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    Republicans Say Spending Is Fueling Inflation. The Fed Chair Disagrees.

    Jerome H. Powell has said that snarled supply chains, an oil shock following Russia’s invasion of Ukraine and shifts among American consumers are primarily behind rapid price growth.WASHINGTON — The chair of the Federal Reserve, Jerome H. Powell, has repeatedly undercut a central claim Republicans make as they seek sharp cuts in federal spending: Government spending is driving the nation’s still-hot inflation rate.Republican lawmakers say spending programs signed into law by President Biden are pumping too much money into the economy and fueling an annual inflation rate that was 6 percent in February — a decline from last year’s highs, but still well above historical norms. Mr. Powell disputed those claims in congressional testimony earlier this month and in a news conference on Wednesday, after the Fed announced it would once again raise interest rates in an effort to bring inflation back toward normal levels.Asked whether federal tax and spending policies were contributing to price growth, Mr. Powell pointed to a decline in federal spending from the height of the Covid-19 pandemic.“You have to look at the fiscal impulse from spending,” Mr. Powell said on Wednesday, referring to a measure of how much tax and spending policies are adding or subtracting to economic growth. “Fiscal impulse is actually not what’s driving inflation right now. It was at the beginning perhaps, but that’s not the story right now.”Instead, Mr. Powell — along with Mr. Biden and his advisers — says rapid price growth is primarily being driven by factors like snarled supply chains, an oil shock following Russia’s invasion of Ukraine and a shift among American consumers from spending money on services like travel and dining out to goods like furniture.Mr. Powell has also said the low unemployment rate was playing a role: “Some part of the high inflation that we’re experiencing is very likely related to an extremely tight labor market,” he told a House committee earlier this month.Increased consumer spending from savings could be pushing the cost of goods and services higher, White House economists said this week.Gabby Jones for The New York TimesBut the Fed chair’s position has not swayed congressional Republicans, who continue to press Mr. Biden to accept sharp spending reductions in exchange for raising the legal limit on how much the federal government can borrow.“Over the last two years, this administration’s reckless spending and failed economic policies have resulted in continued record inflation, soaring interest rates and an economy in a recessionary tailspin,” Representative Jodey C. Arrington, Republican of Texas and the chairman of the Budget Committee, said at a hearing on Thursday.Republicans have attacked Mr. Biden over inflation since he took office. They denounced the $1.9 trillion economic aid package he signed into law early in 2021 and warned it would stoke damaging inflation. Mr. Biden’s advisers largely dismissed those warnings. So did Mr. Powell and Fed officials, who were holding interest rates near zero and taking other steps at the time to stoke a faster recovery from the pandemic recession.Economists generally agree that those stimulus efforts — carried out by the Fed, by Mr. Biden and in trillions of dollars of pandemic spending signed by Mr. Trump in 2020 — helped push the inflation rate to its highest level in 40 years last year. But researchers disagree on how large that effect was, and over how to divide the blame between federal government stimulus and Fed stimulus..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.One recent model, from researchers at the Federal Reserve Bank of New York, the University of Maryland and Harvard University, estimates that about a third of the inflation from December 2019 through June 2022 was caused by fiscal stimulus measures.Much of that stimulus has already made its way through the economy. Spending on pandemic aid to people, businesses and state and local governments fell sharply over the last year, as emergency programs signed into law by Mr. Biden and former President Donald J. Trump expired. The federal budget deficit fell to about $1.4 trillion in the 2022 fiscal year from about $2.8 trillion in 2021.House Speaker Kevin McCarthy and Representative Jodey Arrington have attacked the Biden administration’s spending policies.Haiyun Jiang/The New York TimesThe Hutchins Center at the Brookings Institution in Washington estimates that in the first quarter of 2021, when Mr. Biden’s economic aid bill delivered direct payments, enhanced unemployment checks and other benefits to millions of Americans, government fiscal policy added 8 percentage points to economic growth. At the end of last year, the center estimates, declining government spending was actually reducing economic growth by 1 percentage point.Still, even Biden administration officials say some effects of Mr. Biden’s — and Mr. Trump’s — stimulus bills could still be contributing to higher prices. That’s because Americans did not immediately spend all the money they got from the government in 2020 and 2021. They saved some of it, and now, some consumers are drawing on those savings to buy things.Increased consumer spending from savings could be pushing the cost of goods and services higher, White House economists conceded this week in their annual “Economic Report of the President,” which includes summaries of the past year’s developments in the economy.“If the drawdown of excess savings, together with current income, boosted aggregate demand, it could have contributed to high inflation in 2021 and 2022,” the report says.Some liberal economists contend consumer demand is currently playing little if any role in price growth — placing the blame on supply challenges or on companies taking advantage of their market power and the economic moment to extract higher prices from consumers.High prices “are not being driven by excess demand, but are actually being driven by things like a supply chain crisis or war in Ukraine or corporate profiteering,” said Rakeen Mabud, chief economist for the Groundwork Collaborative, a liberal policy organization in Washington.Other economists, though, say Mr. Biden and Congress could help the Fed’s inflation-fighting efforts by doing even more to reduce consumer demand and cool growth, either by raising taxes or reducing spending.Mr. Biden proposed a budget this month that would cut projected budget deficits by $3 trillion over the next decade, largely by raising taxes on high earners and corporations. Republicans refuse to raise taxes but are pushing for immediate cuts in government spending on health care, antipoverty measures and more, though they have not released a formal budget proposal yet. The Republican-controlled House voted this year to repeal some tax increases Mr. Biden signed into law last year, a move that could add modestly to inflation.Republican lawmakers have pushed Mr. Powell on whether he would welcome more congressional efforts to reduce the deficit and help bring inflation down. Mr. Powell rebuffed them.“We take fiscal policy as it comes to our front door, stick it in our model along with a million other things,” he said on Wednesday. “And we have responsibility for price stability. The Federal Reserve has the responsibility for that, and nothing is going to change that.” More

