Debt Limit Alternatives, Climate Bill, and Stablecoin Regulations
Tax Policy:
October 11: Biden’s Proposal to Empower I.R.S. Rattles Banks and Their Customers
When the Biden administration looked for ways to pay for the president’s expansive social policy bill, it proposed raising revenue by cracking down on $7 trillion in unpaid taxes, mostly from wealthy Americans and businesses. To help find those funds, the administration wants banks to give the Internal Revenue Service new details on their customers and provide data for accounts with total annual deposits or withdrawals worth more than $600. That has sparked an uproar among banks and Republican lawmakers, who say giving the I.R.S. such power would be an enormous breach of privacy and government overreach.
As a result, banks from Denver to Philadelphia say they are being deluged with calls, emails and in-person complaints from both savers and small-business owners worried about the proposal. Banks already submit tax forms to the I.R.S. about the interest that customer accounts accrue. The new proposal would require banks to share information about account balances so that the I.R.S. can see if there are large discrepancies between the income people and businesses report and what they have in the bank.
Banks say the reporting requirements would raise their costs and put them in the unenviable position of handing customer information over to the I.R.S.Top industry trade groups have hammered the proposal in emails and phone calls to members. After the initiative made its first appearance deep in the Treasury's annual budget proposal in May, the American Bankers Association said it and its state-level partner groups quickly heard from hundreds of member banks, raising questions about the idea and its implications.
Treasury officials say they are flummoxed by the outrage, given that banks of all sizes initially told them they could comply with the rules, which would not take effect until 2024. "They have made clear during conversations with banks that firms can easily implement a simple proposal like the one under consideration in Congress, and that any compliance costs would be minimal," said Ms. LaManna, the Treasury spokeswoman.
Biden Agenda:
October 12: House Speaker Nancy Pelosi suggests Democrats could cut major pieces of Biden’s economic plan
Key takeaways:
House Speaker Nancy Pelosi signaled Democrats could cut entire pieces of their social safety net and climate bill, rather than scale back a range of policies, in order to cut costs.
The party has to trim its $3.5 trillion proposal, the core of President Joe Biden’s domestic agenda, in order to win enough votes to pass it.
It will mean deciding whether to prioritize programs including child care, paid leave, Medicare expansion, household tax credits and green energy.
October 9: Internal battles heat up over Biden agenda
Democrats are plotting their next moves on a massive social spending package that advances much of 's economic agenda, but they'll also have to resolve several internal battles that are starting to heat up. Lawmakers say the debt limit deal that resulted in a Senate vote on Thursday night clears the way for Democrats to devote their time to the spending package.
"Senate Democrats will focus on passing [the] Build Back Better agenda so we can finally build up ladders of opportunity for people to climb up to the middle class, to help people already in the middle class stay there, to fight climate change, and create the good-paying jobs of tomorrow and rekindle that sunny American optimism that has long been the core of our national identity," Senate Majority Leader said on the Senate floor Thursday.
Democrats have disagreements on a wide variety of issues, ranging from the overall size of the package to the contours of the spending programs and tax cuts in the bill and to the revenue raisers that will be used to pay for the legislation. Three Democrats voted against a House committee's portion of the spending package that would allow the Health and Human Services secretary to negotiate prescription drug prices, a clear sign that this is an issue where Democrats have yet to reach a consensus.
Expanding Medicare to cover dental, vision, and hearing care is a major priority for a number of Democrats, especially progressives. But the cost of doing so, as well as a preference from other Democrats to focus more on shoring up ObamaCare, is creating significant hurdles for the party. Many Democrats from high-tax states view changes to the cap on the state and local tax deduction as a must-have in the spending package.
Infrastructure Bill:
October 11: Biden faces pressure to pass infrastructure bills before climate summit
President Biden is facing pressure to get major infrastructure legislation across the finish line ahead of a global climate summit this month. Congress is currently working through both a bipartisan infrastructure bill that includes investments in an electric vehicle charging network and public transit and a Democrat-only "Social infrastructure bill" that would spend heavily on clean energy.
Countries are expected to negotiate the future of climate action at the COP26 climate meeting in Glasgow, Scotland, where the U.S. will be working to restore its climate leadership after four years of inaction under the Trump administration.
A version of the Democrats' bill put forward in the House has a number of climate provisions, including clean energy tax credits, a fee on methane emissions from the oil and gas industry, and a program that would seek to shift the bulk of the country's electric power to renewable energy through payments and fines to power providers.
Others argue that it's particularly important to deliver tangential progress after the U.S. lost credibility on climate during the Trump administration - notably with his withdrawal from the Paris agreement, which was born out of a previous global climate conference. Haverkamp, now a professor at the University of Michigan, said that the U.S. not getting the legislation done in time could make it harder for other countries to justify their own climate actions.
