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    California Panel Calls for Billions in Reparations for Black Residents

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    A task force recommended that legislators enact a sweeping program to compensate for the economic harm from racism in the state’s history.A California panel approved recommendations on Saturday that could mean hundreds of billions of dollars in payments to Black residents to address past injustices. The proposals to state legislators are the nation’s most sweeping effort to devise a program of reparations.The nine-member Reparations Task Force, whose work is being closely monitored by politicians, historians and economists across the country, produced a detailed plan for how restitution should be handled to address a myriad of racist harms, including housing discrimination, mass incarceration and unequal access to health care.Created through a bill signed into law by Gov. Gavin Newsom in the wake of the nationwide racial justice protests after the murder of George Floyd in 2020, the panel has spent more than a year conducting research and holding listening sessions from the Bay Area to San Diego.It will be up to legislators to weigh the recommendations and decide whether to forge them into law, a political and fiscal challenge that has yet to be reckoned with.The task force’s final report, which is to be sent to lawmakers in Sacramento before a July 1 deadline, includes projected restitution estimates calculated by several economists working with the task force.One such estimate laid out in the report determined that to address the harms from redlining by banks, which disqualified people in Black neighborhoods from taking out mortgages and owning homes, eligible Black Californians should receive up to $148,099. That estimate is based on a figure of $3,366 for each year they lived in California from the early 1930s to the late 1970s, when federal redlining was most prevalent.To address the impact of overpolicing and mass incarceration, the report estimates, each eligible person would receive $115,260, or about $2,352 for each year of residency in California from 1971 to 2020, during the decades-long war on drugs.In theory, a lifelong state resident who is 71 years old, the average life expectancy, could be eligible for roughly $1.2 million in total compensation for housing discrimination, mass incarceration and additional harms outlined in the report.All of these estimates, the report notes, are preliminary and would require additional research from lawmakers to hash out specifics. The costs to the state were not outlined in the report, but totals from harms associated with housing and mass incarceration could exceed $500 billion, based on estimates from economists.While the panel members considered various methods for distributing reparations — some favored tuition or housing grants and others preferred direct cash payments — they ultimately recommended the direct payments.“The initial down payment is the beginning of a process of addressing historical injustices,” the report reads, “not the end of it.“Kamilah Moore, the chair, and Amos Brown, the vice chair, at the task force meeting on Saturday.Jason Henry for The New York TimesLast year, the task force, which is made up of elected officials, academics and lawyers, decided on the eligibility criteria, determining that any descendant of enslaved African Americans or of a “free Black person living in the United States prior to the end of the 19th century” should receive reparations.Still, on Saturday, there was sometimes contentious debate over clearly expressing the criteria in certain sections of the report — particularly regarding compensation.Should lawmakers pass legislation for payments, the panel suggested that a state agency be created to process claims and render payments, with elderly individuals getting priority. Nearly 6.5 percent of California residents, roughly 2.5 million, identify as Black or African American.“This is about closing the income and racial wealth gap in this country, and this is a step,” Gary Hoover, an economics professor at Tulane University who has studied reparations, said in an interview. “Wealth is sticky and is able to be transferred from generations. Reparations can close that stickiness.”In voting on its final report on Saturday on the Oakland campus of Mills College at Northeastern University, the panel also suggested that state legislators draw up a formal apology to Black residents. A preliminary report made public last year, outlined how enslaved Black people were forced to California during the Gold Rush era and how, in the 1950s and 1960s, racially restrictive covenants and redlining segregated Black Californians in many of the state’s largest cities.In emotional testimony for much of the past year, Black residents have stood before the panel often revealing personal stories of racial discrimination, lack of resources in communities because of redlining and trauma that has had negative effects on health and well-being.While the task force marked the first such effort by a state, a similar measure aimed at creating a commission to explore reparations has stalled in Congress for decades.Representative Barbara Lee speaking during the task force meeting on Saturday.Jason Henry for The New York TimesIn brief remarks before the panel on Saturday, Representative Barbara Lee, a Democrat whose district spans Oakland, lauded the work members have done.“California is leading on this issue,” said Ms. Lee, who is running for the U.S. Senate. “It’s a model for other states in search of reparative damage, realistic avenues for addressing the need for reparations.”The median wealth of Black households in the United States is $24,100, compared with $188,200 for white households, according to the most recent Federal Reserve Board Survey of Consumer Finances. In California, a recent report from the nonpartisan Public Policy Institute of California found for every $1 earned by white families, Black families earn 60 cents — the result of disparities in, among other things, education, and discrimination in the labor market.Assemblyman Reggie Jones-Sawyer, who is one of two state lawmakers on the panel, said he had spoken with Mr. Newsom in recent weeks and expressed optimism that legislation would be approved based on the panel’s report.“The reality is Black Californians have suffered, and continue to suffer, from institutional laws and policies within our state’s political, social, and economic landscape that have negated Blacks from achieving life, liberty and the pursuit of happiness for generations,” said Mr. Jones-Sawyer, who represents a Los Angeles district. “This really is a trial against America’s original sin, slavery, and the repercussions it caused and the lingering effects in modern society.”Mr. Jones-Sawyer said he expected to present some form of legislation early next year.But the efforts and support for racial justice that followed Mr. Floyd’s death are now confronted with an economy that is shadowed by fears of a recession. In January, Mr. Newsom announced that the state faced a $22.5 billion deficit in the 2023-24 fiscal year, a turnaround from a $100 billion surplus a year ago.Nationwide, opinions on reparations are sharply divided by race. Last fall, a survey from the Pew Research Center found that 77 percent of Black Americans say the descendants of people enslaved in the United States should be repaid in some way, while 18 percent of white Americans say the same. Democrats were even split on the issue, with 49 percent opposed and 48 percent in support. Other polls on the issue have found similar splits.Even so, cities across the country have moved forward with reparations proposals. In 2021, officials in Evanston, Ill., a Chicago suburb, approved $10 million in reparations in the form of housing grants.More recently, the San Francisco Board of Supervisors has expressed support for reparations that could offer several million dollars. And in nearby Hayward, Calif., city officials are hearing proposals for reparations for land taken from Black and Latino families in the 1960s.Kamilah Moore, a lawyer who is chair of the California task force, said she was confident that the Legislature would “respect the task force’s official role as a legislative advisory body and work in good faith to turn our final proposals into legislation.”“It will soon be in their hands to act,” Ms. Moore said. More

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    House Democrats Move to Force a Debt-Limit Increase as Default Date Looms

