Monday 23 January 2023

Treasury Secretary Janet Yellen says the IRS needs to be 'completely redone' - and a $1 trillion coin WON'T be minted to avoid U.S. defaulting on its debts

 Treasury Secretary Janet Yellen said on Sunday that the IRS needs to be 'completely redone,' signaling the start of a long and arduous fight against Republican efforts to gut the taxation agency.

It comes the same day she told the Wall Street Journal that minting a $1 trillion coin to stop the U.S. from going into financial default would likely be out of the question.

House Republicans are opposed to raising the debt limit without offsetting the increase with spending cuts elsewhere - a point Senate Democrats and the White House have made clear they will not negotiate on.

Asked about the looming debate with Congress by Reuters, Yellen simply put her hand to her forehead and sighed.

Among the GOP's first acts in the House majority this year has been to vote on a bill to repeal the added funds given to the IRS by the Inflation Reduction Act.

It likely won't get anywhere in the Senate, but the symbolic legislation is a clear marker that negotiating with the right on internal revenue improvements will be an uphill battle.

Treasury Secretary Janet Yellen weighed in on the debt ceiling fight while on a tour promoting American investment in Africa

Treasury Secretary Janet Yellen weighed in on the debt ceiling fight while on a tour promoting American investment in Africa

Yellen said on her way to Zambia that she was thrilled about the last Congress having approved $80 billion in new funding to help the agency reduce a huge backlog of tax returns and better hunt down $600 billion in unpaid tax bills.

She said she decided to stay on as Treasury secretary in large part to oversee implementation of legislation like the Inflation Reduction Act, which included the IRS funding and passed on party lines last year.

In October, Yellen denied unconfirmed reports that she was going to step down and be replaced by President Joe Biden after the midterm elections.

The Treasury official lobbied hard for extra funding to help the IRS deal with what she called massive problems, including a 'huge backlog' in working through tax returns, and lack of personnel to carry out complicated audits of higher-earning taxpayers.

'I'm excited about legislation that's passed and I want to make sure that it makes the difference it should make, and that includes the IRS,' she said.

 'That agency needs to be completely redone, and it's a big task.'

But she'll have to juggle that agency overhaul while also navigating the Treasury through the 'extraordinary measures' needed to carry the U.S. economy, as she announced to House Speaker Kevin McCarthy last week.

Yellen wrote a letter to McCarthy on January 19 warning him that the U.S. was very near its debt limit, and that urgent action was needed to avoid risking a massive default that could put the global economy into a tailspin.

'The period of time that extraordinary measures may last is subject to considerable uncertainty, including the challenges of forecasting the payments and receipts of the U.S. Government months into the future,' she wrote.

'I respectfully urge Congress to act promptly to protect the full faith and credit of the United States.' 

Speaking to the Journal about one option, minting a $1 trillion coin that would then be deposited at the Federal Reserve and used to pay the country's debts, Yellen guessed such a move would be out of question for the monetary body.

'It truly is not by any means to be taken as a given that the Fed would do it, and I think especially with something that’s a gimmick,' Yellen said. 

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