Evelyn Reynolds

Months later, some Federal Reserve leaders resumed their market activity, stoking a scandal now engulfing the central bank.On March 23 last year, as the Federal Reserve was taking extraordinary steps to shore up financial markets at the onset of the pandemic, the central bank’s ethics office in Washington sent out a warning.Officials might want to avoid unnecessary trading for a few months as the Fed dived deeper into markets, the Board of Governors’ ethics unit suggested in an email, a message that was passed along to regional bank presidents by their own ethics officers.The guidance came just as the Fed was unveiling a sweeping rescue package aimed at backstopping or rescuing markets, including those for corporate bonds and midsize-business debt. It appears to have been heeded: Most regional presidents and governors of the Fed did not engage in active trading in April, based on their disclosures.But the recommendation, which was confirmed by a person who saw the email, did not go far enough to prevent a trading scandal that is now engulfing the Fed and being leveraged against its chair, Jerome H. Powell, as the White House mulls whether to reappoint him before his leadership term expires early next year.The email could pose further trouble for the Fed, which declined to provide a copy, because it shows that central bank ethics officers — and officials in general — were aware that active trading could look bad when the Fed was taking emergency action to try to save markets and its policymakers had vast access to sensitive information. Despite the early warning, some top officials resumed trading after the most proactive phase of the Fed’s rescue ended, based on financial disclosures and background comments from regional bank spokespeople.Financial disclosures, first reported by The Wall Street Journal, showed that Robert S. Kaplan traded millions of dollars’ worth of individual stocks last year while he was head of the Federal Reserve Bank of Dallas. No dates are provided for those purchases and sales, but a Dallas Fed spokesman has said they did not take place between late March and the end of April.Another Fed official, Eric S. Rosengren, bought and sold securities tied to real estate while running the Federal Reserve Bank of Boston. Such securities are sensitive to Fed policy, and involve a market that Mr. Rosengren himself warned about in public speeches last year. His trading resumed in May, his disclosures show.Both Mr. Kaplan and Mr. Rosengren have since resigned from their positions, with Mr. Kaplan saying he did not want controversy around his transactions to distract from the Fed’s work and Mr. Rosengren citing health issues.Robert S. Kaplan traded millions of dollars’ worth of individual stocks while president of the Federal Reserve Bank of Dallas last year.Richard Drew/Associated PressWhile attention to the Fed’s ethics rules — and trading habits — started with its 12 regional branches, journalists and academics have begun to re-examine previously reported trades by Fed officials who sit on its board in Washington.Richard H. Clarida, the Fed’s vice chair, rebalanced a portfolio toward stocks in late February 2020, just before the Fed signaled that it stood ready to help markets and the economy in the face of the coronavirus pandemic. The timing has raised questions, though the transactions were in line with previous trading he had done. The vice chair has since said he has always acted “honorably and with integrity” while in public office.Mr. Powell also has faced backlash, primarily from progressives who do not want him reappointed, for selling holdings in a popular and broad stock index last October. The Fed was not rolling out new rescue programs at that time, and a spokeswoman has said Mr. Powell sold the holdings to pay for family expenses. Mr. Powell’s critics argue that he should not have made active financial transactions at all last year.As the ethics controversy swells, the Fed has been working to stem the fallout.Mr. Kaplan and Mr. Rosengren announced last month that they would step down, and Mr. Powell has said that “no one is happy” with the situation. He started a review of Fed ethics rules shortly after news of the presidents’ trading broke. He has also asked an independent watchdog to investigate the trades to make sure they complied with ethics rules and the law.But scrutiny has persisted, in part because Mr. Powell is up for reappointment.“It speaks to governance, incentives and general attitude,” said Simon Johnson, an economist at the Massachusetts Institute of Technology who previously wrote a post for Project Syndicate supporting Lael Brainard, a leading contender to replace Mr. Powell.Mr. Johnson, who does not personally know Ms. Brainard, a Fed governor, has been among those flagging Mr. Powell’s transaction to journalists. He has focused on the fact that Mr. Powell sold a stock-based fund while he was in regular contact with the Treasury secretary during an active year for the central bank, and said he thought the trading scandal should factor into the Fed chair’s reappointment chances.