September 26, 2021

Poverty in U.S. Declined Thanks to Government Aid, Census Report Shows

The government defines poverty, under the more comprehensive definition, as an income level below about $30,000 for a family of four, although the exact threshold varies depending on family size, homeownership status and regional housing costs.

The decline in poverty last year was broad-based. It fell among all racial and ethnic groups, among all family types, and among Americans at every age and education level.

But government programs excluded some groups, such as undocumented immigrants and their families, and failed to reach others. Poverty was significantly higher than the overall average for Black and Hispanic Americans, foreign-born residents and those without college educations. Millions of people waited weeks or months to receive benefits, forcing many to turn to charities.

“We measure poverty annually, when the reality of poverty is faced on a day-to-day-to-day basis,” said Hilary Hoynes, an economist at the University of California, Berkeley, who has studied the government’s response to the pandemic.

Nakitta Long, a single mother of two who was laid off from a North Carolina automotive plant at the start of the pandemic, said government aid helped her get back on her feet.

The first stimulus check helped cover rent and a car payment, and enhanced unemployment benefits helped sustain her family until she was called back to work in October.

Article source: https://www.nytimes.com/2021/09/14/business/economy/census-income-poverty-health-insurance.html

Should Biden Reappoint Jerome Powell? It Depends on His Theory of Change.

It is a distinctly different background and persona from Mr. Powell, a 68-year-old Princeton graduate who worked as a Wall Street dealmaker and private equity executive. He served in the George H.W. Bush administration, and was appointed to lead the central bank by President Donald J. Trump.

He has also become, in recent years, a full-fledged convert to the religion of full employment. This is the view that the Fed should allow the economy to run hot enough that opportunity opens to people across American society, including historically marginalized groups.

This view is more commonly embraced on the political left. But Mr. Powell came to it over the second half of the 2010s, as the labor market improved to levels far beyond what the Fed’s own economic models had envisioned without spurring unwelcome inflation.

His stewardship of the Fed is, in that sense, the 21st-century American embodiment of the concept of “Tory men, Whig measures.”

The phrase, from a 19th-century novel by Benjamin Disraeli, who would go on to become British prime minister, refers to a government in which hardheaded conservatives (the Tories) nevertheless carry out ideas that originated in left-of-center (Whig) circles, aimed at improving life for the masses.

What would that mean if Mr. Powell were to be appointed to a second term as Fed chair starting in early 2022?

It would mean that the major rethinking of the Fed’s approach to the labor market would continue to be led by a registered Republican whom 84 senators voted to confirm in 2018. Ms. Brainard was confirmed with 61 votes in 2014, including 11 Republicans.

Article source: https://www.nytimes.com/2021/09/14/upshot/biden-jerome-powell-fed.html

House Democrats’ Plan to Tax the Rich Leaves Vast Fortunes Unscathed

The proposal includes substantial measures to raise taxes on the rich. Taxable income over $450,000 — or $400,000 for unmarried individuals — would be taxed at 39.6 percent, the top rate before President Donald J. Trump’s 2017 tax cut brought it to 37 percent. The top capital gains rate would rise to 25 percent from 20 percent, considerably less than a White House proposal that would have taxed investment gains as income for the richest, at 39.6 percent.

Under the committee’s plan, a 3 percent surtax would be applied to incomes over $5 million. The value of estates shielded from estate taxation, which doubled to $24 million for married couples under the Republican tax cuts of 2017, would go back to $12 million at the end of this year, four years earlier than the scheduled expiration.

The proposal would also raise taxes in a variety of ways on businesses called pass-through entities — like many law firms and financial companies — that distribute profits to their owners, who then pay individual income taxes on them. Those changes, including the extension of an existing 3.8 percent surtax to include pass-through income, would raise taxes primarily on high earners, generating several hundred billion dollars in revenues, by Democratic estimates.

The joint committee estimated on Monday that the changes would raise about $1 trillion from high-income individuals.

Republicans balked at the proposal. Business lobbying groups rejected the package, with the U.S. Chamber of Commerce slamming it as “an existential threat to America’s fragile economic recovery and future prosperity.”

“President Biden, Speaker Nancy Pelosi and House Democrats are ramming through trillions of wasteful spending and crippling tax hikes that will drive prices up even higher, kill millions of American jobs and drive them overseas, and usher in a new era of government dependency with the greatest expansion of the welfare state in our lifetimes,” Representative Kevin Brady of Texas, the committee’s ranking Republican, said of the plan.

But what is not included is notable. The richest of the rich earn little from actual paychecks (Mr. Bezos’s salary as the founder of Amazon was $81,840 in 2020), so a surtax on income would have little impact. Their vast fortunes in stocks, bonds, real estate and other assets grow largely untaxed each year.

