Economy

The administration says the conditions it has attached to $40 billion in new subsidies will help U.S. semiconductor makers compete globally. Some economists disagree.WASHINGTON — President Biden’s plan to plow billions of dollars into semiconductor manufacturing represents a sharp turn in American economic policy, one aimed at countering China by building up a single, critical industry. But Mr. Biden is going even further. He is using the money to change how corporations behave.If semiconductor manufacturers want a piece of the nearly $40 billion in aid that Mr. Biden’s administration began the process of handing out on Tuesday, they will need to provide child care for employees, run their plants on low-emission sources of energy, pay union wages for construction workers, shun stock buybacks and potentially share certain profits with the government.That decision is a bet on the power of the federal government to transform private industry. But it is also a distinct break from how the United States has traditionally engaged with corporate America. The president is essentially incorporating disparate policy objectives into a big spending bill that was sold as an effort to shore up a supply of semiconductors critical for the economy and national security.The approach could amplify the effects of the CHIPS Act and other economic bills Mr. Biden has signed into law over the past two years, by accomplishing multiple goals at the same time. Administration officials say the money and the guidelines will drive American industry toward Mr. Biden’s vision of an economy with more U.S. production, better conditions for workers and fewer of the fossil fuel emissions driving climate change.But in testing the limits of a new industrial policy, the strategy may also carry significant risks. Some economists, even some who favor robust federal spending to bolster strategic industries, say Mr. Biden is in danger of drowning his core economic goals.“Everyone acknowledges what we are trying to do here, in trying to make a larger, more globally competitive U.S. semiconductor industry, is a difficult challenge,” said Adam Ozimek, the chief economist for the Economic Innovation Group, a bipartisan think tank in Washington. “We’re making that challenge much harder by trying to accomplish another dozen unrelated things at once.“Advocates of industrial policy should worry that not only is this going to fail, but it’s going to discredit industrial policy for a generation,” Mr. Ozimek said.The Global Race for Computer ChipsU.S. Industrial Policy: In return for vast subsidies, the Biden administration is asking chip manufacturers to make promises about their workers and finances, including providing affordable child care.Arizona Factory: Internal doubts are mounting at Taiwan Semiconductor Manufacturing Company, the world’s biggest maker of advanced chips, over its investment in a new factory in Phoenix.CHIPS Act: Semiconductor companies, which united to get the sprawling $280 billion bill approved last year, have set off a lobbying frenzy as they argue for more cash than their competitors.A Ramp-Up in Spending: Amid a tech cold war with China, U.S. companies have pledged nearly $200 billion for chip manufacturing projects since early 2020. But the investments have limits.Biden officials say that they are not asking companies to do anything outside their own commercial interests and that the steps they are taking are not meant to be punitive. They are emboldened by the amount of money they have to hand out and confident that companies will accept it with the conditions they have attached. If anything, those officials essentially say, they are not unduly burdening businesses; they are helping them do what is necessary to attract workers and avoid wasting federal dollars.In an interview, Commerce Secretary Gina Raimondo repeatedly cast the lack of access to child care as an economic issue and a key contributor to the labor shortages that American manufacturers frequently complain they are experiencing. Entrenched bias against working women has prevented corporations and the government from addressing that issue, she said, in ways that have hurt companies.Commerce Secretary Gina Raimondo has described the financial rules for companies that take federal funds as a way to ensure that taxpayer dollars are not wasted.Haiyun Jiang/The New York Times“I am kind of requiring them to pay attention to this because I know this is what they need to be successful,” Ms. Raimondo said.Ms. Raimondo has described the financial rules for companies that take federal funds as a way to ensure taxpayer dollars are not wasted. Requiring companies to share some unexpected upside profits with the government will encourage companies to be accurate and honest with their financial projections, so the department can send dollars where they are needed most. The limitations on stock buybacks will prevent taxpayer dollars from going to enrich company shareholders and chief executives, administration officials say.But after reviewing the rules, industry lobbyists and some economists said they worried companies would be forced to siphon money away from the new law’s central objectives. Several complained that administration officials had not coupled the CHIPS funding announcements with efforts to shrink, not expand, environmental regulations and other government rules covering construction projects..