Failure to reach some sort of agreement would risk a default on federal obligations, and could cause a financial crisis. For that reason, a deal in these cases has always ultimately been done — even if, as in 2011, it created a lot of uncertainty along the way.

The risk here is that both sides could be so determined to stick to their stances that a miscalculation happens, like two drivers in a game of chicken who both refuse to swerve. And to those who are closest to American fiscal policymaking, that looks like a meaningful risk.

“Chances of a default are still remote, and Congress will likely increase the debt ceiling. but the path to a deal is more murky than usual,” said Brian Gardner, chief Washington policy strategist at Stifel, in a research note. He added that the political game of chicken could spook markets in coming weeks.

And on the other side of the Pacific Ocean, the Chinese government has its own challenge, as Evergrande struggles to make payments on $300 billion worth of debt.

Real estate has played an outsize role in China’s economy for years. But few analysts expect the problems to spread far beyond Chinese borders. The Chinese banking and financial system is largely self-contained, in contrast to the deep global linkages that allowed the failure of Lehman Brothers in 2008 to trigger a global financial crisis.

“Everyone’s learned a trick or two since 2008,” said Alan Ruskin, a macro strategist at Deutsche Bank Securities. “What you have here is the world’s second-largest economy, and one that has lifted all boats, could be slowing more materially than people anticipated. I think that’s the primary risk, rather than that financial interlinkages shift out on a global basis.”

All of which could make for a bumpy autumn for the world economy, but which in the most likely scenarios would lead to a solid 2022. If, that is, everything goes the way the forecasters expect.

Article source: https://www.nytimes.com/2021/09/27/upshot/economy-risk-analysis.html

Mr. Lieber and other analysts worry party leaders are talking past each other. Experts suggest it would take a week or two for Democratic leaders to steer a debt limit increase through the fast-track budget process. That could leave the government vulnerable to a sudden crisis. On Friday, the independent Bipartisan Policy Center, a Washington think tank, said the government could run out of cash to pay its bill by mid-October.

Mr. Lieber said he is worried about “the risk of miscalculation of both sides,” in part because this standoff is not the same as the ones under Mr. Obama. “The Republicans aren’t asking for anything,” he said. “So their position is, there’s nothing you can do to get us to vote for a debt ceiling increase. That’s a dangerous situation.”

Goldman Sachs researchers warned in a note to clients this month that the volatile nature of tax receipts this year, a product of the pandemic, makes the debt limit “riskier than usual” for the economy and markets. They said the standoff was at least as risky as in 2011, when brinkmanship disrupted bond yields and the stock market.

Other financial analysts continue to believe that, as they have in the past, the sides will eventually find an agreement — largely because of the consequences of failure.

“We believe Congress will raise or suspend the debt ceiling,” Beth Ann Bovino, SP U.S. chief economist, wrote this week. “A default by the U.S. government would be substantially worse than the collapse of Lehman Brothers in 2008, devastating global markets and the economy.”

In the meantime, Republicans are awaiting a vote by Democrats to raise the limit. Senator Rick Scott of Florida, who heads Republicans’ campaign arm in the Senate, told an NBC reporter he was eager to highlight Democratic support for raising the limit in midterm advertisements.

Article source: https://www.nytimes.com/2021/09/26/business/economy/america-debt-limit-political-game.html

One wild card is how the Delta variant could affect the supply of workers. If virus rates remain high, people may hesitate to take jobs requiring face-to-face interaction, particularly where vaccination rates are low. And if schools and day care centers can’t stay open consistently, parents may have difficulty returning to work.

The government is still providing a boost.

Government aid hasn’t dried up entirely. The Federal Reserve said Wednesday that it could soon begin to pare its $120 billion in monthly bond purchases — which have kept borrowing cheap and money flowing through the economy — but it will almost certainly keep interest rates near zero into next year. Millions of parents will continue to receive monthly checks through the end of the year because of the expanded child tax credit passed in March as part of President Biden’s $1.9 trillion aid package.

That bill, known as the American Rescue Plan, also provided $350 billion to state and local governments, $21.6 billion in rental aid and $10 billion in mortgage assistance, among other programs. But much has not been spent, said Wendy Edelberg, director of the Hamilton Project, an economic-policy arm of the Brookings Institution.

