Democrats have the chance to prevent an economic calamity

“The US is currently projected to hit its existing debt ceiling sometime in 2023, according to the Bipartisan Policy Center. While raising the ceiling should be relatively straightforward, it’s become a contentious process — and an opportunity for the minority party to extract policy concessions or score political points. Both parties have used debt ceiling increases to their advantage, but Republicans have done so much more frequently in recent years.
In 2011, for example, Republicans balked on suspending the debt limit and refused to move forward until President Barack Obama agreed to key spending cuts, concessions they ultimately secured. The US got so close to default that year, however, that Standard and Poor’s downgraded the country’s credit rating.

Political experts note that this disagreement marked one of the first times it seemed like lawmakers were actually willing to go over the edge, despite the economic chaos that could ensue. Were the US to actually default, that would likely downgrade the dollar and lead to a recession.

While a default has never happened, Republicans’ behavior in 2011 — and their current rhetoric — suggests that they’re more open to the possibility and taking such fights to that point.

Democrats, including in the White House, are reportedly considering preempting this worst-case scenario by tackling the debt ceiling this winter, according to Axios. The White House has denied that such conversations are happening.

There are also still questions about what a debt ceiling bill could look like. While some lawmakers including Sen. Jeanne Shaheen (D-NH), and a group of prominent House Democrats, have expressed support for doing away with the debt ceiling altogether, others, like Biden and Sen. Bernie Sanders (I-VT), have opposed taking this route. That’s likely because such talks still offer an opportunity to evaluate spending, and because it could be a useful tool for Democrats should the GOP hold the White House and Congress.

In lieu of getting rid of the debt limit altogether, there’s been growing pressure on Democrats to consider increasing it to such a high value that there isn’t likely to be a standoff over the issue in the short term.”

Why the Consumer Financial Protection Bureau’s Funding Structure Is Unconstitutional

“A three-judge panel on the 5th Circuit Federal Court of Appeals ruled this week that the CFPB’s structure is unconstitutional because Congress has no control over the agency’s budget, which is funded entirely by the Federal Reserve. Under the terms of Dodd-Frank, the CFPB is entitled to receive a budget totaling up to 12 percent of the Federal Reserve’s annual operating expenses, and the Federal Reserve is not allowed to refuse the CFPB’s requests for funding.

“Congress’s decision to abdicate its appropriations power under the Constitution, i.e., to cede its power of the purse to the Bureau, violates the Constitution’s structural separation of powers,” Judge Cory Wilson wrote in this week’s ruling.”

“”Congress did not merely cede direct control over the Bureau’s budget by insulating it from annual or other time-limited appropriations. It also ceded indirect control by providing that the Bureau’s self-determined funding be drawn from a source that is itself outside the appropriations process—a double insulation from Congress’s purse strings that is ‘unprecedented’ across the government,” Wilson wrote in the court’s ruling. “Even among self-funded agencies, the Bureau is unique. The Bureau’s perpetual self-directed, double-insulated funding structure goes a significant step further than that enjoyed by the other agencies on offer.””

Manchin rails against ‘revenge politics’ on permit plan

“Sen. Joe Manchin on Tuesday railed against what he called “revenge politics,” as liberals in the House and Senate team up with Republicans to oppose his plan to speed permits for natural gas pipelines and other energy projects.

Manchin, a West Virginia Democrat who chairs the Senate Energy Committee, secured a commitment from President Joe Biden and Democratic leaders to include the permitting package in a stopgap government-funding bill in return for his support of a landmark law to curb climate change.

But in the weeks since Biden signed so-called Inflation Reduction Act last month, Democrats and environmental groups have lined up to oppose the permitting plan, calling it bad for the country and the climate. Climate hawks such as Vermont Sen. Bernie Sanders and Massachusetts Sen. Ed Markey, along with dozens of House members, say the permitting plan should be excluded from the must-pass spending bill.

Many Republicans agree. Wyoming Sen. John Barrasso, the top Republican on the Senate energy panel, called the permitting deal a “political payoff” to Manchin, whose vote on the climate bill was crucial to the law’s passage.

Manchin’s actions on the climate — including secret negotiations with Senate Majority Leader Chuck Schumer, D-N.Y. — “engendered a lot of bad blood” among Republicans, Sen. John Cornyn, R-Texas, told reporters. “There’s not a lot of sympathy on our side to provide Sen. Manchin a reward.”

At a news conference Tuesday, Manchin expressed bewilderment at such sentiment, saying he’s “never seen” such an example of “revenge politics,” with Sanders and the “extreme liberal left siding up with Republican leadership” to oppose his plan.

“It’s revenge towards one person — me,” Manchin said.

“I’m hearing that the Republican leadership is upset,” he added. “They’re not going to give a victory to Joe Manchin. Well, Joe Manchin is not looking for a victory.”

While legislative text of his permitting plan has not been made public, Manchin called the bill “a good piece of legislation that is extremely balanced” and does not “bypass any environmental review.″ Instead it would accelerate a timeframe that can take up to 10 years for a major project to win approval.”

