A new report from the Tax Policy Center, a left-leaning think tank, said total state revenues rose by about 17.6 percent last year. State rainy day funds — money that is set aside to cover unexpected costs — have reached “new record levels,” according to the National Association of State Budget Officers.

Yet those rosy budget balances may not last if the economy slows, as expected. The Federal Reserve has begun raising interest rates in an attempt to cool economic growth, and there are growing concerns about the potential for another recession. Stocks fell for another session on Monday, with the SP 500 down 3.2 percent, as investors fretted about a slowdown in global growth, high inflation and other economic woes.

Cutting taxes too deeply now could put states on weaker financial footing.

The Tax Policy Center said its state tax revenue forecasts for the rest of this year and next year were “alarmingly weak” as states enacted tax cuts and spending plans. Fitch, the credit rating agency, said recently that immediate and permanent tax cuts could be risky in light of evolving economic conditions.

“Substantial tax policy changes can negatively affect revenues and lead to long-term structural budget challenges, especially when enacted all at once in an uncertain economic environment,” Fitch said.

The state tax cuts are taking place as the Biden administration struggles to respond to rising prices. So far, the White House has resisted calls for a gas tax holiday, though Jen Psaki, the White House press secretary, said in April that President Biden was open to the idea. The administration has responded by primarily trying to ease supply chain logjams that have created shortages of goods and cracking down on price gouging, but taming inflation falls largely to the Fed.

The White House declined to assess the merits of states’ cutting taxes but pointed to the administration’s measures to expand fuel supplies and proposals for strengthening supply chains and lowering health and child care costs as evidence that Mr. Biden was taking inflation seriously.

“President Biden is taking aggressive action to lower costs for American families and address inflation,” Emilie Simons, a White House spokeswoman, said.

Article source: https://www.nytimes.com/2022/05/10/us/politics/states-tax-cuts-inflation.html

The move is one of a variety of economic measures aimed at penalizing Russia and assisting Ukraine. Those include a broad swath of sanctions on Russian entities, export controls that have limited Russian imports and $3.8 billion in arms and equipment for the Ukrainian government, in addition to other direct financial assistance.

Senators called on the administration last month to lift the steel tariffs, saying it would help the industry bounce back immediately after the war.

“Lifting the U.S. tariff on steel from Ukraine is a small but meaningful way for the U.S. to signal support for Ukraine and to provide stability,” Senators Patrick J. Toomey, Republican of Pennsylvania, and Dianne Feinstein, Democrat of California, wrote in a letter.

Many other major steel-producing countries have had their tariffs lifted or eased. During his presidency, Mr. Trump negotiated deals with South Korea, Mexico, Canada and other countries to replace the tariffs with quotas or so-called tariff rate quotas, which restrain the volume of a product coming into the United States but allow at least some of it to be imported at lower tariff rates.

In recent months, the Biden administration has negotiated deals with the European Union, Britain and Japan to ease metal tariffs while still maintaining some protections that domestic steel makers have called for.

The Commerce Department official said that the administration did not want to subject Ukraine to a similar extended negotiation to change the tariffs at this time, but that it would be ready to discuss a further arrangement after the one-year suspension expired.

Lawmakers and industry executives applauded the move, though some importers and other trade proponents said the changes should be made permanent.

Article source: https://www.nytimes.com/2022/05/09/us/politics/ukraine-steel-tariffs.html

In many ways, the project mirrored Mr. Cuomo’s other efforts to put his imprint on the city, including the renovation of the Moynihan Train Hall across the street from Penn Station and his reconstruction of the city’s major airports in Queens.

In this case, the funds from the development would pay for cosmetic improvements at Penn Station, as well as a potential expansion of the station a block south of its current location. New tracks and platforms would add rail capacity along the economically vital corridor connecting commuters in New Jersey to jobs in New York, after a second tunnel is built under the Hudson River.

The state would wield its authority to overrule local zoning and planning laws so that developers could build bigger buildings at the site than otherwise allowed. When Ms. Hochul succeeded Mr. Cuomo, she continued the state’s support for the project while making modest changes to appease critics, such as expanding pedestrian pathways and slightly reducing the project’s proposed scale.