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    IRS Decision Not to Tax Certain Payments Carries Fiscal Cost

    The Biden administration has opted not to tax state payments to residents, a decision that could add to the nation’s fiscal woes.WASHINGTON — More than 20 state governments, flush with cash from federal stimulus funds and a rebounding economy, shared their windfalls last year by sending residents one-time payments.This year, the Biden administration added a sweetener, telling tens of millions taxpayers they did not need to pay federal taxes on those payments.That decision by the Internal Revenue Service, while applauded by some tax experts and lawmakers, could cost the federal government as much $4 billion in revenue at a time when Washington is struggling with a ballooning federal deficit and entering a protracted fight over the nation’s debt limit.The I.R.S.’s ruling came after bipartisan pressure from lawmakers and was the latest move by the agency to forgo revenue this tax season.In December, the I.R.S. delayed by a year a new requirement that users of digital wallets like Venmo and Cash App report income on 1099-K forms if they had more than $600 of transactions. That requirement, which was part of the American Rescue Plan of 2021, was projected to raise nearly $1 billion in tax revenue per year over a decade. The last-minute decision to delay it followed intense lobbying from business groups and political backlash directed at the Biden administration, which was accused of breaking its pledge not to raise taxes on people making less than $400,000.Taken together, the moves by the I.R.S. run counter to two big economic issues bedeviling Washington — rapid inflation and concerns about the government’s ability to avoid defaulting on its debt.Allowing residents to avoid paying taxes on their state rebates means more money in their pockets to spend at a moment when the Federal Reserve is trying to rein in consumer and business spending to cool rising prices. A report released on Friday showed that, despite the Fed’s efforts to slow the economy, personal spending sped up in January.Understand the U.S. Debt CeilingCard 1 of 5What is the debt ceiling? More

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    Brian Deese, Top Economic Aide to Biden, Will Step Down

