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The battle of the forecasts continues — It’s crunch time for Democrats’ climate, health care and deficit-reduction bill, and the endorsements and budgetary estimates are flying.
New this morning: In a joint statement shared with MM, former IRS commissioners from Democratic and Republican administrations say the provisions to boost IRS funding are critical to help the agency rebuild after years of underfunding. And they disputed GOP claims that middle-class Americans would face increased scrutiny as a result.
“In fact, for ordinary Americans who already fulfill their tax obligations, audit scrutiny will decline, because the IRS will be better at selecting returns for examination,” wrote Fred Goldberg, Charles Rossotti and John Koskinen. “This bill is about getting to the heart of the problem and pursuing high-end taxpayers and corporations who today illegally evade their tax obligations.”
Republicans have also seized on analyses suggesting the measure, dubbed the Inflation Reduction Act, wouldn’t have much effect on inflation at all.
But the bill got two important boosts Wednesday:
First, five former Treasury secretaries from Democratic and Republican administrations issued a statement in support of the legislation, which they said would benefit middle-class families.
“This legislation will help increase American competitiveness, address our climate crisis, lower costs for families, and fight inflation—and should be passed immediately by Congress,” wrote Obama Treasury Secretaries Tim Geithner and Jacob Lew, George W. Bush Treasury Secretary Hank Paulson, and Clinton Treasury secretaries Robert Rubin and Larry Summers.
Second, a new analysis from the Committee for a Responsible Federal Budget showed the Inflation Reduction Act would reduce deficits by almost $2 trillion over the next two decades. Yes, that’s trillions, with a T.
CRFB analysts estimated the bill would shave $300 billion from federal deficits over the first nine years, though the bulk of that won’t materialize until after 2027. But they said that number could grow substantially higher over the following decade, when savings from prescription drug changes really start to kick in and interest savings grow.
“The Inflation Reduction Act is the largest deficit-reduction bill in over a decade,” Maya MacGuineas, the group’s president, said and urged lawmakers not to water it down by adding more spending or removing any funding offsets.
Why does this particular analysis carry so much weight? CRFB is one of the most influential deficit-hawk groups in Washington and played a huge role in the budget battles that dominated the Obama administration. It’s nonpartisan — board members include former Clinton officials such as Leon Panetta and Erskine Bowles, former Republican Sen. Alan Simpson of Wyoming and onetime George H.W. Bush adviser and Congressional Budget Office director Dan Crippen. And it has never shied away from calling out both sides for budget gimmicks.
Lastly, the Congressional Budget Office on Wednesday estimated the bill would reduce deficits by about $300 billion over a decade, including about $203 billion from higher revenue as a result of IRS enforcement, which isn’t counted in the official score.
IT’S THURSDAY — A belated official welcome to the newest member of the MM team, Sam Sutton! Sam has been crushing the fintech beat for Politico since last fall, and we’re thrilled to have him as a co-author along with Kate, your regular MM host.
Trade data released at 8:30 a.m. … Cleveland Fed President Loretta Mester speaks at 12 p.m.
THE FED’S GLOBAL PROBLEM — The Fed’s plans to raise interest rates won’t just slow the U.S. economy, our Adam Behsudi writes: “They could also spark a series of economic crises in developing countries around the world. Higher interest rates are making it more expensive for many emerging economies to pay off the crushing debt they took on to survive the pandemic.”
PRIVATE EQUITY’S PUBLIC SAVIORS — Sen. Kyrsten Sinema is requesting key changes to the Inflation Reduction Act that could preserve the private equity industry’s favorite tax break. “The Arizona Democrat, who has not weighed in on whether she will vote for the legislation, wants to nix language narrowing the so-called carried interest loophole, which would change the way some investment income is taxed,” write POLITICO’s Burgess Everett and Marianne LeVine.
OPEC PLUS SNUBS BIDEN— Reuters’ Maha El Dahan and Ahmed Ghaddar: “OPEC+ is set to raise its oil output goal by 100,000 barrels per day, an amount analysts said was a setback to U.S. President Joe Biden after his trip to Saudi Arabia to ask the producer group’s leader to pump more to help the United States and the global economy.”
BIDEN’S ANTITRUST ADVISER TO LEAVE WHITE HOUSE— Our Daniel Lippman and Josh Sisco: “Tim Wu, the White House adviser helping to drive the administration’s push to rein in corporate giants with tougher antitrust enforcement, is planning to leave his position in the coming months. … Wu is expected to return to teaching at Columbia Law School.”
