Treasury Secretary Janet Yellen sent a letter to Congress urging lawmakers to renew the federal government’s ability to pay off its debt ahead of a major deadline, warning that failing to do so in a timely manner risks major damage for average people and the economic recovery.
Republicans led by Senate Minority Leader Mitch McConnell are balking at raising the debt limit without ensuring spending cuts from Democrats. He suggested earlier this week that Democrats would have to do it on their own with no GOP support.
In the letter, Yellen said the US will hit its statutory debt limit on August 1. The next day, she said Treasury is prepared to take “certain extraordinary measures” to pay the country’s outstanding bills and prevent a default that could ripple through the global economy.
“Failure to meet those obligations would cause irreparable harm to the economy and the livelihoods of all Americans,” Yellen wrote on Friday to House Speaker Nancy Pelosi. She noted that raising the debt ceiling doesn’t prompt more federal spending, it only authorizes the government to pay what it already owes.
Yellen underscored the potential damage that even the threat of a default could have on the economy. She cited a 2011 showdown between Obama and House Republicans that led to the first-ever credit downgrade of US debt. Yellen also said it’s hard to predict when Treasury would exhaust its ability to pay off the US’s bills on its own.
On Wednesday, the nonpartisan Congressional Budget Office forecasted Treasury would “probably” run out of cash sometime in October or November.
Republican opposition is hardening now that President Joe Biden sits in the White House. In July 2019, they voted to suspend the borrowing limit for two years under President Donald Trump.
A default from the federal government could precipitate a chain reaction of cash shortages, starting with US bondholders that include people, businesses, and foreign governments. Democrats insisted this week they wouldn’t allow the GOP to use the debt ceiling as a political weapon.
“We’ll handle our business,” Sen. Brian Schatz of Hawaii, a cosponsor of a bill to abolish the debt ceiling, told Insider on Wednesday. “This is something the Hill freaks out about every year or so. We will not negotiate over it, we will not concede anything and we won’t fail to do our job.”
The Biden administration is pushing lawmakers to raise the debt ceiling ahead of the August 2 deadline.
“We certainly expect Congress to act in a bipartisan manner as they did three times under the prior administration to raise the debt limit,” White House Press Secretary Jen Psaki said Friday.
If the Public Service Loan Forgiveness (PSLF) program worked as it should, then every qualifying public servant would be able to receive student debt relief after 120 qualifying monthly payments. But complicated paperwork and eligibility requirements have made it so that 98% of applicants have been denied relief, even if they qualify.
That’s why, on Friday, the Education Department launched a public inquiry to fix the program.
“Unfortunately, for too many public service workers, the program has not functioned the way they hoped it would,” Julie Margetta Morgan, senior advisor and acting under secretary for the Office of the Under Secretary of Education, wrote in a blog post.
“Fixing the PSLF Program has been a priority for the Biden-Harris Administration since day one,” she added. “While we have identified many opportunities for improvement by talking to experts and borrowers and reviewing our procedures, we want to hear from you as well.”
President Joe Biden campaigned on reforming PSLF following its high denial rate under President Donald Trump, and fixing the program was even included in the Education Department’s regulatory agenda that was released last month. But implementing changes to the program could take at least a year, and the public inquiry would help the department more easily identify the problems it needs to fix.
Starting next week, anyone can submit comments to the department regarding PSLF, and the department specifically wants to know:
What features of PSLF are most difficult to navigate?
What barriers are preventing public servants from receiving student loan forgiveness under PSLF?
For borrowers who have had loans other than from the Direct Loan program, what have your experiences been trying to access or participate in PSLF?
Many Democratic lawmakers have stressed the need to reform the program to give public service workers the student debt relief they deserve. In May, 56 Democrats sent a letter to Biden urging him to quickly reform the program and eliminate the “extraordinary confusion” it places on borrowers.
They wrote: “The program has been beset by numerous ‘donut holes’ that disqualify certain types of loans, repayment plans and the payments themselves, leading to extraordinary confusion and distrust of the PSLF program and, by extension, the federal government.”
