Top economic officials are working out complicated details of the global tax plan and will be scrambling to finish them in the coming months. One thorny issue that emerged at the G20 meetings in Venice last weekend was how tax revenue will be allocated around the world as part of a new tax on the largest and most profitable companies.

Selling the agreement in the United States could be the biggest challenge. Congress is narrowly divided, and Republicans have been adamant that they will not support tax increases, giving the Biden administration a narrow margin for success even if it is able to pass most of its proposed tax changes with only votes from Democrats.

Republican lawmakers have complained that the United States is “surrendering” its tax base by allowing other countries to impose new levies on its companies. For instance, in some cases, China will be able to collect new tax revenue from American businesses that sell products there. However, the United States will probably be able to collect taxes from some Chinese companies that do business in the United States. It is not clear if China would have a net gain from that part of the deal.

Ms. Yellen portrayed the global tax as part of a broader economic reckoning that the Biden administration believes needs to happen in order to prepare the United States — and the rest of the world — for future fiscal needs.

She pointed to the Biden administration’s tax plans, which include raising the corporate tax rate to 28 percent from 21 percent, as central to that approach, saying the administration wants to address what she considers to be the unfairness of the tax code in the United States.

“It just isn’t right for very successful companies to be able to avoid paying their fair share to support expenditures that we need to invest in our economy, to invest in our work force, in R.D. and a social safety net that’s operational,” Ms. Yellen said.

Yet resistance is mounting from corporate America, with business groups warning that the possibility of $2 trillion in corporate tax increases would make American companies less competitive around the world. And with rising prices continuing to be a concern among policymakers in the United States, business interests have said the tax increases could fuel inflation, as companies pass them on to consumers.

Article source: https://www.nytimes.com/2021/07/13/business/janet-yellen.html

A key measure of inflation most likely rose rapidly for a third month in June, economists expect, a gain that could keep concerns over rising prices front and center at the White House and Federal Reserve.

The Consumer Price Index, the Labor Department’s measure of how much consumers are paying for purchases like rent and airfare, climbed by 4.9 percent in the year through June, economists surveyed by Bloomberg predicted. That would mean the pace of increase ticked down slightly — it was at 5 percent for the year through May — but remained high, bolstered by consumer demand as the economy reopens and by a quirk in the data.

Investors, lawmakers and central bank officials are watching the changes closely. Quick price gains can squeeze consumers if wages do not keep up, and if they appear to be sustained it could prod the central bank to pull back on support for the economy. The central bank’s cheap-money policies are generally good for markets, so a rapid withdrawal would be bad news for investors in stocks and other asset classes.

Policymakers do expect inflation will fade as the economy gets through a volatile and unprecedented pandemic-reopening period, but how quickly that will happen is unclear. Prices have climbed faster than officials at the Fed had predicted earlier this year, some measures of consumer inflation expectations are starting to rise — a factor that could make inflation a self-fulfilling prophecy — and some officials at the central bank are increasingly wary of the changes.

Here is what to watch when the report comes out at 8:30 a.m.

Monthly Data:

• The C.P.I. is expected to have risen 0.5 percent from May, the Bloomberg survey showed as of Monday afternoon. That would be slower than the 0.6 percent month-over-month increase the prior month.

• Stripping out volatile food and fuel prices, the C.P.I. probably climbed 0.4 percent, down from 0.7 percent the prior month.

Annual Data:

• The C.P.I. is expected to have risen 4.9 percent in the year through June, slower than the 5 percent in the year through May.

• Stripping out volatile food and fuel prices, the C.P.I. probably climbed 4 percent over the past year, up from 3.8 percent in the year through May. That would be the fastest pace since 1992.

Car Prices, Rents and Restaurants

• Used car prices have been jumping thanks to a semiconductor shortage that has slowed auto production, and June may have been the tail end of that trend, economists at Goldman Sachs wrote in a preview note.

• Shelter costs are another area to watch: Rent and a rental equivalent for owner-occupied houses have been firming. Because they make up nearly a third of overall inflation, that strengthening could matter a lot to price gains going forward.

• The “food away from home” category could also prove interesting. Restaurants have seen demand surge even as they struggle to hire, and many have raised wages to attract workers. They may try to pass those costs along.

The Base Effect and PERsonal Consumption Expenditures

• The “base effect” is a wonky way to say that because prices fell last year, gains in the price index look artificially high this year. The quirk was at its most extreme in May. It should start to fade slightly in June’s data, though it remains a factor behind the larger-than-usual increase.

• Analysts watch the C.P.I. closely because it is more timely, but the Fed actually targets a related but different index when aiming for its 2 percent average inflation goal. That measure, the Personal Consumption Expenditures index, tends to come in slightly lower. It too has accelerated this year.

