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.”

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The ‘work disincentive’ theory that will soon strip unemployment from millions comes from a racially suspect Reagan-era book

Ronald Reagan
President Ronald Reagan holding up an ax emblazoned with ‘The official Tax Axe!’ at Chamber of Commerce lunch.

  • The welfare-queen argument emerging around unemployment insurance originated in the 1970s.
  • A key anti-welfare book was 1984’s “Losing Ground,” but its methods were ethically questionable.
  • A nearly identical argument is being used by Republicans today to cancel pandemic unemployment benefits.
  • See more stories on Insider’s business page.

Federal unemployment benefits doled out for more than a year are on the verge of lapsing for millions of Americans, but the reason why isn’t new.

As soon as April’s disappointing jobs report was released, critics – largely in the Republican Party – began blaming the boosted support measure for disincentivizing Americans from seeking work.

This disincentive theory dates back decades, and largely comes from a Reagan-era book that argued government-support programs were the reason the US economy was falling behind.

In his 1984 book “Losing Ground,” political scientist Charles Murray posited that social welfare leaves society worse off, as it leads participants to rely on handouts instead of encouraging them to climb the socioeconomic ladder.

That thesis has informed Republicans’ economic policy for nearly half a century and is rearing its head once again as GOP governors prematurely terminate federal unemployment benefits for millions. But analysis of Murray’s book shows such policy rests on morally suspect arguments and possibly does the US more harm than good.

The origins of the welfare queen

So far, 20 states are set to end the $300-per-week federal boost to unemployment insurance in the summer, months ahead of its scheduled expiration in September. That stands to cut roughly 3.4 million Americans off from some form of federal UI benefit while the pandemic still lingers.

But while the circumstances of the coronavirus recession and the 2021 reopening of the American economy are unique, the argument that the social safety net provides a “disincentive” to work is an old idea.

The viewpoint originated in 1976 when, during his first presidential campaign, President Ronald Reagan highlighted “welfare queens” as a new kind of fraudster plaguing the country. Reagan claimed that by slashing spending on programs like food stamps and welfare, he could run the government more efficiently and put poorer Americans to work.

“Losing Ground” was published the same month Reagan was elected to a second term in a landslide 1984 victory. America clearly liked Reaganomics and wanted more. It didn’t take long for Murray’s book to power even stricter anti-welfare policies.

The political scientist was, indirectly, at the helm of a new economic-policy framework. The New York Times soon deemed Murray’s work a “budget-cutters’ bible” that was used as a “philosophical base” throughout government agencies. Reductions to housing assistance, education, and programs like the Jobs Corps reflected Murray’s push to eradicate welfare spending.

The uneven reopening of the American economy shows the book’s ideas are paraded just as loudly today.

Following this month’s jobs report for April, Gov. Kim Reynolds of Iowa said the payments were “discouraging people from returning to work,” while Gov. Mark Gordon of Wyoming said that “incentivizing people not to work is just plain un-American.” Gov. Brad Little of Idaho said cutting the benefit was “based on a fundamental conservative principle.”

And in 36 states, policymakers are bulking up work-search requirements for UI recipients. President Joe Biden even implicitly accepted some of Murray’s ideology in comments following the jobs report, saying Americans receiving unemployment benefits “must take the job” if offered one.

Yet Murray’s argument – and its decades-long influence – rest in part on shaky and ethically questionable foundations.

kim reynolds iowa
Iowa Gov. Kim Reynolds.

Murray used Black men as a proxy for all poor Americans

Some of Murray’s observations hold water. The number of Americans below the poverty line has gradually increased since the late 1960s, and, around the 1980s, poor Americans were starting to drop out of the workforce.

Other arguments from Murray are less compelling. Murray noted that, as spending on social services ramped up in the 1970s, poor Americans stopped working as a result of the support programs. This, he said, is why the federal safety net should be abolished.

Murray’s argument leans heavily on the “latent poverty” statistic – individuals who are only above the poverty line due to government benefits – but ignores one of its critical drivers, according to a 1984 article in the Yale Law and Policy Review.

Additionally, the political scientist focused only on Black men aged 16 to 24 to gauge poor Americans’ attachment to employment over time. Murray ignores labor force participation among Black women, and also fails to address the structural forces that hinder economic development for racial minorities.

Using young Black men as a proxy for all poor Americans likely skewed rates of labor-force dropouts for reasons not acknowledged in Murray’s book, author and Yale Law School graduate Edward Mattison said.