“Presumably, someone in the White House will pay attention and look at the details,” Mr. Johnson said.Lael Brainard, a Fed governor, is considered a leading contender to replace Mr. Powell as chair. Cliff Owen/Associated PressMr. Powell’s October transaction and the questions about it highlight that there is no time when Fed chairs can safely sell assets to raise cash should they need it, said Peter Conti-Brown, a professor and Fed historian at the University of Pennsylvania. That reinforces the need to update the Fed’s rules to eliminate any appearance of conflict by taking discretion away from officials, he said.“It’s hard for me to fault him that he did it when he did it,” Mr. Conti-Brown said, later adding that “it would be more a scandal for this trade to end Chair Powell’s career as a central banker.”The board’s March 23 guidance appears to have had some effect, because central bank officials overall conducted little or no active trading during the period last year when they were most active in markets, in March and April.Mr. Powell’s only dated transactions came in September, October and December. Mr. Clarida’s came in February and August. Ms. Brainard did not report any transactions last year.Randal K. Quarles, the Fed’s vice chair for supervision at the time, is shown to have bought a financial stake in a fund in early April; a family trust that his wife has an interest in bought an interest in a fund, which the couple sold before the fund purchased any securities, a Fed spokesperson said. Michelle Bowman, a Fed governor, noted a small sale in mid-April. That came from a retirement fund held in her spouse’s health savings account, and reflected the account’s closing as her husband changed jobs, a Fed spokesman said.At the regional banks, the heads in San Francisco, Minneapolis, Chicago, St. Louis and Kansas City, Mo., noted no disclosures or only college savings plan and retirement contributions last year. John C. Williams, the president of the powerful New York Fed, reported one personal transaction in December.The Fed president in Richmond, Va., reported private equity and bond transactions in July and August, and the Atlanta Fed president helped buy a property in Utah in June. The Cleveland Fed president reported buying index fund shares in February, but then stopped until November.The Philadelphia Fed president made several relatively small transactions throughout April and the year, but a spokeswoman for his bank said the spring trades were not active. They involved an automatic liquidation from a legacy fund that occurs every year, an automatic dividend reinvestment and a bond call.The fact that trading more or less halted last spring is a silver lining, Mr. Conti-Brown said. Regional reserve banks are quasi-private institutions, so it is not unambiguously clear that they must listen to the Board of Governors on such matters.“This tells us that the board’s ability to oversee ethics in the system is there,” he said. “What is missing is a better set of rules.” More

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.23% from 3.18% for loans with a 20% down payment.
The 30-year fixed rate has risen 20 basis points over the past month and is now at the highest level since April.
Applications to refinance a home loan, which are most sensitive to weekly rate changes, decreased 7% for the week and were 22% lower year over year.

Climbing mortgage interest rates caused another drop in mortgage demand for both refinances and home purchases. Total application volume fell 6.3% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.23% from 3.18%, with points decreasing to 0.35 from 0.37 (including the origination fee) for loans with a 20% down payment. That rate was 21 basis points lower the same week one year ago.

The 30-year fixed rate has risen 20 basis points over the past month and is now at the highest level since April.

A sign is posted in front of a home for sale on September 28, 2021 in San Anselmo, California.
Justin Sullivan | Getty Images

Applications to refinance a home loan, which are most sensitive to weekly rate changes, decreased 7% for the week and were 22% lower year over year. The refinance share of mortgage activity fell to 63.3% of total applications from 63.9% the previous week.
“Refinance applications declined for the fourth week as rates increased, bringing the refinance index to its lowest level since July 2021,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.
Mortgage applications to purchase a home dropped 5% for the week and were 12% lower year over year. Higher mortgage rates are now playing a larger role in the purchase market because home prices are so high. Various measures have prices nationally up 18% from a year ago for existing homes. For newly built homes, the median price in August was 20% higher than August 2020, according to the U.S. Census.
Mortgage rates continued their climb higher this week, and the expectation is they will rise more significantly into next year, as the Federal Reserve tapers its purchases of mortgage-backed bonds.
The MBA put out its 2022 forecast earlier this week, predicting a 33% drop in mortgage origination volume, and a 4% average rate on the 30-year. That will mean more competition for lenders in a shrinking business.