    Brian Deese, the director of the National Economic Council, played a pivotal role in negotiating economic legislation the president signed in his first two years in office.WASHINGTON — Brian Deese, who served as President Biden’s top economic adviser and helped create and negotiate the sweeping economic legislation that Mr. Biden signed into law in his first two years in office, will leave his position in mid-February.Mr. Biden announced the departure on Thursday, saying Mr. Deese’s work as director of the National Economic Council was crucial to the country’s economic recovery.“Brian has a unique ability to translate complex policy challenges into concrete actions that improve the lives of American people,” Mr. Biden said.The move is the latest high-level departure from the administration as Mr. Biden hits the two-year mark in his presidency and Republicans take control in the House. On Wednesday, Ron Klain, who has known Mr. Biden for more than three decades, stepped down as the White House chief of staff.The turnover comes as Mr. Biden is at something of a policy inflection point, shifting focus from passing laws to carrying them out.Mr. Deese, 44, helped to shape some of Mr. Biden’s most sweeping economic successes, including a $1.9 trillion aid package to help pull the nation from the pandemic recession, bipartisan measures to invest in infrastructure, and an energy, tax and health care measure that was the largest federal effort in history to combat climate change.But his legacy will include the high inflation that plagued the economy last year, which economists attribute in some part to spending from the $1.9 trillion American Rescue Plan. It will also include assembling the most diverse staff in terms of race and gender in the council’s history.The Biden PresidencyHere’s where the president stands as the third year of his term begins.State of the Union: President Biden will deliver his second State of the Union speech on Feb. 7, at a time when he faces an aggressive House controlled by Republicans and a special counsel investigation into the possible mishandling of classified information.Chief of Staff: Mr. Biden named Jeffrey D. Zients, his former coronavirus response coordinator, as his next chief of staff. Mr. Zients replaces Ron Klain, who has run the White House since the president took office.Eyeing 2024: Mr. Biden has been assailing House Republicans over their tax and spending plans, including potential changes to Social Security and Medicare, as he ramps up for what is likely to be a run for re-election.Mr. Deese hosted weekly breakfasts or lunches with Treasury Secretary Janet L. Yellen; Cecilia Rouse, the chairwoman of the White House Council of Economic Advisers; and Shalanda Young, the director of the White House Office of Management and Budget.Perhaps the sharpest criticism Mr. Deese faced as director was when he was appointed, from liberal groups wary of his previous job at the Wall Street giant BlackRock. Those criticisms have quieted somewhat as liberals applauded the climate bill and other legislation.“We were very skeptical of Deese’s decision to go to BlackRock and what that portended,” said Jeff Hauser, the director of the liberal Revolving Door Project. “He has worked out surprisingly well.”Mr. Deese’s departure was long planned. He has been commuting since late last summer from New England, where his wife and children live, to Washington. He does not yet have a new job lined up..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.The president has not decided on his successor. People familiar with the search process say Lael Brainard, the vice chair of the Federal Reserve, and Wally Adeyemo, the deputy Treasury secretary, appear to be the leading candidates for the job. Other contenders include Bharat Ramamurti, a deputy on the National Economic Council; Gene Sperling, a former director of the council under Presidents Bill Clinton and Barack Obama; and Sylvia M. Burwell, a former Obama aide who is now the president of American University.With Mr. Deese’s departure, his allies and colleagues say, Mr. Biden is losing the first and last person he consulted on economic issues and a driving force behind his domestic policy legacy.Ms. Rouse called Mr. Deese “an amazing partner as we navigated the rather choppy economic waters over the past two years.”Mr. Deese worked on the National Economic Council in the Obama White House, where he helped coordinate a bailout of the auto industry and negotiate a landmark international climate treaty in Paris. He joined Mr. Biden’s presidential campaign relatively late; along with Jake Sullivan, who is now the national security adviser, Mr. Deese helped to fashion a campaign platform that sought to curb global warming by investing heavily in new technologies that could help lower greenhouse gas emissions, like electric vehicles.Shortly after Mr. Biden was elected, Mr. Deese and colleagues on the presidential transition team began drafting what would become the American Rescue Plan. The week it passed the House, in mid-March, Mr. Deese and other aides huddled with Mr. Biden in the Oval Office to discuss the rest of the president’s plans for economic legislation.Mr. Deese urged the president to go big, maintaining the cost and ambition of the sweeping expansion of government in the economy that Mr. Biden had promised in the campaign. He prevailed: Mr. Biden later announced a $4 trillion economic agenda.Mr. Deese helped push that agenda through Congress by building relationships with swing-vote Democrats and moderate Republicans. He and a top Biden aide, Steven J. Ricchetti, camped out in the office of Senator Rob Portman, Republican of Ohio, in the waning days of negotiations over the infrastructure bill. Surrounded by Ohio sports jerseys, sustained by ordered-in salads, they hammered out the final details of what became Mr. Biden’s first big bipartisan win.Senators in those negotiations praised Mr. Deese for responding frankly to their concerns, in language that explained how legislative tweaks would affect people and businesses in the country.“Economists can — they can put you to sleep, and they talk, and when they get done, you don’t know what the hell you’ve heard,” Senator Jon Tester, Democrat of Montana, said in an interview. “That isn’t the case with Deese.”Senator Bill Cassidy, Republican of Louisiana and a key negotiator in the infrastructure talks, said that Mr. Deese was “a good poker player, and he’s a good negotiator. But once the commitment was made, I trusted that the commitment would be fulfilled.”Mr. Deese brought more climate expertise to the National Economic Council than any previous director, and it was on that issue that his congressional relationships paid the biggest dividends for Mr. Biden. In July, after months of negotiations, Senator Joe Manchin III, Democrat of West Virginia and a key swing vote, signaled to Democratic leaders that he could not support the climate bill Mr. Deese had helped fashion, apparently dooming the effort.But the following Monday, Mr. Manchin called Mr. Deese, with whom he had built a close relationship, including a zip-lining trip together. Mr. Manchin told Mr. Deese he still wanted to find agreement on a bill and invited him to the Capitol to continue talks that also included Senator Chuck Schumer of New York, the majority leader.Mr. Deese barely slept for the next week, colleagues say, as the negotiations wore on in secret and ultimately produced the Inflation Reduction Act. More

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    Biden Devotes $36 Billion to Save Union Workers’ Pensions

