Good Tuesday evening! Voters are having their say in another round of closely watched primaries today, with Rep. Liz Cheney (R-WY) and Sen. Lisa Murkowski (R-AL) facing challenges from opponents backed by former President Donald Trump. “If the cost of standing up for the Constitution is losing the House seat,” Cheney recently told The New York Times, “then that’s a price I’m willing to pay.” Former Alaska Gov. Sarah Palin is also looking to make a political comeback in a special election to serve out the rest of Republican Rep. Don Young’s term. Young held Alaska’s only House seat for an incredible 49 years until his death in March.
Here's what else is going on.
Biden Signs Inflation Reduction Act. Now Come the Messaging Battles
President Joe Biden on Tuesday afternoon signed into law the Inflation Reduction Act, Democrats’ sweeping, hard-fought package of measures to address climate change, lower health care costs and raise taxes on corporations.
The battle to enact the legislation may be over, but the battle to define it is not.
“With this law, the American people won and the special interests lost,” Biden said at a celebratory event at the White House. He added:
Republicans, for their part, have criticized Democrats for raising taxes and increasing government spending. They have argued — with support from some analysts — that the law will do little to combat inflation. They have also lobbed misleading attacks claiming that the additional funding provided in the legislation for the Internal Revenue Service, some $80 billion over 10 years, will fund an army of auditors set to spy on average Americans (see more on this below).
In his speech and a related op-ed at Yahoo News, Biden sought to make the case that Democrats have shown government can work for working Americans. Senate Majority Leader Chuck Schumer (D-NY) hammered the same point. “For anyone who thought Washington was broken and couldn’t do big things,” he said Tuesday, “Democrats have shown real change is possible.”
The bottom line: Democrats will face some challenges in selling the public on the new law, given that some key elements won’t take effect for some time. But Biden advisers said in a memo that internal administration polling found that the legislation is popular when framed as lowering the cost of health care, prescription drugs and utility bills, The Wall Street Journal reports.
Quote of the Day
“Joe, I never had a doubt.”
– President Biden to Sen. Joe Manchin (D-WV) at Tuesday’s bill signing. Manchin, the centrist senator whose vote was key in passing the Inflation Reduction Act, had seemingly killed Democrats’ economic and climate agenda multiple times over more than a year of negotiations. After singing the bill, Biden handed the pen to Manchin.
What Will the IRS Do With $80 Billion?
Republicans and anti-tax activists are railing against the $80 billion in additional funding provided to the IRS through the Inflation Reduction Act, with some conjuring terrifying images of 87,000 armed tax agents squashing innocent Americans under the dictatorial federal boot.
Sen. Chuck Grassley (R-IA), who serves on the Finance and Budget Committees, told Fox News that he was worried about the prospect of an IRS “strike force that goes in with AK-15s already loaded, ready to shoot some small businessperson in Iowa.”
Rep. Matt Gaetz (R-FL) — referring to a report that the IRS has been buying ammunition — claimed wildly that the government is arming the IRS because “Joe Biden is raising taxes and disarming Americans.”
But the reality of what the IRS plans to do with its extra funding will likely be far more mundane. “It’s unbelievable that we even need to say this, but there are not going to be 87,000 armed IRS agents going door-to-door with assault rifles,” Senate Finance Committee Chair Ron Wyden (D-OR) told Politico’s Brian Faler.
Leaving aside the paranoid fantasies ricocheting around the more extreme reaches of social media, Faler identifies five things to know about what the IRS will likely do with the money:
1. Hire more people – though it’s not clear exactly how many. The 87,000 figure that has made headlines is an estimate provided by the Treasury Department last year, and includes people who would be hired over the next decade to fill in for tens of thousands of expected retirees. Whatever the actual number, the hiring will be for all kinds of positions, including auditors, tech people and customer service specialists.
2. Raise the audit rate. The Biden administration says it will not audit households earning less than $400,000 per year. Still, a major goal of the extra funding is to increase the audit rate for high-income taxpayers and corporations — and as Faler notes, that could be tricky in some circumstances, since sometimes it can be hard to know how much someone earns until they are audited. Nevertheless, it’s worth noting that audit rates for the rich have plummeted in recent years, and few Americans get audited in any case — “just 0.1 percent of those making between $75,000 and $100,000 in 2019,” Faler says.
3. The IRS has been shrinking for years. Thirty years ago, the IRS had 117,000 employees. It now has just 79,000, despite the country’s population growing by nearly a third over the last three decades. Much of the additional funding will go toward simply recovering capabilities that were lost over time due to funding cuts.
4. The spending will pay for itself, and more: Tax analysts widely agree that the $80 billion will help the IRS recover far more revenue. The Congressional Budget Office estimates that the IRS will bring in an additional $124 billion over 10 years, above and beyond the additional funding. Some experts say the figure could be substantially higher.
