Don Beyer (D-VA), chair of Congress' Joint Economic Committee attributed the big jump in first quarter GDP to Biden's pandemic rescue plan, which passed despite 100% Republican obstruction endnote a single Republican vote. "By putting money directly in people’s pockets both through stimulus payments and targeted aid, the American Rescue Plan helped millions of Americans pay bills and make purchases that had long been delayed," said Beyer. "At the same time, the Biden Administration’s successful vaccine production and distribution system provided Americans with the confidence they need to resume every day activities and return to work, helping to fuel the economy. Second quarter growth will likely be even stronger as more Americans get vaccinated and more businesses fully reopen. But that does not mean we should take our foot off the gas. If equitable and enduring growth is our goal-- and it should be, Congress must get to work on passing President Biden’s American Jobs Plan and American Families Plan. Our nation’s future depends on these once-in-a-century investments."
The Wall Street Journal predicted that the 6.4% expansion reported this morning projects "a robust, consumer-led recovery from the pandemic this year. The jump in U.S. gross domestic product in the first three months of the year, reported by the Commerce Department on Thursday, put the size of the economy slightly ahead of where it stood a year earlier, just as the pandemic reached the U.S. The gain was fueled by a flood of federal cash to households and rising vaccinations. Consumer spending soared, with households shelling out the most for big-ticket items such as cars and furniture. The recovery accelerated in the first quarter as more people received a Covid-19 vaccine, states and cities lifted business restrictions, and stimulus payments landed in bank accounts. Consumer confidence rose in April to the highest level in 14 months, the Conference Board said Tuesday... Given the severity of last year’s downturn, the turnaround is one of the most remarkable on record. Just a year ago the pandemic pushed up the unemployment rate to a post-World War II high of 14.8%."
And if that wasn't good enough news, the Labor Department just reported that new applications for unemployment insurance fell by 39,000 to 547,000 last week, their lowest level since the beginning of coronavirus lockdowns.
The defenders of the status quo-- and not just Republicans in Congress-- are out in force trying to turn public opinion against Biden and his proposals. Nothing new there of course-- more whose ox is being gored perspective-- but this morning's Wall Street Journal carried several reports about the forces of the status quo going crazy: private equity firms that are flipping out over his proposal to end carried-interest tax advantage and corrupt conservative senators who don't want to see their legalistic bribes dry up.
The Journal noted that hedge funds and private-equity firms are among those that would be affected by Biden’s proposal, given his plan would get rid of lower rates on long-term capital gains for high-income households and end the grotesquely unfair carried-interest loophole. "The moves," explained Juliet Chung and Miriam Gottfried, "would mean investment managers would no longer be allowed to pay a lower rate on a substantial portion of their compensation. Lobbyists for the private-equity industry responded to the proposal by arguing it might do more harm than good." Who would have ever imagined!
Andrew Duehren's report is more unsettling. Crooked New Jersey criminal senator Bob Menendez, one of the most corrupt Democrats in the Senate and who escaped a prison term on a technicality, called Biden's tax increases on the super-rich too high, aligning himself with the corrupt Republican obstructionists. John Thune (R-SD), McConnell's right-hand man: "Even if the spending is popular, and a lot of it probably will be, the tax increases I think are going to be a hard sell, not just with people in the country, or with Republicans but I think with some Democrats too. I think they realize that you really run the risk of stepping on a lot of economic growth." Apparently Thune is right about Biden's plan being popular but completely wrong about taxing the rich being unpopular. According to this recent Data for Progress poll, even if corrupt senators disagree with fair taxation, 67% of Americans approve of higher taxes on the rich-- including 71% of independents and even 40% of self-identified Republicans!
Yesterday Judd Legum wrote that "the single largest source of funding, an estimated $700 billion over 10 years, is expected to come from cracking down on Americans who cheat on their taxes... The vast majority of Americans-- more than 80%-- pay the taxes they owe on time. For most people, cheating isn't even an option. Their taxes are automatically withheld from each paycheck. People who receive W-2 forms have a tax compliance rate approaching 100%. But some 'taxpayers with more complex sources of income, most of whom are in high-income brackets' are able to avoid paying what they owe. In recent testimony before Congress, IRS Commissioner Chuck Rettig said that he believes the 'tax gap'-- the difference between what is paid to the IRS and what is owed-- could exceed $1 trillion annually.
The privileged few are taking advantage of an agency that has been hollowed out. Years of ideological warfare have left the IRS with a small fraction of its previous capacity to enforce the law. It's easier than ever for the wealthy to get away with cheating.
Biden's plan attempts to reverse these trends. His proposal would invest about $80 billion in the IRS over 10 years in an effort to recover $780 billion.
...The IRS currently lacks the resources to pursue people who don't file their taxes at all. Investigations of non-filers dropped from 2.4 million in 2011 to just 362,000 in 2017. If the government doesn't pursue tax obligations within 10 years, the debt expires. In 2010, the IRS let $482 million in tax debt expire. By 2017, that figure ballooned to $8.3 billion.
None of this was an accident. Republicans have demanded substantial budget cuts to the agency over the last decade. This was motivated by Republicans' long-held belief that the IRS was emblematic of "big government" and by the agency's role in administering Obamacare. Overall, the IRS budget was cut by about 21% in inflation adjusted dollars between 2010 and 2020 even as the number of returns increased by 9%. Funding for enforcement fell by more than one-third.
...Corporations underreport income at a similar rate to wealthy individuals — about 20%. Previously, virtually all corporations with revenues of $20 billion or more were audited. Today, the IRS only has the resources to scrutinize half of these returns. Overall, "audits of corporate tax filings fell by 37 percent." Even when the IRS audits a large company, it is ill-equipped for the task.
Corporations "can pour resources into tax planning, litigation, and lobbying to try to shift the boundary between permissible tax avoidance and unlawful tax evasion-- and to stretch out their cases as long as they can." The IRS has little recourse to push back. As a result the IRS frequently settles with corporations "for much smaller amounts than it believes they owe."
Biden's proposal would not level the playing field. Nor would it eliminate tax cheating by corporations and the wealthy. But it would give the IRS a fighting chance.
That goes a long way towards explaining why Thune and Menendez are pissing in their pants.