Tax Return Backlog, Student Loan Forgiveness, and the Factory Job Boom

Tax Policy:

September 21: IRS management blamed for tax return backlog

Continuing delays in management actions are contributing to the backlogs of millions of unprocessed tax returns and tax transcript requests at the Internal Revenue Service, according to a new report. The report pointed out that the IRS continues to have significant inventory backlogs at its tax processing centers, and efforts to reduce the backlogs are being held back in part by ongoing hiring shortfalls of employees needed to fill critical positions in IRS tax processing centers.

"The Tax Processing Centers also had almost 1.8 million amended individual returns in inventory as of April 25, 2022. The IRS sent approximately 300,000 amended individual returns to Accounts Management, which also has a significant backlog of amended individual returns." In a previous report, TIGTA recommended that the IRS ensure that efforts to evaluate and purchase updated or new mail opening and sorting technology are executed on a timely basis.

Last week, Treasury Secretary Janet Yellen announced that the IRS would automate the scanning of millions of individual paper returns into a digital copy next filing season to speed processing and provide faster refunds. "The IRS will also build online capabilities to enable taxpayers to fully interact with the agency digitally," she said during a speech at an IRS facility in New Carrollton, Maryland.

The IRS has also been pursuing other automation solutions for processing tax account and tax return transcript requests through its Income Verification Express Service and third-party authorizations that designate taxpayer representatives, such as practitioners.

The IRS is planning to use the extra funding it's getting from Congress to use optical character recognition technology to automate the processing of paper documents.

For processes where handling paper can't be eliminated, such as processing incoming mail, Corbin said the IRS is seeking a comprehensive solution that will extend beyond replacing its current mail-sorting and processing equipment to encompass the full extraction and digitalization of paper documents and correspondence.

Student Loan Forgiveness:

September 26: Biden’s student loan forgiveness plan to cost about $400 billion: CBO

The Biden administration's sweeping effort to provide widespread student loan forgiveness for some Americans will cost about $400 billion, according to new reporting by Congress's nonpartisan budget scorekeeper. The estimate applies to the plan Biden announced last month to forgive $10,000 in federal student loan debt for borrowers earning under $125,000 and $20,000 for borrowers who received Pell Grants.

The Congressional Budget Office said 43 million borrowers shared $1.6 trillion in federal student loan debt as of June 30. The CBO also estimated the costs for the Biden administration's recent renewal of the moratorium on federal student loan payments and interest accrual, which had been set to lapse at the end of August.

At the same time, advocates and progressives have pushed the Biden administration to go further, touting widespread debt forgiveness as a way to help lower-income households struggling with repayment and borrowers of color who face an outsize burden in the student loan system.

Senate Majority Leader Charles Schumer and Sen. Elizabeth Warren, who pushed Biden to go as far as forgiving $50,000 in federal student debt per borrower, said in a statement on Monday that the recent estimate "Makes clear that millions of middle-class Americans have more breathing room thanks to President Biden's historic decision to cancel student debt."

"In contrast to President Trump and Republicans who gave giant corporations $2 trillion in tax breaks, President Biden delivered transformative middle-class relief by canceling student debt for working people who need it most - nearly 90% of relief dollars will go to those earning less than $75,000 a year," they added.

Economic News/Policy: 

September 26: The Dollar Is Strong. That Is Good for the U.S. but Bad for the World

The Federal Reserve’s determination to crush inflation at home by raising interest rates is inflicting profound pain in other countries — pushing up prices, ballooning the size of debt payments, and increasing the risk of a deep recession.

Roughly 40 percent of the world's transactions are done in dollars, whether the United States is involved or not, according to a study done by the International Monetary Fund. And now, the value of the dollar compared with other major currencies like the Japanese yen has reached a decades-long high.

In an anxious world, the dollar has traditionally been a symbol of stability and security. Rising interest rates make the dollar all the more alluring to investors by ensuring a better return.

Poor countries often have no choice but to repay loans in dollars, no matter what the exchange rate was when they first borrowed the money. Brazil has cut fuel taxes and increased social welfare payments, but soaring prices remain a daily struggle.

Private companies, too, in emerging markets like Korea, Brazil, and Indonesia over the last decade borrowed large amounts of dollars, attracted by what seemed to be reliably low-interest rates. Despite the pain a strong dollar is causing, most economists say that the global outcome would be worse if the Fed failed to halt inflation in the United States.

September 26: Factory Jobs Are Booming Like It’s the 1970s

Ever since American manufacturing entered a long stretch of automation and outsourcing in the late 1970s, every recession has led to the loss of factory jobs that never returned. But the recovery from the pandemic recession has been different: American manufacturers have now added enough jobs to regain all that they shed - and then some.

The resurgence has not been driven by companies bringing back factory jobs that had moved overseas, nor by the brawny industrial sectors and regions often evoked by President Biden, former President Donald J. Trump, and other champions of manufacturing.