    The money comes from last year’s Covid-19 relief package and will avert cuts of up to 60 percent in pensions for 350,000 Teamster truck drivers, warehouse and construction workers and food processors.WASHINGTON — President Biden announced Thursday that he was investing $36 billion in federal funds to save the pensions of more than 350,000 union workers and retirees, a demonstration of commitment to labor just a week after a rupture over an imposed settlement of a threatened rail strike.Mr. Biden gathered top union leaders at the White House to make the commitment, described by the White House as the largest ever award of federal financial support for worker and retiree pension security. The money, coming from last year’s Covid-19 relief package, will avert cuts of up to 60 percent in pensions for Teamster truck drivers, warehouse workers, construction workers and food processors, mainly in the Midwest.“Thanks to today’s announcement, hundreds of thousands of Americans can feel that sense of dignity again knowing that they’ve provided for their families and their future, and it’s secure,” Mr. Biden said, joined by Sean M. O’Brien, president of the Teamsters, and Liz Shuler, president of the A.F.L.-C.I.O., as well as Marty Walsh, the U.S. secretary of labor.The Biden PresidencyHere’s where the president stands after the midterm elections.A New Primary Calendar: President Biden’s push to reorder the early presidential nominating states is likely to reward candidates who connect with the party’s most loyal voters.A Defining Issue: The shape of Russia’s war in Ukraine, and its effects on global markets, in the months and years to come could determine Mr. Biden’s political fate.Beating the Odds: Mr. Biden had the best midterms of any president in 20 years, but he still faces the sobering reality of a Republican-controlled House for the next two years.2024 Questions: Mr. Biden feels buoyant after the better-than-expected midterms, but as he turns 80, he confronts a decision on whether to run again that has some Democrats uncomfortable.The pension investment came just a week after Mr. Biden prodded Congress to pass legislation forcing a settlement in a long-running dispute between rail companies and workers, heading off a strike that could have upended the economy just before the holidays. While the agreement included wage increases, schedule flexibility and an additional paid day off, several rail unions had rejected it because it lacked paid sick leave. A move to add seven days of paid sick leave failed in Congress before Mr. Biden signed the bill.The showdown over the rail settlement left Mr. Biden in the awkward position of forcing a deal over the objections of some union members even though he had promised to be the “the most pro-union president you’ve ever seen.” The pension rescue plan announced on Thursday put him back in the more comfortable stance of allying himself with organized labor, a key constituency of the Democratic Party.The $36 billion, drawn from the $1.9 trillion American Rescue Plan passed last year, will go to the Central States Pension Fund, which is largely made up of Teamster workers and retirees. The fund has been the largest financially distressed multi-employer pension plan in the nation. As a result of shortfalls, pensioners were facing 60 percent cuts over the next few years, but the White House said the federal funding will now ensure full benefits through 2051.Many of the affected workers and retirees are clustered in Midwestern states that have been battlegrounds in recent elections, including Michigan, Ohio, Wisconsin and Minnesota as well as other states like Missouri, Illinois, Florida and Texas.In his remarks, Mr. Biden expressed sympathy for workers and retirees facing cuts not of their own making. “For 30, 40, 50 years you work hard every single day to provide for your family. You do everything right,” he said. “But then imagine losing half of that pension or more through no fault of your own. You did your part. You paid in. Imagine what it does financially to your peace of mind, to your dignity.”Mr. O’Brien hailed Mr. Biden’s move. “Our members chose to forgo raises and other benefits for a prosperous retirement, and they deserve to enjoy the security and stability that all of them worked so hard to earn,” he said in a statement. While much of public policy is determined by big corporations, “it’s good to see elected officials stand up for working families for once.”Republicans called it a politically inspired payoff. Representative Kevin Brady of Texas, the top Republican on the House Ways and Means Committee, dubbed the rescue plan “the largest private pension bailout in American history,” saying it rewarded those who mismanaged their pensions.“Despite years of bipartisan negotiations and recommendations, Democrats rejected protections for union workers in other underfunded multi-employer plans that are not as politically connected as the Teamsters’ Central States plan,” Mr. Brady said. “Now, American taxpayers are being forced to cover promises that pension trustees never should have been allowed to make.” More

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    Democrats Spent $2 Trillion to Save the Economy. They Don’t Want to Talk About It.

