| Biden eyes tax hike, a big week for central banks and AstraZeneca vaccine woes. Paying President Joe Biden is planning the first major federal tax hike since 1993 to help pay for a long-term economic program, according to people familiar with the matter. Among the moves proposed are raising the corporate tax rate to 28%, increasing income tax on high earners and a possible hike in capital-gains tax. No date has been set yet for an announcement of the plan, though the White House said it would follow the signing of the Covid-19 relief bill. Fed and friends With investors pricing in a strong economic recovery and Treasury yields rising, this week's Fed meeting will be closely watched for any hints of an earlier-than-forecast rate increase. Economists surveyed by Bloomberg see two quarter-point hikes in 2023, while also expecting that the updated dot plot published on Wednesday will not indicate a policy change that year. As well as the Fed this week, investors have the Bank of England on Thursday and the Bank of Japan on Friday. Following last week's promise to increase the pace of bond purchases, ECB Governing Council member Martins Kazaks warned that higher yields won't always spur a similar move. Vaccine limit The Netherlands joined a list of about 12 places that have moved to suspend use of AstraZeneca's vaccine over concerns about possible side effects. The company defended its shot saying in a statement yesterday that 17 million doses have been administered in the U.K. and Europe, with no evidence of an increase in blood clots. Overall, the latest pandemic data paints a mixed picture. While the U.S. continues to make strong progress on its vaccination program and is seeing deaths and infections drop, on a global scale the number of new cases rose for a third week. Markets riseStrong data from China and continued optimism over the progress of the economic recovery is seeing global stocks continue their move higher. Overnight the MSCI Asia Pacific Index was broadly unchanged while Japan's Topix index closed with a 0.9% gain. In Europe, the Stoxx 600 Index had added 0.5% by 5:50 a.m. Eastern Time with travel stocks the best performers. S&P 500 futures pointed to a small gain at the open, the 10-year Treasury yield was at 1.616%, oil held close to $66 a barrel and gold rose slightly. Coming up... U.S. Empire manufacturing for March is at 8:30 a.m. January total net TIC flows data is released at 4:00 p.m. President Biden will hold an event to discuss the implementation of his stimulus plan. Secretary of State Antony Blinken travels to Japan today for talks as the U.S. seeks to counter security threats in the region from China. The World Health Organization may release a report on the origins of the coronavirus. What we've been readingThis is what's caught our eye over the weekend. And finally, here's what Joe's interested in this morningLast week President Biden signed the $1.9 trillion stimulus into law, and there's a lot of talk about whether this represents some major turning point in policy, economics, and markets. On our latest podcast, Tracy Alloway and I talked to Skanda Amarnath of Employ America and Mike Konczal of the Roosevelt Institute (and the author of a new book) about whether we're at the end of this 40-year Volcker trend of monetary policy dominance, lower and lower inflation and persistently lower interest rates.  If you zoom out and look at a chart of 30-year bond yields you see that it undulates, but each cyclical high is lower than the previous one. And it seems very plausible that this time will be the same. We get our stimulus and our growth spurt in 2021 and 2022, and then we resume the descent. Maybe the Fed starts to tighten again before inflation can gather steam. Maybe the government retrenches on spending after the next midterms. Who knows.
But it's at least possible that things change this time, and partly it revolves around the political ramifications of this stimulus deal. As Skanda laid it out in our chat, if it "works" (i.e. leads to a broad-based revival of the economy) and people like it and politicians get credit for voting for it, then you could have a feedback loop where politicians feel an inclination to do more. Maybe they feel comfortable going bigger on stimulus. Maybe we get some kind of domestic industrial policy. Maybe we get some kind of automatic stabilizers or a sustained redistribution of wealth towards lower income households with a higher propensity to spend. Of course, if people are unsatisfied with the next year or so, we could get the opposite -- go back towards lower spending, and a resumption of the pre-pandemic approach to macro.
This is the key question to watch and it's interesting that at least so far, the public overwhelmingly, per CBS, thinks this bill will help the working class, a sign perhaps that politicians will be buoyed by its passage, thus making them want to do more. Check out our episode on iTunes here. Joe Weisenthal is an editor at Bloomberg. Something new we think you'd like: We're launching a newsletter about the future of cars, written by Bloomberg reporters around the world. Be one of the first to sign up to get it in your inbox soon. | 
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