issue: Fiscal Policies

Ritz for Forbes: A New Economic Blueprint For The New Democratic Nominee

Posted on by Alyssa Brown

By Ben Ritz

President Joe Biden’s historic decision to withdraw from the 2024 presidential election has left Democrats beginning to debate what the future of the party should look like. While coming to voters with a new candidate at the top of the ticket, Democrats should also come to them with new ideas.

Vice President Kamala Harris — now the party’s presumptive nominee — should take the opportunity to not only embrace the president’s many accomplishments but also craft a governing agenda that improves on some areas where he could have done better. A new report published Tuesday by my colleagues at the Progressive Policy Institute (PPI) and I, titled Paying for Progress: A Pragmatic Blueprint to Cut Costs, Boost Growth, and Expand American Opportunity, offers one possible framework for that agenda.

Keep reading in Forbes.

New PPI Report Offers Democrats a ‘Radically Pragmatic’ Post-Biden Economic Blueprint

Posted on by Alyssa Brown

Washington, D.C. — As the Democratic Party begins to chart its path forward following President Joe Biden’s historic decision to end his re-election campaign, a new report from the Progressive Policy Institute (PPI) argues Democrats must adopt new ideas in addition to a new candidate at the top of the ticket.

The report, titled “Paying for Progress: A Pragmatic Blueprint to Cut Costs, Boost Growth, and Expand American Opportunity,” was compiled by PPI’s Center for Funding America’s Future with contributions from more than a dozen PPI experts covering a wide variety of policy areas. The report argues that, although President Biden successfully led the country in revitalizing major public investments and bringing unemployment to historic lows, failure to tackle the federal government’s $2 trillion annual budget deficit and the inflationary pressures it creates puts those successes in jeopardy.

“Voters are unlikely to support expanding the role of any government that they believe can’t even pay for the promises it’s already making,” said Ben Ritz, PPI’s Vice President of Policy Development and lead author of the report. “Demonstrating to the American people that we have an ambitious vision to cut costs, boost growth, and expand American opportunity — along with an economically pragmatic plan to pay for it — would help progressives restore confidence in the government’s ability to tackle big problems and build a more prosperous society for all.”

PPI’s report proposes a comprehensive blueprint for achieving many of the uncompleted goals from the Biden administration’s Build Back Better agenda while simultaneously putting the federal budget on a path to balance within 20 years. The report also offers the next administration a series of ideas to address major upcoming fiscal deadlines, including the reinstatement of the federal debt limit, the expiration of the Tax Cuts and Jobs Act, and the impending exhaustion of the Social Security and Medicare trust funds.

The roughly six dozen federal policy recommendations in the report are organized into 12 overarching priorities:

I. Replace Taxes on Work with Taxes on Consumption and Unearned Income
II. Make the Individual Income Tax Code Simpler and More Progressive
III. Reform the Business Tax Code to Promote Growth and International Competitiveness
IV. Secure America’s Global Leadership
V. Strengthen Social Security’s Intergenerational Compact
VI. Modernize Medicare
VII. Cut Health-Care Costs and Improve Outcomes
VIII. Support Working Families and Economic Opportunity
IX. Make Housing Affordable for All
X. Rationalize Safety-Net Programs
XI. Improve Public Administration
XII. Manage Public Debt Responsibly

An abridged version of PPI’s blueprint was featured this morning by the Peter G. Peterson Foundation’s 2024 Solutions Initiative alongside comprehensive budget plans by six other think tanks from across the political spectrum. Of all the proposals, PPI’s would achieve the most deficit reduction while maintaining the highest level of discretionary spending, demonstrating that fiscal responsibility and robust public investment can be complementary rather than contradictory policy objectives.

Read and download the full report here.

See how PPI’s plan compares to those of six other think tanks here.

Launched in 2018, the Progressive Policy Institute’s Center for Funding America’s Future works to promote a fiscally responsible public investment agenda that fosters robust and inclusive economic growth. To that end, the Center develops fiscally responsible policy proposals to strengthen public investments in the foundation of our economy, modernize health and retirement programs to reflect an aging society, transform our tax code to reward work over wealth, and put the national debt on a downward trajectory.

The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org. Find an expert at PPI and follow us on Twitter.

