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    House G.O.P. Eyes Rescinding Unspent Covid Money as Part of Its Fiscal Plan

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    Estimates put the amount of leftover money between $50 billion and $70 billion. But even if Republicans could claw it back, it would not make much of a dent in the deficit.WASHINGTON — House Republicans demanding spending cuts in exchange for raising the nation’s debt limit have rallied around a seemingly straightforward proposal: recalling billions of dollars in coronavirus relief funds that Congress approved but have not been spent.Top Republicans regard the idea of rescinding unspent pandemic emergency money — an amount estimated to be between $50 billion and $70 billion — as an easy way to save money while avoiding more politically perilous options like cutting funding for popular federal programs. Their focus on the idea reflects how, after toiling unsuccessfully for months to unite their rank and file around a fiscal blueprint, G.O.P. leaders have become acutely aware that they have few options for doing so that could actually pass the House.On Wednesday, Speaker Kevin McCarthy highlighted the measure when he finally unveiled House Republicans’ proposal to raise the debt limit for one year in exchange for a series of spending cuts and policy changes. The party plans to vote on the legislation next week.“The American people are tired of politicians who use Covid as an excuse for more extreme inflationary spending,” Mr. McCarthy said in a speech on the House floor. “If the money was authorized to fight the pandemic, what was not spent during the pandemic should not be spent after the pandemic is over.”But going after the leftover money scattered across the patchwork of government programs used to dole out the relief funding — dozens of different accounts — is easier said than done.And even if House Republicans can find a way to identify and get their hands on the comparatively small sums of leftover money, it would do little to shrink the nation’s $1.4 trillion deficit. Additionally, the federal budget analysts who calculate the deficit have already accounted for the fact that some of the money Congress allocated for pandemic relief programs will likely never be spent.House Republicans have identified the move as just one way to rein in federal spending, which they say must be done in exchange for their votes to raise the debt ceiling, which is expected to be breached as early as June.But the challenges around what has widely been considered one of the simplest options underscore how difficult it will be for the party to meet the lofty goals Republican leaders laid out at the beginning of the year. They have already abandoned their aspiration of balancing the federal budget in 10 years and have been unable to reach consensus on freezing spending levels and other cuts that would shave down the deficit without touching Medicare or Social Security.Jeenah Moon for The New York TimesOver the span of two years and six laws, Congress approved about $4.6 trillion in federal spending to help the nation respond to and recover from the coronavirus pandemic. While most of that money has already been spent, either by federal agencies or state or local governments, tens of billions of dollars have yet to be earmarked for specific use.An internal document circulated by House Republican leaders laying out a draft of their fiscal demands in exchange for raising the debt limit until May 2024 estimated that there is $50 to $70 billion in leftover federal coronavirus relief funds scattered across federal agencies and programs. The Government Accountability Office reported in February that there was about $90 billion remaining.That money is spread across dozens of programs, and many agencies are still doling out money, including the Health and Human Services Department, the Department of Veterans Affairs and the Transportation Department.The bulk of it is intended for grants to health care providers, medical care for veterans, pension benefits and aid for public transit agencies that saw ridership levels plummet during the pandemic. Although Biden administration officials expect much of the remaining funds to be spent eventually, officials believe some programs with leftover money are largely over, including one designed to help aircraft manufacturers pay for compensation costs during the pandemic, which had about $2.3 billion left as of January.The funds could be unspent for various reasons. Transit agencies could already be using some to fund operations, but may not have submitted reimbursement requests to the federal government because they have more than a year left to spend the money. Funds for public health have been set aside for research, vaccine distribution and refilling stockpiles of personal protective equipment. A program that provides assistance to financially troubled pension plans is accepting applications through 2026 because of its extensive review process.Economists and policy researchers said rescinding the unspent funding would help trim the deficit — but only by a relatively small amount.Even if lawmakers were able to rescind, for example, $70 billion in relief funds, it likely would not result in a $70 billion reduction of the deficit, according to economic researchers. That is because researchers at Congress’s nonpartisan Congressional Budget Office who project the deficit have already assumed that not all pandemic relief funds would be spent and factored that into their calculations.Douglas Holtz-Eakin, the president of the conservative American Action Forum and a former C.B.O. director, said it would “make good sense” to rescind unspent relief funds if there were a substantial amount left and they were not needed, but the total savings would be relatively scant. He argued that it would be more effective for lawmakers to instead focus on slowing the growth of benefit programs such as Social Security or Medicare.