Treasury Secretary Janet L. Yellen said that the recovery of manufacturing jobs was a result of the unique nature of the recession, which was induced by the pandemic, and the robust federal response, including legislation like the $1.9 trillion American Rescue Plan of 2021. "We had a huge shift away from services and into goods that spurred production and manufacturing and very rapid recovery in the U.S. economy," Ms. Yellen told reporters during a trip to Detroit this month.

Manufacturing jobs quickly rebounded in the spring of 2020, then began to climb at a much faster pace than has been typical for factory job creation in recent decades.

Mr. Biden has pushed a variety of legislative initiatives to boost domestic manufacturing, including direct spending on infrastructure, tax credits and other subsidies for companies like battery makers and semiconductor factories, and new federal procurement requirements that benefit manufacturers located in the United States.

While growth in the U.S. manufacturing sector was strong last year, so were imports of manufactured goods, Mr. Gresser said.

September 25: Economy Week Ahead: Housing Market and Consumer Spending in Focus

Tuesday: The Commerce Department releases August figures on new orders, shipments, unfilled orders, and inventories of products meant to last at least three years. Overall new orders for durable goods declined slightly in July from the prior month.

S&P Global releases its S&P CoreLogic Case-Shiller National Home Price Index, which will show home-price trends across the country in July. Home prices rose 18% in June, down from a 19.9% annual rate in May.

The Commerce Department releases its report on August sales of new homes in the U.S. New-home sales fell 12.6% in July compared with June. The Conference Board publishes its September consumer-confidence index, which measures U.S. attitudes toward jobs and the economy. Consumer confidence improved in August after falling for three consecutive months.

Wednesday: The National Association of Realtors reports the number of home sales based on contract signings in August. Pending home sales declined in July for the second consecutive month as high mortgage rates and elevated home prices diminished demand.

Thursday: The Commerce Department publishes a third estimate of second-quarter gross domestic product—a broad measure of the goods and services produced in an economy—after its second estimate showed that the decline in U.S. economic output during that time was less severe than initially estimated. The second estimate showed that the economy contracted at a 0.6% annual rate in the April-through-June period, a slower pace than the 0.9% decline initially estimated, driven in part by an upward revision of consumer spending.

The Labor Department reports the number of U.S. worker filings for unemployment benefits in the week ended Sept. 24. Initial jobless claims rose slightly the previous week after five consecutive weeks of declines, remaining just below the 2019 weekly average of around 218,000.

China’s National Bureau of Statistics and S&P Global released September surveys of purchasing managers about economic activity in China’s manufacturing sector. China’s agency also released a separate survey measuring the country’s nonmanufacturing sector.  

Friday: The U.K.’s Office for National Statistics publishes a revised estimate of second-quarter gross domestic product, which fell 0.1% in the three months through June, according to an initial estimate.

The European Union’s statistics agency releases September inflation figures for the 19-nation eurozone. The bloc’s consumer prices were 9.1% higher in August than the same month a year earlier, the fastest pace since records began in early 1997.

The Commerce Department releases figures on U.S. household spending and income in August. Consumer spending rose 0.1% in July from the prior month, a sharp slowdown from June when it increased 1%, suggesting that consumers shifted their spending habits amid high inflation and rising interest rates.

The University of Michigan publishes its final reading of consumer sentiment for September. Its initial estimate earlier in the month showed it had ticked up from August’s final reading.

September 23: Dow hits the lowest point since 2020 as recession fears grow

The Dow Jones Industrial average dropped nearly 500 points to hit 29,590 at market close on Friday - its lowest point in nearly two years. Since the Fed started raising interest rates in March, the index has lost more than 13 percent of its value and is down more than 19 percent on the year.

The S&P 500 fell 65 points to close at 3,693 on Friday, down more than 15 percent since March and almost 23 percent on the year. The technology-heavy Nasdaq dropped nearly 200 points, or 1.8 percent, to close at 10,867, down almost 20 percent since March.

Interest rates have increased to 3.25 percent since the Fed started raising them from 0 percent in March. Consumer inflation did come down slightly over the summer, falling to 8.3 percent in August from 8.5 percent in July and 9.1 percent in June.

Despite sticky inflation in recent months, President Biden's approval ratings rebounded to 42 percent in September after falling to 38 percent in July when average gas prices in the U.S. soared to around $5 per gallon, according to the latest Gallup poll.

September 22: Central Banks Accept Pain Now, Fearing Worse Later

A day after the Federal Reserve lifted interest rates sharply and signaled more to come, central banks across Asia and Europe followed suit on Thursday, waging their own campaigns to crush an outbreak of inflation that is bedeviling consumers and worrying policymakers around the globe.