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.“We should be focused on removing regulatory barriers — particularly in the permitting space — and we have to be careful about adding ancillary new requirements that only increase cost and delay bringing production online,” said Neil Bradley, an executive vice president at the U.S. Chamber of Commerce, a heavyweight business organization in Washington.And some congressional Republicans accused the administration of undermining the intent of the law by trying to force liberal priorities on companies competing for subsidies.Representative Frank D. Lucas of Oklahoma, the chairman of the Science, Space and Technology Committee, said the administration had been “adamant” that the United States needed to incentivize chip production, or else companies would choose to build in other countries that offered more attractive policies.“That’s why it’s troubling that now that the administration has the $52 billion in funds they requested,” Mr. Lucas said, “they’re focusing less on the urgent need for chip production and more on attempting to impose their labor agenda on this critical industry.”For some foreign chip makers, investing in the United States is already provoking concerns about high costs and managerial challenges. And other countries have also continued to subsidize their own chip facilities aggressively, providing a potentially attractive alternative to investing in the United States.Economists largely agree that both the scale and practices of Mr. Biden’s industrial policy are signs of how dramatically the thinking about the government’s role in the economy has changed in Washington.A core reason for that shift is what has happened in East Asia, particularly China, where governments have made frequent use of state subsidies to shore up industries and capture global market share. Since American researchers invented the integrated circuit in the 1950s, Taiwan, South Korea, China, Israel and other locations have invested heavily in chips, helping to push production out of the United States.The U.S. share of global chips manufacturing has now dwindled to just 12 percent. American companies still design many of the world’s most cutting-edge chips; they just manufacture them offshore.Representative Frank D. Lucas of Oklahoma said the administration was “focusing less on the urgent need for chip production and more on attempting to impose their labor agenda on this critical industry.”Kenny Holston/The New York TimesShortages of chips and other critical products in the pandemic helped underscore how reliant the country is on foreign factories. More broadly, U.S. dependence on China for key products like electric vehicles, solar panels, steel and rare earth metals has helped to turn the tide in Washington toward a more interventionist economic policy and dampened concerns about government interference in markets.Both political parties are now broadly aligned behind the use of industrial policy to counter China’s economic dominance. Members of the Trump and Biden administrations, and Democratic and Republican lawmakers, helped create the CHIPS and Science Act, which Congress passed last summer by significant margins.The bill included several strict provisions for companies that receive subsidies, including a ban on using government funding for stock buybacks and dividends and a 10-year restriction on making investments in cutting-edge chip facilities in China. The bill also encouraged companies to offer work force training initiatives and team up with unions and educational institutions.The Biden administration appears confident that the $52 billion carrot it is offering to chip makers, suppliers and research facilities is a big enough incentive for companies to overpower any corporate complaints about the administration’s efforts to influence their behavior. Officials note that some chip makers already comply with some of the requirements in other locations: Taiwan Semiconductor Manufacturing Company, which is building a new facility in Arizona, provides child care at several of its plants in Taiwan. Chip makers operating in other countries, China for example, may have to go to great lengths to support government initiatives or national security objectives.Chief executives have privately grumbled about the restrictions, but most continue to publicly praise the program. Most major semiconductor makers have already broken ground on expensive new U.S. facilities. Since early 2020, companies have pledged nearly $200 billion for U.S. chip manufacturing projects, many in anticipation of the funding.One of those companies, Intel, said in a release on Tuesday that the CHIPS guidelines released by the Commerce Department were “an important step for American semiconductor companies to be globally competitive and will help to restore balance in the global chip making industry.” The Semiconductor Industry Association said it was “carefully reviewing” the rules but welcomed the Commerce Department’s steps to set the program in motion.Clyde V. Prestowitz Jr., a former trade official and labor economist who has advocated industrial policy, said he was sympathetic to the Biden administration’s goals of maximizing the program’s benefit to the public, rather than company shareholders.“The policy is aimed at ensuring the security and increasing the well-being of all Americans,” he said. “It is not meant to be a special gift to the semiconductor companies.” More

