Rep. Alexandria Ocasio-Cortez is once again making it clear that progressives want to go big with social infrastructure spending, even amidst pushback from the moderate wing of the party.
On Twitter, she wrote that a $1 trillion bill would come to just about $100 billion every year.
“That’s the annual budget for NYC alone, but spread thin for everyone in the US. Do you think that’s enough to be impactful? To be widely felt in people’s lives? It’s not. Sufficiency is the bare minimum,” Ocasio-Cortez wrote, implying that $1 trillion falls below her acceptable minimum.
Indeed, New York City’s most recent budget was just shy of $100 billion, according to The City.
Infrastructure talks are currently at an impasse as Democrats hash out how much they’re willing to spend on party-line social spending, in addition to the $1 trillion bipartisan package. That has already been passed by the Senate, meaning it just needs to pass the House. Facing unified Republican opposition to the other measure, Democrats are debating a party-line bill of $3.5 trillion, which may be cut two-thirds in size.
For months, progressives in the House, including Ocasio-Cortez, have stressed that they’ll only vote on a bipartisan infrastructure package if it moves in tandem with the larger social package, which contains major progressive priorities like affordable childcare, climate spending, and a Medicare expansion.
When House Speaker Nancy Pelosi tried to bring forward an unlinked vote on the bipartisan package, progressives pushed back. Ocasio-Cortez said she wouldn’t vote for it unless she got “new information.” Sen. Bernie Sanders urged House progressives to vote it down “until Congress passes a strong reconciliation bill.”
Ultimately, the vote on the bipartisan package was delayed. President Joe Biden stepped in, endorsing progressives’ desire to move the two bills simultaneously – while also suggesting a smaller price tag of $2 trillion. On Monday, Biden took aim at key moderates Sens. Joe Manchin and Kyrsten Sinema, who have both attracted ire for pushing back against the size of the party-line social spending package.
Manchin, for instance, said just months ago that he would be willing to spend up to $4 trillion on an infrastructure package. Now, his topline is $1.5 trillion.
Even $3.5 trillion is lower than some progressives Democrats wanted. Sanders drafted a $6 trillion proposal; Ocasio-Cortez has said she wants $10 trillion. Regardless, it seems that progressives will keep fighting for as much spending as they can.
“We’re taking on the entire ruling class of this country,” Sanders said on ABC’s This Week about the $3.5 trillion package. “Right now the drug companies … the health insurance companies, the fossil fuel industry are spending hundreds and hundreds of millions of dollars to prevent us from doing what the American people want. And this really is a test of whether or not American democracy can work.”
Heather Boushey, a member of President Joe Biden’s Council of Economic Advisers, sounded off in a New York Times opinion essay on who the government should work for – and who it’s left behind in recent decades.
“Millions of Americans don’t trust the government or its ability to improve their lives, and it’s not hard to see why,” Boushey writes. Instead, she says, politicians from both sides of the aisle have done everything from allowing monopolies to grow to slashing taxes for the wealthiest Americans.
It’s an argument in favor of Democrats’ sweeping reconciliation bill that would unwind some Trump-era tax cuts and funnel money towards social services and lower and middle-income Americans. That bill is currently in jeopardy as progressives and moderates seem unable to agree on shifting from the system Boushey decries to the one she wants.
Boushey writes that it is “now abundantly clear that the problem lies with a government that rewards wealth over work, that serves big corporate interests over working families.” Such a statement from a presidential economic adviser would have been unthinkable in the Obama administration, let alone the Trump one, but the identification of the widening chasm between wealth and work has gone mainstream in recent years, led by groundbreaking work from economists such as Thomas Piketty. Boushey is further confirming Biden’s radical shift on wealth and inequality.
Biden’s White House has been focused on taxes and inequality
Biden’s economic team has repeatedly used the press to hammer home the importance of Democrats’ proposed tax hikes to offset infrastructure as a move to address inequality and close tax gaps.
“The president has put forth a robust tax agenda that rewards work, not wealth, one that will ensure companies pay their fair share and encourage them to keep jobs in America,” Boushey writes.
Last week, White House economists released their own analysis of how much the wealthiest Americans pay in taxes. They found the 400 wealthiest families in America pay about 8.2% in income taxes annually; significantly, they included assets like stocks as part of those incomes.