The Bank of England raised interest rates half a point to 2.25 percent on Thursday, even as it said the United Kingdom might already be in a recession. The European Central Bank is similarly expected to continue raising rates at its meeting in October to combat high inflation, even as Russia's war in Ukraine throws Europe's economy into turmoil.

On Thursday, Indonesia, Taiwan, the Philippines, South Africa, and Norway lifted rates, and a large move by Switzerland's central bank ended the era of below-zero interest rates in Europe.

"For the first time in four decades, central banks need to prove how determined they are to protect price stability," Isabel Schnabel, an executive board member of the European Central Bank, said at a Fed conference in Wyoming last month. 

Maurice Obstfeld, an economist at the Peterson Institute for International Economics and a former chief economist of the International Monetary Fund, wrote in a recent analysis that there is a risk that global central banks are not paying enough attention to one another. "Central banks clearly are scrambling to raise interest rates as inflation runs at levels not seen for nearly two generations," he wrote. But there can be too much of a good thing. Now is the time for monetary policymakers to put their heads up and look around.”

Still, at many central banks around the world - and clearly at Mr. Powell's Fed - policymakers are treating it as their duty to remain resolute in the fight against price increases.

September 22: Lawmakers slam big bank CEOs for failure to increase interest rates on savings

Congressional lawmakers slammed U.S. bankers this week for not raising interest rates on savings accounts held by everyday consumers despite a series of major increases in the federal funds rate by the Federal Reserve. Higher interest rates also make it more lucrative for banks to lend money, a revenue increase they could be passing onto consumers in the form of higher interest rates on basic savings and money market accounts.

The committee heard testimony from the heads of JP Morgan Chase, Wells Fargo, and Bank of America, among other big U.S. banks.

Sen. Jack Reed (D-R.I.) made the same point Thursday in a meeting of the Senate Banking Committee. "I'll cut to the chase. Interest rates are going up, but deposit rates, which you pay for your deposits, are really stagnant - very, very low. It raises the question that by making substantial amounts of money on these increased interest rates, why are you not beginning to raise interest rates on deposits?" he said.

Paying out less in interest while pulling in more from higher federal interest rates is one of the ways that big banks turn a profit.

Charles Scharf, head of Wells Fargo, told the Senate Banking Committee that his company is "Beginning to raise rates." During an earnings call in July he said that "On the retail and the consumer side, the core rates haven't changed much for the big banks."

Critics of the banking industry say that banks love the current environment of rising interest rates because it allows them to get more money out of their customers.

Energy and Environmental Policy/News:

September 21: Manchin’s Gas Pipeline Deal Irks Both Parties, Snarling Spending Bill

Mr. Manchin has insisted that legislation to streamline the permitting of fossil fuel and energy infrastructure projects, including the West Virginia pipeline, be tied to the spending measure, which is expected to keep the government funded through mid-December.

"Today, far too many energy projects face delays - keeping us from generating and shipping critical, cost-saving clean energy to families and businesses across America," Karine Jean-Pierre, the White House press secretary, said in a statement.

The permitting bill, which would explicitly allow for the completion of the Mountain Valley Pipeline, a controversial gas project that passes through West Virginia, was left out of the climate legislation because it was being considered as a budget reconciliation bill, which allowed Democrats to shield the sprawling measure from a Republican filibuster but also strictly limited what could be included.

After the climate legislation became law, dozens of liberal lawmakers expressed concerns about the permitting measure, warning against weakening environmental protections, including the National Environmental Policy Act, which requires the government to study the impacts on the environment of any highways, pipelines, or other major federal projects.

The 91-page permitting legislation, which Mr. Manchin's office released Wednesday evening, includes several provisions intended to help streamline environmental permitting for major energy projects.

Senator Tim Kaine, Democrat of Virginia, said that "Greenlighting the M.V.P. is contrary to the spirit of permitting reform" and expressed frustration that he could not voice his concerns with the project, which will also go through his state before a deal was struck.

The Progressive Policy Institute, a centrist Washington think tank, released a study finding that renewable energy projects take an average of 2.7 years from proposal to permit decision, while transmission projects take an average of 4.3 years.

September 21: More Senate Democrats oppose Manchin's push for permitting reform in stopgap funding

Additional Senate Democrats have come out in opposition of Sen. Joe Manchin's push to change the approval process for energy projects. Sen. Jeff Merkley led a letter calling for the separation of the permitting reform message from a stopgap government funding measure known as a continuing resolution.

The lawmakers stopped short of explicitly saying they would vote against funding the government in order to stop the deal from going through. 

As a condition of his support for the Democrats’ recently passed climate and tax bill, Manchin struck a deal with leadership to pass legislation aimed at speeding up the process for approving energy projects.

But the measure, which Majority Leader Charles Schumer has said he would put into a stopgap funding measure, has met resistance from progressives who are concerned that it may undercut environmental inspections that are part of the approval process. If the additional lawmakers vote against the permitting measure, that complicates its prospects for approval.