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Media Contact: Ian O’Keefe — iokeefe@ppionline.org

Paying for Progress: A Blueprint to Cut Costs, Boost Growth, and Expand American Opportunity

Posted on by The Progressive Policy Institute

The next administration must confront the consequences that the American people are finally facing from more than two decades of fiscal mismanagement in Washington. Annual deficits in excess of $2 trillion during a time when the unemployment rate hovers near a historically low 4% have put upward pressure on prices and strained family budgets. Annual interest payments on the national debt, now the highest they’ve ever been in history, are crowding out public investments into our collective future, which have fallen near historic lows. Working families face a future with lower incomes and diminished opportunities if we continue on our current path.

The Progressive Policy Institute (PPI) believes that the best way to promote opportunity for all Americans and tackle the nation’s many problems is to reorient our public budgets away from subsidizing short-term consumption and towards investments that lay the foundation for long-term economic abundance. Rather than eviscerating government in the name of fiscal probity, as many on the right seek to do, our “Paying for Progress” Blueprint offers a visionary framework for a fairer and more prosperous society.

Our blueprint would raise enough revenue to fund our government through a tax code that is simpler, more progressive, and more pro-growth than current policy. We offer innovative ideas to modernize our nation’s health-care and retirement programs so they better reflect the needs of our aging population. We would invest in the engines of American innovation and expand access to affordable housing, education, and child care to cut the cost of living for working families. And we propose changes to rationalize federal programs and institutions so that our government spends smarter rather than merely spending more.

Many of these transformative policies are politically popular — the kind of bold, aspirational ideas a presidential candidate could build a campaign around — while others are more controversial because they would require some sacrifice from politically influential constituencies. But the reality is that both kinds of policies must be on the table, because public programs can only work if the vast majority of Americans that benefit from them are willing to contribute to them. Unlike many on the left, we recognize that progressive policies must be fiscally sound and grounded in economic pragmatism to make government work for working Americans now and in the future.

If fully enacted during the first year of the next president’s administration, the recommendations in this report would put the federal budget on a path to balance within 20 years. But we do not see actually balancing the budget as a necessary end. Rather, PPI seeks to put the budget on a healthy trajectory so that future policymakers have the fiscal freedom to address emergencies and other unforeseen needs. Moreover, because PPI’s blueprint meets such an ambitious fiscal target, we ensure that adopting even half of our recommended savings would be enough to stabilize the debt as a percent of GDP. Thus, our proposals to cut costs, boost growth, and expand American opportunity will remain a strong menu of options for policymakers to draw upon for years to come, even if they are unlikely to be enacted in their entirety any time soon.

The roughly six dozen federal policy recommendations in this report are organized into 12 overarching priorities:

I. Replace Taxes on Work with Taxes on Consumption and Unearned Income
II. Make the Individual Income Tax Code Simpler and More Progressive
III. Reform the Business Tax Code to Promote Growth and International Competitiveness
IV. Secure America’s Global Leadership
V. Strengthen Social Security’s Intergenerational Compact
VI. Modernize Medicare
VII. Cut Health-Care Costs and Improve Outcomes
VIII. Support Working Families and Economic Opportunity
IX. Make Housing Affordable for All
X. Rationalize Safety-Net Programs
XI. Improve Public Administration
XII. Manage Public Debt Responsibly

Read the full Blueprint. 

Read the Summary of Recommendations.

Read the PPI press release.

See how PPI’s Blueprint compares to six alternatives. 

Media Mentions:

Ritz for Forbes: The RNC Platform Would Make Inflation Worse

Posted on by Max Sherrill

By Ben Ritz

The theme of the Republican National Convention’s opening night in Milwaukee was “Make America Wealthy Again.” Speakers one after the other blamed the Biden administration and Democratic policies for the high inflation rates that plagued the country for much of the last three years. But at the same time, delegates approved a new party platform crafted by former President Donald Trump that would actually make inflation worse.

One of the first planks of the GOP’s new platform is “End Inflation and Make America Affordable Again.” Although Republicans want to place the blame for rising prices on President Biden, much of the inflation experienced over the past three years was due to factors entirely outside the president’s control, such as supply-chain bottlenecks and the residual effects of the COVID-19 pandemic.