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    House Democratic leaders who have been quietly planning a strategy to force a debt ceiling increase to avert default began taking steps on Tuesday to deploy their secret weapon.The only clue to the gambit was in the title of the otherwise obscure hodgepodge of a bill: “The Breaking the Gridlock Act.”But the 45-page legislation, introduced without fanfare in January by a little-known Democrat, Representative Mark DeSaulnier of California, is part of a confidential, previously unreported, strategy Democrats have been plotting for months to quietly smooth the way for action by Congress to avert a devastating federal default if debt ceiling talks remain deadlocked.With a possible default now projected as soon as June 1, Democrats on Tuesday began taking steps to deploy the secret weapon they have been holding in reserve. They started the process of trying to force a debt-limit increase bill to the floor through a so-called discharge petition that could bypass Republican leaders who have refused to raise the ceiling unless President Biden agrees to spending cuts and policy changes.“House Democrats are working to make sure we have all options at our disposal to avoid a default,” Representative Hakeem Jeffries, Democrat of New York and the minority leader, wrote in a letter he sent to colleagues on Tuesday. “The filing of a debt ceiling measure to be brought up on the discharge calendar preserves an important option. It is now time for MAGA Republicans to act in a bipartisan manner to pay America’s bills without extreme conditions.”An emergency rule Democrats introduced on Tuesday, during a pro forma session held while the House is in recess, would start the clock on a process that would allow them to begin collecting signatures as soon as May 16 on such a petition, which can force action on a bill if a majority of members sign on. The open-ended rule would provide a vehicle to bring Mr. DeSaulnier’s bill to the floor and amend it with a Democratic proposal — which has yet to be written — to resolve the debt limit crisis.The strategy is no silver bullet, and Democrats concede it is a long shot. Gathering enough signatures to force a bill to the floor would take at least five Republicans willing to cross party lines if all Democrats signed on, a threshold that Democrats concede will be difficult to reach. They have yet to settle on the debt ceiling proposal itself, and for the strategy to succeed, Democrats would likely need to negotiate with a handful of mainstream Republicans to settle on a measure they could accept.A handful of hard-right Republicans explicitly warned their colleagues on Tuesday not to go down that path. “House Republicans: don’t defect!” Senator Mike Lee of Utah wrote on Twitter.Still, Democrats argue that the prospect of a successful effort could force House Republicans into a more acceptable deal. And Treasury Secretary Janet L. Yellen’s announcement on Monday that a potential default was only weeks away spurred Democratic leaders to act.House Democratic leaders have for months played down the possibility of initiating a discharge petition as a way out of the stalemate. They are hesitant to budge from the party position, which Mr. Biden has articulated repeatedly, that Republicans should agree to raise the debt limit with no conditions or concessions on spending cuts.But behind the scenes, they were simultaneously taking steps to make sure a vehicle was available if needed.There were no signs on Tuesday of any momentum toward even a temporary resolution. Senator Chuck Schumer, Democrat of New York and the majority leader, brushed aside the idea of putting off a confrontation by passing a short-term debt limit increase, telling reporters: “We should not kick the can down the road.”And Senator Mitch McConnell, Republican of Kentucky and the minority leader, reiterated that he intended to leave the negotiations to Mr. Biden and Speaker Kevin McCarthy, again dashing the private hopes of some Democrats that the veteran Republican would ultimately cut a deal with them to allow the debt ceiling to be lifted, as he has done in the past.“There is no solution in the Senate,” Mr. McConnell said.The White House had no public comment on the discharge effort, according to Karine Jean-Pierre, the press secretary. Mr. Biden is scheduled next week to host Mr. McCarthy and other congressional leaders at the White House to discuss raising the debt limit. His goal at that meeting, a senior administration official said, will be to stress the importance of averting default and creating a separate negotiation to address other budget issues.The discharge petition process can be time-consuming and complicated, so House Democrats who devised the strategy started early and carefully crafted their legislative vehicle. Insiders privately refer to the measure as a “Swiss Army knife” bill — one intended to be referred to every single House committee in order to keep open as many opportunities as possible for forcing it to the floor.It would create a task force to help grandparents raising grandchildren, create a federal strategy for reducing earthquake risks, change the name of a law that governs stock trading by members of Congress, extend small business loans, protect veterans from the I.R.S., authorize a new Pentagon grant program to protect nonprofit organizations against terrorist attacks and more. The legislation was so broad and eclectic that it was referred to 20 committees, where it has sat idle for months. That was the point.Mr. DeSaulnier’s intent was never to pass the elements of the bill, though he favors them all. It was to create what is known on Capitol Hill as a shell of a bill that would ultimately serve as the basis for a discharge petition — and a way out of the debt limit standoff.“I wrote it in a way to be prepared,” said Mr. DeSaulnier, a former member of the Rules Committee who worked with Democratic procedural experts to craft legislation that could provide a debt-limit escape hatch. “I anticipated there would be these problems with the Republican caucus, whether it was abortion or the debt limit. I think it was the responsible thing as a legislator to do.”Democrats say the beauty of Mr. DeSaulnier’s bill — which Republicans have ignored — is that it long ago passed the threshold of being held in committee for at least 30 days, the minimum length of time to initiate a discharge petition to force action on legislation. Even so, in a memo sent to members on Tuesday, a U.S. Chamber of Commerce analysis projected that even if Democrats were able to draw enough support for their plan and advance it without further delay, the measure could take until June 12 or 13 to clear Congress — many days beyond the earliest date Ms. Yellen has warned the debt limit could be reached.Democrats said the fact that their bill would fall under the jurisdiction of so many committees gave them several options for moving forward.Mr. DeSaulnier was picked to sponsor the measure because his low profile meant there was likely to be little attention to his bill. In contrast, any legislation introduced by Representative Jim McGovern of Massachusetts, the ranking Democrat on the Rules Committee, would have drawn attention immediately, and Republicans might have been able to take action to derail it.Discharge petitions have spurred action in the past by prompting House leaders to move on issues rather than lose control of the floor through a guerrilla legislative effort. But the procedure is rarely successful and has produced a law in only a handful of cases, including the approval of major bipartisan campaign finance legislation in 2002. Congressional leaders of both parties have been disdainful of such efforts, since they effectively wrest control of the House floor from the majority.Democrats say that the current situation, with a default looming, showed that they were taking prudent precautions with Mr. DeSaulnier’s bill. Besides thwarting gridlock, the legislation says its purpose is also “to advance common-sense policy priorities.”Catie Edmondson More

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    Is the Debt Limit Constitutional? Biden Aides Are Debating It.

