Let’s talk about taxes

Make Me Smart May 15, 2023 Transcript

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Kimberly Adams 

Happy Monday, everybody. I’m Kimberly Adams. Thank you for joining us! Today we have our news fixes and then we’re gonna let you in on what is making us smile. But before we dive in. This Wednesday we’re gonna be answering your questions about the debt limit, debt ceiling, debt crisis, pick your language and hyperbolic words whatever. But anyway.

Kai Ryssdal 

No, no man, you go.

Kimberly Adams 

Yeah. So if there’s something you want to know, for, what do you want to know, Wednesday on that, you can let us know. We’re at 508-UB-SMART or email us at makemesmart@marketplace.org. So let us move on to the news. Kai, why don’t you go?

Kai Ryssdal 

I shall do that? Well, we’ve we’ve each we’ve each got a lot of news here. Holy cow. Okay. I’m gonna skip the one that’s first on my thing, because I did it on the radio show this afternoon. And I don’t like to duplicate content. Here, though, is what I’m going to talk about. I’m going to talk about just how close to the debt limit we are, and what is happening already because Republicans in Congress are holding the full faith and credit the United States hostage. So Janet Yellen sent another letter to Speaker McCarthy with copies to every other leader of a party in Congress and said, in essence, “I told you two weeks ago it was going to be on or about the first of June, give or take.” And she said that again today. And if you listen to marketplace this afternoon, you’ll hear a whole bunch of stories about why and what’s going on and all of that. What I want to talk about right now is what is already happening in the financial markets because of what is happening in Washington. And here’s a quote from Janet Yellen’s letter. “In fact, we have already seen Treasury’s borrowing costs increase substantially for securities maturing in early June.” And if you looking at the yield on the one month treasury, okay, now, the United States Department of the Treasury borrows money at all durations, right? It’s there’s overnight money, there’s one month money, there’s 10 year money, there’s 30 year money, there’s all kinds. One month money is money that will expire into this crisis, right? If you bought a one month Treasury today, it’s going to expire right into the middle of this crisis. And rates for that are already going up. That is to say, people are demanding higher interest rates from the Treasury Department, because they are not sure if Washington knows what it’s doing. If you look at the chart, about six or eight weeks ago, a one month was going for 3.3%. Right? That was the yield. Today, it’s about 5.5%. And when you’re borrowing at the volumes of American dollars that the US Treasury Department is borrowing at, a 2% point increase is a lot. It’s a lot. So that’s item number one. Item number two is actually a fascinating tweet by David Wessel, who used to be at the Wall Street Journal and is now at Brookings. He cites Piper Sandler’s projection of, Piper Sandler is a big accounting, consulting and research firm. And he cites their tracking of how much cash the United States government has on hand at any given time.

Kimberly Adams 

Yeesh. That’s an ugly chart.

Kai Ryssdal 

It i ugly chart. And here’s here’s why. Here’s why. So the United States government is a multi trillion dollar operation. And it is not, repeat not, like running a business. But there are parts of it that are similar and and I said this on the show today, so I guess I am repeating content. But one of the ways that the government is similar to a business is that cashflow matters, right? You’ve got to get money in so you can get money out. Money in for the government is tax receipts, and a whole bunch of other stuff. Mostly tax receipts. Money out is payrolls, and social security and interest on the debt and all kinds of other stuff. Anyway. And so the government likes to have a nice, tidy sum on hand, a little float so that they can not really worry about running out of cash. Okay? Piper Sandler is predicting that the first couple of weeks of June, we might get down to $25 billion cash on hand. And that is a staggeringly small amount of money in a multi trillion dollar economy. So whether or not Kevin McCarthy and President Biden make a deal, whether or not the Republicans finally decide not to hold the full faith and credit of the United States hostage, things are already happening. And we are so close to the edge. That’s my news for today.

Kimberly Adams 

Well… And what’s also in this tweet is is the reason the first couple of weeks of June are dicey is because then on June 15, is when another round of sort of quarterly tax receipts come in for the people who have to pay, you know, in installments throughout the year, which will give a bit more of a buffer. And given what’s happening here in DC, I would not be surprised if someone’s like, you know, someone being, you know, parties in Congress, saying, “If we hit it, you know, on June 1, you know, well we’re going to play chicken with each other for two weeks, until this next round comes in, in order to see who blinks first.” That’s not an unrealistic possibility.