The primary mechanism by which the president can worsen inflation is by adding to the federal budget deficit: if the federal government pumps more money into the economy through spending than it removes in taxes, those extra dollars help bid up the prices of goods and services. And on this measure, Republicans could make a decent argument: policies enacted during the Biden administration added more than $4 trillion to deficits over the 10-year window conventionally used for fiscal estimates by the Congressional Budget Office.

Keep reading in Forbes.

Building Financial Futures: Empowering Underserved Communities Through Savings and Retirement Planning

Thursday, June 27
12:00 to 1:30 p.m.Rayburn House Office Building

Room 2060
45 Independence Ave SW, Washington, DC 20515

 

Please join the Progressive Policy Institute (PPI) and the Alliance for Prosperity & a Secure Retirement (APSR) for a lunch briefing about empowering underserved communities through savings and retirement planning on Thursday, June 27, from 12:00 to 1:30 p.m. in Rayburn 2060. The event will feature opening remarks from Rep. Joyce Beatty (D-OH), co-chair of the House Financial Literacy and Wealth Creation caucus, followed by a panel of experts:

Featured speakers include:

  • Ben Ritz, Vice President of Policy Development at the Progressive Policy Institute
  • Lettie Nocera, Director of the American Savings Education Council for Bipartisan Policy Center’s Economic Policy Program
  • Yanira Cruz, President & CEO of the National Hispanic Council on Aging
  • Tim Hill, President of the Alliance for Prosperity & a Secure Retirement
Additional speakers to be announced. 

This expert panel will discuss the challenges that prevent underserved communities from building wealth, new financial tools that have been successful in empowering individuals to make informed financial decisions, and policy recommendations to promote retirement security in the United States. Lunch will be served.

We look forward to seeing you there!

 

RSVP here.

GOP’s Budget-Busting Defense and Tax Proposals Are Incompatible

Posted on by Alyssa Brown

Last week, Senator Roger Wicker, the GOP ranking member on the Senate Armed Services Committee, called for increasing U.S. defense spending from roughly 3% to 5% of gross domestic product (GDP) over the next five to seven years to prepare for increased geopolitical tensions with Russia, China, and Iran. That would require at least $5 trillion in new federal spending over the next decade, for which Senator Wicker offers no offsets.

Meanwhile, Senate Republicans also want to spend an additional $4 trillion over the next decade to extend the Trump 2017 tax cuts, most of which are currently set to expire in 2026. Even if there were national security merits to Senator Wicker’s proposal, Republicans have offered the country no explanation for how they intend to finance $9 trillion in spending, which would reverse the $1.5 trillion of savings they secured in last year’s Fiscal Responsibility Act several times over. By comparison, the most recent Biden budget proposed $4.1 trillion in new spending over the next decade, and much of that was offset by proposed tax increases.

Wicker’s plans for a dramatic ramp-up of defense spending were swiftly endorsed by Mitch McConnell and several other prominent Republicans. However, the proposal does not spell out a clear strategic rationale for such a high defense target. In an op-ed defending the proposal, Wicker cites the unfunded priorities lists annually requested by the Pentagon as one justification for this increase. However, the spending increase that would be required to fully fund all these priorities is less than one-tenth of what Wicker is calling for. Moreover, there is clearly some room for the Pentagon to pay for these priorities by spending smarter rather than spending more. The Inspector General’s Office, the Government Accountability Office, and the Defense Business Board have all suggested that smarter procurement and personnel decisions could save money with few negative consequences for military readiness.

But if our country faces threats dire enough to justify this new spending, you’d expect a party that has repeatedly threatened to crash the economy in the name of “fiscal discipline” to come up with ways to pay for it. Yet Republicans have instead chosen to do the opposite, calling for even more tax cuts for affluent Americans by making their 2017 tax bill, the Tax Cuts and Jobs Act (TCJA), permanent. Although TCJA made some positive changes to simplify the individual tax code that are worth extending, it also lavished almost two-thirds of the overall benefits on the top fifth of income earners. And contrary to GOP claims that the law would pay for itself, even sympathetic estimates say only about 14% of the total cost is estimated to be recouped through faster economic growth.

