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    Can Congress Use an Archaic Process to Get Around the Debt Stalemate?

    Some Democrats are urging their colleagues to lay the groundwork for using an arcane procedural process to bypass Republicans and stave off economic peril.WASHINGTON — Call it an escape valve, an off-ramp or a break-glass-in-case-of-emergency option.From Pennsylvania Avenue to Wall Street to Main Street, those anxious about the political impasse over raising the federal debt limit are eying an arcane, seldom successful congressional process known as a discharge petition as a possible solution to ward off a disastrous default.The petition is just what its name implies: a signed demand, in this case bearing the signatures of a majority of the House, that can force consideration on the floor of a certain piece of legislation. The demand would be an increase in the federal debt limit — a way of staving off disaster if House Republicans refuse to agree to raise it before the Treasury Department exhausts its legal authority to borrow to pay its creditors this summer.But the process is exceedingly difficult, time-consuming and easily derailed. It has been successful only rarely in recent decades, most notably with passage of a campaign finance overhaul in 2002.That high degree of difficulty — and the economic threat posed by a federal default — has some Democrats urging their colleagues in the House to, at minimum, begin the process soon. They see it as a safeguard in the event that dormant debt talks between President Biden and Speaker Kevin McCarthy deteriorate further and the country finds itself on the brink of economic peril with no end in sight this year.Even if Congress does not ultimately need the discharge petition, they argue, lawmakers should get the ball rolling just in case — and soon.“I do think it is important to lay the groundwork for a discharge petition because it is a complicated process, so you need to plan ahead — meaning now,” said Senator Chris Van Hollen of Maryland, the former top Democrat on the House Budget Committee. “Having a backup would be a good strategy and, if necessary, would put pressure on House Republicans.”Executing a discharge petition is convoluted and politically dicey. It is a deliberately arduous exercise because it is intended to wrest control of the House floor from the majority leadership — an outcome that neither party wants to encourage on a regular basis. Since it is typically a tool of the minority, it requires wooing some members of the majority to defy their leadership and cross party lines to sign on. To force a debt limit vote, Democrats would need the support of all their members, as well as at least five Republican defectors.It is also a drawn-out process. The legislation at issue must sit in committee at least 30 legislative days — days the House is in session — before a petition to push it forward can be submitted. Then it can be brought to the floor only on specially designated days if its sponsors have the required 218 signatures.Mr. Van Hollen estimates that legislation introduced when Congress returns from recess on April 17 would not reach the point where its backers could even begin collecting signatures on a petition until June 21. It would still have a long way to go after that. The most recent prediction of when the debt ceiling will be breached is sometime between July and September.Lawmakers also noted that the House speaker can erect many procedural obstacles. For a discharge petition to succeed, they say, it is best if the speaker — in this case, Mr. McCarthy — tacitly wants the legislation to pass or is at least not adamantly opposed. In a crisis situation, as the debt limit endgame is likely to be, a discharge petition might be too cumbersome if the House leaders dug in against it.Speaker Kevin McCarthy insists Republicans will raise the debt ceiling only if President Biden and Democrats agree to spending cuts and other conditions.Al Drago for The New York Times“Look, I wouldn’t rule it out,” Representative Brendan F. Boyle of Pennsylvania, the top Democrat on the Budget Committee, said in a recent interview. But he warned that “it is really hard to do.”“Basically, in real time it works out to about two-and-a-half to three months,” said Mr. Boyle, who in the coming weeks plans to introduce legislation overhauling the debt limit process, allowing the president to raise it unless overridden by Congress. That measure could conceivably provide a basis for a discharge petition, as could other bills.Yet Democratic leaders in the House and Senate have been publicly resistant to the idea so far, mainly because they want to keep pressure on Republicans to raise the debt ceiling without conditions, as they did several times during the Trump administration without any upheaval.Mr. McCarthy and other Republican leaders insist they will raise the cap only if Mr. Biden and Democrats agree to spending cuts and other conditions — a demand that they have so far refused.Representative Hakeem Jeffries of New York, the Democratic leader, has steered clear of discharge petition discussions. Senator Chuck Schumer, Democrat of New York and the majority leader, said recently that he had no problem with readying a discharge petition but that he anticipates it will not be necessary because Democrats are succeeding in their push to box in Republicans on the issue, forcing a resolution.Other Democrats privately worry that embracing a discharge petition could backfire politically next year, allowing Republicans to paint them as employing a legislative trick to raise the debt limit over the objections of most Republicans.The concept of a discharge petition originated in the early 20th century as a way to circumvent the powerful Republican speaker at the time, Joseph Cannon. The rules have been revised multiple times, including in 1993, to make public a running tally of those who have signed.While petitions are not often successful, the prospect of one gaining enough support has forced action on major issues such as civil rights, immigration and gun rights.While Democrats have held back on initiating a petition, the possibility of one has helped calm nerves on Wall Street as bankers survey the potential outcomes of the debt limit struggle.Many economists at banks and consultancies acknowledged from the start that it was a long shot; Deutsche Bank pointed out that it was “rarely used,” and Morgan Stanley warned that it “may not be viable.”Still, it was regularly painted as an avenue out of the crisis, if an unlikely one: A discharge petition was “hardly a panacea, but it is in play,” Chris Krueger at the research group TD Cowen wrote in a research note in early January.But the possibility that it could be at all practical as a workaround is rapidly waning.“I’ve never thought the discharge petition was nearly as elegant a solution as made out by some,” Mr. Krueger said in an interview. He said he thought at this stage Congress would let negotiations get down to the wire and come to an agreement only when backlash in the news media or the financial markets became severe.“I don’t think we get into technical default scenarios,” he said, “but I think it’s going to get very uncomfortable.”Mr. Boyle said the real solution was not a discharge petition but the plan that he and other Democrats supported to remove the regular clashes over the debt limit from the congressional arena.“We have to structurally change this once and for all, because this is too dangerous a weapon to keep alive in our political system,” he said.“The future of the Republican Party is more Marjorie Taylor Greene than Mitt Romney,” Mr. Boyle added, naming the far-right congresswoman from Georgia and the more mainstream senator from Utah. “And so if we don’t permanently fix this process now, we’re going to be right back in this in a couple of years — and it might even be worse.” More