Kai Ryssdal 

Oh, no, no. In fact, it’s quite realistic I would say. I would bet that there are conversations happening on the sidelines, and whatever these meanings are saying, “let’s just stretch it out a little. See how it goes. Treasury’s gonna save us. Treasury will figure it out.” Anyway, we’re closer than anybody thinks that’s what I’m saying.

Kimberly Adams 

Yeah. Okay. Mine are also, oddly enough, related to taxes. But in a completely different way. So first of all, one of the interesting bits within the Inflation Reduction Act, when that law was passed, is that the Congress told the IRS to start looking into the option to have a free file program that the government provided. We talked about this on the show. This is… years and years ago, when Congress said that there needed to be a Free File option, part of the caveat they put on it was that the government could not provide the Free File service, they had to outsource it to private companies.  Private companies were supposed to be letting people below certain income threshold with simple tax returns, file their taxes for free. But what really ended up happening, and hat tip to ProPublica for some amazing reporting on this, was that they would hide those free files, sites behind all sorts of hoops that you had to jump through. And what ended up happening was tons and tons of people who were eligible to file for free ended up paying to file. And so the federal government is trying to fix this by you know, cracking down on those companies, saying “you have to make it easier to file online” which meant that some of those companies decided to pull out of even offering the free file service because they couldn’t make any more money on it. So in the Inflation Reduction Act, Congress said, “Okay, IRS, lots of other countries in the world do this themselves by the government. You look into it.” apparently, they have been. And according to The Washington Post, they’ve been secretly sort of testing out not secretly, but quietly, “building a prototype system that would allow Americans to file,” I’m reading here “file tax returns digitally and free of charge.” And, you know, this is a system developed by the IRS, the White House, the US Digital Service. And it’s a pilot program and a couple of, a small group of taxpayers are going to be trying it out. And I you know, I’m just watching with great interest because this has the potential to hopefully save people some grief, but also save a lot of people money because, you know, so many people paid file their taxes when they don’t have to. Okay, so that’s tax story I guess number two, since we were just talking about tax receipts. Tax story number three… I know who new taxes are so exciting. There is an amazing story in The New York Times and I’m just going to read the headline: “how to raise $89 million in small donations and make it disappear.” I’ve talked quite a bit over time about the various ways that in campaign finance, money gets moved around in the secret groups, and 501 C4s, PACs, Super PACs and dark money and all the various ways that money gets moved around between campaigns, campaign committees and donors, and secret groups and industry groups. And you can’t always track where it is. And so what the New York Times did was they looked a little bit at the Federal Election Commission filings. But what they also looked at were IRS filings. And they discovered this group of conservative operatives that were using robocalls to raise millions and millions of dollars from small dollar donors for conservative causes, and basically just paid themselves back with it. They made hardly any political contributions with this money. They just fundraised to fund their fundraising operations, effectively creating this circular economy within themselves, enriching themselves. What jumped out to me in this story was their use of robocalls. And there’s technology that they were using to make these robo calls that made them sound so authentic. So, yes there were call centers overseas involved. But rather than just having a recording, or someone who doesn’t sound stereotypically American on the other line, the people would have these pre-recorded prompts. So you could push a button, you know, someone’s like, “oh, is this a robot? Is this a recording?” You could push a button and have it play out? “No, I’m a real person. And I’m blah, blah, blah.” Sounding like an actual American. I got one of these calls. And I remember so clearly, because it was some guy who they said was called, like Frank, or something like that. And I remember the phone number… here it is the Frank Wallace calling for the American Police Officers Alliance. I 100% remember getting this robo call. I remember thinking sounded a little odd. I remember saying, “Hey, is is this a recording?” And he’s like, “no, no, no, I’m, this is a real person.” And I said, you know, “I’m not allowed to make, you know, political contributions.” And I remember hearing the disappointment in his voice. Yeah. You “No, no, I understand. Well, if there’s anything…” And it’s it was all recorded. It was all recorded, and I totally fell for it. And I didn’t give them any money, of course. But millions of people, well not millions of people. People gave millions of dollars to this. So anyway, it’s a really interesting story about loopholes in the campaign finance system, and the way that technology is factoring into political fundraising, which is probably going to get even more intense now with all this artificial intelligence and generative AI getting so much better at cloning voices. And yeah, I would recommend that people be extraordinarily cautious when someone calls you to ask for a donation over the phone. Unless it’s from your local public radio station.