Biden cites Jan. 6 riot chant as he condemns ‘despicable’ attack on Paul Pelosi

“The perpetrator’s shouts of “Where’s Nancy?” during the home invasion early Friday morning echoed the chants of pro-Trump rioters who searched the Capitol’s halls for the speaker in a bid to stop the certification of Biden’s 2020 victory.

“This is despicable. There’s no place in America. There’s too much violence — political violence — too much hatred, too much vitriol,” Biden said. “And what makes us think one party can talk about stolen elections, Covid being a hoax, [that it’s] all a bunch of lies, and it not affect people who may not be so well balanced? What makes us think that it’s not going to alter the political climate? Enough is enough is enough.””

Would the Inflation Reduction Act actually reduce inflation?

“I think it’s likely to have a modest downward effect on inflation, so directionally, I think it is likely to push downward on prices. But that’s unlikely to be the primary effect of the legislation, given how many specific policies there are.
Most of the impact on inflation and the broader economy from this legislation is likely to be medium-term, not felt in the immediate next few months, which is how households are thinking about inflation.”

What the new $80 billion for the IRS really means for your taxes

“Democrats’ new climate, health care, and tax package — known as the Inflation Reduction Act — includes nearly $80 billion in new funding for the IRS, which is supposed to help the chronically underfunded agency staff back up and boost enforcement measures to collect unpaid taxes from wealthy Americans.
The funding has become a political flashpoint in recent days among conservatives and some business groups, who have falsely claimed that the IRS will use the money to hire an “army” of 87,000 new agents who will target average taxpayers.”

“Administration officials have reiterated that they will focus enforcement efforts on wealthy Americans and large corporations.”

“The IRS’s budget has been cut by nearly 20 percent since 2010, impacting the agency’s ability to staff up and modernize half-century-old technology. In 2010, the IRS had about 94,000 employees. That number dipped to about 78,000 employees in 2021. Some of the agency’s computers still run on COBOL, a programming language that dates back to the 1960s.

Since 2010, the agency’s enforcement staff has declined by 30 percent, according to IRS officials, and audit rates for the wealthiest taxpayers have seen the biggest declines because of years of underfunding. The new bill is an attempt to change that.”

“The new funding is intended to help reduce the “tax gap,” or the difference between what people pay in taxes and what they owe in taxes, which the Treasury Department estimates is about $600 billion annually. The new money could help the IRS increase revenue by about $200 billion over the next decade, according to a Congressional Budget Office estimate, although the exact amount is hard to calculate and highly uncertain.

Natasha Sarin, a counselor for tax policy and implementation at the Treasury Department, said that for Americans making less than $400,000 a year, their chances of being audited wouldn’t increase from typical levels in recent years.

Instead, Sarin said, average taxpayers should have an improved experience filing their taxes because the funds would allow the agency to add staff. In the first half of 2021, there were fewer than 15,000 employees available to answer nearly 200 million calls, which is one person for every 13,000 calls, according to Treasury Department figures.”

“As a result of reduced staffing at the IRS, audit rates of individual income tax returns decreased for all income levels from 2010 to 2019, according to a recent Government Accountability Office report. Audit rates decreased the most for taxpayers with incomes of $200,000 or more.”

“A 2018 analysis by ProPublica found that while audits had declined most dramatically for the wealthy, the IRS continued to audit the lowest-income filers — recipients of anti-poverty tax credits, including the earned income tax credit — at relatively high rates.

Over the last decade, audit rates for multimillionaires have decreased by twice as much as audit rates for the lowest-income families who receive the EITC because it requires more resources to go after top earners, Sarin said.

The funding should allow the IRS to better target wealthy earners who aren’t paying their taxes because the agency will be able to upgrade its technology, Sarin said, reducing the chances that compliant taxpayers would be audited.

Janet Yellen, the Treasury secretary, reaffirmed similar commitments in a letter to the IRS commissioner last week.

“Contrary to the misinformation from opponents of this legislation, small business or households earning $400,000 per year or less will not see an increase in the chances that they are audited,” Yellen wrote.”

“Budget cuts and reduced capacity have led to a significant backlog of unprocessed tax forms. As of the beginning of August, the IRS had a backlog of 9.7 million unprocessed individual 2021 returns.”

“Sarin said the IRS would focus on hiring employees who have experience working with complex tax filings from large corporations and high-net-worth individuals. Audits of average taxpayers follow a significantly different process, she said.”

The Inflation Reduction Act, explained

“The policies overall aim to push American consumers and industry away from reliance on fossil fuels. The biggest share of the funding goes to tax credits and rebates for a host of renewable technologies — solar panels, wind turbines, heat pumps, energy efficiency, and electric vehicles. It includes incentives for companies to manufacture more of that technology in the United States. The law will also put funding into energy efficiency at industrial sites that can help lower the sector’s hefty carbon footprint, while dedicating some funds to forest and coastal restoration.
The IRA also breaks new ground on other problematic areas of the climate crisis. It sets the first methane fee that penalizes fossil fuel companies for excess emissions of the especially powerful climate pollutant. Another substantial part of the funding helps disadvantaged communities with monitoring and cleaning up pollution, and builds their resilience to climate impacts.