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The Occupational Safety and Health Administration said Tuesday that it was taking steps that could strip three states — Arizona, South Carolina and Utah — of their authority to regulate workplace safety, citing shortcomings in policies on coronavirus protection.Under federal law, states can assume responsibility for occupational safety if the government approves their plan for doing so and if the plan remains at least as effective as federal enforcement.Federal officials said Tuesday that the three states had failed to adopt a rule that OSHA issued in June — or to adopt one at least as effective — requiring certain Covid-related safety measures by employers, like providing protective equipment.“OSHA has worked in good faith to help these three state plans come into compliance,” Jim Frederick, the agency’s acting director, said on a call with reporters. “But their continued refusal is a failure to maintain their state plan commitment to thousands of workers in their state.”Emily H. Farr, the director of South Carolina’s Department of Labor, Licensing and Regulation, expressed disappointment in the action, saying that the state’s program had “proven effective as South Carolina has consistently had one of the lowest injury and illness rates in the nation.”Officials in Arizona and Utah did not immediately respond to requests for comment.Twenty-eight states or territories have OSHA-approved plans for enforcing workplace safety. Where no plan has been approved, OSHA retains primary authority.The action comes as OSHA prepares to release a rule mandating that companies with 100 or more workers require employees to be vaccinated or to submit to weekly Covid-19 testing. Some states have indicated that they will challenge the rule, though the legal basis for doing so appears weak.OSHA, which is part of the Labor Department, will publish a notice in the Federal Register announcing its proposal to reconsider and revoke approval of the three states’ self-regulation plans. There will be a 35-day comment period on the proposal before it can be finalized.Seema Nanda, the Labor Department solicitor, said that as a result of the process, the states’ authority to regulate workplace safety could be revoked entirely or partially, such as for certain industries. More

Why New York’s Taxi Drivers Are ProtestingKaren ZraickReporting from New York City HallWhen the bubble burst, many owed much more than the medallions were worth. Families faced financial ruin; several drivers died by suicide. Then the pandemic decimated demand and posed grave health risks to drivers.Members of the New York Taxi Workers Alliance have been protesting at City Hall for a month, calling for help for drivers. The city has proposed a plan to help medallion owners restructure their loans to reduce their debt. But at a rally on Monday, a litany of drivers said it wasn’t enough. More

Despite school reopenings and the end of some federal aid, many people are in no rush to land a job. Savings and health concerns are playing a role.Fall was meant to mark the beginning of the end of the labor shortage that has held back the nation’s economic recovery. Expanded unemployment benefits were ending. Schools were reopening, freeing up many caregivers. Surely, economists and business owners reasoned, a flood of workers would follow.Instead, the labor force shrank in September. There are five million fewer people working than before the pandemic began, and three million fewer even looking for work.The slow return of workers is causing headaches for the Biden administration, which was counting on a strong economic rebound to give momentum to its political agenda. Forecasters were largely blindsided by the problem and don’t know how long it will last.Conservatives have blamed generous unemployment benefits for keeping people at home, but evidence from states that ended the payments early suggests that any impact was small. Progressives say companies could find workers if they paid more, but the shortages aren’t limited to low-wage industries.Instead, economists point to a complex, overlapping web of factors, many of which could be slow to reverse.The health crisis is still making it hard or dangerous for some people to work, while savings built up during the pandemic have made it easier for others to turn down jobs they do not want. Psychology may also play a role: Surveys suggest that the pandemic led many to rethink their priorities, while the glut of open jobs — more than 10 million in August — may be motivating some to hold out for a better offer.The net result is that, arguably for the first time in decades, workers up and down the income ladder have leverage. And they are using it to demand not just higher pay but also flexible hours, more generous benefits and better working conditions. A record 4.3 million people quit their jobs in August, in some cases midshift to take a better-paying position down the street.“It’s like the whole country is in some kind of union renegotiation,” said Betsey Stevenson, a University of Michigan economist who was an adviser to President Barack Obama. “I don’t know who’s going to win in this bargaining that’s going on right now, but right now it seems like workers have the upper hand.”The slow return of workers is causing headaches for the Biden administration, which was counting on a strong economic rebound to give momentum to its political agenda.Kendrick Brinson for The New York TimesRachel Eager spent last fall at home, taking the last class for her bachelor’s degree over Zoom while waiting to be recalled to her job at a New York City after-school program. That call never came.So Ms. Eager, 25, is looking for work. She has applied for dozens of jobs and had a handful of interviews, so far without luck. But she is taking her time. Ms. Eager says she is still worried about catching Covid-19 — she would prefer to work remotely, and if she does end up taking an in-person job, she wants it to be worth the risk. And she doesn’t want another job with low pay, little flexibility and no benefits.