America cannot afford the GOP’s reckless spending proposals. The federal government spent $2 trillion more than it raised in revenue last year — a deficit that cannot be justified at a time of strong economic growth and record-low unemployment rates. Interest costs as a percent of GDP are now higher than at any other point in American history, and they are projected to more than double over the next 30 years even if current law remains unchanged. If this growth continues unchecked, interest costs will begin to crowd out other important priorities, including national defense. This scenario is hardly hypothetical, as interest payments on the debt eclipsed defense spending for the first time last year. If the GOP truly wanted to ensure military readiness, they would ensure that defense spending is sustainable rather than pitch unrealistic spending surges.

Ultimately, these GOP proposals highlight how unserious their party is on improving the nation’s fiscal outlook. Despite their routine demonization of fiscal proposals from the other side of the aisle, they fail to recognize the complete incompatibility and hypocrisy of their own $9 trillion priorities. Republicans want to spend now and pay later — by sticking young Americans with the bill. Policymakers in Congress and the Administration should be having a serious dialogue about what is necessary to correct the nation’s fiscal trajectory, not making it worse.

Ryan for Newsweek: To Avoid Danger, U.S. Must Lead on Crypto and Blockchain

Posted on by Max Sherrill

By Tim Ryan

“Those who came before us made certain that this country rode the first waves of the industrial revolution, the first waves of modern invention, and the first wave of nuclear power, and this generation does not intend to founder in the backwash of the coming age of space. We mean to be a part of it—we mean to lead it.”

That was President Kennedy more than a half-century ago. Even then, he understood better than most that America’s place in the world was bound up with our determination to be at the cutting edge of progress. We were a beacon of hope because the world knew that we would use our technological prowess to expand the rule of law and the basic human rights of all people. America’s promise was to ensure that breakthroughs would be used for the good of humanity.

Today, that same spirit still animates certain elements of progressive thinking. My fellow Democrats aren’t trying to smother the emerging industry being born from artificial intelligence—they’re trying to establish wise and fair rules that ensure both that its deployed safely and that it benefits everyone, and not just the very well off. They’re refusing to cede the advanced semiconductor industry to businesses overseas—helping instead to induce the industry to construct “fabs” domestically in places like my home state of Ohio. On a whole range of issues, Democrats are determined to keep America at the cutting edge.

But when it comes to blockchain, namely the new technology promising to power a new, secure, decentralized, and transparent set of applications across a whole range of industries, many Democrats seem to have lost sight of Kennedy’s admonition. Having convinced themselves that various misuses of blockchain obviate its underlying value, Sen. Elizabeth Warren and her allies seem more interested in smothering innovation than harnessing its potential for the public benefit. While their concerns are understandable, their approach is fundamentally misguided.

Keep reading in Newsweek.

PPI Comment on NPRM for Additional Student Debt Relief, Docket ID ED-2023-OPE-0123, Federal Register, 2024-07726

Posted on by Max Sherrill

Although we at the Progressive Policy Institute (PPI) believe some modest relief from overly burdensome debt is warranted, we are concerned many of this rule’s provisions would provide generous windfalls to relatively affluent borrowers while providing little additional benefit for borrowers most in need. The rule also comes with a high cost to taxpayers — $147 billion by the department’s own estimates — yet has no offsets to pay for it, making it a clear violation of the Fiscal Responsibility Act’s administrative PAYGO provision. Proceeding with this rule as written would only worsen the existing bias that federal policy has towards the minority of young people who attend college, at the expense of the majority who do not yet will be saddled with the bill.

Founded in 1989, PPI – a 501(c)(3) think tank – is a force for radically pragmatic innovation in politics and government. Our mission is to develop a new progressive blueprint for change that can help center-left parties broaden their appeal and build stable governing majorities. PPI has been a prominent voice in fiscal policy through our Center for Funding America’s Future, which works to promote a fiscally responsible public investment agenda that fosters robust and inclusive economic growth. The Center has played a critical role in shaping fiscal policy debates around key legislation over the past five years and has been extremely involved in the national college affordability discussion.

