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    Modern Monetary Theory Got a Pandemic Tryout. Inflation Is Now Testing It.

    The sun was sinking low over Long Island Sound as Stephanie Kelton, wearing the bright red suit jacket she had donned to give a virtual guest lecture to university students in London that morning, perched before a pillow fort she had constructed atop the heavy wooden desk in her home office.The setup was meant to keep out noise as she recorded the podcast she co-hosts, a MarketWatch production called the “Best New Ideas in Money.” The room was hushed except for Ms. Kelton, who bantered energetically with the producers she was hearing through noise-blocking headphones, sang a Terri Gibbs song and made occasional edits to the script. At one point, she muttered, “That sounds like Stephanie.”What Stephanie Kelton sounds like, circa early 2022, is the star architect of a movement that is on something of a victory lap. A victory lap with an asterisk.Ms. Kelton, 52, is the most familiar public face of Modern Monetary Theory, which posits that if a government controls its own currency and needs money — to make sure its citizens have food and places to live when, say, a global pandemic pushes many out of work — it can just print it, as long as its economy has the ability to churn out the needed goods and services.In the M.M.T. view of the world, “How will you pay for it?” is a vapid policy question. Real-world resources and political priorities determine how much lawmakers can and should spend.It is an idea that was forged, and put to something of a test, during a low-inflation era.When Ms. Kelton’s book, “The Deficit Myth,” was published in June 2020 and shot onto best seller lists, inflation had been weak for decades and had dropped below 1 percent as consumers retrenched in the pandemic. The government had begun to spend rapidly to try to prop up flailing households.When Ms. Kelton appeared on a Bloomberg podcast episode, “How M.M.T. Won the Fiscal Policy Debate,” in early 2021, inflation had bounced back to around 2 percent.But by a chilly January afternoon, as ducks flew over the frosty estuary outside Ms. Kelton’s house near Stony Brook University, where she teaches, inflation had rocketed up to 7 percent. The government’s debt pile has exploded to $30 trillion, up from about $10 trillion at the start of the 2008 downturn and $5 trillion in the mid-1990s.The good news: The government has had no trouble selling bonds to fund its spending, contrary to the direst projections of deficit scolds.The bad news: Some economists blame big spending in the pandemic for today’s rapid price increases. The government will release fresh Consumer Price Index data this week, and it is expected to show inflation running at its fastest pace since 1982.And that may be why Ms. Kelton, and the movement she has come to represent, now seem anxious to control the narrative. The pandemic spending wasn’t entirely consistent with M.M.T principles, they say — it wasn’t assessed carefully for its inflationary effects as it was being drawn up, because it was crisis policy. But the situation has underlined how hard it is to know just where the economy’s constraints lay, and how difficult it is to fix things once you run into them.Last summer, Ms. Kelton called inflation a temporary sign of “growing pains.” By the fall, she painted it as a good problem to solve, compared with a continued weak economy. As it lingers, she has argued that diagnosing what is causing it is key.“Can we blame ‘MMT’ for the run-up in inflation?” she tweeted rhetorically last month, just hours before her podcast recording.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: We asked readers to send questions about inflation. Top experts and economists weighed in.What’s to Blame: Did the stimulus cause prices to rise? Or did pandemic lockdowns and shortages lead to inflation? A debate is heating up in Washington.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.“Of course not.”Emon Hassan for The New York TimesThe economy is the limitTo understand how M.M.T. fits in with other dominant ways of thinking, it’s helpful to take a trip to the beach.In economics, there’s a school of thought sometimes called “freshwater.” It’s the set of ideas that became popular at inland universities in the 1970s, when they began to embrace rational markets and limited government intervention to fight recessions. There’s also “saltwater” thinking, an updated version of Keynesianism that argues that the government occasionally needs to jump-start the economy. It has traditionally been championed in the Ivy League and other top-ranked schools on the coasts.You might call the school of thought Ms. Kelton is popularizing, from a bay that feeds into the East River, brackish economics.M.M.T. theorists argue that society should feel capable of spending to achieve its goals to the extent that there are resources available to fulfill them. Deficit spending need not be constrained to recessions, even theoretically. Want to build a road? No problem, so long as you have asphalt and construction workers. Want to feed children free lunches? Also not a problem, so long as you have the food and the cafeteria workers.What became Modern Monetary Theory began to percolate among a small group of academics when Ms. Kelton, a former military brat and one-time furniture saleswoman, was a graduate student.She had a gap period between graduating with a bachelor’s degree from California State University, Sacramento and attending Cambridge University on a Rotary scholarship, and her college economics professor recommended that she spend the time studying with L. Randall Wray, an early pioneer in the set of ideas.They hit it off. She remained in Mr. Wray’s circle, and he — and Warren Mosler, a hedge fund manager who had written a book on what we get wrong about money — convinced her that the way America understood cash, revenues and budgeting was all backward.Ms. Kelton earned her doctorate at The New School, long a booster of out-of-mainstream economic thinking, and went on to teach at the University of Missouri-Kansas City. She, Mr. Wray, who was there at the time, and their colleagues mentored doctoral students and began to write academic papers on the new way of thinking.But academic missives reached only a small circle of readers. After the 2008 financial crisis punched a hole in the economy that would take more than a decade to fill, Ms. Kelton and her colleagues, invigorated with a new urgency, began a blog called “New Economic Perspectives.” It was a bare bones white, red and black layout, using a standard WordPress template, that served as a place for M.M.T. writers to make their case (and, in its early days, featured a #Occupy[YourCityHere] tab).The theory picked up some fervent followers but limited popular acceptance, charitably, and outright derision, uncharitably. Mainstream economists panned it as overly simplistic. Many were confused about what it was arguing.“I have heard pretty extreme claims attributed to that framework and I don’t know whether that’s fair or not,” Jerome H. Powell, the Fed chair, said in 2019. “The idea that deficits don’t matter for countries that can borrow in their own currency is just wrong.”Ms. Kelton kept the faith. She and her colleagues held conferences, including one in 2018 at The New School where she gave a lecture on “mainstreaming M.M.T.”Rohan Grey organized the conference and a media reception afterward at an Irish pub (“‘Shades of Green,’ monetary pun intended,” he said). It was attended by organizers, academics, “lay people” and lots of journalists. At the happy hour — which lasted until 1 a.m. — Ms. Kelton was mobbed when she walked in the door. “She was already on her way to super celebrity status at that point,” said Mr. Grey, an assistant professor at Willamette Law.When she gave presentations on her ideas, Ms. Kelton would occasionally display a quote often attributed to Mahatma Gandhi: “First they ignore you, then they laugh at you, then they fight you. Then you win.”And her star was rising more broadly. She advised Bernie Sanders’ presidential campaigns in 2016 and 2020, getting to know the Vermont senator. He never fully publicly embraced M.M.T., but he nevertheless advanced policies — like Medicare for All — that reflected its ideals.She amassed a following of tens of thousands, later growing to 140,000, on Twitter. Her first handle, @deficitowl, prompted ardent fans to gift her wise bird figurines, some of which are still on display in her home office. She cultivated a small coterie of prominent journalists who were interested in the idea, most notably Joe Weisenthal at Bloomberg. She signed a book deal. She was regularly talking to Democratic lawmakers, sometimes in groups.Her idea percolated through Washington’s media and liberal policy circles. Mainstream economic predictions that huge debt loads would come back to haunt nations like Japan had not played out, the anemic rebound from 2008 had scarred society and called the size of the crisis response into question. Ms. Kelton and her colleagues were ensuring that their theory on benign deficits was an ever-present feature of the blossoming debate.Then the pandemic hit, and suddenly the theoretical question of just how much the government could spend before it ran into limits faced a real-world experiment.The $1.9 Trillion FloorWithout thinking about paying for it, Donald J. Trump’s government quickly passed a $2.3 trillion relief package in late March 2020. In December, it followed that up with another $900 billion. President Biden took office in early 2021, and promptly added $1.9 trillion more.Inflation F.A.Q.Card 1 of 6What is inflation? More

