Happy Thursday! President Biden today hosted Prime Minister Narendra Modi of India, who also delivered an address to a joint meeting of Congress in the afternoon. Modi is just the third world leader to be honored by a state visit under Biden, following France’s Emmanuel Macron and South Korea’s Yoon Suk Yeol. Here in New York, the big news tonight may be the NBA draft in Brooklyn, where France’s 19-year-old Victor Wembanyama is expected to be the first pick.
We’ll be back in your inbox on Monday. Until then, here’s what you should know.
Senate Appropriators Set Up Funding Clash With House
The Senate Appropriations Committee on Thursday approved funding levels for fiscal year 2024 in line with the caps established under the recent bipartisan deal to raise the debt limit. The $1.59 trillion total is about $120 billion higher than the funding level approved by the House. The Senate committee vote fell along party lines, with all Republicans opposed to the proposed allocations.
Thursday’s action sets up a clash between the two chambers and another potential fiscal showdown between Democrats and Republicans.
“The disagreement is a significant setback for the appropriations process, as the Senate will ultimately require 60 votes—meaning bipartisan support—to advance spending bills and avoid a shutdown this fall,” Eric Katz of Government Executive writes. “Lawmakers on both sides acknowledged the hitch, but expressed optimism they can ultimately come together on an agreement.”
Democratic Sen. Patty Murray of Washington, who heads the Appropriations Committee, and Sen. Susan Collins of Maine, the top Republican on the panel, said that they hope to move forward in bipartisan fashion. “We are determined to continue working together in a bipartisan manner to craft serious funding bills that can be signed into law,” they said in a joint statement. “Keeping the Senate appropriations process moving full steam ahead and in a bipartisan way is critical. Our nation absolutely must be able to count on a dependable appropriations process as we grapple with urgent challenges at home and abroad. We are both committed to ensuring that the voice of the Senate is heard through the appropriations process and expect a busy summer of markups and continued bipartisan deliberation.”
Collins reportedly said she voted against the allocations due to concerns that they did not adequately fund the Defense and Homeland Security departments. “I hope that in the weeks ahead we will be able to reach an agreement to ensure that our military and the Department of Homeland Security have the resources they need to keep our country safe,” she said, per GovExec.
Murray acknowledged that many lawmakers, herself included, are concerned about the topline spending levels set under the debt ceiling deal.
“This is not an agreement that I would have made—and as I said on the floor when the Senate considered the legislation—I am worried about how it will limit our ability to make necessary investments in our country’s future,” she said in her opening remarks, adding, “The way we make the best of what we have to work with is by pushing forward and writing serious bills that can be signed into law, and then passing the strongest possible bills in a timely, bipartisan way to keep our government running smoothly and avoid an automatic, across-the-board cut to everything.”
Senate appropriators also voted unanimously to advance the first two of 12 annual appropriations bills, the “Military Construction, Veterans Affairs, and Related Agencies” bill and the “Agriculture, Rural Development, Food and Drug Administration, and Related Agencies” bill.
The bottom line: Both House and Senate appropriators are working to pass the required annual spending bills, but they’ll have to resolve their differences over appropriations levels or risk a government shutdown and a 1% across-the-board spending cut if they fail to approve the spending bills by the end of the year.
IRS ‘Vastly Improved’ in 2023 Filing Season, Taxpayer Advocate Says
The IRS vastly improved its performance and delivered a dramatically better experience for taxpayers this past filing season, according to a new report to Congress.
“What a difference a year makes!” National Taxpayer Advocate Erin M. Collins writes in the preface to her mid-year report released on Wednesday. “In submitting this report, I’m finally able to deliver some good news: The taxpayer experience vastly improved during the 2023 filing season.”
Collins notes that the Covid-19 pandemic years starting in 2020 saw “the worst service in memory” from the tax agency, with lengthy delays in processing returns and correspondence and frustrating difficulties for taxpayers seeking assistance.
Those problems haven’t been eliminated completely, but the IRS has processed returns faster and markedly improved telephone customer service, Collins writes: “The IRS caught up in processing paper-filed original Forms 1040 for individuals and various business returns; refunds were generally issued quickly; and taxpayers calling the IRS were much more likely to get through – and with substantially shorter wait times. Overall, the difference between the 2022 filing season and the 2023 filing season was like night and day.”
The IRS cut its backlog of unprocessed paper tax returns from 13.3 million at the end of the 2022 filing season to 2.6 million at the end of the 2023 filing season, bringing the number back to pre-pandemic levels. And IRS employees answered 35% of calls compared with 10% in 2022.
Collins says that the billions of dollars in additional funding provided by Congress as part of the 2022 Inflation Reduction Act have fueled the service improvements, but the IRS still has further to go in addressing delays in the processing of amended tax returns and updating antiquated technology.
“To date, the IRS has used nearly $1 billion of the IRA funding to hire more employees to process paper-filed tax returns, answer taxpayer telephone calls, and process taxpayer correspondence. The strong improvement in taxpayer services this filing season is mostly due to this increased staffing,” the report says. “But to achieve and sustain transformational improvement over the longer term, the IRS must focus like a laser beam on IT.”
Another problem: Because customer service representatives both answer calls and process correspondence, the agency’s emphasis on improved phone service has limited progress in addressing the backlog of amended returns. And identity theft cases now take an average of nearly 15 months to close, about three months longer than last year.
Some $21 billion of the $80 billion in additional funding for the IRS will be rescinded as part of the recent deal to raise the debt limit struck by President Joe Biden and House Speaker Kevin McCarthy. But that money could eventually be restored, and Biden administration officials have suggested that the clawbacks would not affect the agency in the near term.