Under House Democrats’ proposed tax plan, capital gains – the profits from selling assets like stocks – would be taxed at 25% instead of 20%. The wealthiest Americans often derive more of their income from assets, while many Americans rely on wages for income. That means that while lower-earning Americans pay higher income taxes on their wages, wealthy Americans are often taxed at the preferential rate for capital gains. Democrats also want to impose a 3% “surtax” on people earning over $5 million, although that still wouldn’t be an outright wealth tax, since it targets income and not assets.
Democrats also want to hike the corporate rate to 26.5% for companies that earn over $5 million. Both the corporate rate and capital gains increases are lower than Biden’s original proposals.
Boushey writes that Biden’s “vision for the economy” has resulted in the two bills currently going through Congress: a bipartisan infrastructure bill and Democrats’ party-line reconciliation bill. However, both are currently in jeopardy.
Progressives have repeatedly warned that the two bills must move forward together. But moderates have been reluctant to commit to moving the massive reconciliation bill forward, and Pelosi has moved to decouple them. Now, progressives are making noises about torpedoing the bipartisan bill in retaliation.
“Congress has a choice to make,” Boushey writes. “Does it want to grow our economy by investing in the middle class and the public sector, and fundamentally recalibrating the relationship between government and the people it represents, or continue giving billions in tax handouts to the wealthiest Americans and multinational corporations?”
Rep. Alexandria Ocasio-Cortez said she’s planning to vote against the bipartisan infrastructure deal struck by moderate Democrats unless she gets “new information,” she told Politico on Tuesday.
House Speaker Nancy Pelosi has lately prioritized passing the bipartisan deal ahead of the larger reconciliation package championed by progressives after signaling for months she would pass them jointly. That’s a change from June, when Pelosi told reporters, “there ain’t going to be an infrastructure bill unless we have the reconciliation bill passed by the United States Senate.”
Ocasio-Cortez said some of her colleagues aren’t happy with Pelosi’s recent turn, though she wasn’t sure how many would also vote down the bill, according to Politico reporter Heather Caygle.
Progressive lawmakers have threatened to refuse to support the $1 trillion infrastructure deal unless the House takes up a $3.5 trillion social spending package – which includes investments in several sectors, including healthcare, childcare, and climate change – at the same time, Insider previously reported.
Pelosi has said that the House will vote on the bipartisan measure this Thursday.
For months, Ocasio-Cortez has warned that progressives would not allow the bipartisan deal to go through without the reconciliation package. In July, she said at a town hall that House progressives were “standing up” and “will tank the bipartisan infrastructure bill unless we also pass the reconciliation bill.”
The $1 trillion bipartisan package has already passed the Senate. Importantly, while it would infuse capital into roads, highway, bridges, and broadband, it doesn’t include the care-economy and “human infrastructure” measures that Democrats like Ocasio-Cortez have thrown their support behind.
Instead, measures like paid leave, affordable childcare, and universal pre-K will be tucked into the $3.5 trillion reconciliation package. But that massive spending package has run into intra-party resistance. Sen. Joe Manchin, an influential Democratic moderate, has told Politico that there’s “no timeline” for that package, and that he’s “always said pause.”
According to Axios, the House Democratic caucus met on Monday to discuss the path forward, with several moderates reportedly calling on other members of the caucus “to accept the political reality of the Senate.” The meeting came after Pelosi and Senate Majority Leader Chuck Schumer spoke with President Joe Biden, with Pelosi reportedly urging the caucus for unity.
Progressive Rep. Ilhan Omar told the New York Times that she would like for moderates “to make their demands clear” regarding the larger package before progressives threw their support behind the pared-down bipartisan package. Omar said that the bills are linked, telling the Times: “They have to be linked in order for anything to pass the House.”
Democratic Sen. Joe Manchin of West Virginia on Thursday insisted that “there is no timeline” for the $3.5 trillion infrastructure bill, a stance that threatens the momentum that President Joe Biden and party leaders have sought to build as they push for votes on the legislation next week.
Biden and Democratic leaders, angling for passage of the gargantuan reconciliation package that would provide critical investments in healthcare, childcare, and climate initiatives, have pleaded with moderate holdouts to identify a figure that could possibly attract their support for the bill.
While many of Manchin’s colleagues are hoping that the influential senator will point out what he’d like to see cut from the bill, he is in no rush to take such action, as he feels that funding for spending programs is sufficient to last through the end of the year.