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    Democrats Blast Corporate Profits as Inflation Surges

    Politicians are placing more blame on greedy companies as prices stay high. But booming consumer demand is enabling firms to charge more.Inflation remains rapid as the economy enters 2022, and Democrats have begun pointing to a new culprit for the high and lasting price increases: Greedy corporations.Senator Sherrod Brown of Ohio, Senator Elizabeth Warren of Massachusetts, and the White House spokeswoman, Jen Psaki, have been among those pointing to excessive profits in certain industries as one thing jacking up costs for consumers. They don’t blame overall inflation on price-gouging businesses — but the implication is that higher prices are partly the product of corporate opportunism.The explanation for inflation is the latest in a string Democrats have offered since price gains shot up to uncomfortably high levels last year. It is partly grounded in economic reality, partly in political necessity: Rising prices are burdening and unsettling consumers, making them a liability for a party with a tenuous hold on Congressional control headed into 2022 midterm elections.Prices are increasing at the fastest pace since 1982, and while inflation is broadly expected to fade in the year ahead, the speed and extent of that moderation is uncertain. Even if price gains slow down, they could remain a headache for the Biden administration if they continue to rise more rapidly than was normal before the pandemic — which is what economists increasingly expect. They had hovered around or below 2 percent for years, but Federal Reserve officials think they will reach an average of 2.6 percent by the end of this year.The administration has limited power over prices: It is making tweaks around the edges to help to tamp them down, but keeping a lid on inflation is mostly the job of the Fed, which has signaled it expects to begin raising interest rates this year to help control it.Still, as consumers feel the pinch of higher prices for food, gas and household goods, it’s creating a political messaging problem for Democrats. Lawmakers and the White House had initially argued that fast inflation was a sign that airfares and hotel rates were bouncing back and would fade quickly, but supply chain snarls and booming consumer demand for goods kept them elevated throughout 2021. More recently, price pressures have begun to broaden to service categories, like rent, in which increases tend to be long-lasting — and as wages climb swiftly, it raises the possibility that companies will keep lifting prices to cover their costs.As inflation proves stubbornly sticky, administration officials and prominent lawmakers have refined their message to focus more blame on corporations, especially those in concentrated industries with a handful of powerful firms, like meat processing or gas.Many companies — from car dealerships to beauty stores and beef sellers — are raking in bigger profits as they successfully raise their prices or discount less while still managing to sell as much or more. But economists have pointed out that in many cases, blaming big firms for worsening inflation is overly simplistic. Industries have been relatively concentrated for years, but businesses now have the wherewithal to charge more because consumers are spending strongly. That owes partly to government stimulus checks and other benefits that have put more money in shoppers’ pockets.“It’s what you would fully expect when demand goes up,” said Jason Furman, a Harvard economist and a former chairman of the White House Council of Economic Advisers during the Obama administration.The laws of supply and demand have not stopped many on the political left from calling companies out.What to Know About Inflation in the U.S.Inflation, Explained: What is inflation, why is it up and whom does it hurt? We answered some common questions.The Fed’s Pivot: Jerome Powell’s abrupt change of course moved the central bank into inflation-fighting mode.Fastest Inflation in Decades: The Consumer Price Index rose 6.8 percent in November from a year earlier, its sharpest increase since 1982.Why Washington Is Worried: Policymakers are acknowledging that price increases have been proving more persistent than expected.The Psychology of Inflation: Americans are flush with cash and jobs, but they also think the economy is awful.“Profits at the biggest U.S. companies shot above $3 trillion this year, and the margins keep growing,” Mr. Brown, chairman of the Senate Banking Committee, said during a recent hearing. “Mega corporations would rather pass higher costs on to consumers than cut into their profits.”Ms. Warren has pointed to robust corporate profits as a sign that companies are partly to blame for rising costs.“Corporations are exploiting the pandemic to gouge consumers with higher prices on everyday essentials, from milk to gasoline,” she posted on Twitter on Nov. 26. “American families shouldn’t be bankrolling corporate America’s record-high profits.”And White House economic advisers have pointed to what they have called price gouging behavior in a few specific, concentrated industries. Mr. Biden has publicly encouraged an examination of oil company pricing, and the administration has announced measures to try to combat price fixing in meat processing, pointing out that four large companies control 85 percent of the beef market.“When too few companies control such a large portion of the market, our food supply chains are susceptible to shocks,” the administration said in a Jan. 3 release, repeating an argument administration officials have increasingly highlighted. “Mega corporations would rather pass higher costs on to consumers than cut into their profits,” Senator Sherrod Brown has said.Tom Brenner for The New York Times“I would say there are some areas where we have seen corporations benefit, profit from the pandemic,” Ms. Psaki said at a news conference in December.It is the case that big company profits are surging across many industries, a sign that companies are either selling more goods and services or are managing to eke more profit out of each unit that they are selling thanks to higher prices or better productivity. Based on corporate earnings calls and a spate of data, it’s likely a combination of those factors.Using data reported by Standard & Poor’s, the market analyst Edward Yardeni estimates that 2021 was a year of robust profit margins — the amount companies earn after subtracting their costs. After contracting sharply early in the pandemic, margins jumped to a record-high 13.7 percent in the second quarter before ticking down to 13.6 percent in the third.He thinks that owes partly to efficiency improvements, and partly to the fact that some firms have raised prices by more than their costs have climbed, something that they had previously struggled to do without losing customers.“It kind of became culturally acceptable to raise prices,” Mr. Yardeni said. “Consumers could understand that many corporations are under pressure to pass on their costs.”Inflation F.A.Q.Card 1 of 6What is inflation? More