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    As the government heads toward a possible default on its debt as soon as next month, officials are entertaining a legal theory that previous administrations ruled out.A standoff between House Republicans and President Biden over raising the nation’s borrowing limit has administration officials debating what to do if the government runs out of cash to pay its bills, including one option that previous administrations had deemed unthinkable.That option is effectively a constitutional challenge to the debt limit. Under the theory, the government would be required by the 14th Amendment to continue issuing new debt to pay bondholders, Social Security recipients, government employees and others, even if Congress fails to lift the limit before the so-called X-date.That theory rests on the 14th Amendment clause stating that “the validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”Some legal scholars contend that language overrides the statutory borrowing limit, which currently caps federal debt at $31.4 trillion and requires congressional approval to raise or lift.Top economic and legal officials at the White House, the Treasury Department and the Justice Department have made that theory a subject of intense and unresolved debate in recent months, according to several people familiar with the discussions.It is unclear whether President Biden would support such a move, which would have serious ramifications for the economy and almost undoubtedly elicit legal challenges from Republicans. Continuing to issue debt in that situation would avoid an immediate disruption in consumer demand by maintaining government payments, but borrowing costs are likely to soar, at least temporarily.Still, the debate is taking on new urgency as the United States inches closer to default. Treasury Secretary Janet L. Yellen warned on Monday that the government could run out of cash as soon as June 1 if the borrowing cap is not lifted.Mr. Biden is set to meet with Speaker Kevin McCarthy of California at the White House on May 9 to discuss fiscal policy, along with other top congressional leaders from both parties. The president’s invitation was spurred by the accelerated warning of the arrival of the X-date.But it remains unclear what type of compromise may be reached in time to avoid a default. House Republicans have refused to raise or suspend the debt ceiling unless Mr. Biden accepts spending cuts, fossil fuel supports and a repeal of Democratic climate policies, contained in a bill that narrowly cleared the chamber last week.Mr. Biden has said Congress must raise the limit without conditions, though he has also said he is open to separate discussions about the nation’s fiscal path.A White House spokesman declined to comment on Tuesday.A group of legal scholars and some liberal activists have pushed the constitutional challenge to the borrowing limit for more than a decade. No previous administration has taken it up. Lawyers at the White House and the Justice and Treasury Departments have never issued formal opinions on the question. And legal scholars disagree about the constitutionality of such a move.“The Constitution’s text bars the federal government from defaulting on the debt — even a little, even for a short while,” Garrett Epps, a constitutional scholar at the University of Oregon’s law school, wrote in November. “There’s a case to be made that if Congress decides to default on the debt, the president has the power and the obligation to pay it without congressional permission, even if that requires borrowing more money to do so.”Other legal scholars say the limit is constitutional. “The statute is a necessary component of Congress’s power to borrow and has proved capable of serving as a useful catalyst for budgetary reform aimed at debt reduction,” Anita S. Krishnakumar, a Georgetown University law professor, wrote in a 2005 law review article.The president has repeatedly said it is the job of Congress to raise the limit to avoid an economically catastrophic default.Top officials, including Ms. Yellen and the White House press secretary, Karine Jean-Pierre, have sidestepped questions about whether they believe the Constitution would compel the government to continue borrowing to pay its bills after the X-date.ABC News asked Ms. Yellen amid a debt-ceiling standoff in 2021 if she would invoke the 14th Amendment to resolve it.“It’s Congress’s responsibility to show that they have the determination to pay the bills that the government amasses,” she said. “We shouldn’t be in a position where we need to consider whether or not the 14th Amendment applies. That’s a disastrous situation that the country shouldn’t be in.”The government reached the borrowing limit on Jan. 19, but Treasury officials deployed what are known as extraordinary measures to continue paying bills on time. The measures, which are essentially accounting maneuvers, are set to run out sometime in the next few months, possibly as soon as June 1. The government would default on its debt if Treasury stopped paying all bills. Economists have warned that could lead to financial crisis and recession.Progressive groups have encouraged Mr. Biden to take actions meant to circumvent Congress on the debt limit and continue uninterrupted spending, like minting a $1 trillion coin to deposit with the Federal Reserve. Internally, administration officials have rejected most of them. Publicly, Biden aides have said the only way to avert a crisis is for Congress to act.“I know you probably get tired of me saying this from here over and over again, but it is true,” Ms. Jean-Pierre said on Thursday, after referring a question about the 14th Amendment to the Treasury Department. “It is their constitutional duty to get this done.”But inside the administration, it remains an open question what Treasury would do if Congress does not raise the limit in time — because, many officials say, the law is unclear and so is the Constitution, which gives Congress the power to tax and spend.Officials who support invoking the 14th Amendment and continuing to issue new debt contend the government would be exposed to lawsuits either way. If it fails to continue paying its bills after the X-date, it could be sued by anyone who is not paid on time in the event of a default.Other officials have argued that the statutory borrowing limit is binding, and that an attempt to ignore it would draw an immediate legal challenge that would most likely rise quickly to the Supreme Court.There is a broad consensus on both sides of the debate that the move risks roiling financial markets. It is likely to cause a surge in short-term borrowing costs because investors would demand a premium to buy debt that could be invalidated by a court.The Moody’s Analytics economist Mark Zandi modeled such a situation this year and found it would create short-term economic damage but long-term gains if courts upheld the constitutional interpretation — by removing the threat of future brinkmanship over the limit.“The extraordinary uncertainty created by the constitutional crisis leads to a sell-off in financial markets until the Supreme Court rules,” Mr. Zandi wrote in March. Economic growth and job creation would be dampened briefly, he added, “but the economy avoids a recession and quickly rebounds.”Obama administration officials considered — and quickly discarded — the constitutional theory when Republicans refused to raise the limit in 2011 unless the president agreed to spending cuts. Treasury lawyers never issued a formal opinion on the question, and they have not yet this year, department officials said this week.But in a letter to the editor of The New York Times in 2011, George W. Madison, who was Treasury’s general counsel at the time, suggested that department officials did not subscribe to the theory. He was directly challenging an assertion by the constitutional law professor Laurence H. Tribe, who wrote in an opinion essay in The Times that Treasury Secretary Timothy F. Geithner had pushed to embrace the 14th Amendment interpretation, which Mr. Tribe opposed.“Like every previous secretary of the Treasury who has confronted the question,” Mr. Madison wrote, “Secretary Geithner has always viewed the debt limit as a binding legal constraint that can only be raised by Congress.” More

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    Biden Faces His First Big Choice on Debt Limit