“What’s the need? There is no timeline. I want to understand it,” Manchin expressed in an interview with Politico. “I don’t think anything runs out. Right now, we’ve got good nutrition for children, a lot of things are covered right now clear [into] next year.”
The senator’s statement makes it extraordinarily difficult to foresee a reconciliation deal being put together ahead of a House vote on the $1.2 trillion bipartisan infrastructure package, which could come as soon as Sept. 27, a self-imposed deadline that was set last month after the successful passage of the bipartisan bill that easily passed in the Senate.
In the evenly-divided Senate, Democrats need every member to be on board for the reconciliation package to pass, and Manchin – along with fellow moderate Kyrsten Sinema of Arizona – wield incredible influence over the bill, which is slated to include tax increases on the wealthy and tuition-free community college, among many other items.
Manchin does not have the same sense of urgency as House Speaker Nancy Pelosi, who must contend with unrest about the larger reconciliation package from moderates who want to pass the $1.2 trillion bipartisan bill regardless of the larger bill’s fate and progressives who feel that the larger bill should be passed in tandem with the bipartisan bill.
However, the senator has signaled a willingness to compromise on the reconciliation bill, versus outright opposition to the sweeping legislation.
Democratic Sen. Jon Tester of Montana, a fellow moderate, said as much to Politico.
“I don’t think Joe is unworkable, I think, look he’s fiscally conservative, OK? So, $3.5 trillion is a lot of money, it shakes into his soul,” he said to the publication. “We can get to a point where we’re all happy. Maybe not tickled, but happy.”
Independent Sen. Bernie Sanders of Vermont, the chairman of the Budget Committee, who has insisted that the $3.5 trillion reconciliation package should remain at that level, said earlier this week on CBS’s “Face the Nation” that he expects the party “to come together again and do what has to be done.”
Manchin, in admitting that his “strategic pause” of the $3.5 trillion framework is largely at odds with the rest of the Democratic caucus, said that he wanted to further “understand” the pacing of the bill.
“I’ve always said pause. I thought because this is such a big thing. Right now I can tell they’re not moving for a pause and looking for a pause,” the senator said. “I don’t know what the time frame is, but I want to understand it right now before I do anything.”
‘Everybody knows me pretty well’
As is the case with many substantive pieces of legislation, Manchin has been heavily courted by his colleagues in the Senate caucus, along with Biden, who has met him twice in recent days.
However, according to Politico, Senate Majority Whip Dick Durbin of Illinois isn’t “actively whipping” Manchin, while Senate Majority Leader Chuck Schumer of New York continues to speak highly of the West Virginian.
“Everybody knows me pretty well. My mind is my mind, not theirs,” Manchin told the publication. “I wouldn’t think I could do anything to change their minds. I think Bernie [Sanders] is sincere, he has a very social mindset and he is who he is to the core. I hope he’ll respect me. I’m not anywhere near that.”
GOP Sen. John Cornyn of Texas was skeptical that Manchin will broker a deal to allow the reconciliation bill to pass in the coming weeks.
“I’d be surprised if he cut a deal that allowed him to do it this fall,” he said. “He’s been consistent.”
Senate Republicans, led by Minority Leader Mitch McConnell of Kentucky, are vehemently opposed to the Democratic reconciliation package – and are also refusing to support a short-term government funding bill, which Democrats have paired with an increase in the federal debt ceiling.
While Sinema has also balked at the cost of the reconciliation bill, she has signaled support for climate provisions that Manchin has opposed.
A Democratic senator who spoke anonymously to Politico said that Manchin and Sinema are taking different approaches in tackling the bill.
“Kyrsten recognizes there’s a timeline, there’s got to be a process,” the senator told the publication, while Manchin is “coming at it from a values perspective first and saying ‘I am happy to support this or this or this but not in this way or not at this time.'”
Despite Manchin’s continued skepticism of the reconciliation bill, Democrats are confident that he will join them in passing the legislation, as he did with the $1.9 trillion COVID-19 relief package that passed along party lines in March.
“None of us like artificial deadlines and he doesn’t make a decision before he needs to,” Sen. Tim Kaine of Virginia told Politico. “When we need him, he’s there. And I would be surprised if that were any different this time.”
Passing Democrats’ latest spending plan could mean the difference between a stellar economic rebound and a subpar recovery that lasts for years, experts at Oxford Economics said Wednesday.