Article source: https://www.nytimes.com/2021/09/13/us/politics/tax-plan-democrats.html

How House Democrats Plan to Raise $2.9 Trillion for a Safety Net

The Biden administration has led a global effort to crack down on profit shifting by companies that locate their headquarters in countries with low rates to reduce their tax bills. The measure unveiled by House Democrats on Monday waters down some of what the White House has been pushing for, including the rate that companies would pay on their overseas profits.

The legislation calls for a tax rate of 16.6 percent on corporate foreign earnings. That would be an increase from the current rate of about 10.5 percent, which Republicans enacted as part of their 2017 tax legislation, but less than the 21 percent that the Biden administration proposed. The tax would be calculated on a country-by-country basis.

The House proposal also offers more generous exclusions than what the White House envisioned. Companies could exclude 5 percent of their foreign tangible assets, such as property and equipment, from the minimum tax. While that is less than the current 10 percent, the Biden administration wanted to cut that benefit entirely.

Still, the House proposal would put the United States more closely in line with the rest of the world, which has been coalescing around an agreement that would set a global minimum tax rate of at least 15 percent. Critics have argued that a rate of 21 percent in the United States would put American companies at a competitive disadvantage.

The Committee for a Responsible Federal Budget, a fiscal watchdog, called the Ways and Means Committee international tax proposal “less aggressive” than what the White House proposed and projected it would raise about $360 billion in revenue compared with the $1 trillion that the White House plan would raise.

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The 2022 fiscal year for the federal government begins on October 1, and President Biden has revealed what he’d like to spend, starting then. But any spending requires approval from both chambers of Congress. Here’s what the plan includes:

    • Ambitious total spending: President Biden would like the federal government to spend $6 trillion in the 2022 fiscal year, and for total spending to rise to $8.2 trillion by 2031. That would take the United States to its highest sustained levels of federal spending since World War II, while running deficits above $1.3 trillion through the next decade.
    • Infrastructure plan: The budget outlines the president’s desired first year of investment in his American Jobs Plan, which seeks to fund improvements to roads, bridges, public transit and more with a total of $2.3 trillion over eight years.
    • Families plan: The budget also addresses the other major spending proposal Biden has already rolled out, his American Families Plan, aimed at bolstering the United States’ social safety net by expanding access to education, reducing the cost of child care and supporting women in the work force.
    • Mandatory programs: As usual, mandatory spending on programs like Social Security, Medicaid and Medicare make up a significant portion of the proposed budget. They are growing as America’s population ages.
    • Discretionary spending: Funding for the individual budgets of the agencies and programs under the executive branch would reach around $1.5 trillion in 2022, a 16 percent increase from the previous budget.
    • How Biden would pay for it: The president would largely fund his agenda by raising taxes on corporations and high earners, which would begin to shrink budget deficits in the 2030s. Administration officials have said tax increases would fully offset the jobs and families plans over the course of 15 years, which the budget request backs up. In the meantime, the budget deficit would remain above $1.3 trillion each year.

House Democrats included legislative language that would double the existing excise tax on cigarettes, small cigars and roll-your-own tobacco, as well as imposing taxes on any non-tobacco nicotine products, like e-cigarettes.

That proposal could run afoul of Mr. Biden’s pledge to not raise taxes on families making less than $400,000. In negotiations over the $1 trillion bipartisan infrastructure package, Mr. Biden and his main deputies refused to consider raising the gas tax to help pay for the plan, largely because such a tax would affect anyone who buys gas, regardless of income level. That same problem would accompany an increased tax on tobacco and nicotine as well.

Article source: https://www.nytimes.com/2021/09/13/us/politics/democrats-tax-plan.html

In Social Policy Bill, Businesses See a Lot to Like. They Oppose It.

“People say they’re for this new stakeholder economy, that they’re committed to sustainability,” said Mr. Hollender, now the chief executive of the liberal American Sustainable Business Council. “But at the same time, there is a system of incentives designed to maximize profits, and when those profits are threatened, businesses don’t like it.”

More mainline business groups recoiled at the accusation. Mr. Bradley, of the Chamber of Commerce, agreed that parts of the Democratic vision mirrored the business lobby’s longstanding wishes. Accessible child care is a high priority, he said, and addressing climate change with investments in clean energy is overdue.

“The administration was right to raise I.R.S. enforcement to close the tax gap,” he added. “We want a pro-growth tax code, but we want people to comply with that tax code.”

But he said the way Democrats were addressing those issues — by hastily lumping them into one voluminous $3.5 trillion measure to be passed through a fast-track process known as reconciliation — guaranteed opposition.

For instance, business groups had been working with lawmakers from both parties to try to create a paid family and medical leave program that would be paid for with a payroll tax, shared among businesses, workers and the government. To satisfy Mr. Biden’s pledge not to raise any taxes on people with incomes below $400,000, the payroll tax has disappeared, replaced by a variety of tax increases on rich people and corporations that are no longer connected to the program they are to finance.