In a previous comment, we applauded the administration’s efforts to expand and improve upon income-driven repayment programs, which we believe are the best mechanisms to help borrowers who are burdened by the debt of pursuing degrees from which they did not ultimately benefit. But we also warned that the Department’s SAVE plan was overly aggressive in scope, leading to the typical college graduate paying back only three fifths of what they initially borrowed — and not a dollar of interest. Providing such a generous subsidy is profoundly unfair to the majority of American taxpayers who didn’t attend college and are being asked to foot the bill for people who did, despite earning lower average incomes than them. Even worse, it is likely to further inflate the already high costs of college by incentivizing universities to hike tuition rather than control costs.

PPI is concerned that the current proposed rule would compound these mistakes. The rule’s most expensive provision, the cancellation of accumulated interest, will mostly benefit wealthy professionals while being redundant for low-income borrowers struggling with high debt burdens. Enrolling the SAVE plan already prevents borrowers with large loan balances and lifetime earnings equal to or below those of the average college graduate from having to pay any interest. But borrowers who enhance their future earnings by taking on large debts, such as lawyers, doctors, and other professional degree holders, will reap a significant windfall that they should not get if this rule is finalized as proposed. Currently, the rule proposes to cancel up to $20,000 of interest for those on standard repayment and an unlimited amount for those enrolled in IDR. We urge the department to set this interest cap as low as possible for all borrowers to limit these regressive impacts.

We are similarly concerned about the provision to forgive all loans after 20-25 years. Those enrolled in IDR plans even before the SAVE plan was enacted were on track to have their balances forgiven after 20-25 years of making the required payments. If someone is paying back student loans for more than 25 years, they are likely a professional degree holder with a large debt balance who has chosen to structure their repayment plans over a longer period of time. Giving forgiveness to a relatively affluent group in the last few years of their repayment is unnecessary and arbitrary, especially when the most vulnerable borrowers already benefit from a similar policy.

We are more sympathetic towards the provision providing relief to borrowers who attended low-value educational institutions. These students are most likely to be burdened by the debt of pursuing a degree from which they did not financially benefit. We applaud previous rulemaking from the department targeting these often fraudulent institutions, forcing them to transparently disclose the financial value they provide for students, cutting off future federal aid, and closing them if necessary. But we encourage the Department to work with Congress to ensure the costs of canceling this debt are borne by these predatory institutions as much as possible rather than asking taxpayers to foot the bill.

The administration has already spent more than $600 billion of American taxpayer money on executive actions to cancel student loan debt, most of which belonged to individuals with above-average lifetime earnings, without explicit approval from Congress. We urge the Department to work with lawmakers on developing progressive reforms to the SAVE plan, greater accountability for educational institutions, and other common-sense reforms to control the cost of higher education rather than pursuing more unilateral debt cancellation schemes.

Even in the absence of congressional action, we also encourage the Department to keep the above concerns in mind when developing their proposed regulations on “waivers for hardship,” as is mentioned to be forthcoming in the proposed rule.

Read the comment on the proposed Department of Education rule.

Ritz for Forbes: Alarming CBO Report Shows Unprecedented Interest Costs Starting Next Year

Posted on by Max Sherrill

By Ben Ritz

Just as two years of punishing inflation finally appears to have subsided, new projections from the Congressional Budget Office show another major economic problem on the rise. Thanks to excessive deficit spending that worsened inflation and the interest-rate hikes implemented by the Federal Reserve to bring it under control, the U.S. government is now on track to spend a larger share of economic output on annual interest payments next year than at any other point in our nation’s history. Even worse, these costs are projected to more than double over the next 30 years if current law remains unchanged. And the worst part of all: CBO’s projections are more likely than not to deteriorate further based on the agendas being offered by the two major parties heading into the 2024 elections.

CBO’s Budget and Economic Outlooks have shown for years that government debt was on an unsustainable path. As our population ages, spending on retirement programs such as Social Security and Medicare is growing faster than the revenue needed to fund them. If the federal government continues relying on borrowed money to finance growing structural deficits, an ever-growing share of the federal budget will be spent just servicing past debts. That rising cost draws resources away from other critical public investments our government needs to fund and threatens to dampen economic growth.

Previous reports generally suggested this challenge was a long-term one: Just last summer, CBO estimated that annual interest payments as a percent of gross domestic product would remain below the all-time high they reached in 1991 until 2030. But thanks to an unforeseen spike in borrowing costs last fall, CBO now expects the previous record to be broken in 2025.