Congressional Democrats are currently pushing forward with plans to pass President Joe Biden’s sweeping infrastructure proposal. Details around the plan – which includes $3.5 trillion in spending – have slowly emerged as House committees finalize their portions of the bill. But as Democrats near their September deadline for passing the plan, disagreement over key elements such as the child tax credit and the price tag threaten to delay a vote.
It might be better for Democrats to move forward with a smaller package, as failing to pass new spending would seriously hamper the US recovery, economists Nancy Vanden Houten and Gregory Daco of Oxford Economics said in a note. The team expects Democrats to shrink the latest spending proposal to $2.5 trillion before passing it through budget reconciliation. If lawmakers fumble efforts to pass the smaller measure with the $550 billion bipartisan infrastructure plan, the recovery will suffer for years, the economists said.
For one, the US economy won’t grow nearly as fast. Failure to pass the bills would cut 2022 growth to 3.7% from 4.4%, Oxford Economics said. Growth in 2023 would slide by 1.4% from 2.6%.
It would also drag on the labor market’s rebound. A lack of new spending would lead to 1.2 million fewer jobs being created, according to the team. The unemployment rate would only fall to 4.2% through 2023, instead of 3.5% in the firm’s baseline scenario that sees both measures passing.
More broadly, botching both plans’ passages would leave the country struggling to return to its pre-pandemic economic health. Passing both packages would help US gross domestic product outpace its pre-crisis trend early next year, according to Oxford Economics’ forecasts. That would mark a substantial victory over the pandemic after nearly two years of harsh economic pain.
Conversely, a dearth of fresh stimulus dooms the country to a substandard recovery. Gross domestic product growth would retake its pre-crisis trend in 2022 but quickly slow and remain below the critical level well into 2023, the economists said.
Approving both bills, then, can determine whether the country ever returns to its pre-COVID welfare.
“September will be a pivotal month for the trajectory of US fiscal policy and President Biden’s domestic policy agenda,” the team said. Failure to pass the spending packages would drag on the economy just as other fiscal boosts are set to fade, they added.
Oxford Economics’ latest forecast comes after several banks slashed their own outlooks for the recovery ahead. Bank of America and Goldman Sachs nearly halved their GDP estimates in August, blaming the Delta wave and weaker spending for the gloomier projections.
JPMorgan followed on Wednesday, cutting its third-quarter growth forecast to 5% from 7%. While some of the lost growth will show up in the fourth quarter, much is permanently lost to supply-chain issues and weak demand, Michael Feroli, chief US economist at JPMorgan, said in a note.
With Delta case counts climbing higher through September, the US recovery is on the ropes. Democrats’ efforts to pass trillions of dollars in new spending could decide whether the rebound accelerates or runs out of steam.
Rep. Alexandria Ocasio-Cortez took aim at Sen. Kyrsten Sinema of Arizona, a fellow Democrat, after Sinema came out against her party’s $3.5 trillion infrastructure bill.
Sinema told the Arizona Republic in a statement that she thinks the bill is too costly, and “will work in good faith to develop this legislation with my colleagues and the administration to strengthen Arizona’s economy and help Arizona’s everyday families get ahead.”
Ocasio-Cortez took to Twitter to call out the Arizona Democrat, writing: “Good luck tanking your own party’s investment on childcare, climate action, and infrastructure while presuming you’ll survive a 3 vote House margin – especially after choosing to exclude members of color from negotiations and calling that a ‘bipartisan accomplishment.'”
Ocasio-Cortez previously criticized the lack of diversity in the bipartisan group, arguing that it leaves marginalized communities behind.
Sinema is a key moderate for the Democrats, and a main negotiator in the bipartisan infrastructure deal. A group of Republican senators said earlier today that they had reached a bipartisan deal with the White House. That deal cut $30 billion from the new spending proposed, lowering funding for public transit and slashing an infrastructure bank meant to foster private and public partnership. Sinema’s opposition will force Senate Democrats to make cuts from the $3.5 trillion agreement they struck earlier this month. It will need all 50 Democrats in the Senate to stick together so it clears the arduous reconciliation process.
AOC is not the only progressive sounding off on the prospects of a slimmed down Democrat-only spending package. Rep. Mondaire Jones of New York also tweeted: “Without a reconciliation package that meets this moment, I’m a no on this bipartisan deal.”
At the time, the New York congresswoman said that $3.5 trillion agreement was an “enormous victory,” although she would have preferred a larger package.