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    After Republicans passed a bill that pairs spending cuts and fossil fuel support with raising the nation’s borrowing cap, the president must decide when and how to negotiateWASHINGTON — This week’s vote by House Republicans to couple deep spending cuts with an agreement to raise the debt limit for one year has put President Biden on the defensive, forcing him to confront a series of potentially painful choices at a perilous economic moment.Mr. Biden has long maintained that he would not negotiate spending cuts or other efforts to reduce the federal debt as part of discussions over raising the nation’s debt limit, which must be raised in order for the United States to keep borrowing money to pay its bills.But business groups, fiscal hawks and some congressional Democrats are calling on Mr. Biden to begin negotiating in earnest toward a deal that would avoid a default on the debt, which could come as soon as June or July.Mr. Biden and his aides now must choose how quickly to engage with Speaker Kevin McCarthy of California — along with Senator Chuck Schumer, Democrat of New York, the majority leader; Senator Mitch McConnell of Kentucky, the minority leader; and Representative Hakeem Jeffries of New York, the House minority leader — and on what terms.The president faces a cascading set of decisions as the nation, which has already bumped up against its $31.4 trillion debt limit, barrels toward default. He will need to find what, if any, common ground on spending cuts he has with Republicans, who do not share his preference for reducing the nation’s debt path largely by raising taxes on corporations and the rich. He will need to determine if he is prepared to sign any debt limit increase that is attached to conditions demanded by House conservatives.Ultimately, he may need to decide how aggressively to intervene in the delicate politics of House leadership. A potential debt-limit agreement could spur revolt by Mr. McCarthy’s most restless members, who laid the groundwork for the current brinkmanship when they held out against Mr. McCarthy’s ascension to the speaker’s gavel and retain the power to try to push him out.As administration officials describe it, they are all complicated choices. Mr. Biden and his aides do not want to encourage Republicans to habitually threaten economic collapse under Democratic presidents — and only under Democratic presidents — by allowing them to extract concessions to raise the limit now. They also recognize that a recession set off by default would hammer American families just as Mr. Biden is ramping up his re-election campaign, a dangerous scenario for an unpopular incumbent no matter which party voters blame for the default.House Speaker Kevin McCarthy after the House passed the debt limit bill.Kenny Holston/The New York TimesSome of Mr. Biden’s next steps are clear. To the chagrin of some House conservatives, there was no scenario in which the president would sign the bill that barely cleared the chamber on Wednesday. Along with raising the limit, it included spending cuts, new supports for oil and gas drilling and the near-total reversal of Mr. Biden’s signature law meant to fight climate change.“The president has made clear this bill has no chance of becoming law,” Karine Jean-Pierre, the White House press secretary, said on Wednesday after the vote. “In our history, we have never defaulted on our debt or failed to pay our bills. Congressional Republicans must act immediately and without conditions to avoid default.”But that does not mean Mr. Biden will be able to maintain his current posture toward Mr. McCarthy indefinitely. Administration officials have pushed business groups to pressure Republicans to pass a no-strings debt limit increase. But on Wednesday, leading business lobby groups, including the U.S. Chamber of Commerce and the Business Roundtable, lauded the House passage of the bill and called on Mr. Biden to engage.“Failing to raise the debt limit would trigger a strong market reaction with severe economic consequences, likely including widespread job losses, decimated retirement savings and serious hardship for millions of American families,” said Joshua Bolten, president and chief executive of the Business Roundtable. The group, he said, “is hopeful that today’s vote in the House will jump-start negotiations between Congress and the Biden administration on a bipartisan deal that takes default off the table and begins the hard work of dealing with our deficits and debt.”White House officials concede that Mr. Biden will have to convene negotiations with congressional leaders over taxes, spending and debt before the government runs out of money to pay its bills. In recent days, the president has suggested an openness to talk fiscal issues with Republicans, with the wink-nod stipulation that they have nothing to do with the borrowing limit.“I’m happy to meet with McCarthy, but not on whether or not the debt limit gets extended,” Mr. Biden told reporters at the White House on Wednesday. “That’s not negotiable.”Mr. Biden still sees his position in any fiscal talks, and the public debate around them, as a political winner. In the early months of this year, he demonized Republican plans that included cuts to safety-net programs and forced Mr. McCarthy to make Social Security and Medicare — the two largest drivers of federal spending growth in the years to come — untouchable in the Republican bill.More recently, officials across the administration have blasted the Republican bill for potentially cutting spending on popular programs for veterans, students and more. They are able to do that because the bill does not specify where the bulk of its spending reductions would come from, leaving the task to future congressional appropriators.In a White House memo obtained this week by The New York Times, officials sketch out what they believe Republicans would have to cut in order to satisfy the spending caps in their legislation, while keeping military spending intact. Over a decade, the reductions would include $500 billion for veterans’ health care, $300 billion from scientific and other research and $100 billion from the early childhood education program Head Start.Some administration officials privately suggest that a more modest version of spending caps, lasting for a few years at most, could plausibly form the centerpiece of an agreement to continue funding the government and raise the borrowing limit. Some business groups agree, though they would also like to see lawmakers add in a bipartisan effort to streamline government permitting for fossil fuels, clean energy and other projects, which they say would enhance economic growth.But many House Republicans appear in no mood to move from the bill that passed with only one vote to spare on Wednesday, raising the possibility that a deal with smaller spending cuts would need a combination of Republican and Democratic votes to pass the House — and potentially set off an effort by conservatives to depose Mr. McCarthy as speaker.Representative Ralph Norman of South Carolina, and a member of the Freedom Caucus, emerged from a closed-door briefing on the legislation ahead of the vote on Wednesday demanding that Republicans refuse to take anything less than their opening offer.“I wanted double what was in there,” Mr. Norman said. “I agreed to vote for it because that starts the ball and gets us in the arena to solve the debt problem. Now I’m not interested in anything coming back, anything but what we voted on.”Catie Edmondson More

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    The Debt Ceiling Debate Is About More Than Debt