“Those delays are frustrating,” she said. “At the same time, what that also means is that support is going to continue having an effect over the next several quarters.”

Household savings could provide a buffer — if they last.

Economists, including officials in the Biden administration, say that as the economy heals, there will be a gradual “handoff” from government aid to the private sector. That transition could be eased by a record-setting pile of household savings, which could help prop up consumer spending as government aid wanes.

A lot of that money is held by richer, white-collar workers who held on to their jobs and saw their stock portfolios swell even as the pandemic constrained their spending. But many lower-income households have built up at least a small savings cushion during the pandemic because of stimulus checks, enhanced unemployment benefits and other aid, according to researchers at the JPMorgan Chase Institute.

“The good news is that people are going into the fall with some reserves, more reserves than normal,” said Fiona Greig, co-director of the institute. “That can give them some runway in which to look for a job.”

Article source: https://www.nytimes.com/2021/09/24/business/economy/coronavirus-delta-economy.html

Ms. Yellen’s task has been complicated by the fact that while she can readily convey the economic risks of default, the debt limit has become wrapped up in a larger partisan battle over Mr. Biden’s entire agenda, including the $3.5 trillion spending bill.

Republicans, including Mr. McConnell, have insisted that if Democrats want to pass a big spending bill, then they should bear responsibility for raising the borrowing limit. Democrats call that position nonsense, noting that the debt limit needs to be raised because of spending that lawmakers, including Republicans, have already approved.

“This seems to be some sort of high-stakes partisan poker on Capitol Hill, and that’s not what her background is,” said David Wessel, a senior economic fellow at the Brookings Institution who worked with Ms. Yellen at Brookings.

While lawmakers squabble on Capitol Hill, Ms. Yellen’s team at Treasury has been trying to buy as much time as possible. After a two-year suspension of the statutory debt limit expired at the end of July, Ms. Yellen has been employing an array of fiscal accounting tools known as “extraordinary measures” to stave off a default.

Uncertainty over the debt limit has yet to spook markets, but Ms. Yellen is receiving briefings multiple times a week by career staff on the state of the nation’s finances. They are keeping her informed about the use of extraordinary measures, such as suspending investments of the Exchange Stabilization Fund and suspending the issuing of new securities for the Civil Service Retirement and Disability Fund, and carefully reviewing Treasury’s cash balance. Because corporate tax receipts are coming in stronger than expected, the debt limit might not be breached until mid- to late October, Ms. Yellen has told lawmakers.

A Treasury spokeswoman said that Ms. Yellen is not considering fallback plans such as prioritizing debt payments if Congress fails to act, explaining that the only way for the government to address the debt ceiling is for lawmakers to raise or suspend the limit. However, she has reviewed some of the ideas that were developed by Treasury during the debt limit standoff of 2011, when partisan brinkmanship brought the nation to the cusp of default.

A new report from the Bipartisan Policy Center underscored the fact that if Congress fails to address the debt limit, Ms. Yellen will be left with no good options. If the true deadline is Oct. 15, for example, the Treasury Department would be approximately $265 billion short of paying all of its bills through mid-November. About 40 percent of the funds that are owed would go unpaid.

Article source: https://www.nytimes.com/2021/09/23/us/politics/debt-limit-fight-yellen.html

Mr. Bivens and his co-author, James Barrett, an economic consultant, examine the effects of doing both. They note that roughly three-quarters of the parts in the powertrain for a U.S.-made gasoline vehicle are produced domestically, versus less than half of the parts in the powertrain of a U.S.-made electric vehicle.

Raising the proportion of domestic content in electric vehicles so that it mirrors gas-powered ones could save tens of thousands of jobs a year, they estimate — potentially more than half the likely job losses that would arise without additional government action.

But to transform likely job deficits into job gains, Mr. Barrett and Mr. Bivens find, it is necessary to increase the market share of vehicles made in the United States. According to the study, the percentage of vehicles sold in the United States that are made domestically has hovered around 50 percent over the past decade. If it were to rise to 60 percent, the authors conclude, the industry could gain over 100,000 jobs in 2030.

