Biden’s big jobs plan will actually hurt low-income and minority Americans’ chances of owning a home

compromises buying home
The Biden administration’s proposed American Jobs Plan would create new hurdles for minority and low-income first-time homebuyers.

  • The American Jobs Plan would make home ownership less accessible for low-income and minority home buyers.
  • If you can’t put 20% down when you buy a house, you have to pay mortgage insurance.
  • Biden’s plan would make private mortgage insurance more expensive.
  • Jerry Theodorou is the director of the Finance, Insurance and Trade Policy Program at the R Street Institute.
  • This is an opinion column. The thoughts expressed are those of the authors.
  • See more stories on Insider’s business page.

Homeownership is a pillar of the American dream. Last year, the pandemic made many Americans realize they wanted that dream sooner rather than later. Many turned to Redfin and Zillow, swiping through home after home as travel was restricted. News reports quickly followed of surging housing prices and increasing demand as renters turned into buyers and people looked for more living space.

On the surface, this news sounds like a boon to the American economy. Owning a home builds equity and intergenerational wealth, and it can be a cushion against financial setbacks. Yes, there are risks, as shown from the 2008 financial crisis, but American homeownership is still on the rise.

It baffles the mind, then, that as the economy continues to recover, the Biden administration’s proposed American Jobs Plan would create new hurdles for minority and low-income first-time homebuyers. In an effort to pay for the plan, the government would raise the cost of private mortgage insurance, potentially squashing the dreams of millions of Americans.

Inequity in homeownership

Minority and low-income families would be hit hardest by the new legislation because 40% of loans with private mortgage insurance are for families with annual incomes below $75,000, and 60% go to first-time homebuyers. The disparity between homeownership by Black families and white families is already significant – 42.3% of Black families own homes compared with 72.2% of white families. The Biden plan would only widen this gap.

Home buyers can pay as little as 3% of a home purchase price as a down payment. But for those who supply less than 20%, mortgage insurance must be purchased to protect lenders against a borrower defaulting. But private mortgage insurers must have sufficient financial strength to withstand the inevitable peaks and valleys in the cyclical housing market. Since the 2008 financial crisis, new regulations have required insurers to maintain sufficient capital levels to survive another downturn.

Insurers have strengthened their capital base by purchasing reinsurance – insurance for insurance companies. Think of it like a financial shock absorber that spreads risk globally and acts as a bulwark against crippling losses from catastrophic events. Reinsurance is so important for mortgage insurers that in 2020, US insurers shared more than 30% of their mortgage insurance risk with non-US sources. Bermuda reinsurers alone, for example, accounted for just over 50% of such cessions.

The failure of the Jobs Plan

This is where the American Jobs Plan enters the picture. First, it would increase the corporate tax rate from 21% to 28%. Second, it would impose a global minimum tax rate that dilutes the benefits of Bermuda reinsurance. For mortgage insurers, this will inevitably lead to higher prices. Currently, Bermuda reinsurers do not impose taxes on corporate income, allowing mortgage insurers to benefit from the availability of low-cost mortgage insurance.

These actions seem far upstream from the average home buyer, but the effects will trickle down quickly. A higher corporate tax rate for mortgage insurers will eat into their profits. To recoup these lost dollars, they will raise required mortgage insurance rates for all home buyers who put down less than 20%. Simple financial modeling suggests that rates could rise by approximately 10% overall, a significant increase for borrowers, pushing homeownership further away for those of lesser means.

The math is fairly straightforward. Mortgage buyers with excellent credit scores – more than 740 – who put 3% down on a $200,000 home pay approximately $9,500 for the mortgage insurance over eight and half years until the loan-to-value ratio drops below 80%. Borrowers with credit scores between 680 and 699, slightly below the national average, with the same down payment on the same home pay approximately $19,800 in mortgage insurance. Under Biden’s plan, those costs could increase by as much as 10%.

If the American Jobs Plan becomes law, the cost of insurance will rise, potential homebuyers will be affected directly, and, thus, the economy overall.

The Biden administration should stop building barriers to homeownership and instead support policies that will help first-time homebuyers, particularly the low-and-moderate- income families, especially in today’s low interest rate environment. One way to begin is to reconsider the proposed anti-free trade, anti-fair trade, globally-mandated minimum tax policies. The American dream depends on it.

Read the original article on Business Insider

The GOP prepares to come up $500 billion on infrastructure after Biden comes down by $600 billion

Roger Wicker Mississippi
Sen. Roger Wicker.

  • GOP Sen. Roger Wicker said Republicans will bring Biden a $1 trillion infrastructure counter-offer.
  • This follows the White House’s offer to cut its $2.25 trillion plan down to $1.7 trillion.
  • Some Republicans still think $1 trillion is too high, while the parties are far apart on funding new spending.
  • See more stories on Insider’s business page.

