Cuts to Reduce IRS Agent Expansion Possible, But True Spending Reform Unlikely: Analyst

House Speaker Kevin McCarthy (R-Calif.) talks to reporters after meeting with President Joe Biden at the White House in Washington on Feb. 1, 2023. Chip Somodevilla/Getty Images

Despite political posturing from both sides and calls for “real structural spending reform that reduces deficit spending and brings fiscal sanity back to Washington” from 24 Senate Republicans, Washington such change is unlikely at this time, Ryan Yonk explained in an interview that aired on Newsmakers by NTD and The Epoch Times on Feb. 1.

But, Yonk added, one area where Republicans could significantly impact the recent Washington budget talks is their push to reduce funding for the IRS agent expansion. Yonk is Senior Research Faculty at the American Institute for Economic Research (AIER).

“The debate around the IRS, I think, is one of the places where Republicans probably actually have a hand,” he said. “That is, you'd be hard-pressed to find anyone that loves their neighborhood IRS agent that’s coming to audit them.

The Internal Revenue Service (IRS) building in Washington on Feb. 19, 2014. Jim Watson/AFP/Getty Images

“The $80 billion that’s intended to expand the number of agents to conduct more audits isn’t going to make [politicians] a lot of friends. Especially as it becomes clear that that’s going to push audits down farther and farther into the middle incomes.”

Yonk explained that the argument that the IRS agent expansion will only increase audits for millionaires and billionaires and not for the middle class is ludicrous.

“It’s going to increase the number of [middle class] audits,” Yonk said. “You can talk about it going after billionaires over and over again. But if you’re adding that many agents, there are not that many billionaires that those agents would spend all their time on. [The IRS agent expansion] is likely to increase the number of audits and push down the income threshold.”

Political Posturing Over Spending

Democrats control the Senate, but Republicans control the House. Consequently, Senate Minority Leader Mitch McConnell (R-Ky.) directed House Speaker Kevin McCarthy (R-Calif.) to take the lead in negotiating with President Joe Biden over the nation’s budget.

Before their first meeting on Feb. 1, McConnell and Biden released memos and statements about their budget positions.

Biden’s memo, released on Jan. 31, stated that Biden wanted McCarthy to “commit to the bedrock principle that the United States will never default.”

McCarthy’s statement, issued via Twitter, said, “Mr. President: I received your staff’s memo. I’m not interested in political games. I’m coming to negotiate for the American people.”

Yonk stated that both McConnell’s and Biden’s public declarations are nothing more than political posturing and “business as usual” regarding Washington budget negotiations.

President Joe Biden speaks about the U.S. economy at Steamfitters Local 602 in Springfield, Va., on Jan. 26, 2023. Andrew Caballero-Reynolds/AFP via Getty Images

“I don’t think there’s a high probability that America will default,” Yonk said. “We’ve been down this path many, many times. I refer to this as being both apocalyptic and completely business as usual in Washington.”

Yonk explained that the threat of the United States defaulting — that politicians lobby back and forth — would be terrible for the economy and have a ripple effect. However, the public political statments by both sides are what politicians have resorted to for years.

“If we do default, all sorts of terrible things happen. But it’s not the first time we’ve had these sorts of discussions,” Yonk said.

“I fully expect that despite the president’s assertion that he will not negotiate for anything other than a clean raise of the debt ceiling, and McCarthy promising not to use [the debt ceiling] as a political football, the next five months will be exactly that: a negotiation largely involving politics, about how much spending, how to cut it, what sort of actions that will be taken.

“Ultimately, I fully expect we‘ll end up in the same place we’ve ended up the other 100 or so times since the debt ceiling was put in. Which is everyone will bemoan that we spend too much money, and then they’ll raise the debt ceiling yet again,” he said.

Increasing Debt

Yonk explained that the United States has ended up with $31.45 trillion in debt because both parties aren’t genuinely committed to fiscal responsibility.

“The real issue in almost all of these discussions are, we hear about problems with spending when you’re in the minority party,” Yonk said. “We don’t hear so much when you’re in the majority party.

“And that’s really how we’ve ended up where we are. When you have the power, you like to spend. When you don’t have the power, you tend to not like how the other side is spending and so you object. And so, we end up with the cycle that we’re currently at.”

Senate Minority Leader Mitch McConnell (R-Ky.) speaks during a press conference at the U.S. Capitol. McConnell addressed a range of issues including the looming debt limit problem during his remarks, on Jan. 24, 2023. Win McNamee/Getty Images

Yonk concluded that he believes the only thing that'll force Washington to get serious about spending reform is the cost of serving the debt. He explained that as the deficit increases and the Federal Reserve raises interest rates, the price of each dollar borrowed also increases.

“One of the double squeezes that happens when you reach a point where you’re spending large deficits—increasing the national debt—[and] at the same time the Fed is raising interest rates, how much you’re paying on those bonds goes up, which raises the cost of every dollar borrowed.

“And it gets tougher and tougher to continue to make those payments without impacting government services,” Yonk said.

“I’m not terribly optimistic that this Congress, or the next Congress, or Congress five years from now, will make significant progress. But as the debt rises, and the cost of serving it goes up, the pressure will increase to do something.”