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Axios Sneak Peek

Happy Father's Day, and welcome to Sneak Peek, our weekly lookahead for both ends of Pennsylvania Avenue. I'd love your tips and feedback: jonathan@axios.com. And please urge your friends and colleagues to join the conversation by signing up for Sneak Peek. See you all week in the Axios STREAM.

1 big thing: debt ceiling, behind the scenes

President Trump is likely to play a much smaller role than previous presidents in the coming debt-ceiling fight.

Marc Short, director of the White House's Office of Legislative Affairs, has told associates his recommendation is that the House and Senate initiate the debt-limit negotiations within their own conferences rather than leaning on Trump to do the heavy lifting. (During the previous debt ceiling crises, Obama aggressively lobbyied Congress both publicly and privately.)

  • The White House theory: Congressional spending habits got America into this mess and the President has enough on his plate and would gain nothing from spending his political capital on this fight.
  • The upshot: Trump will ultimately have to play some role in the debt ceiling debate, but the White House won't have him out there providing cover for congressional leadership to negotiate an unpopular bill.
  • Current status: Nobody agrees on anything. Budget Director Mick Mulvaney wants to use the debt limit bill to cut spending. Treasury Secretary Steven Mnuchin just wants the debt ceiling raised without fuss — to avoid a last-minute standoff in September that could crash markets.

Why this matters: Presidents have traditionally used the weight of the presidency to push Congress to raise the ceiling. Some in Republican leadership circles are frustrated that the White House appears willing to make GOP leadership do the thankless work.

  • Between the lines: Some in the White House believe Republican leadership has already given up on the Freedom Caucus / Mulvaney approach, and concluded the only workable path is to collaborate with Democrats and moderate Republicans. Leadership says it's not close to making such decisions.
  • Click here for three options being kicked around.

2. "Tapes"?

We told you in last Sunday's Sneak Peek you should expect to see a lot more of Jay Sekulow — the man Trump has chosen as his TV lawyer for the Russia probe. Today Sekulow repped POTUS on nearly every Sunday show — Fox, NBC, CBS and CNN.

  • Tantalizing: Sekulow told John Dickerson of CBS's "Face the Nation" he expected Trump to address "in the week ahead" whether he secretly taped his private conversations with former FBI director James Comey.

Several of Sekulow's interviews got testy, especially his exchange with "Fox News Sunday" host Chris Wallace. The two talked over each other, with Sekulow accusing the host of manipulating his words.

Wallace's response:

"Don't tell me what I'm trying to do because you don't know what I'm trying to do. Actually, what I'm trying to get is a straight answer out of you."

The bone of contention: Whether Special Counsel Bob Mueller is investigating Trump. Trump seemed to confirm the investigation when he tweeted: "I am being investigated for firing the FBI Director." But Sekulow said nobody had told Trump he was under investigation, and the President was only responding to the Washington Post story.

Money quote: "The President is not under investigation by the Special counsel," Sekulow told NBC's "Meet the Press" moderator Chuck Todd. "He's not afraid of the investigation. There is no investigation."

3. Huge week for healthcare

Sources close to Mitch McConnell tell me the Majority Leader is dead serious about forcing a Senate vote on the Obamacare repeal-and-replace bill before the July 4 holiday.

Some senators want to delay the vote but McConnell views that as delaying the inevitable. There are no mysteries about what the toughest disagreements are over — Medicaid funding and insurance market regulations.

  • This week is crucial: the Senate won't vote without a CBO score, which means they need to finalize negotiations this week.
  • Behind-the-scenes: McConnell and Senate leaders have been at this for all of May and now first couple weeks of June, turning their weekly lunches into working sessions on various aspects of the healthcare legislation. They've whittled down the stack of items that people don't agree on. I've spoken to a number of people who know McConnell well who speculate that he'll force a vote regardless of whether he knows he has 50 votes. They say he's desperate to move on to tax reform and can't have healthcare hanging around like a bad smell through the summer.

