Congressional lawmakers from both parties are considering incentives such as providing federal funding to pay for hiring bonuses for workers and expanded tax credits for employers. A handful of states are moving to implement such programs on their own, without waiting for Washington.
Some economists, Republican lawmakers and business owners say enhanced federal unemployment benefits are contributing to the labor shortage, because many workers receive more in government aid than they would get on the job. Those benefits — $300 a week on top of regular state payments — are due to expire after Labor Day.
Other economists say the payments have provided a boost to many lower-income families, who have disproportionately lost jobs in the coronavirus pandemic, while in turn pushing money back into the broader economy.
New York Gov. Andrew Cuomo (D) on Monday urged Congress to include repeal of the state and local tax (SALT) deduction cap in future legislation as House Democrats from the state are pushing to include such a repeal in an infrastructure package.
“Don’t pass another bill until you fully repeal SALT,” Cuomo said during a news conference.
Cuomo’s remarks came as he signed a state budget that raises state taxes for wealthy individuals and lowers taxes for the middle class.
The legislation Cuomo signed Monday raises the top state tax income rate to 10.9 percent for income above $25 million. It also continues phasing in tax cuts for middle-class households that were first enacted in 2016 and provides an income tax credit for certain homeowners with income up to $250,000.
The Time to Rescue United States Trusts, or TRUST Act, would establish bipartisan, bicameral commissions to address the long-term solvency of major trust funds.
The Congressional Budget Office projects the Highway Trust Fund will be insolvent by 2022, the Medicare Hospital Insurance Trust Fund in 2026, the Social Security retirement fund in 2032, and Social Security Disability Insurance in 2035.
First, as I referenced in passing in my prior column, the long-lasting nature of infrastructure is what justifies paying for it over time. This proposal’s spending is meant to be accomplished over 8 years, with the tax increase funding it over 15 years. That could be justifiable for some types of infrastructure, when it is something new rather than ongoing maintenance, but is not at all appropriate for ongoing day-to-day spending.
There remains a striking contrast between the quick recovery of financial markets and the slower recovery of the economy, which experienced the highest unemployment rate since World War II (see Figures 5 and 6). The possibility remains for heavy ongoing credit losses and failures. Consumer spending and business investment face pervasive uncertainty about the course of the pandemic and its consequences.
Any standalone, substantial minimum wage bill will face a filibuster requiring 60 votes to overcome it. Despite the White House fantasizing that Republicans might support a serious minimum wage increase, there probably are not 10 GOP senate votes to break such a filibuster.
Meanwhile, if Democrats try to attach a minimum wage increase to a bill that Republicans actually really want to vote for — say, the National Defense Authorization Act — Republicans could move to simply strike it out of that underlying bill, which enough conservative Democrats might agree to, and then the GOP would vote en masse for final passage of the stripped-down legislation.
Everyone in Washington knows this script, so a move to attach a minimum wage to a bill like this would likely be a performative gesture, but not a legislative victory.
Coronavirus vaccines will hopefully get economies humming this year, as people feel comfortable returning to shops, businesses reopen and workers get jobs again. The International Monetary Fund expects the global economy to grow 5.5% this year following last year’s 3.5% plunge.
A stronger economy often coincides with higher inflation, though it’s been generally trending downward for decades. Congress is also close to pumping another $1.9 trillion into the U.S. economy, which could further boost growth and inflation.
A sizable portion, about $500 billion, is a bailout of state and local governments that for the most part do not need one. While state tax revenues took a small hit from the pandemic and associated economic lockdowns, the damage is far smaller than was once feared. States should handle their own finances.
But it’s not just a bailout; it’s a bailout in which the funding is allocated based on the size of each state’s unemployed population. In other words, states that imposed draconian and unnecessary economic lockdowns during the past year are going to get a larger share of the federal cash than states that managed to balance public health needs and the economy—an arrangement that New Hampshire Gov. Chris Sununu rightly calls “outrageous.”
Boston Mayor Marty Walsh has vowed to work with both parties as Labor Department secretary to address the hundreds of underfunded multiemployer pension plans in the U.S. that are now in danger of collapsing.
The big problem standing in his way? Congress has that power, not the U.S. Labor Department, according to labor attorneys and industry insiders. Which means that if Walsh is confirmed by the full Senate for the Cabinet spot, the two-term mayor will have to rely on his organized-labor background and a unique propensity to bridge divides and broker deals outside DOL’s scope to help rescue the tapped-out plans.
“The thing that is going to be pretty neat about going in to see Secretary Walsh is you’re not going to spend the first 20 minutes trying to explain what the heck a multiemployer pension plan is,” said Timothy Lynch, a senior director at Morgan Lewis in Washington who testified in 2018 before the now-defunct Joint Select Committee on the Solvency of Multiemployer Pension Plans.
Without congressional intervention, about 100 multiemployer pension plans are expected to become insolvent in the next 20 years, and some much sooner. In other words, for these pension plans, their liabilities to retired employees and current employees with vested benefits far outweigh their assets and incoming contributions. Although the Pension Benefit Guaranty Corporation is intended to provide a backstop to any insolvencies, the sheer number of plans facing insolvency and the total size of unfunded vested liabilities will bankrupt the PBGC’s multiemployer program as well. It is against that backdrop that Congress has added the Butch Lewis Emergency Pension Plan Relief Act of 2021 to the COVID-19 relief bill.
Fourth, the bill would create a special financial assistance program for those plans that are expected to become insolvent in the near future. Under the bill, the Treasury would grant money to the PBGC, which would then disburse it to eligible plans. Eligible plans include (a) those in critical and declining status, (b) those that have approved benefit suspensions, (c) those that are in critical status with a funding percentage of less than 40% with more inactive than active participants, and (d) those plans that are already insolvent. The bill would instruct the PBGC to develop regulations within 120 days for applications and to prioritize applications from plans that are (a) insolvent, (b) likely to become insolvent within five years, (c) have a present value of over $1 billion in unfunded vested benefits, or (d) have already implemented benefit suspensions. The money would be paid in a single, lump-sum payment in the amount sufficient to guarantee benefits, without reductions, through 2051. If a multiemployer plan were to receive financial assistance, it would be required to reinstate any suspended benefits, and repay the amount of benefits previously suspended. Finally, an employer’s withdrawal liability would be calculated without taking into account this assistance for 15 calendar years after it was received.
States like Illinois, New York and California have long histories of financial negligence. California ran a budget deficit during seven of the last 16 years, according to a Wirepoints analysis of Pew Charitable Trust data. Connecticut has 10 years of deficits to its name. New York has 11. And Illinois and New Jersey have run budget deficits every year since at least 2004.
And then there’s the problem of pensions. States like Illinois, Connecticut and New Jersey all have amassed hundreds of billions in pension debt – all self-inflicted by state lawmakers.
The pandemic had nothing to do with those past deficits and debts, but that’s exactly what more federal aid would end up paying for.