    Polls show voters liked direct payments from President Biden’s 2021 economic rescue bill. But they have become fodder for Republican inflation attacks.In the midst of a critical runoff campaign that would determine control of the Senate, the Rev. Raphael Warnock promised Georgia voters that, if elected, he would help President-elect Biden send checks to people digging out of the pandemic recession.Mr. Warnock won. Democrats delivered payments of up to $1,400 per person.But this year, as Mr. Warnock is locked in a tight re-election campaign, he barely talks about those checks.Democratic candidates in competitive Senate races this fall have spent little time on the trail or the airwaves touting the centerpiece provisions of their party’s $1.9 trillion economic rescue package, which party leaders had hoped would help stave off losses in the House and Senate in midterm elections. In part, that is because the rescue plan has become fodder for Republicans to attack Democrats over rapidly rising prices, accusing them of overstimulating the economy with too much cash.The economic aid, which was intended to help keep families afloat amid the pandemic, included two centerpiece components for households: the direct checks of up to $1,400 for lower- to middle-class individuals and an expanded child tax credit, worth up to $300 per child per month. It was initially seen as Mr. Biden’s signature economic policy achievement, in part because the tax credit dramatically reduced child poverty last year. Polls suggested Americans knew they had received money and why — giving Democrats hope they would be rewarded politically.Liberal activists are particularly troubled that Democratic candidates are not focusing more on the payments to families.“It’s a missed opportunity and a strategic mistake,” said Chris Hughes, a founder of Facebook and a senior fellow at the Institute on Race, Power, and Political Economy at The New School, who is a co-founder of the liberal policy group Economic Security Project Action. “Our public polling and our experience suggest the child tax credit is a sleeper issue that could influence the election, a lot more than a lot of candidates realized.”Celinda Lake, a Democratic pollster who has surveyed voters in detail on the child credit, said data suggest the party’s candidates should be selling Americans on the pieces of Mr. Biden’s policies that helped families cope with rising costs.“We have a narrative on inflation,” Ms. Lake said in an interview. “We just aren’t using it.”Many campaign strategists disagree. They say voters are not responding to messages about pandemic aid. Some Democrats worry that voters have been swayed by the persistent Republican argument that the aid was the driving factor behind rapidly rising prices of food, rent and other daily staples.Economists generally agree that the stimulus spending contributed to accelerating inflation, though they disagree on how much. Biden administration officials and Democratic candidates reject that characterization. When pressed, they defend their emergency spending, saying it has put the United States on stronger footing than other wealthy nations at a time of rapid global inflation.Republicans have spent nearly $150 million on inflation-themed television ads across the country this election cycle, according to data from AdImpact. The State of the 2022 Midterm ElectionsWith the primaries over, both parties are shifting their focus to the general election on Nov. 8.The Final Stretch: With less than one month until Election Day, Republicans remain favored to take over the House, but momentum in the pitched battle for the Senate has seesawed back and forth.A Surprising Battleground: New York has emerged from a haywire redistricting cycle as perhaps the most consequential congressional battleground in the country. For Democrats, the uncertainty is particularly jarring.Arizona’s Governor’s Race: Democrats are openly expressing their alarm that Katie Hobbs, the party’s nominee for governor in the state, is fumbling a chance to defeat Kari Lake in one of the most closely watched races.Herschel Walker: The Republican Senate nominee in Georgia reportedly paid for an ex-girlfriend’s abortion, but members of his party have learned to tolerate his behavior.In Georgia alone, outside groups have hammered Mr. Warnock with more than $7 million in attack ads mentioning inflation. “Senator Warnock helped fuel the inflation squeeze, voting for nearly $2 trillion in reckless spending,” the group One Nation, which is aligned with Senator Mitch McConnell of Kentucky, the Republican leader, says in an ad that aired in the state in August.Democrats have tried to deflect blame, portraying inflation as the product of global forces like crimped supply chains while touting their efforts to lower the cost of electricity and prescription drugs. They have aired nearly $50 million of their own ads mentioning inflation, often pinning it on corporate profit gouging. “What if I told you shipping container companies have been making record profits while prices have been skyrocketing on you?” Mr. Warnock said in an ad aired earlier this year.Candidates and independent groups that support the stimulus payments have spent just $7 million nationwide on advertisements mentioning the direct checks, the child tax credit or the rescue plan overall, according to data from AdImpact.Far more money has been spent by Democrats on other issues, including $27 million on ads mentioning infrastructure, which was another early economic win for Mr. Biden, and $95 million on ads that mention abortion rights..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-ok2gjs{font-size:17px;font-weight:300;line-height:25px;}.css-ok2gjs 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.Mr. Warnock has not cited any of the rescue plan’s provisions in his advertisements, focusing instead on issues like personal character, health care and bipartisanship, according to AdImpact data.Senator Raphael Warnock, who is locked in a tight re-election campaign this year, barely mentions the relief checks.Nicole Craine for The New York TimesFor months after the rescue plan’s passage, Democratic leaders were confident that they had solved an economic policy dilemma that has vexed Democrats and Republicans stretching back to the George W. Bush administration: They were giving Americans money, but voters weren’t giving them any credit.Tax cuts and direct spending aid approved by Mr. Bush, President Barack Obama and President Donald J. Trump failed to win over large swaths of voters and spare incumbent parties from large midterm losses. Economists and strategists concluded that was often because Americans had not noticed they had benefited from the policies each president was sure would sway elections.That was not the case with the direct checks and the child tax credit. People noticed them. But they still have not turned into political selling points at a time of rapid inflation.As the November elections approach, most voters appear to be motivated by a long list of other issues, including abortion, crime and a range of economic concerns.Mr. Warnock’s speech last week to a group of Democrats in an unfinished floor of an office space in Dunwoody, a northern Atlanta suburb, underscored that shift in emphasis.He began the policy section of the rally with a quick nod to the child credit, then ticked through a series of provisions from bills that Mr. Biden has signed in the last two years: highways and broadband internet tied to a bipartisan infrastructure law, semiconductor plants spurred by a China competitiveness law, a gun safety law and aid for veterans exposed to toxic burn pits. He lingered on one piece of Mr. Biden’s Inflation Reduction Act: a cap on the cost of insulin for Medicare patients, which Mr. Warnock cast as critical for diabetics in Georgia, particularly in Black communities.The direct payments never came up.When asked by a reporter why he was not campaigning on an issue that had been so central to his election and whether he thought the payments had contributed to inflation, Mr. Warnock deflected.“We in Georgia found ourselves trying to claw back from a historic pandemic, the likes of which we haven’t seen in our lifetime, which created an economic shutdown,” he said. “And now, seeing the economy open up, we’ve experienced major supply chain issues, which have contributed to rising costs.”Direct pandemic payments were begun under Mr. Trump and continued under Mr. Biden, with no serious talk of another round after the ones delivered in the rescue plan. Most Democrats had hoped the one-year, $100 billion child credit in the rescue plan would be made permanent in a new piece of legislation.But the credit expired, largely because Senator Joe Manchin III, Democrat of West Virginia and a key swing vote, opposed its inclusion in what would become the Inflation Reduction Act, citing concerns the additional money would exacerbate inflation.Senator Michael Bennet, Democrat of Colorado, was one of the Senate’s most vocal cheerleaders for that credit and an architect of the version included in the rescue plan. His campaign has aired Spanish-language radio ads on the credit in his re-election campaign, targeting a group his team says is particularly favorable toward it, but no television ads. In an interview last week outside a Denver coffee shop, Mr. Bennet conceded the expiration of the credit has sapped some of its political punch.“It certainly came up when it was here, and it certainly came up when it went away,” he said. “But it’s been some months since that was true. I think, obviously, we’d love to have that right now. Families were getting an average of 450 bucks a month. That would have defrayed a lot of inflation that they’re having to deal with.”Mr. Biden’s advisers say the rescue plan and its components aren’t being deployed on the trail because other issues have overwhelmed them — from Mr. Biden’s long list of economic bills signed into law as well as the Supreme Court decision overturning Roe v. Wade that has galvanized the Democratic base. They acknowledge the political and economic challenge posed by rapid inflation, but say Democratic candidates are doing well to focus on direct responses to it, like the efforts to reduce costs of insulin and other prescription drugs.Ms. Lake, the Democratic pollster, said talking more about the child credit could help re-energize Democratic voters for the midterms. Mr. Warnock’s speech in Dunwoody — an admittedly small sample — suggested otherwise.Mr. Warnock drew cheers from the audience after he called the child tax credit “the single largest tax cut for middle- and working-class families in American history.”But his biggest ovation, by far, came when the economics section of his speech had ended, and Mr. Warnock had moved on to defending abortion rights. More

