Biden Unveils $700 Billion ‘Buy American’ Economic Plan

Plus, an IRS budget boost would pay off big-time  [The Fisc](   By Yuval Rosenberg Biden Unveils $700 Billion ‘Buy American’ Economic Plan Joe Biden on Thursday proposed a $700 billion plan to use government purchasing power to boost U.S. manufacturing and innovation. Biden’s plan calls for the government to buy American products and invest in clean energy research, infrastructure and health care with the aim of bringing back jobs lost during the pandemic and adding 5 million beyond that. “When the federal government spends taxpayers’ money, we should use it to buy American products and support American jobs,” Biden, the presumptive Democratic presidential nominee, said in an afternoon speech near his childhood home in Scranton, Pa. The Biden proposal is the first plank of what his campaign says will be a four-part “build back better” agenda to strengthen the recovery from the coronavirus. “Biden does not accept the defeatist view that the forces of automation and globalization render us helpless to retain well-paid union jobs and create more of them here in America,” the former vice president’s campaign said in a statement summarizing the plan. Biden’s plan calls for $400 billion in federal procurement spending on American-made products over four years, which his campaign says would be the largest such public investment since World War II. The spending would be focused in areas including clean vehicles and green energy generation; construction materials for infrastructure improvements, including steel, cement and concrete; and critical medical supplies and pharmaceuticals to replenish national stockpiles. The plan also includes a $300 billion investment in U.S. research on technologies ranging from "electric vehicle technology to lightweight materials to 5G and artificial intelligence -- to unleash high-quality job creation in high-value manufacturing and technology." And it calls for a review to evaluate and protect U.S. supply chains. Biden’s proposal reportedly builds on a plan Massachusetts Sen. Elizabeth Warren and the former vice president’s campaign “consulted closely” on the plan with Warren’s team, according to [The Washington Post](. In his speech, Biden again pledged to reverse some of the Trump tax cuts for corporations and raise the corporate tax rate to 28%, but his campaign did not spell out how it would pay for the full $700 billion in proposed spending. Why it matters: “Biden’s pitch underscores a major shift by both major parties [away from embracing globalization and free trade]( and toward protecting American workers and revitalizing struggling domestic industries,” the Post’s Sean Sullivan and Jeff Stein write. Biden is in some ways proposing his own version of President Trump’s “America First” economic agenda, simultaneously challenging Trump’s approach and looking to undercut the president’s economic reelection message. The Post reports: “Biden’s announcement prompted frustration by some Trump allies that it was released before the president announced a similar ‘Buy American’ proposal that has been held up for months amid internal objections, according to current and former officials. Stephen K. Bannon, a former chief Trump strategist, said the president’s team was ‘caught flat-footed.’” Trump Admin, Republicans Eye Narrower Coronavirus Relief Package As Congress prepares to put together a new coronavirus relief bill, the Trump administration and congressional Republicans are looking to deliver aid more narrowly and limit the overall cost of the package. Eyeing a $1 trillion package: Vice President Mike Pence’s top aide told [Bloomberg News]( this week that the administration wants to limit the cost of the next coronavirus package to $1 trillion or less, about the same level that Senate Majority Leader Mitch McConnell (R-KY) reportedly is seeking. That target likely ensures a fight with Democrats, who want a much larger and broader aid package. White House wants to change $600 enhanced unemployment benefit: Treasury Secretary Steven Mnuchin told CNBC Thursday that the administration opposes an extension of the $600 in weekly federal unemployment payments on top of regular state benefits. Any extension would ensure that jobless benefits would be “no more than 100%” of what workers were earning, Mnuchin said. “We knew there was a problem with enhanced unemployment in that certain cases people were paid more than they made in their jobs,” he said. “We’ll fix that and we’ll figure out an extension to it that works for companies and works for those people who will still be unemployed.” A National Bureau of Economic Research [working paper]( by researchers at