Collins sounds optimistic as well. “With adequate funding, leadership prioritization, and appropriate oversight from Congress, I believe the IRS will make considerable progress in the next three to five years in helping taxpayers comply with their tax obligations as painlessly as possible,” she writes.
Ford Gets $9.2 Billion Federal Loan to Boost Battery Production
The Department of Energy plans to lend $9.2 billion to BlueOval SK, a joint venture between American automaker Ford and South Korean battery manufacturer SK On, to help finance the construction of new battery factories in Tennessee and West Virginia. The massive loan, part of an effort by the Biden administration to boost electric vehicle production in the U.S., nearly doubles the $11.4 billion already put into the joint venture by the parent firms.
The loan is also the largest investment yet by the Energy Department’s Loan Programs Office, a 20-year-old initiative that received additional funding through last year’s Inflation Reduction Act, which dedicated $370 billion to clean-energy projects overall. According to a Treasury Department official this week, nearly 200 new clean-energy projects have been announced since the IRA was signed into law, with a total value of roughly $83 billion.
The BlueOval SK battery factories are projected to create 5,000 construction jobs initially, and then 7,500 manufacturing jobs once they are up and running. The three plants financed by the loan will have a capacity of more than 120 gigawatt hours of battery production per year, enough to displace 455 million gallons of gasoline annually, according to the Department of Energy.
“Expanding domestic production of American-made batteries is critical to reaching the Biden-Harris Administration’s goals to have EVs represent at least 50% of all new car sales in the U.S. by 2030, reach net-zero electricity by 2035 and a net-zero economy by 2050,” said Jigar Shah, director of the Loans Program Office.
The Loan Programs Office has been involved in other notable loans in the past, Bloomberg reports, including a failed $535 million loan to solar tech firm Solyndra in 2009, and a successful loan of $465 million to Tesla Motors in 2010, which helped finance the company’s first factory.
And it’s not the first time Ford has taken a sizable loan from the federal government. In 2009, in the midst of the financial crisis, the automaker received $5.9 billion from the Energy Department to retool its factories and improve the fuel efficiency of its fleet. That loan was paid off in 2022.
Chart of the Day
More than 1.5 million people have been removed from the Medicaid system since April 1, according to a tracker maintained by KFF, a nonprofit foundation focused on health care policy. With the end of temporary Covid-19 rules that halted Medicaid disenrollments for the duration of the pandemic, states have started to remove those who no longer qualify. One concern, though, is the number of people who are losing their Medicaid coverage for procedural reasons, such as failing to complete required paperwork. So far, 73% of those disenrolled have lost coverage for procedural reasons rather than proven ineligibility. Rates of procedural disenrollments vary widely at the state level, ranging from 95% of all disenrollments in South Carolina to 28% in Iowa.
Number of the Day: 38.9
The median age of the U.S. population reached 38.9 years in 2022, according to data published Thursday by the U.S. Census Bureau. On an upward trend for decades, the median age has risen by nearly nine years since 1980, and almost four years since 2000. The increase is driven by decreasing birth rates and the aging of the two largest generations, baby boomers and millennials. “[T]he United States is graying, posing challenges for the work force, the economy and social programs,” says Dana Goldstein of The New York Times.
Fiscal News Roundup
- Senate Appropriators Set Higher Funding Levels Than House, Setting Up Standoff – The Hill
- House Armed Services Passes $874 Billion Defense Bill Targeting Diversity, Culture Issues – The Hill
- House Republicans Largely Agree on Substance. Process Is Dividing Them. – Washington Post
- GOP Centrists Strike Back at the Right – Politico
- Ford Gets $9.2 Billion to Help US Catch Up With China’s EV Dominance – Bloomberg
- Treasury Department Says Nearly 200 Clean Energy Projects Announced Since IRA – The Hill
- Federal Health Care Rulings Highlight Court Shopping – Axios
- Federal Judge Strikes Down Florida’s Ban on Medicaid Funding for Transgender Treatment – Associated Press
- Fed’s Powell Says US May Need One or Two More Rate Hikes in 2023 – Bloomberg
- Bank of England Raises Rates More Than Expected, as Inflation Persists – New York Times
- Rate Hikes Echo Around the World as Inflation Proves Unrelenting – Bloomberg
- Former Congressman Will Hurd Announces Republican Presidential Bid – Washington Post
- The Freedom Caucus Firebrand You May Not Know Well — but Should – Politico
Views and Analysis
- No, the Fed Isn’t Letting Up on Rates: Takeaways From Powell’s Hearing – Victoria Guida, Politico
- Biden’s $9.2 Billion Ford Loan Is Aimed at China – Liam Denning, Bloomberg
- Debt Ceiling Deal Squeezes Non-Defense Appropriations, Even With Agreed-Upon Adjustments – David Reich, Center on Budget and Policy Priorities
- Chipmaker’s Scramble to Build Marred by Mistakes and Injuries – Lee Harris, American Prospect
- Can Digital Credentials Boost Enrollment in Social Welfare Programs? – Elizabeth Meisenzahl, American Prospect
- Understanding R&D Tax Breaks and Reform Options – Thomas Brosy, Tax Policy Center
- JCT Analyzes Federal Revenue Effects of Pillar Two – Alan Cole, Tax Foundation
- A Year Without Roe Has Taken a Toll on OB-GYNs – Lisa Jarvis, Bloomberg