The report also highlights a key concern from critics: It would largely benefit a single company, Vornado Realty Trust, one of the city’s largest office developers. Vornado owns four sites in the development zone and part of a fifth, and its chief executive, Steven Roth, last year donated the maximum, $69,700, to Ms. Hochul’s campaign.

Mr. Roth, along with his family members, also gave Mr. Cuomo about $400,000 in campaign donations before he resigned. State officials and a Vornado spokesman have said the donations did not influence Vornado’s role in the venture. Mr. Roth has called the redevelopment of the Penn Station area Vornado’s “Promised Land.”

In an earnings call this week, Mr. Roth reiterated the company’s commitment to the state’s project. “Obviously, we support it,” he said.

A Vornado spokesman declined to comment on the record on the report.

Despite the state’s multiyear work on the project and its imminent approval, the Independent Budget Office found that the plan lacked a robust analysis of the numerous risks, including the consequences of the shift to remote work and whether the new Penn Station towers could negatively impact Hudson Yards, the enormous development on the far West Side of Manhattan. Hudson Yards opened in 2019 and has a similarly structured tax deal as the proposed Penn Station site.

Article source: https://www.nytimes.com/2022/05/09/nyregion/penn-station-revitalization-taxes.html

A major force upholding business expansion and job growth has been the durability of household finances, buoyed by the relief spending of the past two years. Savings accumulated during the pandemic, though tilted toward the affluent, remain in the trillions. And according to anonymized data collected by Bank of America, which tracks the spending of its 67 million customers, households with an annual income below $50,000 have about twice the savings they did before the pandemic.

Mary and Chris Ginder, a married couple in St. Charles, Ill., who run a business making artisanal hot sauces, have seen the benefits of the continued willingness to spend.

They were pleased with their growing operation, Spice of Life, in February 2020. Then came a problem: “About 45 percent of our business consisted of going around to local festivals and farmers’ markets, getting face to face with people and selling direct to customers,” Ms. Ginder said. That business model was fully undermined by virus fears and the state’s health restrictions.

To keep the business alive, the couple pivoted to free delivery and aggressively increased their e-commerce presence by refurbishing their website, marketing by email and doing social media campaigns with local partners. When gasoline prices surged, they canceled the free delivery service.

“We tried to see it as an opportunity, you know? It’s not all negative.” Mr. Ginder said, referring to the vagaries of the past two years. “For everything that seems like a hiccup, there’s something positive that can come out of it, if you’re creative enough.”

With weekend markets and festivals running again, the couple has enough cash flow to expand beyond their eight to 10 employees. So far, they have not had trouble hiring. Part-time kitchen workers start at $12 an hour, and pay for full-time workers varies greatly based upon negotiation.

Article source: https://www.nytimes.com/2022/05/06/business/economy/jobs-report-april-2022.html

Christian Smalls, president of the Amazon Labor Union, asked Mr. Biden to press Amazon’s leadership to recognize the union and to begin collective bargaining, and Mr. Biden expressed general support in response, according to Mr. Speidel and another attendee, Jaimie Caldwell, a librarian at the Baltimore County Public Library in Maryland.

A White House spokeswoman said it was up to the National Labor Relations Board, an independent agency, to certify unions. She also pointed to earlier remarks by Jen Psaki, the White House press secretary, noting that President Biden is a longtime advocate “for collective bargaining, for the rights of workers to organize, and their decision to do exactly that” in the case of Amazon.

The meeting comes at a time when union organizers have won several high-profile elections, including more than 50 at Starbucks locations and at the Staten Island warehouse where Mr. Smalls led a unionization effort.

In addition to union leaders and workers from Amazon, Starbucks, Paizo and the Baltimore County Public Library, the meeting included workers from the outdoor apparel retailer REI and the animation production company Titmouse.

Labor leaders often describe Mr. Biden as the most pro-labor president of their lifetimes, pointing to his replacement of government officials they disliked with those more sympathetic to unions, and to the undoing of Trump-era rules that weakened worker protections.

Article source: https://www.nytimes.com/2022/05/05/business/economy/biden-harris-amazon-starbucks-union.html

Prices rose 7 percent in Britain in March from a year earlier, the fastest pace since 1992. The central bank predicts the inflation rate will peak above 10 percent in the last quarter of the year, when household energy bills will increase again after the government’s energy price cap is reset in October. Ten percent would be the highest rate since 1982.