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    Job growth totals 236,000 in March, near expectations as hiring pace slows

    Nonfarm payrolls grew by 236,000 for March, compared to the Dow Jones estimate for 238,000 and below the upwardly revised 326,000 in February.
    The unemployment rate ticked lower to 3.5% amid an increase in labor force participation, against expectations that it would hold at 3.6%
    Average hourly earnings rose 0.3%, pushing the 12-month increase to 4.2%, the lowest level since June 2021.
    The unemployment rate for Blacks tumbled 0.7 percentage points to a record low 5%.

    Nonfarm payrolls rose about in line with expectations in March as the labor market showed increased signs of slowing.
    The Labor Department reported Friday that payrolls grew by 236,000 for the month, compared to the Dow Jones estimate for 238,000 and below the upwardly revised 326,000 in February.

    The unemployment rate ticked lower to 3.5%, against expectations that it would hold at 3.6%, with the decrease coming as labor force participation increased to its highest level since before the Covid pandemic.

    Though it was close to what economists had expected, the total was the lowest monthly gain since December 2020 and comes amid efforts from the Federal Reserve to slow labor demand in order to cool inflation.
    Along with the payroll gains came a 0.3% increase in average hourly earnings, pushing the 12-month increase to 4.2%, the lowest level since June 2021. The average work week edged lower to 34.4 hours.
    “Everything is moving in the right direction,” said Julia Pollak, chief economist for ZipRecruiter. “I have never seen a report align with expectations as much today’s over the last two years.”
    Though the stock market is closed for Good Friday, futures rose following the report. Treasury yields also moved higher.

    Leisure and hospitality led sectors with growth of 72,000 jobs, below the 95,000 pace of the past six months. Government (47,000), professional and business services (39,000) and health care (34,000) also posted solid increases. Retail saw a loss of 15,000 positions.
    While the February report was revised up from its initially reported 311,000, January’s number moved lower to 472,000, a reduction of 32,000 from the last estimate.

    An alternative measure of unemployment that includes discouraged workers and those holding part-time jobs for economic reasons edged lower to 6.7%. The household survey, which is used to calculate the unemployment rate, was much stronger than the establishment survey, showing growth of 577,000 jobs.
    The unemployment rate for Blacks tumbled 0.7 percentage points to a record low 5%, according to data going back to 1972.
    The report comes amid a bevy of signs that job creation is on wane.
    In separate reports this week, companies reported that layoffs surged in March, up nearly 400% from a year ago, while jobless claims were elevated and private payroll growth also appeared to slow. The Labor Department also had reported that job openings fell below 10 million in February for the first time in nearly two years.
    That all has followed a year-long Fed campaign to loosen up what had been a historically tight labor market. The central bank has boosted its benchmark borrowing rate by 4.75 percentage points, the quickest tightening cycle since the early 1980s and an effort to bring down spiraling inflation.
    The job gains come during a month in which the failure of Silicon Valley Bank and Signature Bank rocked the financial world. Economists expect the banking troubles to have repercussions in coming months.
    “The March data effectively are a look back into the pre-SVB world; the payroll survey was conducted the week after the bank failed, far too soon for employers to have responded. But the hit from tighter credit conditions is coming,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics.
    Several Fed officials said this week they remain committed to the inflation fight and see interest rates staying elevated at least in the near term. Market pricing shifted following Friday’s report, with traders now expecting the Fed to implement one last quarter percentage point hike in May.
    “This is great news for the Federal Reserve. They don’t have any concerns for the labor market when they make the next decision,” Pollak said. “Today’s report is just a checkmark for them.”
    Investors worry, though, that the Fed move are likely to result in at least a shallow recession, something the bond market has been pointing to since mid-2022.
    In its most recent calculation, through the end of March, the New York Fed said the spread between 3-month and 10-year Treasurys are indicating about a 58% probability of recession in the next 12 months. The Atlanta Fed’s GDP tracker is indicating growth of just 1.5% in the first quarter, after pointing to a gain of as much as 3.5% just two weeks ago. More

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    How AI and DNA Are Unlocking the Mysteries of Global Supply Chains