Seth Frotman, executive director of the Student Borrower Protection Center – which advocates for borrowers’ rights – said in a statement that the move by the Education Department to launch a public inquiry “offers hope for public service workers who have been let down and cheated out of promised debt forgiveness.”
“For the first time, the federal government is asking those who depend on the program to help decide what comes next,” he said.
On July 31, a set of pandemic-relief measures for renters and homeowners enacted under President Trump will end – and the Biden administration doesn’t appear interested in renewing them.
A federal eviction ban is ending on July 31 after an extension last month. It’s the same for a moratorium on foreclosures. But the Biden administration rolled out a new measure allowing homeowners to refinance their mortgages and cut monthly payments in an effort to aid 1.8 million Americans still in forbearance.
Still, some groups are pushing for the White House to take more aggressive steps to prevent people from losing their homes.
On evictions, advocates say the emergency measure’s end threatens 6 million renters who are at risk of losing their homes at a moment new infections are rising and a federal program to help them has been very slow to provide rent relief.
“The CDC eviction moratorium is a necessary public health measure to lessen spread of/deaths from COVID-19,” Diane Yentel, president of the National Low-Income Housing Coalition, recently wrote on Twitter. “The need clearly remains as Delta surges & 6m renter households remain behind on rent & at risk of eviction when moratorium expires.”
Paul Williams, a fellow at the Jain Family Institute, projected that 80% of all households struggling with rental debt are in counties experiencing a surge of virus cases due to the Delta variant.
“Letting county courts kick people onto the street next week is probably the worst Delta variant strategy I can think of,” he wrote on Twitter.
Separately, the Biden administration is allowing homeowners to extend the length of their mortgage. The White House said Friday that homeowners with mortgages backed by Fannie Mae and Freddie Mac can still delay their payments until September 30.
Senate Republicans voted Wednesday to oppose an infrastructure deal they struck with Biden.
They said they wouldn’t vote for an unfinished bill – but they’ll be prepared to do that on Monday.
Senate Minority Leader Mitch McConnell hasn’t thrown his backing behind the measure yet.
Senate Republicans voted against advancing the $1 trillion bipartisan infrastructure deal on Wednesday in an early vote. But a key faction called for more time and said they can support the same agreement in four days.
Republicans lined up to oppose the blueprint in a 49-51 vote on Wednesday afternoon. The measure fell short of the 60 votes needed to clear the chamber.
Senate Majority Leader Chuck Schumer said he went from a “yes” to a “no” only so he could bring up the measure again for another vote under Senate rules.
Still, Republican negotiators including Sens. Rob Portman of Ohio and Mitt Romney of Utah expressed confidence about supporting their plan on Monday once details on how to pay for it were ironed out.
The agreement contains $579 billion in fresh spending beyond what Congress has already approved focused on roads, bridges, and upgrading broadband connections. All five Republican negotiators voted against kicking off debate on the agreement they had struck with President Joe Biden last month.
It comes days after the bipartisan group jettisoned $40 billion in extra IRS funding in the bipartisan deal, as it had triggered a backlash among conservatives alarmed about the possibility of overreach by the agency.
The GOP maneuver represents a stark contrast with their Obamacare repeal efforts in 2017. At the time, most Senate Republicans voted to advance an incomplete “skinny repeal” blueprint of the Affordable Care Act, a major Republican priority. But the late Sen. John McCain ultimately cast the pivotal vote that torpedoed that effort, with an infamous thumbs-down vote.
Romney told reporters before the vote that it’ll be some time before a full infrastructure bill is drafted. “We won’t have a complete text, that’s going to take quite a while,” he said. “We’ll have elements that are written but many that are not.”
He said the bipartisan group is aiming to be fully agreed upon “the major issues” by Monday. Sen. Jon Tester of Montana, a Democrat in the talks, told reporters the group would continue fleshing out the deal by phone on Wednesday evening.