In his latest attempt to get Republicans on board with his infrastructure plan, President Joe Biden offered them a $1.7 trillion plan last week, down from his initial $2.25 trillion proposal. GOP lawmakers plan on countering that with a $1 trillion plan on Thursday.

A group of GOP senators, led by Shelley Moore Capito of West Virginia, met with Biden two weeks ago to discuss their initial $568 billion counter-proposal to Biden’s infrastructure plan. They missed last Tuesday’s deadline to bring the president a new offer, but Sen. Roger Wicker of Mississippi told reporters on Tuesday that a new offer close to $1 trillion will be brought to the table on Thursday.

“We’re going to hit a figure very close to what the president said he would accept, and it will end up being the most substantial infrastructure bill ever enacted by the federal government,” Wicker told reporters.

Capito’s office said in a statement to Insider last week that Friday’s White House offer was “well above the range of what can pass Congress with bipartisan support” and that Republicans and the White House still differed on what’s considered infrastructure, how much should be spent on it, and where that money should come from.

While Biden has proposed funding the plan through corporate tax hikes, Republicans have strongly opposed doing so, instead suggesting “user-fees,” a set of charges levied on the users of a federal service or good, like raising the federal gas tax.

And last week, Insider reported that Capito floated the idea of taking unused federal unemployment money to fund infrastructure, which comes as 23 GOP-led states have so far announced they are ending unemployment benefits early following the weak April jobs report.

Wicker told reporters on Tuesday that repurposing stimulus funds, and not spending any new money, will be something the GOP will push for. Republicans are also pushing take Biden’s proposed tax hikes on the richest Americans and multinational firms off the table in any deal.

“I do think there’s a path forward here if the president is willing to take it,” Sen. Joni Ernst of Iowa, the fourth-ranking Senate Republican, told Insider. “As long as we’re not talking about tax hikes, I think that’s really important because Republicans are not going to support any tax hikes.”

Biden has proposed lifting the corporate tax rate to 28% from the 21% level put in place in the 2017 Republican tax law. He’s also seeking to impose higher taxes on investors and raise the marginal income tax rate.

Not all Republicans support the $1 trillion figure, likely complicating a bipartisan plan. Sen. Mitt Romney of Utah told reporters that it’s “unlikely” he’d support a number that high, which could pose another barrier to reaching a bipartisan agreement.

As these negotiations continue, Democratic lawmakers are increasingly urging Biden to forego these discussions and move ahead with passing the comprehensive package he proposed, with corporate tax hikes, to get urgent aid to Americans.

“We appreciate the White House’s interest in reaching across the aisle to seek Republican support for overwhelmingly popular infrastructure priorities …” House Democrats wrote in a letter. “While bipartisan support is welcome, the pursuit of Republican votes cannot come at the expense of limiting the scope of popular investments.”

Read the original article on Business Insider

The White House offers to cut infrastructure plan down to $1.7 trillion

amtrak joe biden
President Joe Biden.

  • The White House presented a $1.7 trillion infrastructure counteroffer to Republicans.
  • It slashes the $2.25 trillion price tag substantially and reduces funding for roads and bridges.
  • The counteroffer came after a GOP group did not meet a Tuesday deadline to bring a new offer.
  • See more stories on Insider’s business page.

President Joe Biden has offered to cut down the cost of his infrastructure plan – the American Jobs Plan – from $2.25 trillion to $1.7 trillion, presenting a counteroffer to Republicans on Friday.

The offer did not address the $1.7 trillion American Families Plan, which is largely focused on care-economy measures, so the initial $4.1 trillion combination of packages would now come to about $3.2 trillion.

White House press secretary Jen Psaki said that officials including Transportation Secretary Pete Buttigieg and Commerce Secretary Gina Raimondo offered up the reduced package.

“In our view, this is the art of seeking common ground,” Psaki said.

Psaki said that proposed funding for broadband was reduced to match that of Republicans, and proposed funding for roads, bridges, and major projects was also reduced to be more in line with senators’ proposals. Investments in research and development, supply chains, manufacturing, and small businesses will be shifted into different legislative pushes.

But the White House said it would continue to push for funding for critical transportation infrastructure, especially railways.

Psaki also said the White House planned to reiterate the president’s unwillingness to raise taxes on Americans making under $400,000, such as through a gas tax and user fees.

“He believes that the extraordinarily wealthy, that companies – many of whom have not paid taxes in recent years – can afford a modest increase to pay for middle-class jobs,” Psaki said.

Republicans had previously offered a $568 billion counteroffer to the White House, well below the $2.25 trillion originally proposed and still substantially lower than the new counteroffer. It would preserve Trump-era tax cuts, which are directly countered in Biden’s proposed funding.

