Debt Ceiling, Interest Rates, and TikTok
Tax Policy/News:
March 22: Conservative coalition takes aim at Biden’s IRS-run tax preparation service
A coalition of conservative groups led by Americans for Tax Reform is calling on lawmakers to block the creation of a government-run tax preparation service or a "Direct file" tax return system, a largely overlooked reform included last year in President Biden's landmark Inflation Reduction Act.
Conservative critics led by Americans for Tax Reform President Grover Norquist said the government shouldn't be helping Americans figure out how much they owe in taxes because the Internal Revenue Service has a vested interest in collecting as much tax revenue as possible.
"Government-run tax preparation would create a significant conflict of interest in which the IRS would be responsible for calculating a filer's tax liability and for managing contested tax returns," the groups wrote.
Warren introduced her Tax Filing Simplification Act in response to what she saw as the failures of the earlier "Free File" program, which the IRS outsourced to the tax preparation industry and she argued at the time underserved the public.
“The IRS’s selection of New America Foundation represents an obvious effort from the Biden Administration to select a politically allied group to conduct a study where the results are pre-baked and favorable to the cause of government-run tax preparation,” the groups wrote.
They argued that the IRS lacks the information it needs to prepare tax returns and would put tax credits often claimed by lower-income tax filers at risk, citing a Progressive Policy Institute report that warned a "Return-free" system could fail to properly identify Americans who qualify for the earned income tax credit.
"The IRS just doesn't have the information required to be able to file a for people. A significant percentage of people, I think it drops by 10 or 15 percent, wouldn't be claiming the EITC as currently do. That's when the tax trap comes in," said Mike Palicz, the director of tax policy at Americans for Tax Reform.
Americans for Tax Reform and its allies argue that another study from PricewaterhouseCoopers found that a government-run tax preparation service would increase the compliance burdens on individual tax filers.
Economic News/Policy:
March 28: Debt ceiling impasse: McCarthy presses Biden to negotiate
House Speaker Kevin McCarthy, R-Calif., said Tuesday he’s increasingly concerned about President Joe Biden’s unwillingness to negotiate on lifting the nation’s borrowing authority, saying in a letter to the president that the White House position could “hold dire ramifications for the entire nation.”
Rather than open direct talks on the debt ceiling, which the Democrats agree must be raised, Biden and his party's lawmakers are challenging Republicans to publicly present their own budget proposals - something McCarthy has so far declined to do.
The White House has emphasized that Biden is not willing to entertain proposed cuts in programs simply in exchange for lifting the debt limit. McCarthy and Republicans are insisting he must for debt ceiling legislation to move ahead. The two sides are on a slow-motion collision course that could have negative implications for the economy.
"Nearly two months ago, you and I sat down to discuss a path forward on the debt limit," McCarthy wrote in a letter to Biden dated Tuesday.
"It's time for Republicans to stop playing games, pass a clean debt ceiling bill, and quit threatening our economic recovery," said White House press secretary Karine Jean-Pierre.
Democrats believe the pressure will continue to build on Republicans to allow for a clean debt ceiling increase - with no spending-cut trade-offs - and then lawmakers from the two parties can negotiate overall levels for federal agencies in spending bills for the coming fiscal year.
Rep. Pete Aguilar, D-Calif., disparaged McCarthy's letter as consisting only of bullet points and called on House Republicans to both produce a budget and raise the debt limit, noting Congress lifted the ceiling three times during Donald Trump's presidency.
March 26: Economy Week Ahead: U.S. Household Spending and Home Prices in Focus
Tuesday: S&P Global releases its S&P CoreLogic Case-Shiller National Home Price Index for January. Home prices rose 5.8% in the year ended in December, down from a 7.6% annual rate the prior month, the lowest December-to-December change since 2019. The National Association of Realtors last week separately said the median sale price of previously owned homes fell year-over-year in February for the first time in over a decade.
The Conference Board publishes its March consumer-confidence index, which measures Americans’ attitudes toward the economy and labor market. Consumer confidence worsened in February for the second month in a row.
Wednesday: The National Association of Realtors reports the number of home sales based on contract signings in February. Pending home sales rose in January from the prior month.
Thursday: The Labor Department reports the number of worker filings for unemployment benefits in the week ended March 25. Initial jobless claims edged lower in the prior week, showing the job market remains strong despite announced layoffs.
The Commerce Department releases its third estimate of output by the U.S. economy in the fourth quarter. The economy grew at a 2.7% annual rate in the final three months of last year, the second estimate showed.
Friday: The Commerce Department releases figures on U.S. household spending and income in February. Consumer spending jumped 1.8% in January from the prior month, the largest increase in nearly two years. The department also releases its personal-consumption expenditures price index, a gauge of inflation closely watched by the Federal Reserve. The PCE-price index rose 5.4% in January from a year earlier.
The European Union’s statistics agency releases March inflation figures for the eurozone. The bloc’s consumer prices were 8.5% higher in February from a year earlier, the fourth straight month of easing eurozone inflation.
The University of Michigan publishes its final reading of consumer sentiment for March. A preliminary reading showed that sentiment fell for the first time in four months, mainly over persistently high inflation.
March 22: Fed hikes rates despite concerns over banking crisis
The Federal Reserve hiked interest rates by 0.25 percentage points on Wednesday after numerous failures in the banking sector had prompted some analysts on Wall Street to call for a pause.
“Bank stress calls for a pause,” analysts for Goldman Sachs wrote in a Monday research letter to investors, arguing that banking is more important than other sectors of the economy.
