Defense Bill, ChatGPT, and El Niño
Tax Policy/News:
July 14: IRS plans improvements in tax pro accounts and new business online accounts
The Internal Revenue Service continues to progress on modernization efforts after receiving extra funding, with plans to improve infrastructure, including creating online accounts for businesses, improving its online accounts for taxpayers and tax professionals, and adding extra capabilities for submitting forms via mobile phones while cracking down on high-income tax evaders.
"Thanks to funding provided by Congress in the Inflation Reduction Act of 2022, we've started transforming IRS operations. These will provide significant benefits for taxpayers, tax professionals and the tax system over the next decade. We have a unique opportunity, a once-in-a-generation chance, to envision and realize the future of tax administration," IRS commissioner Daniel Werfel said during a press conference Thursday.
The IRS is also launching new business online accounts, allowing businesses to view outstanding balances, make payments online, and conduct a business tax check.
"During the filing season, taxpayers were able to respond to 10 common notices for credits like the Earned Income and Health Insurance Tax Credits online, saving them time and money. By mid-August, IRS will provide this capability for taxpayers to respond digitally to an additional 53 notices and letters received from the IRS. These updated IRS notices and letters will provide a URL for the taxpayers to submit their response digitally, instead of mailing the response to the IRS,” Werfel continued.
"These new machines will allow the IRS to quickly open and prepare large volumes of mail for processing, which will result in the IRS processing paper returns and delivering refunds more quickly," said Werfel.
Laurel Blatchford, chief implementation officer for the Inflation Reduction Act at the Treasury Department, described some of the progress the IRS has made so far: "The IRS achieved 87% levels of service exceeding [Treasury] Secretary [Janet] Yellen's goal of 85%. The IRS answered 3 million more calls, cut phone wait times to three minutes from 28 minutes, served 140,000 more taxpayers in person, digitized 80 times more returns than in 2022 through the adoption of new scanning technology, cleared the backlog of unprocessed 2022 individual tax returns with no errors, launched new digital tools, and enabled a new direct deposit refund option for taxpayers with amended returns. The IRS has not taken its foot off the gas and continues to make steady progress in improving service, enforcement and technology."
The IRS is expanding its walk-in taxpayer assistance centers and plans to set up new temporary centers to meet with taxpayers in remote parts of the country.
In its new Community Assistance Visits initiative, the IRS will set up a temporary Taxpayer Assistance Center to give taxpayers in hard-to-reach areas an opportunity to meet face-to-face with IRS customer service representatives.
July 13: Senate report confirms data leakage from tax software
A recent Senate investigation report says that major tax preparation software companies have been sending sensitive personal information to tech companies like Meta and Google, in possible violation of taxpayer privacy laws.
The report details the results of an investigation led by Sen. Elizabeth Warren, D-Massachusetts, which was launched in response to reports late last year that several prominent tax prep solutions providers were leaking data to third parties.
The report noted that both the tax prep companies and the tech firms they sent data to pointed out that the information was anonymous.
On the part of the tech companies receiving the data, the senate report assailed them as acting with "Stunning disregard for taxpayer privacy," as they did not fully disclose how they were collecting taxpayer data or what their intended use for it was.
The report further said that, upon initial reports of data leakage late last year, the tax prep companies attempted to get clarification from Meta to get a better understanding of the kind of data sent to the social media company, and to get the company to delete personal information it may have collected.
Sen. Warren said that, in light of these revelations, it is possible the tax prep companies may have violated taxpayer privacy laws by sharing this sensitive data.
"This potentially illegal misuse of taxpayer data should be immediately investigated by the Department of Justice, IRS, the Treasury Inspector General for Tax Administration and FTC, and liable actors should be duly prosecuted. This investigation raises serious doubts about the ability of the tax prep industry to safeguard taxpayer information and highlights the urgent need for the IRS to develop its own online tax filing system - to protect taxpayer privacy and provide a better alternative for taxpayers to file their returns," the report concluded.
Economic News/Policy:
July 17: Treasury yields fall as investors assess state of U.S. economy
U.S. Treasury yields declined on Monday as investors considered the outlook for the economy and monetary policy ahead of a week with few key economic data reports.
The yield on the 10-year Treasury inched up to 3.830%. The 2-year Treasury yield was last higher by about 2 basis points to 4.768%. Yields and prices move in opposite directions.
One basis point equals 0.01%. Investors assessed the state of the U.S. economy and considered what could be on the horizon for it, and how this could affect Federal Reserve monetary policy.
Data published last week suggested that inflationary pressures were easing, with the consumer price index rising by 0.2% compared to the previous month and 3% on a yearly basis.
Those data points are likely to inform the Fed's monetary policy decisions.
Pressures from rising prices were a key factor in the central bank's decision to adopt a tighter monetary policy stance in early 2022.
Interest rates were left unchanged at the most recent central bank policy meeting, but markets are broadly pricing in a further rate hike from the Fed this month.