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    US National Debt Tops $31 Trillion for First Time

    America’s borrowing binge has long been viewed as sustainable because of historically low interest rates. But as rates rise, the nation’s fiscal woes are getting worse.WASHINGTON — America’s gross national debt exceeded $31 trillion for the first time on Tuesday, a grim financial milestone that arrived just as the nation’s long-term fiscal picture has darkened amid rising interest rates.The breach of the threshold, which was revealed in a Treasury Department report, comes at an inopportune moment, as historically low interest rates are being replaced with higher borrowing costs as the Federal Reserve tries to combat rapid inflation. While record levels of government borrowing to fight the pandemic and finance tax cuts were once seen by some policymakers as affordable, those higher rates are making America’s debts more costly over time.“So many of the concerns we’ve had about our growing debt path are starting to show themselves as we both grow our debt and grow our rates of interest,” said Michael A. Peterson, the chief executive officer of the Peter G. Peterson Foundation, which promotes deficit reduction. “Too many people were complacent about our debt path in part because rates were so low.”The new figures come at a volatile economic moment, with investors veering between fears of a global recession and optimism that one may be avoided. On Tuesday, markets rallied close to 3 percent, extending gains from Monday and putting Wall Street on a more positive path after a brutal September. The rally stemmed in part from a government report that showed signs of some slowing in the labor market. Investors took that as a signal that the Fed’s interest rate increases, which have raised borrowing costs for companies, may soon begin to slow.Higher rates could add an additional $1 trillion to what the federal government spends on interest payments this decade, according to Peterson Foundation estimates. That is on top of the record $8.1 trillion in debt costs that the Congressional Budget Office projected in May. Expenditures on interest could exceed what the United States spends on national defense by 2029, if interest rates on public debt rise to be just one percentage point higher than what the C.B.O. estimated over the next few years.The Fed, which slashed rates to near zero during the pandemic, has since begun raising them to try to tame the most rapid inflation in 40 years. Rates are now set in a range between 3 and 3.25 percent, and the central bank’s most recent projections saw them climbing to 4.6 percent by the end of next year — up from 3.8 percent in an earlier forecast.Federal debt is not like a 30-year mortgage that is paid off at a fixed interest rate. The government is constantly issuing new debt, which effectively means its borrowing costs rise and fall along with interest rates.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Factory Jobs Are Booming Like It’s the 1970s