“This bill is absolutely a progressive victory,” Ocasio-Cortez said, according to reporter Kevin Frey of NY1. “If it wasn’t for progressives in the House, we probably would be stuck with that tiny, pathetic bipartisan bill alone.”
The toll of the climate crisis on daily life has become increasingly clear. Just ask President Joe Biden.
“Interesting to me – I didn’t raise it – but how many of the survivors and how many of the families talked about the impact of global warming,” Biden told reporters after meeting with the families of victims in the Surfside, Florida condo collapse.
The tragedy in Southern Florida that killed at least 18 people and left as many as 145 missing wasn’t the only sudden catastrophe with climate at its root this summer. Just days earlier, temperatures reached record-breaking highs in the Pacific Northwest amid a deadly “heat dome” that local medical officials eventually declared a “mass casualty event.” Then, New York City’s streets and subways flooded during a tropical storm that recalled Hurricane Sandy’s devastation not too long ago.
The climate crisis – long a far-off warning or even political talking point – is suddenly a deadly reality. And it’s starting to have what one expert called local effects, meaning it’s really changing the way people live, hitting the food they eat, places they live, and especially their health. Climate change is an economic issue, now more than ever.
“People are talking about it as if it’s now something we should be considering when talking about the risks that we face as a society – risks to infrastructure, risks to human life,” Amir Jina, an assistant professor at the University of Chicago Harris School of Public Policy, told Insider.
Going outside will look different. UCLA environmental law professor Sean Hecht said the climate crisis changes “the parameters that have defined our built environment.”
The climate crisis is already in your backyard, or your local store
In the Pacific Northwest, some grocery stores stopped selling perishables, and restaurants and other businesses temporarily shuttered due to the heat. Globally, a UN report finds that the world’s food supply will be gravely impacted by the climate crisis without intervention, and that extreme weather could disrupt food supply chains.
“We are going to be seeing roads that aren’t placed in places that make sense,” Hecht said. Communities might not be equipped for less beach or snow, and farmers may need to adjust the crops they’re planting. For instance, California’s booming $6 billion almond industry was hit hard by a historic drought this year, The Wall Street Journal reported, with many farmers forced to simply raze trees they can no longer water.
“When the world changes around [climate change], these basic legal and then really human expectations start to not match the physical environment. And that creates a lot of conflict,” Hecht said.
That was apparent for the New Yorkers wading through several feet of water to finish their commutes. Rep. Alexandria Ocasio-Cortez tweeted a video of the flooding and said it makes the case for her Green New Deal, which hasn’t yet become law: ‘The Green New Deal, which is a blueprint to create millions of good jobs rebuilding infrastructure to stem climate change & protect vulnerable communities, is unrealistic. ‘Instead we will do the adult thing, which is take orders from fossil fuel execs &make (sic) you swim to work.'”
The economic impacts have already started, and they’ll be unequal
While these extreme weather events illustrate the larger-scale impact of the climate crisis, the smaller-scale impact will hit your wallet soon.
On a macro scale, climate change cost the US economy $500 billion over the previous half-decade, according to a Fed official, and potentially over $1.775 trillion since 1980, according to the NOAA. Research by Tatyana Deryugina in the American Economic Journal found that the economic costs of hurricanes may be greater than previously thought – since the distribution of measures like unemployment insurance goes up.
On the individual level, Jina said the costs add up, too. “There’s a set of risks involved in anywhere we choose to live or any economic activity we choose to engage in that we need to start thinking about a little bit more,” he said.
And, of course, the costs aren’t felt equally. As Hecht said, whenever there’s disruption, people with more resources can better afford to address the disruption.
Hecht says research “very consistently” shows that disruptions are harder on communities with fewer resources, which creates inequity by class, something that “also is correlated in large part with race.” Research from Jina and other members of the Climate Lab finds that the poorest counties will take the largest income hit from the crisis.
As Healthline reports, the climate crisis disproportionately impacts people of color, such as comorbidities linked to racism exacerbated by rising temperatures, to being redlined into areas more likely to be impacted.
Infrastructure spending is (maybe) on the horizon
Meanwhile, climate measures – or lack thereof – have come to the forefront in President Biden’s infrastructure proposals.
The bipartisan deal that the president struck with a group of senators omits some of his original climate proposals, and pares down spending on others. Democrats have already sent a list of climate demands for inclusion in a reconciliation bill, including equity for low-income communities and communities of color impacted by pollution, along with a carbon-free grid.