July 14: JPMorgan Chase beats analysts’ estimates on higher rates, better-than-expected bond trading
JPMorgan reported second-quarter earnings that exceeded analysts’ expectations as the company benefited from growing interest rates and unprecedented bond trading.
Shares of the bank climbed about 2%. JPMorgan's retail banking division was its main source of strength this quarter.
The bank's results also benefited from better-than-expected trading and investment banking activity.
Investment banking revenue of $1.5 billion topped the $1.42 billion estimate.
Whether it's about deposits, funding costs or net interest income - all hot-button topics since the regional banking crisis began in March - the bank has outperformed smaller peers.
That's helped shares of the bank climb 11% so far this year as of Thursday, compared with the 16% decline of the KBW Bank Index.
Last month, several regional banks disclosed lower-than-expected interest revenue, and analysts expect more banks to do the same in coming weeks.
On top of that, banks are expected to disclose a slowdown in loan growth and rising costs related to commercial real estate debt, all of which squeeze banks' bottom lines.
House Republicans passed the National Defense Authorization Act after GOP leadership made several concessions to the right flank of the party in a big gamble.
Members of the House Freedom Caucus, some of the most conservative lawmakers in the chamber, pressured McCarthy to hold last-minute floor votes on several contentious amendments, ranging from targeting the Pentagon's abortion policy to reeling back climate change initiatives.
The amendments endangered final passage of the legislation, a must-pass defense bill that sets the Pentagon's policy agenda and authorizes how the Defense Department uses federal funding.
This is one of the most popular amendments among House conservatives, with over 70 co-sponsors.
A vocal minority of House GOP lawmakers who have expressed skepticism about continued U.S. assistance to Ukraine have filed amendments aimed at restricting military aid.
Rep. Adam Smith, D-Wash., the top Democrat on the House Armed Services Committee told the Washington Post Monday he had specific concerns about "Extreme right-wing amendments that have been filed, specifically those related to abortion, guns, the border, and social policy and equity issues."
Even Rep. Matt Gaetz, R-Fla., one of the most outspoken lawmakers on the right, said earlier before the abortion vote he had doubts as to whether the amendment would make it in the bill.
July 12: Inflation slowed to 3 percent in June, hits lowest rate in two years
Consumer prices rose 3 percent annually in June and 0.2 percent last month alone, according to inflation data released Wednesday by the Labor Department.
The consumer price index posted its smallest annual increase since March 2021, as inflation fell from a 4 percent annual rate in May. Without food and energy, prices rose 4.8 percent on the year and 0.2 percent in June, the smallest one-month increase since August 2021.
Housing costs were the biggest driver of inflation, according to the Labor Department, fueling more than 70 percent of price growth in June.
The June slowdown in price growth is another sign that the U.S. is finally past the burst of inflation set off by the recovery from the COVID-19 pandemic and years of supply chain issues.
After peaking at an annual rate of 9.1 percent in June 2022, inflation has fallen rapidly back toward pre-pandemic levels.
The overall decline in inflation should be somewhat reassuring to the Federal Reserve as the central bank battles price growth; the Fed is trying to bring inflation back down to an annual rate of 2 percent with a string of rapid interest rate hikes, which tend to slow the economy.
"Core" inflation - which strips out food and energy prices - is at an annual rate of 4.8 percent, still well above the bank's target.
Energy and Environmental Policy/News:
July 17: A Call for New Research on Energy and the Environment
CBO is on the lookout for new research related to various topics in the area of energy and the environment-specifically, research that addresses how changes to federal regulations and permitting would affect energy markets and CO2 emissions, and how changes in federal spending on efforts to adapt to climate change would affect the amount of damage it causes.
The Congress often considers legislation intended to hasten the federal approval process for building large infrastructure projects by reducing regulatory and permitting requirements, including projects to produce and deliver energy.
Although there is ample literature on the market effects of government regulation, there is little research for CBO to draw upon about how changing regulatory and permitting requirements for energy-related infrastructure would affect the quantities and prices of energy produced and the resulting amount of CO2 released.
There has been little research on the expected economic and environmental effects in energy-producing sectors from changes to permitting or to environmental reviews under NEPA or other laws.
Some research has considered federal environmental protections as a whole but has not identified the relative importance of particular requirements for environmental protection.
Other studies have focused on specific environmental protections but not the role of environmental review under NEPA. Research that evaluates how changes to the federal permitting process and related environmental reviews would affect domestic energy sectors could enhance CBO's analysis of the budgetary and economic effects of future changes in federal permitting.
CBO is conducting research on the effects of federal spending on climate change adaptation, and that work would be enhanced by additional research that extends, compares, and combines different approaches to help fill gaps in the literature.