If market share were instead to drop to 40 percent by the end of the decade and there were no increase in the domestic content of electric vehicle powertrains, the industry could lose more than 200,000 jobs, the report finds.

Under the Democratic plan circulating in Congress, a current $7,500 tax credit for the purchase of a new electric vehicle would rise as high as $12,500. An extra $4,500 would apply to vehicles assembled at unionized factories in the United States. Consumers would receive the final $500 if their vehicle had a U.S.-made battery. The details could change in the face of opposition from automakers with nonunion U.S. plants.

Democrats are also discussing subsidies to encourage manufacturers to set up new factories or upgrade old ones.

Article source: https://www.nytimes.com/2021/09/22/business/economy/electric-vehicles-jobs.html

The analysis, from researchers at the Office of Management and Budget and the Council of Economic Advisers, is an attempt to bolster Mr. Biden’s claims that billionaires are not paying what they actually should owe in federal taxes, and that the tax code rewards wealth, not work.

“While we have long known that billionaires don’t pay enough in taxes, the lack of transparency in our tax system means that much less is known about the income tax rate that they do pay,” administration officials wrote in a blog post the budget office released accompanying the analysis.

The White House’s calculation of what the wealthiest pay in taxes is well below what other analyses have found. The difference comes from the White House officials’ decision to count the rising value of wealthy Americans’ stock portfolios — which is not taxed on an annual basis — as income. It finds that between 2010 and 2018, those top 400 households, when including the rising value of their wealth, earned a combined $1.8 trillion and paid an estimated $149 billion in federal individual income taxes.

Most measures of tax rates do not use the White House method of counting asset gains as annual income.

The independent Tax Policy Center in Washington estimated this year that in 2015, the highest-earning 1,400 households in the country paid an average effective tax rate of about 24 percent, compared with an average rate of about 14 percent for all taxpayers.

Article source: https://www.nytimes.com/2021/09/23/us/politics/biden-wealthy-tax-rates.html

The analysis, from researchers at the Office of Management and Budget and the Council of Economic Advisers, is an attempt to bolster Mr. Biden’s claims that billionaires are not paying what they actually should owe in federal taxes, and that the tax code rewards wealth, not work.

“While we have long known that billionaires don’t pay enough in taxes, the lack of transparency in our tax system means that much less is known about the income tax rate that they do pay,” administration officials wrote in a blog post the budget office released accompanying the analysis.

The White House’s calculation of what the wealthiest pay in taxes is well below what other analyses have found. The difference comes from the White House officials’ decision to count the rising value of wealthy Americans’ stock portfolios — which is not taxed on an annual basis — as income. It finds that between 2010 and 2018, those top 400 households, when including the rising value of their wealth, earned a combined $1.8 trillion and paid an estimated $149 billion in federal individual income taxes.

Most measures of tax rates do not use the White House method of counting asset gains as annual income.

The independent Tax Policy Center in Washington estimated this year that in 2015, the highest-earning 1,400 households in the country paid an average effective tax rate of about 24 percent, compared with an average rate of about 14 percent for all taxpayers.

Article source: https://www.nytimes.com/2021/09/23/us/politics/biden-wealthy-tax-rates.html

The projections also penciled in faster price gains in 2021. Inflation has moved sharply higher in recent months, elevated by supply-chain disruptions and other quirks tied to the pandemic. The Fed’s preferred metric, the personal consumption expenditures index, climbed 4.2 percent in July from a year earlier.

Fed officials expected inflation to average 4.2 percent in the final quarter of 2021 before falling to 2.2 percent in 2022, the new forecasts showed.

Central bankers are trying to predict how inflation will evolve in the coming months and years. Some officials worry that it will remain elevated, fueled by strong consumption and newfound corporate pricing power as consumers come to expect and accept higher costs.

Others fret that the same factors pushing prices higher today will lead to uncomfortably low inflation down the road — for instance, used car prices have contributed heavily to the 2021 increase and could fall as demand wanes. Tepid price increases prevailed before the pandemic started, and the same global trends that had been weighing inflation down could once again dominate.

“Inflation expectations are terribly important, we spend a lot of time watching them, and if we did see them moving up in a troubling way” then “we would certainly react to that,” Mr. Powell said. “We don’t really see that now.”