The rapidly changing landscape was reflected in the prospects for economic growth. In 2023, the bank now predicts, the economy will shrink 0.25 percent instead of growing 1.25 percent, which it predicted three months ago.

On Wednesday, policymakers at the U.S. Federal Reserve increased interest rates half a percentage point, the biggest jump in 22 years, in an effort to cool down the economy quickly as inflation runs at its fastest pace in four decades. The U.S. central bank also said it would begin shrinking its balance sheet, allowing bond holdings to mature without reinvestment.

On Thursday, the Bank of England said its staff would begin planning to sell the government bonds it had purchased, but a decision on whether to commence these sales hasn’t been made. The bank stopped making new net purchases at the end of last year after buying 875 billion pounds ($1.1 trillion) in bonds. The bank said it would provide an update in August.

The outlook for the global economy has been rocked by the war in Ukraine, which is pushing up the price of energy, food and other commodities such as metals and fertilizer. The Covid-19 pandemic continues to disrupt trade and supply chains, particularly from shutdowns stemming from China’s zero-Covid policy. Last month, the International Monetary Fund slashed its forecast for global economic growth this year to 3.6 percent from 4.4 percent, which was predicted in January.

Article source: https://www.nytimes.com/2022/05/05/business/economy/bank-of-england-rates-inflation.html

Deciding how quickly to remove policy support is a fraught exercise. Central bankers are hoping to move decisively enough to arrest the pop in prices without curbing growth so aggressively that they tip the economy into a deep downturn.

Mr. Powell nodded to that balancing act, saying, “I do expect that this will be very challenging — it’s not going to be easy.” But he said the economy had a good chance “to have a soft, or soft-ish, landing.”

He later elaborated that it could be possible to “restore price stability without a recession, without a severe downturn, and without materially higher unemployment.”

The balance sheet plan the Fed released on Wednesday matched what analysts had expected, which probably also contributed to the sense of market calm. The Fed will begin shrinking its nearly $9 trillion in asset holdings in June by allowing Treasury and mortgage-backed debt to mature without reinvestment. It will ultimately let up to $60 billion in Treasury debt expire each month, along with $35 billion in mortgage-backed debt, and the plan will have phased in fully as of September.

By reducing its bond holdings, the Fed is likely to take steam out of financial markets — bond prices will fall, causing yields to rise, and riskier investments like stocks will become less attractive. It also could help to cool the housing market by pushing up longer-term borrowing costs, which follow bond yields, reinforcing the effect of the central bank’s interest rate increases.

In fact, mortgage rates have already begun to push higher, climbing nearly two percentage points since the start of the year. The rate on a 30-year fixed-rate mortgage averaged 5.1 percent for the week that ended last Thursday, according to Freddie Mac, touching its highest level in more than a decade.

The Fed’s moves “will quickly make financing big-ticket purchases more challenging.” Jonathan Smoke, chief economist at Cox Automotive, wrote in a research note after the meeting. “This is exactly what the Fed wants to see. As demand for homes, cars and other durables declines in response to declining affordability, the rate of price increases should slow as well.”

Article source: https://www.nytimes.com/2022/05/04/business/economy/fed-rate-decision-inflation.html

Nor was the Fed’s policy the only thing that mattered for inflation. Had the Fed begun to pull back policy support last year, it might have slowed the housing market more quickly and set the stage for slower demand, but it would not have fixed tangled supply chains or changed the fact that many consumers have more cash on hand than usual after repeated government relief checks and months spent at home early in the pandemic.

“I think it would look somewhat different,” Mr. Kohn, who has been critical of the Fed’s slowness, said of the economy had it reacted sooner. “Would it look a lot different? I don’t know.”

Still, the gradual reorientation away from easy monetary policy could give inflation the time to become a more permanent feature of American life. Once rapid price gains are embedded, they may prove harder to eradicate, requiring higher rates and possibly a more painful increase in unemployment.

For now, longer-term consumer inflation expectations have remained fairly steady, though short-term expectations have surged. The Fed is moving rapidly now to avoid a situation in which inflation changes expectations and behavior more lastingly.