To be sure, neither Murray nor Mattison could have predicted the coronavirus crisis and its economic fallout. Both would likely be shocked to discover Congress allocated some $5 trillion to fiscal stimulus, much of it passed on a bipartisan basis, while the Federal Reserve embarked on an unprecedented level of monetary easing.

As a post-pandemic economy emerges, Democrats have proposed overhauling UI programs to match the new attitude toward stimulus, with a larger benefit and minimum 26-week payment period. Such proposals would mark a major shift in the government’s welfare policy and a huge step away from Reaganomics.

Republicans, meanwhile, seem to want to revert to the stripped-down UI programs seen in 2019. It’s a sign that Murray and Reagan’s ideas still hold significant sway, even with roughly 10 million Americans still jobless. The old debate is set to continue for some time still.

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GameStop and AMC short-sellers have lost almost $1 billion in just 5 days of trading amid a meme-stock rally

Stonks meme

  • GameStop and AMC short-sellers have lost $930 million on their positions over the last five days, according to data provider ORTEX.
  • Short positions for the stocks remains high with AMC at 18.3% of free float and GameStop at 21.8%.
  • The short-seller squeeze is exactly “what the Reddit army is hoping for,” said ORTEX’s co-founder.
  • See more stories on Insider’s business page.

Investors betting against GameStop and AMC Entertainment shares have lost nearly $1 billion in the last five trading days alone, new figures from ORTEX show.

According to the data, GameStop and AMC short-sellers lost $930 million on their positions over the last five days of trading as both stocks rallied. Monday alone, AMC shorts lost $210 million and GameStop shorts lost $227 million.

Short positions in the stocks remains high, which causes “large losses” for anyone with a short position, ORTEX co-founder Peter Hillerberg told Insider in an email. AMC short interest is at 18.3% of free float and GameStop short interest is at 21.8%, according to ORTEX.

“The sharp price increase can cause short position holders to try to close their positions by buying back the shares, causing additional demand which in turn can cause the share price to go up further,” Hillerberg said.

“This is what the ‘Reddit army’ is hoping for,” he said.

Read more: The GameStop mania driven by Reddit traders isn’t simple market trolling. It’s a populist movement threatening to disrupt the financial system to a degree Occupy Wall Street only dreamed of.

Shares of both companies fell Tuesday, according to Investing.com data.

Before that, AMC was on a multi-day rally after Redditors on Wall Street Bets and other subreddit groups pushed for a short squeeze in the meme stock. On Twitter Monday, the phrase #SqueezeAMC was trending. That trend, Hillerberg said, indicates, “this is a large and very vocal community.”

Adam Aron, CEO of AMC – the world’s largest cinema chain operator – thanked Reddit and Robinhood traders on an earnings call earlier this month for boosting the stock. So far this year, shares have rallied roughly 500%.

The popular trend of meme stocks began with GameStop, though. In January, an army of Reddit day traders pushed the shares to rally from single to triple digits in an effort to squeeze short sellers.

Shares hit their lowest in a month on May 11, sinking to $136.50, and have since rallied, trading at around $175 Tuesday.

The company nodded at Redditors last week in a tweet that was later deleted in which an astronaut sat on the moon, a likely reference to a popular Reddit phrase about the stock price going “to the moon.”

GameStop short sellers have lost billions amid the share rally this year, forcing some to cut their losses and exit their positions.

Amid the months-long saga, GameStop has seen a management shakeup, with activist investor Ryan Cohen joining the board and CEO George Sherman announcing his departure. The company has also strengthened its balance sheet, eliminating $216 million in debt.

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The home-construction boom sputtered out in April as prices surged higher

Home construction
A red-hot real-estate market has kickstarted new home construction, but builders face a shortage of lumber.

  • US housing starts fell 9.5% in April, erasing much of the March surge that looked likely to provide much-needed supply.
  • The lack of adequate inventory has driven up home prices in recent months as demand remains red hot.
  • Soaring lumber prices and supply bottlenecks likely weighed on construction, one economist said.
  • See more stories on Insider’s business page.

Potential buyers will need to wait a little while longer for the housing market to cool off.

US housing starts slid 9.5% in April to an annualized rate of 1.57 million units, the Census Bureau said Tuesday. That’s well below the median estimate of a 1.7 million pace from economists surveyed by Bloomberg. March’s huge upswing was revised slightly lower to a rate of 1.73 million.

The reading erases much of the sharp improvement seen through March and suggests contractors’ efforts to shore up supply are hitting snags. Lumber prices skyrocketed through April as shortages slammed the construction sector. While the housing market remains robust, the Tuesday report signals inventory pressures won’t be alleviated so easily.

