Joe Biden told potential donors to his campaign that his administration would end most of President Trump’s multitrillion-dollar tax cuts – even though “a lot of you may not like that,” CNBC reports.
The Economist: “State tax revenues in the United States collapsed in April, falling on average by half, according to the Urban Institute, a think-tank. Demands on spending soared because the states are responsible for much of America’s spending on public health, unemployment and policing. By some calculations, state-budget deficits will reach a quarter of revenues in the coming fiscal year—or would do, if most states had not bound themselves by law to run balanced budgets.”
“So instead of vast deficits, the states will have to make savage cuts to public services in the midst of a recession and pandemic. Through no fault of their own, their budgets are out of control and are about to hit the buffers.”
Washington Post: “Inside the West Wing, Trump is reticent to pursue a new stimulus package and confident about a revival even as economists and the Federal Reserve chairman push the president and Congress to spend more to address the economic carnage.”
“They said conservatives are urging Trump to hold off on providing relief to states that have been battered by the coronavirus pandemic and telling him to instead focus on securing tax breaks for businesses, reducing regulations and fighting his trade war with China.”
The coronavirus will cost states hundreds of billions of dollars in revenue in the upcoming fiscal year, according to an NBC News survey of 33 states and Washington, D.C.
“With most states starting their new fiscal year early this summer, the projections in many cases will serve as the basis for severe budget cuts states may have to soon make if massive aid from the federal government doesn’t come soon. Though the nature of the crisis makes forecasting the future incredibly difficult.”
“White House officials have privately signaled that they are willing to provide tens of billions of dollars in relief to states as part of a bipartisan deal with Democrats in the coming weeks, despite President Trump’s reluctance and strong opposition from conservative groups,” the Washington Post reports.
“Although that position is likely to anger some Republicans who have warned that Democrats want ‘blue state bailouts,’ many White House officials now believe that providing new funding to states to deal with challenges related to the novel coronavirus will be necessary if they want to secure their own priorities, such as tax breaks and liability protections for businesses.”
“Senior Trump administration officials are growing increasingly wary of the massive federal spending to combat the economic downturn and are considering ways to limit the impact of future stimulus efforts on the national debt,” the Washington Post reports.
“While no one in the administration is advocating immediate cuts, the unease among senior Trump advisers about federal spending comes as the White House halts talks with Congress on additional emergency measures to rescue a U.S. economy facing its worst crisis in generations.”
“The concerns about the deficit are coming from traditional conservatives at the White House, including new chief of staff Mark Meadows and acting budget director Russ Vought. But officials say they are likely to face much more skepticism from President Trump himself. Trump has shown little interest since becoming president in shrinking the deficit and has so far stood firm on his campaign pledge not to alter Social Security.”
“President Trump’s demands for the next coronavirus aid package are running into a stubborn obstacle: his own party,” Politico reports.
“As Washington begins zeroing in on its next major coronavirus bill, congressional Republicans are on a different trajectory than the president and are themselves divided on the payroll tax cut, or whether to do anything at all. Much of the party has coalesced behind providing liability protections that Democrats disdain, yet Trump is eyeing the much flashier tax cut as the centerpiece of the upcoming legislation.”
Washington Post: “The intraparty rift on a payroll tax cut comes as the Democratic-led House scrambles to produce additional coronavirus legislation with perhaps another massive price tag.”
“Massive stimulus to support the U.S. economy through the coronavirus crisis will cause the Treasury to borrow a record $3 trillion this quarter,” CNBC reports.
“Total U.S. government debt now is near $25 trillion.”
“Thousands of foreign workers, many living overseas, are receiving stimulus checks designated for U.S. residents due to an unforeseen glitch that funneled taxpayer dollars to other countries,” Politico reports.
Speaker Nancy Pelosi said she wants the next coronavirus rescue package to provide $1 trillion just for aid to states and cities, Bloomberg reports.
Politico: “Economists from a broad range of ideological backgrounds are encouraging Congress to keep spending to combat catastrophic job losses — and say now is not the time to focus on the deficit. They emphasize that the federal government can borrow at near-zero interest rates, as investors seek the safety of U.S. bonds and the Federal Reserve buys up tens of billions of dollars worth of Treasury securities each week.”
President Trump indicated he wouldn’t allow federal aid for states facing budget deficits from the coronavirus outbreak unless they take action against “sanctuary cities” — municipalities that prevent their police from cooperating with immigration authorities, Bloomberg reports.
Said Trump: “We would want certain things including sanctuary city adjustments, because we have so many people in sanctuary cities. What’s happening is people are being protected that shouldn’t be protected and a lot of bad things are happening with sanctuary cities.”
This piece is only available to Political Wire members.
Your support makes this site possible. Join today for the complete Political Wire experience and get exclusive analysis, new features and no advertising.
Sign in to your account or join today!
If you’re already signed in and still seeing this message, your subscription has expired. To renew your membership, navigate to your account, adjust your credit card information and click Renew Now.
“The Congressional Budget Office now expects that the coronavirus will push the federal debt to the highest level in history, exceeding the previous record set during World War II,” the Washington Examiner reports.
“Taking into account the trillions of dollars in new spending and the economic downturn caused by the coronavirus and related shutdowns, CBO expects the U.S. to add $5.8 trillion to the debt in the next two years, bringing the debt to 108% of GDP by the end of 2021.”
“Treasury Secretary Steven Mnuchin said he is sensitive to concerns about rising federal debt but emphasized that low interest rates and the urgency of helping the economy during the coronavirus outbreak cut in the other direction,” the Wall Street Journal reports.
Said Mnuchin: “This is a war, and we need to win this war and we need to spend what it takes to win the war. We are sensitive to the economic impacts of putting on debt and that’s something that the president is reviewing with us very carefully.”
Wall Street Journal: “The coronavirus pandemic is expected to weigh on the financial condition of Social Security, which is currently projected to pay benefits that exceed its income in 2021 for the first time in nearly 40 years.”
Politico: “The agency is under pressure to push the money out as quickly as possible — even as the coronavirus is simultaneously killing tens of thousands of people. The IRS is supposed to check death records before okaying the payments, but the government does not have real-time information on who dies. That data percolates up from the states, and there is invariably a lag in reporting.”
Politico: “The IRS is piling unopened business tax refund requests into storage trailers and advising companies to file by fax instead. It’s stopped answering phone calls on taxpayer assistance lines. And it’s not processing millions of paper tax returns filed by individual Americans.”
“The coronavirus pandemic has nearly crippled the tax collection agency, which relies on antiquated technology and still does a lot of business on paper, just as it is most needed to help pump money into the ailing economy.”