On the House side:

  • Following the White House's "Workforce Development Week," House GOP leadership will vote on two workforce bills. The big one: a bipartisan bill to reauthorize the "Perkins Act" for six years — providing more than $1 billion per year in federal support for career and technical education programs.
  • Wednesday's conference meeting is expected to be more policy-focused than usual. (They had to cancel Friday's meeting due to the fallout from last week's shooting.) A senior House aide tells me the Wednesday conference will focus on the budget caps and appropriations.
  • Paul Ryan and Kevin McCarthy will both address the National Association of Manufacturers. Ryan pushing tax reform and McCarthy on reg reform and workforce development.

4. What Tim Cook will tell Trump

Apple CEO Tim Cook will be at the White House tomorrow for tech meetings organized by Jared Kushner's Office of American Innovation. It's the first of two heavy-hitter meetings in what the White House is calling "Technology Week."

A source tells me Cook, who doesn't belong to any of the President's councils, plans to proactively raise four issues:

  1. Immigration: Cook will participate in the session titled "H-1B/immigration." He's got a long history of arguing for the importance of immigration to the American economy and doesn't agree with the Trump-Bannon-Sessions view that unchecked immigration has been driving down wages and stealing jobs from Americans.
  2. Encryption: Cook will "fly the flag" for strong encryption. This has been a controversial issue within the administration and it remains unsettled. Shortly after the San Bernardino shootings, Trump called for a boycott of Apple products because Cook refused to cooperate with the FBI after it requested that Apple create a special version of its operating software that would have given the government a backdoor into the iPhone used by the terrorists. Cook took a lot of incoming after saying it'd compromise customers' privacy and security. Some argue Cook has been vindicated given subsequent leaks from federal agencies.
  3. Veterans' affairs: How to better serve vets both in the provision of medical care and in hiring policies.
  4. How the administration talks about human rights: Ensuring it remains a priority for the U.S., both domestically and internationally.

Other points on Tech Week:

  • I'm told the White House won't be rolling out any new policies or signing any executive orders related to technology.
  • Tomorrow: Attendees are expected to include Alphabet Chairman Eric Schmidt, Amazon's Jeff Bezos, Microsoft's Satya Nadella, IBM's Ginni Rometty, Oracle's Safra Catz, and venture capitalist John Doerr, among others. Cabinet secretaries will attend and the President will drop by, too.
  • Wednesday: Per a White House official: "We're taking the tech conversation to rural America ... [W]e'll be in Iowa talking about agriculture and technology and showcasing the latest technology that is changing the way farmers produce, harvest, and market food." The event will double as a send-off for Iowa Gov. Terry Branstad, who's heading to China to be the U.S. ambassador.
  • Thursday: Breakout sessions focusing on 5G and the Internet of Things, the commercial use of drones, and what the administration can do to spur innovation. The attendees are expected to come together after their more specialized sessions for a meeting with Trump. C-suite level executives and general partners from venture capital firms have been invited. Commerce Secretary Wilbur Ross will play a key role.

What's next: "Energy Week." (These branded weeks are part of the White House's framing of June as "Jobs Month" — focused on public-private partnerships.)

5. 1 $$ thing: Kellyanne's cost

A source from a Fortune 100 company tells me his business was ready to pay an eye-popping price to have Kellyanne Conway speak to them shortly after the election. Her going rate in December: $75,000 for a "local" speech and $100,000 for outside the New York area. That's not far from Clinton money.

The conversation got me wondering exactly how much cash would've been available to a top official from a winning presidential campaign. (Kellyanne and the others who joined the White House gave up that immediate earning capacity.)

A well-known book agent tells me Kellyanne and other top officials could expect "high seven figures" if they publish the first "insider" book on life inside the Trump campaign or White House. The agent told me he's heard from a number of officials currently inside the White House who want to know how much money they could expect to make from writing books when they leave.

(N.B.: Corey Lewandowski is reportedly one step ahead of them. CNN's Oliver Darcy reports that the sacked campaign manager is shopping a book through his agent. I'm told he can expect more than $1 million if he goes through with it.)

Final thought: what POTUS could be talking about

The father of Otto Warmbier — the American college student just freed from prison in North Korea — held a deeply moving press conference on Thursday. Wearing the blazer his son wore during the show trial where North Koreans sentenced him to 15 years of hard labor, Fred Warmbier ripped into the Obama administration and praised Trump.

  • His son was arrested during Obama's presidency, and the Obama administration told the family to stay quiet about his imprisonment in hopes of negotiating a deal to free him. It didn't work. Then Trump's State Department got Otto free.