“Many, many people are realizing that the way things were prepandemic were not sustainable and not benefiting them,” she said. She has been applying for jobs in data analysis, nonprofit management and other fields that would offer better pay, benefits and a sense of purpose.Ms. Eager, who is vaccinated, said that she had always been careful with money and that she built savings this year by staying home and socking away unemployment benefits and other aid. “My financial situation is OK, and I think that is 99 percent of the reason that I can be choosy about my job prospects,” she said.Americans have saved trillions of dollars since the pandemic began. Much of that wealth is concentrated among high earners, who mostly kept their jobs, reduced spending on dining and vacations, and benefited from a soaring stock market. But many lower-income Americans, too, were able to set aside money thanks to the government’s multitrillion-dollar response to the pandemic, which included not only direct cash assistance but also increased food aid, forbearance on mortgages and student loans and an eviction moratorium. Economists said the extra savings alone aren’t necessarily keeping people out of the labor force. But the cushion is letting people be more picky about the jobs they take, when many have good reasons to be picky.In addition to health concerns, child care issues remain a factor. Most schools have resumed in-person classes, but parents in many districts have had to grapple with quarantines or temporary returns to remote learning. And many parents of younger children are struggling to find day care, in part because that industry is dealing with its own staffing crisis.Liz Kelly-Campanale left her job as a winemaker last year to care for her two children in Portland, Ore. She thought about going back to work when schools resumed in-person instruction this fall. But the Delta variant upended those plans.“If you have an exposure, all of a sudden your kids are out of school for 10 days,” she said. “For people who have jobs where they can work from home, it’s maybe a little more feasible, but I can’t really drive a forklift around the house.”Ms. Kelly-Campanale, 37, said she might go back to work once her children, now 6 and 3, are vaccinated and the pandemic seems under control. But she said the pandemic has led her to rethink her priorities.“So much of how I saw myself was tied up in what I did for a living — it was a huge adjustment to all of a sudden not be doing that all the time,” she said. “But once I made that adjustment, it also became apparent that there were also benefits to having that work-life balance.”Economists worry that if the pandemic leads many people to opt out of the work force, it could have long-term consequences for economic growth. Rising labor force participation, particularly among women, was a major driver of the strong gains in income and production after World War II. Many economists argue that the reversal of that trend in recent decades has hurt economic growth..css-1xzcza9{list-style-type:disc;padding-inline-start:1em;}.css-3btd0c{font-family:nyt-franklin,helvetica,arial,sans-serif;font-size:1rem;line-height:1.375rem;color:#333;margin-bottom:0.78125rem;}@media (min-width:740px){.css-3btd0c{font-size:1.0625rem;line-height:1.5rem;margin-bottom:0.9375rem;}}.css-3btd0c strong{font-weight:600;}.css-3btd0c em{font-style:italic;}.css-1kpebx{margin:0 auto;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}#NYT_BELOW_MAIN_CONTENT_REGION .css-1kpebx{font-family:nyt-cheltenham,georgia,’times new roman’,times,serif;font-weight:700;font-size:1.375rem;line-height:1.625rem;}@media (min-width:740px){#NYT_BELOW_MAIN_CONTENT_REGION .css-1kpebx{font-size:1.6875rem;line-height:1.875rem;}}@media (min-width:740px){.css-1kpebx{font-size:1.25rem;line-height:1.4375rem;}}.css-1gtxqqv{margin-bottom:0;}.css-1g3vlj0{font-family:nyt-franklin,helvetica,arial,sans-serif;font-size:1rem;line-height:1.375rem;color:#333;margin-bottom:0.78125rem;}@media (min-width:740px){.css-1g3vlj0{font-size:1.0625rem;line-height:1.5rem;margin-bottom:0.9375rem;}}.css-1g3vlj0 strong{font-weight:600;}.css-1g3vlj0 em{font-style:italic;}.css-1g3vlj0{margin-bottom:0;margin-top:0.25rem;}.css-19zsuqr{display:block;margin-bottom:0.9375rem;}.css-12vbvwq{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;}@media (min-width:740px){.css-12vbvwq{padding:20px;width:100%;}}.css-12vbvwq:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-12vbvwq{border:none;padding:10px 0 0;border-top:2px solid #121212;}.css-12vbvwq[data-truncated] .css-rdoyk0{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-12vbvwq[data-truncated] .css-eb027h{max-height:300px;overflow:hidden;-webkit-transition:none;transition:none;}.css-12vbvwq[data-truncated] .css-5gimkt:after{content:’See more’;}.css-12vbvwq[data-truncated] .css-6mllg9{opacity:1;}.css-qjk116{margin:0 auto;overflow:hidden;}.css-qjk116 strong{font-weight:700;}.css-qjk116 em{font-style:italic;}.css-qjk116 a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;text-underline-offset:1px;-webkit-text-decoration-thickness:1px;text-decoration-thickness:1px;-webkit-text-decoration-color:#326891;text-decoration-color:#326891;}.css-qjk116 a:visited{color:#326891;-webkit-text-decoration-color:#326891;text-decoration-color:#326891;}.css-qjk116 a:hover{-webkit-text-decoration:none;text-decoration:none;}In the shorter term, many economists think that more people will return to work as pandemic-related issues recede and as people deplete their savings.