June 20, 2022
What to expect in Washington (June 20)
On the Sunday political news shows, Biden administration officials called for a prescription drugs, energy, and deficit reduction package to fight inflation, and National Economic Council Director Brian Deese said, "We're hopeful we can move forward on that and other priorities in Congress as well." (The question posed to him was whether a bill can get done before September.) Deese said on CBS's Face the Nation that Majority Leader Chuck Schumer (D-NY) "is working with his caucus to try to get a final package in place and we're hopeful that we'll see progress on that in the coming weeks."
Hopes for a deal have focused on Senators Schumer and Joe Manchin (D-WV). On Fox News, Deese was careful not to characterize any talks: "I'm going to leave the negotiations where they are and not talk about them here. But what I'll say substantively is, 'What are we talking about right now?' We're talking about some concrete measures to lower costs the typical families are facing." Senate Finance Chairman Ron Wyden (D-OR) was similarly deferential to Schumer and hesitant to divulge details last week, after President Biden projected confidence Congress can pass a bill and meetings suggested movement on a bill. Senator Manchin hasn't publicly checked in on the issue since saying he had no idea whether a bill would happen.
Deese said on CBS: "the single most impactful thing that we could do right now is to work with Congress to pass legislation that would lower the costs of things that families are facing right now … We could lower the cost of prescription drugs by allowing Medicare to negotiate better prices. That would actually lower federal spending, and it would lower the costs that people pay … Lowering utility costs by providing tax incentives for energy is another piece, but, equally important, lowering the federal deficit by enacting long-overdue tax reform. If we can do a package like that, and we can move forward in the near future, it will not only help in lowering prices, but it will send a signal to the markets and the global economy that the United States is really deadly serious about taking on this inflation."
On ABC's This Week, Treasury Secretary Janet Yellen said President Biden "stands ready to work and is encouraging producers of oil and refined products, gas, to work with him to increase supplies, to bring gas prices and energy prices down. And if Congress will work with him to enact some of the administration's programs, we can bring down other costs that are burdening households, like prescription drugs, healthcare costs, increase the supply of affordable housing. We clearly have a housing problem in the United States, and we need to address it by building more affordable housing." She further said, "I don't think a recession is inevitable."
The notion of a health-energy-deficit reduction bill has support from some economists outside of the Administration. On NBC's Meet the Press, former Treasury Secretary Lawrence Summers said, "I'm not sure it can save the situation and prevent a recession, but it would be a very positive contribution. If at long last we can have some kind of bipartisan budget bill with three elements, with reduction of pharmaceutical prices which will help health care and will also reduce the inflation rate. That's within our reach if we just use the government's large purchasing power through Medicare, number one. Number two, put in place the partial repeal, not the full repeal, but the partial repeal of the Trump tax cuts, which would take some demand out of the economy, increase confidence and reduce pressure on the Fed. And number three, an all-in more energy supply approach that emphasizes freeing up fossil fuels in various ways in the short run and making, with government support, the ultimate pivot to renewables."
Punchbowl reported this morning, Schumer-Manchin "discussions are ongoing, although there's no deal yet, and there won't be one this week," in a report noting that a Senate health-energy-deficit reduction deal could have trouble passing the House with only a handful of Democratic votes to spare, given the potential omission of SALT deduction cap relief and wariness over tax increases with elections — and maybe a recession — looming. Also, "Democrats could go another route. For instance, they could push a narrow bill focused on Medicare prescription drug pricing and extending Obamacare premium support, which expires this fall, right before the election. Up to 13 million Americans could be hit. Manchin hasn't said where he is on the issue."
The Wall Street Journal reported June 19 that economists "have dramatically raised the probability of recession, now putting it at 44% in the next 12 months, a level usually seen only on the brink of or during actual recessions."
Congress is out today. The Senate next convenes on Tuesday, June 21 at 3 p.m. On Tuesday, the House will meet at 12:00 p.m. for Morning Hour debate and 2:00 p.m. for legislative business. House floor consideration this week includes two Energy and Commerce bills: H.R. 7666, the Restoring Hope for Mental Health and Well-Being Act and H.R. 5585, the Advanced Research Projects Agency-Health Act.
The only activity scheduled in the tax-writing committees is the Senate Finance Committee mark up of its Enhancing American Retirement Now (EARN) Act, intended to be part of 'SECURE 2.0' retirement legislation, on Wednesday, June 22 (10 a.m.). Chairman Wyden released a summary of the bill June 17.
Like the bill passed by the House March 29, the Earn Act also includes provisions on 403(b) multiple employer plans, part-time workers, treating student loan payments as elective deferrals, and insurance-dedicated exchange-traded funds. While the House bill would increase catch-up contributions to $10,000 ($5,000 for SIMPLE plans) between ages 62-64, the Senate Finance bill would permit participants to elect to contribute the additional amount between ages 60 and 63 (both the House and Senate provisions would be effective after 2023). Both bills would also increase the age for required minimum distributions from 72 to 75 and include a provision to remove required minimum distribution barriers for life annuities.
The EARN Act would provide an exception to the additional 10% tax that applies to early distributions from tax-preferred retirement accounts for certain distributions used for emergency expenses, which are unforeseeable or immediate financial needs relating to personal or family emergency expenses. It would also provide a $500 credit if a small employer adopts a reenrollment feature under which employers would be required to reenroll employees at least every three years.
Similar to the House bill, EARN Act revenue offsets would: permit an employee participating in a SIMPLE IRA plan or SEP to elect to treat elective deferrals and employer contributions as after-tax Roth contributions; require catch-up contributions within an employer retirement plan to be made as after-tax Roth contributions; and permit an employee to elect to treat employer matching and other employer contributions as after-tax Roth contributions. The provisions in the Senate bill would raise $39.2 billion over 10 years, compared to about $36 billion under the House bill, according to JCT estimates.