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Illustration: Brendan Lynch/Axios

In normal times, private equity would be nervous about Democratic Party control of both the White House and Congress. But in pandemic-consumed 2021, the industry seems sanguine.

Driving the news: Industry executives and lobbyists paid very close attention to Treasury Secretary nominee Janet Yellen's confirmation hearings this week, and came away convinced that tax reform isn't on the near-term agenda.

The history: President Biden campaigned on a tax policy plan that was significantly worse for private equity than was Trump's.

  • He pledged to raise income tax rates on top earners, eliminate the preferential tax treatment of capital gains and increase corporate taxes (including a new minimum tax on book income).

The reality: Yellen, as expected, endorsed Biden's tax plan in her testimony. But she also said the administration's top legislative priority would be economic stimulus, with infrastructure not too far behind.

  • Both of those would be major boons to private equity, as would be greater predictability on trade policy.

The bet: Private equity is keeping its fingers crossed that tax reform gets pushed off for at least a year, at which point election politics might interfere. And then, in the industry's best-case scenario, Republicans then regain control of at least one house of Congress.

The counterargument is that election season might embolden Democrats to raise taxes on the wealthiest Americans, particularly after its stimulus spending spree.

  • There also are some concerns about Gary Gensler as SEC chair. Like Jay Clayton, he knows where some private equity bodies are buried. Unlike Jay Clayton, he might be eager to dig them up.

The bottom line: Private equity is a long-term asset class. But for now it's banking on the short-term.

Go deeper

Biden picks up his pen to change the tone on racial equity

Vice President Harris looks on as President Biden signs executive orders related to his racial equity agenda. Photo: Doug Mills-Pool/Getty Images

President Biden is making a down payment on racial equity in a series of executive orders dealing with everything from private prisons to housing discrimination, treatment of Asian Americans and relations with indigenous tribes.

The big picture: Police reform and voting rights legislation will take time to pass in Congress. But with the stroke of his pen, one week into the job, Biden is taking steps within his power as he seeks to change the tone on racial justice from the Trump administration.

Mike Allen, author of AM
3 hours ago - Politics & Policy

Biden adviser Cedric Richmond sees first-term progress on reparations

Illustration: "Axios on HBO"

White House senior adviser Cedric Richmond told "Axios on HBO" that it's "doable" for President Biden to make first-term progress on breaking down barriers for people of color, while Congress studies reparations for slavery.

Why it matters: Biden said on the campaign trail that he supports creation of a commission to study and develop proposals for reparations — direct payments for African-Americans.

Cyber CEO: Next war will hit regular Americans online

Any future real-world conflict between the United States and an adversary like China or Russia will have direct impacts on regular Americans because of the risk of cyber attack, Kevin Mandia, CEO of cybersecurity company FireEye, tells "Axios on HBO."

What they're saying: "The next conflict where the gloves come off in cyber, the American citizen will be dragged into it, whether they want to be or not. Period."

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