“Strong demand, a need for inventory, and homebuilder optimism will support housing starts over the rest of 2021, while record-high lumber prices and supply chain bottlenecks may act as headwinds,” Nancy Vanden Houten, lead US economist at Oxford Economics, said in a note. The firm expects starts to average 1.6 million through the year, which would mark the fastest pace of home construction since 2006.

In more encouraging data, building permits rose 0.3% through April. Permits are more forward-looking than starts, suggesting contractors expect to ramp up construction through the year. There’s also a growing backlog of permitted homes that haven’t been started yet. The recent decline in lumber prices and easing of some supply bottlenecks could pull forward that construction, Vanden Houten said.

Housing starts will be the indicator to watch as the red-hot market charges into the summer. Sales of existing and previously owned homes, while still elevated, have dropped off in recent months as massive demand runs up against a nationwide supply shortage.

That imbalance has driven prices higher throughout the year. Home-price inflation hit a record-high 12.2% in February, the Federal Housing Finance Agency said on April 27. The lingering shortage and lack of an immediate supply boost likely kept price growth strong in March and April.

The shortage and months-long price surge led some to worry that the market is repeating the boom-and-bust cycle of the late 2000s. Experts told Insider last month that, while prices will likely climb further, the current rally has more to do with a lack of inventory than the risky lending that fueled the 2008 crash.

The Federal Reserve backed the outlook following its April policy meeting. The central bank is “carefully” monitoring the housing market but doesn’t see the “kind of financial stability concerns” that emerged in the late 2000s, Fed Chair Jerome Powell said in an April 28 press conference.

“My hope would be that over time, housing builders can react to this demand and come up with more supply, and workers will come back to work in that industry,” he added.

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Elon Musk is no longer the world’s 2nd-richest person after Tesla shares lost a quarter of their value since January

Tesla CEO Elon Musk.
Tesla CEO Elon Musk.

Elon Musk on Monday lost his position in the Bloomberg Billionaires Index as the world’s second-richest person after Tesla’s shares fell another 2.2%.

He was unseated by LVMH Chairman Bernard Arnault, the luxury-goods tycoon. The billionaires are separated by a few million dollars on the list of the world’s wealthiest people.

Arnault has amassed a fortune of $161.2 billion, while Musk’s fortune fell to $160.6 billion, according to Bloomberg.

Musk’s drop in wealth was a direct consequence of Tesla’s stock falling 24% from its January high. The electric-vehicle maker’s shares spiked to an intraday high of $900 in late January but have slumped to about $580.

The company’s market capitalization has dropped below $560 billion from a peak of almost $870 billion. Wedbush said public-relations issues in China had hurt Tesla’s monthly sales.

Read more: UBS says to buy these 42 ‘new momentum’ stocks that are poised to outperform in a rising inflation environment

Musk nabbed the top spot on the list in January after Tesla shares skyrocketed amid a boom in technology stocks.

The Tesla boss was already having an eventful week in markets last week after his bitcoin U-turn triggered a wipeout of about $350 billion from the crypto market; bitcoin stabilized after he clarified that Tesla hadn’t sold any of its crypto holdings. His suggestions on how to improve the technical efficiency of dogecoin spurred small increases in the price of the meme-inspired cryptocurrency.

“Tesla is the poster child of the low or no earnings equity movement that has worked incredibly well, as markets saw ever-increasing central bank liquidity through 2020,” said Chris Weston, the head of research at the brokerage Pepperstone, adding that when Tesla moves it can become a momentum-and-trend juggernaut.

“That time is over, at least for now it seems, and in a world where market participants are debating the timing around a reduction in the Federal Reserve’s bond-buying program, and other central banks are already tapering theirs, the market has moved from high growth stocks to value.”

Tesla’s shares closed at $576.83 on Monday but were trading 0.2% higher, at $578.29, in Tuesday premarket trading.

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Home Depot slides even after first-quarter earnings blow out expectations amid unprecedented demand for DIY projects

FILE- In this Aug. 14, 2018, file photo workers stock the shelves at a Home Depot store in Passaic, N.J. Home Depot Inc. reports financial results Tuesday, Feb. 26, 2019. (AP Photo/Ted Shaffrey, File)
  • Home Depot shares fell as much as 1% on Tuesday, even after first-quarter financial results trounced expectations.
  • Earnings of $3.86 a share outpaced a FactSet consensus estimate of $3.02 a share
  • Revenue of $37.5 billion was higher than the $34.82 billion projection from Wall Street.
  • See more stories on Insider’s business page.