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    Child Tax Credit’s Extra Help Ends, Just as Covid Surges Anew

    A pandemic benefit that many progressives hoped to make permanent has lapsed in a congressional standoff. Researchers say it spared many from poverty.For millions of American families with children, the 15th of the month took on a special significance in 2021: It was the day they received their monthly child benefit, part of the Biden administration’s response to the pandemic.The payments, which started in July and amounted to hundreds of dollars a month for most families, have helped millions of American families pay for food, rent and child care; kept millions of children out of poverty; and injected billions of dollars into the U.S. economy, according to government data and independent research.Now, the benefit — an expansion of the existing child tax credit — is ending, just as the latest wave of coronavirus cases is keeping people home from work and threatening to set off a new round of furloughs. Economists warn that the one-two punch of expiring aid and rising cases could put a chill on the once red-hot economic recovery and cause severe hardship for millions of families already living close to the poverty line.“It’s going to be hard next month, and just thinking about it, it really makes me want to bite my nails to the quick,” said Anna Lara, a mother of two young children in Huntington, W.Va. “Honestly, it’s going to be scary. It’s gong to be hard going back to not having it.”Ms. Lara, 32, lost her job in the pandemic, and with the cost of child care rising, she has not been able to return to work. Her partner kept his job, but the child benefit helped the couple make ends meet at a time of reduced income and rising prices.“Your children watch you, and if you worry, they catch on to that,” she said. “With that extra cushion, we didn’t have to worry all the time.”The end of the extra assistance for parents is the latest in a long line of benefits “cliffs” that Americans have encountered as pandemic aid programs have expired. The Paycheck Protection Program, which supported hundreds of thousands of small businesses, ended in March. Expanded unemployment benefits ended in September, and earlier in some states. The federal eviction moratorium expired last summer. The last round of stimulus payments landed in Americans’ bank accounts last spring.Relative to those programs, the rollback in the child tax credit is small. The Treasury Department paid out about $80 billion over six months in the form of checks and direct deposits of up to $300 per child each month. That is far less than the more than $240 billion in stimulus payments issued on a single day last March.Unlike most other programs created in response to the pandemic, the child benefit was never intended to be temporary, at least according to many of its backers. Congress approved it for a single year as part of the $1.9 trillion American Rescue Plan, but many progressives hoped that the payments, once started, would prove too popular to stop.That didn’t happen. Polls found the public roughly divided over whether the program should be extended, with opinions splitting along partisan and generational lines. And the expanded tax credit failed to win over the individual whose opinion mattered most: Senator Joe Manchin III, Democrat of West Virginia, who cited concerns over the cost and structure of the program in his decision to oppose Mr. Biden’s climate, tax and social policy bill. The bill, known as the Build Back Better Act, cannot proceed in the evenly divided Senate without Mr. Manchin’s support.To supporters of the child benefit, the failure to extend it is especially frustrating because, according to most analyses, the program itself has been a remarkable success. Researchers at Columbia University estimate that the payments kept 3.8 million children out of poverty in November, a nearly 30 percent reduction in the child poverty rate. Other studies have found that the benefit reduced hunger, lowered financial stress among recipients and increased overall consumer spending, especially in rural states that received the most money per capita.Congress last spring expanded the existing child tax credit in three ways. First, it made the benefit more generous, providing as much as $3,600 per child, up from $2,000. Second, it began paying the credit in monthly installments, usually deposited directly into recipients’ bank accounts, turning the once-yearly windfall into something closer to the children’s allowances common in Europe.Finally, the bill made the full benefit available to millions who had previously been unable to take full advantage of the credit because they earned too little to qualify. Poverty experts say that change, known in tax jargon as “full refundability,” was particularly significant because without it, a third of children — including half of all Black and Hispanic children, and 70 percent of children being raised by single mothers — did not receive the full credit. Mr. Biden’s plan would have made that provision permanent.“What we’ve seen with the child tax credit is a policy success story that was unfolding, but it’s a success story that we risk stoping in its tracks just as it was getting started,” said Megan Curran, director of policy at Columbia’s Center on Poverty and Social Policy. “The weight of the evidence is clear here in terms of what the policy is doing. It’s reducing child poverty and food insufficiency.”But the expanded tax credit doesn’t just go to the poor. Couples earning as much as $150,000 a year could receive the full $3,600 benefit — $3,000 for children 6 and older — and even wealthier families qualify for the original $2,000 credit. Critics of the policy, including Mr. Manchin, have argued that it makes little sense to provide aid to relatively well-off families. Many supporters of the credit say they’d happily limit its availability to wealthier households in return for maintaining it for poorer ones.Mr. Manchin has also publicly questioned the wisdom of unconditional cash payments, and has privately voiced concerns that recipients could spend the money on opioids, comments that were first reported by The Wall Street Journal and confirmed by a person familiar with the discussion. But a survey conducted by the Census Bureau found that most recipients used the money to buy food, clothing or other necessities, and many saved some of the money or paid down debt. Other surveys have found similar results.For one of Mr. Manchin’s constituents, Ms. Lara, the first monthly check last year arrived at an opportune moment. Her dishwasher had broken days earlier, and the $550 a month that she and her family received from the federal government meant they could replace it.Ms. Lara, who has a 6-year-old daughter and a 3-year-old son and whose partner earns about $40,000 a year, said the family had long lived “right on the edge of need” — not poor, but never able to save enough to withstand more than a modest setback.The monthly child benefit, she said, let them step a bit further back from the edge. It allowed her to get new shoes and a new car seat for her daughter, stock up on laundry detergent when she found it on sale and fix the brakes on her car.A line at a Covid testing site in Atlanta on Friday. The child tax benefit is ending just as the latest wave of coronavirus cases is keeping people home from work.Nicole Craine for The New York Times“None of the dash lights are on, which is amazing,” she said.Some researchers have questioned the policy’s effectiveness, particularly over the long term. Bruce D. Meyer, an economist at the University of Chicago who studies poverty, said that whatever the merits of direct cash payments at the height of the pandemic-induced disruptions, a permanent policy of providing unconditional cash to parents could have unintended consequences. He and several co-authors recently published a working paper finding that the child benefit could discourage people from working, in part because it eliminated the work incentives built into the previous version of the tax credit.“Early on, we just wanted to get cash in people’s hands — we were worried about a recession, we were worried about people being able to pay for their groceries,” Mr. Meyer said. Now, he said, “we certainly should be more focused on the longer-term effects, which include likely larger effects on labor supply.”Analyses of the data since the new child benefit took effect, however, have found no evidence that it has done much to discourage people from working, and some researchers say it could actually lead more people to work by making it easier for parents of young children to afford child care.“There’s every reason to believe that in the current labor market, the child tax credit is work-enabling, and no evidence to the contrary has been presented,” said Samuel Hammond, director of poverty and welfare policy at the Niskanen Center, a research organization in Washington.Mr. Hammond said the child benefit should also have broader economic benefits. In a report last summer, he estimated that the expansion would increase consumer spending by $27 billion nationally and create the equivalent of 500,000 full-time jobs. The biggest impact, on a percentage basis, would come in rural, mostly Republican-voting states where families are larger and incomes are lower, on average.Some Republican critics of the expanded child tax credit, including Senator Roy Blunt of Missouri, have argued that it has essentially done too much to increase spending — that by giving people more money to spend when the supply chain is already strained, the government is contributing to faster inflation.But many economists are skeptical that the tax credit has played much of a role in causing high inflation, in part because it is small compared with both the economy and the earlier rounds of aid distributed during the pandemic.“That’s a noninflationary program,” said Joe Brusuelas, chief economist at the accounting firm RSM. “That’s dedicated toward necessities, not luxuries.”For those receiving the benefit, inflation is an argument for maintaining it. Ms. Lara said she had noticed prices going up for groceries, utilities and especially gas, stretching her budget even thinner.“Right now, both of my vehicles need gas and I can’t put gas in the car,” she said. “But it’s OK, because I’ve got groceries in the house and the kids can play outside.”Emily Cochrane More