The bipartisan group put out a statement shortly after the Wednesday afternoon vote. “We have made significant progress and are close to a final agreement,” the senators said, adding they want to broker a deal “in the coming days.”
Progressives are losing patience with the slow pace of bipartisan talks. Democrats including Sen. Elizabeth Warren and Rep. Alexandria Ocasio-Cortez have argued for several weeks that the GOP has been given plenty of time to come onboard and warn that Republicans are attempting to only delay Democratic efforts.
“Democrats have kept the door open to Republicans for months now on infrastructure,” Warren told Insider on Tuesday. “Republicans cannot be allowed to delay progress any longer. I hope Republicans will be part of this, they’ve been given every accommodation, but it’s time to move.”
Senate Minority Leader Mitch McConnell said that he doesn’t envision any Congressional Republicans voting alongside Democrats to renew the federal government’s authority to pay its bills.
That raises the prospects of derailing the economic recovery if the debt limit isn’t raised quickly enough.
“I can’t imagine a single Republican in this environment that we’re in now – this free-for-all for taxes and spending – to vote to raise the debt limit,” McConnell told Punchbowl News, adding Democrats would have to raise it alone in a party-line bill that’s taking shape.
The Kentucky Republican’s remarks represents a major warning to Democrats as they begin assembling a $3.5 trillion reconciliation plan that’s poised to clear Congress without GOP votes. That’s the legislative pathway for certain bills to be approved with only a majority vote.
The federal government’s borrowing authority is set to end on July 30.
Treasury Secretary Janet Yellen urged lawmakers to raise it as she testified before a panel last month, raising alarm about an “absolutely catastrophic” hit to the economic recovery if the government’s borrowing authority isn’t renewed. Raising the debt limit doesn’t mean federal spending will increase.
If the federal government defaults, Yellen said it could trigger a chain reaction of cash shortages starting with US bond holders that include individuals, businesses, and foreign governments.
The Treasury Department can tap into emergency powers to keep payments flowing until a certain date. But Yellen told Congress it’s tough to predict when those will be exhausted this summer given the economic uncertainty stemming from the pandemic.
Republicans voted to suspend the borrowing limit in July 2019 for two years under President Donald Trump. Experts say Democrats could raise the ceiling in a reconciliation package sometime this fall. But that would require them to list a numerical figure because of the process’s strict budgetary rules, opening the door for GOP political attacks on Democrats as big spenders while the national debt tops $28.5 trillion.
On Wednesday, Republican Sen. Lindsay Graham of South Carolina is set to hold a press conference about Democrats’ “reckless tax and spending spree.”
“Jeff Bezos forgot to thank all the hardworking Americans who actually paid taxes to keep this country running while he and Amazon paid nothing.” Warren tweeted, shortly after Rep. Ocasio-Cortez had criticized Bezos.
It’s not the first time Warren has taken aim at Bezos and his taxes. As Insider’s Avery Hartmans previously reported, Warren told TMZ that Bezos was “laughing at every person in America who actually paid taxes. Jeff Bezos’s trip to outer space is being financed by all the rest of the US taxpayers who paid their taxes so that Jeff Bezos didn’t have to.”
Her remarks came after a bombshell ProPublica report revealed just how little the wealthiest Americans pay in taxes. That report said that Bezos did not pay income taxes for two years; in fact, in 2011 he reportedly received a $4,000 tax credit that’s meant for families earning under $100,000. Insider’s Lynnley Browning also previously reported that Amazon paid no income taxes in 2017 and 2018.
While the methods that America’s wealthiest use to pay relatively little in taxes are legal, they’ve prompted discussions from legislators around the need for tax reform.
Warren is a longtime advocate for a wealth tax. Her proposal, the Ultra-Millionaire Tax Act, targets households with a net worth of $50 million or more. Households with $50 million to $1 billion would see a 2% tax; those with over $1 billion would see a 3% tax.