Home Depot shares slid on Tuesday, even after the retailer’s first-quarter earnings jumped 86% from a year ago on strong demand for supplies as customers worked on DIY projects during the COVID-19 pandemic.

Earnings came in at $3.86 a share, higher than the $3.02 a share estimated in a FactSet survey of analysts. A year ago, earnings were $2.08 a share.

Revenue for the quarter ended May 2 was $37.5 billion, above the anticipated $34.82 billion and 33% higher than $28.3 billion a year earlier.

Home Depot shares fell as much as 1%, but are still up roughly 20% year-to-date.

“Fiscal 2021 is off to a strong start as we continue to build on the momentum from our strategic investments and effectively manage the unprecedented demand for home improvement projects,” Craig Menear, Home Depot’s CEO, said in the earnings release.

Worldwide comparable sales rose 31% from a year and US same-store sales increased by 29.9%. Home Depot has been considered an essential retailer during the pandemic, allowing homeowners and builders access to supplies and equipment such as hot water heaters, propane, and plumbing fixtures.

Jefferies in a note said the company presented a “solid quarter” with strong expansion in operating margins. Jefferies has a buy rating on Home Depot with a price target of $374.

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These are the key support levels bitcoin and ether need to hold to prevent further downside, technical analyst says

NYSE trader

A decline in bitcoin and ether over the past week has traders looking for key levels of support where buyers will step in and help stop the current decline.

In a Monday note, technical analyst Katie Stockton of Fairlead Strategies outlined the key support levels traders should be watching for bitcoin and ether.

Bitcoin is off as much as 33% from its record high reached last month, while ether experienced a quick 29% decline since its record high set last week.

The decline in the cryptocurrencies was in part sparked by tweets from Elon Musk, who questioned the sustainability of bitcoin’s energy consumption and announced that Tesla would no longer accept the cryptocurrency as a form of payment.

According to Stockton, short-term momentum in bitcoin has weakened, and key resistance for the digital coin is now set at $60,000. Meanwhile, strong support for bitcoin can be found around the $42,000 level, which was successfully tested over the weekend. That support level coincides with a fibonacci retracement level and will soon coincide with bitcoin’s rising 200-day moving average.

“While this [$42,000] would be a natural place for bitcoin to hold, there are no signs of intermediate-term downside exhaustion yet,” Stockton explained, adding that a breakdown below that support level “would put next support near $34,000.”

A decline to $34,000 represents potential downside of 23% from current levels. Stockton believes an oversold buy signal likely won’t form in bitcoin until early June, and emphasized that long-term momentum is still positive for bitcoin despite its weak intermediate-term momentum, “favoring a bullish bias beyond the corrective phase.”

Ether has a different technical set up than bitcoin, as it was staging a parabolic surge in late April and May as bitcoin was moving lower.

“The magnitude of [ether’s] pullback shows the risk inherent to parabolic rallies, during which support levels are left well behind,” Stockton explained. Ether’s support level now stands around $2,038 according to Stockton, which represents potential downside of 40% from current levels.

“We expect the pullback [in ether] to deepen in the near term, after which a consolidation phase may keep hold for a month or two within the context of the long-term uptrend,” Stockton said.

As traders look to buy the dip in cryptocurrencies, keeping an eye on these key technical support levels outlined by Stockton could prove to be a helpful guide.

Read more: ‘Wolf of All Streets’ crypto trader Scott Melker breaks down his strategy for making money using ‘HODLing’ and 100X trade opportunities – and shares 5 under-the-radar tokens he thinks could explode

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Fidelity plans to offer no-fee investment services for teenagers who want to trade stocks and ETFs

fidelity investments
  • Fidelity Investments will offer no-fee investing accounts to 13- to 17-year-olds.
  • The firm said parents can use the accounts as a “teaching moment” to discuss finances.
  • Analysts have previously said Gen Z will be the most disruptive generation ever to markets.
  • See more stories on Insider’s business page.

Teens will soon be able to use a new no-fee service from Fidelity Investments to buy and sell stocks, exchange-traded funds, and Fidelity mutual funds.

The firm plans to offer investing accounts, along with debit cards and savings accounts, to 13- to 17-year-olds whose parents or guardians also bank with Fidelity, according to a Tuesday press release.

Parents can see what their teens are doing in the account and discuss the reasoning behind their child’s financial decisions. “Fidelity is committed to responsibly supporting young investors,” Jennifer Samalis, senior vice president of acquisition and loyalty at Fidelity Investments, said in the press release.

