The ‘Crazy’ Reason for the IRS’s Huge Backlog

Plus, the hiring boom continues ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ [The Fisc](   By Yuval Rosenberg and Michael Rainey Happy Friday and welcome to April! A big weekend of college basketball lies ahead and "music’s biggest night" is coming Sunday with the delayed 2022 Grammy Awards. But President Joe Biden got a prize of sorts of his own today. Here’s the latest. [*] Unemployment Rate Falls to 3.6% as Hiring Boom Continues The U.S. economy added 431,000 jobs in March and the unemployment rate dropped to a pandemic low of 3.6%, the Labor Department announced Friday. While the report fell a bit short of expectations, the results were quite robust nevertheless and buttressed by the upward revision of February’s jobs gains to 750,000. The labor market has now added more than 600,000 jobs on average over the last six months, more than 400,000 jobs for the last 11 months, and is within roughly 1%, or 1.5 million jobs, of its pre-pandemic level (see chart above). "It’s been a remarkable recovery; we’ve never seen anything like this," Jane Oates of the nonprofit WorkingNation [told The Washington Post](. "Two years ago, every sector was at least disrupted if not completely shut down. But we’ve had such a quick recovery that things are almost back to normal." Lots of solid trends: The unemployment rate is now just one-tenth of a percent below where it stood before the pandemic. Although employers still report a tight labor market and difficulty filling jobs, workers continue to come off the sidelines in massive numbers, fueling hopes that the expansion can continue. And wages are rising, up 0.4% in March and 5.6% over the last year, though not so fast as to cause concerns about a wage-price spiral. White House happy to brag: White House Chief of Staff Ron Klain cited the "historic unemployment report" and the 3.6% unemployment rate as he [highlighted]( the Biden administration’s accomplishments this past week, which also include a pandemic low for the national Covid-19 hospitalization rate, the approval of a second booster for those over 50, and the release of the 2023 budget request. And President Biden noted that the 7.9 million jobs created so far during his time in office are more than those created in the first 14 months of any other administration. Another green light for the Fed: The March report will likely bolster the Federal Reserve’s effort to start reining in the economy with higher interest rates. The report is the last one before the next Fed meeting on May 3 and 4, and some inflation hawks are calling for an aggressive rate hike of half a percentage point. "This is an economy and labor markets overheating, the Fed has to accelerate" its tightening, Jeffrey Rosenberg of BlackRock told Bloomberg Television. Still a way to go: As strong as the jobs numbers have been, it’s worth remembering that the economy is still millions of jobs short of where it was projected to be in the absence of the pandemic. At the current rate of growth, the job market will return to pre-pandemic levels this year, as soon as summer. "We are on pace to recover nearly EIGHT YEARS faster than we recovered from the Great Recession," Heidi Shierholz of the Economic Policy Institute tweeted, while crediting the rapid recovery to the fiscal policy choices made by Congress. At the same time, the gap between where we are and where we could have been is enormous, and could take years to fill. "The recession left a huge hole, and depending on how you measure the counterfactual, the total gap in the labor market right now is around 4-6 million jobs," Shierholz noted, before adding that the "gap is closing astonishingly fast." The ‘Crazy’ Reason for the IRS’s Huge Tax Return Backlog The Internal Revenue Service had a backlog of nearly 15 million paper returns as of March 18, National Taxpayer Advocate Erin Collins reported in a [blog post]( this week, noting that since the start of the Covid pandemic the agency has fallen almost a year behind in processing those paper returns. "The reason paper returns are so challenging is that the IRS still has not implemented technology to machine read them, so each digit on every paper return must be manually keystroked into IRS systems by an employee," Collins explained. That could mean several hundred digits for a "moderately complex" return, or more than a thousand entries for a longer return. "In the year 2022, this doesn’t just seem crazy. It is crazy," Collins says. She recommends that the IRS implement scanning technology to reduce the need for manual data entry. Over the past two decades, she says, "the IRS has considered, rejected, proposed, reconsidered, partially implemented, and deferred the question of whether to implement scanning technology." Meaning it’s well past time for the agency to deal with its paper problem. "If necessity can be the mother of invention," Collins writes, "the unprecedented paper returns backlog resulting from the COVID-19 pandemic should spur the IRS to take immediate steps to automate the processing of paper tax returns – not in two years or three years but beginning with the upcoming filing season. The timely payment of tax refunds for millions of taxpayers is depending on it." How Biden’s Build Back Better Bill Imploded — and How It Could Be Rebuilt Bloomberg’s Erik