Our thought bubble: It isn't the first time diplomatic efforts under Trump have succeeded where Obama's fell short. In April, Trump's team convinced the Egyptians to free an American aid worker. But instead of sharing this deeply moving moment and praising his Secretary of State's leadership, the President tweeted about Bob Mueller's "WITCH HUNT."

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Farenthold faces new allegations from male staffer

Texas Rep. Blake Farenthold. Photo: Jacquelyn Martin / AP

A former communications director for Rep. Blake Farenthold told CNN that the Texas congressman's office was such "an intensely hostile environment" that he was "[driven]...to physical and emotional distress."

Why it matters: The House Ethics Committee is already investigating Farenthold for separate sexual harassment allegations, which were reportedly settled by the Office of Congressional Ethics in 2014 for $84,000. Rekola shared his allegations with the office of Rep. Susan Brooks, the chairwoman of the committee.

  • In 2015, when the former staffer, Michael Rekola, was about to leave town for his wedding, Farenthold told him: "Better have your fiancee blow you before she walks down the aisle — it will be the last time."
  • Rekola said he was "disgusted," and gave his two weeks notice upon returning from the wedding. Farenthold denied making the comment.
  • Rekola told CNN that Farenthold called him a "f---tard," and another staffer confirmed that he regularly referred to aides that way. Farenthold told CNN he called aides that it "in jest," but that in hindsight, "it wasn't appropriate."
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PBS suspends "Tavis Smiley" for sexual misconduct

Tavis Smiley of PBS, talks with Lower 9th Ward resident Carolyn Parker for Smiley's late-night PBS program. Photo: Bill Haber / AP

The late-night show "Tavis Smiley" was suspended by PBS after an investigation of Smiley that resulted in "multiple, credible allegations of conduct that is inconsistent with the values and standards of PBS," Variety reports.

  • Per Variety, the investigation revealed sexual relationships with subordinates, and a "verbally abusive and threatening environment" created by Smiley.

Why it matters: Another powerful man has been taken down by allegations of sexual misconduct, joining dozens of other men.

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Microsoft taps AI, Reddit to make Bing smarter

Microsoft AI and Research chief Harry Shum, speaking in San Francisco Wednesday. Photo: Ina Fried/Axios

Microsoft announced a bunch of new partnerships Wednesday as it aims to show itself as a leader in the field of artificial intelligence. It's also adding a bunch of AI-powered features to its own products, including its Bing search engine along with a deep integration of content from Reddit.

Why it matters: AI is one of the hottest areas in tech and Microsoft is competing with Google, Facebook, IBM and others for talent, mindshare and deals.

Partnerships: Microsoft announced efforts with a range of companies, including Reddit, UPS and China's Cheetah Mobile. In the Reddit deal, Microsoft's Bing search engine will use content from the online discussion community, including its popular "Ask Me Anything" Q&As.

Internal efforts

  • On the Bing front, Microsoft is using AI to deliver answers that combine information from multiple sites. That can allow results that compare different arguments on an issue, explore the differences between two things or just deliver a summary of facts from more than one place, with footnotes showing where the information came from. It is also making Bing more conversational and allowing people to search within images.
  • With Cortana, Microsoft is trying to help its digital assistant stand out from a crowded pack that includes Apple's Siri, Google's Assistant and Amazon's Alexa. Microsoft's case is that it is the only digital assistant that stretches across work and personal life. To that end, Microsoft said Cortana can now understand calendar and other data from Google's Gmail. It's also building Cortana into Android apps, including the CM Launcher app from China's Cheetah Mobile.
  • Microsoft is also expanding its use of AI in Office 365. A new insights feature will automatically make charts showing trends within a complex spreadsheet. Within word, AI will help make sense of acronyms within a document using other documents within the company. Microsoft already prioritizes which e-mails to read first, but a new feature will help find the action items within Outlook.
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The debate over inequality

Last week, we reported that the wage inequality gap in the U.S., a primary source of the polarization among Americans, has been shrinking: For five straight quarters, wages have been growing the most for U.S. workers with only a high school diploma.