Beyond cutting climate pollution, the clean energy investments could also make a dent in inflation. According to Robbie Orvis, senior director at Energy Innovation, rising energy prices have driven roughly a third of the 9 percent rise in the overall Consumer Price Index this past year. By helping Americans become less reliant on fossil fuels, the spending helps ease the global oil crunch and cut consumer bills.”

“The agreement also includes a 15 percent minimum tax on corporations with profits over $1 billion. Senate Democrats note that while the current corporate tax rate is 21 percent, dozens of major companies, including AT&T, Amazon, and ExxonMobil, pay much less than that. Originally, the provision was expected to raise $313 billion, though new carveouts were added to win Sen. Kyrsten Sinema’s (D-AZ) vote, which give manufacturers and private equity firms more leeway when it comes to the new minimum tax rate. Those changes are likely to reduce the revenue this measure will bring in.

There is also a 1 percent excise tax on corporations’ stock buybacks, which are currently not subject to any taxes at all. That excise tax is estimated to raise roughly $73 billion in revenue.”

What could the Inflation Reduction Act mean for you?

“One big question is whether a bill called the Inflation Reduction Act will lower the decades-high inflation numbers that consumers are feeling at the grocery store and the gas pump.
As economists told Vox’s Li Zhou, the average American likely won’t feel the impact immediately or particularly significantly — its effect will be in a longer-term and macroeconomic sense.

“For the most part, this isn’t a bill about 2022,” Marc Goldwein, the senior policy director at the Committee for a Responsible Federal Budget, told Vox. “This is about 2023, 2024, 2025. It’s about helping the Federal Reserve to fight against persistent inflation. It’s not gonna be bringing down the inflation rate in the month of September.””

“the bill will allow Medicare to negotiate for cheaper prescription drug prices for certain very expensive medications and cap out-of-pocket prescription costs for Medicare beneficiaries at $2,000 per year. That unprecedented measure will lower the cost for consumers. A further measure requires pharmaceutical companies to pay a rebate to Medicare if they raise drug prices faster than inflation increases, NPR reported — presumably disincentivizing those companies from repeated price increases.”

“In addition to cementing Medicare’s new negotiating power, the bill also holds insurance subsidies for the Affordable Care Act through 2025, making health insurance more affordable for the millions of people who are insured through the health care marketplace. The initial subsidies were supposed to end this year, which would have meant increased premiums for the millions of people who qualified for free health insurance when Congress eliminated the income cap to qualify for federal assistance paying premiums.

The IRA also includes the largest-ever investments in climate change mitigation efforts, clean energy production, and climate justice programs, all designed to mitigate harmful effects of climate change in underserved areas.”

“While much of the financial incentives for pursuing clean energy and climate change mitigation are geared toward companies, there are rebates and tax credits available for people buying clean energy sources like heat pumps and rooftop solar panels. Those measures are aimed at making clean energy more available to more people, although solar panels, for example, cost about $11,000 in 2021 for a household setup.

The legislation also offers a $4,000 tax credit for low- and middle-income drivers to buy a used electric vehicle, and up to $7,500 for a new electric vehicle. Additionally, a study by the Rhodium Group estimates that the bill’s provisions will save households an average of $1,025 per year by 2030.”

“Even though all of these measures are in place, there is no question that the environmental actions and funding aren’t enough. The bill provides far less than what’s actually needed: a total system overhaul. It will be years before these programs will be implemented and pay off in the form of lower greenhouse gas emissions, better health outcomes for low-income communities, and improved clean energy infrastructure. However, it’s hard to deny that the IRA provides a glimmer of hope that it’s possible to start addressing some of the most pressing problems — including overwhelming health care costs and climate change.”

Hidden inside the Inflation Reduction Act: $20 billion to help fix our farms

“Farms cover roughly 40 percent of the country, and they’ve replaced countless ecosystems with vast fields of soybeans, corn, and cattle. Agriculture also accounts for about 11 percent of US greenhouse gas emissions.”

“The biggest chunk of money — roughly $8.5 billion — goes toward a program run by the US Department of Agriculture called the Environmental Quality Incentives Program. It pays for projects that restore the ecosystem or reduce emissions on farmland.
Farmers often use the money to buy and plant cover crops. These are plants, such as clover, radishes, or rye, that are rooted in fields that might otherwise be fallow to improve the health of the soil and prevent erosion. The idea is that the ground is always “covered” with something.

Cover crops also have a range of other superpowers, said Rob Myers, director of the Center for Regenerative Agriculture at the University of Missouri. During a drought, for example, they can lock moisture in the soil; during a flood, meanwhile, they help water more easily penetrate the ground.”