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    Republicans’ opening bid to avert economic catastrophe by raising the nation’s borrowing limit focuses more on energy policy than reducing debt.WASHINGTON — Speaker Kevin McCarthy of California has repeatedly said that he and his fellow House Republicans are refusing to raise the nation’s borrowing limit, and risking economic catastrophe, to force a reckoning on America’s $31 trillion national debt.“Without exaggeration, America’s debt is a ticking time bomb that will detonate unless we take serious, responsible action,” he said this week.But the bill Mr. McCarthy introduced on Wednesday would only modestly change the nation’s debt trajectory. It also carries a second big objective that has little to do with debt: undercutting President Biden’s climate and clean energy agenda and increasing American production of fossil fuels.The legislation, which Republicans plan to vote on next week, is meant to force Mr. Biden to negotiate over raising the debt limit, which is currently capped at $31.4 trillion. Unless the cap is lifted, the federal government — which borrows huge sums of money to pay its bills — is expected to run out of cash as early as June. The House Rules Committee said on Friday that it will meet on Tuesday to consider the bill and possibly advance it to a floor vote.More than half the 320 pages of legislative text are a rehash of an energy bill that Republicans passed this year and that aimed to speed up leasing and permitting for oil and gas drilling. Republicans claim the bill would boost economic growth and bring in more revenue for the federal government, though the Congressional Budget Office projected it would slightly lose revenue.The Republican plan also gives priority to removing clean energy incentives that were included in Mr. Biden’s signature climate, health and tax law. That legislation, known as the Inflation Reduction Act, included tax credits and other provisions meant to encourage electric vehicle sales, advanced battery production, utility upgrades and a variety of energy efficiency efforts.The proposal does include provisions that would meaningfully reduce government spending and deficits, most notably by limiting total growth in certain types of federal spending from 2022 levels.The bill would claw back some unspent Covid relief money and impose new work requirements that could reduce federal spending on Medicaid and food assistance. It would block Mr. Biden’s proposal to forgive hundreds of billions of dollars in student loan debt and a related plan to reduce loan payments for low-income college graduates.As a result, it would reduce deficits by as much as $4.5 trillion over those 10 years, according to calculations by the Committee for a Responsible Federal Budget in Washington. The actual number could be much smaller; lawmakers could vote in the future to ignore spending caps, as they have in the past.Even if the entire estimated savings from the plan came to pass, it would still leave the nation a decade from now with total debt that was larger than the annual output of the economy — a level that Mr. McCarthy and other Republicans have frequently labeled a crisis.The Republican plan is estimated to reduce that ratio — known as debt-to-G.D.P. — in 2033 by about nine percentage points if fully enacted. By contrast, Mr. Biden’s latest budget, which raises trillions of dollars in new taxes from corporations and high earners and includes new spending on child care and education, would reduce the ratio by about six percentage points.Those reductions are a far cry from Republicans’ promises, after they won control of the House in November, to balance the budget in 10 years. That lowering of ambitions is partly the product of Republican leaders’ ruling out any cuts to the fast-rising costs of Social Security or Medicare, bowing to an onslaught of political attacks from Mr. Biden.The lower ambitions are also the result of party leaders’ unwillingness or inability to repeal most of the new spending programs Mr. Biden signed into law over the first two years of his presidency, often with bipartisan support.At the New York Stock Exchange on Monday, Mr. McCarthy accused the president and his party of already adding “$6 trillion to our nation’s debt burden,” ignoring the bipartisan support enjoyed by most of the spending Mr. Biden has signed into law.The speaker’s plan would effectively roll back one big bipartisan spending bill, which Mr. Biden signed at the end of 2022 to fund the government through this year. But the other big drivers of debt approved under Mr. Biden that are not singled out for repeal in the Republican bill include trillions in new spending on semiconductor manufacturing, health care for veterans exposed to toxic burn pits, and upgrades to critical infrastructure like bridges, water pipes and broadband.Some of that spending could potentially be reduced by congressional appropriators working under the proposed spending caps, but much of it is exempt from the cap or already out the door. Most of the $1.9 trillion economic aid plan Mr. Biden signed in March 2021, which Republicans blame for fueling high inflation, is already spent as well.The plan squarely targets the climate, health and tax bill that Democrats passed along party lines last summer by cutting that bill’s energy subsidies. It would also rescind additional enforcement dollars that the law sent to the Internal Revenue Service to crack down on wealthy tax cheats. The Congressional Budget Office says that change would cost the government about $100 billion in tax revenue.Taken together, those efforts reduce deficits by a bit over $100 billion, suggesting debt levels are not the primary consideration in targeting those provisions. The bill’s next 200 pages show what actually is: a sustained push to tilt federal support away from low-emission energy and further toward fossil fuels, including mandating new oil and gas leasing on federal lands and reducing barriers to the construction of new pipelines.Republicans say those efforts would save consumers money by reducing gasoline and heating costs. Democrats say they would halt progress on Mr. Biden’s efforts to galvanize domestic manufacturing growth and fight climate change.The plan “would cost Americans trillions in climate harm,” said Senator Sheldon Whitehouse of Rhode Island, the Democratic chairman of the Budget Committee. “And it would shrink our economy by disinvesting in the technologies of tomorrow.”Republicans have positioned their fossil fuel efforts as a solution to a supposed production crisis in the United States. “I have spent the last two years working with the other side of the aisle, watching them systematically take this country apart when it comes to our natural resources,” Representative Jerry Carl of Alabama said last month before voting to pass the energy bill now embedded in the debt ceiling bill.Government statistics show a rosier picture for the industry. Oil production in the United States has nearly returned to record highs under Mr. Biden. The Energy Department projects it will smash records next year, led by output increases from Texas and New Mexico. Natural gas production has never been higher.White House officials warn that Republicans are risking a catastrophic default with their demands attached to raising the borrowing cap. “The way to have a real negotiation on the budget is for House Republicans to take threats of default, when it comes to the economy and what it could potentially do to the economy, off the table,” Karine Jean-Pierre, the White House press secretary, told reporters on Thursday.Mr. McCarthy has defended his entire set of demands as a complete package to reorient economic policy. But he mentioned energy only in passing in his speech to Wall Street.The issue he called a crisis — and the basis he cited for refusing to raise the borrowing limit without conditions — was fiscal policy and debt. Debt limit negotiations, he said, “are an opportunity to examine our nation’s finances.” More

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    Franchisers, Facing Challenges to Business Model, Punch Back