“Paid family leave, outside a reconciliation context, would require intense negotiations and trade-offs, but it wouldn’t be outside the realm of possibility that we could find a proposal that we could support,” Mr. Bradley said. “Inside reconciliation, it’s only getting worse.”

The Business Roundtable, which represents the chief executives of the nation’s largest corporations, expressed a similar desire. “There is strong bipartisan support for some of these policies, and we encourage Congress to take them up through that deliberative process, not via reconciliation,” the group said in a statement.

Article source: https://www.nytimes.com/2021/09/12/us/politics/businesses-social-policy.html

Biden’s New Vaccine Push Is a Fight for the U.S. Economy

Data from Homebase, which provides time-management software to small businesses, show that employment in entertainment, dining and other coronavirus-sensitive sectors has fallen in recent weeks as the Delta variant has spread. But the decline is smaller than during the spike in cases last winter, suggesting that economic activity has become less sensitive to the pandemic over time. Other measures likewise show that economic activity has slowed but not collapsed as cases have risen.

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That trend has helped bolster overall consumer spending and hiring in the short term and helped keep the economy on track for its fastest annual growth in a quarter century. But there is a risk that it will be undercut by a continued pandemic dampening of labor force participation. Economists who have tracked the issue say that even if consumers have grown more accustomed to shopping or dining out as cases rise, there is little sign that would-be workers, even vaccinated ones, have become more accepting of the risks of returning to service jobs as the pandemic rages.

“It’s becoming increasingly clear that employers are eager to hire,” said Andrew Atkeson, an economist at the University of California at Los Angeles who has released several papers on the economics of the pandemic. “The problem is not that people aren’t spending. It’s that people are still reluctant to go back to work”

The Delta wave also appears to be sidelining some workers by disrupting child care and, in some cases, schools — forcing parents to take time off or to delay returning to jobs.

Some forecasters believe the combination of rising vaccination rates and a growing share of Americans who have already contracted the virus will soon arrest the Delta wave and set the economy back on track for rapid growth, with small-business hiring and restaurant visits rebounding as soon as the end of this month. “Now is the time to start thinking about the post-Delta world,” Ian Shepherdson, the chief economist at Pantheon Macroeconomics, wrote in a research note this month.

Other economists see the possibility that a continued Delta wave — or a surge from another variant in the months to come — will substantially slow the recovery, because potential workers in particular remain sensitive to the spread of the virus.

“That’s a very real danger,” said Austan Goolsbee, a former head of the Council of Economic Advisers under President Barack Obama whose research earlier in the pandemic showed fear, not government restrictions, was the driving force behind lost economic activity from the virus.

Article source: https://www.nytimes.com/2021/09/09/us/politics/biden-vaccines-economy.html

Fed Officials’ Trading Draws Outcry, and Fuels Calls for Accountability

None of those transactions took place between late March and May 1, a Fed official said, which would have curbed Mr. Kaplan’s ability to use information about the coming rescue programs to earn a profit.

But the trades drew attention for other reasons. Mr. Conti-Brown pointed out that Mr. Kaplan was buying and selling oil company shares just as the Fed was debating what role it should play in regulating climate-related finance. And everything the Fed did in 2020 — like slashing rates to near zero and buying trillions in government-backed debt — affected the stock market, sending equity prices higher.

“It’s really bad for the Fed, people are going to seize on it to say that the Fed is self-dealing,” said Sam Bell, a founder of Employ America, a group focused on economic policy. “Here’s a guy who influences monetary policy, and he’s making money for himself in the stock market.”

Mr. Perli noted that Mr. Kaplan’s financial activity included trading in a corporate bond exchange-traded fund, which is effectively a bundle of company debt that trades like a stock. The Fed bought shares in that type of fund last year.

Other key policymakers, including the New York Fed president, John C. Williams, reported much less financial activity in 2020, based on disclosures published or provided by their reserve banks. Mr. Williams told reporters on a call on Wednesday that he thought transparency measures around trading activity were critical.

“If you’re asking should those policies be reviewed or changed, I think that’s a broader question that I don’t have a particular answer for right now,” Mr. Williams said.

Washington-based board officials reported some financial activity, but it was more limited. Jerome H. Powell, the Fed chair, reported 41 recorded transactions made by him or on his or his family’s behalf in 2019, and 26 in 2020, but those were typically in index funds and other relatively broad investment strategies. Randal K. Quarles, the Fed’s vice chair for supervision, recorded purchases and sales of Union Pacific stock from 2019 in his 2020 disclosure. Those stocks were assets of Mr. Quarles’s wife and he had no involvement in the transactions, a Fed spokesman said.