The Fed’s second goal — full employment — also remains elusive. Millions of jobs remain missing compared with before the pandemic, even after months of historically rapid employment gains. Officials want to avoid lifting interest rates to cool off the economy before the labor market has fully healed. It’s difficult to know when that might be, because the economy has never recovered from pandemic-induced lockdowns before.

“The process of reopening the economy is unprecedented, as was the shutdown at the onset of the pandemic,” Mr. Powell said on Wednesday.

Article source: https://www.nytimes.com/2021/09/22/business/economy/fed-taper-interest-rate-increase.html

“The president is on the cusp of achieving a major expansion in public education, one of the largest expansions of the social safety net, the largest investment in climate change mitigation” and overhauls in labor law and drug pricing, said Patrick Gaspard, a former Obama administration official who is now the president of the liberal Center for American Progress in Washington.

“Each one of these things is significant in its individual constituent parts,” he said, “but taken as a whole, it, I think, speaks to the remarkable opportunity that we have — these once-in-a-generation opportunities to set a course that creates growth for all, including and especially those who have been most vulnerable in this economy.”

If the effort succeeds, Mr. Biden will have accomplished much of what he campaigned on in one fell swoop. Observers say he will carry a strengthened hand into global summits in October and November that are meant to galvanize the world around transitioning from planet-warming fossil fuels and ending the use of offshore havens that companies have long used to avoid taxation.

White House officials say that the breadth of programs in the package form a unified vision for the United States’ domestic economy and its place in the world, and that the planks serve as a sort of coalition glue — a something-for-everyone approach that makes it difficult to jettison pieces of the plan in negotiations, even if they prove contentious.

But the sheer scope of its contents has opened divisions among Democrats on multiple fronts, when Mr. Biden cannot afford to lose a single vote in the Senate and no more than three votes in the House.

Centrists and progressives have clashed over the size of the spending in the legislation and the scale and details of the tax increases that Mr. Biden wants to use to help offset its cost. They are divided over prescription drug pricing, the generosity of tax credits for the poor, the aggressiveness of key measures to speed the transition to a lower-emission energy sector and much more.

Even items that are not top priorities for Mr. Biden have opened rifts. On Friday, one of the party’s most outspoken progressives, Representative Alexandria Ocasio-Cortez of New York, took aim at a crucial priority of several top Democrats, including Senator Chuck Schumer, saying she would resist attempts to fully repeal a cap on deductions for state and local property taxes that would aid high earners in high-tax areas.

Article source: https://www.nytimes.com/2021/09/18/business/economy/biden-spending-bill.html

As a result, large employers like Condé Nast and JPMorgan Chase have relinquished chunks of office space, contributing to nearly 19 percent of Manhattan offices being available for rent, according to Newmark, a real estate services firm, nearly double the average rate over the last decade.

About 28 percent of office workers in the New York City region, which includes parts of New Jersey, Connecticut and Pennsylvania, had returned to the office as of last week, more than double the rate from a few months ago, according to Kastle Systems, a security company that tracks employee card swipes in office buildings. The nationwide average was 33.6 percent, Kastle said.

Kate Lister, the president of Global Workplace Analytics, a consulting firm advising companies on their return-to-office policies, said that hybrid work would remain a permanent feature of work culture after the pandemic.

Office space is not going to disappear, but, Ms. Lister added, “The total space will come down.”

Still, elected officials in New York sought to cast Google’s announcement as a sign of the city’s rebound.

“This announcement from Google is yet another proof point that New York’s economy is recovering and rebuilding,” Gov. Kathy Hochul, a Democrat, said in a statement. “We are creating jobs, investing in emerging industries, lifting up New Yorkers, and together, we are writing our comeback story.”

Mayor Bill de Blasio called the deal “a historic investment in New York City.” The transaction was first reported by The Wall Street Journal.

When the St. John’s building opens after construction is finished in mid-2023, Google will have more than 3.1 million square feet of office space in New York, making it one of the largest leaseholders in the city.

Article source: https://www.nytimes.com/2021/09/21/nyregion/google-buys-building-hudson-square.html