After the GOP group met with Biden last week to discuss its $568 billion counterproposal, Biden gave them a Tuesday deadline to bring him a new plan to negotiate, but that never happened.

Instead, the group met with Buttigieg and Raimondo, and a new plan wasn’t introduced, with the senator from West Virginia who led the Republican plan, Shelley Moore Capito, telling reporters after the meeting that there was “progress, but we still got a ways to go.”

“I think they’re digesting what we proposed, and I think the plan is for them to react to that,” Capito added.

Capito’s office said in a statement to Insider that Friday’s White House offer was “well above the range of what can pass Congress with bipartisan support” and that Republicans and the White House still differed on what’s considered infrastructure, how much should be spent on it, and where that money should come from.

“Based on today’s meeting, the groups seem further apart after two meetings with White House staff than they were after one meeting with President Biden,” Capito’s office said. “Senate Republicans will further review the details in today’s counteroffer and continue to engage in conversations with the administration.”

Separately this week, Capito also floated using unused unemployment benefits to fund infrastructure after April’s weak jobs report, which caused a growing number of GOP-led states to end Biden’s weekly $300 unemployment benefits early.

The White House’s counteroffer comes as Democrats are increasingly calling on Biden to ditch negotiations with Republicans and act big on infrastructure legislation.

Psaki said the negotiations were an art of a “different kind of a deal – a deal for the working people.”

Read the original article on Business Insider

59 House Democrats urge Biden to ditch Republicans and go even bigger on $7 trillion of infrastructure spending

Rep. Pramila Jayapal congress tech antitrust hearing
Rep. Pramila Jayapal.

  • House Democrats sent a letter to Democratic leadership urging them to go even bigger on infrastructure funding.
  • They said that Biden should see past GOP negotiations and pass an urgently needed bill.
  • Biden has remained committed to bipartisanship and plans to negotiate on another GOP counter-offer.
  • See more stories on Insider’s business page.

Bipartisanship is the theme of President Joe Biden’s agenda these days, with him dedicating the majority of his May in persuading both sides of the aisle to get on board with his $4 trillion infrastructure plan.

But House Democrats are worried that these negotiations, while well-intentioned, could narrow down legislation that Americans urgently need, and they want Biden to go bigger – in line with his campaign promises.

Led by Reps. Pramila Jayapal of Washington and Jimmy Panetta of California, 59 House Democrats sent a letter to Speaker of the House Nancy Pelosi and Senate Majority Leader Chuck Schumer on Monday, urging them to take the opportunity to go big on infrastructure investments. They outlined three priorities regarding the size, scope, and speed of Biden’s American Jobs Plan, and they urged the congressional leaders to not get bogged down by Republican counter-offers. The letter was first reported on by ABC News.

“We appreciate the White House’s interest in reaching across the aisle to seek Republican support for overwhelmingly popular infrastructure priorities to invest in caregiving, workforce development, the environment, housing, and education, and to make the very wealthy and large corporations pay their fair share in taxes to reduce inequality,” they wrote in the letter. “While bipartisan support is welcome, the pursuit of Republican votes cannot come at the expense of limiting the scope of popular investments.”

A group of Senate Republicans, led by Shelley Moore Capito of West Virginia, introduced a $568 billion counter-proposal to Biden’s infrastructure plan. They have a Tuesday deadline to bring the president a new offer to negotiate, but Democrats don’t want this to be the focus of Biden’s agenda.

Here are the three main priorities the Democrats outlined to Schumer and Pelosi:

(1) Size

The lawmakers want Biden to prioritize his campaign promise of a $7 trillion infrastructure investment, including a four-year, $2 trillion investment on climate-focused infrastructure. Currently, Biden’s American Jobs Plan proposes $2.3 trillion over eight years, but Democrats want Biden to “maintain an ambitious infrastructure size” and go even bigger.

(2) Scope

After Republicans introduced their $568 billion infrastructure plan, Democrats called it “a joke” and “a slap in the face” given how small it was compared to Biden’s. In the letter, the Democrats cited Republicans’ “widespread climate denial,” among other things, as reasons to see past bipartisan negotiations and not succumb to a deal that doesn’t meet the needs of the economy and the climate.

(3) Speed

Given the fierce Republican opposition to Biden’s infrastructure plan as he proposed it, the Democratic group said “that robust legislation comprising the American Jobs Plan and American Families Plan must be enacted as rapidly as possible, preferably as a single, ambitious package combining physical and social investments hand in hand.”

Republican lawmakers said that Biden’s plan focuses on too many things beyond physical infrastructure, like roads and bridges, but Democrats remained firm in their messaging that care-economy measures, like universal pre-K and affordable housing, belong in infrastructure.