EX-IM GETS A NEW BOARD MEMBER— Owen Hernstadt was sworn in Tuesday by Sen. Amy Klobuchar (D-Minn.) as the newest member of the Export-Import Bank board.
THE GOP AND GARY GENSLER — For months, GOP lawmakers have groused about SEC Chair Gary Gensler’s contention that digital asset markets and major exchanges belong under his agency’s oversight. In the aftermath of a crypto lending crisis that has blown up hedge funds and left millions of retail traders holding the bag, they’re starting to ask why the SEC didn’t do more.
“Why didn’t they come out and issue guidance about how and why it is that crypto lending constitutes a security activity?” Sen. Pat Toomey, the Senate Banking Committee’s top Republican, said in an interview. “He’s acting, but he’s doing it selectively. And that’s hard to understand. I don’t understand it. I doubt that people in this ecosystem understand it.”
CRYPTO GETS ITS REGULATOR?— Senate Agriculture Committee Chair Debbie Stabenow (D-Mich.) and ranking Republican Sen. John Boozman said they could hold a hearing as soon as next month on a bipartisan bill that would put the Commodity Futures Trading Commission in charge of overseeing digital asset markets. “This is not a marker bill,” Boozman (R-Ark.) told reporters during a briefing call on Wednesday. “This is something we want to get done.”
One of the reasons Boozman said that’s possible is because most crypto executives would prefer to have their businesses regulated by the CFTC, rather than the much-larger SEC. “The fact they’re fairly united on that [point] makes it easier on members,” he said.
The bill’s already getting strong reviews from crypto exchange executives like FTX founder and CEO Sam Bankman-Fried and Coinbase’s policy chief Faryar Shirzad. It’s also been endorsed by the Center for American Progress, a progressive organization that has been wary of the industry’s influence on other crypto bills: “In addition to ensuring strong investor protections by regulating crypto commodity brokers, exchanges and other intermediaries for the first time, this bill would task the CFTC with investigating how to reduce crypto assets’ energy usage and promote responsible financial inclusion,” said Todd Phillips, CAP’s director of financial regulation and corporate governance.
CLARIDA TO PIMCO— Big news in the world of ex-Fed officials: Richard Clarida, the former Fed vice chairman who stepped down in January amid a trading scandal, is returning to PIMCO, the investment management firm where he spent 12 years before joining the Fed. Clarida will rejoin the company in October as a managing director and global economic adviser, a role similar to the one he held during his last stint at the firm, PIMCO announced Wednesday.
Worth remembering: The Fed’s inspector general cleared Clarida of any wrongdoing in a report last month. But lawmakers have blasted the Fed over the broader scandal, and pressed new board members to agree not to take jobs in the financial services sector for four years after their terms.
THE HAWKS COME OUT — Bloomberg’s Steve Matthews and Catarina Saraiva: “Federal Reserve leaders pledged the central bank would continue an aggressive fight to cool an inflation rate that’s at a four-decade high, even if higher rates cause the risk of recession.”
THE BOSS IS NOT YOUR FRIEND (EXCEPT MY BOSS. RIGHT, BOSS?) — WSJ’s Chip Cutter: “The era of the kinder, gentler CEO is fading. Corporate chiefs who spent much of the pandemic patiently answering questions in town halls, sending reassuring notes to staff members and projecting a softer image are shifting their tone as signs emerge that the economy is worsening.”
TIRED: AFTER-SCHOOL JOBS; WIRED: ‘APPRENTICESHIPS’— Bloomberg’s Molly Smith and Nic Querolo: “US companies are increasingly tapping high school students for skilled jobs. As a result, apprenticeships are seeing a renaissance after failing to gain a foothold over the past few decades. About 214,000 people age 16 to 24 were in apprenticeships in 2022, more than double the amount a decade ago, according to July data from the US Department of Labor.”
Meghan Welch has joined Plaid as its first chief people officer. Welch was most recently executive vice president, head of enterprise HR and chief diversity officer at Capital One, where she spent more than 20 years.
Capital One Financial Corp. is expanding its offices on Fifth Avenue, even as other companies reconsider real estate footprints amid rising concerns about an economic downturn and the increase in remote work. — Bloomberg’s Natalie Wong
Payrolls have grown faster during the first half of this year than during any other post-World War II period when the economy began contracting. — WSJ’s Sarah Chaney Cambon and Gwynn Guilford
— The way Vin Scully called a baseball game, it felt like bumping into an old friend. There were stories to tell and memories to share, his soothing banter as familiar as green grass and warm breezes on a sunny afternoon. — LA Times’ David Wharton