the University of Chicago found that 68% of unemployed workers who are eligible for unemployment insurance will get benefits exceeding their lost earnings and one out of five eligible jobless workers will get at least double their lost earnings. The overall median replacement rate of the enhanced benefits is 134%, the researchers said. “Notably, replacement rates under the CARES Act are highest for the unemployed with the lowest prior earnings who are likely most vulnerable,” they wrote. “At the same time, replacement rates over 100% create distributional issues and may hamper efficient labor reallocation both now, and especially during an eventual recovery.” Fewer stimulus checks: The eligibility threshold for the $1,200 relief payments approved by Congress in March was set at $75,000 in income for individuals and $150,000 for married couples, with payments phasing out above those levels. The Washington Post reports that congressional Republicans and White House officials are considering lowering those income levels, though talks are still ongoing and the exact number they may propose is still unclear. McConnell said this week that any additional direct payments should be targeted to people earning $40,000 a year or less. Other Senate Republicans oppose sending out more payments altogether, with many conservatives saying they’re concerned by the trillions of dollars being added to the national debt. “Limiting the next round of stimulus checks to those earning under $40,000,” the Post’s Jeff Stein and Erica Werner write, “would save lawmakers about $200 billion compared with the first round of checks, according to Ernie Tedeschi, who served as an economist in the Obama administration. It would also mean that 20 million middle-class Americans would not receive the financial lifeline.” Mnuchin told CNBC that the administration does support another round of stimulus payments, but that he would discuss the “level and criteria” for those payments with senators after they return from their recess. (He also said the White House supports wants a “much, much more targeted” extension of the Paycheck Protection Program for small businesses.) Efforts to scale back the next round of stimulus payments would likely face both political and logistical challenges. “One Republican tax expert, who spoke on the condition of anonymity to discuss private deliberations, predicted the GOP would probably back off plans to curb the payments because of the administrative hurdles in effectively targeting the funding,” Stein and Werner report. “The GOP will also face political pressure not to curb stimulus payments during an election year for middle-class households.” IRS Budget Boost Would Pay for Itself More Than Twice Over: CBO Boosting the Internal Revenue Service’s budget for audits and collections would pay for itself as much as three times over, the Congressional Budget Office estimated in a report released Wednesday. Increasing IRS funding for examinations and collections by $20 billion over 10 years would raise federal revenues by $61 billion, while a $40 billion increase would add $103 billion in revenues, CBO said. It noted that its estimates were uncertain, but it also said the figures “only capture the direct effect of enforcement activities,” not the indirect gains that could result as taxpayers get scared straight by stepped-up enforcement. The CBO report also describes how budget cuts over the last decade have weakened IRS enforcement and potentially helped perpetuate a yawning tax gap — the amount of taxes that go uncollected each year, mostly as the result of underreported income. The IRS estimates that the gap averaged $441 billion a year from 2011 through 2013, and narrowed to $381 billion a year as the result of IRS enforcement and collections. The current tax gap is almost certainly higher, with some estimates putting it closer to $600 billion. IRS funding, adjusted for inflation, is 20% below where it was in 2010, according to CBO, and [budget cuts]( have resulted in the elimination of 22% of the tax agency’s staff. Funding and staff allocated to enforcement activities have fallen by about 30% since 2010. The share of individual tax returns audited decreased by 46% between 2010 and 2018, while corporate audits fell by 37%. Audits of taxpayers with more than $1 million in income fell by 63%. The [report]( prepared at the request of Sen. Bernie Sanders (I-VT), the ranking member of the Senate Budget Committee, came as a House Appropriations subcommittee advanced a spending bill for 2021 that would increase the IRS budget by about $600 million, or roughly 5%, to $12.1 billion. “The agency would receive funding increases for taxpayer