"In an ideal world I think we would have a good deal on climate before COP26 because that really gives President Biden and the U.S. team more leverage going into the COP to be able to push for enhanced ambition from other countries," said Danielle Arostegui, a senior analyst at the Environmental Defense Fund, "But at the end of the day, I think it's the substance of the bill that really matters."
Spending Bill:
October 10: Democrats set up chaotic end-of-year stretch
Democrats are facing a daunting stretch as the party struggles to get beyond internal battles to win the approval of Biden's agenda - and deal with other crises that have effectively been punted to the Christmas season.
Democrats are entering the home stretch of the year with four big priorities: funding the government, raising the debt ceiling, and passing both the bipartisan infrastructure bill and a sweeping social spending measure. If they can't pass the bipartisan infrastructure bill by the end of October, they'll need to pass another short-term highways extension, and the scheduling of other must-pass bills, including an annual defense policy bill, have also been in limbo as
Democrats try to figure out when they'll bring their two-part spending package to the floor.
Senate Majority Leader is doubling down on his pledge that Democrats won't use reconciliation - a budget process that lets them bypass the 60-vote legislative filibuster - to pass a long-term debt hike later this year. "The solution is for Republicans to either join us in raising the debt limit or stay out of the way and let Democrats address the debt limit ourselves," Schumer said.
While 11 Republicans helped Senate Democrats overcome a key procedural hurdle on the debt ceiling last week, they are vowing they won't do so again. The move, GOP senators argue, was designed to take pressure off changes to the filibuster and prove Democrats had time to raise the debt ceiling on their own under the budget rules.
Debt Ceiling:
October 8: Growing number of Democrats endorse abolishing debt limit altogether
Congress is on the verge of narrowly averting a catastrophic debt default — and some Democrats want it to be for the last time. The calls for taking the near-annual fight out of lawmakers’ hands are coming from prominent voices such as House Budget Committee Chairman John Yarmuth (D-Ky.) and Treasury Secretary Janet Yellen, who want to eliminate the debt limit in its current form.
That's leading some Democrats to propose longer-term solutions, like taking the authority away from Congress or exempting bills related to the debt limit from the Senate filibuster rules. Rep. Brendan Boyle (D-Pa.) has also previously introduced legislation in recent years to repeal the debt limit altogether as a way to permanently eliminate a disastrous scenario that would lead to a U.S. credit downgrade, a likely recession, and delayed Social Security, military salary and other essential payments made by the federal government. "While I welcome this change in stance from Sen. McConnell, we need a long-term solution to our debt ceiling dysfunction. It's time to end the debt limit as we know it," Boyle said.
Yellen came out in support of getting rid of the debt limit in testimony last week before the House Financial Services Committee, arguing that it's impractical to limit the Treasury's ability to pay for spending already enacted by Congress and the president. It's not clear that Democrats would be entirely unified about overhauling the debt limit; some fiscally minded centrists are skittish about making major changes to precedent or appearing dismissive of the national debt.
Only 11 Senate Republicans were willing to join with Democrats on Thursday to overcome a procedural motion on the debt limit extension, underscoring the reluctance in the caucus to be seen as helping Democrats under the Biden administration on the issue. Other Democrats already frustrated with Senate Republicans' ability to use the filibuster to block most of their agenda think it's a better alternative than merely kicking the can down the road. Following the Senate passage of the debt limit extension late Thursday, the House will vote to send the bill to Biden on Tuesday evening.
October 7/8: Debt Ceiling Bill Passes Senate, Heads To The House
The Senate late Thursday adopted a short-term measure to raise the country's debt ceiling into early December, a move that could pull the federal government back from the fiscal brink even though it risked reigniting the high-stakes battle at the end of the year. The resolution would end a tense few weeks of partisan warfare, during which Democrats tried repeatedly to suspend the country's debt ceiling into 2022 - only to falter at the hands of GOP objections.
Republicans ultimately provided the 10 votes that Democrats needed to conclude debate a day later, though GOP lawmakers soon after voted against the actual increase to the debt ceiling itself. Even though Democrats say the package is financed in full, Republicans argue it would add to the deficit even beyond the 10-year scope of the plan - prompting them to withhold their support for an increase to the debt ceiling.
The Republicans' opposition had for weeks frustrated Schumer and his fellow Democrats, who repeatedly pointed out that the debt ceiling covered past spending, including bipartisan initiatives to respond to the coronavirus pandemic enacted last year. Even as he brokered a deal, McConnell maintained an insistence Thursday that Republicans are not going to provide the 10 votes Democrats need to advance a longer-term measure to address the debt ceiling in the narrowly divided chamber, where most legislation requires 60 votes to progress.
Privately, Democrats also acknowledge that reconciliation could open them up to uncomfortable political votes and attacks, especially because it requires them to raise the debt ceiling by a specific amount rather than suspending it outright.