Wasson, Nancy Cook and Laura Davison take a detailed look back today at how President Biden Build Back Better bill imploded in the Senate — and what it might take to revive portions of the plan. "Its demise boils down to a miscalculation in the White House’s handling of Joe Manchin, the Democratic senator from a Trump-loving, coal-dependent state who can be vague and unpredictable in what he will support," they write. "Whether any of it can be salvaged will depend on the extent to which Biden is willing to get personally involved in mending the relationship with the most powerful politician in Washington, a man who has been tagged with the moniker ‘President Manchin.’" Bloomberg notes that Biden and Manchin "haven’t spoken about the legislation in months" but both sides remain open to a deal. Biden has sought to court Manchin and other centrists by emphasizing deficit reduction in his new budget proposal. Manchin, meanwhile, has indicated that he’s interested in a scaled back version of the legislation focused on tax increases and prescription drug pricing reforms, with the savings from those changes used to reduce the deficit and pay for climate programs. "The question remains," Wasson and company write, "whether Manchin’s offer is a foundation to rebuild trust and move forward with a package that has polled well with voters and can get the support of progressives as well as fellow Senate holdout Kyrsten Sinema of Arizona, another moderate Democrat Biden needs." They also suggest that some of the miscues in previous negotiations "may have been averted had Biden — whom Manchin is said to personally like — done the arm twisting himself, rather than deputizing senior staff who Manchin deems too liberal." But the president is reportedly not yet engaging in direct talks, with White House aides concerned "that talking about the bill could hurt Biden politically." "There is no reason for him to be personally involved for some time to come," former Democratic Senate Majority Leader Tom Daschle told Bloomberg. The bottom line: Manchin has indicated that any bill would need to pass this summer, before lawmakers leave for their August recess and ramp up their campaigning for November’s midterm elections. But Bloomberg also notes that Biden will likely have to sharply pare back what started out as a massively ambitious plan to transform vast swaths of the U.S. economy. Map of the Day: Where $9 Billion in Earmarks Went The $1.5 trillion annual spending bill passed by Congress last month included 4,962 earmarks totaling more than $9 billion. [The New York Times]( has a detailed breakdown of those appropriations that lawmakers directed, noting that the money "went to projects big and small, rural and urban, crustacean and porcine." Democrats secured 3,682 earmarks totaling more than $5 billion while Republicans got 1,014 earmarks worth about $3.4 billion. Just over $600 million worth of earmarks were bipartisan. Here’s the Times map of where the money went. --------------------------------------------------------------- Send your feedback to yrosenberg@thefiscaltimes.com. And please encourage your friends to [sign up here]( for their own copy of this newsletter. --------------------------------------------------------------- News - [House Passes Bill to Cap Insulin Prices]( – NPR - [Senators Revive School Lunch Debate With Bill to Extend Universal Free Meals]( – Politico - [U.S. Economy Looks Strong Enough to Avoid Recession, IMF Says]( – Bloomberg - [Key Part of Yield Curve ‘Inverts’ as Short-Term Rates Jump After Jobs Report]( – CNBC - [Number of Covid Patients in US Hospitals Reaches Record Low]( – Associated Press - [Can Biden Make Up With His Frenemy to Save His New Deal?]( – Bloomberg - [Sherrod Brown Blames Republicans for Sabotaging the Biden Agenda]( – New Republic - [Arthritis Top-Seller Humira Set for U.S. Rival After $193 Billion in Sales]( – Bloomberg - [It Used to Be Hard to Find a Coronavirus Test. Now There Are Too Many]( – Washington Post - [Congressional Black Associates Asks Members of Congress to Raise Wages for All Staffers]( – The Hill Views and Analysis - [What the March Jobs Report Means for Biden]( – Garrett Ross, Politico - [Jobs Report Gives the Fed the All Clear to Go All Out]( – Jonathan Levin, Bloomberg - [Biden’s New Taxes for Billionaires: One Is Hard, One Is Easy]( – Steven M. Rosenthal, Tax Policy Center - [The Many Ways to Tax the Rich]( – Howard Gleckman, Tax Policy Center - [’70s-Era Inflation Advice Was Hollow and Still Is]( – Stephen Mihm, Bloomberg - [Will Putin Kill the Global Economy?]( – Paul Krugman, New York Times - [Can Supply Chain Disruptions Lead to a Recession?]( – Willy C. Shih, The Hill - [Are We Ready for Another Covid Wave? Not if Congress Keeps Stalling]( – Washington Post Editorial Board - [How Can We Put Covid Behind Us Without Guaranteed Paid Sick Leave?]( – Céline Gounder and Mollyann Brodie, Washington Post - [No, Biden’s New Deal With Iran Won’t Involve ‘U.S. Taxpayer Dollars’]( – Glenn Kessler, Washington Post - [The Real Reason the IRS Is Behind in Processing Tax Returns]( – Michelle Singletary, Washington Post Copyright © 2020 The Fiscal Times, All rights reserved. You are receiving this newsletter because you subscribed at our website 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? [Update your preferences]( or [unsubscribe](