5. The plan is still developing: The IRS is still working on a plan for how to spend the money, which in any event will be doled out over many years. The CBO expects the tax agency to spend just $5 billion of the total in the first year.
Biden Admin Cancels Another $3.9 Billion in Student Debt
The Department of Education announced Tuesday that it will cancel $3.9 billion in student loan debt associated with ITT Technical Institute, a private, for-profit educational chain that went bankrupt six years ago. The department will automatically cancel all loans for students who attended ITT from January 2005 to September 2016, affecting roughly 208,000 borrowers.
Before declaring bankruptcy, ITT had been under investigation for a variety of deceptive practices. “The evidence shows that for years, ITT's leaders intentionally misled students about the quality of their programs in order to profit off federal student loan programs, with no regard for the hardship this would cause,” Education Secretary Miguel Cardona said in a statement Tuesday.
Cardona also said that the Biden administration would “continue to stand up for borrowers who've been cheated by their colleges, while working to strengthen oversight and enforcement to protect today's students from similar deception and abuse.”
Including this most recent announcement, the Biden administration has forgiven nearly $32 billion in student loans.
Budget hawks lobby against broad debt forgiveness: The Biden administration is currently considering what to do about the nation’s $1.5 trillion student loan portfolio, payments on which were suspended repeatedly during the Covid-19 crisis. Though the most recent extension of the suspension expires at the end of August, many analysts expect the administration to extend the pause again, at least through the end of the year.
At the same time, some student loan activists have been calling on the White House to forgive student loan debt, in full or in part, with forgiveness of $10,000 per borrower being one frequently cited option.
On Tuesday, the Committee for a Responsible Federal Budget, a fiscally conservative group that generally opposes student debt forgiveness, published an analysis of the cost of doing so. Extending the payment pause for the rest of the year would cost $20 billion, CRFB estimated. And cancelling $10,000 in debt for middle- and low-income borrowers (defined as earning less than $300,000 per year) would cost $230 billion over 10 years.
The CRFB analysts note that the cost would wipe out much of the budgetary savings provided by the climate and health bill Biden signed into law Tuesday. “Combined, these policies would consume nearly ten years of deficit reduction from the Inflation Reduction Act,” CRFB said.
Politics either way: Biden has reportedly been weighing a decision on student loans for months, with political and fiscal factors pulling in different directions. As CNN’s Katie Lobosco reports, opinions about student loan forgiveness vary significantly by age and by political orientation. A recent CNN poll shows that while 69% of self-described liberals agree that the government is doing too little on student loan debt, only a third of conservatives say the same. Younger people are also far more likely to be interested in more government involvement in student loans: About 70% of those under 35 say the government is doing too little, while just 35% of those 50 and older agree.
- Biden Signs Expansive Health, Climate and Tax Law – New York Times
- What’s in Big Biden Bill? Health, Climate Goals Become Law – Associated Press
- The $80 Billion Question: What Will the IRS Do With All Its New Money? – Politico
- Bill Gates and the Secret Push to Save Biden’s Climate Bill – Bloomberg
- Fiscal Watchdog Argues Against Biden Student Debt Action – The Hill
- FDA Moves to Make Over-the-Counter Hearing Aids Available to Millions – Washington Post
- Infrastructure Money to Almost Double Zero-Emission Buses on Road – Washington Post
- Six Drastic Plans Trump Is Already Promising for a Second Term – Washington Post
- First Lady Jill Biden Tests Positive for Coronavirus – Washington Post
Views and Analysis
- 3 Things Everyone Should Know About the Inflation Reduction Act – President Joe Biden, Yahoo News
- The Republican Tax Attack Betrays Fiscal Responsibility – Jay A. Soled, The Hill
- Every Dollar Spent on This Climate Technology Is a Waste – Charles Harvey and Kurt House, New York Times
- Fact-Check: Is Biden Arming Up the IRS? – Jeff Cercone, PolitiFact
- Why the Inflation Reduction Act Is Such a Big Deal – Li Zhou, Vox
- A 15% Minimum Corporate Tax Is No Economic Villain – Nir Kaissar, Bloomberg
- 4 Underrated Parts of the Inflation Reduction Act – Rebecca Lebber, Vox
- 5 Ways the Inflation Reduction Act Could Save You Money – Aha Bhattarai, Washington Post
- The SALT Democrats Surrender – Wall Street Journal Editorial Board
- Thank Young People for the Inflation Reduction Act – Tom Steyer, The Hill
- Why We Don’t Have a Carbon Tax – Paul Krugman, New York Times
- Holes in the Recession Story – Jim O’Neil, Project Syndicate
- Should I Get a Fourth Shot Now, or Wait for an Omicron-Specific Booster? – Dani Blum, New York Times