When a pandemic-era boost ends on Wednesday, more than 30 million people will lose a significant amount of assistance.WASHINGTON — Tens of millions of low-income families are set to lose additional food stamp benefits on Wednesday after the expiration of a pandemic-era policy that had increased the amount they received, leaving food banks bracing for a surge in demand and some advocates predicting a rise in hunger nationwide.For nearly three years of the pandemic, emergency legislation enacted by Congress sought to cushion the economic blow of the coronavirus, allowing all participants in the Supplemental Nutrition Assistance Program to receive the maximum monthly benefit, regardless of income. The extra cash, along with other economic assistance programs, helped keep food insecurity at bay and cut poverty rates to a record low.But that temporary increase lapses for more than 30 million people across 35 states and territories on Wednesday, effectively cutting benefits for the vast majority of recipients as inflation remains persistently high and many other coronavirus-era programs end.“This is a cost shift from the federal government,” said Ellen Vollinger, the SNAP director at the nonprofit Food Research & Action Center. “It just shifts the burden of hunger onto states and counties, to the charitable sector, but of course, most harshly, it shifts the burden to that household to try to make do with even less.”Under the pandemic-era policy, each recipient got a monthly average of $251. That is expected to decline by about a third, or $82, in March, according to the Agriculture Department, which administers the food stamp program.Those who qualify for the minimum benefit under the standard income guidelines — many of whom are older Americans relying on Social Security — will see the steepest decrease, from $281 in monthly benefits to only $23, according to Ms. Vollinger.Even though the extra benefits will lapse, food stamp benefits will remain more generous than three years earlier, because the Biden administration permanently increased benefits by 25 percent over prepandemic levels. Inflation F.A.Q.Card 1 of 5What is inflation? More

NEW YORK (Reuters) – Retailers have a new sweet spot: products that cost $3 to $5. Target (NYSE:TGT) said on Tuesday that it would be stocking its shelves with more products priced under $10 as the retailer tries to appeal to more cost-conscious consumers dealing with once-in-a-generation inflation.This comes a little more than a year after dollar store chain Dollar Tree (NASDAQ:DLTR) said it would launch more discretionary products including seasonal items and apparel priced between the $3 and $5.Americans are shifting their shopping habits and hunting for bargains in the face of unrelenting inflation. Many, including high-income households, are buying more store-label brands as budgets stretch in the face of higher interest rates.Minneapolis-based Target, which has nearly 2,000 stores, reported a quarterly profit that beat Wall Street’s expectations for the first time in a year, as it shifted its focus to selling more food and lower-priced items under its higher-margin private-label brands including Favorite Day, Good & Gather and Mondo Llama. Target generates more than $30 billion in sales from its 48-owned brands, the company disclosed in a presentation on Tuesday adding that these brands grew faster than overall sales in 2022. Now it plans to double down on its in-house products. Target said it plans to launch or expand more than 10 owned brands, adding thousands of new products. The majority of these items will be sold for $3, $5, $10 and $15, according to the retailer.The move comes after Target saw higher sales of $3 ornaments, $5 candles and $10 throw pillows, Christina Hennington, the company’s chief growth officer, said on a call on Tuesday.It also follows discount chain Five Below (NASDAQ:FIVE) Inc’s plans to open more than 200 new stores in 2023 and convert 400 existing stores to its “Five Beyond” format, which sells items priced above its $5 threshold. CFRA Research analyst Arun Sundaram said Target’s motive to lower prices was to drive more traffic to its stores. “It is nice to see Target invest in own brands and use that as a way to keep differentiating themselves against Walmart (NYSE:WMT) and Kroger (NYSE:KR),” he said.Consumer prices rose at a more rapid monthly pace in January, the Labor Department reported earlier this month.  