An analysis from Americans for Tax Fairness and the Institute for Policy Studies Project on Inequality found that, under Warren’s tax, Bezos would have paid $5.7 billion in taxes in 2020.
This is a developing story. Check back for updates.
In the first-of-its-kind state initiative, California just approved a program to distribute monthly checks to its residents, marking a step toward a universal basic income in the country.
On Thursday, California’s state legislature unanimously passed a $35 million guaranteed income program funded by taxpayer dollars, in which residents can receive up to $1,000 monthly checks. According to the text of the bill, the program would prioritize residents who age out of the foster system and pregnant individuals, and it does not contain any restrictions on how the monthly payments should be spent.
“I’d like to thank my colleagues for partnering with me on this important work and investing in this concept that will uplift the lives of so many,” California State Senator Dave Cortese, who advocated for the program, said in a statement. “I’m excited that 40 million Californians will now get a chance to see how guaranteed income works in their own communities.”
Cortese added that this program is modeled after a successful universal basic income program passed in Santa Clara County last year, which offered $1,000 monthly checks for a year to young adults who were no longer eligible for foster care.
The California Department of Social Services will administer the funds equitably for both rural and urban applicants, and the bill now heads to California Gov. Gavin Newsom’s desk for approval.
The idea of a universal basic income is becoming increasingly popular. After the pandemic spurred Congress to approve three stimulus checks for Americans, some Democrats began to call for those checks to continue well beyond the end of the pandemic.
On March 31, in the midst of infrastructure negotiations, 21 Democratic senators urged President Joe Biden in a letter to include recurring direct payments in his infrastructure plan, saying that when checks ran out after the CARES Act, poverty rose.
Insider also previously reported that a fourth and fifth stimulus check could cut the number of Americans in poverty in 2021 from 44 million to 16 million while helping close imbalances in poverty, income, and wealth between white Americans and Americans of color.
Biden has not yet commented on if recurring direct payments will become a reality, but California might have paved the way for other states to follow suit and amplified Democrats’ calls to give every resident guaranteed monthly payments.
After President Joe Biden reached an agreement with a bipartisan group of senators on an infrastructure plan, many Democrats criticized how the deal cut out many care-economy measures, like eldercare and affordable housing.
Rep. Alexandria Ocasio-Cortez of New York doubled down on those criticisms on Thursday, promising that progressives will “tank” the deal unless a separate bill, full of care-economy measures, makes the cut, too.
Senate Democrats announced on Tuesday they had reached such a deal which they hope to pass in tandem with the infrastructure package through a political process known as reconciliation, which just requires a simple majority vote.
“House progressive are standing up…” Ocasio-Cortez said during a town hall. “We will tank the bipartisan infrastructure bill unless we also pass the reconciliation bill.”
On June 24, Biden announced he had reached an agreement on an infrastructure plan with the bipartisan group of senators after weeks of negotiations, ending up with a plan that was just under $1 trillion – cutting over a half of the president’s original price tag. This led many Democrats, including Speaker of the House Nancy Pelosi, to say that in order to win their support for the bipartisan deal, a reconciliation bill must be passed alongside it to get needed care-economy measures to the American people.
“There ain’t going to be an infrastructure bill unless we have the reconciliation bill passed by the United States Senate,” Pelosi told reporters at the time.
Biden even said during a press conference after announced the agreement that the infrastructure deal and a reconciliation bill would work “in tandem,” but he later walked back those comments following fierce opposition from Republican lawmakers.
But progressive lawmakers are still pushing for a reconciliation bill that they believe is urgent to meet the needs of the country, including addressing the climate crisis, and their promise to shut down the bipartisan deal if the reconciliation bill isn’t passed at the same time imposes difficulties for the deal’s future.
“If [Senate Dems] try to strip immigration reform, if they try to claw back on child care, climate action, etc., then we’re at an impasse,” Ocasio-Cortez said. “It’s a no-go.”
America’s neglected social safety net could be getting its largest patch in a generation on Thursday, when the US begins a year-long experiment providing a guaranteed income for families with children. Its success will determine whether it becomes a permanent fixture.
