Facial Recognition Technology, 3-Week Spending Bill, and Economic Highlights
Tax News/Policy:
February 21: I.R.S. Will Allow Taxpayers to Forgo Facial Recognition Amid Blowback
The Internal Revenue Service said on Monday that it would allow taxpayers to opt-out of using facial recognition technology to gain access to their online accounts and would shift to an entirely different identity verification system next year as the agency tries to alleviate backlash over its use of biometric data. The decision came after the I.R.S. said this month that it would "Transition away" from using a third-party service, ID.me, to help authenticate people creating online accounts by using facial recognition to verify their identity.
Taxpayers can still choose to have images of their faces scanned to gain access to their accounts, but those who decline to use facial recognition technology can verify their identity during a live, virtual interview with representatives from the company.
"No biometric data - including facial recognition - will be required if taxpayers choose to authenticate their identity through a virtual interview," the I.R.S. said in a statement.
The uproar over the agency's use of facial recognition is the latest challenge for the I.R.S., which is behind in processing more than 20 million 2020 tax returns, is coping with staffing shortages, and remains short on funding. Republican lawmakers, who for years have criticized the agency and its ability to keep data confidential, called the facial recognition technology "Intrusive." Democrats have agreed, arguing that taxpayers should not have to sacrifice privacy for data security.
The I.R.S. described the move to avoid facial recognition as a short-term solution.
February 17: Democrats press IRS to address backlogs, improve customer service during filing season
Democratic lawmakers are pressing the Internal Revenue Service to address a backlog of tax returns and improve customer service as the U.S. makes its way through filing season. A group of more than 40 senators and representatives penned letters to IRS Commissioner Charles Rettig on Tuesday requesting that the agency "Pursue additional actions to maximize the IRS' current workforce to address the backlog in order to reduce disruptions this filing season."
The lawmakers, led by Sen. Bob Menendez (D-N.J.) and Rep. Abigail Spanberger (D-Va.) are specifically asking that the IRS allow more employees to voluntarily join surge teams and extend overtime options for those workers. Additionally, the group is requesting the IRS provide "Maximum overtime options" for staff members working to address the backlog.
The IRS started accepting returns for 2021 taxes late last month. The lawmakers on Thursday said that while the "Long-term solution" for ensuring the IRS can accomplish its workload and supply timely, high quality-service is hiring and training more employees and modernizing technology, those changes "Will take time."
Thursday's letters come nearly a month after Menendez led another bipartisan, bicameral group of lawmakers in writing a letter to Rettig and Treasury Secretary asking that the IRS and Treasury Department take a number of steps "To bring immediate relief to taxpayers, and reduce the backlog, during this tax filing season."
Build Back Better Act:
February 18: Biden Is Traveling The Country Pitching His Build Back Better Plan, But There Is No Bill And Talks Have Evaporated
Biden sometimes makes it sound as though Build Back Better is on the cusp of passage. During Thursday's lunch of Senate Democrats attended by White House chief of staff Ron Klain and other top administration officials, the topic of Build Back Better barely surfaced, according to senators in attendance.
At times, Biden and the White House use the phrase "Build Back Better agenda" to promote his plans in a larger sense, similar to the way "New Deal" captured the sweep of Franklin D. Roosevelt's legislative program.
Sometimes the White House appears to be rebranding Build Back Better as an inflation-fighting plan.
The House-passed version of Build Back Better would make record investments in combating climate change, and its collapse has unnerved environmental activists and put pressure on Biden to find other ways to demonstrate that he is taking action to protect the environment and fight global warming.
Biden does not seem ready to give up the Build Back Better name just yet.
Economic News/Policy:
February 20: Fiscal Stimulus Is Turning Into a Fiscal Drag, in a Big Headwind for Growth
The federal pandemic support that helped propel the economy to blistering growth last year and put upward pressure on inflation is rapidly waning. Robert Dent, a senior U.S. economist at Nomura Securities, put the hit to this year's growth from declining fiscal support at 2.5-to-3 percentage points.
Fiscal drag will hold down the growth of nominal retail sales this year to 4%, from 2021, Mr. Montani estimates.
In the first half growth will be lower than the same period in 2021 primarily because Americans won't be receiving stimulus checks like they did last year. The possibility of additional financial support this year is also still on the table, although prospects are uncertain.
Mr. Mericle, of Goldman Sachs, said that had the entire package become law, it would have reduced the impact of fiscal drag this year by about half a percentage point. "The basic story that 2022 would be a year of substantial reduction in fiscal support would still be the case," he said.
February 20: Economy Week Ahead: Housing, Inflation, The Fed
Federal Reserve speakers, consumer spending, and inflation data highlight this week's economic calendar. Geopolitical tensions in Eastern Europe will also be in focus.
U.S. home sales reached a 15-year high in 2021. The downside: falling inventories and rising prices.
The S&P CoreLogic Case-Shiller National Home Price Index for December is forecast to show prices up more than 18% from a year earlier.