Kai Ryssdal 

Oh, snap. Good job.

Kimberly Adams 

Thank you. Thank you. I try.

Kai Ryssdal 

Juan Carlos let’s go. That was awesome. Alright, keep going Kimberly. You’re on a roll.

Kimberly Adams 

Okay, hat tip to Pete on Mastodon. Yes, because I’m using Mastodon, a lot. Pete flag this story in Ars Technica for me as a make me smile, and I think it is fantastic. Which is this private company that is trying to rescue/reactivate the Spitzer Space Telescope, which, to be honest, I had never even heard of this. Okay. So this was one of the several telescopes that was supposed to, you know, be part of NASA’s four “great observatories” put into space from 1990 to 2003. And Hubble was one of those, there was another one that like fell into the sea. And James Webb is is one of those. The Spitzer one was in an orbit that ended up just getting further and further away. And so now, we just can’t really get information from it anymore. So Pete linked also to another Mastodon thread, from Thomas Connor. And here’s how they describe it. “Unlike the first three, which are on earth centric orbits. Spitzer was a drifter. It slowly moved away from Earth, but on roughly the same orbit. We retired it because it was too far, but it still should be functioning.” And so now there’s a private company that rather than trying to send a new space observatory out there, they want to basically hitch a ride on one of the other rockets like going to the moon or something, and then have another space vehicle kind of veer off to the side, go catch up with Spitzer and like, attach a new antenna to it so that we can use it again. It’s so cool. Yeah, it’s a really interesting story. So yes, you should read the ArsTechnical, ArsTechnica article, this wonderful thread and hat tip thank you Pete for this really cool story. Yeah, that’s what I got.

Kai Ryssdal 

Yeah, super cool story. Mine is also space related. Just a quick HR update on space and SpaceX. So they have hired a woman named Kathy Lueders. I hope I’m pronouncing that right, who just retired at a NASA to work on human spaceflight for the Starship, which is the one that just yes exploded, but they’re gonna get there eventually. And I just think it’s really interesting how SpaceX, thank you very much Gwynne Shotwell is plowing ahead. Fail early, fail often, and keep your eyes you know, going forward. That’s kind of what they do. And now they’re getting serious about getting to human spaceflight, not just on the Crew Dragon thing, which they’ve sent to the ISS six or seven times now, but on the ginormous starship, which hopefully will get us to the moon… Well, we’ll get us to the moon because otherwise we’re not going. And then Mars, which is kind of cool. Anyway, that’s just an HR update. Kathy Lueders is her name. Yeah. Yeah. So super quick, just because you know, it’s time. That time of the podcast, it’s that time of the week, it’s that time of the year. This is pledge week, match Monday here at Marketplace. Today your gifts will be matched up to $20,000. So if we have one person give $20,000 boom, the rest of you are off the hook. But if not, your gifts, however small, will be matched up to a total of $20,000. Because of the investors challenge fund, your gift goes twice as far. Remember the goal, it’s a biggie, is $350,000 this time.

Kimberly Adams 

Right. And if you’ve been waiting, you know there’s no day like today to make a gift. And it really does make a huge impact. I mean, just you know over the weekend, we’ve got more news about the financial problems of the media industry and how expensive and hard it is to do meaningful journalism. And so we would really appreciate your support. The match component is good for today only, so if you can give today that would double your donation. And you can do that at Marketplace.org/givesmart or you can click on the link in the show notes.

Kai Ryssdal 

Please and thank you as a friend of mine says. Make Me Smart is produced by Courtney Bergsieker. Today’s program was engineered by Juan Carlos Torado. Ellen Rolfes writes our newsletter. Our intern is Antonio Barreras.

Kimberly Adams 

Marissa Cabrera is our senior producer. Bridget Bodnar is the director of podcasts …  And Francesca Levy is the executive director of Digital. I didn’t even know about this other telescope though. This is so cool.

Kai Ryssdal 

No me neither. Never heard of it. You know all the biggies right? You know Hubble, and the rest of them. You don’t know this one.

Kimberly Adams 

Yeah.

Kai Ryssdal 

Kind of wild. Kind of wild.