services, enforcement, operations support and business systems modernization,” The Hill [reports](. That measure now heads to the full committee for further debate. Sanders pointed to estimates by former Treasury Secretary Larry Summers and Natasha Sarin, a professor at the University of Pennsylvania, suggesting that at least 70% of the tax gap comes from underpayment by those with incomes in the top 1%. “Make no mistake: the primary beneficiaries of IRS funding cuts are wealthy tax cheats and large corporations,” Sanders said in a statement. “Congress is leaving hundreds of billions of dollars in taxes uncollected from the wealthy. We have got to invest in a robust IRS that focuses on the biggest culprits of tax evasion so we can prioritize those resources to ensure people’s basic needs.” 1.3 Million Workers Filed New State Unemployment Claims Last Week Another 1.3 million Americans filed first-time claims for state unemployment benefits in the week ending July 4, the Labor Department [said]( Thursday, and 1 million new claims were filed under the federal Pandemic Unemployment Assistance program created to provide federal unemployment insurance to the self-employed, gig workers and others who aren’t eligible for traditional benefits. “Job losses remain catastrophically bad,” said Ben Casselman of The New York Times in a [tweet](. “We can debate the best measure to use, but the big picture is the same no matter what: Nearly four months into this crisis, claims are still higher than in ANY period before this. And the decline has stalled out.” The new state unemployment filings were lower than the 1.39 million economists surveyed by Dow Jones had expected and a decrease of 99,000 from the previous week. The number of new jobless claims has been falling since early April, but remains at levels well above the pre-pandemic record. “This is the 16th week in a row that unemployment claims have been more than twice the *worst* week of the Great Recession,” economist Heidi Shierholz of the left-leaning Economic Policy Institute [tweeted](. Send your tips and feedback to yrosenberg@thefiscaltimes.com. Follow us on Twitter: [@yuvalrosenberg]( [@mdrainey]( and [@TheFiscalTimes](. And please tell your friends they can [sign up here]( for their own copy of this newsletter. News - [Coronavirus Hot Spots Should Pause Reopening, Not Shut Down Again, Fauci Now Says]( – CNN - [CDC Director Says No Revised School Guidelines Despite Trump's Push]( – CNN - [Pandemic Relief Programs Near Their End. Then What?]( – New York Times - [Trump Administration’s Approach to Testing Is Chaotic and Unhelpful, States Say]( – Washington Post - [Fed Officials Suggest U.S. Recovery May Be Stalling]( – Reuters - [Jobless Claims Tell Us 33 Million People Are Unemployed, but Many Doubt It’s That Bad]( – MarketWatch - [Tearful WHO Director Calls for Global Unity to Fight the Virus Following U.S. Pullout]( – Washington Post - [New OECD Data Sheds Light on Multinationals Profit-Shifting to Cut Taxes]( – Reuters - [Biden-Sanders Unity Task Force Calls for Fed, US Postal Service Consumer Banking]( – The Hill - [Walmart Makes New Push Into Healthcare With Insurance Business]( – Reuters - [Drug Prices Steadily Rise Amid Pandemic, Data Shows]( – Politico - [Recession Forces Spending Cuts on States, Cities Hit by Coronavirus]( – Wall Street Journal Views and Analysis - [Key Battleground States Most Vulnerable to Cutoff in Jobless Aid]( – Rebecca Rainey, Politico - [Congressional Budget Office Confirms That IRS Budget Cuts Lose Money and Benefit the Rich]( – Steve Wamhoff, Institute on Taxation and Economic Policy - [Don’t Shame Businesses for Taking Government Money]( – Karl W. Smith, Bloomberg - [The U.S. Is Battling Two Recessions, Not Just One]( – Noah Smith, Bloomberg - [Joe Biden Flips the Script on Trump]( – Greg Sargent, Washington Post - [The Long Political Fight Over Trump’s Tax Returns Is Likely to Be Over. Trump May Have Won.]( – Philip Bump, Washington Post - [To Save the US Economy, We Need to Save Jobs. This Program Could Do That]( – Mark Zandi, Jared Bernstein and Antonio Weiss, CNN Business - [Don't Bail Out Feckless States Without Strings Attached]( – Adam Schuster, RealClearPolitics - [Want to Help Minorities? Eliminate Opportunity Zones.]( – Travis Nix, RealClearPolicy - [Why Trump's Trade War Failed]( – Ryan Cooper, The Week Copyright © 2020 The Fiscal Times, All rights reserved. You are receiving this newsletter because you subscribed at our website, [thefiscaltimes.com]( or through Facebook. The Fiscal Times, 399 Park Avenue, 14th Floor, New York, NY 10022, United States Want to change how you receive these emails? 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