    U.S. manufacturing is experiencing a rebound, with companies adding workers amid high consumer demand for products.WASHINGTON — Ever since American manufacturing entered a long stretch of automation and outsourcing in the late 1970s, every recession has led to the loss of factory jobs that never returned. But the recovery from the pandemic recession has been different: American manufacturers have now added enough jobs to regain all that they shed — and then some.The resurgence has not been driven by companies bringing back factory jobs that had moved overseas, nor by the brawny industrial sectors and regions often evoked by President Biden, former President Donald J. Trump and other champions of manufacturing.Instead, the engines in this recovery include pharmaceutical plants, craft breweries and ice-cream makers. The newly created jobs are more likely to be located in the Mountain West and the Southeast than in the classic industrial strongholds of the Great Lakes.American manufacturers cut roughly 1.36 million jobs from February to April of 2020, as Covid-19 shut down much of the economy. As of August this year, manufacturers had added back about 1.43 million jobs, a net gain of 67,000 workers above prepandemic levels.Data suggest that the rebound is largely a product of the unique circumstances of the pandemic recession and recovery. Covid-19 crimped global supply chains, making domestic manufacturing more attractive to some companies. Federal stimulus spending helped to power a shift in Americans’ buying habits away from services like travel and restaurants and toward goods like cars and sofas, helping domestic factory production — and with it, job growth — to bounce back much faster than it did in the previous two recessions.Treasury Secretary Janet L. Yellen said that the recovery of manufacturing jobs was a result of the unique nature of the recession, which was induced by the pandemic, and the robust federal response, including legislation like the $1.9 trillion American Rescue Plan of 2021.“We had a huge shift away from services and into goods that spurred production and manufacturing and very rapid recovery in the U.S. economy,” Ms. Yellen told reporters during a trip to Detroit this month. The support for local economies and small businesses included in Mr. Biden’s rescue plan, she said, “has been tremendously helpful in restoring the health of the job market and given the shifting in spending patterns, I think that’s been to the benefit of manufacturing.”American manufacturers, like many industries, have struggled to find raw materials, component parts and skilled workers. And yet, they have continued to create jobs at a rate that has surprised even some longtime promoters of American factory employment.“We have 67,000 more workers today than we had in February 2020,” said Chad Moutray, the chief economist for the National Association of Manufacturers. “I didn’t think we would get there, to be honest with you.”In recessions over the last half century, factories have typically laid off a greater share of workers than other employers in the economy, and they have been slower to add jobs back in recoveries. Often, companies have used those economic inflection points to accelerate their pace of outsourcing jobs to foreign countries, where wages are significantly lower, and to invest in technology that replaces human workers.The State of Jobs in the United StatesEconomists have been surprised by recent strength in the labor market, as the Federal Reserve tries to engineer a slowdown and tame inflation.August Jobs Report: Job growth slowed in August but stayed solid, suggesting that the labor market recovery remains resilient, even as companies pull back on hiring.Job Market Trends: The labor market appears hot, but the supply of labor has fallen short, holding back the economy. Here is why.Gig Workers: Labor activists hoped President Biden would tackle gig worker issues aggressively. But a year and a half into his presidency, little has been done at the federal level.Black Employment: Black workers saw wages and employment rates go up in the wake of the pandemic. But as the Federal Reserve tries to tame inflation, those gains could be eroded.This time was different. Factory layoffs roughly matched those in the services sector in the depth of the pandemic recession. Economists attribute that break in the trend to many U.S. manufacturers being deemed “essential” during pandemic lockdowns, and the ensuing surge in demand for their products by Americans.Manufacturing jobs quickly rebounded in the spring of 2020, then began to climb at a much faster pace than has been typical for factory job creation in recent decades. Since June 2020, under both Mr. Trump and Mr. Biden, factories have added more than 30,000 jobs a month.Sectors that hemorrhaged employment in recent recessions have fared much better in this recovery. Furniture makers, who eliminated a third of their jobs in the 2008 financial crisis and its aftermath, have nearly returned to their prepandemic employment levels. So have textile mills, paper products companies and computer equipment makers.Manufacturers say the numbers could be even stronger, if not for their continued difficulties attracting and hiring skilled workers amid 3.7 percent unemployment.Fernando Torres, vice president of operations for Greene Tweed, a Pennsylvania-based manufacturer of materials and components used by the aerospace and semiconductor industries, said his company has had to become more flexible to attract new workers and offer more attractive salaries and benefits. He has been looking for employees with different backgrounds that the company can train to develop the skills to fill open jobs, and said that it has been hard to retain staff because competitors are aggressively trying to lure them away.But Mr. Torres said that Greene Tweed, which employs just fewer than 2,000 workers, did not plan to give up, considering the demand for his company’s products.“We are looking for lots of employees,” Mr. Torres said. “We are not looking at slowing down.”Chuck Wetherington, president of BTE Technologies, a manufacturer of medical devices based in Maryland, said that he was trying to expand his work force of around 40 by 10 percent. A lack of workers, he said, has become a bigger problem than supply chain disruptions.“Our backlog continues to grow,” Mr. Wetherington said at a National Association of Manufacturers briefing. “I just can’t find the employees.”Mr. Biden has pushed a variety of legislative initiatives to boost domestic manufacturing, including direct spending on infrastructure, tax credits and other subsidies for companies like battery makers and semiconductor factories, and new federal procurement requirements that benefit manufacturers located in the United States. Biden administration officials say those policies could play a decisive role in further encouraging factory job growth in the coming months and years, in hopes of continuing the expansion and possibly pushing factory employment back to pre-2008 levels.Other factors could help hasten more American manufacturing. Delayed deliveries, sky-high shipping prices and other supply chain issues during the pandemic have encouraged some chief executives to think about moving production closer to home. The average price to ship a 40-foot container internationally has fallen sharply in recent months, but it is still three times higher than it was before the pandemic, according to tracking by the freight booking platform Freightos.A container ship at the Port of Los Angeles. As Covid-19 crimped global supply chains, domestic manufacturing became more attractive to some companies.Stella Kalinina for The New York TimesBusinesses are also beginning to question the wisdom of producing so many goods in China, amid rising tensions between Washington and Beijing over trade and technology. The Chinese government’s insistence on a zero-Covid policy, despite the severe disruptions it has caused for the economy, has especially shaken many executives’ confidence in their ability to operate in China. Mr. Biden has also maintained many tariffs on Chinese imports imposed by Mr. Trump.“The pandemic response by China has definitely prompted more than a rethink on where to put new money. I think we are actually beginning to see action,” said Mary Lovely, a professor of economics at Syracuse University and a senior fellow at the Peterson Institute for International Economics. How much of that investment came to the United States was unclear. “I don’t think anyone really knows,” she added.Ed Gresser, the vice president of trade and global markets at the Progressive Policy Institute, a left-leaning think tank, said that the United States had seen a noticeable uptick in new manufacturing establishments since 2019, especially in the pharmaceutical sector, which might be a response to the pandemic. Food and beverage establishments have also continued to grow.But while growth in the U.S. manufacturing sector was strong last year, so were imports of manufactured goods, Mr. Gresser said. That suggests, he said, that the growth of manufacturing probably reflects strong consumer demand in the United States through the pandemic, rather than a shift to production in the United States.While attitudes toward doing business in China have quickly soured, patterns of production have been slower to change. A survey of 117 leading companies released in August by the U.S. China Business Council found that business optimism had reached record lows, but U.S. corporations remained overwhelmingly profitable in China, which is still home to the world’s most expansive ecosystem of factories and a lucrative consumer market.Eight percent of the surveyed companies reported moving segments of their supply chain out of China to the United States in the past year, while another 16 percent had moved some operations to other countries. But 78 percent of the companies said they had not shifted any business away from China.The Biden administration is hopeful that new policies — including a manufacturing competitiveness law and a climate law the president signed this summer — will encourage more companies to leave China for the United States, particularly cutting-edge industries like clean energy and advanced computing.Brian Deese, the director of the National Economic Council, said in an interview that the laws were already changing the calculus for investment and job creation in the United States. In recent weeks, White House officials have promoted factory announcements from automakers, battery companies and others, directly linked to the climate bill.“One of the most striking things that we are seeing now,” Mr. Deese said, “is the number of companies — U.S. companies and global companies — that are committing to build and expand their manufacturing footprint in the United States, and doing so based on their view that not only did the pandemic highlight the need for more resilience in their supply chains, but that the United States is creating a policy environment that makes long term investment here in the United States more attractive.” More