Technology:
July 14: ChatGPT chief pledges to work with FTC as federal probe begins
The CEO of the company behind artificial intelligence tool ChatGPT has pledged to work with the Federal Trade Commission, even as he criticized how news of the agency's probe of the company became public.
OpenAI CEO Sam Altman's response came after the agency's request for documents from the company about the AI chatbot was first reported Thursday by The Washington Post.
"[I]t is very disappointing to see the FTC's request start with a leak and does not help build trust," Altman tweeted. “[O]f course we will work with the FTC," he added.
The Post had reported that the FTC's expansive request to OpenAI seeks descriptions of complaints to the company as well as records related to a security incident disclosed in March.
"Our capped-profits structure means we aren't incentivized to make unlimited returns." The FTC's request is the latest - and seemingly most direct - regulatory threat to OpenAI as the federal government races to regulate the booming AI industry.
FTC Chair Lina Khan and other agency heads have pledged to use existing authority under law to hold AI technology accountable as Congress weighs new legislation.
July 12: Harris Huddles With Civil Rights Leaders On AI
Vice President Harris met with civil rights and consumer protection advocates Wednesday for a discussion on the risks of artificial intelligence technology.
"This is a very multifaceted issue and topic, and we also know that this is technology that is rapidly developing," Harris said during remarks before the meeting.
The discussion is intended to cover a range of AI impacts, including risks posed to vulnerable Americans - such as seniors targeted by AI-generated scams - and potential discrimination by AI tools used during job hiring processes.
Harris said a "Guiding principle" for the administration is to reject the "False choice" that suggests the U.S. can either advance innovation or protect consumers.
Taiwan's vice president to transit through the US, raising tensions with China 'Smokeageddon' was unprecedented.
Harris's meeting follows a talk she led in May with President Biden and executives of companies leading in the development of AI. It also comes one day after the Senate held its first classified briefing about AI, featuring top intelligence and defense officials.
Senators left the briefing with increased concerns about the risks of AI, but clear battle lines on a legislative plan to regulate the technology have not yet appeared.
ICYMI:
July 15: When El Niño exacerbates global warming: Record heat, record flooding, record wildfires
If you feel like record-level extreme weather events are happening with alarming frequency, you're not alone.
"The number of simultaneous weather extremes we're seeing right now in the Northern Hemisphere seems to exceed anything at least in my memory," Michael Mann, professor of earth and environmental science at the University of Pennsylvania, told CNBC. Globally, June was the hottest June in the 174-year records kept by the National Oceanic and Atmospheric Administration, the federal agency said on Thursday.
As of Friday morning, 93 million people in the United States are under excessive heat warnings and heat advisories, the National Weather Service Weather Prediction Center, according to a bulletin published Friday morning.
There have been 12 billion-dollar weather and climate disasters in 2023, according to NOAA. "This year will almost certainly break records for the number of extreme weather events," Paul Ullrich, professor of regional and global climate modeling at University of California at Davis, told CNBC. Global warming is making extreme weather events more severe, scientists said.
"Our own research shows that the observed trend toward more frequent persistent summer weather extremes - heat waves, floods, - is being driven by human-caused warming," Mann told CNBC. Ullrich agrees.
"Scientists are extremely confident that an increasing frequency and intensity of extreme events is a direct consequence of human modification of the climate system." Also in June, the weather pattern called "El Niño" arrived.
"Higher temperatures from climate change are indisputable, and with each degree increase we're multiplying our chances of getting an extreme heat wave. In the wetter regions of the world, including the Northeastern US, we're expecting more rain and more intense storms," Ullrich told CNBC. "To avoid even more extreme changes, we need to both reduce our reliance on fossil fuels and act to clean up our polluted atmosphere." And as long as global greenhouse gas emissions continue to increase, the trend of more and more frequent extreme weather is expected to continue, Mann says.
For Fun:
July 13: NASA rover reveals new evidence about organic molecules on Mars
Evidence is mounting about what may be a wealth of organic molecules - a potential indicator of life - on Mars, with new findings from NASA's Perseverance rover suggesting the presence of a diversity of them in rocks at a locale where a lake existed long ago.
The latest evidence comes from an instrument called SHERLOC mounted on the six-wheeled rover's robotic arm that enables a detailed mapping and analysis of organic molecules.
They obtained evidence indicating the presence of organic molecules in multiple rock samples, including some collected for potential return to Earth for future analysis.
Signals of organic molecules were detected at all 10 places that SHERLOC - short for Scanning Habitable Environments with Raman and Luminescence for Organics and Chemicals - studied on the crater floor.
SHERLOC employs cameras, a laser and instruments called spectrometers that analyze light wavelengths to search for organic molecules that may be signs of past microbial life.
Signs of organic molecules were first detected on Mars in 2015 by a different rover called Curiosity, followed by more evidence in subsequent years.
With Perseverance now detecting possible signatures of organic molecules, the evidence is accumulating that organic molecules may be relatively common on Mars, though at low levels.