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    What We Learned About the Economy in 2021

    For once, the government tried overheating the economy. For better and worse, it succeeded.For people who study the vicissitudes of the economy, 2021 has been the most interesting year of the 2000s.It hasn’t been the most dramatic (that would be 2008 or 2020), and neither the best (2000 or 2019) nor the worst (2009). Rather, it has been a year in which economic dynamics that had seemed entrenched for decades came apart, or changed in fundamental ways. Workers attained the upper hand over employers; supply chains broke; inflation surged; and the economy rebuilt itself from its depressed pandemic levels with astounding speed.In contrast to the last economic cycle, the government tried overheating the economy for once. For better and worse, it succeeded.The unemployment rate, 6.7 percent in December 2020, fell to 4.2 percent 11 months later. That same shift took three and a half years in the last expansion, from March 2014 to September 2017.But the flip side has been soaring prices and many goods in short supply. Inflation has reached its highest levels in four decades. In surveys, Americans are remarkably unsatisfied with economic conditions. The growth numbers have been good. The vibes have been bad.These are the most important things to learn from a year in which the economic ground beneath our feet shifted.Yes, you can overheat the economyIn the early months of 2021, there was vigorous disagreement between people in the centrist and left-of-center economics worlds. Was the $1.9 trillion pandemic rescue plan the Biden administration enacted, on the heels of a $900 billion bipartisan package passed in the final weeks of the Trump administration, too big relative to the hole the economy was in?For example, in February the Congressional Budget Office projected that the 2021 output gap — the economy’s shortfall relative to its full potential — was only $360 billion. Even if you think the C.B.O. numbers are too cautious, estimates like that implied that the pandemic relief that passed a month later would send too much money coursing through the economy and result in inflation.That, anyway, was the interpretation by traditional models of how fiscal stimulus works. Defenders of the Biden approach emphasized, among other things, risk management — doing everything possible to get money into Americans’ hands, aggressively roll out vaccination, and get the economy back to its prepandemic path as quickly as possible.These views were shaped in large part by the experience of the last expansion. Fiscal austerity was a major reason for a painfully long slog out of the global financial crisis. After years, or arguably decades, in which the central crisis was an under-heated economy, the experience of 2021 is a reminder that overheating can cause its own discontents.What to Know About Inflation in the U.S.Inflation, Explained: What is inflation, why is it up and whom does it hurt? We answered some common questions.The Fed’s Pivot: Jerome Powell’s abrupt change of course moved the central bank into inflation-fighting mode.Fastest Inflation in Decades: The Consumer Price Index rose 6.8 percent in November from a year earlier, its sharpest increase since 1982.Why Washington Is Worried: Policymakers are acknowledging that price increases have been proving more persistent than expected.The Psychology of Inflation: Americans are flush with cash and jobs, but they also think the economy is awful.With demand for goods exceeding supply, especially for physical items, it is clear that the surging prices and other related problems (shortages and shadow inflation) are now America’s central economic problems. Economists will debate how much they are attributable to excess stimulus for years to come. But regardless of where one comes down on that question, the events of the last few quarters are a reminder that just because the risks of overheating were dormant for a long time doesn’t mean they’ve gone away.When supply chains get messed up, it is hard to un-mess themThe disruptions to supplies of all sorts of goods have their roots in the earliest weeks of the pandemic, when manufacturers the world over pulled back on production amid collapsing demand and a public health crisis.But things didn’t play out as in past recessions. Demand for physical goods surged in late 2020 and into 2021 — not like a typical recession in which demand for cars and other big-ticket items is depressed.That happened because consumers shifted their spending toward physical goods and away from services, and government support kept incomes stable, preventing a collapse in overall demand.The result: an economywide occurrence of the “bullwhip effect,” a phenomenon from the field of operations management in which small shifts in demand ripple through supply chains to cause wild swings.The complexity of modern global supply chains and the fact that this bullwhip effect has played out across countless industries has made it a fiendishly difficult problem to solve. The issue is not just a shortage of semiconductors, or shipping containers, or any other single item. It is shortages of all these things crashing together in ways that make the feeling of scarcity and shortages more intense.More power for workers doesn’t necessarily make workers happyThe tension between soaring demand and pandemic-limited supply showed up in the labor market in 2021 as well. The result was that workers were in command to a degree not seen in at least two decades.This showed up across multiple dimensions. Wages have been rising rapidly. Companies have been forced to be more creative, flexible and aggressive in attracting a work force. The rate of people quitting their jobs soared. After two decades in which employers were mostly able to have their pick of workers, the tables had turned.And people hated it.That’s an exaggeration, of course. The Great Resignation is real, and plenty of people have taken advantage of this moment to secure a better, more rewarding employment arrangement. But in the aggregate, people view the state of the economy as horrendous.In a Gallup poll in early December, 67 percent of adults said the economy was getting worse. Overall economic confidence matched its lowest levels from the early days of the pandemic and was lower than it was in the very weak economy of 2010 and 2011.Some of this is surely tied to the fact that prices are rising more quickly than average wages, which means an average worker’s purchasing power is declining. Wage gains have been highest, in percentage terms, in lower-paying industries. In effect, hourly workers have been securing raises, while middle-managers and white collar workers are, on average, losing significant ground.Inflation F.A.Q.Card 1 of 6What is inflation? More