The Internal Revenue Service is poised to send the first batch of monthly child tax credit payments stemming from President Joe Biden’s stimulus law, which was approved in March over united Republican opposition. For six months, families can get a $300 monthly benefit per child age 5 and under, amounting to $3,600 this year. The measure provides $250 each month per kid age 6 and 17, totaling $3,000. Half of the benefit will come as a tax refund.
If all goes to plan, the federal government will deposit cash directly into the bank accounts of 36.2 million families, according to projections from administration officials shared with reporters on Wednesday evening. That represents the bulk of the 39 million families the IRS has identified as being eligible for the child allowance.
Experts say the one-year child tax credit payments could shift public attitudes on cash benefits given its wide reach and mark a big step forward in slashing child poverty – some estimate it could be cut by up to half.
“It’s hard to understate the significance of this expansion for child poverty in America,” Samuel Hammond, a welfare policy expert at the center-right Niskanen Center, told Insider. “Most countries have some form of child or family allowance – and the US has been an outlier in excluding the lowest income households from our version of a child benefit,” he said, adding “once you start on this path, it’s hard to turn back.”
Some Democrats are already drawing comparisons between the program and the birth of Social Security in 1935, a milestone that set up a critical source of income for retired and disabled Americans.
“It’s the most transformative policy coming out of Washington since the days of FDR,” Sen. Cory Booker of New Jersey recently told The New York Times.
‘Some bumps in the road’
Democratic lawmakers and Congressional aides have labored behind the scenes to ensure a smooth rollout of the payments. The child tax credit was revamped to include low-income families not required to file taxes, a group previously shut out from tapping into the benefit.
There were some signs of problems early on. Some experts and community groups raised concern that an IRS portal to sign up the poorest families was too complex and inaccessible for people who lacked desktop computers.
Sen. Michael Bennet of Colorado, an architect of the measure, said on Monday the IRS has given the child tax credit “100% of their attention” and said he’s regularly communicated with the agency.
Still, he cautioned there could still be some snags. The pandemic has added to the IRS’s responsibilities over the past year and strained its depleted staff. It has gone from being a tax-collecting agency to a benefit distributor on par with the Social Security Administration.
“I’m sure there will be some bumps in the road as there always are when rolling out something new like this,” he told reporters. “But it’s important as bumps arise to iron them out.”
Some of those potential problems, Bennet told Insider, include “people not getting the benefit they were supposed to receive and accounting issues that might arise. I hope they won’t be systemic issues, I don’t think they will be.”
The IRS has struggled sorting through a massive backlog of tax returns in recent months, delaying tax refunds in at least some cases. Hammond said it was unclear whether distributing monthly child benefits via the IRS is “sustainable in the long run.”
“We’ve increasingly asked the IRS to do an awful lot of social policy beyond taxing and collecting revenues, and the IRS is just not equipped to be a benefits administrator,” he said.
The future of Biden’s child allowance
The bulked-up child tax credit is a rare measure that enjoys deep support among both House and Senate Democrats. Bennet, Sen. Sherrod Brown of Ohio, and Reps. Rosa DeLauro of Connecticut and Suzan DelBene of Washington, are among the lawmakers spearheading efforts to make it permanent.
Biden proposed in his spending plans to extend the bulked-up benefit until 2025, the same year that Trump-era tax cuts for individuals end. It’s possible Republicans could trade support to renew the pair of benefits, given the GOP is generally opposed to cash aid as a standalone measure.
“I think we should embrace allowing people to keep more of their own money, if we’re applying it towards their payroll tax,” Sen. Marco Rubio of Florida told Insider last month. Rubio and Sen. Mike Lee of Utah led efforts to double the size of the child tax credit in the 2017 Republican tax law. The pair favor boosting the benefit amount for workers.