Data: Indeed analysis of BLS monthly jobs data; Chart: Axios Visuals

But readers pushed back:

  • "Surely you're kidding?" wrote James Harvey, executive director of the National Superintendents Roundtable. The percentage wage increase is better for high school graduates, he said, but the dollar increase still favors the rich: a 3.3% raise for someone making $20,000 a year is $660—only an eighth of the $5,000 raise going to someone earning $500,000 and getting a 1% increase.
  • In a phone call, Upwork CEO Stephane Kasriel told me, "The 1% is doing a lot better, and for the 30% and 40% at the bottom, it keeps getting worse."

Quick take: The times do indisputably favor the rich:

  • When adjusted for inflation, U.S. wages are up only 10% from almost a half-century ago.
  • Meanwhile, wealth held by the top 1% has surged: it rose to 38.6% of the total in 2016, from 36.3% in 2013, the Fed said in a report in September, while the bottom 90%'s wealth has fallen for almost three decades—last year, it was 22.8% of the total, compared with 33.2% in 1989.
  • FoW reader W.Spackman linked to this July report by Deloitte, which said income inequality today is comparable with the Gilded Age of robber barons, in the 19th century (Figure 3).

And Charlie Allenson, a FoW reader in New York, made another point: "Many of those chronically not working are not getting back to work. Namely, those more 'mature' workers. Ageism rolls on. Personal example: People look at my website and love my work. They meet me, see the gray hair and suddenly they're going in a 'different direction.' This is a constant for me. And it sucks."

But there are in fact signs of an improvement in the fortunes of ordinary people, and wages and salaries are among them, says Jed Kolko, chief economist at Indeed.com, the jobs listing website, who wrote the blog post on which we were reporting. In an email exchange, Kolko told me:

  • Harvey and Kasriel are correct to single out the vast concentration of income at the top, comprised largely of non-wage earnings like capital gains, interest and dividends—which combined are how the wealthy make most of their money.
  • But wages earned for work are another lens into the inequality story, and in that realm, the gap indeed has narrowed.
  • The shrinking wage gap is important to watch because wages and salaries are a large component of pre-tax money income, which includes interest, dividends and income from property. The Bureau of Labor Statistics puts the proportion at 76.8%. (see pages 8-9 in this BLS report).

The Fed, too, has noted the trend favoring less-educated workers. According to a Fed report released in September, income rose from 2013 through 2016 for all income groups, after accounting for inflation, which was a change from the prior three years, when income was stagnant. But the highest growth — an average of 25% — was among families without a high school diploma; in the 2010 to 2013 period, income fell for these workers, the Fed said.

Thought bubble: Inequality is not an absolute metric. If it were, ordinary people could legitimately lash out about wealth at the top regardless of how they themselves were faring. The rise of wages at the bottom and in the middle is slow, and the trend could halt—that is a point that Kolko makes. But it remains notable that the numbers are no longer going only in one, inexorable direction—there are metrics pointing to growing wages and salaries, and more jobs, for those whom the economy has been leaving behind.

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Bitcoin: 'This is a casino, not an investment'

Illustration: Lazaro Gamio / Axios

Bitcoin is up about 1,700% since the start of the year. Some attribute the surge to ordinary, if enthusiastic, investment, along with the forces of supply and demand. Others say it's a bubble, and that it will ultimately burst. Joe Borg, president of the North American Securities Administrators Association, a grouping of state securities officials, suggests it's the latter. "This is a casino," he tells Axios, "not an investment."

The bottom line: Borg, who is also director of the Alabama Securities Commission, says he could be wrong and that those who say bitcoin is just "another type of investment" will be proven correct. But he sees worrying signs of a classic investment mania.

Among the signs:

  • People have told him they have taken out home equity lines of credit to buy bitcoin.
  • Those doing so, he said, are mostly millennials and young baby boomers.
  • "They seem to think anything electronic is a game," Borg said. "There are entrepreneurs who run Facebook, and they put this in the same category."

Thought bubble: If bitcoin collapses, which has been the normal course in big, sudden investment manias, the price is highly unlikely to go to zero, meaning a lot of people will still be in the money. But lots of people will lose, too, including perhaps some who have taken out those home equity lines of credit.