While economists are predicting a slight slowdown from November, the double-digit increase would remain well ahead of overall inflation and typical wage gains.
February 17: Inflation Blame Splits White House As Some Economists Warn Against Heated Rhetoric
Members of the White House Council of Economic Advisers had raised objections to the idea that a spike in prices was due to corporate power, according to two people aware of the matter who spoke on the condition of anonymity due to fears of professional reprisals. The alteration of the testimony highlights the tensions within the administration over whether the White House should blame corporate consolidation and monopoly power for price hikes.
Some officials in the White House National Economic Council believe the administration could more aggressively advance that argument, and Democratic pollsters have told the White House that a populist economic message on corporate greed and prices broadly resonates with voters. These higher prices have eaten into wage increases and become one of the most dominant economic issues facing voters, putting the White House on the defensive as its attempts to curb inflation come up short.
The White House has faced substantial political headwinds from the pressures caused by inflation, with President Biden's economic approval rating declining amid the biggest price increases in four decades. Some economists have praised the White House for resisting the political temptation to make a bigger deal out of monopoly's role in inflation.
Warren, who has pushed the White House to get tougher on the issue, said in a statement, "CEOs of giant companies are saying the quiet part out loud: Corporate executives are happy to help drive inflation and fatten their profit margins by price-gouging Americans. More evidence that years of corporate consolidation in the U.S. economy is hurting families' wallets and workers' wages will strengthen the case for strong antitrust enforcement as a critical tool to fight inflation."
February 16: Fed officials discussed removing policy support more quickly if inflation continues to accelerate
Fed officials noted that the labor market remained strong, though the Omicron wave of the coronavirus had worsened supply chain bottlenecks and labor shortages, and that inflation continued to significantly exceed the levels the central bank targets. Most officials still expect inflation to moderate over the year as pandemic-related supply bottlenecks ease and the Fed removes some of its support for the economy.
If inflation does not move down as they expect, most Fed officials agreed that they might need to pare back their support for the economy even more quickly, though that could carry some risk. Most officials agreed that the Fed should take a faster approach to cool the economy than it did in 2015 when it began raising rates at a slow and plodding pace in the wake of the Great Recession.
In a statement after their two-day policy meeting in January, Fed officials laid the groundwork for higher borrowing costs "Soon." Jerome H. Powell, the Fed chair, said at a news conference after the meeting that "I would say that the committee is of a mind to raise the federal funds rate at the March meeting, assuming that the conditions are appropriate for doing so."
Inflation has continued to run hot since the Fed's last meeting, and wage growth remains elevated. A separate inflation gauge that the Fed prefers also showed that prices remained elevated at the end of 2021.
Global Trade:
February 21: White House Aides Discuss Release Of Gas Reserves Over Russia Risks
White House aides are reviewing how the United States could respond if Russia curtails exporting global oil products due to hostilities over Ukraine, anticipating a potential spike in gas prices that could further compound already high prices domestically. If the United States imposes broader sanctions on Russia over a military incursion in Ukraine, Russia could strike back by limiting sales of oil and other energy products to Europe and other parts of the world.
The conversations weighing a release of American oil reserves were described as preliminary as the administration considers a broader set of options to insulate Americans from higher gas prices, the people said, both with or without a conflict in Eastern Europe. White House officials have also recently expressed openness to a holiday from the national gas tax.
President Biden announced a separate release of 50 million barrels of oil last fall from the Strategic Petroleum Reserve in response to high gas prices related to the global economy's uneven rebound from the pandemic.
The administration is "Prepared, if necessary, to deploy all tools and authorities at our disposal" to bring down prices at the gas pump, according to the White House said in a statement, which added that millions of barrels tied to the administration's fall announcement are rolling onto the market and helped gasoline fall by more than 10 cents a gallon during the holiday season.
The average price for a gallon of gas hit $3.53 on Monday, a slight increase from $3.33 a month ago and a big increase from $2.63 last year, according to AAA. The White House has few obvious answers - outside deploying the nation's limited reserves - should Russia constrict its supply, analysts say.
February 18: US clears way for return of Mexican avocados
The U.S. Embassy in Mexico announced Friday that a ban on avocado imports into the U.S. has been lifted. On Sunday, the U.S. suspended avocado imports from Mexico after an American.
The inspector received the threat after he refused to allow a shipment of avocados due to safety concerns. U.S. Ambassador to Mexico, Salazar did not detail what changed but said Mexico will be enacting "Measures" to keep U.S. inspectors safe.
"This is possible due to the rapid response and cooperation of the governor of Michoacán, Mexico's federal government, and the Mexican Association of Avocado Producers and Exporters. I thank them for working with my security colleagues in the U.S. Embassy to enact the measures that ensure the safety of our APHIS inspectors in the field," Salazar said.