On Wednesday, Rubio released a statement tearing into the child allowance. “The way President Biden tells it, the handout is part of his administration’s ‘pro-family’ plan,” he said. In reality, he has transformed the pro-worker, pro-family Child Tax Credit into an anti-work welfare check.”
Senate Democrats are kicking off a flurry of negotiations to finalize what measures will ultimately be included in a $3.5 trillion budget deal that would mostly be paid for with tax increases. They’ll advance it in a pathway known as reconciliation, which allows them to approve certain bills with a simple majority instead of a filibuster-proof 60 votes. Every Democrat must stick together for the budget package to clear the Senate.
Brown, the Banking Committee chairman, said talks were in their early stages so no child allowance expiration date was set. “Not clear what year yet, but it’s going to be a popular program like Social Security,” he told Insider on Wednesday. “Republicans will not only be afraid to take it away, they’ll start taking credit for it.”
He also suggested its hefty price tag could keep a permanent extension out: “I think its so costly it may not [be included], but I’m still fighting for permanence,” he said.
Brown also rejected the notion of changing the income thresholds. “I think that’s pretty locked in. We’ve all been talking about how important that is, 90% of the public getting this is really consequential and key to its popularity,” he told Insider.
Some Democratic moderates may balk at renewing the child tax credit in its current state. Sen. Joe Manchin of West Virginia, a swing vote, told Insider he was open to a permanent extension last month. Others are undecided on the program’s fate.
“I consider it not an easy issue,” Sen. Angus King of Maine, an independent who caucuses with Democrats, said in an interview. “It is a major expansion of what amounts to an entitlement program. I certainly supported it as part of the pandemic relief package. But supporting it on a permanent basis is something that I have to have more data on and understand how it’ll be paid for.”
Senate Republicans are mostly keeping their cards close to the vest when it comes to the $579 billion bipartisan infrastructure agreement.
Senate Minority Leader Mitch McConnell hasn’t thrown his support behind the package yet, even though it was negotiated by a handful of Senate Republicans that included Mitt Romney if Utah and Susan Collins of Maine. The framework is concentrated on physical items like roads and bridges. It also contains funding for broadband internet, a major priority for both parties.
There doesn’t appear to be a lot of enthusiasm among Republicans to back the agreement yet, which could partly stem from the fact that negotiators are still turning the blueprint into a formal bill. Democrats are pressing to finalize the details this week, but Republicans say a bill won’t be ready until next week.
A total of 11 GOP senators signed onto the bipartisan agreement, which would be enough for the plan to clear the 60-vote threshold if every Democratic senator voted for it as well.
But some have signaled they could withdraw their support given that Democrats are poised to advance a separate $3.5 trillion party-line package through reconciliation in the coming weeks. That legislative pathway requires Democrats to stick together in an evenly-divided Senate over united Republican opposition – and both measures would be approved on parallel tracks.
‘This deal is troublesome to me,” said Sen. Jerry Moran of Kansas, a GOP sponsor, on Wednesday.
Others say they don’t want the bipartisan deal’s fate to be tied to the Democrat-only plan. House Speaker Nancy Pelosi has insisted the House will only approve a bipartisan bill once the Senate clears a party-line infrastructure bill. “They certainly can’t be connected,” Sen. Lindsay Graham, another Republican sponsor, told reporters on Wednesday.
Republicans have also started criticizing the funding mechanisms, potentially making it harder for more Republicans to support an agreement.
Some experts are skeptical that the funding provisions of the bipartisan deal – which include repurposing coronavirus relief funds and unspent federal unemployment aid – will fully pay for itself. Howard Gleckman, a tax expert at the nonpartisan Tax Policy Center, called it “pixie dust” in a recent blog post.
The GOP is seizing on that given their opposition to growing the national debt. Sen. John Cornyn of Texas said in a Tuesday interview that Republicans want “just to make sure the pay-fors are responsible, actually real and not illusory,” he said.
Sen. John Thune, the second-ranked Senate Republican, told reporters on Tuesday that a plan that’s fully paid for would be a “prerequisite for a lot of Republicans to support it.”