President Biden turned up the pressure on Democratic lawmakers Thursday as he rallied them to support his $3.5 trillion economic package. “This our moment to deal working people back into the economy,” Biden said in remarks at the White House. But some Democrats warned that it will take time to work out all the issues that have cropped up as the party tries to enact the president’s domestic agenda.
Here’s what else is going on.
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McConnell Warns Yellen That Republicans Won’t Help Raise the Debt Ceiling
Facing a potential default on U.S. debt payments in a matter of weeks, Treasury Secretary Janet Yellen called Senate Majority Leader Mitch McConnell on Wednesday to ask for his bipartisan cooperation in passing an increase or suspension of the debt ceiling. But the Kentucky Republican rejected her request, according to reports Thursday, and stuck to his position that the GOP will not help Democrats address the debt limit.
“This is a unified Democrat government, engaging in a partisan reckless tax and spending spree,” a McConnell spokesman said late Wednesday after the call. “They will have to raise the debt ceiling on their own and they have the tools to do it.”
In an interview with Punchbowl News published Thursday, McConnell explained why he is refusing to support any effort to raise or suspend the debt limit: “Let me make it perfectly clear. The country must never default. The debt ceiling will need to be raised. But who does that depends on who the American people elect,” McConnell said. “So the only issue is, whose responsibility is it to do it? A Democratic president, a Democratic House, a Democratic Senate. ... It's their obligation. They should step up. It's hard being in the majority. They are the ones who will raise the debt limit.”
McConnell tipped his hat to earlier bipartisan efforts – “I have voted a number of times to raise the debt ceiling in divided government,” he said – but insisted that Democratic control absolves the Republican Party of any responsibility to help avoid what could be a global financial calamity, should the U.S. default.
Democrats push back: Not for the first time, Democrats rejected McConnell’s argument, pointing out that they voted several times to raise the debt ceiling during the Trump administration and that the debt that must be paid now was incurred in the past.
“Senators from both parties overwhelmingly voted in support of the many laws that contributed to this obligation,” Senate Majority Leader Chuck Schumer (D-NY) said. “So neither party can wash its hands of responsibility to pay the bills.”
According to an analysis by the Associated Press, nearly 98% of the country’s $28.4 trillion national debt was created before President Joe Biden took office. And the total includes more than $7 trillion that was added during the Trump presidency.
A strategic gamble: While there’s more than one way for Democrats to attempt to raise the debt limit, including attaching it to the reconciliation bill they plan to use to pass President Biden’s $3.5 trillion economic package, their current strategy appears to be to include an increase in a must-pass bill that will keep the government open after September 30 and provide assistance to hurricane victims and Afghanistan war refugees – while waiting for Republicans to lose their nerve and vote to support the measure.
However, Sen. Roy Blunt, a Republican from Missouri who voted to raise the debt limit during the Trump presidency, told reporters Thursday that bipartisan cooperation isn’t likely, despite Biden’s oft-spoken desire for lawmakers to work across the aisle. “I don’t think anything in the last month has increased the likelihood that he can now create an atmosphere of: Let’s work together,” Blunt said.
And McConnell doesn’t sound like he’s in any mood to change his mind. “I’m not voting [for a debt limit increase],” he told Punchbowl. “How many different ways do I need to say this?”
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Forecast of the Day
A forecast by analysts at JPMorgan, cited by James Pethokoukis of the American Enterprise Institute Thursday, gives a good sense of just how much is going on in Washington right now, and how complicated the political and economic playing field is:
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Effective Tax Rates for High-Income Households Have Fallen Sharply Since WWII: Report
At the end of World War II, the top 0.1% of households in terms of income were paying an effective tax rate of about 50%, according to an analysis by Robert McClelland of The Tax Policy Center. That rate declined over time, falling to roughly 25% by 1985, about where it stayed through 2015, with some fluctuations.
The top 1% of households have followed the same pattern, with their effective tax rate falling from nearly 40% in 1945 to about 25% in 2015.
By contrast, average effective tax rates for all households showed remarkable stability between 1945 and 2015, ranging between 12% and 15%.
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Number of the Day: $279 Billion
Individual Retirement Accounts were introduced in the 1970s to help workers save for their golden years, but some lawmakers are concerned that they are being abused by wealthy investors. According to the nonpartisan Joint Committee on Taxation, there are now nearly 29,000 IRA accounts worth more than $5 million each, with a total value of $279 billion. About 500 of the accounts hold more than $25 million.
Democrats want to introduce limits into the system, and restrictions on IRS accounts worth more than $10 million are included in the tax plan approved by the House Ways and Means Committee this week. “Lawmakers’ concern, shared by some tax experts, is that a system created to help the middle class retire now lavishes too many perks on the richest of the rich,” says Bloomberg’s Ben Steverman.
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Connect the dots between financial policy, politics, and citizen and legislative action, with the latest from The American Prospect. Read it HERE.
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News
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- At an Economic ‘Inflection Point,’ Biden Leans Into Expansive, Populist Agenda – Washington Post
- Biden’s Economic Plan at Risk of Delays as Democrats Squabble – Bloomberg
- Budget Bill Reopens Moderate vs. Progressive Divide for Dems – Associated Press
- Manchin Keeps Washington Guessing on What He Wants – The Hill
- Dems Call in Big Gun as They Face Huge Hill Tests – Politico
- His Economic Agenda on the Line, Biden Prepares to Fight for Tax Increases on the Wealthy – CNBC
- As G.O.P. Digs In on Debt Ceiling, Democrats Try Shaming McConnell – New York Times
- U.S. Initial Jobless Claims Rose Last Week, Led by Louisiana – Bloomberg
- Inflation Soared in Some U.S. Cities, Barely Budged in Others – Bloomberg
- To Retake Congress, the GOP Plans to Attack Democrats on the Economy – NPR
- Almost 450 Economists Signed a Letter in Favor of Extending the Enhanced Child Tax Credit – CNBC
- A Paid Family Leave Policy Could Be Coming to the US. Here’s What It Would Look Like – CNBC
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Views and Analysis
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- Mitch McConnell’s Debt Limit Game-Playing Is Lunacy, and We Should Say So – Greg Sargent, Washington Post
- Democrats Should Heed Mitch McConnell’s Advice – Karl W. Smith, Bloomberg
- Democrats’ $3.5 Trillion Spending Plan Flunks Its Own Test – Michael R. Strain, Bloomberg
- Can American Politics Allow for Long-Run Investment? – Lee Harris, American Prospect
- Joe Manchin Doesn’t Know What He’s Missing – Bryce Covert, New York Times
- No, the Richest One Percent Don’t Pay 40 Percent of the Taxes – Jonathan Chait, New York
- Infrastructure Summer: A Surprisingly Radical Housing Bill – Alexander Sammon, American Prospect
- Families Planned to Use Child Tax Credit to Pay Bills but Some Were Confused About Eligibility – Elaine Maag et al, Tax Policy Center
- Peter Thiel Gamed Silicon Valley, Donald Trump, and Democracy to Make Billions, Tax-Free – Max Chafkin, Bloomberg Businessweek
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