“If you’re genuinely worried about the fiscal future and the unsustainable nature of the federal budget, good, but this won’t solve any of those problems,” Mr. Holtz-Eakin said. “This is a one-time reduction in spending that looks backward, not forward, and the real issues are in front of us.”Marc Goldwein, the senior vice president at the Committee for a Responsible Federal Budget, a nonpartisan fiscal watchdog group, said the federal government should pursue some of the relief money that is not being used and try to recoup funds by investigating cases of potential fraud, though it would be a “little too late” now.“We shouldn’t have a bunch of money sitting out there that’s not being used if it’s not needed, but we just shouldn’t expect much budget savings from it,” Mr. Goldwein said.The White House has pushed back on the proposal and signaled that it would not support a move to rescind a significant amount of the funds.Gene Sperling, a senior White House adviser, said that about 98 percent of the funding in the $1.9 trillion American Rescue Plan has already been spent or is “on the train to go out to people and places as it was specifically intended to by the law.”Rescinding the unspent funds, he said, would “lead to significant pain for veterans, retirees [and] small businesses.”“This is a one-time reduction in spending that looks backward, not forward, and the real issues are in front of us,” said Dr. Douglas Holtz-Eakin, the president of the conservative American Action Forum and a former C.B.O. director.Stefani Reynolds for The New York TimesCongressional negotiators have previously attempted to offset the costs of other bills by rescinding unspent Covid money provided to state and local governments, including last year, when Democrats tried to cover the cost of a $15 billion pandemic relief bill in part by rescinding funding earmarked for state and local relief funds.But a revolt from Midwestern House Democrats — whose states would have been disproportionately affected by the clawbacks and whose governors yowled at the idea of being stripped of money they had already planned to use — ultimately led party leaders to drop the measure altogether.The episode served as a warning to state and local leaders, and ahead of the debt limit fight, some prominent mayors began publicly warning their peers to spend down the federal funds available to them quickly.Lawmakers last year also sought to offset the costs of the stand-alone pandemic aid bill by raiding the $2.3 billion in unspent money from the Transportation Department’s program to help aircraft manufacturers cover the costs of their employees’ wages during the pandemic. The idea was ultimately scuttled after the revolt around rescinding state and local funds. More

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    Biden Will Release Dead-on-Arrival Budget, Picking Fight With GOP

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    The president’s plans have little in common with the budget Republicans are set to release this spring, as the nation hurtles toward a possible default on its debt.WASHINGTON — President Biden will propose a budget on Thursday that has no chance of driving tax or spending decisions in Congress this year, but instead will serve as a statement of political priorities as he clashes with Republicans over the size of the federal government.Mr. Biden’s budget proposal, the third of his presidency, is an attempt to advance a narrative that the president is committed to investing in American manufacturing, fighting corporate profiteering, reducing budget deficits and fending off conservative attacks on safety-net programs.It is expected to include what White House officials say will be nearly $3 trillion in new deficit reduction, largely from a familiar batch of tax increases on companies and high earners, along with robust spending on the military and policies to further Mr. Biden’s attempts to support high-tech factory jobs and fight climate change.Republicans are expected to offer a starkly different budget sometime this spring, one likely to be stocked with cuts to federal health programs and aid to the poor, in an effort to eliminate the budget deficit within a decade without raising taxes. Mr. Biden is certain to reject those proposals, and they may struggle to attract enough moderate Republican votes to pass the House.The competing documents will highlight the dearth of common ground for Mr. Biden and his opposition party on fiscal policy at a high-stakes moment for the government and the global economy. That is true even though both the president and congressional Republicans are embracing the politics of promising to reduce deficits and the growth of the national debt, which topped $31 trillion late last year.Republican leaders in the House have refused to raise a congressionally imposed cap on how much the federal government can borrow unless Mr. Biden agrees to steep cuts to federal spending in exchange. Given the United States borrows huge sums of money to pay its bills, that position risks plunging the economy into crisis if the government runs out of cash and defaults on its debt later this year.Mr. Biden has refused to tie any spending cuts to raising the borrowing cap, which does not authorize any new expenditures, but said he welcomes debate over how best to ease the nation’s debt burden.The parties’ entrenched positions set Washington up for several bruising months, at least, of debt-limit discussions. Economists warn the standoff will rattle investors and poses mounting threats to the global financial system.On Wednesday, Jerome H. Powell, the chair of the Federal Reserve, urged lawmakers not to play games, saying there is no way to prevent a financial meltdown without raising the borrowing cap.