That there is a fever is indisputable. It is global, and especially heavy in Asia. Ordinary South Koreans are the most aggressive bitcoin investors, in addition to Hong Kong Chinese, Japanese and Vietnamese, report the WSJ's Steven Russolillo and Eun-Young Jeong. Together, they account for almost 80% of global bitcoin trading. Other reminders of fevers past:

  • Most of these Asians buying bitcoin are the general public, not professional traders.
  • At the point last week when bitcoin went above $17,000, it was almost $25,000 in South Korea, almost 50% higher, the WSJ said. In other words, the trade is chaotic to the point of irrationality.
  • At the FT, Izabella Kaminska writes today that even central banks are "getting drunk on the collective cryptocurrency/blockchain Kool-Aid."

A point that increasing numbers of observers are making is that bitcoin is only an investment, with no other real-life, large-scale utility, at least at present: bitcoin and other cryptocurrencies are too slow and cumbersome to serve as money, their original purpose.

  • In a speech today in Sydney, Phillip Lowe, the governor of the Reserve Bank of Australia, makes the point: "The current fascination with these currencies feels more like a speculative mania than it has to do with their use as an efficient and convenient form of electronic payment."
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Jones gets 'gracious' call from Trump, invited to the White House

Doug Jones is greeted by a supporter before speaking during an election-night watch party Tuesday, Dec. 12, 2017, in Birmingham, Ala. Photo: John Bazemore / AP

Senator-elect Doug Jones of Alabama on Wednesday said had "a very gracious" phone call with President Donald Trump, in which he was invited to visit the White House and congratulated for his stunning campaign victory.

“It was a very gracious call. I very much appreciate it. He congratulated me on the race that we won. He congratulated me and my staff in the manner in which we handled this campaign and went forward. And we talked about finding that common ground, to work together. And he invited me over to the White House to visit as soon as I get up [to Congress],”
— Doug Jones at a press conference
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Here's the DOJ's letter that delayed the Waymo-Uber trial

In a letter to the judge overseeing Waymo's lawsuit against Uber, the Justice Department says that a former Uber employee suspected the company helped its then-CEO covertly communicate with a startup the company eventually acquired. A document detailing the employee's original concerns will be released on Friday.

Why it matters: The Justice Department's notice to the court led to a second delay to the trial between the two companies. The ex-Uber employee's concerns, which he communicated to the company back in May after being fired, were never mentioned in the case until that point, raising questions about whether the ride-hailing company was purposefully hiding.

  • This is also the first confirmation of a Justice Department criminal probe into Uber, beyond rumors and media reports.

However: Another Uber employee testified last month in court that the presentation he gave on secretive communications, referenced by the former employee and Justice Department, was purely hypothetical. In fact, he and his team had no idea that Kalanick and the startup's founder communicated without leaving a trace until Bloomberg published an article detailing their tactics months later. Uber also argued in court that the former employee sought to extort money from the company after getting fired for poor performance.

Note: The case was referred in May to the U.S. Attorney's Office for a potential criminal probe.

Here's the full Justice Department letter:

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Why Republicans should worry about 2018

Doug Jones is the first Democratic senator Alabama has elected since 1992. His surprising victory continues a trend we've seen in other elections this year — Democratic voters are turning out in significant numbers and independent voters are leaning more toward Democrats. Axios' Alexi McCammond breaks down why that should worry Republicans heading into 2018:

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Trump: We are "days away" from passing tax cuts

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President Trump delivered his closing arguments on tax reform Wednesday afternoon, just hours after GOP lawmakers reached an agreement on an overhaul package. Trump emphasized how passing tax cuts was a key campaign promise, and said "now we're just days away" from keeping it.

Key quote: "But we need your help to get Congress across that finish line. We'll have very little Democratic support, probably none, and that's purely for political reasons. They like it a lot, and they can't say it ... some day we have to come together and do bipartisan — and hopefully it can happen soon."

More from Trump:

  • "I'm here today to tell you that we will never let bad things happen with respect to the economy of our country."
  • If Congress gets him a tax bill before Christmas, the IRS said Americans will start seeing lower taxes and bigger paychecks beginning in February.
  • "Somebody else called me and everybody else the 'Deplorables.' We're proud to be the Deplorables, and we're doing well."
  • Go deeper: The Republicans' looming Christmas deadline.