out for Trump. NJ-09, for example, has a Cook PVI of D+8. In 2026, with Trump not on the ballot, will it revert to that and elect a Democrat as expected? No one knows. (V)

Supreme Court May Uphold the Ban on TikTok

Congress passed a law, with bipartisan support, saying that if ByteDance, the Chinese company that owns TikTok, doesn't sell it to an American company, it will be phased out in the U.S. Naturally, ByteDance sued. On Friday, the Supreme Court held oral hearings on the case. ByteDance argued that its First Amendment rights were violated by the law. The justices were skeptical. Amy Coney Barrett said that the law doesn't require TikTok to be shut down, only sold to an American company. Elena Kagan said that the law targets a foreign corporation and foreign corporations do not have any First Amendment rights. John Roberts said that Congress isn't banning any particular kind of speech on TikTok. The site can host any content it wants to, so the First Amendment isn't in play here. Ketanji Brown Jackson said that Congress is not preventing TikTok from saying what it wants to. It is objecting to the ownership structure.

You can never really tell how the justices will vote based on their questions, but there was a lot of concern about ByteDance being ordered to hand over all its data on Americans to the Chinese government, which then could potentially blackmail some Americans that they want to control.

TikTok's lawyers argued that TikTok was being singled out for no good reason. Other Chinese companies, like Temu, also collect data about millions of Americans and there are no laws ordering them to do anything. The lawyers also argued that TikTok was so expensive that no American company could afford to buy it. However, it doesn't appear that the justices were impressed.

The law takes effect on Jan. 19, and it is likely the Court will issue an opinion on or before that date. Suppose it rules that the law is constitutional. Then what? Within minutes of the ruling, the TikTok app will permanently disappear from the Apple and Google app stores. No new downloads and no updates. Also, the telecom companies will be required to block the website. The app will continue to function initially. However, since it won't be upgraded anymore, as new versions of iOS and Android come out, the app won't be updated to work with them and it could happen that some change to one or both of the operating systems make it not work at all.

If that actually happens, ByteDance might finally consider selling to a U.S. company—and probably for a price much lower than it wants. At that point, its choices are just let it waste away and die off or get some money by selling. In the past, Walmart, Microsoft and Oracle have expressed potential interest in buying it. If they end up being the only bidders, TikTok would have to simply accept the highest bid, even if it were lower than what they think it is worth. The bidders know this, too, which could affect how much they bid.

One potential buyer is a consortium led by billionaire Frank McCourt, the former owner of the Los Angeles Dodgers. He is putting together a collection of private equity investors, millionaires, and billionaires, and is talking about making a $20 billion bid, without the algorithm that decides what content a user should be shown. What makes the company valuable, though, is not the algorithm, but the established user base. If McCourt or any of the American companies were to buy TikTok without the algorithm, they could hire a team of software engineers, psychologists and interface designers to make a new algorithm. It might not be as good as ByteDance's at first, but it would improve over time. As long as the users didn't give up en masse and go elsewhere, the company would still be valuable.

Could Donald Trump play a role here? Maybe. The law says the president can extend the deadline by up to 90 days if there has been progress on a sale. On Jan. 20, Trump could say to ByteDance: "How much is it worth to you for me to give you another 90 days?" Depending on what they were willing to pay him, he might or might not give the app a 90-day reprieve. Also, Oracle's cofounder, billionaire Larry Ellison, is a longtime Trump supporter. Ellison is not shy about anything, and is surely not shy about giving Trump advice on how to proceed here.

Another factor is the Chinese government. It has said that if the sale includes the algorithm that shovels content at users, it would block the sale. It is not clear to us that the algorithm is so central here. Again, we think that getting the existing user base of 170 million Americans is the biggie. (V)

Giuliani Breaks Record: Held in Contempt in Two Jurisdictions in One Week

Never before has a former mayor of a major city been held in contempt of court in two separate jurisdictions in the same week. But Rudy Giuliani managed to pull it off last week. Pretty impressive.

Last Monday, Judge Lewis Liman in New York held Giuliani in contempt of court for failing to turn over information about his assets so that the two Georgia election workers he defamed, Ruby Freeman and Shaye Moss, could start collecting the $148 million he owes them. He doesn't have $148 million, but he does own a condo in Manhattan and one in Palm Beach, FL, whose combined worth is about $11 million, minus whatever it might cost to fumigate them to get rid of the stench of having once been owned by Rudy Giuliani.

On Friday, Judge Beryl Howell in D.C. held Giuliani in contempt of court for continuing to lie about the two women. Some people never learn. Before the hearing, Giuliani called Howell "bloodthirsty" and the proceeding against him a waste of time. After the hearing he said: "She didn't consider a damn thing I said. She wrote it beforehand."

Either or both judges could put Giuliani in prison, but so far neither has indicated that is in the immediate future. Still, both judges are clearly angry with Giuliani's disrespect for the court, the judge, law, and the jury's verdict. Their patience may be wearing thin.

This week won't be much better for the former mayor. On Thursday, Giuliani is due back in Liman's courtroom for a hearing about where he lives. For most people (other than the late senator John McCain) it is obvious where you live. For Giuliani it is not so obvious. He claims to live in Palm Beach, FL, but in reality he is rarely seen there. If the judge rules that he lives in his Manhattan condo, then the Florida condo is just another asset and the women can seize and sell it. If the judge rules that he lives in Florida, it is protected from seizure by the Florida Homestead Act. The lawyers for the women have demanded that Giuliani produce a list of every doctor he has seen in the past 4 years to see if they are in New York or in Florida. He has refused to produce the list. The judge is free to interpret this refusal as he wishes.

Also at issue is who owns the New York Yankees World Series rings that Giuliani was given when he was mayor of New York. He claims that he gave them to his son in 2018 so they are no longer his property and can't be seized. The judge will probably take note of the fact that during Giuliani's bankruptcy proceeding in 2023, Giuliani listed the rings among his property. While Donald Trump has managed to avoid any consequences of his many indictments, Giuliani may not be so lucky. In addition to this civil case, which has the potential to actually bankrupt him, he has been indicted in Arizona and Georgia for his role in the 2020 fake electors' scheme. Oh, and his previous lawyers have sued him for nonpayment of their bills. (V)

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