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    The Inflation Miscalculation Complicating Biden’s Agenda

    Administration officials blame the Delta variant for a prolonged stretch of consumer spending on goods, rather than services, pushing up prices and creating a conundrum for the Fed.WASHINGTON — President Biden’s top economists have worried from the beginning of his administration that rising inflation could hamstring the economy’s recovery from recession, along with his presidency. Last spring, Mr. Biden’s advisers made a forecasting error that helped turn their fears into reality, a calculation that spread to this week’s decision to renominate the Federal Reserve chair.Administration officials overestimated how quickly Americans would start spending money in restaurants and theme parks, and they underestimated how many people wanted to order new cars and couches.Mr. Biden’s advisers, along with economists and some scientists, believed that widespread availability of coronavirus vaccinations would speed the return to prepandemic life, one in which people dined out and filled hotel rooms for conferences, weddings and other in-person events.Instead, the emergence of the Delta variant of the virus over the summer and fall slowed that return to normalcy. Americans stayed at home, where they continued to buy goods online, straining global supply chains and sending the price of almost everything in the economy skyward.“Because of the strength of our economic recovery, American families have been able to buy more products,” Mr. Biden said this month at the Port of Baltimore. “And — but guess what? They’re not going out to dinner and lunch and going to the local bars because of Covid. So what are they doing? They’re staying home, they’re ordering online, and they’re buying product.”That view is the closest thing the administration has offered to an explanation for why the White House was surprised by the size and durability of a price surge that has hurt Mr. Biden’s poll numbers and imperiled part of his economic agenda in Congress. From the administration’s perspective, the problem is not that there is too much money sloshing around, as Republicans and some economists insist, but that consumers are throwing an unexpectedly large amount of that money at a narrow set of things to buy.Put another way: If Mr. Biden had sent people travel vouchers or DoorDash gift cards for services — instead of sending Americans direct payments as part of his $1.9 trillion rescue plan in March — the inflation picture might look different right now..css-1xzcza9{list-style-type:disc;padding-inline-start:1em;}.css-3btd0c{font-family:nyt-franklin,helvetica,arial,sans-serif;font-size:1rem;line-height:1.375rem;color:#333;margin-bottom:0.78125rem;}@media (min-width:740px){.css-3btd0c{font-size:1.0625rem;line-height:1.5rem;margin-bottom:0.9375rem;}}.css-3btd0c strong{font-weight:600;}.css-3btd0c em{font-style:italic;}.css-1kpebx{margin:0 auto;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}#NYT_BELOW_MAIN_CONTENT_REGION .css-1kpebx{font-family:nyt-cheltenham,georgia,’times new roman’,times,serif;font-weight:700;font-size:1.375rem;line-height:1.625rem;}@media (min-width:740px){#NYT_BELOW_MAIN_CONTENT_REGION .css-1kpebx{font-size:1.6875rem;line-height:1.875rem;}}@media (min-width:740px){.css-1kpebx{font-size:1.25rem;line-height:1.4375rem;}}.css-1gtxqqv{margin-bottom:0;}.css-19zsuqr{display:block;margin-bottom:0.9375rem;}.css-12vbvwq{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;}@media (min-width:740px){.css-12vbvwq{padding:20px;width:100%;}}.css-12vbvwq:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-12vbvwq{border:none;padding:10px 0 0;border-top:2px solid #121212;}.css-12vbvwq[data-truncated] .css-rdoyk0{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-12vbvwq[data-truncated] .css-eb027h{max-height:300px;overflow:hidden;-webkit-transition:none;transition:none;}.css-12vbvwq[data-truncated] .css-5gimkt:after{content:’See more’;}.css-12vbvwq[data-truncated] .css-6mllg9{opacity:1;}.css-qjk116{margin:0 auto;overflow:hidden;}.css-qjk116 strong{font-weight:700;}.css-qjk116 em{font-style:italic;}.css-qjk116 a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;text-underline-offset:1px;-webkit-text-decoration-thickness:1px;text-decoration-thickness:1px;-webkit-text-decoration-color:#326891;text-decoration-color:#326891;}.css-qjk116 a:visited{color:#326891;-webkit-text-decoration-color:#326891;text-decoration-color:#326891;}.css-qjk116 a:hover{-webkit-text-decoration:none;text-decoration:none;}Inflation has risen across wealthy nations over the past year, but it has risen faster in the United States, where prices rose 6.2 percent in October from the year before. America’s inflation has been exacerbated, in part, by Mr. Biden and his predecessor, Donald J. Trump, pouring more fiscal support into the U.S. economy than their counterparts did elsewhere, at a time when consumption patterns shifted and did not rapidly snap back to normal.Republicans, and even some left-leaning economists such as the former Obama administration officials Lawrence H. Summers and Jason Furman, have blamed the rapid price increases across the economy on the aid package that Mr. Biden signed in the spring. They say the package’s direct assistance to Americans, including $1,400 checks to individuals and enhanced benefits for the unemployed, fueled more consumer demand than the economy could bear, driving prices skyward.Mr. Biden is betting that those critiques are largely wrong — and that the Fed would be wrong to follow their advice. His aides say excess consumer demand is not the driver of the fastest price increases America has seen in decades, and that the economy needs more fuel, not less, to complete the job of delivering wage and employment gains to historically marginalized workers.The president wants Fed Chairman Jerome H. Powell, whom he reappointed this week for a second term, to join him in that wager — by avoiding quick increases in interest rates that could choke off growth, and which would not address what White House officials see as the real cause of inflation: the virus.“We’re still dealing with the difficult challenges and complications caused by Covid-19 that are driving up costs for American families,” Mr. Biden said on Monday at the White House, in announcing Mr. Powell’s reappointment and laying the blame for inflation at the feet of the resurgent virus.A cafe that closed this summer in Washington. The resilience of the coronavirus slowed Americans’ return to spending on in-person services like dining and tourism.Alyssa Schukar for The New York TimesWhile prices are up broadly across industries and sectors of the economy, there is a wide gulf in the inflation rates of physical things people buy and the services they consume. The Consumer Price Index for services is up 3.6 percent from the previous year. For durable goods, it is up 13.2 percent. And those goods represent a much larger share of America’s consumer spending than they did before Covid-19 hit.On the eve of the pandemic, about 31 percent of American consumer spending went toward goods, and the rest toward services. In September, that share had risen to about 35 percent, down just slightly from its pandemic highs. Those few percentage points made a huge difference for supply chains, which were suddenly carrying record-shattering levels of toys, electronics and other goods from country to country, and straining under the load.The $1.9 trillion rescue plan “juiced demand, and importantly for the inflation story, much of that demand played out in reduced consumption of in-person services and increased demand for manufactured goods,” Jared Bernstein, a member of the White House Council of Economic Advisers, said in a speech this week.“That, in tandem with the impact of the virus on transportation logistics, has played a role in elevated price growth.”Understand the Supply Chain CrisisCard 1 of 5Covid’s impact on the supply chain continues. More