Keep reading in Forbes.

PPI Urges Democrats To Move Beyond $400K Tax Pledge

Posted on by Max Sherrill

Washington, D.C. — Government programs that benefit most Americans can only be sustained if most Americans are willing to pay for them. But for more than two decades, U.S. political leaders have kept taxes far below the level needed to pay for growing social spending on programs like Social Security and Medicare. America can afford to borrow when addressing temporary emergencies, but it cannot continue to sustain debts growing faster than our economy in perpetuity.

Today, the Progressive Policy Institute (PPI) released a new report titled “How The $400K Tax Pledge Undermines Policymaking,” which argues that President Biden and the Democratic Party should move beyond Biden’s 2020 pledge not to raise taxes on any household making under $400,000. Report author Ben Ritz, Director of PPI’s Center for Funding America’s Future, explains the need for pragmatic progressives to push Democrats to soften this tax pledge if they want to bolster public investment in a fiscally sustainable way.

The report argues that raising taxes only on households with incomes over $400,000 is insufficient to fund current promises, let alone the new initiatives Biden has proposed during his presidency or the wish list of expanded programs sought by progressives. While it made for a popular campaign promise, President Biden’s pledge undermines prudent democratic governance by severing the crucial link between citizens’ demands for more government spending and their willingness to pay for it. In addition, the report contends that the pledge prevents the adoption of common-sense tax simplification measures and efficient revenue-raisers that most other advanced economies use to fund their welfare states.

“The reality is that some form of higher tax revenue is necessary to finance the needs of our aging population — and asking only families that make $400K to bear an increased burden is neither fair nor practical,” said Ben Ritz. “Pragmatic progressives must start making the case to voters why progressive programs are worth paying for. That means advocating for not only progressive tax increases, but also for broadening the tax base and closing inefficient loopholes — even those that benefit the middle class. At the same time, progressives must propose to modernize rather than simply expand existing spending programs, because the public’s tolerance for taxation only goes so high.”

Read more about the report in Politico and download the report here.

 

PPI’s Center for Funding America’s Future works to promote a fiscally responsible public investment agenda that fosters robust and inclusive economic growth. It tackles issues of public finance in the United States and offers innovative proposals to strengthen public investments in the foundation of our economy, modernize health and retirement programs to reflect an aging society, and transform our tax code to reward work over wealth.

The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org. Find an expert at PPI and follow us on Twitter.

 

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Media Contact: Amelia Fox – afox@ppionline.org

How the $400K Tax Pledge Undermines Policymaking

Posted on by Alyssa Brown

INTRODUCTION

Americans have always understood that our nation’s prosperity rests on two pillars: A vibrant free-enterprise system that rewards innovation and risk-taking, and a fiscally responsible government that invests in basic public goods and services that cannot be provided by the private sector. But to benefit from these investments, citizens must pay sufficient taxes to finance them — and for more than two decades now, U.S. political leaders have not asked them to do so.

Last year alone, the federal government spent $2 trillion more than it raised in tax revenue. Our country can afford to borrow when addressing temporary emergencies, but it cannot sustain debts growing faster than our economy in perpetuity. Unfortunately, that’s the path we’re on today, as the costs of health-care and retirement programs such as Medicare and Social Security continue growing faster than the revenues needed to finance them. If this structural mismatch between taxes and spending continues unabated, rapidly rising interest costs will further crowd out critical public investments and smother our economy.

Anti-tax zealots on the right have argued the imbalance can be solved entirely through spending cuts. Yet they have been unable to produce a plausible plan to do so without eviscerating core functions of government, such as food safety and basic scientific research that plants the seeds for innovation. The reality is some higher tax revenue is necessary to finance the needs of our aging population.

President Joe Biden at least partially grasps this reality and has called for raising taxes by almost $5 trillion over the next decade. However, his approach also is marred by political expediency. In Biden’s telling, our current spending trajectory can largely be sustained — and even raised — simply by raising taxes on the top 2% of income-earners, without any contribution from the vast majority of Americans. During his 2020 presidential campaign, Biden famously pledged not to raise taxes on households making under $400,000 (hereafter referred to as “the $400K pledge”). Since taking office, his administration has reinforced this pledge by saying no household earning under $400,000 will pay a penny more in taxes from his policies and proposing to prevent $1.7 trillion of temporary tax cuts that benefit these households from expiring.