    At a cotton gin in the San Joaquin Valley, in California, a boxy machine helps to spray a fine mist containing billions of molecules of DNA onto freshly cleaned Pima cotton.That DNA will act as a kind of minuscule bar code, nestling amid the puffy fibers as they are shuttled to factories in India. There, the cotton will be spun into yarn and woven into bedsheets, before landing on the shelves of Costco stores in the United States. At any time, Costco can test for the DNA’s presence to ensure that its American-grown cotton hasn’t been replaced with cheaper materials — like cotton from the Xinjiang region of China, which is banned in the United States because of its ties to forced labor.Amid growing concern about opacity and abuses in global supply chains, companies and government officials are increasingly turning to technologies like DNA tracking, artificial intelligence and blockchains to try to trace raw materials from the source to the store.Companies in the United States are now subject to new rules that require firms to prove their goods are made without forced labor, or face having them seized at the border. U.S. customs officials said in March that they had already detained nearly a billion dollars’ worth of shipments coming into the United States that were suspected of having some ties to Xinjiang. Products from the region have been banned since last June.Customers are also demanding proof that expensive, high-end products — like conflict-free diamonds, organic cotton, sushi-grade tuna or Manuka honey — are genuine, and produced in ethically and environmentally sustainable ways.That has forced a new reality on companies that have long relied on a tangle of global factories to source their goods. More than ever before, companies must be able to explain where their products really come from.A technician at Applied DNA Sciences testing samples to trace the raw materials.Johnny Milano for The New York TimesCotton samples that are being processed at the lab.Johnny Milano for The New York TimesThe task may seem straightforward, but it can be surprisingly tricky. That’s because the international supply chains that companies have built in recent decades to cut costs and diversify their product offerings have grown astonishingly complex. Since 2000, the value of intermediate goods used to make products that are traded internationally has tripled, driven partly by China’s booming factories.A large, multinational company may buy parts, materials or services from thousands of suppliers around the world. One of the largest such companies, Procter & Gamble, which owns brands like Tide, Crest and Pampers, has nearly 50,000 direct suppliers. Each of those suppliers may, in turn, rely on hundreds of other companies for the parts used to make its product — and so on, for many levels up the supply chain.To make a pair of jeans, for example, various companies must farm and clean cotton, spin it into thread, dye it, weave it into fabric, cut the fabric into patterns and stitch the jeans together. Other webs of companies mine, smelt or process the brass, nickel or aluminum that is crafted into the zipper, or make the chemicals that are used to manufacture synthetic indigo dye.“Supply chains are like a bowl of spaghetti,” said James McGregor, the chairman of the greater China region for APCO Worldwide, an advisory firm. “They get mixed all over. You don’t know where that stuff comes from.”Harvesting cotton in Xinjiang. Cotton from the region in China is banned in the United States because of its ties to forced labor.Getty ImagesGiven these challenges, some companies are turning to alternative methods, not all proven, to try to inspect their supply chains.Some companies — like the one that sprays the DNA mist onto cotton, Applied DNA Sciences — are using scientific processes to tag or test a physical attribute of the good itself, to figure out where it has traveled on its path from factories to consumer.Applied DNA has used its synthetic DNA tags, each just a billionth of the size of a grain of sugar, to track microcircuits produced for the Department of Defense, trace cannabis supply chains to ensure the product’s purity and even to mist robbers in Sweden who attempted to steal cash from A.T.M.s, leading to multiple arrests.MeiLin Wan, the vice president for textiles at Applied DNA, said the new regulations were creating a “tipping point for real transparency.”“There definitely is a lot more interest,” she added.The cotton industry was one of the earliest adopters of tracing technologies, in part because of previous transgressions. In the mid-2010s, Target, Walmart and Bed Bath & Beyond faced expensive product recalls or lawsuits after the “Egyptian cotton” sheets they sold turned out to have been made with cotton from elsewhere. A New York Times investigation last year documented that the “organic cotton” industry was also rife with fraud.In addition to the DNA mist it applies as a marker, Applied DNA can figure out where cotton comes from by sequencing the DNA of the cotton itself, or analyzing its isotopes, which are variations in the carbon, oxygen and hydrogen atoms in the cotton. Differences in rainfall, latitude, temperature and soil conditions mean these atoms vary slightly across regions of the world, allowing researchers to map where the cotton in a pair of socks or bath towel has come from.Other companies are turning to digital technology to map supply chains, by creating and analyzing complex databases of corporate ownership and trade.Farmers in India auction their cotton.Saumya Khandelwal for The New York TimesSome firms, for example, are using blockchain technology to create a digital token for every product that a factory produces. As that product — a can of caviar, say, or a batch of coffee — moves through the supply chain, its digital twin gets encoded with information about how it has been transported and processed, providing a transparent log for companies and consumers.Other companies are using databases or artificial intelligence to comb through vast supplier networks for distant links to banned entities, or to detect unusual trade patterns that indicate fraud — investigations that could take years to carry out without computing power.Sayari, a corporate risk intelligence provider that has developed a platform combining data from billions of public records issued globally, is one of those companies. The service is now used by U.S. customs agents as well as private companies. On a recent Tuesday, Jessica Abell, the vice president of solutions at Sayari, ran the supplier list of a major U.S. retailer through the platform and watched as dozens of tiny red flags appeared next to the names of distant companies.“We’re flagging not only the Chinese companies that are in Xinjiang, but then we’re also automatically exploring their commercial networks and flagging the companies that are directly connected to it,” Ms. Abell said. It is up to the companies to decide what, if anything, to do about their exposure.Studies have found that most companies have surprisingly little visibility into the upper reaches of their supply chains, because they lack either the resources or the incentives to investigate. In a 2022 survey by McKinsey & Company, 45 percent of respondents said they had no visibility at all into their supply chain beyond their immediate suppliers.But staying in the dark is no longer feasible for companies, particularly those in the United States, after the congressionally imposed ban on importing products from Xinjiang — where 100,000 ethnic minorities are presumed by the U.S. government to be working in conditions of forced labor — went into effect last year.Uyghur workers at a garment factory in the Xinjiang region of China in 2019.Gilles Sabrie for The New York TimesXinjiang’s links to certain products are already well known. Experts have estimated that roughly one in five cotton garments sold globally contains cotton or yarn from Xinjiang. The region is also responsible for more than 40 percent of the world’s polysilicon, which is used in solar panels, and a quarter of its tomato paste.But other industries, like cars, vinyl flooring and aluminum, also appear to have connections to suppliers in the region and are coming under more scrutiny from regulators.Having a full picture of their supply chains can offer companies other benefits, like helping them recall faulty products or reduce costs. The information is increasingly needed to estimate how much carbon dioxide is actually emitted in the production of a good, or to satisfy other government rules that require products to be sourced from particular places — such as the Biden administration’s new rules on electric vehicle tax credits.Executives at these technology companies say they envision a future, perhaps within the next decade, in which most supply chains are fully traceable, an outgrowth of both tougher government regulations and the wider adoption of technologies.“It’s eminently doable,” said Leonardo Bonanni, the chief executive of Sourcemap, which has helped companies like the chocolate maker Mars map out their supply chains. “If you want access to the U.S. market for your goods, it’s a small price to pay, frankly.”Others express skepticism about the limitations of these technologies, including their cost. While Applied DNA’s technology, for example, adds only 5 to 7 cents to the price of a finished piece of apparel, that may be significant for retailers competing on thin margins.And some express concerns about accuracy, including, for example, databases that may flag companies incorrectly. Investigators still need to be on the ground locally, they say, speaking with workers and remaining alert for signs of forced or child labor that may not show up in digital records.Justin Dillon, the chief executive of FRDM, a nonprofit organization dedicated to ending forced labor, said there was “a lot of angst, a lot of confusion” among companies trying to satisfy the government’s new requirements.Importers are “looking for boxes to check,” he said. “And transparency in supply chains is as much an art as it is a science. It’s kind of never done.” More