"Banking is not just another sector of the economy because financial intermediation is vital to every sector. As a result, addressing stress in the banking system is the most immediate concern and must take priority over other less urgent goals for the moment. We expect that policymakers and staff economists at the Fed will have the same view," they wrote.
"The banking mess is, as far as I can tell, sufficient reason for the Fed to pause until we know more," economist Paul Krugman wrote online.
The Fed decision comes after a series of bank failures over the past week-and-a-half prompted government intervention to prop up the banking sector and placate volatile markets.
The Federal Deposit Insurance Corporation, Fed, and Treasury responded by insuring all deposits at the bank above the standard $250,000 limit, using money from the FDIC's deposit insurance fund as well as a new line of credit from the Fed backed up by $25 billion of taxpayer money.
The public is disapproving of bank bailouts Powell says the banking system is 'sound' following the SVB collapse Fed projects the jobless rate to reach 4.5 percent by end of 2023.
While the Fed's actions over the past week may prove enough to save the banking industry from a wider collapse, Americans overwhelmingly agree that taxpayers should not have to bail out banks that can't properly manage themselves.
ICYMI:
March 24: Why does the US see Chinese-owned TikTok as a security threat?
TikTok CEO Shou Zi Chew, a native of Singapore, told the lawmakers that TikTok prioritizes user safety as he sought to avert a U.S. ban on the app by downplaying its ties to China. Both Republican and Democratic representatives aggressively questioned Chew on topics including TikTok’s content moderation practices, its data security plans, and past spying on journalists.
WHY DOES WASHINGTON SAY TIKTOK IS A THREAT? TikTok, which has over 150 million American users, is a wholly owned subsidiary of Chinese technology firm ByteDance Ltd., which appoints its executives.
ByteDance is based in Beijing but registered in the Cayman Islands, as is common for privately owned Chinese companies. Its headquarters is in Beijing’s northwestern Haidian district, home to key universities and a hub for tech startups. TikTok has dual headquarters in Singapore and Los Angeles.
Founded by Chinese entrepreneur Zhang Yiming in 2012, ByteDance is said to be valued at around $220 billion — nearly half of its 2021 valuation of $400 billion. Publicly traded Chinese tech companies and privately held ones like ByteDance have plunged in value since the ruling Communist Party tightened control over the industry with anti-monopoly and data security crackdowns.
Western governments worry Chinese authorities could force ByteDance to hand over TikTok data on American users, exposing sensitive information.
Since ByteDance, which owns TikTok, is a Chinese company, it would likely have to abide by these rules if Chinese authorities asked it to turn over data.
MUST TIKTOK TURN OVER DATA IF THE CHINESE GOVERNMENT SAYS SO, EVEN WITH " PROJECT TEXAS?" TikTok has promised to protect data on American users by storing it on servers operated by an outside contractor, Oracle Corp., in what's known as "Project Texas." Chew, the TikTok CEO, said all new U.S. user data is stored in the United States and the company should finish deleting older U.S. data from non-Oracle servers this year.
The fear is that ByteDance would have to hand over information it obtained from TikTok if ordered to do so by Chinese authorities, but Chew has said Project Texas will put U.S. data out of China's reach.
March 23: House fails to override Biden’s first veto
The Republican-led House on Thursday failed to override President Biden's first veto, falling short of the two-thirds majority needed to revive the resolution targeting an administration rule related to ESG investing, which takes environmental and social factors into account.
Both the House and the Senate approved a resolution that would undo the administration's rule, sending it to Biden's desk and forcing the first veto of his presidency.
The effort to overturn the veto was not expected to be successful - only one House Democrat supported the initial resolution - but it put most of the Democratic caucus on record as supporting this type of investing for the second time.
The Biden administration rule targeted by Republicans clarifies that money managers can weigh climate change and other ESG - which stands for environmental, social, and governance - factors when they make investment decisions related to retirement accounts.
Critics of the Trump rule have called it confusing, and the Biden administration has said that it discouraged consideration of ESG factors "Even in cases where it is in the financial interest of plans to take such considerations into account."
The pushback against the Biden administration rule is part of a larger Republican effort opposed to ESG investing, which some legislators have decried as "Woke." Republicans argue that considering these types of factors can come at the expense of profits, and they warn that it could harm the fossil fuel industry.
"Ultimately, President Biden had a choice to make: do you support blue-collar workers who deserve the best benefits in their retirement, or billionaire elites who want to direct your funds into places that get a lower yield?" House Majority Leader Steve Scalise said.
For Fun:
March 28: It's a bird! It's a plane! It's a pretty neat planetary viewing!
This week, you have an opportunity to acquaint yourself with some of our solar system neighbors and reduce some of your screen time.
Who are they? That all depends on the weather. But Jupiter, Mercury, Venus, Uranus, and Mars will dazzle us earthlings this week.
What's the big deal? Over the next couple of nights, the planets are expected to align.
It's an opportunity to take a glimpse at a "planetary parade," according to Rick Fienberg, senior contributing editor of Sky & Telescope magazine. And he says you won't need a telescope — although some binoculars, an unobstructed view of the horizon, and clear skies will certainly help.
"I want people to want to go outside and look up. I want people to be excited about looking up at the stars and planets. Right now what's happening is something that you might not realize does happen quite a bit, which is the planets are up a lot. This is not a particularly rare event, but it is an event that you should celebrate and you should want to go outside and look at."
What you see will largely depend on where you are, according to reporting by NPR's Joe Hernandez. Those in the northern hemisphere might have a better shot at catching these celestial vibes.
Venus will be the brightest, so it might be easier to spot. The reddish Mars will shine brightly near the moon, while nearby Uranus may appear faint and only be visible through binoculars.