The federal government can be instrumental when it comes to addressing how we produce and consume energy, the experts said. Actually creating that infrastructure is one important step.
“We gotta make lemonades out of lemons here,” Biden has said. “We have a chance to do something that not only deals with the problem today, but allows us to be in a position to move forward – and create real good jobs, by the way, generate economic growth.”
Even though Biden has proposed spending up to $4 trillion on rebuilding infrastructure, not all of that is focused on climate initiatives. Meanwhile, although Ocasio-Cortez did not initially put a price tag on the Green New Deal, she later clarified its cost would be much higher. “It’s not a fun number to say, I’m not excited to say we need to spend $10 trillion on climate, but … it’s just the fact of the scenario,” she said in 2019.
“Let’s make sure that when we build a house or rezone an area, that it’s not just going to be repeatedly flooded every single year – where the potential insurance costs or the reconstruction costs are going to completely dwarf the construction costs,” Jina said. “That just makes simple economic sense.”
A big part of addressing the situation is in more “mundane” aspects, like updating building codes, Jina said.
The White House maintains that the funding will “Improve healthy, sustainable transportation options for millions of Americans by modernizing and expanding transit and rail networks across the country while reducing greenhouse gas emissions.”
“Amtrak is ready to support this vision for greater public transit,” an Amtrak spokesperson told Insider.
But the compromise comes with billions of dollars being left behind at the station. Only $66 billion will go to combined passenger and freight rail projects instead of the $80 billion initially allocated for Amtrak.
The national rail provider quickly jumped on board the infrastructure train in March and unveiled its “Amtrak Connects US” plan. New rail lines were imagined and major cities without existing rail services like Phoenix and Nashville, Tennessee were promised connectivity to the national rail network. An investment in high-speed rail was notably absent.
Parts of the plan may still be implemented as the infrastructure plan still represents “the largest federal investment in passenger rail since the creation of Amtrak,” according to the White House, but the key victory for Amtrak would be a new weapon in its arsenal against freight trains.
Amtrak trains outside of the Northeast Corridor primarily run on tracks owned by freight companies that are, by law, required to give preference to Amtrak trains. But that’s not often the reality on America’s tracks and lengthy delays are often incurred by long-distance passenger trains as a result.
Rep. Peter DeFazio’s House Transportation Committee is spearheading the effort to give Amtrak the right to have federal courts settle disputes with freight companies.
“Right now they’ve got it the way they want it,” DeFazio said of rail freight companies in an interview, as reported by the Wall Street Journal. “So we’re going to change the law and give Amtrak better access.”
Amtrak’s enthusiasm surrounding the planned $80 billion investment also didn’t go to waste. States and localities across the US, excited by the idea of new rail service, have been eager to work with Amtrak on new state-sponsored routes.
In Colorado, officials are working towards a new rail line along Interstate 25 in what’s known as the Front Range corridor between Fort Collins and Pueblo, according to the Denver Post. Amtrak is also petitioning Congress to make it easier for states to get new services by not forcing them to foot a lion’s share of the bill, which is what the law requires at present.
Amtrak spokesperson Marc Molinari attributes the excitement to Amtrak finally going on the offensive instead of having to constantly defend itself and its spending.
Roger Harris, Amtrak’s chief marketing and revenue officer, told Insider on June 15 that the $80 billion plan was “extremely ambitious” but “even part of it would be revolutionary.”
President Joe Biden has thrown his support behind a $1 trillion bipartisan infrastructure deal focused on roads and bridges – and part of the spending would be potentially offset by unused relief funds and targeting unemployment insurance fraud.
Repurposed federal UI will account for $25 billion of the deal’s pay-fors, a person familiar with details of the plan told Insider. The bulk of the funding from UI will come in the form of “unemployment insurance program integrity,” which will provide $80 billion in revenue.
“It’s the fraud. It’s the fraud from UI,” Sen. Jeanne Shaheen (D-N.H.) told Insider when asked about the inclusion of unemployment insurance in the funding. She added: “Apparently, there are several reports that talk about significant fraud in the UI.”
Sen. Joe Manchin, a key moderate, said the deal wouldn’t detract from enhanced UI. “There’s an awful lot of fraud in UI that can be repurposed,” Manchin told Insider.