James Bullard, the president of the Federal Reserve Bank of St. Louis, has even suggested that officials could consider a 0.75-point rate increase — though his colleagues have signaled little appetite for such a large move at this meeting.

Michael Feroli, chief U.S. economist at J.P. Morgan, said in a research note that while “it’s pretty clear that this economy doesn’t need stimulative monetary policy,” he didn’t expect the Fed to raise interest rates by that much, especially because it tended to broadcast its moves ahead of time.

“But if there is a time to break from habit, it’s when the Fed’s inflation credibility is being called into question, and so we don’t write off the possibility of a larger rate move,” he said.

Article source: https://www.nytimes.com/2022/05/04/business/economy/federal-reserve-inflation-recession.html

But labor law experts said that it could be illegal to withhold wages and benefits from only unionized employees or employees voting on a union.

Matthew Bodie, a former lawyer for the labor board who teaches law at Saint Louis University, said the announced pay increases could unlawfully taint the so-called laboratory conditions that are supposed to prevail during a union election by giving employees an incentive not to unionize.

“If Starbucks said, ‘Drop the union campaign and you’ll get this wage increase and better benefits,’ that’d clearly be illegal,” Mr. Bodie said by email. “Hard to see how this is that much different in practice.”

Mr. Bodie said the pay increases could also amount to a violation of the company’s obligation to bargain in good faith because they suggest an intention to give unionized employees a worse deal than nonunionized employees. “They’d have to at least offer this package to the union,” Mr. Bodie added.

Reggie Borges, a Starbucks spokesman, did not say whether the company would make the same proposals announced Tuesday in negotiations with unionized workers but said, “Where Starbucks is required to engage in collective bargaining, Starbucks will always negotiate in good faith.”

Starbucks also said it planned to post leaflets in stores to keep employees informed, in which the company says that the outcome of collective bargaining is uncertain and risky. “Through collective bargaining, wages, benefits and working conditions may improve, diminish or stay the same,” says one of the informational sheets to be posted in stores.

Such messaging is common among employers facing union campaigns, but labor experts say it is misleading because workers are highly unlikely to see their compensation drop as a result of collective bargaining.

Article source: https://www.nytimes.com/2022/05/03/business/economy/starbucks-howard-schultz-union-pay.html

Employers have been rankled, too, complaining of labor shortages as millions of workers — energized by the discussion about “essential work” during the pandemic and buoyed by savings — experience a degree of bargaining power they haven’t had in decades.

That has led to a tense, politically charged dynamic in which wage pressures are a broadening complaint among large and small businesses trying to maintain their profit margins, even though jumps in pay haven’t generally kept up with price increases.

“We’re learning a lot about how structurally fragile our economy is,” said Claudia Sahm, a former Federal Reserve economist. She cited a dependence on “endless low-wage workers and just-in-time supplies of goods” for keeping consumer prices depressed for many years.

The employment cost index, which tracks wages and benefits, jumped by the most on record in the first quarter of this year, according to Labor Department figures released last week. Still, a recent analysis by the Economic Policy Institute, a left-leaning think tank in Washington, concluded that roughly 54 percent of the overall increase in prices in the nonfinancial corporate sector since the second quarter of 2020 could be attributed to an expansion of profit margins, while labor costs were responsible for less than 8 percent of price increases. The analysis indicates that 38 percent of the uptick stems from nonlabor input costs, such as overhead, fuel or raw materials.

That data complicates the increasingly popular narrative that the spikes in worker pay are mostly to blame for the severity of price increases, rather than a wider mix of reasons.

“Normally, you’d expect profits to decrease during a period of high inflation,” said Tony Roth, the chief investment officer of Wilmington Trust Investment Advisors, an arm of MT Bank. The reason the opposite has happened for many companies over the last couple of years is, he said, straightforward: “Businesses are doing it because they can get away with it.”

The economy, while strong, may be locked in a vexing, self-reinforcing cycle for a while: The continued wave of household spending has often signaled to businesses that they had room to raise prices without consequence — allowing executives to hire more workers while maintaining profitability.

Article source: https://www.nytimes.com/2022/05/03/business/economy/job-openings-quits.html