“Eventually those savings, especially for lower-income people, they’re going to run out,” said Pablo Villanueva, an economist at UBS. “A lot of people are going to be increasingly unable to stay out of work even if they have some fear of Covid.”Some businesses seem determined to wait them out. Wages have risen, but many employers appear reluctant to make other changes to attract workers, like flexible schedules and better benefits. That may be partly because, for all their complaints about a labor shortage, many companies are finding that they can get by with fewer workers, in some instances by asking customers to accept long waits or reduced service.“They’re making a lot of profits in part because they’re saving on labor costs, and the question is how long can that go on,” said Julia Pollak, chief economist for the employment site ZipRecruiter. Eventually, she said, customers may get tired of busing their own tables or sitting on hold for hours, and employers may be forced to give into workers’ demands.Some businesses are already changing how they operate. When Karter Louis opened his latest restaurant this year, he abandoned the industry-standard approach to staffing, with kitchen workers earning low wages and waiters relying on tips. At Soul Slice, his soul-food pizza restaurant in Oakland, Calif., everyone works full time, earns a salary rather than an hourly wage, and receives health insurance, retirement benefits and paid vacation. Hiring still hasn’t been easy, he said, but he isn’t having the staffing problems that other restaurants report.Restaurant owners wondering why they can’t find workers, Mr. Louis said, need to look at the way they treated workers before the pandemic, and also during it, when the industry laid off millions.“The restaurant industry didn’t really have the back of its people,” he said.Still, better pay and benefits alone won’t bring back everyone who has left the job market. The steepest drop in labor force participation came among older workers, who faced the greatest risks from the virus. Some may return to work as the health situation improves, but others have simply retired.And even some nowhere near retirement have made ends meet outside a traditional job.When Danielle Miess, 30, lost her job at a Philadelphia-area travel agency at the start of the pandemic, it was in some ways a blessing. Some time away helped her realize how bad the job had been for her mental health, and for her finances — her bank balance was negative on the day she was laid off. With federally supplemented unemployment benefits providing more than she made on the job, she said, she gained a measure of financial stability.Ms. Miess’s unemployment benefits ran out in September, but she isn’t looking for another office job. Instead, she is cobbling together a living from a variety of gigs. She is trying to build a business as an independent travel agent, while also doing house sitting, dog sitting and selling clothes online. She estimates she is earning somewhat more than the roughly $36,000 a year she made before the pandemic, and although she is working as many hours as ever, she enjoys the flexibility.“The thought of going to an office job 40 hours a week and clocking in at the exact time, it sounds incredibly difficult,” she said. “The rigidity of doing that job, feeling like I’m being watched like a hawk, it just doesn’t sound fun. I really don’t want to go back to that.” More

A more traditional view is competing against a newer approach that has become mainstream among economists.Over the last dozen years, there has been a sea change in how economists view many crucial questions related to deficits, public debt and the long-term payoffs of social spending.Most Democratic elected officials have embraced this new thinking, and it permeates the Biden domestic agenda. But a handful of Democrats are unpersuaded, holding to a view that was more widespread in the early Obama years, focusing on the risks of debt and spending.That tension, and how it resolves itself — or doesn’t — will be central to the evolution of the Biden presidency and American economic policy for years to come. On the surface, there is a clash between lawmakers with different political instincts. But there is also a clash over whether a more traditional view will prevail over a newer approach that has become mainstream among economists — especially those who lean left, but with some acceptance among center-right thinkers.“I just don’t want our society to move to an entitlement society,” Senator Joe Manchin of West Virginia has said. T.J. Kirkpatrick for The New York TimesIn the older view, it is irresponsible to increase long-term budget deficits because it will curtail private investment and risk a fiscal crisis. Social policies should be seen as a zero-sum trade-off between alleviating poverty and encouraging work. And any major new spending should be coupled with enough revenue-raising measures that the number-crunchers at the Congressional Budget Office conclude the numbers will balance over the next 10 years.This was the approach that the Obama administration and congressional Democrats took in passing the Affordable Care Act, a process made lengthier and more complex by these self-imposed constraints.But since those days, the intellectual ground has shifted in important ways.For one, long-term interest rates have fallen precipitously, even as very large budget deficits have become the norm. That implies the United States can maintain higher public debt than once seemed possible without excessively constraining private investment or facing excessive interest costs.“The long-term downward move in interest rates is the most important macroeconomic development that has occurred over the last couple of decades,” said Karen Dynan, a former official at the Federal Reserve and at the Obama Treasury Department who now teaches at Harvard. (One of her classes is on the economic crises of the 21st century, including a unit on the evolution in thinking they have prompted.)