Biden and Republican lawmakers have expressed the desire to strike a bipartisan deal by Memorial Day, and Pelosi aims to get a bill to the House floor by July 4. Democratic leaders, including Pelosi and Schumer, have remained optimistic on reaching a bipartisan agreement.

“The president has his vision,” Pelosi told reporters last week. “The Congress will work its will. In any event, I felt optimistic about our ability to pass such a bill, and more optimistic now about being able to do so in a bipartisan way.”

Read the original article on Business Insider

Move aside, hot vax summer. Biden is bringing hot tax summer to the US.

Felipe Castro holds a sign advertising a tax-preparation office for people who still need help completing their taxes before the IRS deadline on April 14, 2010, in Miami.
Felipe Castro holds a sign advertising a tax-preparation office for people who still need help completing their taxes before the IRS deadline on April 14, 2010, in Miami.

  • This summer everyone in Washington will be talking about taxes, while parents will get a tax credit.
  • Biden wants to raise taxes to pay for a huge infrastructure bill that may be ready in July.
  • Meanwhile, millions of American parents will start getting checks from Biden’s expanded tax credit.
  • See more stories on Insider’s business page.

You’ve probably heard that it’s hot vax summer. Vaccination rates have climbed, mask mandates are lifting, and Americans are slowly starting to venture into the first semblance of the After Times. In anticipation of the US fully reopening, cooped-up Americans are buying new going-out clothes and getting ready for the intimacy they put on pause. Even brands are getting thirsty.

But another thing will be heating up this summer: tax policy. President Joe Biden has already shepherded a law through Congress that will change the tax code (for a few years) to send monthly checks to American families, and he’s hard at work on another that would raise taxes on corporations and families earning more than $400,000 a year.

The tax-credit checks will start going out in July, just when Speaker Nancy Pelosi has vowed to deliver Biden his infrastructure bill in the House.

The stakes are scorchingly high, because despite the reopening economy, the pandemic exacerbated preexisting inequalities, while millions of Americans remain unemployed and April’s surprisingly dismal jobs report showed an uneven labor-force recovery.

Enter the hot tax summer.

Biden wants to raise taxes on the wealthy and corporations to offset massive infrastructure spending

Some of the country’s highest earners will see tax increases if Biden gets his way. He’s proposed increasing the income tax rate to 39.6% for Americans earning over $400,000, and raising the capital gains rate to the same level.

That increase – targeted only at Americans earning $1 million or more – would hit wealthy investors who get the bulk of their income from assets like stocks. The capital gains rate is generally lower than the rate that income is taxed at. As Insider’s Liz Knueven reported, the change would affect just about 0.4% of American taxpayers.

Overall, only the top 1% of filers would be affected and have to pay $100,000 more a year in taxes.

“This is about making the average multimillionaire pay just a fair share,” Biden said in a fiery speech defending the increases. “It’s not going to affect their standard of living a little bit.”

Significantly, Biden also wants to close up some tax-code loopholes and to ramp up tax enforcement on the wealthiest American, who have been found to hide billions in income from the IRS. The IRS estimates that there’s a tax gap of $441 billion a year. But Charles Rettig, the agency’s commissioner, has told Congress that the number could actually be over $1 trillion.

The gap between taxes owed and taxes paid could grow only if left untouched, according to the Department of Treasury. Treasury estimates that Biden’s proposed $80 billion investment in the IRS could bring in an additional $700 billion over 10 years. That would still leave hundreds of billions in taxes going uncollected each year, as Insider’s Ayelet Sheffey reported.

Biden’s also proposed raising taxes on corporations, aiming to bring the corporate tax rate up to 28% from 21%, though it will likely end up closer to the international average rate of 25%.

Meanwhile, an expanded tax credit will start putting checks into families’ pockets

Regardless of what happens with the infrastructure negotiations, many Americans will start feeling the effects of new Biden tax policies this summer.

Beginning July 15, families will start receiving monthly checks of up $300 from the IRS. Every 15th of the month for the next year – unless it falls on a holiday – checks will come. Those checks come from the expansion of the child tax credit, which was revamped under Biden’s $1.9 trillion American Rescue Plan.

One of Biden’s proposals in the American Families Plan is extending those checks through 2025 (many Democrats want to make them permanent). The checks are, as Insider’s Aria Bendix reported, essentially akin to basic income, and most children in the United States are set to benefit from then.

Low-earning Americans will also see an income boost from the expanded Earned Income Tax Credit, which subsidizes wages. According to an analysis from the left-leaning Center on Budget Policy and Priorities, over 17 million adults will now be eligible for an expanded subsidy.