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    Discontented franchisees have found allies among state legislators and federal regulators in pushing for new laws and rules, but change has been slow.When you visit a McDonald’s, a Jiffy Lube or a Hilton Garden Inn, you may assume you’re visiting one business. More likely, you’re actually visiting two: the operator of that particular location, known as the franchisee, and the larger company that owns the intellectual property behind it, or the franchiser.Conflict is inherent in that relationship, but it has hit a boil in recent months, as franchisees say they’re being squeezed out of the profits their business generates through new fees, required vendors and constraints on their ability to sell.On Monday, the Government Accountability Office released a report finding that franchisees “do not enjoy the full benefit of the risks they bear,” citing interviews with dozens of small-business owners who said they lacked control over basic operations that determined their ability to earn a profit.They’ve found a sympathetic ear in the Biden administration and in several state legislatures, giving rise to a growing wave of proposals to limit the power of franchisers.Franchisers have been largely successful in heading off new laws and rules, which the chief executive of McDonald’s, Chris Kempczinski, has described as an existential threat.“The reality is that our business model is under attack,” he said in February at the convention of the International Franchise Association, a trade group for franchisers, franchisees and franchise suppliers. “If you’re not paying attention to these pieces of legislation because you think they don’t impact you, think again.”The chief executive of McDonald’s says the franchising industry’s business model is “under attack” because of a push for new laws and rules.Haiyun Jiang/The New York TimesFranchising has been a feature of American capitalism for decades, allowing brands to grow quickly using investment from entrepreneurs who commit their own capital in exchange for a business plan and a logo that consumers might recognize. The Federal Trade Commission requires franchisers to disclose factors including start-up costs and the company’s financial performance to those considering buying a franchise, and some state laws govern considerations like transfer rights.But much of the relationship is largely unregulated — changes a franchiser can make to contracts, for example, and which vendors can be required.Keith Miller, a Subway franchisee in California who has become an advocate for franchisee rights, said the lack of oversight had given rise to an increasing number of disputes. “There’s more of a squeeze on the franchisees than ever,” he said. Franchisees’ royalty payments used to cover things like marketing, new menus and sales tools, he added, but “now you seem to have to pay for your services.”The franchise industry says that its business model remains beneficial to individual owners, and that additional regulation would protect substandard franchisees at everyone else’s expense. Matthew Haller, chief executive of the International Franchise Association, cited a 2021 survey by the market research firm Franchise Business Review in which 82 percent of franchisees said they supported their corporate leadership.But legislative battles at the state level reflect rising tension.Hotel franchisees, squeezed by lost revenue during pandemic lockdowns, say they have also been hurt by the hotel brands’ loyalty programs, which require the hotelier to rent rooms at a reduced rate. A bill in New Jersey that would limit those loyalty programs, as well as rebates that brands can collect from vendors that franchisees are required to use, faces fierce opposition from the American Hotel and Lodging Association. In a statement, the association’s chief executive, Chip Rogers, said the bill would “completely undermine the foundation of hotel franchising by limiting a brand’s ability to enforce brand standards.”Laura Lee Blake, the chief executive of the 20,000-member Asian American Hotel Owners Association, said hoteliers had reached desperation. “There comes a point when you’ve tried and tried to meet with the franchisers to ask for changes, and they refuse to listen,” she said.In Arizona, legislation introduced to enhance franchisees’ ability to sell their businesses and prevent retaliation from franchisers if they band together in associations has also faced resistance. The bill was approved by two committees in February and March, but the International Franchise Association hired two lobbying firms to fight it. In a Republican caucus meeting, opponents attacked the legislation as a “sledgehammer” that would bring the government into private business relationships. The bill’s sponsor, Representative Anastasia Travers, a freshman Democrat, said she was taken aback by how quickly opposition snowballed, and ultimately gave up on it for the 2023 session.“Time has not been my friend,” Ms. Travers said.A similar bill in Arkansas, which the International Franchise Association initially said would be “the most extreme franchise regulation of any state,” was amended to strip entire sections, including one that would have prevented franchisers from imposing any requirement that “unreasonably changes” the financial terms of the relationship as a condition of renewal or sale.After the bill was slimmed down — leaving provisions such as one restoring the existing statute, which had been rendered ineffective by a subsequent law, and another requiring the franchiser to establish material cause before terminating the franchise — the industry group withdrew its opposition, allowing swift passage.A Subway location in New York. “There’s more of a squeeze on the franchisees than ever,” said Keith Miller, a Subway franchise owner in California.Carlo Allegri/ReutersIn an email to supporters before the votes, the franchise association’s vice president for state and local government relations, Jeff Hanscom, credited the Arkansas agribusiness giant Tyson Foods for being “instrumental in negotiating this outcome.” Tyson Foods did not respond to a request for comment.At the federal level, franchisers may face greater challenges.The Biden administration is moving on two fronts. One is the Federal Trade Commission, which issued a request in March for information about the ways in which franchisers control franchisees. The initiative could result in additional guidance or rules — putting the industry on high alert.The second front is the National Labor Relations Board, which has proposed making it easier for franchisers to be designated as “joint employers” that would be liable for the labor law violations of franchisees if they exerted significant control over working conditions. Franchisers maintain that this would “destroy” the business model, because it would subject them to unacceptable risks.Franchisers attribute the flurry of activity to union influence. The Service Employees International Union, in particular, has long fought to get McDonald’s designated as a joint employer so it would be easier to mount an organizing effort across the chain, rather than store by store.Robert Zarco, a Miami lawyer retained by an association of 1,000 McDonald’s owners, said that to avoid the joint-employer designation, and the extra liability it would bring, franchisers could choose to weaken their grip on franchisee operations.“If the company wants to not be considered a joint employer, it’s very simple to fix,” he said. “Unwind all those excessive controls that they have implemented that are outside of protecting the brand and the product and service quality.”The franchise association’s federal lobbying spending hit a high of $1.24 million in 2022, alongside millions more spent in recent years on federal elections, and doesn’t include money spent by the individual franchise brands.The high stakes are evident in other ways, as well.The Franchise Times, a 30-year-old independent trade publication with six editorial employees, writes about day-to-day events in the industry: acquisitions, executive leadership changes, technology trends. When strife arises, such as lawsuits and bankruptcies, it writes about those, too.The publication’s legal columnist, Beth Ewen, wrote several stories this year about Unleashed Brands, a portfolio of franchises that has drawn lawsuits from franchisees. In response, the company published a markup of one of Ms. Ewen’s stories in red pen font with “DEBUNKED” stamped across the top. (The organization had given similar treatment to an article about the company by The New York Times. Both publications stand by their reporting, and Unleashed did not ask for corrections.)In March, a new website popped up at the address “NoFranchiseTimes.com.” Its front page was devoted to an attack on what it called “editorial bias,” “denigrating the businesses that support their publication.”It called for the publication’s advertisers — which include law firms, vendors and brands — to cancel their purchases.Michael Browning Jr., the chief executive of Unleashed Brands and a member of the International Franchise Association’s board, emailed the trade group’s membership saying that while he had not created the website, he supported its message and thought the group should revoke The Franchise Times’s membership. Mr. Browning did not respond to a request for further comment.The association declined to revoke the membership, and the publication says its advertising revenue is up from last year. But to Ms. Ewen, a 35-year veteran of business reporting, the episode shows that the industry is trying to divert attention from real problems — and that some members are playing hardball.“They’re trying to hit at our business model and our ability to keep going,” she said. “There’s a lot of people spending a lot of time trying to get us and others to stop doing these stories.” More

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    What’s in the House G.O.P. Debt Limit Bill