“Lower rates make deficit-financed spending less costly in budget terms and lowers the economic cost, because you can think of lower rates as a signal that the private sector has less demand for that money,” Professor Dynan sad.During the early Obama years, there was extensive discussion, including from some Democrats, that a loss of confidence in America’s debts could cause a fiscal crisis. The experience of the last decade has offered reassurance that in a nation like the United States, with a credible and competent central bank, such an event is unlikely.Republican legislators like Jeff Sessions and Paul Ryan, back, led the charge against spending in 2011 during the Obama era. Michael Reynolds/European Pressphoto Agency“I would have worried 10 years ago that as debt rose to 100 percent or more of G.D.P., folks lending to the U.S. government would start to feel differently about it, and the answer is that they don’t,” said Wendy Edelberg, a former chief economist of the C.B.O. who is now director of the Hamilton Project at the Brookings Institution. “I personally feel like I’ve learned a lot more in the last decade about how monetary and fiscal policy interact, especially in a crisis.”As evidence: The federal government, with extensive help from the Federal Reserve, launched a multitrillion dollar response to the pandemic despite coming into the crisis with an elevated public debt. Rather than spur a crisis of confidence in U.S. government bonds, their values have surged.The evolution in thinking is hardly universal, with some more conservative economists pointing to the risks that conditions could change.“Any economic policy that begins with the premise, ‘Let’s just assume interest rates stay below 2008 levels forever,’ is extraordinarily hubristic and naïve,” said Brian Riedl, a senior fellow at the Manhattan Institute. “Particularly because there is no backup plan if they are wrong and rates ever do revert to pre-2008 levels. At that point, the policies driving the debt will be nearly impossible to reverse, and we could face a severe fiscal crisis.”That is very much the argument that Senator Joe Manchin has made in holding up the party’s social spending bill, seeking to lower its total cost and seek offsetting revenue increases that would reduce the deficit.“While my fellow Democrats will disagree, I believe that spending trillions more dollars not only ignores present economic reality, but makes it certain that America will be fiscally weakened when it faces a future recession or national emergency,” Senator Manchin wrote in a commentary for The Wall Street Journal last month.The national debt clock in New York in August 2020. Amr Alfiky/The New York TimesA similar shift has taken place in how many economists view the potential long-term economic benefits of certain forms of social welfare spending.Not long ago, research into the trade-offs of welfare spending tended to focus on narrow questions like how much a given benefit might discourage people from working. In the last few decades, researchers have used novel statistical techniques (including those that won a Nobel Prize last week) and rich new sources of data to try to determine what long-term benefits they might offer to the overall economy.Take, for example, spending that keeps children well-fed and out of poverty, such as school lunch programs and assistance payments to low-income parents. These appear to have long-lasting benefits for future employment and earning power — creating supply-side benefits, or increasing the economy’s overall potential.“If we give people more resources when they’re young, they can eat better and do better in school, and this could have lasting impacts,” said Hilary Hoynes, a professor at the University of California, Berkeley, and an author of extensive research along these lines. “It doesn’t seem like such a crazy thing to assert, but we had no evidence on that 15 years ago.”This is part of the thinking beneath major elements of Democratic legislation under consideration, including universal preschool and an extension of a child tax credit. Professor Hoynes said she had received many calls from congressional staff members in the last few years seeking to understand the emerging evidence.Senator Manchin, meanwhile, has said, “I just don’t want our society to move to an entitlement society,” suggesting he is focused on the ways these benefits might create a near-term disincentive to work.Beyond the intraparty divide over the risk of deficits and the benefits of social spending, there is a simmering debate over how the costs of the bill should be offset. Centrist Democrats insist upon provisions that raise money so as to keep the programs from raising the deficit, but it’s less clear what that means in practice.During the passage of the Affordable Care Act, that meant a very specific thing — achieving a “score” from the C.B.O. attesting that by its best estimates, the legislation would have a neutral to positive effect on cumulative deficits.This scoring incentivizes an odd gaming of the system, including programs that phase in or out, and revenue-raising measures that are backloaded to avoid near-term pain while making the numbers balance. It also inserts a false precision into the legislative process — as if anyone knows what economic growth and federal revenue will be a decade down the road.“I very much worry that there’s going to be some absurd emphasis on the C.B.O. score, whether it is slightly on one side of zero or the other side of zero,” Ms. Edelberg said. “This is a really important package that will change people’s lives, and that should be the guiding principle. The 10-year window is arbitrary. Aiming for deficit neutrality is arbitrary — it’s arbitrariness on top of arbitrariness.”The Biden agenda, in other words, could depend on just how much the entire range of Democrats in Congress view the strategies and instincts of the Obama years as a model to follow or a cautionary tale. More