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    Wages May Not Be Inflation’s Cause, but They’re the Focus of the Cure

    While fear of a “wage-price spiral” has eased, the Federal Reserve’s course presumes job losses and risks a recession. Some see less painful remedies.As Covid-19 eased its debilitating grip on the U.S. economy two years ago, businesses scrambled to hire. That lifted the pay of the average worker. But as one economic challenge ended, another potential problem emerged.Many economic analysts feared that a wage-price spiral was forming, with employers trying to recover the higher labor costs by increasing prices, and workers in turn continually ratcheting up their pay to make up for inflation’s erosion of their buying power.As wages and prices have risen at the fastest pace in decades, however, it has not been an evenly matched back and forth. Inflation has outstripped wage growth for 22 consecutive months, as calculated by economists at J.P. Morgan.That has prompted economists to debate how much, if at all, pay has driven the current bout of inflation. As recently as November, the Federal Reserve chair, Jerome H. Powell, said at a news conference, “I don’t think wages are the principal story for why prices are going up.”At the same time, influential voices on Wall Street and in Washington are arguing over whether workers’ earnings growth — which, on average, has already slowed — will need to let up further if inflation is to ease to a rate that policymakers find tolerable.Wage growth has not kept up with inflationYear-over-year percentage change in earnings vs. inflation through February More

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    I.R.S. Unveils $80 Billion Plan to Overhaul Tax Collection