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    Republicans revealed a proposal on Wednesday that would cut federal spending and unravel parts of the Biden administration’s policy agenda in exchange for lifting the nation’s borrowing cap.WASHINGTON — House Republicans on Wednesday unveiled a bill that would cut billions in federal spending and roll back some of President Biden’s policy priorities in exchange for lifting the debt ceiling for one year.After trying and failing to coalesce lawmakers around a budget blueprint of their own, Republican leaders have instead framed the legislation as an opening offer to Democrats and a way to get the White House to come to the negotiating table.Mr. Biden has insisted that Republicans raise the debt limit without any conditions and said that he would not meet with them to discuss spending cuts until they passed their own fiscal plan.Speaker Kevin McCarthy said he would put the new legislation, which Republicans claim would save the nation $4.5 trillion, to a vote next week.Negotiations have so far been frozen, and time is running short: The United States, which has already hit a $31.4 trillion cap on how much money it can borrow, could run out of money to pay its bills as soon as June.That could have catastrophic effects, potentially leading to a global financial crisis and a painful recession in the United States.While the two sides could soon begin talks, Mr. Biden is unlikely to accept few, if any, of Mr. McCarthy’s proposals. Here is a look at what is in the bill.Rescind unspent Covid-19 relief fundsRepublicans proposed rescinding pandemic relief funds that have not yet been spent, which they estimated would return about $50 billion to $60 billion to the government’s coffers.In 2020 and 2021, Congress approved about $4.6 trillion in stimulus funding, which was intended to help the country recover from the effects of the coronavirus pandemic. Most of that money has been spent.But there is some leftover funding for programs that provide grants to health care providers, medical care for veterans, pension benefits and aid for public transit agencies. Some of the programs have unspent money because applications are still open or their funds do not expire until next year. Others, including one devised to help aircraft manufacturers pay for compensation costs, are not expected to use all of their allotted funds.Biden administration officials have pushed back on the effort, since they expect a majority of unspent relief funds to be used before they expire.Speaker Kevin McCarthy said he would put the new legislation regarding the debt ceiling to a vote next week. Haiyun Jiang/The New York TimesCap spending to fiscal 2022 levelsHouse Republicans have long complained that federal spending is out of control, and the conference began the year with the aspiration of balancing the budget in 10 years. But that would require deep spending cuts to popular federal programs, something G.O.P. leaders have been unable to coalesce their conference around. The bill instead aims to assuage conservatives by proposing freezing spending to last year’s levels.That would effectively force budget cuts. As costs of government programs rise with inflation over time, lawmakers would have to cut some programs to stay under the cap. That would require Republicans to identify spending cuts totaling $3.6 trillion over a decade, by their own calculations, and this bill does not outline them. Instead, House Republican leaders are punting those decisions to the Appropriations Committee.One fight appropriators will have to resolve is how to balance the cuts between defense-related spending and spending on other domestic programs, like environmental protection and education. House Republicans in particular have been loathe to adopt any cuts to military spending, but leaving those budgets intact would require steeper cuts to other programs.Democrats have sought to make that part of the proposal politically toxic. They released a memo on Thursday accusing Republicans of seeking to kill manufacturing jobs by cutting government subsidies for low-emission energy technology.Karine Jean-Pierre, the White House press secretary, said in a briefing that the White House was still reviewing the plan but broadly called it unserious and harmful to Americans “who are struggling everyday to make ends meet.”Even if Republicans succeeded in imposing the caps, there is no guarantee they would produce anywhere close to the promised savings. Lawmakers in the future could simply vote to ignore them, as they did frequently with the spending caps that President Barack Obama and congressional Republicans agreed on to avoid a debt default in 2011.Roll back some of the Biden administration’s climate measuresThe bill would undo major parts of the Biden administration’s landmark health, climate and tax law, which Democrats passed last year and named the Inflation Reduction Act.Republicans proposed repealing an array of energy tax credits in the law that aim to cut greenhouse gas emissions, including those that incentivize the use of previously owned electric vehicles and the production of clean electricity and fuel. Republican lawmakers claim the move would save about $271 billion to $1.2 trillion.The Republican plan also includes proposals in a separate energy bill that House G.O.P. lawmakers passed last month to bolster domestic energy production. Although that bill has not passed the Democratic-controlled Senate, it includes provisions that would expand mining and fossil fuel production in the country and speed up the construction of necessary infrastructure by reforming a permitting process that can take up to five years.Claw back funding from the Internal Revenue ServiceRepublicans also vowed to “defund Biden’s I.R.S. army” by rescinding the bulk of new funding that the tax collection agency was given to improve customer service and crack down on tax cheats.The Inflation Reduction Act approved $80 billion in additional funding for the I.R.S., which has been struggling to deal with backlogs of tax filings and answer taxpayer calls because of declining resources over the years.The funding has come under intense scrutiny from conservatives, who claim that they will be used to increase audit rates for average taxpayers. I.R.S. officials have reiterated that they will not raise audit rates above “historical levels” for taxpayers who earn less than $400,000 a year and will focus on increasing compliance among large corporations and wealthy people.Cutting that spending would actually add to federal deficits, the Congressional Budget Office estimated. That’s because the money is projected to help the I.R.S. crack down on taxpayers who do not pay what they owe — bringing in an estimated $200 billion in new revenue over a decade. That revenue would be lost if the funding is taken away.Impose stricter work requirements for food stamp and Medicaid recipientsThe proposal would enact more stringent work requirements for recipients of food stamps and Medicaid benefits, which Republicans claim would help attract more people to the work force and save about $110 billion to $120 billion. Republican leaders backed down from pursuing more drastic requirements after lawmakers who are facing challenging re-election battles in swing districts raised concerns.The measure would make able-bodied adults without dependents who receive both federal food assistance and Medicaid benefits subject to work requirements until they are 55 years old, raising the current age from 49. It also seeks to close a loophole Republicans have claimed that states abuse, which allows officials to exempt food assistance recipients from work requirements.The legislation bill would repeal the Biden administration’s plan to forgive up to $20,000 in student loan debt.Andrew Caballero-Reynolds/Agence France-Presse — Getty ImagesBlock student loan forgivenessThe bill would repeal the Biden administration’s actions to forgive up to $20,000 in student loan debt for millions of borrowers making under $125,000 a year. The move would wipe out more than $400 billion in debt, although the Supreme Court’s conservative majority appeared to be deeply skeptical of the legality of the plan ahead of an expected ruling by June.Republicans would also block a second student-loan change the Education Department has announced, which would reduce payments for future borrowers who go on to earn relatively low incomes after college. The department has estimated that plan would cost more than $100 billion over a decade, though the University of Pennsylvania’s Penn Wharton Budget Model pegs the cost at about $350 billion.Raise the debt limit through March 2024In exchange for the spending cuts and policy changes, Republicans would raise a statutory cap on how much the United States can borrow through March 2024, or until the nation’s debt grows to $32.9 trillion.That length of extension would be much shorter than Mr. Biden would prefer, guaranteeing another economy-rattling showdown as the presidential campaign heats up next year.The United States could default on its debt if both parties fail to reach an agreement. That could potentially lead to a financial crisis, damaging economic output and causing a deep recession if the country is unable to pay all its bills on time.The country might not be able to afford salaries for federal workers or Social Security checks, among other things. A debt default could also have global repercussions and destabilize bond markets across the world, since U.S. Treasury bonds are typically seen as one of the safest investments.Christopher Cameron More