An initial proposal to offer workers 12 weeks of paid leave could be whittled down as Democrats try to trim their $3.5 trillion social policy bill.WASHINGTON — Christina Hayes, 34, stopped going to the doctor for treatment of her lupus when she was pregnant and working at a cable company in Michigan in 2013. She had used up her vacation days, and without paid sick leave, she worried about paying her rent and electricity bill if she took more time off.But after her blood pressure spiked, her doctors induced labor two months early, fearing that she might have a seizure. She and her baby ended up being fine, but Ms. Hayes, now an airline gate agent in Inkster, Mich., said that having paid leave would have allowed her to prioritize her health over her paycheck.“I would have been able to schedule doctor’s appointments better,” she said. “I might not have gone into premature labor.”Paid leave, a cornerstone of President Biden’s economic agenda, is one of the many proposals at risk of being scaled back or left out of an expansive social safety net bill that Democrats are trying to push through Congress. Mr. Biden’s initial $3.5 trillion plan called for providing up to 12 weeks of paid leave for new parents, caretakers for seriously ill family members and people suffering from a serious medical condition. Democrats proposed compensating workers for at least two-thirds of their earnings and funding the program with higher taxes on wealthy people and corporations.But as Democrats try to shave hundreds of billions off the overall policy package to appease moderate holdouts, paid leave could wind up shrinking to just a few weeks. That is alarming supporters of paid leave, who view this as the best chance to secure a crucial safety net for workers, particularly women.Researchers and economists say a federal paid leave program could provide a jolt to the labor market, lifting women’s participation in the labor force and increasing the likelihood that mothers return to work after having children. Research also has shown that paid leave policies would be particularly beneficial for people of color and low-wage workers, who are among those least likely to get such a benefit from their jobs.Only 23 percent of private-sector workers have paid family leave through their employers, and 42 percent have access to personal medical leave through an employer-provided short-term disability insurance policy, according to the Bureau of Labor Statistics.Under the Family and Medical Leave Act of 1993, workers at companies with at least 50 employees can take 12 weeks of unpaid leave. The United States is the only rich country without a federal paid leave mandate for new parents or for medical emergencies.Paid leave advocates say they have received assurances from the White House and congressional leadership that Democrats are continuing to push for the proposed program.“We’re a critical voting bloc,” said Molly Day, the executive director of Paid Leave for the United States. “Women are not going to forget the decisions that were made now when we go to the ballot box.”Negotiators have discussed ways to bring down the cost of the program, such as reducing the number of weeks offered or the maximum benefit an individual could receive each month, according to people familiar with the talks. Lawmakers have also discussed trimming the number of weeks initially offered, then phasing in a 12-week benefit over a decade.Many top Democrats say they remain committed to the original paid leave plan and have urged their colleagues in Congress and the Biden administration to keep the program intact.Representative Rosa DeLauro, a Democrat of Connecticut, said she was worried about how the program might be pared back, particularly if the benefit is phased in.“I am concerned at how long it will take us to get to that 12 weeks,” Ms. DeLauro said. “It shouldn’t take 10 years to do that.”Some Democrats say passing a federal paid leave program has become more crucial amid a global pandemic that has exposed the need for workers to have access to medical and sick leave without worrying about how they will pay their bills. The social policy legislation is being fast-tracked through the Senate using a process known as reconciliation.“If we really want to achieve paid leave in the next decade, now is the only moment, through reconciliation,” Senator Kirsten Gillibrand of New York said. “If you want to get everyone working who wants to be working, paid leave has to be part of the strategy.”Research on California, the first state to offer paid family leave, has mostly shown that paid leave has a positive effect on women’s wages and participation in the labor force. Nine states and the District of Columbia have passed paid leave programs.Christopher J. Ruhm, a professor of public policy and economics at the University of Virginia, found that under California’s paid leave law, new mothers who had worked during their pregnancy were estimated to be 17 percent more likely to have returned to work within a year of their child’s birth. During the second year of their child’s life, mothers’ time spent at work increased.“The evidence is pretty strong that we’d see favorable effects,” Mr. Ruhm said. “It’s not going to lead to a huge increase in employment or labor force participation of women, but it would be a modest one.”Maya Rossin-Slater, an associate professor of health policy at Stanford University, said research found that policies offering up to one year of paid leave can increase labor participation among women after childbirth. Under California’s program, the biggest gain in leave-taking is seen for Black mothers, who became more likely to take maternity leave, according to Ms. Rossin-Slater’s research.