Hope your Wednesday is going well. Congress spent much of the day debating gun violence, though the prospects for a substantial bipartisan deal addressing the issue are iffy at best. Let's hope lawmakers can get something meaningful done.
Here's what else is going on.
White House Issues New Warning on Covid Funding
A White House official said Wednesday that the lack of additional funding from Congress for the federal response to the Covid-19 pandemic is forcing the administration to make “unacceptable tradeoffs” as it maneuvers to acquire new, more powerful vaccines in the fall.
“Due to a lack of additional funding," the official told CNN, the Department of Health and Human Services “is now forced to pull funds from other essential elements of our response to meet some basic Covid-19 response needs. This will allow the US to get in line to procure some additional lifesaving vaccines for the fall, including next-generation vaccines if available, and procure additional lifesaving treatments.”
The official said that even with the reshuffling of funds, the administration will not have enough money to acquire all of the vaccines, treatments and equipment that may be needed in the fall.
Last week, Dr. Ashish Jha, the White House coronavirus response coordinator, told reporters that he is worried about what could happen later this year. “If you want to [know] what keeps me awake at night, it is that we are going to run out of vaccines,” he said. “We’re not going to be able to have enough of the next generation of vaccines. We’re going to run out of treatments. And we’re going to run out of diagnostic tests, probably in the late fall into winter, if we end up having a significant surge of infections.”
The bottom line: The White House requested $22.5 billion to fund its efforts to combat Covid-19, which lawmakers slashed to $10 billion. But that smaller package has stalled in Congress amid fights over funding sources and border policies, and there’s no clear timeline on when lawmakers might take it up again.
House Adopts $1.6 Trillion Spending Cap for 2023
The House of Representatives passed a $1.6 trillion “deeming resolution” Wednesday, setting the topline for federal discretionary spending in 2023. The move allows appropriators to start advancing various parts of the annual spending package, even as negotiations continue with the Senate on the details.
The 218-205 vote to adopt the resolution occurred as part of a debate over gun control on the floor of the House – a maneuver that was criticized by some Republicans, all of whom opposed the measure. House Budget ranking member Jason Smith (R-MO) accused Democrats of “smuggling their spending levels for the upcoming appropriations process into a rule for a totally unrelated bill so they don’t have to debate or defend their out-of-control spending habits.”
House Democrats said they were simply doing their job by using a technical procedure to keep the appropriations process on track. “Setting a discretionary topline is a core responsibility of the Budget Committee in the appropriations process,” said Chairman John Yarmuth (D-KY). “This resolution supports President Biden’s FY23 budget request with a topline discretionary funding level of $1.6 trillion — a 9 percent increase from FY22 enacted levels.”
Still, budget hawks were not happy with the way things played out, charging that lawmakers are failing to live up to their budgeting responsibilities. “It’s beyond disappointing that Congress won’t even try to pass a budget this year,” Maya MacGuineas of the Committee for a Responsible Federal Budget said in a statement. “In fact, they aren’t even pretending to try. What’s the point of having a Budget Committee if they are never going to put forward a budget?”
Quote of the Day
“For a president, inflation is the problem from hell — you can’t win. Because it’s so difficult economically, politically it is even worse: There’s nothing you can do in the short run to solve it.”
— Elaine Kamarck, a senior fellow at the Brookings Institution, talking to The New York Times about the challenges the Biden administration is facing as inflation continues to run hot.
Deficit Just a Fraction of What It Was Last Year
The federal budget deficit totaled $423 billion in the first eight months of the current fiscal year, which started last October, the Congressional Budget Office said in an estimate released Wednesday. Revenues were $768 billion (29%) higher in 2022 during the period, while outlays were $873 billion (19%) lower.
The totals represent an enormous decline in the size of the budget deficit, driven by the expiration of emergency pandemic spending and a surge in revenues tied to the recovery. “That amount is about one-fifth of the $2.1 trillion shortfall recorded during the same period in 2021,” CBO said.