The Consumer Price Index rose 0.5% in January, as prices for food, fuel and apparel accelerated at a more rapid rate. In the 12 months through January, inflation was 6.4%, compared to 6.5% in December.Walmart executives said last week that they have seen stretched consumers gravitate towards private label, such as its Great Value and Equate brands. Target’s private-label brands are generally more expensive than at Walmart, a Reuters review of their online prices showed. In one example, a 64-ounce Great Value bottle of orange juice sells for $2.98 on Walmart.com compared with $3.69 for Good & Gather orange juice in the same size. Dollar Tree, which dropped its long-standing $1 policy in November 2021, said last year its focus to offer more $3 to $5 items was working for its products that competed against those in grocery and drugstores, and led to its first traffic increase in three years during its third-quarter ended October 29 last year. The Virginia-based chain said it was planning on adding more $3 and $5 items to its fleet of 16,000 stores in the years ahead.  More

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever.A bumper data dump on Wednesday kicks off the new trading month in Asia, with China’s manufacturing PMI report for February and fourth quarter Australian GDP among the most important releases for investors. Market sentiment going into these and a host of other numbers from across the continent is likely to be fairly neutral after Wall Street closed February with a lackluster performance on Tuesday.To recap, the S&P 500 closed February down 2.6% and the Nasdaq lost 1%, but that wasn’t bad – the MSCI World Index fell 3% and MSCI Asia ex-Japan lost 7%, erasing almost all of January’s gains. Asian stocks have only risen two months out of the last 14.Traders in Asia will be hoping for some encouraging signs in the economic data to get markets off to a positive start for the month. Assuming ‘good news is good news’, that is.How is China’s economic reopening from zero-COVID policies progressing? Purchasing managers index figures will give the most up-to-date snapshot of the huge manufacturing sector, and economists polled by Reuters reckon growth is picking up pace. (Graphic: China manufacturing PMI – https://fingfx.thomsonreuters.com/gfx/mkt/dwvkdzkakpm/ChinaPMI.jpg) The latest manufacturing PMI data from Japan, India, Australia and several other countries across the region will also be released on Wednesday.Another Reuters poll suggests the quarterly pace of GDP growth in Australia accelerated to 0.8% in the October-December period last year, but the annual pace more than halved to 2.7%. International trade is expected to have been a major driver thanks to a boom in resource exports.Australian and Indonesian inflation figures for January are expected to be a mixed bag. In the current climate of markets repricing the global rate outlook significantly higher, mixed or forecast-matching numbers may not be enough to keep the hawks at bay. The annual rate of Australian consumer inflation is expected to slow, but tick higher in Indonesia. Current rates pricing points to the Reserve Bank of Australia raising interest rates by another 100 bps this year, while Bank Indonesia policymakers indicated in February that their hiking cycle is over. (Graphic: Australia inflation & interest rates – https://fingfx.thomsonreuters.com/gfx/mkt/zjpqjyneavx/AussieCPI1.jpg) Here are three key developments that could provide more direction to markets on Wednesday:- Manufacturing PMIs across Asia (February)- Australia GDP (Q4)- Australia inflation (January) (By Jamie McGeever; Editing by Josie Kao) More

A sprawling new program for the semiconductor industry is foremost about national security, but it will try to advance other priorities as well.The Biden administration unveiled rules Tuesday for its “Chips for America” program to build up semiconductor research and manufacturing in the United States, beginning a new rush toward federal funding in the sector.The Commerce Department has $50 billion to hand out in the form of direct funding, federal loans and loan guarantees. It is one of the largest federal investments in a single industry in decades and highlights deepening concern in Washington about America’s dependence on foreign chips.Given the huge cost of building highly advanced semiconductor facilities, the funding could go fast, and competition for the money has been intense.Here’s a look at the CHIPS and Science Act, what it aims to do and how it will work.Funding chip production and researchThe largest portion of the money— $39 billion — will go to fund the construction of new and expanded manufacturing facilities. Another $11 billion will be distributed later this year to support research into new chip technologies.The bulk of the manufacturing money is likely to go to a few companies that produce the world’s most advanced semiconductors — including Taiwan Semiconductor Manufacturing Company, Samsung Electronics, Micron Technology and, perhaps in the future, Intel — to help them build U.S. facilities.Some will go to makers of older chips that are still essential for