    The 10-year strategy document outlines a focus on improving customer service and cracking down on tax evasion by corporations and the wealthy.WASHINGTON — The Internal Revenue Service on Thursday unveiled an $80 billion plan to transform itself into a “digital first” tax collector focused on customer service and cracking down on wealthy tax evaders. The move lays the groundwork for an ambitious 10-year overhaul of one of the most scrutinized arms of the federal government.The effort is a key part of President Biden’s economic agenda, which aims to reduce the nation’s $7 trillion of uncollected tax revenue and use the funds to combat climate change, curb prescription drug prices and pay for other initiatives prized by Democrats.The plan is also at the heart of the White House’s goal of making tax administration fairer. The report indicates that more than half the new money will be dedicated to ensuring that rich investors and large corporations cannot avoid paying the taxes that they owe.The $80 billion is the largest single infusion of funds in the agency’s history and was included in the Inflation Reduction Act, the sweeping climate and energy legislation that Democrats pushed through last year.According to the Biden administration, the investment will yield hundreds of billions of dollars in deficit reduction. But efforts to bolster the I.R.S. have drawn strong opposition from Republicans, who have long accused the agency of improperly targeting them.The report released Thursday was requested by Treasury Secretary Janet L. Yellen, whose department oversees the tax agency.In a memorandum to Ms. Yellen that accompanied the report, Daniel I. Werfel, the new I.R.S. commissioner, said he would focus new enforcement resources on “hiring the accountants, attorneys and data scientists needed to pursue high-income and high-wealth individuals, complex partnerships and large corporations that are not paying the taxes they owe.”Daniel I. Werfel, the new I.R.S. commissioner, said the agency’s staff expansion would aim to improve its ability to collect unpaid taxes from the wealthy and big corporations.Shuran Huang for The New York TimesThe I.R.S. has about 80,000 full-time employees, about 20 percent fewer than it had in 2010 even though the U.S. population is now larger and the tax system more complex. The agency’s resources have also declined over the years, as Republicans have sought to cut its funding and, in some cases, called for its abolition. The financial strain has led to backlogs of tax filings, delayed refunds, long waits for taxpayers who call the agency with questions and plunging audit rates.In recent months, the I.R.S. has ramped up hiring to improve its customer service capacity and has been racing to complete the processing of old tax returns, most of which were filed on paper rather than electronically.The plan released on Thursday details how the I.R.S. intends to become a “digital first” organization that provides “world class” service to taxpayers. That includes the replacement of antiquated technology and the introduction of systems that will allow taxpayers greater access to their financial information, easier communication with the I.R.S. and new ways to correct errors as returns are being filed.The most sweeping and politically sensitive changes involve enforcement. The I.R.S. plans to introduce more data analytics and machine-learning technology to better detect cheating, and it aims to bolster its teams of revenue agents and tax attorneys so that the agency is not overwhelmed when auditing complicated business partnerships or corporations.The I.R.S. plan repeatedly emphasizes that it will honor Ms. Yellen’s directive that the new money not be aimed at increasing audit rates for taxpayers who earn less than $400,000 a year — a pledge meant to align with Mr. Biden’s promise not to raise taxes on low- and middle-income Americans. The plan echoes Ms. Yellen’s assurance that those audit rates will not rise above “historical levels,” but does not specify the levels, suggesting that audit rates could rise above their existing levels.In a briefing for reporters on Thursday, however, Mr. Werfel said that in the near term, audit rates for those making less than $400,000 would not rise.“We have years of work ahead of us, where we will be 100 percent focused on building capacity for higher-income individuals and corporations,” he said.But Janet Holtzblatt, a senior fellow at the Urban-Brookings Tax Policy Center, said it would be a challenge for the I.R.S. to determine whether taxpayers reporting an income under $400,000 were doing so legitimately, without being able to audit some of them initially. Ultimately, she said, the agency will need to decide on an acceptable audit rate for people under that income level.Mr. Werfel acknowledged that the I.R.S. would have to be alert in instances when taxpayers earn, for example, $5 million in a given year and $399,000 a year later.“We might take a second look at that,” he said.The plan lays out benchmarks for many of its goals, but it leaves unanswered questions.The I.R.S. is in the midst of a $15 million study to determine if it can create its own system enabling more taxpayers to file their federal returns online at no cost. This idea has met resistance from lobbying groups representing the tax preparation industry.The agency has faced criticism this year after the publication of a study that showed Black taxpayers are at least three times as likely as other taxpayers to face I.R.S. audits, even after the study accounted for the differences in the types of returns that each group is most likely to file. The plan includes using data to support “equity analyses” and says a key project will be developing procedures to evaluate the fairness of I.R.S. systems.The Treasury Department said earlier that the investment in the I.R.S. would lead to the hiring of 87,000 employees over 10 years, and has suggested that with anticipated attrition its head count could top 110,000 by the end of the decade. But the operating plan does not give an estimate for the agency’s eventual head count, and Wally Adeyemo, the deputy Treasury secretary, said on Thursday that I.R.S. did not want to be “locked in” to long-term hiring requirements before learning how new technology would affect its staffing needs.Mr. Werfel batted down claims by Republican lawmakers that the I.R.S. would be hiring thousands of armed “agents” to scrutinize middle-class taxpayers and small businesses. He said that only 3 percent of the I.R.S. work force was in the criminal investigations division, which has access to weapons, and that there were no plans to increase that percentage. The plan projects that the I.R.S. will hire more than 7,000 new enforcement employees over the next two years.Despite efforts to focus on technology and taxpayers services, the plan is likely to stoke criticism.Erin M. Collins, the national taxpayer advocate, wrote in a blog post on Thursday that the plan had the potential to transform tax administration but that the money was disproportionately invested in enforcement.“I believe Congress should reallocate I.R.S. funding to achieve a better balance with taxpayer service needs and IT modernization,” Ms. Collins, who serves as a watchdog for the I.R.S., wrote.The report notes that if the agency’s annual funding is curtailed over the coming years, some of the $80 billion might be needed to maintain its basic operations. That would force the I.R.S. to scale back its overhaul.House Republicans in January voted to pare the allocation, and Republican reaction to the report on Thursday indicated that the political fight over the I.R.S. will only intensify.“The Democrats are further weaponizing the most-feared agency in all of the federal government: the IRS,” Representative Mike Kelly, Republican of Pennsylvania and a member of the House Ways and Means Committee, said on Twitter. “Make no mistake — we are using money from hardworking American taxpayers to go after hardworking American taxpayers.”Former Gov. Nikki Haley of South Carolina, a candidate for the Republican presidential nomination, said on Twitter, “Does anyone believe the IRS won’t go after middle America?” More

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    Layoffs are up nearly fivefold so far this year with tech companies leading the way

    Planned layoffs totaled 89,703 for the period, an increase of 15% from February, according to Challenger, Gray & Christmas.
    Job cuts have soared to 270,416 so far in 2023, an increase of 396% from the same period a year ago.
    The damage was especially bad in tech, which announced has announced 102,391 cuts so far in 2023. That’s a staggering increase of 38,487% from a year ago.