Biden is right that the rich need to pay more in taxes but that simply isn’t enough. As this report demonstrates, raising taxes only on households with incomes over $400,000 is insufficient to fund current promises, let alone the new initiatives Biden has proposed during his presidency or the wish list of expanded programs sought by progressives. In addition to starving the government of needed revenue, the $400K pledge prevents the adoption of commonsense tax simplification measures and efficient revenue-raisers that most other advanced economies use to fund their welfare states

But the final problem with the $400K pledge is perhaps the most serious: it destabilizes our democracy. Asking fewer than 3 million households to bear the burden of financing a government meant to serve 330 million people is neither fair nor practical. It removes the incentive for prudent fiscal policy by severing the crucial link between citizens’ demands for more government spending and their willingness to pay for it. After all, why should voters care about wasteful or corrupt government spending if “somebody else” is paying for it? Meanwhile, the few households that are footing the bill will likely reduce their output in response to confiscatory levels of taxation. Government programs in a democratic society can only be sustained if most of the citizens who can contribute are willing to do so.

Pragmatic progressives must pressure the Biden administration to soften the president’s misguided tax pledge heading into a potential second term. They must start making the case to voters why progressive programs are worth paying for. That means advocating for not only progressive tax increases, but also for broadening the tax base to close inefficient loopholes — even those that benefit the middle class — and adopting new taxes, such as the consumption taxes that fund European welfare states. Beyond that, progressives must propose to modernize rather than expand existing spending programs, because the public’s tolerance for taxation only goes so high. Bringing spending into alignment with revenues at a sustainable level voters truly support is essential for Biden to establish a durable legacy.

READ THE FULL REPORT. 

Duffy for The Messenger: New Tax Deal Imperfectly Invests in Our Future

Posted on by Max Sherrill

By Laura Duffy

After years of uncertainty, Congress may be on the verge of passing a $78 billion tax package to partially revive an expanded Child Tax Credit and business tax incentives for research and development that expired at the end of 2021. These popular — yet costly — provisions became linked in 2022 by Democrats arguing that benefits for working families should accompany tax breaks for businesses, but compromise has remained elusive until now. Although the deal, introduced Monday by Senate Finance Committee Chairman Ron Wyden (D-Ore.) and House Ways and Means Chairman Jason Smith (R-Mo.), is imperfect, it would temporarily reduce child poverty, incentivize innovation and minimally add to the national debt.

Expanding the Child Tax Credit (CTC) can play a key role in reducing child poverty, which is both a moral imperative and a smart investment in children’s health, educational and economic outcomes later in life. In 2021, Congress temporarily provided a pandemic-era expansion to the CTC to all families. These changes were expensive: If made permanent, they would have cost $1.6 trillion between 2022 and 2031. Yet, instead of adjusting the policy to provide more targeted support, lawmakers allowed the changes to completely expire.

Currently, the full $2,000-per-child value of the CTC isn’t available to many families that need it most.

Read more.

This op-ed was originally published in The Messenger on January 20, 2024.

Kilander for The Messenger: Republican Budget Concessions Enrich Tax Cheats and Increase the Deficit

Posted on by Max Sherrill

By Alex Kilander

The budget deal recently struck by congressional leaders would be a bittersweet resolution to this year’s spending fight. On the one hand, it prevents a harmful government shutdown and adheres to the spending levels in the Fiscal Responsibility Act (FRA) negotiated by President Biden and former House Speaker Kevin McCarthy (R-Calif.)  in June. But it rewards Republicans for threatening to renege on the agreement they already made and may help wealthy tax cheats in the process. Moreover, it avoids any real discussion about what is needed to remedy our nation’s fiscal imbalance.

The bipartisan agreement calls for just under $1.66 trillion in discretionary spending for fiscal year 2024, split between domestic and defense programs. Defense spending will be set at $886 billion, a 3% increase over the previous year, while non-defense spending will be set at $773 billion, roughly flat from the previous year. After accounting for inflation, this amounts to roughly flat defense spending with a 3.4% cut for non-defense spending.