cars, appliances and weapons, as well as suppliers of raw materials for the industry and companies that package the chips into their final products.While some critics have questioned the wisdom of giving grants to a profitable industry, semiconductor executives argue that they have little incentive to invest in the United States, given the higher costs of workers and running a factory.The Global Race for Computer ChipsU.S. Industrial Policy: In return for vast subsidies, the Biden administration is asking chip manufacturers to make promises about their workers and finances, including providing affordable child care.Arizona Factory: Internal doubts are mounting at Taiwan Semiconductor Manufacturing Company, the world’s biggest maker of advanced chips, over its investment in a new factory in Phoenix.CHIPS Act: Semiconductor companies, which united to get the sprawling $280 billion bill approved last year, have set off a lobbying frenzy as they argue for more cash than their competitors.A Ramp-Up in Spending: Amid a tech cold war with China, U.S. companies have pledged nearly $200 billion for chip manufacturing projects since early 2020. But the investments have limits.The administration does not plan to fund entire projects: Biden administration officials say they plan to offer grants of between 5 to 15 percent of a company’s capital expenditures for a project, with funding not expected to exceed 35 percent of the cost. Companies can also apply for a tax credit reimbursing them for 25 percent of project construction.Limiting foreign dependenceGina Raimondo, the secretary of commerce, describes the program as foremost a national security initiative.While the United States is still a leader in designing chips, most manufacturing has been sent offshore. Today, more than 90 percent of the most technologically advanced chips, which are critical for the U.S. military and the economy, are produced in Taiwan. That has prompted concerns about the supply’s vulnerability, given China’s aggression toward Taiwan and the potential for a military invasion of the island.At the same time, China has increased its market share in less advanced chips that are still critical for cars, electronics and other products. The United States manufactures 12 percent of chips, though none of the world’s most advanced.Chip shortages during the pandemic forced factories to halt work and brought home in a tangible way how vulnerable the supply chain is to disruption. Workers at Ford Motor factories in Michigan and Indiana worked a full week just three times last year because of a chips shortage, Ms. Raimondo said in a speech at Georgetown University last week. That helped create a car shortage and raise the price of cars, stoking inflation.The Commerce Department says the program will also provide the Department of Defense and the national security community with a domestic source of the world’s most advanced chips.An Intel factory under construction in Arizona. The Biden administration unveiled the rules for its program to build up U.S. semiconductor research and manufacturing.Philip Cheung for The New York TimesBuilding chip hubsAccording to Ms. Raimondo, the goal is to build at least two U.S. manufacturing clusters to produce the most advanced types of logic chips, as well as facilities for other kinds of chips, and complex supply networks to support them.Commerce officials have declined to speculate where these facilities might be, saying they must review applications. But chip makers have already announced billions of dollars in plans for new investments around the United States.TSMC, which produces most of the world’s leading-edge chips, has been busy expanding in Arizona, while No. 2 Samsung is growing in Texas. Micron, which makes advanced memory chips, has announced big expansion plans in New York. And Intel, a U.S. technology giant that is investing heavily to try to capture a technological edge, has broken ground on a “megasite” in Ohio.Ms. Raimondo has said the vision is to restore the United States to a position of leadership in semiconductor technology, to the point where every major global chip company wants to have both research and manufacturing facilities in the United States.Still, there is skepticism about how much the program can do. One 2020 study, for example, found that a $50 billion investment in the industry would increase U.S. market share only to 14 percent.Protecting taxpayer fundsThe stakes are high for the Biden administration to prove this foray into industrial policy can work. Critics have argued that the federal government may not be the best judge of winners and losers. If the administration gets it wrong, it could face intense criticism.The Commerce Department said it would look closely at companies that applied for funding, to try to ensure that they were not being given more taxpayer dollars than they needed.In a decision that may irk some companies, the department said projects receiving grants would be required to share a portion of any unanticipated profits with the federal government, to ensure that companies gave accurate financial projections