The deficit for the full fiscal year is projected to be $1 trillion, a reduction of $1.7 trillion compared to the year before.
Global Corporate Tax Plan in Jeopardy
More than 130 countries have agreed in principle to change the way major corporations are taxed within their jurisdictions, a move that would amount to “the most sweeping changes to the international tax system in a century,” according to The New York Times’s Alan Rappeport. But the tax overhaul is now “mired in a toxic mix of fine print and political paralysis,” Rappeport says, raising questions about whether it will ever be put into effect.
The plan has two main components: 1) imposing a minimum corporate income tax of 15%, so companies can’t game the system by setting up offices in low-tax countries like Ireland and the Netherlands; and 2) taxing revenues where they are earned, so companies can’t shift profits to the likes of Bermuda and the Cayman Islands to reduce their tax bills. The plan would also allow countries to impose higher tax rates on some of the world’s largest multinationals.
Despite the multinational agreement announced last fall, plenty of problems remain. In the U.S., the tax proposal has been tightly linked with Democrats’ Build Back Better social spending plan, which would require the support of every Democrat in the Senate to pass – and which now appears to be all but dead.
Other countries could serve as stumbling blocks, as well. While Ireland, which has thrived for years thanks in large part to its low corporate income tax rates, eventually agreed to participate, Poland is now expressing concerns about certain technical aspects of the agreement.
During Treasury Secretary Janet Yellen’s recent trip to Europe, Poland was her first stop, in part to discuss the tax plan. Her assessment of the situation was cautiously optimistic. “I think it is not hopeless,” Yellen said about making sure Poland stuck to the agreement. “It is certainly possible that will happen.”
Even if Poland can be brought back on board, challenges will remain as each participating country tries to enact the deal. “If both the United States and Europe cannot manage to comply with the agreement, the global deal is likely to unravel, Rappeport says. “That would mean a continuation of a hodgepodge of tax rates and related tariff fights around the world.”
- White House Warning of ‘Unacceptable Tradeoffs’ on COVID-19 Response Amid Congressional Inaction – CNN
- Much Higher Inflation and Weaker Global Growth Predicted in Latest OECD Forecast – New York Times
- U.S. Considering Reducing Tariffs on China to Ease Inflation, Yellen Says – Wall Street Journal
- GOP Rips Yellen After Botched Predictions on Inflation – The Hill
- Moderate Democrats Push Their Party to Do More to Fight Inflation – CNBC
- Worry About Stagflation, a Flashback to ’70S, Begins to Grow – Associated Press
- ‘Train Wreck’ Economy or Red-Hot Inflation Is Big New Bond Call – Bloomberg
- US Has a “Very Serious” Problem With COVID-19 Vaccine Uptake – CNN
- Majority of Americans Support More COVID Aid for the Uninsured: Poll – Politico
- White House to Train Health Care Workers in Latin America – Roll Call
- Armed Services Committee Plans 4.6 Percent Military Pay Raise – Roll Call
- No, You’re Not Imagining It — Package Sizes Are Shrinking – Associated Press
Views and Analysis
- The Federal Budget Has 99 Problems. This Program Ain’t One — Anymore – Charles Lane, Washington Post
- How Changes in Economic Conditions Might Affect the Federal Budget: 2022 to 2032 – Congressional Budget Office
- Congressional Democrats Just Offered Their Best Inflation Plan Yet – Ben Ritz, Forbes
- The U.S. and Europe Have Different Inflation Problems – Jason Furman, Wall Street Journal
- The Supply Solution to Stagflation – David Malpass, Project Syndicate
- The Bad Vibes Economy – Emily Stewart, Vox
- Class War > Rate Hikes – Nick Peterson, Financial Times
- Economic Well-Being Improved in 2021, But Will It Continue? – Elaine Maag, Tax Policy Center
- A Problematic Crypto Tax Break Introduced in the Senate – John Buhl, Tax Policy Center