Avocado imports between Mexico and the U.S. in 2021 was a $2.8 billion industry. The brief ban had sparked widespread fears of a shortage, as about 80 percent of avocados bought in the U.S. are imported from Michoacán, the only Mexican state authorized to export the fruit to the U.S.
Covid-19 and Its Impact:
February 16: Retail sales rallied in face of omicron
Retailers made far more in sales last month than economists expected, even amid a record surge of COVID-19 cases. Retail sales rose 3.8 percent in January, according to data released Wednesday by the Census Bureau, far higher than economists had expected.
Economists expected retail sales to rise 2.1 percent in January after falling 2.5 percent in the final month of 2021. Economists had expected the record-breaking surge of COVID-19 cases driven by the omicron variant to wipe out January job growth and weigh heavily on retail sales.
Department store sales jumped 9.2 percent, furniture and home goods stores saw sales rise 7.2 percent, and auto dealers and parts stores saw a 5.7 percent increase in sales. A pandemic-driven decline in dining and drinking out pushed sales by restaurants and bars 0.9 percent lower in January.
Government Funding:
February 21: Congress eyes sprint to avoid shutdown
Congress is working quickly to pass sweeping legislation to fund the government through the rest of the fiscal year, though sticking points remain. A new omnibus package would afford the Democratic-led Congress and a major chance to shape government funding for the current fiscal year.
Federal Reserve Governor Michelle Bowman suggested Monday the central bank could raise interest rates at a faster pace than in previous cycles, as inflation remains "Much too high."
In a Monday speech to a convention of bankers, Bowman said she supported raising rates when the Fed's monetary policy panel - the Federal Open Market Committee - meets March 15-16.
After Putin's authorized Russian forces to invade the Ukrainian territories Monday, the White House told reporters that it would announce additional "Sanctions activity" tomorrow.
The Biden administration has said that it would slap Russia with hefty sanctions if Putin escalated tensions in Ukraine, but it's unclear whether Monday's sanctions will make a large impact.
Mexican President Andrés Manuel López Obrador on Monday repeated calls for the United States to stop funding civil society groups in the country that have been critical of his administration.
February 17: Senate Passes 3-Week Spending Bill, Averting Government Shutdown
Congress gave final approval on Thursday to a bill to fund the government through March 11, averting a shutdown this week and giving lawmakers more time to cement a deal on spending for the remainder of the fiscal year. Passage of the short-term measure in the Senate came less than 48 hours before government funding was sent to lapse, as lawmakers rushed to leave Washington for a weeklong recess.
The legislation, which will keep the government funded through March 11, now heads to President Biden's desk. Four months into the fiscal year, which began in October, lawmakers have yet to reach an agreement, instead of relying on a series of stopgap bills that maintain funding levels set under the Trump administration.
If they can nail down the details of the agreement, the catchall spending package would not only allow for spending increases, but unlock funding outlined in the bipartisan infrastructure law and, for the first time in more than a decade, fund earmarks that let individual lawmakers direct money to specific projects in their states.
The Biden administration told key congressional officials on Tuesday that it could need as much as an additional $30 billion in coronavirus response funds, including to improve testing and vaccinations across the country. Mr. Leahy, in particular, grew visibly frustrated on the floor by the delay, as he blocked an attempt by Senator Marco Rubio, Republican of Florida, to first swiftly pass legislation banning federal funding from going toward pipes for smoking crack cocaine and other drug paraphernalia.
For Fun:
February 22: Remains of ‘world’s largest Jurassic pterosaur’ recovered in Scotland
Fossil hunters in Scotland say they have recovered the remains of the world's largest Jurassic pterosaur, adding the creature - known informally as a pterodactyl - also boasted a mouthful of sharp teeth for spearing and trapping fish. With a wingspan of about 2.5 meters or larger - around the size of the largest flying birds today, such as the wandering albatross - the creature sheds new light on the evolution of pterosaurs, given they were not thought to have reached such a size until about 25m years later.
“When this thing was living about 170m years ago, it was the largest animal that had ever flown, at least that we know of,” said Prof Steve Brusatte, a co-author of the research from the University of Edinburgh. Brusatte added previous finds suggested pterosaurs did not grow much larger than about 1.6-1.8 meters in wingspan during the Jurassic, only reaching much larger sizes during the Cretaceous period.
"There were pterosaurs living at the end of the Cretaceous when the asteroid hit that was the size of fighter jets," said Brusatte, referring to the mass extinction 66m years ago wiped out non-avian dinosaurs, pterosaurs, and myriad other creatures.
The latest discovery calls into question the idea that competition with birds may have initially driven the boom in pterosaur size.
Dr. David Unwin, an expert in pterosaurs at the University of Leicester who was not involved in the research, said it was debatable whether the newly discovered creature was the largest of its era, noting some fragmented bones from other fossils have already hinted at similar-sized pterosaurs in the middle Jurassic.
Nonetheless, he said the find was significant because fossils dating to that time are scarce, while there are very few pterosaur remains that are as complete.