and didn’t exaggerate costs to get bigger awards.The Commerce Department also said it would dole out funding over time as companies hit project milestones, and give preference to those that pledged to refrain from stock buybacks, which tend to enrich shareholders and corporate executives by increasing a company’s share price.Companies are also barred from making new, high-tech investments in China or other “countries of concern” for at least a decade, to try to ensure that taxpayer money does not go to fund new operations in China.But analysts said it remained to be seen how difficult it would be to enforce these provisions. Company finances can be opaque, and when a company saves a dollar in the United States, it may then choose to invest it elsewhere.Helping workers by attaching big stringsThe program also includes some ambitious and unusual requirements aimed at benefiting the people who will staff semiconductor facilities.For one, the department will require companies seeking awards of $150 million or more to guarantee affordable, high-quality child care for plant construction workers and operators. This could include building company child care centers near construction sites or new plants, paying local child care providers to add capacity at an affordable cost or directly subsidizing workers’ care costs. Ms. Raimondo has said child care will draw more people into the work force, when many businesses are struggling in a tight labor market.Applicants are also required to detail their engagement with labor unions, schools and work force education programs, with preference given to projects that benefit communities and workers.Other provisions will encourage companies, universities and other parties to offer more training for workers, both in advanced sciences and in skills like welding. The department said it would give preference to projects for which state and local governments were providing incentives with “spillover” benefits for communities, like work force training, education investment or infrastructure construction.This is part of the Biden administration’s “worker-centered” approach to economic policy, which seeks to use the might of the federal government to benefit workers. But some critics say it could put the program’s goal of building the most advanced semiconductor factories at risk, if it adds excessive costs to new projects. More

Biden said in November he was confident the plan is legal, and announced new, temporary relief for borrowers that may mean their next loan payment is not due until August 2023. WHAT IS THE LATEST NEWS?The U.S. Supreme Court’s nine justices are hearing arguments in the Biden administration’s appeal of the two lower court rulings today. The court is expected to rule on this case this Spring. The court said on Dec. 1 it would hear Biden’s bid to reinstate his plan, after a challenge by six states that have accused his administration of exceeding its authority.On Nov. 22, Biden said he would extend the COVID-19 pandemic-era pause in student loan payments until no later than June 30, 2023, to allow the court to review his administration’s requests.Payments will resume 60 days after the pause ends, Biden said. WHAT HAPPENS NEXT WITH THE COURT CASES? The Supreme Court has agreed to hear the Biden administration’s bid to put on hold a Nov. 14 decision by the St. Louis, Missouri-based 8th U.S. Circuit Court of Appeals, which granted an injunction request by Republican-led states Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina.The administration on Dec. 2 also asked the justices to put on hold a separate Nov. 10 ruling by a Texas judge appointed by Republican former President Donald Trump that declared the debt forgiveness plan unlawful. The administration did so after the New Orleans-based 5th U.S. Circuit Court of Appeals earlier that week declined to stay the judge’s ruling.WHO IS ELIGIBLE FOR LOAN FORGIVENESS?The program forgives $10,000 of debt held by the federal government for individuals who make less than $125,000. It also forgives $10,000 of debt for couples that make less than $250,000, and it forgives up to $20,000 of debt held by Pell Grant holders, who are mostly lower-income borrowers. WHAT IS THE STATUS OF APPLICATIONS? About 26 million Americans have applied for student loan forgiveness since August, and the U.S. Department of Education has already approved requests from 16 million. The government stopped taking new applications Nov. 11, after the Texas judge blocked Biden’s order.Borrowers who have not yet applied can subscribe for updates by email. WHAT DO VOTERS SAY?American voters support debt forgiveness by a narrow margin; about 15% of voters say they could be impacted by the plan, an Economist/YouGuv poll found. The six Republican-led states that have sued to block Biden’s executive order argue he skirted congressional authority and the plan threatens future tax revenues and money earned by state entities that invest in or service student loans.Deep South states will get the greatest benefits per borrower from the Biden order, New York Federal Reserve research shows, including