Biden Unveils $700 Billion ‘Buy American’ Economic Plan

By Yuval Rosenberg

Biden Unveils $700 Billion ‘Buy American’ Economic Plan

Joe Biden on Thursday proposed a $700 billion plan to use
government purchasing power to boost U.S. manufacturing and
innovation.

Biden’s plan calls for the government to buy American products
and invest in clean energy research, infrastructure and health care
with the aim of bringing back jobs lost during the pandemic and
adding 5 million beyond that.

“When the federal government spends taxpayers’ money, we should
use it to buy American products and support American jobs,” Biden,
the presumptive Democratic presidential nominee, said in an
afternoon speech near his childhood home in Scranton, Pa.

The Biden proposal is the first plank of what his campaign says
will be a four-part “build back better” agenda to strengthen the
recovery from the coronavirus. “Biden does not accept the defeatist
view that the forces of automation and globalization render us
helpless to retain well-paid union jobs and create more of them
here in America,” the former vice president’s campaign said in a
statement summarizing the plan.

Biden’s plan calls for $400 billion in federal procurement
spending on American-made products over four years, which his
campaign says would be the largest such public investment since
World War II. The spending would be focused in areas including
clean vehicles and green energy generation; construction materials
for infrastructure improvements, including steel, cement and
concrete; and critical medical supplies and pharmaceuticals to
replenish national stockpiles.

The plan also includes a $300 billion investment in U.S.
research on technologies ranging from "electric vehicle technology
to lightweight materials to 5G and artificial intelligence -- to
unleash high-quality job creation in high-value manufacturing and
technology." And it calls for a review to evaluate and protect U.S.
supply chains.

Biden’s proposal reportedly builds on a plan Massachusetts Sen.
Elizabeth Warren and the former vice president’s campaign
“consulted closely” on the plan with Warren’s team, according to

The Washington Post.

In his speech, Biden again pledged to reverse some of the Trump
tax cuts for corporations and raise the corporate tax rate to 28%,
but his campaign did not spell out how it would pay for the full
$700 billion in proposed spending.

Why it matters: “Biden’s pitch underscores a major shift
by both major parties
away from embracing globalization and free trade
and toward protecting American workers and revitalizing struggling
domestic industries,” the Post’s Sean Sullivan and Jeff Stein
write.

Biden is in some ways proposing his own version of
President Trump’s “America First” economic agenda, simultaneously
challenging Trump’s approach and looking to undercut the
president’s economic reelection message. The Post reports: “Biden’s
announcement prompted frustration by some Trump allies that it was
released before the president announced a similar ‘Buy American’
proposal that has been held up for months amid internal objections,
according to current and former officials. Stephen K. Bannon, a
former chief Trump strategist, said the president’s team was
‘caught flat-footed.’”

Trump Admin, Republicans Eye Narrower Coronavirus Relief
Package

As Congress prepares to put together a new coronavirus relief
bill, the Trump administration and congressional Republicans are
looking to deliver aid more narrowly and limit the overall cost of
the package.

Eyeing a $1 trillion package: Vice President Mike Pence’s
top aide told
Bloomberg News this week that the administration
wants to limit the cost of the next coronavirus package to $1
trillion or less, about the same level that Senate Majority Leader
Mitch McConnell (R-KY) reportedly is seeking. That target likely
ensures a fight with Democrats, who want a much larger and broader
aid package.

White House wants to change $600 enhanced unemployment
benefit: Treasury Secretary Steven Mnuchin told CNBC Thursday
that the administration opposes an extension of the $600 in weekly
federal unemployment payments on top of regular state benefits. Any
extension would ensure that jobless benefits would be “no more than
100%” of what workers were earning, Mnuchin said.

“We knew there was a problem with enhanced unemployment in that
certain cases people were paid more than they made in their jobs,”
he said. “We’ll fix that and we’ll figure out an extension to it
that works for companies and works for those people who will still
be unemployed.”

A National Bureau of Economic Research working
paper by researchers at the University of Chicago found
that 68% of unemployed workers who are eligible for unemployment
insurance will get benefits exceeding their lost earnings and one
out of five eligible jobless workers will get at least double their
lost earnings. The overall median replacement rate of the enhanced
benefits is 134%, the researchers said.

“Notably, replacement rates under the CARES Act are highest for
the unemployed with the lowest prior earnings who are likely most
vulnerable,” they wrote. “At the same time, replacement rates over
100% create distributional issues and may hamper efficient labor
reallocation both now, and especially during an eventual
recovery.”

Fewer stimulus checks: The eligibility threshold for the
$1,200 relief payments approved by Congress in March was set at
$75,000 in income for individuals and $150,000 for married couples,
with payments phasing out above those levels. The Washington Post
reports that congressional Republicans and White House officials
are considering lowering those income levels, though talks are
still ongoing and the exact number they may propose is still
unclear.