Article source: https://www.nytimes.com/2021/07/13/business/economy/consumer-price-index-june-2021.html

China’s policies have been effective in keeping virus cases to a minimum, but at some economic cost.

One of the world’s largest ports, Yantian Port in the southeastern Chinese city of Shenzhen, partially shut down for more than a month from late May through much of June. Shenzhen acted in response to fewer than two dozen coronavirus cases.

When the port fully reopened on June 24, shipping executives and freight forwarders hoped that trade would start returning to normal.

It has not worked out that way.

Dozens of huge container ships fell far behind schedule when they had to wait weeks to dock in Shenzhen. That meant ships later showed up in bunches at ports in other countries, causing further congestion. Chinese export factories also sent goods by truck to alternative ports, like Shanghai’s, leaving them overcrowded as well.

Zhao Chongjiu, China’s deputy minister of transport, defended his country’s tough coronavirus measures. “Everyone knows that during an epidemic, workers in ports must be placed under lockdown, and various countries have taken corresponding measures, so the efficiency of loading and unloading would be reduced,” he said when Yantian reopened.

By mid-June, the freight yard was so crammed with containers at Shanghai’s vast, highly automated Yangshan Deep Water Port that the stacking cranes barely had room to lift containers on and off ships. Dong Haitao, a senior administrator at the adjacent free trade zone, blamed foreign ports for failing to handle arriving containers on time.

“Their schedule of shipments has been disrupted, but not ours,” he said.

Shipping rates for containers have continued to rise steeply in the weeks since Yantian Port reopened. The increase is widely expected to keep going as stores in the United States in particular race to restock shelves for returning shoppers and also start preparing for the Christmas shopping season.

Article source: https://www.nytimes.com/2021/07/13/business/china-exports.html

Other finance ministers indicated that the delay was another sign of progress.

“It’s very, very good that we are now going to the next step, discussing how we will implement this at the European Union and that the European Union is deciding not to go with its own proposal to the public today,” Olaf Scholz, Germany’s finance minister, said as he entered the meeting.

The E.U. digital levy proposal faced a difficult path to becoming law in Europe, but the prospect of a new proposal that could be construed as a tax that targets American companies would have been another distraction for the fragile negotiations.

The United States has already been angered by other digital taxes that countries like France, Italy and Britain have enacted, which are separate from the new proposal. More than a dozen countries have enacted or announced plans in recent years to move forward with their own digital taxes.

The Biden administration has asked countries to immediately drop their digital taxes and has prepared retaliatory tariffs on a wide swath of European goods, including cheese, wine and clothing. As part of the global tax negotiations, countries have said they are willing to do so in exchange for additional tax on the largest and most profitable multinational enterprises, those with profit margins of at least 10 percent, that would be based on where their goods or services were sold, even if they had no physical presence there.

France, Europe’s biggest proponent of a digital tax, had no comment Monday. Its finance minister, Bruno Le Maire, had said during the weekend that France would legally commit to withdrawing its digital services tax only after an agreement was in effect, which is unlikely to happen before 2023.

In remarks at the meeting on Monday, Ms. Yellen emphasized the importance of a close relationship between the United States and the European Union and underscored the importance of the global tax agreement that she has been helping to broker. She argued that a deal over a global minimum tax would help European nations make important investments in their economies and reduce inequality.

“Long-run fiscal sustainability is critically important, which is one of the reasons why we need to continue working collectively to implement a global minimum tax of at least 15 percent, in line with the commitment the G20 made just days ago,” Ms. Yellen said. “We hope all E.U. member states will join the consensus and the European Union will move forward on this issue at E.U. level.”

Article source: https://www.nytimes.com/2021/07/12/us/politics/eu-digital-tax.html

“While we want to do everything possible to reach any missing children, the most dramatic impact on child poverty will happen automatically,” because the program will reach about 26 million children whose families are known but earned too little to fully benefit from the previous credit. “That will be huge.”

By delivering monthly payments, the program seeks to address the income swings that poor families frequently suffer. One unknown is how families will spend the money, with critics predicting waste and supporters saying parents know their children’s needs.

When Fresh EBT asked users about their spending plans, the answers differed from those about the stimulus checks. “We saw more responses specifically related to kids — school clothes, school supplies, a toddler bed,” Ms. Taylor said. “It tells me the framing of the benefit matters.”

There is evidence for that theory. When Britain renamed its “family allowance” a “child benefit” in the 1970s and paid mothers instead of fathers, families spent less on tobacco and men’s clothing and more on children’s clothing, pocket money, and toys.

“Calling something a child benefit frames the way families spend the money,” said Jane Waldfogel, a Columbia professor who studied the British program.

While the payments will greatly reduce poverty, most beneficiaries are not poor. Jennifer Werner and her husband had a household income of about $75,000 before she quit her job as a property manager in Las Vegas two years ago to care for her first child. Since then, she has used savings to extend her time as a stay-at-home mother.