Crypto News:
October 12: IMF warns cryptocurrencies may threaten financial stability without regulation
As crypto grows in adoption, the potential impact on the economy and the risks will grow, according to the IMF. The international body added its voice to a growing chorus on the need for more oversight, underscoring that crypto has inadequate regulations and deficiencies in its operating structure - pointing to exchanges that go down during major selloffs.
"Challenges posed by the crypto ecosystem include operational and financial integrity risks from crypto asset providers, investor protection risks for crypto assets and DeFi , and inadequate reserves and disclosure for some stablecoins," the IMF's report said.
The report suggested risks can be further amplified by the use of leverage offered in crypto exchanges, which has been as high as 125 times the initial investment, according to the IMF. The market capitalization for stablecoins has quadrupled in 2021 to more than $120 billion, while trading volumes outpace other crypto assets, since they're used for settling spot and derivative trades on exchanges.
U.S. authorities are expected to roll out a regulatory proposal for stablecoins later this month, and mandating transparency of what exactly backs stablecoins is expected to be part of the recommendations.
Stronger competition for bank deposits through stablecoins held on crypto exchanges or private wallets could push local banks toward less stable and more expensive funding sources to maintain similar levels of loan growth, according to the report.
To guard against systemic risks to the global financial system, the IMF said global standards for crypto assets should be adopted-notably for taxes - and that national regulators should coordinate for effective enforcement to prevent regulatory arbitrage. For stablecoins, the international body says disclosure requirements for what stablecoins are backed by should be mandated, along with independent audits of those reserves.
October 6: Ledgible releases full Dogecoin support for tax and accounting
Verady, which makes Ledgible, a platform to monitor and report on cryptocurrency investments, has created a native integration with Doge to make it easier to work with clients who invest in Dogecoin. As Dogecoin continues to grow, Ledgible can manage all the transactions made using Dogecoin, or any supported action of the Doge blockchain. Ledgible tracks on-chain Doge blockchain transactions.
Dogecoin holders can store Doge in an on-chain wallet and directly import all transactions via an API connection rather than needing to upload the transactions to Ledgible or enter them manually. One of the biggest challenges for cryptocurrency holders is to account, track and manage all the crypto data across multiple wallets and exchanges as well as all transactions to calculate gains or losses and income, especially now that the IRS is taxing this activity.
The complexity of transferring crypto and complex transaction history can lead to many reporting difficulties. Ledgible supports a wide range of integrations across major blockchains, cryptocurrency exchanges and accounting platforms.
FYI:
October 8: The Postal Service is slowing the mail to save money. Critics say it's a death spiral
The U.S. Postal Service began slowing deliveries of first-class mail nationwide on Oct. 1.
"Every postal expert in the country and across the globe really knows that you don't slow down service and raise prices at the same time and expect customers to stick around," McConnell tells NPR. "People will use the Postal Service less, revenue will decline and then they'll need to make more cuts. So essentially, you're sending the post office into a death spiral."
The Postal Service says that 61% of first-class mail will not be affected by the slowdown, which is caused in part by the agency's decision to rely less on moving mail by air and more by ground transportation.
One thing that would help, Yoder says, is for Congress to pass the Postal Service Reform Act, legislation that would eliminate the requirement the Postal Service prepay its retirees' health benefits, which would save the agency an estimated $46 billion over 10 years.
McConnell of the Save the Post Office Coalition says the Postal Service should also take advantage of its network of more than 31,000 post offices to increase its revenues. The Postal Service has launched a very limited experiment in postal banking in the Washington-Baltimore area and the Bronx in New York City.
For Fun:
October 10: Can Crypto Go Green?
Ether, the second-most popular cryptocurrency, uses a lot of power, like Bitcoin, but its developers are planning a transition to a mining method that is more friendly to the environment.
DealBook gathered three prominent experts to debate the solutions for greening crypto: Alex de Vries, a data scientist who created the Bitcoin Energy Consumption Index; Kathleen Breitman, co-founder of the Tezos blockchain network; and Paul Prager, chief executive and founder of the Bitcoin mining company Terawulf, who is an energy industry veteran.
Given newer cryptocurrencies that use less energy, is Bitcoin mining already outdated?
Green energy goes to waste if it’s not used when generated. Batteries that can store renewable power for when the sun isn’t shining or wind isn’t blowing are the holy grail of the energy industry. For now, these don’t exist at the necessary scale. But some see a way that Bitcoin could function as another sort of “battery.” It could store the value of renewable energy by converting intermittently available local solar and wind power into a globally traded digital asset with unlimited shelf life. Another way Bitcoin mining can be made more sustainable, some argue, is to use "Stranded" or wasted energy, for example capturing the power of flare gas at oil patches to mint digital money.
China recently banned Bitcoin mining because these Bitcoin miners were ultimately responsible for the revival of coal mines.
De Vries: Bitcoin miners are trying to make more profitable equipment all the time, and those machines are improving at a rapid rate. As soon as the Bitcoin price runs up, what happens is the money that goes to Bitcoin mining goes up.