McConnell said this week that any additional direct payments
should be targeted to people earning $40,000 a year or less. Other
Senate Republicans oppose sending out more payments altogether,
with many conservatives saying they’re concerned by the trillions
of dollars being added to the national debt.

“Limiting the next round of stimulus checks to those earning
under $40,000,” the Post’s Jeff Stein and Erica Werner write,
“would save lawmakers about $200 billion compared with the first
round of checks, according to Ernie Tedeschi, who served as an
economist in the Obama administration. It would also mean that 20
million middle-class Americans would not receive the financial
lifeline.”

Mnuchin told CNBC that the administration does support another
round of stimulus payments, but that he would discuss the “level
and criteria” for those payments with senators after they return
from their recess. (He also said the White House supports wants a
“much, much more targeted” extension of the Paycheck Protection
Program for small businesses.)

Efforts to scale back the next round of stimulus payments
would likely face both political and logistical challenges. “One
Republican tax expert, who spoke on the condition of anonymity to
discuss private deliberations, predicted the GOP would probably
back off plans to curb the payments because of the administrative
hurdles in effectively targeting the funding,” Stein and Werner
report. “The GOP will also face political pressure not to curb
stimulus payments during an election year for middle-class
households.”

IRS Budget Boost Would Pay for Itself More Than Twice Over:
CBO

Boosting the Internal Revenue Service’s budget for audits and
collections would pay for itself as much as three times over, the
Congressional Budget Office estimated in a report released
Wednesday.

Increasing IRS funding for examinations and collections by $20
billion over 10 years would raise federal revenues by $61 billion,
while a $40 billion increase would add $103 billion in revenues,
CBO said.

It noted that its estimates were uncertain, but it also said the
figures “only capture the direct effect of enforcement activities,”
not the indirect gains that could result as taxpayers get scared
straight by stepped-up enforcement.

The CBO report also describes how budget cuts over the last
decade have weakened IRS enforcement and potentially helped
perpetuate a yawning tax gap — the amount of taxes that go
uncollected each year, mostly as the result of underreported
income. The IRS estimates that the gap averaged $441 billion a year
from 2011 through 2013, and narrowed to $381 billion a year as the
result of IRS enforcement and collections. The current tax gap is
almost certainly higher, with some estimates putting it closer to
$600 billion.

IRS funding, adjusted for inflation, is 20% below where it was
in 2010, according to CBO, and budget
cuts have resulted in the elimination of 22% of the tax
agency’s staff. Funding and staff allocated to enforcement
activities have fallen by about 30% since 2010. The share of
individual tax returns audited decreased by 46% between 2010 and
2018, while corporate audits fell by 37%. Audits of taxpayers with
more than $1 million in income fell by 63%.

The report,
prepared at the request of Sen. Bernie Sanders (I-VT), the ranking
member of the Senate Budget Committee, came as a House
Appropriations subcommittee advanced a spending bill for 2021 that
would increase the IRS budget by about $600 million, or roughly 5%,
to $12.1 billion. “The agency would receive funding increases for
taxpayer services, enforcement, operations support and business
systems modernization,” The Hill
reports. That measure now heads to the full
committee for further debate.

Sanders pointed to estimates by former Treasury Secretary
Larry Summers and Natasha Sarin, a professor at the
University of Pennsylvania, suggesting that at least 70% of the tax
gap comes from underpayment by those with incomes in the top
1%.

“Make no mistake: the primary beneficiaries of IRS funding cuts
are wealthy tax cheats and large corporations,” Sanders said in a
statement. “Congress is leaving hundreds of billions of dollars in
taxes uncollected from the wealthy. We have got to invest in a
robust IRS that focuses on the biggest culprits of tax evasion so
we can prioritize those resources to ensure people’s basic
needs.”

1.3 Million Workers Filed New State Unemployment Claims Last
Week

Another 1.3 million Americans filed first-time claims for state
unemployment benefits in the week ending July 4, the Labor
Department said Thursday,
and 1 million new claims were filed under the federal Pandemic
Unemployment Assistance program created to provide federal
unemployment insurance to the self-employed, gig workers and others
who aren’t eligible for traditional benefits.

“Job losses remain catastrophically bad,” said Ben Casselman of
The New York Times in a
tweet. “We can debate the best measure to use, but the
big picture is the same no matter what: Nearly four months into
this crisis, claims are still higher than in ANY period before
this. And the decline has stalled out.”

The new state unemployment filings were lower than the
1.39 million economists surveyed by Dow Jones had expected and a
decrease of 99,000 from the previous week. The number of new
jobless claims has been falling since early April, but remains at
levels well above the pre-pandemic record. “This is the 16th week
in a row that unemployment claims have been more than twice the
*worst* week of the Great Recession,” economist Heidi Shierholz of
the left-leaning Economic Policy Institute tweeted.

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