Most importantly, this deal averts a harmful shutdown that would interrupt important federal programs and create a costly disruption to the nation’s economy through higher unemployment, lower GDP and disruptions to important sectors. Depending on their length, previous government shutdowns have cost the economy as high as $20 billion.

Read more.

This story was originally published in The Messenger on January 16, 2024.

Some Observations on Proposed Capital Requirements

Posted on by Max Sherrill

Strong capital requirements help protect taxpayers and prevent financial crises. As the savings and loan industry bailout of 1989 and the 2008 financial crisis underscore, when banks take on too much risk with too little capital, workers, small businesses, and American taxpayers pay the price.

PPI believes strong, tangible capital requirements for depository institutions are key to ensuring a well-functioning banking system. Given the collapse of Silicon Valley Bank and Signature Bank last spring, we applaud federal regulators for undertaking a review of what changes are needed to prevent similar outcomes in the future.

With regard to the proposed rule to increase capital standards on large banks by as much as 20%, we find ourselves in agreement with Senator Mark Warner of Virginia. As the Senator stated earlier this fall, we must “make sure that when we think about the safety and soundness of the system, we think about the interaction between interest rate rise, capital standards, and other factors.”

Or in other words, given the many economic challenges facing the nation today — a 22-year high federal funds rate, an inflation rate that has dropped significantly but remains higher than the Fed’s target, weakening loan demand, and ongoing political dysfunction — regulators must be careful that the impact of any changes in capital requirements not inadvertently hurt middle-and working-class families and small businesses.

Balancing the safety and soundness of the financial system has always been a difficult tightrope to walk. But that is the job of banking regulators. Regulators may be correct that higher capital standards may be needed, but the evidence must be clear, rational, and thorough.

Ritz for Forbes: Improving Financial Capability Can Help Low-Income Families Around The Holidays

Posted on by Max Sherrill

By Ben Ritz

Managing money around the holidays can be tough for low-income families even in the best of times. The pressure to be generous with family and friends can often lead to overspending and a hangover of debt when the new year rolls around. But the challenge has become particularly acute for many after a prolonged period in which rising prices often outstripped modest wage gains. One relatively easy solution is to improve “financial capability” — an individual’s understanding of how to distribute their incomes, manage their debts, balance their cashflow, and protect themselves against financial uncertainties.

A 2021 study from the Financial Industry Regulatory Authority (FINRA) found that an individual making between $25,000 and $50,000 was 15 points more likely to have emergency savings capable of covering three months of expenses if they scored above average on an assessment of financial literacy (another term for financial capability). Individuals in this income range demonstrating high financial literacy were also 10 points more likely to spend less than they earn, putting them on par with people who made more than $100,000 and demonstrated below-average financial literacy. These findings suggest good financial education can give many lower-income families the same financial security high-income households enjoy.

Unfortunately, those households under the most financial pressure are often the least equipped to manage it. The FINRA study found individuals with incomes over $50,000 were more than twice as likely to demonstrate high financial literacy as those without. Improving financial capability may not be a panacea for families in the depths of poverty, for whom there is no substitute for additional resources, but it would clearly make a meaningful difference for many low- and middle-income families.

Read more in Forbes.

Ritz for Forbes: Ukraine Aid Costs Pale In Comparison To The Price Of Appeasement

Posted on by Max Sherrill

By Ben Ritz

The current obstacle holding up Washington’s continued aid to Ukraine seems unconnected to the merits. Republicans, many of whom do not share President Joe Biden’s resolve to stand firm against Vladimir Putin’s imperial ambitions, are refusing to approve new funding unless the administration accepts their position on domestic immigration reform. They are cynically using Ukraine’s fate as a chit in an unrelated political battle. But underpinning this decision is another view held by many of them and their constituents: that the money Washington spends on assistance to Kyiv is a poor use of taxpayer dollars.

The critic’s argument, which can frequently be heard on both the right and the far left, is rhetorically powerful: How does it make sense to spend money on Ukraine’s military when we have so many problems here at home? Why should America finance a foreign war when we’re facing ballooning budget deficits, rising consumer prices, and other pressing economic needs? The answer is relatively straightforward: Cutting the Ukrainians off would not only be morally reprehensible, and militarily shortsighted — it would be fiscally irresponsible.

Read more in Forbes.