Biden’s proposed tax increases are already seeing pushback. Some businesses have come out against the corporate increase, and there’s likely to be a lot of back and forth over what can and cannot be included in Biden’s two-pronged infrastructure package.

As Politico reported, lobbyists and executives think that they’ll be able to kill off many of the tax hikes that the president is putting forward. That could put some of Biden’s promises in jeopardy.

So while it’s not clear what, exactly, taxes will look like on the other side of all of this, they’re already in the spotlight – and they’ll probably only become a hotter topic as the temperature goes up this summer.

Read the original article on Business Insider

How Biden’s historically diverse administration plans to improve workforce diversity and economic equity

Biden cabinet
Joe Biden holds the first Cabinet meeting of his presidency on April 1, 2021.

  • President Biden vowed to appoint the most diverse Cabinet in history and fix economic inequities.
  • Financial support for women, communities of color, and low-income American are among the pledges.
  • The president faces an uphill battle to get the plans through Congress amid Republican resistance.
  • See more stories on Insider’s business page.

President Joe Biden promised his Cabinet would be the most diverse in history. Recently released data revealed his progress.

After saying he wanted his administration to “look like America” in December last year, the 78-year-old president has mostly succeeded in his plan to diversify the executive branch, according to an analysis by Insider in February.

As the country tries to emerge from the worst economic crisis since the 1930s, Biden has installed a diverse team to forward his economic and business agenda, which includes tackling entrenched inequities.

Among them, Treasury Secretary Janet Yellen as the first woman to lead the department in its 231-year history, Cecilia Rouse as the first African American to chair of the Council of Economic Advisors, and Pete Buttigieg as the first openly gay cabinet member in his role as transportation secretary.

Last week marked the first 100 days of the Biden administration. We take a look at some of the actions taken since his January inauguration to promote diversity in business, the workplace and support communities disproportionately affected by the Covid-19 pandemic.

Bridge
Biden’s $2 trillion American Jobs Plan aims to rebuild the country’s aging road and bridge network.

A $2 trillion infrastructure plan that targets funding towards underserved neighborhoods

Biden’s proposed $2 trillion infrastructure bill sets out to repair the country’s dilapidated road and bridge network, expand access to high-speed broadband and accelerate the clean energy transition.

The American Jobs Plan targets infrastructure projects towards historically underserved communities. The plan includes proposals to replace lead pipes that disproportionately harm Black children and a $20 billion investment to “reconnect” previously cut-off areas to affordable public transportation systems.

The plan would also build more climate-resilient public infrastructure, with a focus on low-income people and communities of color, who are most vulnerable to the impact of extreme weather events such as flooding.

However, Republicans have opposed the bill, citing its “far-left” priorities and the corporate tax hike Biden has said will finance the plan.

Jennifer Granholm
Energy secretary Jennifer Granholm speaks at Howard University.

Proposed funding to build a diverse clean-energy workforce, with investments targeted towards historically Black colleges

Biden’s administration is pushing for more solar panels to be installed in communities disproportionately affected by pollution, as part of his American Jobs Plan.

The Department of Energy announced on Tuesday that $15.5 million would go into installing solar panels in underserved communities and training a diverse clean-energy workforce.

The DOE also committed $17.3 million to fund internship and research programs, with a focus on training more students of color in STEM fields. More than $5 million will be directed to 11 colleges, including historically Black universities Howard and Florida A&M.

Historically Black colleges have long been denied equal access to federal funding opportunities, DOE secretary Jennifer Granholm said in a roundtable discussion at Howard University on Monday.

“This administration is really committed to making the transition to clean energy an inclusive transition, offering benefits to every community,” Granholm said.

Working mom
Biden’s American Families Plan aims to support working mothers.

A plan to introduce 12 weeks of paid family leave – and Biden hopes it will encourage women to stay in the workforce

Biden has introduced a $1.8 trillion American Families Plan – made up of a mix of investments and tax cuts – that would create a national paid family and medical leave program.

The plan is estimated to cost $225 billion over 10 years.

The Biden administration hopes that introducing 12-weeks of paid family leave will help mothers to keep working, reduce racial disparities in lost wages, and improve children’s health.

Biden’s plan also commits to providing support for low- and middle-income families to access childcare, ensuring this does not account for more than 7% of their income, and investing in the childcare workforce.

Childcare workers are among the most underpaid in the US and more than nine in ten jobs are held by women, and more than four in ten by women of color.

D&I training
Biden reversed a decision by former President Trump to ban federal workplace diversity training.

An overturn of Trump’s ban on federal workplace diversity and inclusion training

One of Biden’s first actions as president was to revoke the workplace diversity training ban, signed by former President Trump, across federal agencies and their contractors.