South Carolina, one of the six behind the lawsuit: A handful of states may consider the student loan debt that is forgiven as taxable income, financial advisers warn.WHY IS U.S. STUDENT DEBT SO HIGH?The cost of higher education has skyrocketed in the United States in the past three decades, doubling at private four-year colleges and universities and rising even more than that at public four-year schools, according to research from the nonprofit College Board. The outstanding balance of student loans nearly quadrupled from 2006 to 2019. U.S. borrowers hold about $1.77 trillion in student debt, according to the latest Federal Reserve figures. The vast majority of that is held by the federal government.Biden’s student loan forgiveness plan could add $300 billion to $600 billion to the federal debt, economists estimate. More

WASHINGTON (Reuters) – U.S. companies with the highest credit ratings sold a record $144 billion of debt securities so far in February to get ahead of further potential interest rate hikes, meeting strong demand from investors looking to capitalize on a spike in yields.Investment-grade rated corporate bond issuance in February has been the busiest ever for the month with the tally as of Monday already some $20 billion ahead of the now second-heaviest February in 2021, said BMO Capital Markets’ fixed income strategy director Dan Krieter in a report.Companies have been rushing to issue bonds as yields spiked to touch new highs with the Federal Reserve looking to keep interest rates higher for longer. Traders now expect the Fed to raise rates to about 5.4% in July, with only a minor decline by December, futures markets show. In early February, the market envisaged rates rising to a peak under 5.0%, with several rate cuts by year’s end.The average yield on U.S. investment grade bonds rose to 5.55% on Monday from just 4.94% on Feb. 1..”There’s much more yield now to be had in corporates,” said David del Vecchio, co-head of the U.S. investment grade corporate bond team at PGIM Fixed Income. February’s bonds were oversubscribed by 3.64 times on average, data from Informa Global Markets said. Investors still had plenty of cash, despite the flurry of issuance, said Blair Shwedo, head of IG corporate bond trading at U.S. Bank. Analysts expect $160-165 billion of new bond supply in March.”With more volatility, you may see some short term negative returns but overall, we’re well positioned to have a very nice positive total return in investment grade credit in 2023,” said Natalie Trevithick, head of investment grade credit strategy at investment management firm Payden & Rygel. More

BENGALURU (Reuters) – New Zealand house prices are set to fall further this year than previously thought, according to a Reuters poll of property analysts who forecast a peak-to-trough slump of over 20% as the central bank continues to hike interest rates aggressively.Average house prices peaked in November 2021, having risen more than 40% in just two years during the worst of the COVID-19 pandemic, as home buyers took advantage of near-zero interest rates, making New Zealand one of the least affordable markets among developed nations.Since October 2021, the Reserve Bank of New Zealand has raised its policy rate 450 basis points to a 14-year high of 4.75%. The central bank is expected to raise the rate as high as 5.50% later this year, which is likely to keep pressure on the retreating housing market.Average home prices were expected to decline 8.9% this year, according to the Feb. 17-27 Reuters poll of 10 property analysts, compared to a 6.0% fall in a November poll.Analysts predicted a small 2.8% rise next year, a downgrade from the 4.0% increase forecast in the previous poll.”The reason for falling house prices is the very sharp increase in interest rates, which is making affordability of repayments quite substantially worse,” said Brad Olsen, principal economist at Infometrics.Asked how much average house prices would fall from peak to trough, analysts who answered an additional question gave a median estimate of 21.8%, with forecasts in a 19%-25% range.A like-for-like analysis of the latest poll and the previous survey showed over 80% of respondents, six of seven, now expected a bigger peak-to-trough home price fall. The other analyst left his forecast unchanged from the previous poll. Given house prices have nearly doubled in the last seven years, the relatively small decline expected along with sharply higher borrowing costs, means entering the market will remain challenging for first-time homebuyers.”The decline in house prices is one thing, but if you have got a cheaper house but no mortgage to afford it, you still haven’t got a house under your own name. It still means affordability is out of reach for many,” added Olsen.Miles Workman, senior economist at ANZ, said house prices will fall more if “inflation remains a lot higher for longer than expected, requiring the Reserve Bank to be more aggressive with interest rate hikes. If that were to happen, mortgage rates would be higher.”(For other stories from the Reuters quarterly housing market polls:) More