Ms. Werner, 45, supports the one-year benefit but wants to see the results before deciding whether it should last. “When you have a child you realize they’re expensive — diapers, wipes, extra food,” she said. But she added “I don’t know where all that money’s coming from.”

Article source: https://www.nytimes.com/2021/07/12/us/politics/child-tax-credit-payments.html

“For the United States, it’s going to be a fundamental shift in how we choose to compete in the world economy,” Ms. Yellen said. “Not a competition based on rock-bottom tax rates, but rather on the skills of our work force, our ability to innovate and our fundamental talents.”

Policymakers continue to grapple with what the global minimum tax rate will be and what exactly will be subject to the tax.

A separate proposal calls for an additional tax on the largest and most profitable multinational enterprises, those with profit margins of at least 10 percent. Officials want to apply that tax to at least 20 percent of profit exceeding that 10 percent margin for those companies, but continue to debate how the proceeds would be divided among countries around the world. Developing economies are pushing to ensure that they will get their fair share.

Mr. Bradley, of the Chamber, said that the details of a final agreement would determine how punitive it would be for companies. Representatives from Google and Facebook have been in touch with senior Treasury officials as the process has played out.

American businesses are also worried about being put at a disadvantage by a 21 percent tax that President Biden has proposed on their overseas profits, if their foreign competitors are only paying 15 percent. The Biden administration also wants to raise the domestic corporate tax rate from 21 percent to 28 percent. Democrats in Congress are moving forward with legislation to make those changes to the tax code this year.

“If a U.S. company is trying to compete globally with a significantly higher tax burden because of this significantly higher minimum tax on its operations, that’s a competitive issue for being able to be successful,” said Barbara Angus, a global tax policy leader at Ernst Young.

Washington and Europe also remain at odds over how to tax digital giants like Google and Amazon.

At the G20 summit, finance ministers expressed optimism that such obstacles could be overcome. In his closing news conference after the deal was reached, Daniele Franco, Italy’s finance minister, hailed the agreement as historic and called on the countries that had yet to join to reconsider.

“To accept global rules is, for each country, difficult. Each country has to be prepared to compromise,” Mr. Franco said. “To have worldwide rules for taxing multinationals, for taxing the profits of big companies is a major change, is a major achievement.”

Liz Alderman contributed reporting from Paris, and Eshe Nelson from London.

Article source: https://www.nytimes.com/2021/07/10/us/politics/global-tax-overhaul-g20.html

Narrowing the gap between the fortunes of advanced and developing economies was a central topic on the first day of the G20 meetings in Venice. Bruno Le Maire, France’s finance minister, told reporters on Friday that inequality was a risk to the stability and security of Europe that could lead to an influx of refugees. He argued that it must be urgently addressed.

It remains to be seen how far the $650 billion will go to help developing countries as they race to vaccinate people before new variants of the virus take hold, including the Delta variant, which has plunged many countries back into a health crisis.

The United Nations Conference on Trade and Development called this year for $1 trillion worth of Special Drawing Rights to be made available by the I.M.F. as a “helicopter money drop for those being left behind.”

Jubilee USA Network, a nonprofit organization that advocates debt relief for poor countries, praised the move by the I.M.F. and called on wealthy countries to do more to help.

“This is the biggest creation of emergency reserve funds that we’ve ever seen, and developing countries will immediately receive more than $200 billion,” said Eric LeCompte, executive director of Jubilee USA Network. “Wealthy countries who receive emergency reserves they don’t need should transfer those resources to developing countries struggling through the pandemic.”

The I.M.F., the World Bank, the World Health Organization and the World Trade Organization have created a new vaccine task force and called for an additional $50 billion investment to broaden access to supplies. The groups have also called on G20 countries to set a goal of having 40 percent of their populations vaccinated by the end of this year and 60 percent by the middle of next year.

The United States has thrown its support behind the expansion of the I.M.F. reserves, reversing a Trump administration policy and angering Republican lawmakers in the process.

Article source: https://www.nytimes.com/2021/07/09/us/politics/g20-imf-vaccines.html

In a speech on Wednesday, Mr. Biden gave no hint that he was scaling back his ambitions.

“It’s time that we have to think bigger and we have to act bolder,” Mr. Biden said at a community college in suburban Chicago, his latest stop in a tour to rally support for his agenda.

Using sweeping rhetoric, the president compared his ambitions to those of former President Ronald Reagan, who presided over an economic boom during his eight-year tenure.

In 1984, “Ronald Reagan was telling us it was an American morning,” Mr. Biden said, referring to Mr. Reagan’s re-election campaign ad that bragged that it was “morning in America” because of his policies.

“This is going to be an American century,” Mr. Biden said.