Biden issued an executive order on his first day in office, which overturned Trump’s ban on diversity and inclusion training that taught critical race theory and involved discussions on institutional racism.

The new order instead advances a “whole-of-government” approach to addressing racial inequities, and asks federal agencies to consider whether their policies and programs create barriers for underserved communities to access their benefits and services.

Takeout delivery
Biden has extended unemployment insurance for gig workers.

Targeted Covid-19 relief, including protections for those in insecure work

The landmark $1.9 trillion stimulus package includes funding commitments to help communities that have been disproportionately affected by the pandemic.

In the law, signed in March, $5 billion is provided to farmers of color to invest in their business, buy equipment and repay loans.

“This is a big deal for us,” John Boyd, Jr., president of the National Black Farmers Association, told CBS. “We see this as a great opportunity to help thousands.”

In the package, unemployment insurance for self-employed and gig workers, such as ride-share and takeout delivery drivers, has been extended until September.

In announcing the plan, Biden called on businesses to provide back hazard pay to frontline workers – who are disproportionately Black, Latino and Asian American and Pacific Islander – in retail and grocery sectors. It was employers’ “duty,” the proposal stated, to compensate workers who had risked their lives to keep businesses running.

Biden still faces a challenging road ahead

The president’s administration has taken bold and swift action in its first 100 days, even winning praise from more left-leaning members of his own party. But the impact of Biden’s policies will only be felt in the coming months and years.

Biden still faces an uphill battle to get his Jobs Plan and Families Plan through Congress in the face of Republican opposition and with a razor-thin majority.

Read the original article on Business Insider

The 3 economic pledges that will shape Biden’s $4 trillion bareknuckle fight over infrastructure

Joe Biden and Mitch McConnell speaking
Senate Minority Leader Mitch McConnell and President Joe Biden.

  • Biden is entering a more complicated phase of his presidency, as the fight over his infrastructure plans drags on.
  • Biden’s pledges will be tested, including no tax hikes for families earning less than $400,000.
  • McConnell said on Wednesday that “100% of my focus is on standing up to this administration.”
  • See more stories on Insider’s business page.

With the first 100 days behind him, Joe Biden is entering a new phase of his presidency – one with the capacity to be a lot messier than the initial three months of the administration.

The White House is now gearing up to shepherd $4 trillion in new spending plans through the cauldron of Congress. Democrats have paper-thin majorities in both the House and the Senate, where their control stems from Vice President Kamala Harris’s tie-breaking vote.

Biden has brought up and doubled down on three economic pledges over the past week:

  • No tax hikes for families earning below $400,000,
  • Willingness to negotiate with Republicans on infrastructure package, and
  • No deficit-spending on his long-term economic plans.

These promises are setting the parameters for the Biden administration’s next stage and test the limits of the president’s economic ambitions, given the strong Republican opposition to his proposals.

Mark Warner
Sen. Mark Warner (D-VA).

Roadblocks ahead for spending on roads, bridges, and more

The White House is likelier to face more roadblocks compared to its push to pass $1.9 trillion in emergency virus relief spending earlier in the year. Some of it will arise from Democrats themselves.

“As far as I can tell, this next tranche of spending will be a lot more difficult to get done than the last one,” Jim Manley, a former aide to Senate majority leader Harry Reid (D-Nev.), told Insider. “Not only am I not convinced that Republicans are going to play ball, but there’s also some differences with Democrats – not only in the House, but the Senate as well – about how to proceed.”

Centrist Democrats are already pushing to trim some of the tax hikes that Biden has laid out, largely focused on fetching new revenue from multinational firms, high-earners and other wealthy Americans.

Sen. Joe Manchin (D-W.Va.) said he favors a 25% corporate tax rate, lower than the 28% level the president called for. He’s also insisted on cooperating with Republicans on a wide range of issues, including the economy.

Manchin isn’t alone on corporate taxes. Sen. Mark Warner (D-Va.) told NBC News on Tuesday that he “probably wouldn’t go as far” as Biden on a corporate tax increase. He also voiced some disapproval with the White House’s early move to rule out user-fees to finance infrastructure.

“I wish the president had not taken user fees off the table, whether it be a gas tax or whether it be vehicle-miles traveled,” Warner said. “I think user fees make sense and they need some bipartisan support.”

User-fees enjoy strong support from Republicans, who argue infrastructure spending should financed by people who benefit from the federal investments – essentially, the people who will drive on a rebuild road or bridge should pay for it.

A group of Senate Republicans led by Sen. Shelley Moore Capito put forward a $568 billion infrastructure counteroffer mostly focused on roads, bridges, water systems, and broadband in mid-April. That part of the plan is unlikely to gain the administration’s backing. White House Press Secretary Jen Psaki said last month that user-fees would violate Biden’s tax pledge, which she described as a “line in the sand for him.”