Article source: https://www.nytimes.com/2021/09/09/business/economy/fed-stock-trading.html

E.C.B. Will Slow Its Crisis-Era Bond Buying

It’s a concoction that has created divisions among the central bank’s policymakers about when to slow and then end its enormous bond-buying program. It began in March 2020 as the pandemic spread across Europe, and is meant to buy a total of 1.85 trillion euros in bonds and run until at least next March. The slowdown would help ensure the purchases end on schedule, though the central bank hasn’t ruled out an extension.

“Based on a joint assessment of financing conditions and the inflation outlook, the Governing Council judges that favorable financing conditions can be maintained with a moderately lower pace of net asset purchases,” the central bank said in statement on Thursday.

Thursday’s decisions are the first test of the central bank’s updated forward guidance. In July, policymakers said they were willing to overlook short-term jumps in inflation and would raise interest rates only once it was clear the annual inflation rate would reach 2 percent “well ahead” of the end of the central bank’s projection horizon and stay around that level over the medium term.

New projections for inflation and economic growth will be published later on Thursday when the central bank’s president, Christine Lagarde, will hold a press conference.. The previous forecasts, in June, predicted inflation would peak at 2.6 percent in the fourth quarter and decline to 1.5 percent in 2022 and 1.4 percent in 2023.

But inflation has already risen to 3 percent in August, the highest in nearly 10 years, the region’s statistics agency said last week. So far, policymakers have been betting that the jump in inflation will be temporary, like other central banks around the world.

Article source: https://www.nytimes.com/2021/09/09/business/economy/european-central-bank-meeting.html

Biden’s Infrastructure Plan: Scarcity of Skilled Workers Poses Challenge

He wants to hire more skilled masons to finish the projects sooner, but he can’t find enough people to fill the dozen positions he has open, even though he is willing to pay up to $50 an hour — twice what he offered before the pandemic. He checks his email daily, waiting for more applications to come in.

“My biggest struggle is finding guys that want to work,” Mr. Kadavy said.

Even when he does hear from applicants, Mr. Kadavy said, he is unable to hire many of them because they are not qualified enough. He was already seeing a shortage of skilled masons before the pandemic, he said, and he worries that the craft is “dying” because newer generations are not pursuing the field.

The nation’s public transit systems would receive $39 billion under the infrastructure bill, allowing agencies to expand service and upgrade decades-old infrastructure. But transit agencies are dealing with worker shortages of their own, facing a dearth of bus drivers, subway operators and maintenance technicians.

Metro Transit in Minneapolis is trying to hire about 100 bus drivers by the end of the year, said Brian Funk, the agency’s acting chief operating officer. The agency had originally aimed to hire 70 workers by the end of June, but it met only about half of that goal.

Although he is optimistic that the agency will be able to fill those remaining positions after ramping up efforts to promote the openings, he said he was still wary about some workers choosing to leave.

“We know that every day that goes by, there’s the potential that somebody else is looking at either retirement or another job,” Mr. Funk said.

Some are optimistic that policymakers will be able to scale up work force development programs to keep up with the demand the infrastructure bill would create. Projects could take several months to get started, economists said, giving the country time to train workers who are not yet qualified.

Article source: https://www.nytimes.com/2021/09/09/us/politics/biden-infrastructure-plan.html

High Natural Gas Prices Strain Europeans, Weighing on Recovery

Adding to the tight situation in Europe, Groningen, the giant gas field in the Netherlands that long served as a safety valve for both its home country and western Germany, is being gradually shut down because of earthquakes. Over the last year European gas prices have risen from around $4 per million British thermal units to about $18.

Russia, the largest gas supplier to Europe, and Algeria have substantially increased their exports but not enough to ease market concerns. Some analysts question whether Gazprom, Russia’s gas company, is pursuing a high-price strategy or trying to persuade the West to allow the completion of its Nord Stream 2 pipeline project, which will deliver gas from Russia to Germany.

“On the face of it, it looks as though some sort of game is being played here,” said Graham Freedman, an analyst at Wood Mackenzie. On the other hand, Mr. Freedman said, it could be that Gazprom doesn’t have any more gas to export.

A spokeswoman for Gazprom said: “Our mission is to fulfill contractual obligations to our clients, not to ‘reduce the concerns’ of an abstract market.” She added that Gazprom had increased supplies to near-record levels this year.

Construction of the 746-mile pipeline, which runs under the Baltic Sea, was halted last year just short of completion off Germany’s shores by the threat of sanctions from the United States. But in a deal with Germany in July, the Biden administration agreed to drop its threat to stop the pipeline. On Monday, the management company for the project said it aimed to have the pipeline operating this year.

Stanley Reed reported from London, and Raphael Minder from Madrid.

Article source: https://www.nytimes.com/2021/09/08/business/europe-natural-gas-prices.html