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    Pandemic Aid Cut U.S. Poverty to New Low in 2021, Census Bureau Reports

    A measure that accounts for all federal subsidies also showed a reduction of almost half in the number of children below the poverty level.A second year of emergency pandemic aid from the federal government drove poverty to the lowest level on record in 2021 and cut the number of poor children by nearly half, the Census Bureau reported on Tuesday.The poverty rate fell to 7.8 percent, down from 9.2 percent the previous year, according to the Supplemental Poverty Measure, a yardstick that includes wages, taxes and the fullest account of government aid. In addition, the share of children in poverty sank to another record low of 5.2 percent, down 4.5 percentage points from 2020, a sharp acceleration of a long-term trend. In large part, those changes reflect the trillions of stimulus dollars approved by Congress, culminating in the Democrats’ American Rescue Plan of March 2021, especially the expanded child tax credit, which temporarily provided an income guarantee to families with children.Real median household income reached $70,800, not significantly different from 2020, as increases in full-time employment were offset by rising inflation and decreases in unemployment insurance, which had been supplemented above normal levels through the summer of 2021. The “official” poverty rate, generally considered outdated because it omits hundreds of billions spent on programs like tax credits and housing assistance, also did not change significantly from the previous year.How Poverty Has DecreasedThe official poverty rate was 11.6 percent last year, but the supplemental rate — which accounts for the impact of government programs — fell to 7.8 percent.

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    Share of the population living in poverty
    The supplemental rate adjusts for geographic differences. It also includes wage income, taxes and the fullest account of government aid.Sources: Census Bureau; Columbia UniversityKarl RussellThis data covers a year that was profoundly influenced by a set of emergency programs that have largely expired. Since then, many families have again found themselves under financial strain.Progressives see the reduction in poverty — even if temporary — as evidence that the federal government has the power to give people a better standard of living and that it should continue to do so in the future.“Man, I’m just grinning ear to ear,” said Luke Shaefer, who runs a center on poverty at the University of Michigan and sees the expanded child tax credit as a blueprint for a permanent program. “Americans wonder if the government can shape successful policies that address poverty. This offers incontrovertible evidence that it can.”Inflation F.A.Q.Card 1 of 5What is inflation? More