Previously, Sen. Shelley Moore Capito – a major GOP player and negotiator – had floated repurposing unemployment funds from the states ending federal early benefits early to pay for an infrastructure package. That seems to have garnered traction among lawmakers.
Andrew Stettner, a senior fellow and unemployment expert at the left-leaning Century Foundation, cautioned that legislative details still needed to be ironed out. He also said there’s a risk people could lose jobless aid they’re entitled to if anti-fraud prevention policies are poorly implemented.
“There’s been certainly a surge in organized crime activity in the UI system that has led to a lot of fraud,” Stettner told Insider. “The thing that we have to be concerned about: Are the mechanisms that are being put in place to try and prevent that fraud? Does it lead to unfairness in the system? Are people being wrongly implicated in fraud? We’ve had a lot of cases with that.”
At least 26 states are prematurely cutting off federal unemployment benefits this summer.
Many of the states opting out are ending all federal benefits, including programs with expanded eligibility. That means thousands of workers will lose – or already have lost – all benefits completely. So far, a dozen states have ended their benefits, cutting off somewhere between 400,000 and 500,000 people.
Now, lawmakers are proposing that those severed benefits be used to fund new infrastructure spending, rather than tax hikes on America’s wealthiest and its large corporations.
Overall, about 4 million Americans will see their benefits end ahead of schedule. Federal programs are set to end nationwide in September, but several governors have opted to cut off their benefits in an effort to get workers back into the workforce – although the current labor shortage may also be driven by lack of childcare, or a mismatch between open roles and unemployed workers’ qualifications. As Insider’s Ayelet Sheffey reported, job searches were actually down in states ending those benefits early.
“This is not because the government – because the world – is suffering from people not returning to their jobs,” Keshya Dempsey told Insider of the decision to end benefits prematurely, which will cut her off as well. The 35-year-old Dempsey lives in Florida, where the $300 in extra weekly benefits will end on Saturday.”This is political. It has always been political.”
As bipartisan infrastructure talks plod on, funneling money to beef up IRS enforcement looks like it’ll be sticking around.
Sen. Angus King, an independent of Maine who caucuses with the Democrats, told Insider on Tuesday that deciding what pay-fors make it into the final package is difficult – but suggested that funding for IRS enforcement will remain.
“I understand going after tax cheats is part of it,” King said. “There’s a lot of money we’re leaving on the table right now.”
The bipartisan Senate group of 10 – evenly divided between Republicans and Democrats – is working on a $1 trillion package. Sen. Rob Portman of Ohio, a prominent lawmaker in the group, told reporters Tuesday that money to bulk up the IRS’s ability to enforce tax laws would be included in the nascent framework.
The IRS officially estimates the “tax gap” coming in at $441 billion a year. But Charles Rettig, the agency’s commissioner, told Congress in April that the number could actually be over $1 trillion.
The bipartisan approach to IRS enforcement might not go that high.
“We have a CBO estimate that, if you put about $40 billion into bringing back the IRS workforce … that could result in $110 billion – which nets out to $63 billion,” Portman said on Tuesday. “It’s a relatively modest increase in IRS spending compared to what the Democrats proposed under Biden’s plan.”
The number of agents devoted to working on sophisticated tax evasion enforcement has fallen by 35% over the last decade, according to Treasury and the IRS budget has fallen by 20%, while audits fell by 42% from 2010 to 2017. According to a White House fact sheet, the audit rate for those making over $1 million a year declined by 80% from 2011 to 2018.
Biden wants to ramp up enforcement on the wealthiest Americans. A recent study from IRS researchers and academics found the top 1% of Americans fail to report about a quarter of their income. Income underreporting is nearly twice as high for the top 0.1%, which could account for billions unreported.
The role of IRS enforcement is coming into greater relief following a bombshell ProPublica report, which revealed just how little in proportional taxes some American billionaires pay. The tax mechanisms that those billionaires utilize are actually completely legal, but they’ve kickstarted talks of tax reform among Democrats.
Following the ProPublica report, five former treasury secretaries published an op-ed in The New York Times saying that, “in the ways outlined by President Biden’s recent proposal,” more enforcement could be pursued.
The five former treasury secretaries – who served under both Democratic and Republican presidents – write: “But on this issue, all should agree, including members of Congress of both parties: Giving the I.R.S. the tools it needs to improve compliance will raise significant revenue and create a fairer, more efficient system of tax administration.”