“Implementation of paid family leave can reduce inequities,” Ms. Rossin-Slater said.Pepper Nappo, 33, a mother in Derry, N.H., said she was left alone to take care of her newborn son the day she was discharged from the hospital in 2016. She had required stitches after childbirth.As a barber, she did not have paid parental leave, and her husband could not afford to take more than a week off from his job at a landscaping company. The family downgraded their car and limited what they bought at the grocery store but still struggled to keep up with the bills.“If I had paid leave, we wouldn’t have been behind,” Ms. Nappo said.Public support for paid family and medical leave is strong, but Americans tend to differ over specific policies. A recent CBS News/YouGov poll found that 73 percent of U.S. adults surveyed supported federal funding for paid family and medical leave.Conservatives have signaled an openness to paid leave in recent years, although they have been more vocal about supporting leave for parents than for other types of caregivers or those suffering from illness. Many have also expressed concerns for small businesses. Senator Marco Rubio of Florida and Senator Mitt Romney of Utah reintroduced a proposal last month that would allow new parents to use a portion of their Social Security to fund their own leave after the birth or adoption of a child.While larger businesses have grown open to a paid leave program, some small business groups have pushed back against a federal mandate.Holly S. Wade, the executive director of the research center at the National Federation of Independent Business, said the group was concerned that a paid leave program would burden small employers since it would require more administrative reporting.“While covering the cost of some of these mandates could potentially be helpful, in the way that an owner sees it, it just comes with a lot of paperwork, a lot of confusion and a lot of challenges,” Ms. Wade said.Supporters of paid leave say they are still pushing for 12 weeks to be available immediately, but have conceded that they would accept a permanent program that would phase in the full amount over time. Dawn Huckelbridge, director of Paid Leave for All, spoke at a rally in Washington, D.C., where she urged lawmakers to keep paid leave in the bill.Valerie Plesch for The New York Times“We are very cleareyed that there are going to be cuts,” said Dawn Huckelbridge, the director of Paid Leave for All. “We think there can be a meaningful program accomplished at less than 12.”Ms. Huckelbridge and other paid leave supporters rallied near the White House last week, urging lawmakers and the Biden administration to keep the benefit in the bill.“There have been troubling signs,” Ms. Huckelbridge said, referring to reports about demands by Senator Joe Manchin III, a West Virginia Democrat, to reduce the bill’s size and scope. More

Inflation is likely getting a temporary boost from the $1.9 trillion coronavirus relief package that the Biden administration ushered in early this year, new Federal Reserve Bank of San Francisco research released on Monday suggested.The analysis may add fuel to a hot debate in Washington over whether the administration’s policies are contributing to a spike in prices. Critics of the government spending package that was signed into law in March, including former Treasury Secretary Lawrence H. Summers, have said it was poorly targeted and risked overheating the economy. Supporters of the relief program have said it provided critical aid to workers and businesses still struggling through the pandemic.The new paper comes down somewhere in the middle, finding that the spending had some effect on inflation but suggesting that it is most likely to be temporary. The economists estimated that it would add 0.3 percentage points to the core Personal Consumption Expenditures inflation index in 2021 and “a bit more” than 0.2 percentage points in 2022. Core inflation strips out volatile items like food and fuel.While those numbers are significant, they are not what most people would consider “overheating” — the Fed aims for 2 percent inflation on average over time, and a few tenths of a percent here or there are not a reason for much alarm.But the result is only a rough estimate, one the researchers came up with to help inform an continuing political and economic debate.Both the Trump and Biden administrations signed trillions of dollars in virus relief spending into law. The packages included two bipartisan bills in 2020 that pumped more than $3 trillion into the economy, including direct checks to individuals and generous unemployment benefits. Another $1.9 trillion — called the American Rescue Plan — was passed this year by Democrats after they took control of both Congress and the White House.“The later timing and large size of the A.R.P. stirred debate about whether it is causing an overheating of the economy and fueling a sustained increase in inflation,” the San Francisco Fed researchers noted.The economists tried to answer that question by looking at how much spare capacity is in the economy using a labor market measure — the ratio of job openings to unemployment. The logic is that inflation tends to pick up when there is very little labor market slack, because businesses raise wages to attract workers and then raise prices to cover their climbing labor costs.Government stimulus can push up the number of job openings in the economy as it fuels demand while constraining the number of available workers because it gives would-be employees a financial cushion, allowing them to take their time as they search for a new job.Based on the package’s size and using historical evidence on how fiscal spending affects the labor market, the researchers found that the American Rescue Plan might raise the vacancy-to-unemployment ratio close to its historical peak in 1968, fueling some inflation — but that the price impact would be small and short-lived.U.S. Inflation & Supply Chain ProblemsCard 1 of 6Covid’s impact on supply continues. More