    Google headquarters in Mountain View, California, US, on Monday, Jan. 30, 2023. Alphabet Inc. is expected to release earnings figures on February 2.
    Marlena Sloss | Bloomberg | Getty Images

    Companies announced nearly 90,000 layoffs in March, a sharp step up from the previous month and a giant acceleration from a year ago, outplacement firm Challenger, Gray & Christmas reported Thursday.
    Planned layoffs totaled 89,703 for the period, an increase of 15% from February. Year to date, job cuts have soared to 270,416, an increase of 396% from the same period a year ago.

    The damage was especially bad in tech, which has announced 102,391 cuts so far in 2023. That’s a staggering increase of 38,487% from a year ago and good for 38% of all staff reductions. Tech already has cut 5% more than for all of 2022, according to the report, and is on pace to eclipse 2001, the worst year ever amid the dotcom bust.
    “We know companies are approaching 2023 with caution, though the economy is still creating jobs,” said Andrew Challenger, senior vice president of Challenger, Gray & Christmas. “With rate hikes continuing and companies’ reigning in costs, the large-scale layoffs we are seeing will likely continue.”

    In other jobs news Thursday, weekly jobless claims totaled 228,000 for the week ended April 1, higher than the 200,000 Dow Jones estimate, the Labor Department reported. Continuing claims nudged higher to 1.823 million, the highest since December 2021.
    Benchmark revisions from the department indicate that claims have been above 200,000 for virtually the entire period going back to late-October 2022.
    Financial companies have announced the second-highest rate of cuts this year, with the 30,635 layoffs representing a 419% increase from the first quarter in 2022. Health care and retail are the next highest.

    At the same time, planned hiring waned in March, totaling just 9,044, or the worst for the month since 2015. On a year-to-date basis, planned additions are at the lowest quarterly total since 2016.
    The main reason cited for job cuts has been market and economic conditions, with cost-cutting the next most-often mentioned factor.
    The Challenger report comes a day ahead of the Labor Department’s nonfarm payrolls count. Economists surveyed by Dow Jones expect job growth of 238,000 for March, which would be the smallest increase since January 2020.
    Along with the high level of layoffs, job openings have begun to fall.
    Available positions in February declined below 10 million for the first time since May 2021, indicating at least some loosening in the jobs market, according to Labor Department data released Tuesday. The pace of hiring edged lower by 164,000, though layoffs and discharges were down by 215,000.
    In all, there were still nearly 1.7 job openings per available workers.
    The Federal Reserve has been targeting the ultra-tight labor market as it battles inflation still running near 40-year highs. The Fed has increased its benchmark borrowing rate by 4.75 percentage points over the past year or so as it seeks to soften the demand that has propelled rising prices.
    Markets currently are expecting that the Fed is done raising rates and is likely to start cutting later this year, according to the CME Groups FedWatch tool, which tracks pricing in the futures market. More

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    IMF says U.S-China tensions could cost the world about 2% of its output

    The most notable push for “friend-shoring,” the IMF says in its report, is seen in the series of recent bills adopted against the backdrop of rising tensions between the U.S. and China.
    The IMF warns emerging markets are more vulnerable to the shift in foreign investment stemming from geopolitical divides as “they rely more on flows from more geopolitically distant countries.”

    WASHINGTON D.C., UNITED STATES – DECEMBER 26: The International Monetary Fund (IMF) building is seen in Washington D.C., United States on December 26, 2022. (Photo by Celal Gunes/Anadolu Agency via Getty Images)
    Anadolu Agency | Anadolu Agency | Getty Images

    The International Monetary Fund said in a Wednesday report that global tensions could disrupt overseas investment and eventually lead to a long-term loss of 2% of the world’s gross domestic product.
    Companies and policymakers across the globe are exploring ways to make their supply chains more resilient by “moving production home or to trusted countries,” the IMF warned in its report, adding that this will lead to fragmenting foreign direct investment.

    The IMF pointed to recent bills adopted against the backdrop of rising tensions between the U.S. and China, such as Washington’s Chips and Science Act. Japan recently imposed its own restrictions on 23 types of semiconductor manufacturing equipment, joining U.S. efforts to curb China’s ability to make advanced chips.
    A recent survey conducted by the American Chamber of Commerce in China similarly showed a shift of foreign direct investment away from China. Less than half of its respondents ranked China as a top three investment priority for the first time in 25 years.

    Read more about China from CNBC Pro

    IMF economists said that money is now flowing into what are considered “geopolitically close countries.” The rise of “friend-shoring” could hurt less developed markets the most, the organization said.
    “Emerging market and developing economies are particularly affected by reduced access to investment from advanced economies, due to reduced capital formation and productivity gains from the transfer of better technologies and know-how,” IMF economists including Jae-bin Ahn wrote in the report.
    This comes as tensions increase between China and the United States. After a recent meeting between U.S. House Speaker Kevin McCarthy and Taiwanese President Tsai Ing-wen in California, Beijing made veiled threats, pledging to take “resolute actions” in response to the “provocation.”