Biden is still attempting to cut a deal with the GOP. Psaki recently said he’s meeting with Capito and other Republicans at the White House next week to discuss infrastructure. It remains unclear if they can strike an agreement given wide differences on the scope of their spending plans and who should pay for them.

Senate Minority Leader Mitch McConnell (R-Ky.) drew a red line of his own on Monday, saying Republicans would not go above $600 billion for an infrastructure plan, an amount less than a fifth of Biden’s spending proposals. Two days later, he said at a press conference in Kentucky that “100% of my focus is on standing up to this administration.”

Other Democratic bills on voting rights, immigration, and DC statehood have garnered no GOP support.

“As far as I can tell, Sen. Manchin is the only Democrat left on Capitol Hill that still thinks its possible to cut deals with McConnell,” Manley said.

Read the original article on Business Insider

Treasury Secretary Janet Yellen says Americans can expect a ‘big return’ from Biden’s $4.1 trillion spending proposal

AP21049840179506
Treasury secretary Janet Yellen pushed for stimulus checks

  • President Biden’s spending plans can offer a “big return,” Tres. Sec. Janet Yellen said Sunday.
  • The measures should be paid for while interest rates sit at historic lows, she added.
  • If inflation rises more than expected, the government “has the tools to address it,” Yellen said.
  • See more stories on Insider’s business page.

Treasury Secretary Janet Yellen reiterated her support for President Joe Biden’s spending plans on Sunday, pitching the measures as strong investments in the country’s future.

The president on Wednesday rolled out a $1.8 trillion spending proposal that includes funding for paid family and medical leave, universal pre-K, and childcare. The measure follows the March passage of Biden’s $1.9 trillion stimulus package and joins the president’s $2.3 trillion infrastructure plan as his latest step in big-government economic policy.

Republicans and some moderate Democrats have balked at the follow-up plans cost, saying the measures would dangerously inflate the government’s debt pile. Yellen countered on NBC’s “Meet The Press,” saying it’s a better time than ever to spend on such projects.

“We’re in a good fiscal position. Interest rates are historically low… and it’s likely they’ll stay that way into the future,” the Treasury Secretary said. “I believe that we should pay for these historic investments. There will be a big return.”

That’s not to say the government shouldn’t offset the multitrillion-dollar price tag. The Biden administration rolled out a handful of tax hikes and stronger enforcement to cover the spending, but those proposals were swiftly rejected by Republicans. The GOP has criticized Biden’s public-works plan and a proposed corporate tax increase, calling it a “slush-fund” and a “Trojan horse” for Democratic priorities.

The economy is poised to rebound from the coronavirus pandemic throughout 2021 and, in turn, bring in greater tax revenues. That stronger growth justifies some spending, but the safest and most sustainable way to spend on infrastructure and care involves equitable tax increases, Yellen said.

Stricter tax compliance would also play a critical role. The country is currently estimated to lose $7 trillion through tax underpayment over the next decade. Stepping up compliance efforts and adequately funding the IRS can also boost tax collection, Yellen added.

The Treasury Secretary also rebuffed concerns of the massive spending fueling a sharp rise in inflation.

Administration officials and the Federal Reserve already anticipates the latest stimulus and economic reopening to drive a sharp but temporary bout of stronger inflation. While Biden’s latest proposals are far larger than the March stimulus, plans to spend them over eight to 10 years cuts down on the risk of rampant inflation, Yellen said.

“I don’t believe that inflation will be an issue, but if it becomes an issue, we have tools to address it,” she added. “These are historic investments that we need to make our economy productive and fair.”

Read the original article on Business Insider

Biden won’t get all his tax increases through Congress. Here’s what Morgan Stanley thinks is possible.

joe jill biden
President Joe Biden and First Lady Jill Biden.

  • President Joe Biden wants to pay for his infrastructure proposals with tax increases.
  • Morgan Stanley strategists predict taxes will go up, but not as much as Biden’s proposing.
  • Still, it said Americans earning over $400,000 should expect to see their income tax rate increase.
  • See more stories on Insider’s business page.

President Joe Biden wants to increase taxes on some of the country’s highest earners to pay for affordable childcare, paid family leave, and free community college.

But how much will taxes actually go up? Morgan Stanley thinks Biden will only get some of what he’s asking for.

The investment bank cited comments from moderate Democratic Sen. Joe Manchin of West Virginia in predicting that a 25% corporate tax rate – not 28%, as Biden proposed – is possible. And while the income rate increasing to 39.6% for those earning over $400,000 remains possible, it said, an increase to the capital gains rate would be 30% or below, not the 39.6% currently proposed.

