Tomorrow, President Trump will give his big speech to Congress. It's not technically a SOTU, even though it could be: the Constitution only states that the President shall "from time to time" inform Congress of the state of the Union, so he could just decide to do one every month if he wanted to. Anyway, a combination of online reading and reporting leads us to believe the following themes will be broached.

The economy

Here's what you can expect.

On tax, the President will tout the effects of the TCJA and call on Congress to renew it, along with his tax cut priorities. It will be interesting to see if they all get a mention or if he pares back his ambitions, for example quieting dropping SALT in line with the House proposal (unlikely, but who knows). Also worth watching out for: whether he will keep insisting to keep tariffs in the reconciliation bill as a pay-for (probably yes).

He will brag about economic investment, such as the recently announced $500 billion by Apple and the "Stargate" AI project and others.

He will talk a strong game about deregulation, mentioning the EO setting out a target of eliminating 10 regulations for every new one, and new NEPA rules streamlining environmental review.

He will, of course, brag about DOGE, including the plan to cut the Federal workforce by 5-10% as well as hiring freezes and reduced attrition. Whether or not he mentions Schedule F by name, he will talk about making it easier to fire civil servants. Expect bragging about forcing Federal employees to return to the office.

Energy

Energy will be a significant part of the speech, under the famous slogan "energy dominance." Here, again, deregulation will be key; the President will brag about fast-tracking fossil fuel projects by revoking Biden-era climate rules, including methane emission limits and clean water standards, opening up Federal lands for exploration and drilling, and streamlining approvals for pipelines, LNG terminals, and offshore drilling, including through "national emergency" authority. He may also talk about nuclear and (holy of holies) small modular reactors and fusion. We'll be watching out for that.

Immigration

Immigration will also, predictably, be a key section of the speech. Deportation numbers have been somewhat underwhelming, so we are wondering if there are announcements there. The contours of the policy on bringing so-called "sanctuary" jurisdictions into line are also vague (in part because they're awaiting judicial review) so we will be looking for clarity on that. And we will be waiting to see whether the "gold card" scheme makes a return.

Policy News You Need To Know

#Shutdown — From Punchbowl: "More than half of senior Hill staffers say their member of Congress believes there will likely be a government shutdown this year […] Survey respondents largely fell along party lines with only 37% of Republicans and 76% of Democrats predicting a shutdown."

#TheEconomy — Fascinating, albeit ominous, article on the job market in The Atlantic; apparently, underneath the positive unemployment numbers, something more serious is happening: the job market is "frozen." Writes journalist Rogé Karma: "two seemingly incompatible things are happening in the job market at the same time. Even as the unemployment rate has hovered around 4 percent for more than three years, the pace of hiring has slowed to levels last seen shortly after the Great Recession, when the unemployment rate was nearly twice as high. The percentage of workers voluntarily quitting their jobs to find new ones, a signal of worker power and confidence, has fallen by a third from its peak in 2021 and 2022 to nearly its lowest level in a decade. The labor market is seemingly locked in place: Employees are staying put, and employers aren’t searching for new ones. And the dynamic appears to be affecting white-collar professions the most." He goes on to cite an economist saying: "I don’t want to say this kind of thing has never happened, but I’ve certainly never seen anything like it in my career as an economist."

#DOGE — Interesting article from Vero de Rugy, who is always worth reading, over at Reason: she certainly agrees with the aims of DOGE, but has questions about how it goes about doing its work.

#Tariffs — Tax Foundation analysis: if they go into effect tomorrow as planned, Trump's tariffs on Mexico and Canada (before retaliation) would raise taxes by nearly $100 billion this year while shrinking US GDP by nearly 0.3% and after-tax incomes by 0.7% on average.

#Tax — One pay-for endorsed by President Trump: ending the so-called carried interest loophole, whereby fund managers (largely venture capital, private equity and hedge fund managers) pay the capital gains rate on their share of the returns on their funds, which is called carried interest. The argument against this is that the carried interest is a fee for a service, like a bonus, and therefore it is labor income and should be taxed as such. Not everyone agrees with this however. Here is Parkview Institute's John Tamny with the opposite case.

#Crypto — We very much appreciated this observation by Bloomberg's Joe Weisenthal, re: the recently-announced crypto reserve, so we'll just quote it at length: "Conceptually, it makes sense for the government to hold "strategic" stockpiles of any asset that: A) It could presumably have a liability in, at some point B) It can't instantly acquire with money. So for example, oil (especially when we didn't produce much here) made sense. Military equipment is like this as well. One could argue that in a war, we have bullet-denominated liabilities. Or tank-denominated liabilities. And you can't acquire bullets or tanks out of thin air with money, due to the time to ramp up production." Makes plenty of sense to have strategic stockpiles of fuel and military matériel. Cryptocurrencies…not so much.

#Chyna #Trade — According to a report in the WSJ, Chinese buyers are circumventing US export controls of Nvidia's AI chips on a massive scale, with revenues from the greater Sinosphere similar to US sales and dwarfing the rest of the world (EU combined).

#Reg #Insurance — Very interesting report from the American Consumer Institute on "the National Association of Insurance Commissioners (NAIC), a U.S. standard-setting and regulatory support insurance organization." These types of Quangos (this is the British term for these semi-public, semi-private organizations which often have significant powers) are often unhealthy. "Today, the NAIC operates as an incorporated tax-exempt nonprofit that is treated, in some ways, as a quasi-governmental body—despite not being a government agency—due to its role in helping set national insurance standards and providing state governments with regulatory guidance," the authors write. Furthermore, strikingly, "unlike most nonprofits, the NAIC is not required to disclose standard information to the IRS," while, at the same time, "it is also not subject to laws like the Administrative Procedure Act, and the Freedom of Information Act that apply to government agencies."

#Cities — Striking quote from the excellent Jeffrey Blehar at NR: "With a record-breaking 6.6 percent approval rating, Mayor Brandon Johnson is now quite possibly the Most Unpopular Man in America."

#Crime #Fentanyl #Border — Apparently, the President's crackdown on Mexican drug cartels is already having an effect. Leaders have gone into hiding and are shutting down fentanyl labs, according to a report in the New York Times.

#TrustTheScience — Not really directly policy-related, but we couldn't help share this study, according to which humor correlates positively with IQ, and that men are funnier than women.

#MAGA — Congressman Brandon Gill, who is very good at social media and publicity, has just introduced a bill to put President Trump's face on the $100 bill.