    Tsai Ing-wen, Taiwan’s president, left, and US House Speaker Kevin McCarthy, a Republican from California, during an event at the Ronald Reagan Presidential Library in Simi Valley, California, US, on Wednesday, April 5, 2023.
    Bloomberg | Bloomberg | Getty Images

    The IMF economists added that developing economies are more vulnerable to this shift in foreign direct investment as “they rely more on flows from more geopolitically distant countries.”
    Even if more powerful countries reap the benefits they seek through heightened tensions, those gains could be partially offset due to spillover from weaker external demand, IMF warns.
    “A fragmented world is likely to be a poorer one,” the IMF economists wrote.

    Vulnerable to shocks

    IMF argues that while “reconfigured” supply chains according to geopolitical alliances may benefit a country’s national security interests and secure an upper hand against competitors, there are also consequences.
    “Friend-shoring to existing partners will often reduce diversification and make countries more vulnerable to macroeconomic shocks,” IMF economists wrote in a note. The organization argued for more supply diversification in global trade a year ago, saying that a “more diversified global value chains could help lessen the impact of future shocks.

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    The organization revisited that argument, saying that even for developed economies, overseas firms ramping up competition “spurs domestic enterprises to be more productive.”
    It warned that policy uncertainty should be minimized, as it “amplifies losses from fragmentation.”
    “In a fragmented world with heightened geopolitical tensions, investors may worry that nonaligned economies will be forced to choose one bloc or the other in the future, and such uncertainty could intensify losses,” IMF wrote. More

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    In Ohio, Electric Cars Are Starting to Reshape Jobs and Companies