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    Biden Says Spending Bill Will Slow Inflation. But When?

    The Biden administration has argued that its infrastructure and broader economic package will slow rapid price increases. But that will take time.Rocketing inflation has become a headache for U.S. consumers, and President Biden has a go-to prescription. He says a key way to help relieve increasing prices is to pass a $1.85 trillion collection of spending programs and tax cuts that is currently languishing in the Senate.A wide range of economists agree with the president — but only in part. They generally accept his argument that in the long run, the bill and his infrastructure plan could make businesses and their workers more productive, which would help to ease inflation as more goods and services are produced across the economy.But many researchers, including a forecasting firm that Mr. Biden often cites to support the economic benefits of his proposals, say the bill is structured in a way that could add to inflation next year, before prices have had time to cool off.Some economists and lawmakers worry about the timing, arguing that the risk of fueling more inflation when it has reached record highs outweighs the potential benefits of passing a big spending bill that could help to keep prices in check while addressing other social goals. Prices have picked up by 6.2 percent over the past year, the fastest pace in 31 years and far above the Federal Reserve’s inflation target.Others say that any near-term effect on prices would be small and easy enough for the Fed to offset later with interest rate increases, which can temper demand and cool a hot economy. They argue that potential inflationary risks are not a good reason for the Biden administration to curb its ambitions on priorities like broadening access to child care and easing the transition to cleaner energy sources.“It’s more likely a small positive for inflation in 2022, because it’s preventing a big reduction in spending that would otherwise have happened that year,” said Jason Furman, an economist at Harvard and a former chairman of the White House Council of Economic Advisers during the Obama administration. “The pros and cons of Build Back Better with regard to improvements in climate change and opportunity vastly dwarf any pros or cons on inflation.”Republicans have criticized Mr. Biden on inflation for months, seeking to derail his sprawling proposal to fight climate change, guarantee universal prekindergarten, expand access to health insurance, cap child care costs for low earners and the middle class and extend a lucrative new tax break for parents. They have argued that the bill’s spending, much of which is spread over several years, will push prices higher.Some centrist Democrats have also voiced similar concerns. A key holdout, Senator Joe Manchin III of West Virginia, has questioned whether high and rising prices should persuade lawmakers to tone down their ambitions.“West Virginians are concerned about rising inflation,” he said on Twitter last week. “We cannot throw caution to the wind & continue to pile on debt that our country can’t afford.”The bill remains in legislative limbo, with Democrats preparing to push it to a House vote as early as next week. But timing is uncertain in the Senate, where a vote is likely to be changed or delayed in response to Mr. Manchin’s concerns.The extent to which Mr. Biden’s $1.85 trillion bill exacerbates inflation largely depends on how much it stimulates the economy and whether Americans increase their spending as a result of the legislation — and when all of that occurs.Many economists say it could create a short-term stimulus because the plan is structured to raise money gradually by taxing wealthier Americans, who are less likely to spend each additional dollar they have, and redistribute it quickly to people who earn less and are more likely to spend newfound cash.Because of the difference in timing between when the government spends money and when it starts to bring in more revenue, the bill is expected to pump money into the economy in its early years. Moody’s Analytics — the firm that the White House typically cites when arguing in favor of its legislation — estimates that the government will spend $163 billion more on the package than it takes in next year. And the redistribution could make the money more potent as economic stimulus.“The spending is designed to go to the people who are more likely to spend it than to save it,” said Ben Ritz, the director of the Progressive Policy Institute’s Center for Funding America’s Future. But more than any specific program, “the bigger inflationary issue is the math.”White House economists have countered those arguments. If the bill passes, they say, it would do relatively little to spur increased consumer spending next year and not nearly enough to fully offset the loss of government stimulus to the economy as pandemic aid expires. That the program spends more heavily next year is a feature, they say, because it will partly blunt the economic drag as fiscal help fades. They note that the bill is intended to be offset completely by tax increases and other revenue savings.And they argue that by increasing the economy’s capacity to churn out goods and services, the president’s infrastructure plan and his broader program could both help to moderate costs over time.“If anything, these measures push back on inflationary pressures,” said Jared Bernstein, a member of Mr. Biden’s Council of Economic Advisers.Shoppers in New York last month. White House officials say that by increasing the economy’s capacity to churn out goods and services, the president’s plans could help moderate costs over time.Jutharat Pinyodoonyachet for The New York TimesLawrence H. Summers, the Harvard economist who loudly criticized the $1.9 trillion economic aid legislation that Mr. Biden signed this year, has said that he does not see the current plans as an inflationary threat. The infrastructure and broader spending packages are both spread over time and paid for, Mr. Summers has argued.There is less economic or political debate about Mr. Biden’s $1 trillion infrastructure plan, which cleared Congress last week and which the president will sign on Monday. Economists — including conservative ones — largely agree that it is likely to eventually expand the capacity of the economy, and that it is small and spread out enough that it will not meaningfully fuel faster inflation in the near term.Among Democrats, there is widespread support for the economic ambitions contained in the administration’s broader spending bill, which aims to create more equity for low- and middle-class earners and a bigger safety net for working parents. But the measure is drawing more complicated reviews when it comes to its immediate effect on inflation.Economists at Moody’s found in a recent analysis that the administration’s full agenda would slightly increase inflation in 2022, though they did not expect the program to ultimately raise it because of benefits that would later ease supply constraints. It estimates that with the infrastructure bill alone, inflation will be running at a 2.1 percent annual rate by the final quarter of next year. If the larger spending bill also passes, that grows to 2.5 percent.Understand the Supply Chain CrisisCard 1 of 5Covid’s impact on the supply chain continues. More