But first, there will have to be compromise. The negotiations ahead will pose a challenge to the expansive vision Mr. Biden laid out to overhaul the American economy, with new and costly government interventions to lift advanced industries and train and support the workers of the future. His objective in the weeks to come will be to pack as much of that agenda as possible into a pair of bills that are unlikely to spend as much as he wants, with his economic legacy hanging on the choices he and congressional leaders make.

Administration officials say Mr. Biden will continue to prioritize large and unifying national goals, including the extension of an enlarged tax credit for parents, the creation of America’s first federally funded paid leave program for workers and a government guarantee of four additional years of public education via preschool and community college.

Article source: https://www.nytimes.com/2021/07/07/business/economy/biden-infrastructure-economy.html

“The overriding concern being reflected in the bond market is that peak growth has been reached, and the benefits from fiscal policy are starting to fade,” said Sophie Griffiths, a market analyst with the foreign exchange brokerage Oanda, in a research note.

The evidence of a more measured growth path was evident, for example, in a report from the Institute for Supply Management this week. It showed the service sector was continuing to expand rapidly in June, but considerably less rapidly than it had in May. Anecdotes included in the report supported the idea that supply problems were holding back the pace of expansion.

“Business conditions continue to rebound; however, like everywhere, the challenges in the supply chain are numerous,” reported one anonymous retailer that participated in the I.S.M. survey. “We continue to see cost increases, delayed shipments, pushed-out lead times, and no clarity as to when predictive balance returns to this market.”

The bond market shifts could leave the Federal Reserve wrong-footed in contemplating plans to unwind its efforts to support the economy. At a policy meeting three weeks ago, some Fed officials were ready to proceed with tapering bond purchases in the near future, and some expected to raise interest rates next year, in contrast with a more patient approach that Jerome Powell, the Fed chairman, has advocated.

In one of the odder paradoxes of monetary policy, what was perceived in markets as greater openness at the Fed to raising interest rates has contributed to declines in long-term interest rates. Global investors are betting that potential pre-emptive monetary tightening will cause a stronger dollar, slower growth and less ability for the Fed to raise rates in the future without tanking the economy.

“The market read the views of the minority within the Fed about tapering and about raising rates as signals the Fed has blinked on its decision to allow the economy to run hot,” said Steven Ricchiuto, chief U.S. economist at Mizuho Securities. “A weaker global economy and stronger U.S. dollar all imply greater potential for us to import global deflation.”

There are silver linings to the reassessment taking place in markets. Lower long-term rates make borrowing cheaper for Americans — whether that is Congress and the Biden administration considering how to pay for infrastructure plans, or home buyers trying to afford a house.

Article source: https://www.nytimes.com/2021/07/08/upshot/the-bond-market-is-telling-us-to-worry-about-growth-not-inflation.html

Today, the economy is growing quickly, and many companies have complained of difficulties in finding enough workers, suggesting that the United States might be closer to full employment than standard measures propose.

“We’re not beyond full employment at this point, but a number of people are predicting that we will be, and there’s very little question that we are experiencing a big surge in demand,” said Alan Blinder, a Princeton economist and former Fed vice chairman.

But there are obvious differences between the two periods. The 1960s saw historically low unemployment while the current economy is still missing millions of jobs. According to many standard measures, the recovery remains fragile enough that government spending should lead to faster job growth, not more inflation. Plus, fiscal stimulus will likely slow with time as pandemic-era programs such as enhanced unemployment benefits end.

Supply shocks: Then it was oil, now it’s computer chips.

In the 1960s, an overheating economy gradually pushed up prices, but it was in the 1970s when inflation really took off. Inflation jumped to 12 percent in late 1974, then moderated, and hit a peak of more than 14 percent in early 1980.

The cumulative effects of that much inflation were eye-popping. In January 1970, $100 would have been able to buy as many goods and services as $280 could buy in January 1985. By comparison, $100 of purchases in 2005 would only have cost $135 by 2020.

The immediate culprit, in both big 1970s spikes, was oil. The Arab oil embargo of 1973-74 and the Iranian revolution of 1979 both contributed to an oil slump, leading to price spikes and gas shortages, which in turn pushed up prices elsewhere in the economy. Shortages in commodities including lumber and agricultural goods also contributed.

Oil prices are also rising now, jumping higher this week after talks between the Organization of the Petroleum Exporting Countries and its allies failed to reach a deal to ramp up production — but the situation is not as dire as the disruptions half a century ago. The economy is also facing snarls as it reopens and a dearth of computer chips is pushing up prices for video game systems and used cars. The Biden administration, much like the Nixon, Ford and Carter administrations, has been examining what it can do to ease the bottlenecks, including creating a task force to look into disruptions affecting construction, transportation, semiconductor production and agriculture.

Article source: https://www.nytimes.com/2021/07/08/business/economy/inflation-redux.html