The youth account, which will become a standard brokerage account with more options when the teen turns 18, will also offer educational resources. In a pilot program of the new offering, Fidelity said 90% of parents and guardians used the account as a “teaching moment” to discuss saving, spending, and investing.

“Opening the account can create new opportunities for parents/guardians to engage their teens about money concepts, then allow the teens to independently take action and learn by doing,” Fidelity spokesperson Robert Bearegard said to Insider in an email.

Read more: Northwestern Mutual’s chief investment strategist told us why growth investors are in for ‘painful’ months ahead as the economy heats up – and shares his 2 highest conviction trades right now

The offering comes amid the firm’s push to attract new investors. Fidelity added 1.6 million accounts for individuals 35 years old or younger in the first quarter of this year, which is more than three times the amount from a year earlier, the Wall Street Journal reported, citing the firm.

Bank of America analysts have previously said Gen-Z will be “the most disruptive ever” to the stock market, pushing it to focus more on technology, sustainability, and climate change, and less on classical institutions.

Social media platforms like Reddit and TikTok have helped drive the new wave of investors, along with trading apps such as Robinhood and Webull.

At the beginning of the year, an army of day traders on Reddit drove the GameStop stock price to surge from single to triple digits in an effort to squeeze short sellers. The rally signaled the power of a new wave of investors and a new trend of investing in so-called “meme stocks” like AMC and GameStop, among others.

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High-earning Americans drove 2020’s migration boom, and it shows how wealth is splitting the millennial generation

High-earners were most likely to move and buy a house in 2020.

Americans stopped moving around the 1980s, but that changed last year with remote work.

A new Apartment List report that surveyed 5,000 Americans and analyzed US Census data has confirmed the migration narrative of 2020: Remote work ignited a residential migration rebound as the number of movers increased by 14% to 16% from 2019 to 2020 – it was the first US migration increase in over a decade.

This has big implications for millennial homebuying in particular and wealth inequality in general. The ApartmentList data shows the migrants were largely high-income, meaning that migration was K-shaped, just like the uneven economy born by the coronavirus pandemic. With migration has come a boom in homebuying, and millennials have taken the lead in homebuying, with high-net-worth millennials at the top of the K.

Although the study doesn’t break down generational data, millennials likely comprise many of the high-income households, defined as those earning over $150,000. A previous Apartment List report revealed that the millennial homeownership rate climbed to 47.9% from 40% just three years ago. Many of these millennial homebuyers were likely the same as the 16% of high-income workers that moved over the past year, a 39% jump from the Census Bureau’s estimate of American migrants in 2019.

This marks a sharp contrast from the past decade, in which lower-income workers led migration patterns. Low-income households moved during the migration boom as well, per the report, but the high-income group is more likely to work in flexible jobs. They’ve taken advantage of remote work to move across the country in search of more space and more affordable housing.

Apartment List also found that high-income workers were twice as likely to purchase a home as low-income workers, which dovetails with millennials reaching peak homebuying age during the pandemic and leading the housing recovery. Historically low interest rates made more types of homes viable for the generation, at least for those who had enough money saved to win out bidding wars in a cutthroat market.

Other millennials were priced out as housing prices reached record highs, while others still couldn’t even fathom becoming homeowners. Many moved back home with their parents during the pandemic, either temporarily or permanently. According to a Pew Research Center report, 52% of young adults lived with at least one of their parents as of July 2020, topping the last high of 48% many decades ago, in 1940.

The millennial wealth gap

This migration divide exemplifies the intragenerational millennial wealth gap, which has widened during the pandemic. Such millennial inequality dates back to the Great Recession, with wealthier millennials faring well while their low-earning peers are struggling.

The affordability crisis millennials were already facing prepandemic has left some with little wealth to fall back on as they experience unemployment and other hardships during the coronavirus recession, causing some to move back in with their parents. But a smaller, higher-earning group with stable income has been able to save, invest, and even buy homes with extra money they would otherwise spend in non-pandemic times.

Millennials are experiencing their own K-shaped recovery, uniquely compounded by two recessions. Generational researcher Jason Dorsey, the president of the Center for Generational Kinetics, previously told Insider this could lead to an unequal recovery between these two groups, with those those who lost a job recovering longer than those who began the pandemic with a better financial backstop.

This uneven rebound might have an effect on migration as well. As the report concludes, continuing migration patterns could further redistribute wealth away from the country’s biggest and priciest cities.

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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.

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