    Erick Belmer has seen how tough the car business can be. He was working at a General Motors plant in Lordstown, Ohio, when it shut down in 2019, devastating the community.Mr. Belmer, an industrial mechanic, got another job at a G.M. transmission factory in Toledo, but his commute is now 140 miles each way. His schedule gives him just a few hours with his family and a few hours of sleep.Yet far from being bitter, Mr. Belmer says he is excited. G.M. is converting his factory to produce electric motors, part of an industrial transformation that will redefine manufacturing regions and jobs around the world.G.M., Ford Motor and other carmakers announced investments of more than $50 billion in new factories in the United States last year, according to the Center for Automotive Research in Ann Arbor, Mich. All but a small fraction of that money was to build and retool plants for electric vehicles and batteries.Mr. Belmer is one of thousands of people who will also have to pick up new skills. “It’s going to be a little bit of a learning curve,” he said at the Toledo factory. “But our guys are well equipped to handle this.”Mr. Belmer and Ohio are bellwethers of how the transition to electric vehicles will play out. G.M., Jeep, Honda Motor and parts makers employ many thousands of people across this state.Gas transmissions at G.M.’s plant in Toledo. G.M. has committed to retraining the workers there to make electric motors, and to investing $760 million to convert the plant’s assembly lines.Ohio’s experience may signal how the transition to electric vehicles will play out for workers.An electric drive unit on display at the G.M. plant.Ohio produces more internal combustion engines than any other state, making an adjustment to electric cars particularly urgent. Nearly 90,000 people work in Ohio for carmakers or parts suppliers, and several times that many are employed by businesses that serve those autoworkers and their families.The changes are putting Ohio at the forefront of a new technology that is critical to fighting climate change. But some jobs will become obsolete, and some companies will go bankrupt. It’s an open question whether the winners will outnumber the losers.“This is the largest transition in our industry since its inception,” said Tony Totty, the president of a United Auto Workers local that represents G.M. workers in Toledo.Mr. Totty is optimistic about the members of his local. But he is worried about other colleagues whose jobs are tied to gasoline engines, he said.There is “an expiration date on those facilities and those communities,” Mr. Totty said.Warren, in eastern Ohio, knows what happens when a carmaker leaves town. The city lost one-third of its population, about 20,000 people, after G.M. closed the factory in nearby Lordstown, which produced Chevrolet Cruze sedans, in 2019. Sales of that car had been fading as more Americans chose sport utility vehicles.Even before that shutdown, auto production jobs had been declining. U.S. automakers and their parts suppliers employed about one million people at the end of 2018, down from more than 1.3 million in 2000. In the years before G.M. closed the Lordstown plant, it had reduced shifts and pared its work force.“Our biggest export for the last 20 years has been talented young people,” said Rick Stockburger, the president of Brite Energy Innovators, an organization in Warren that offers work space, advice and funding to start-ups.Today, things are looking somewhat better. Ultium Cells, a joint venture of G.M. and LG Energy Solution, is ramping up production of batteries near the defunct factory.Tony Totty, the president of the United Auto Workers local that represents G.M.’s workers in Toledo, said the current moment represented “the largest transition in our industry since its inception.”Foxconn, a Taiwanese manufacturer, has taken over the old G.M. plant and plans to produce electric vehicles and tractors there. The complex will also house an “electric vehicle academy” established by Foxconn and Youngstown State University to train workers.That surge in investment is helping to revive Warren’s tidy but sleepy downtown. Doug Franklin, the mayor, who worked for G.M. in Lordstown, said he was pleased recently to step into a local restaurant where “nobody knew me, because we had so many new people.”Mr. Franklin represents the optimistic view — that an industrial renaissance is underway. The pandemic and the supply chain chaos that it caused have made companies leery of components produced far away. That experience, plus billions in federal subsidies approved by Democrats last year, motivated manufacturers to build vehicles, batteries and other components in the United States.“We’re seeing a new level of hope that I haven’t seen in decades,” Mr. Franklin said.But community leaders in Warren are also aware that the transition comes with risks.Hopes that the old plant will become a buzzing electric vehicle factory have not panned out, so far. G.M. sold the factory to Lordstown Motors, a fledgling electric pickup truck company that ran into trouble and resold the plant to Foxconn.Executives at Foxconn, which has long assembled electronic devices but has little experience making cars, declined interview requests. It’s not clear when the company will mass-produce electric vehicles in Lordstown, if ever.The Rev. Todd Johnson, the pastor of the Second Baptist Church in Warren and a member of the City Council, worries that his mostly African American parishioners won’t benefit from the new jobs.Mr. Johnson, whose parents worked for G.M., encourages young people to study subjects like robotics and coding, and has led after-church trips to a science and technology center in nearby Youngstown.“There are going to be opportunities coming,” he said, “and I desperately don’t want to see the next generation of our children miss out.”One pressing question is what will happen to people whose skills are no longer needed.Eric Gonzales, the executive director of G.M.’s Toledo factory, says the plant will need at least as many workers as it has today, as it replaces its gasoline models with electric ones.G.M. is dealing with that issue at the Toledo factory, Toledo Propulsion Systems, which makes transmissions that electric cars won’t need. The automaker has committed to retraining the Toledo workers to make electric motors, and to investing $760 million to convert assembly lines at the plant.If anything, G.M. will need more workers, said Eric Gonzales, the executive director of the factory, as it replaces gasoline models with electric cars. “We’re taking the employees with us.”The G.M. factory in Toledo will show whether established automakers can compete with Tesla, the fast-growing automaker that can focus all of its resources on electric vehicles because that’s all it makes. Established carmakers need to keep earning money from internal combustion vehicles while ramping up a new technology that is not yet profitable.G.M. has an advantage, Mr. Gonzales said, because it has factories equipped with sprinkler systems, high-voltage power and other essentials. “We already have the four walls here with the infrastructure,” he said, speaking above the din of clanking machinery. “Somebody new, they have very expensive capital costs.”Other auto executives prefer to start fresh. Volkswagen’s new Scout Motors unit looked at sites in Ohio and other states to produce electric pickup trucks and S.U.V.s, but chose to build a $2 billion factory in South Carolina.It’s cheaper and easier to build from scratch, said Scott Keogh, the chief executive of Scout. “You’re not juggling this classic dynamic of a legacy internal combustion engine plant where you need to inject a new electric vehicle,” he said.Workers placing batteries in hybrid vehicles at the Honda plant in Marysville, Ohio.Ohio is in intense competition with other states to attract investment. But Midwestern states, including Michigan, Indiana and Illinois, have been less successful than states in the South where Republican political leaders have courted investment aggressively — even as they denounce the Democratic policies that helped create the boom.Since 2020, automakers have announced investments of $51 billion in electric vehicle and battery production in the South, compared with $31 billion in states in the Great Lakes region, according to the Center for Automotive Research.Southern states tend to have lower labor costs, in part because most auto plants there are not unionized. This could pose a problem for the United Auto Workers and President Biden, who want the switch to electric vehicles to create more high-paying union jobs. It could well be that most of the new electric car and battery jobs will end up in the South, where unions face political opposition, and not in the Midwest, where unions have political clout — and where most of the jobs lost in combustion engine vehicles once were.Ohio has some things going for it. In March, Honda Motor said it would convert one of two assembly lines at its decades-old plant in Marysville, near Columbus, to build electric vehicles. Honda, a Japanese company, is also building a battery factory about an hour away, in Jeffersonville, with LG Energy Solution.In Ohio, Honda employs more than 14,000 people making cars and motors, and the company’s plans will show whether electric vehicles, which require fewer parts than gasoline cars, will create or destroy jobs.Honda’s assembly line of electric-car batteries at its Marysville plant.For the next several years, the transition will probably create jobs as carmakers make both gasoline and electric vehicles. Bob Nelson, the executive vice president of American Honda Motor, noted that, at the moment, there was a shortage of skilled labor. “We’re going to need everybody,” he said in Marysville, where Honda makes Accord sedans.What happens later is less certain. “When you don’t have the complexity that we’re used to, with engines and transmissions and mufflers and radiators and exhaust systems and all those components that aren’t going to be there anymore,” said Bruce Baumhower, the president of a United Auto Workers local that represents employees of auto suppliers in Ohio, “it makes me wonder what’s left.”Dana Incorporated, based in Maumee, near Toledo, is also grappling with that question. Dana’s employees — more than 40,000 of them — make axles, drive shafts and other parts. Electric vehicles need axles but typically do not need long drive shafts because the motors can be placed close to the wheels.James Kamsickas, Dana’s chief executive, has spent time in China and has been struck by the proliferation of electric vehicles there. Recognizing the threat to some of Dana’s products, Mr. Kamsickas acquired several firms with expertise in electric motors and other technology.James Kamsickas, right, Dana’s chief executive, has acquired several firms with expertise in electric motors and other technology.Dana now offers axles with electric motors built in, saving weight and energy, and it has deployed its expertise in gaskets to make equipment for cooling electric-car batteries that G.M. plans to use. Most of Dana’s orders are for products related to electric vehicles.Ohio’s economic future hinges on whether other companies make similar leaps. “You don’t have a choice,” Mr. Kamsickas said. “Sooner or later, you’d be a melting iceberg.” More