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    I.R.S. Unveils $80 Billion Plan to Overhaul Tax Collection

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    The 10-year strategy document outlines a focus on improving customer service and cracking down on tax evasion by corporations and the wealthy.WASHINGTON — The Internal Revenue Service on Thursday unveiled an $80 billion plan to transform itself into a “digital first” tax collector focused on customer service and cracking down on wealthy tax evaders. The move lays the groundwork for an ambitious 10-year overhaul of one of the most scrutinized arms of the federal government.The effort is a key part of President Biden’s economic agenda, which aims to reduce the nation’s $7 trillion of uncollected tax revenue and use the funds to combat climate change, curb prescription drug prices and pay for other initiatives prized by Democrats.The plan is also at the heart of the White House’s goal of making tax administration fairer. The report indicates that more than half the new money will be dedicated to ensuring that rich investors and large corporations cannot avoid paying the taxes that they owe.The $80 billion is the largest single infusion of funds in the agency’s history and was included in the Inflation Reduction Act, the sweeping climate and energy legislation that Democrats pushed through last year.According to the Biden administration, the investment will yield hundreds of billions of dollars in deficit reduction. But efforts to bolster the I.R.S. have drawn strong opposition from Republicans, who have long accused the agency of improperly targeting them.The report released Thursday was requested by Treasury Secretary Janet L. Yellen, whose department oversees the tax agency.In a memorandum to Ms. Yellen that accompanied the report, Daniel I. Werfel, the new I.R.S. commissioner, said he would focus new enforcement resources on “hiring the accountants, attorneys and data scientists needed to pursue high-income and high-wealth individuals, complex partnerships and large corporations that are not paying the taxes they owe.”Daniel I. Werfel, the new I.R.S. commissioner, said the agency’s staff expansion would aim to improve its ability to collect unpaid taxes from the wealthy and big corporations.Shuran Huang for The New York TimesThe I.R.S. has about 80,000 full-time employees, about 20 percent fewer than it had in 2010 even though the U.S. population is now larger and the tax system more complex. The agency’s resources have also declined over the years, as Republicans have sought to cut its funding and, in some cases, called for its abolition. The financial strain has led to backlogs of tax filings, delayed refunds, long waits for taxpayers who call the agency with questions and plunging audit rates.In recent months, the I.R.S. has ramped up hiring to improve its customer service capacity and has been racing to complete the processing of old tax returns, most of which were filed on paper rather than electronically.The plan released on Thursday details how the I.R.S. intends to become a “digital first” organization that provides “world class” service to taxpayers. That includes the replacement of antiquated technology and the introduction of systems that will allow taxpayers greater access to their financial information, easier communication with the I.R.S. and new ways to correct errors as returns are being filed.The most sweeping and politically sensitive changes involve enforcement. The I.R.S. plans to introduce more data analytics and machine-learning technology to better detect cheating, and it aims to bolster its teams of revenue agents and tax attorneys so that the agency is not overwhelmed when auditing complicated business partnerships or corporations.The I.R.S. plan repeatedly emphasizes that it will honor Ms. Yellen’s directive that the new money not be aimed at increasing audit rates for taxpayers who earn less than $400,000 a year — a pledge meant to align with Mr. Biden’s promise not to raise taxes on low- and middle-income Americans. The plan echoes Ms. Yellen’s assurance that those audit rates will not rise above “historical levels,” but does not specify the levels, suggesting that audit rates could rise above their existing levels.In a briefing for reporters on Thursday, however, Mr. Werfel said that in the near term, audit rates for those making less than $400,000 would not rise.“We have years of work ahead of us, where we will be 100 percent focused on building capacity for higher-income individuals and corporations,” he said.But Janet Holtzblatt, a senior fellow at the Urban-Brookings Tax Policy Center, said it would be a challenge for the I.R.S. to determine whether taxpayers reporting an income under $400,000 were doing so legitimately, without being able to audit some of them initially. Ultimately, she said, the agency will need to decide on an acceptable audit rate for people under that income level.Mr. Werfel acknowledged that the I.R.S. would have to be alert in instances when taxpayers earn, for example, $5 million in a given year and $399,000 a year later.“We might take a second look at that,” he said.The plan lays out benchmarks for many of its goals, but it leaves unanswered questions.The I.R.S. is in the midst of a $15 million study to determine if it can create its own system enabling more taxpayers to file their federal returns online at no cost. This idea has met resistance from lobbying groups representing the tax preparation industry.The agency has faced criticism this year after the publication of a study that showed Black taxpayers are at least three times as likely as other taxpayers to face I.R.S. audits, even after the study accounted for the differences in the types of returns that each group is most likely to file. The plan includes using data to support “equity analyses” and says a key project will be developing procedures to evaluate the fairness of I.R.S. systems.The Treasury Department said earlier that the investment in the I.R.S. would lead to the hiring of 87,000 employees over 10 years, and has suggested that with anticipated attrition its head count could top 110,000 by the end of the decade. But the operating plan does not give an estimate for the agency’s eventual head count, and Wally Adeyemo, the deputy Treasury secretary, said on Thursday that I.R.S. did not want to be “locked in” to long-term hiring requirements before learning how new technology would affect its staffing needs.Mr. Werfel batted down claims by Republican lawmakers that the I.R.S. would be hiring thousands of armed “agents” to scrutinize middle-class taxpayers and small businesses. He said that only 3 percent of the I.R.S. work force was in the criminal investigations division, which has access to weapons, and that there were no plans to increase that percentage. The plan projects that the I.R.S. will hire more than 7,000 new enforcement employees over the next two years.Despite efforts to focus on technology and taxpayers services, the plan is likely to stoke criticism.Erin M. Collins, the national taxpayer advocate, wrote in a blog post on Thursday that the plan had the potential to transform tax administration but that the money was disproportionately invested in enforcement.“I believe Congress should reallocate I.R.S. funding to achieve a better balance with taxpayer service needs and IT modernization,” Ms. Collins, who serves as a watchdog for the I.R.S., wrote.The report notes that if the agency’s annual funding is curtailed over the coming years, some of the $80 billion might be needed to maintain its basic operations. That would force the I.R.S. to scale back its overhaul.House Republicans in January voted to pare the allocation, and Republican reaction to the report on Thursday indicated that the political fight over the I.R.S. will only intensify.“The Democrats are further weaponizing the most-feared agency in all of the federal government: the IRS,” Representative Mike Kelly, Republican of Pennsylvania and a member of the House Ways and Means Committee, said on Twitter. “Make no mistake — we are using money from hardworking American taxpayers to go after hardworking American taxpayers.”Former Gov. Nikki Haley of South Carolina, a candidate for the Republican presidential nomination, said on Twitter, “Does anyone believe the IRS won’t go after middle America?” More