Manchin has signaled he wants a corporate tax rate closer to 25%, while Axios reports that some Senate Democrats are also currently resistant to potential tax hikes.

The bank also said that extending a 3.8% Obamacare tax to high earners is likely possible, but eliminating the step-up basis, which allows valuable assets to be passed along without taxes on any of its gains, may not be.

Screen Shot 2021 04 29 at 9.28.45 AM
Chart via Morgan Stanley.

Increased funding for ramped-up IRS enforcement – which would target the wealthiest Americans, and ensure they’re paying taxes owed – is possible, according to Morgan Stanley. That measure alone could bring in an additional $700 billion over the next decade, according to the Department of Treasury. But, as Insider’s Ayelet Sheffey reported, that boost in funding would likely mean the wealthiest would still be hiding hundreds of billions every year.

Since neither eventual bill is likely to garner GOP support, the bank said a package is likely headed for party-line reconciliation – and require some negotiation.

Still, Morgan Stanley’s base case sees Congress passing about $4 trillion in spending, whether it’s in one package or two, essentially the total that the White House wants.

“Look, I’m not out to punish anyone. But I will not add to the tax burden of the middle class of this country,” Biden said on Wednesday evening in his first joint address to Congress. “They’re already paying enough. What I’ve proposed is fair. It’s fiscally responsible.”

Read the original article on Business Insider

Biden’s infrastructure plan includes massive investments in care for children and the elderly. Here’s how much workers in those jobs are paid.

home caregiver
  • Biden’s infrastructure spending plan includes $400 billion for elderly and disabled care.
  • Insider looked at the typical pay of five different caregiving jobs.
  • Home health and personal care aides made a median salary of $27,080 in May 2020.
  • See more stories on Insider’s business page.

Caregivers, like home health aides and personal care aides, are a big component of President Joe Biden’s infrastructure plan.

But many of the people responsible for caring for America’s most vulnerable make less than the median annual salary of all occupations. The Bureau of Labor Statistics’ Occupational Employment and Wage Statistics program provides May 2020 data for almost 800 different detailed occupations.

Insider decided to look at five different kinds of jobs that provide care to children, disabled Americans, and the elderly to see how much these jobs typically pay.

For our set of care jobs we looked at caregivers, childcare workers, and various nurses and medical professionals who may provide basic care in addition to other responsibilities. For instance, we included licensed practical nurses whose duties range from checking blood pressure to helping the elderly or other patients eat.

The following chart highlights the median annual salaries of five different kinds of caregiving jobs:

Four of the five occupations in the chart made less than the median annual salary of all occupations in May 2020 of $41,950.

Licensed practical and licensed vocational nurses made a median annual salary of $48,820, the highest pay among the selected caregiving occupations we looked at. There were 676,440 licensed practical and licensed vocational nurses in May 2020 with a large number of these workers in nursing care facilities.

There were over 3.2 million home health and personal care aides in May 2020 with a median annual salary of $27,080 per data from BLS. BLS notes that personal care aides are sometimes referred to as caregivers or personal attendants and a lot of these workers work at patients’ homes to help assist them with daily tasks.

The American Jobs Plan includes $400 billion for “expanding access to quality, affordable home- or community-based care for aging relatives and people with disabilities,” according to a White House press release about The American Jobs Plan.

The press release adds that this includes “offering caregiving workers a long-overdue raise,” citing that home caregivers currently make a $12 hourly wage. Insider’s Patricia Kelly Yeo wrote that the $12 rate refers to home care workers of home health aides, nursing assistants, and personal care aides.

Childcare workers typically make $25,460, and 494,360 were employed in May 2020. Biden’s infrastructure plan includes investing $25 billion toward upgrading childcare facilities and adding more in places that need these services.

Politico notes that the American Jobs Plan, or the first part of the infrastructure proposal, doesn’t include an increase in wages for childcare workers mentioned in his campaign, but that could be included in the second part. Insider’s Joseph Zeballos-Roig and Juliana Kaplan reported that this second plan is called the American Families Plan and will focus on social infrastructure, including childcare reform.

The billions of dollars in spending aimed at improving the care economy could add millions of jobs. Insider’s Juliana Kaplan wrote that the combined $775 billion for childcare, home healthcare, and residential care could create 5.3 million jobs in 18 states over a decade according to research from University of Massachusetts, Amherst. Additionally, the billions in spending would be beneficial for women in the workplace; the White House press release notes caregivers are disproportionately made up of women of color.

“These investments will help hundreds of thousands of Americans finally obtain the long-term services and support they need, while creating new jobs and offering caregiving workers a long-overdue raise, stronger benefits, and an opportunity to organize or join a union and collectively bargain,” the White House said in a press release about how this plan can benefit caregivers.

Read the original article on Business Insider