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    Biden's Stimulus Is Stoking Inflation, Fed Analysis Suggests

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

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    Vast Expansion in Aid Kept Food Insecurity From Growing Last Year

    Despite the economic downturn, government figures for 2020 show no overall rise in hunger of the sort typical in past recessions. But some groups still suffered.As 20 million jobs vanished at the start of the coronavirus pandemic and traffic jams formed outside food banks, many experts warned that the twin crises of unemployment and disease would produce soaring rates of hunger.But huge expansions of government aid followed, and data released on Wednesday suggests the extraordinary spending achieved a major goal: Despite shuttered businesses and schools, food insecurity remained unchanged from prepandemic levels. That result defied past experience, when recessions caused food hardship to spike.“This is huge news — it shows you how much of a buffer we had from an expanded safety net,” said Elaine Waxman, who researches hunger at the Urban Institute in Washington. “There was no scenario in March of 2020 where I thought food insecurity would stay flat for the year. The fact that it did is extraordinary.”The government found that 10.5 percent of American households were food insecure, meaning that at some point in the year, they had difficulty providing enough food to all members of the home because of a lack of money. It also found that 3.9 percent experienced “very low food security,” meaning the lack of resources caused them to reduce their food intake. That was statistically unchanged from the previous year.Food insecurity did rise among some groups, including households with children, households with Black Americans and households in the South. The gap between Black and white households, which was already large, widened further, with 21.7 percent of Black households experiencing food insecurity, compared with 7.1 percent of white households. That is a gap of 14.6 percentage points, up from 11.2 points in 2019, before the pandemic struck.Black households suffered disproportionately from job losses and school closings during the pandemic and had fewer assets with which to buffer a crisis.Still, the overall pattern — of hunger constrained — contrasted sharply with the country’s experience during 2008, when nearly 13 million additional Americans became food insecure at the start of the Great Recession. Last year, 38.3 million Americans lacked food security, a level far below the 50.2 million Americans in that situation at the recession’s peak.As President Biden pushes a $3.5 trillion plan to further expand the safety net over Republican opposition, the report on Wednesday from the Agriculture Department provided fodder for both sides. Supporters said it showed the value of increased aid, while critics said the unchanged rates of food hardship showed that further spending was not necessary.The aid expansions reflected in Wednesday’s report occurred early in the pandemic last year. They include the first round of stimulus checks and expanded unemployment benefits, which passed with support from both parties and President Donald J. Trump.Several large rounds of aid followed, most recently in a $1.9 trillion spending package in March that President Biden championed. It included a program of monthly payments to most families with children that Democrats hope to make permanent..css-1xzcza9{list-style-type:disc;padding-inline-start:1em;}.css-3btd0c{font-family:nyt-franklin,helvetica,arial,sans-serif;font-size:1rem;line-height:1.375rem;color:#333;margin-bottom:0.78125rem;}@media (min-width:740px){.css-3btd0c{font-size:1.0625rem;line-height:1.5rem;margin-bottom:0.9375rem;}}.css-3btd0c strong{font-weight:600;}.css-3btd0c em{font-style:italic;}.css-1kpebx{margin:0 auto;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}#NYT_BELOW_MAIN_CONTENT_REGION .css-1kpebx{font-family:nyt-cheltenham,georgia,’times new roman’,times,serif;font-weight:700;font-size:1.375rem;line-height:1.625rem;}@media (min-width:740px){#NYT_BELOW_MAIN_CONTENT_REGION .css-1kpebx{font-size:1.6875rem;line-height:1.875rem;}}@media (min-width:740px){.css-1kpebx{font-size:1.25rem;line-height:1.4375rem;}}.css-1gtxqqv{margin-bottom:0;}.css-19zsuqr{display:block;margin-bottom:0.9375rem;}.css-12vbvwq{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;}@media (min-width:740px){.css-12vbvwq{padding:20px;width:100%;}}.css-12vbvwq:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-12vbvwq{border:none;padding:10px 0 0;border-top:2px solid #121212;}.css-12vbvwq[data-truncated] .css-rdoyk0{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-12vbvwq[data-truncated] .css-eb027h{max-height:300px;overflow:hidden;-webkit-transition:none;transition:none;}.css-12vbvwq[data-truncated] .css-5gimkt:after{content:’See more’;}.css-12vbvwq[data-truncated] .css-6mllg9{opacity:1;}.css-qjk116{margin:0 auto;overflow:hidden;}.css-qjk116 strong{font-weight:700;}.css-qjk116 em{font-style:italic;}.css-qjk116 a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;text-underline-offset:1px;-webkit-text-decoration-thickness:1px;text-decoration-thickness:1px;-webkit-text-decoration-color:#326891;text-decoration-color:#326891;}.css-qjk116 a:visited{color:#326891;-webkit-text-decoration-color:#326891;text-decoration-color:#326891;}.css-qjk116 a:hover{-webkit-text-decoration:none;text-decoration:none;}“A lot of us warned that those further expansions were unnecessary and this provides additional support that that was true,” said Angela Rachidi, a hunger expert at the American Enterprise Institute. She said that progressives were pushing a narrative of exaggerated hardship to justify continued spending increases.In an economic crisis, food is often the first expense that a family with money troubles will cut. Unpaid rents risk eviction, but grocery purchases can be incrementally reduced and meals stretched.Though poverty and food insecurity are related, they are not synonymous. The poorer a household is, the more likely it is to experience food insecurity, but most of those suffering from food insecurity are not poor.Among households disclosing their incomes, 34 percent were poor while 32 percent had incomes greater than 185 percent of the poverty line (about $26,000 for a family of four), according to an analysis by Craig Gundersen, an economist at Baylor University.