In a Wednesday floor speech, Senate Minority Leader Mitch McConnell endorsed a more conservative proposal from Sen. Shelley Moore Capito and called Manchin's proposal "Reform in name only." In the House, about 80 lawmakers signed onto a letter similar to Merkley's, calling for permitting reform to be considered separately from government funding.

ICYMI: 

September 23: Democratic-Allied Group Pours $60 Million Into State Legislative Races

A Democratic-aligned group is investing nearly $60 million in state legislative races in five states, a significant sum in an often overlooked political arena where Democrats have struggled for decades. The group, the States Project, said it was focusing on flipping a single seat in the Arizona State Senate that could swing it to Democratic control and on winning back both chambers of the Michigan and Pennsylvania Legislatures.

On the television airwaves, Republican candidates and outside groups have spent roughly $39 million, while Democrats have spent roughly $35 million, according to AdImpact, a media-tracking firm. In Pennsylvania and Arizona, Republicans have spent nearly $1 million more than Democrats on ads since July.

Nonetheless, the Republican State Leadership Committee has sounded the alarm about falling behind Democrats financially in state legislative races.

The Democratic Legislative Campaign Committee, the arm of the Democratic National Committee that focuses on state legislative races, announced in July that it had raised $6.75 million, a record for the group but still below what the States Project has been able to raise.

Daniel Squadron, a former Democratic state senator from New York and another founder of the States Project, said that while some of the money would be spent on television and digital ads, the vast majority would be sent directly to candidates and Democratic legislative caucuses.

Joanna E. McClinton, the Democratic leader in the Pennsylvania House of Representatives, said the States Project had helped many of the party's candidates in the state with training on messaging and with an incentive program that unlocks more funding per candidate based on doors knocked on.

Since July, Democrats have spent more than $17 million on state legislative races in the state, far more than the roughly $3 million Republicans have spent, according to AdImpact.

For Fun: 

September 26: NASA DART Mission Successfully Crashes Spacecraft Into Asteroid

NASA managed Monday to crash a small spacecraft directly into an asteroid, a 14,000-mile-per-hour collision designed to test whether such a technology could someday be deployed to protect Earth from a potentially catastrophic impact. The violent end of the Double Asteroid Redirection Test spacecraft thrilled scientists and engineers at the Johns Hopkins University Applied Physics Laboratory in Laurel, Md., which operated the mission under a NASA contract.

As engineers conceived of an asteroid deflection mission, they seized on an ingenious idea that would greatly reduce the costs: Hit an asteroid "Moonlet" that's orbiting a larger asteroid.

To detect the effect of a collision with a single asteroid orbiting the sun would have required two spacecraft, engineer Andrew Cheng told reporters, because such an asteroid is moving at tremendous speed, and the impact from a small spacecraft would result in a minimal, hard-to-detect change.

It will take at least a couple of days to tell if the DART mission succeeded in slowing down the targeted asteroid, and to what degree it did so.

Only the larger asteroid - not Dimorphos - could be seen in the live feed from the spacecraft's camera 90 minutes before impact. There was joy in the Mission Operations Center as the asteroid loomed larger on the screen.

September 21:  Pickleball Is Exploding, And It's Getting Messy

Its biggest events are staged in famous tennis venues such as Lindner Family Tennis Center in Ohio, Indian Wells Tennis Garden in California, and Billie Jean King National Tennis Center in New York."If you would've told me two years ago we would have been able to take those courts and turn them into pickleball courts, I would have thought you were crazy," said Ken Herrmann, chief executive and founder of the Association of Pickleball Professionals.

Private businesses have been sprouting up everywhere, such as the Pickle Shack in Columbus, Ohio, which is open to players 24 hours a day; the Missouri Pickleball Club outside of St. Louis, which features 18 indoor courts spread across 51,000 square feet; and several places like Chicken N Pickle, a chain that aims to marry casual pickleball with casual dining.

Like Irvine, many pickle ballers at all levels, old and young, come from tennis backgrounds, and pickleball is increasingly co-opting tennis resources, its courts, and its players.

"Pickleball, to me, is a competition for tennis," said Ray Benton, chief executive of Junior Tennis Champions Center in College Park, Md. "What the pickleball people have done is absolutely spectacular. They found a way to get people to have fun on a racket court. In my judgment, tennis is the better sport, and we need to do a better job of promoting it."

Nearly 1 in 3 pickleball players also participated in tennis at least once in the past year, according to SFIA. Tennis also experienced a covid boom, and more than 22 million Americans played the sport last year - 4.7 times more than pickleball and up 28 percent from two years earlier, according to SFIA data.

"Getting more youth programs, getting it into schools, would be the next kind of big step," said Irvine, the pickleball pro who also coaches high school tennis.