Yellen says top-line federal spending deal consistent with debt ceiling pact

By David Lawder

VIENNA, Va. (Reuters) -U.S. Treasury Secretary Janet Yellen said on Monday that she believes a top-line federal spending deal reached by congressional leaders over the weekend is consistent with last June’s debt ceiling agreement and will not harm the Internal Revenue Service’s modernization drive in the near term.

Yellen, speaking to reporters at an event at the Financial Crimes Enforcement Network’s (FinCEN) suburban Washington headquarters, said she was encouraged by the deal announced on Sunday by House of Representatives Speaker Mike Johnson, a Republican, and Senate Majority Leader Chuck Schumer, a Democrat, but could not say whether a federal government shutdown could be avoided as current funding lapses.

“It’s a basic responsibility of Congress, of the government to keep the government up and running,” Yellen said. “Americans depend on these services and posing a threat to continue good economic performance is something that we don’t need, so I’m hopeful we will not have to shut down.”

The deal sets a maximum spending limit for discretionary programs at $1.59 trillion for the 2024 fiscal year ending Sept. 30, but accelerates about $20 billion in cuts to Internal Revenue Service (IRS) funding to take place over one year instead of two years under the June agreement.

The funds come out of an $80 billion infusion that the tax collection agency received in 2022 clean energy legislation to fund a decade worth of systems modernization, compliance and customer service investments.

Yellen said she would not want to endanger the IRS’s ability to make improvements, especially with an annual “tax gap” – the differences between taxes owed and collected – of as much as $160 billion.

“I believe that what’s been agreed in this deal is consistent with what is called the Fiscal Responsibility Act when the debt ceiling was raised and some of the revenue was taken away,” Yellen said. “But in the short run, certainly medium run, the IRS would be able to continue its important work in modernizing our tax system.”

FROZEN RUSSIAN ASSETS

Regarding deliberations by G7 countries over use of hundreds of billions of dollars in frozen Russian assets to aid Ukraine in its war against Russia, Yellen said no decisions had been made, and the allies were weighing options.

Yellen last year had expressed concerns about significant legal obstacles to confiscating frozen Russian assets, but more recently has embraced exploring the idea in a tighter funding environment.

Yellen was asked if she had concerns about the implications for such a move on the dollar’s status or the willingness of foreign central banks to store reserves in the United States.

“I think there are concerns along those lines, and it would be a question of understanding and seeing if mitigation could be put in place and seeing if the G7 could agree on international law and rationale,” she said.

Yellen visited FinCEN headquarters to promote a new requirement that businesses file disclosures of their beneficial ownership, as part of new laws to crack down on money laundering through shell companies.

Since the registration opened a week ago, Yellen said more than 100,000 companies have registered ownership data. She added that the Treasury early this year will publish proposed rules aimed at combating money laundering risks associated with real estate and investment advisory services.

Source: Investing.com