“There are a lot of Americans in precarious situations,” Mr. Gundersen said. “People are working, but one car repair or sick kid can send them into food insecurity.”The remarkable images of food lines at the pandemic’s start cast a spotlight on food hardship, while the large expansion of aid that followed turned the United States into a laboratory for antihunger policy. Among the lessons learned during the pandemic, researchers said the new report supported at least four.As aid rose, food insecurity fell.The relationship between higher spending and lower hardship may sound obvious. But some social problems prove difficult to address through federal aid. Congress has approved about $46 billion in emergency rental relief, but only a small portion has reached families in need.Wednesday’s report added to a growing body of research showing the opposite: that aid has led to quick reductions in food hardship. “This is not an intractable problem,” Mr. Gundersen said.Last year, the Brookings Institution found that a summer program that replaced school meals with electronic benefit cards led to substantial reductions in child hunger.Likewise, researchers at the University of Michigan, analyzing Census Bureau surveys, found the 2021 stimulus checks brought immediate reductions in food hardship. Most recently, a study by researchers at Columbia University found the same pattern after the introduction of the child tax credit in July, but only among households with children — the group eligible for the monthly payments.“We now have definitive evidence that food hardship is responsive to government aid,” said H. Luke Shaefer, a University of Michigan researcher who studied the stimulus checks. “The effect is crystal clear.”While Wednesday’s report was based on data collected in December 2020, Mr. Shaefer said other surveys showed hardship had continued to fall. “We could potentially be at the lowest level of food insecurity ever recorded, because of the government transfers,” he said.Schools play a vital role.Before the pandemic, school meals accounted for as much as 7 percent of economic resources among low-income households, according to one study.Max Whittaker for The New York TimesWhile food insecurity fell overall, it rose among households with children — to 7.6 percent last year, from 6.5 percent in 2019. One likely explanation is the widespread closure of schools, a reminder that they play a large, if often overlooked, role in delivering food aid.Before the pandemic, Judith Bartfeld, a researcher at the University of Wisconsin, found that school meals account for as much as 7 percent of economic resources among low-income households. That financial contribution approached the impact of the Supplemental Nutrition Assistance Program, or SNAP, the main federal antihunger program, which provided more than 10 percent of household resources but is larger and more visible.“One of the big lessons from the pandemic is the critical role that school meals play as part of the nutrition safety net,” Ms. Bartfeld said. “The value of school meals became transparent when the meals disappeared.”School closures may have also increased food hardship indirectly, by making it hard for parents to return to work.Among the pandemic-era programs is one that replaced the value of lost school meals with electronic benefit cards. Research found it reduced food hardship, though many states issued the aid after significant delays. Congress extended the program during the summers of 2020 and 2021, and the Biden administration wants to make the summer electronic benefit program permanent, to combat the rise in hunger that typically comes with the closure of schools.Most states participated in the summer program this year with the significant exception of Florida, where Gov. Ron DeSantis, a Republican, has declined without explanation to seek the $820 million the state could receive in federal aid.The gaps between Black and white Americans are large.The longstanding disparities in food insecurity between Black and white households had been narrowing in recent years. But last year, they widened again. Though the share of white households suffering food insecurity fell by 0.8 percentage points, it rose by 1.6 points in Hispanic households and by 2.6 points in Black households.One reason may be the nature of the recession, which disproportionately hurt Black workers, many of them in low-wage service jobs. It is also possible that Black and Latino families faced greater barriers than whites families in gaining access to government aid.A third potential explanation may be that Black families entered the recession with far fewer assets than white households and less access to credit, both of which can buffer food hardships.“This is the most disturbing part of the story,” said Ms. Waxman, the Urban Institute researcher. “Whatever we did wasn’t enough to support Black families during this period.”Charity plays an important but limited role.The crisis thrust the United States’ unusual network of private food banks into the spotlight. Able to respond more quickly than the government, they played a highly visible role in emergency aid. Feeding America, the national association of food banks, reported a 44 percent increase in meals served.But food banks are often among the first groups to call for expansions of government aid, arguing they can only complement the much larger public programs. Feeding American said SNAP, formerly known as food stamps, provides about nine times as many meals as food banks. The San Antonio Food Bank is among the places where lines stretched for miles in the spring of 2020. It went from feeding 60,000 people a week in early March to 120,000 in late April. It is still feeding about 90,000.But Eric Cooper, who runs the group, said the crisis reinforced both the fragility of the average household and the limited role that private charities can play.“It was the federal expansions that pulled people out of our parking lots and into grocery stores, which is where people should get their food,” he said. “We’re so small — the safety net is much larger.” More