Dems Eye New Deadline for Deal With Manchin

Sen. Joe Manchin.
Reuters
By Yuval Rosenberg

Happy Tuesday! It’s another big primary day, with voters casting ballots in Alabama, Arkansas, Georgia, Minnesota and Texas. Political analysts are keeping a particularly close eye on Georgia’s Republican gubernatorial contest, among several other contests, to see whether former President Donald Trump has lost some of his grip on the GOP. In that race, incumbent Brian Kemp faces a challenge from former Sen. David Perdue. Trump recruited and endorsed Perdue, who has embraced the big lie about the 2020 election fraud, while Kemp, who resisted Trump’s pressure to overturn the state’s results in the presidential election, is supported by former Vice President Mike Pence.

Here’s what else we’re watching:

Dems Eye New Deadline for Deal With Manchin

It’s been more than five months since Sen. Joe Manchin (D-WV) surprised the White House by announcing on Fox News that he couldn’t get to yes on Democrats’ sweeping Build Back Better budget reconciliation package of climate programs, social spending and tax changes. Democrats had hoped to salvage portions of the legislation, but as The Hill’s Alexander Bolton reports, they are now poised to blow through an unofficial Memorial Day deadline for clinching a deal on a slimmed-down bill more focused on Manchin’s priorities.

Despite ongoing talks between Manchin and Senate Majority leader Chuck Schumer on a revamped reconciliation bill, Bolton reports that Senate Democrats say there’s no chance of an agreement this week. "They now point to the start of the August recess as the new deadline, arguing that gives them most of August to draft legislation and the month of September to pass it on the floor," Bolton writes, adding that, "Such a timetable seems difficult, to say the least" given the challenges of passing major legislation just weeks before Election Day.

Some Democrats remain skeptical that they’ll be able to finalize a party-line package, while others are clinging to hope that Schumer will succeed where the White House could not. "The administration is not getting it done. Their relationships are too damaged. Only through Schumer is it going to get done but it’s not like it’s easy. I give it a 50-50 possibility of a modest bill getting done," one unnamed Democratic senator told The Hill. Another Democratic senator, Tammy Duckworth, also told The Hill she puts the chances of passing a reconciliation bill at 50-50.

Manchin on Monday reportedly said at a World Economic Forum panel in Davos, Switzerland, that he believes lawmakers will be able to get something done. He has said that the new package should fight inflation, reduce the deficit and address climate change and he told reporters last week that all 50 Senate Democrats should be able to support a bill that cuts prescription drug costs.

The bottom line: Democrats aren’t likely to reach any deal on a reconciliation bill this week. The details of talks between Schumer and Manchin are being kept out of the press — and that silence is giving some Democrats reason for optimism that, as pre-election pressure builds, they’ll be able to reach some sort of slimmed-down deal. But the process may still take months to play out.

Read more at The Hill.

Surge in Individual Tax Payments Likely Driven by Capital Gains: Report

Individuals paid quite a bit more in taxes this year compared to years past, and according to an analysis by the Penn Wharton Budget Model, that surge in taxes owed was probably driven by enormous capital gains recorded by households in 2021.

In the 15 years before 2021, inflation-adjusted individual tax payments in April typically totaled about $300 billion, PWBM says. In 2021 that number soared above $500 billion. Although complete data from the IRS is not yet available, PWBM notes that most of the payments came to IRS via electronic transfer, which suggests that individual households were the source.

The record surge in individual tax payments parallels the growth of financial wealth and income for households in the rebounding economy of 2021. "Household equity wealth rose 40 percent last year – nearly twice as fast as any other year since 1990 – as the economy recovered and equity prices rose sharply," PWBM says. "Recent years have also seen a substantial increase in the volume of trading by households. Rapid asset price appreciation and broadening participation in markets imply an unusually high level of household financial income in 2021, especially capital gains."

US Birthrate Rises for First Time in 7 Years

The U.S. birthrate rose last year for the first time since 2014, according to new data from the National Center for Health Statistics. Births in 2021 totaled 3,659,289, an increase of roughly 46,000, or 1%, from the year before. Not surprisingly, the pandemic likely played a role. Births dropped sharply in 2020 in response to the pandemic, and the rebound in 2021 likely reflects both a lower starting point and a growing acceptance among parents of the conditions created by Covid-19.

Still, those hoping that the uptick in births signals a long-term change in population dynamics are probably out of luck. "The uptick in fertility does not change the country’s overall demographic picture," say Dana Goldstein and Daniel Victor of The New York Times. "Since 2007, fertility has generally been in a free fall. And while the birthrate went up in 2021, it is still lower than in 2019. More parents are choosing to have only one child."

Chart of the Day: A Ceiling for Treasury Rates?

With interest rates climbing rapidly as the Federal Reserve wages its campaign against inflation, the rate on the 10-year Treasury note has roughly doubled this year, recently flirting with 3%. While many analysts expect rates to continue to climb as the Fed aggressively tightens monetary conditions, others are starting to think the growing threat of recession could slow down the Fed — making Treasuries a more attractive investment, resulting in lower rates as investors return to the market (prices move in the opposite direction of rates).

The rate on the 10-year tumbled Tuesday as investors snapped up Treasuries, raising the question of whether interest rates will stay lower for longer than many expected. "We are not completely out of the woods with inflation – so therefore there’s a chance you could possibly see slightly higher yields from here," Yvette Klevan of Lazard Asset Management told Bloomberg. However, she added, "at roughly 3% on the 10-year Treasury, a lot is already baked in."

Send your feedback to yrosenberg@thefiscaltimes.com. And please encourage your friends to sign up here for their own copy of this newsletter.

News

Views and Analysis