“Congress raising the debt ceiling is really the only alternative,” Mr. Powell told a House committee. “There are no rabbits in hats to be pulled out on this.”Jerome H. Powell, the chair of the Federal Reserve, told a House committee: “Congress raising the debt ceiling is really the only alternative.”Haiyun Jiang/The New York TimesPresidential budgets always offer visions for the nation’s fiscal policy that compete with those of their opposition — and budgets submitted by presidents to an opposition-dominated chamber of Congress rarely serve as more than messaging documents. Often, including under Mr. Biden, much of the budget fails to pass muster with the president’s own party.Mr. Biden failed to persuade a sufficient number of Democrats to pass many of the policy priorities outlined in his previous budget requests, like free community college and federally guaranteed paid leave. More than $2 trillion in tax increases from last year’s budget were never enacted despite Democrats’ control of Congress..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.Still, this year’s budget releases from Mr. Biden and House Republicans carry extra importance because of the stakes of the debt-limit fight — and the few paths to compromise on fiscal policy that the documents are expected to show.Mr. Biden’s budget will raise taxes on corporations and high earners, both to pay for his policy priorities and to reduce the growth in America’s reliance on borrowed money, including a 25 percent tax aimed at billionaires. Republicans will seek to cut taxes, including making permanent some temporary tax cuts approved under former President Donald J. Trump, and may seek to eliminate the budget deficit in 10 years by gutting huge swaths of federal spending. Mr. Biden will continue to push his vision of an expanded and empowered government hand in the economy, with new spending for child care, education and more. Republicans will seek to slash federal agencies and much of the health coverage provided by the Affordable Care Act, though it may be difficult for Speaker Kevin McCarthy of California to assemble a package of cuts that will satisfy hard-liners and centrists in his caucus alike.Leaders on both sides of the aisle are embracing the contrasts in their approach.Mr. Biden “is willing to do what Republicans are not: lower the deficit in a realistic, responsible way without cutting benefits that tens of millions of people rely on,” Senator Chuck Schumer of New York, the majority leader, said in a brief speech on Wednesday. “Unlike Republicans, the president is also asking the richest of the rich to pay a little more of their fair share in taxes,” he added.Senator Mitch McConnell of Kentucky, the Republican leader, told reporters this week that Mr. Biden’s budget was “replete with what they would do if they could.”“Thank goodness the House is Republican,” Mr. McConnell said. “Massive tax increases, more spending, all of which the American people can thank the Republican House for, will not see the light of day.”Speaker Kevin McCarthy faces a challenge in coming up with cuts that will satisfy both hard-liners and centrists in the Republican caucus.Julia Nikhinson for The New York TimesRepublicans largely ignored the growth in deficits under Mr. Trump, including approving his tax cuts, which cost the federal government $2 trillion, and when joining with Democrats to pass trillions of dollars in economic aid amid the pandemic recession. Republicans joined Democrats three times to raise or suspend the debt limit without any spending cuts when Mr. Trump was in office. But after winning control of the House in November, Republican leaders have returned to warning that America’s debt load is hurting the U.S. economy and refusing to raise the debt limit unless Mr. Biden agrees to pare back federal spending.The Congressional Budget Office projects the budget deficit will grow slightly this fiscal year, from $1.375 trillion to $1.41 trillion, then continue to rise for the course of the decade, topping $2 trillion in 2032.Those increases are being driven in part by the rising costs of Medicare and Social Security as members of the baby boom generation retire, and by the growing cost of servicing the nation’s $31.4 trillion debt following a series of rapid interest rate increases by the Fed in a bid to tame high inflation. Mr. Powell told lawmakers on Wednesday that “it isn’t that the debt today is unsustainable. It’s that the path is unsustainable.”The director of the budget office, Phillip L. Swagel, briefed lawmakers about deficit projections on Wednesday at the Capitol, warning they would eventually need to raise taxes, cut spending or both in order to mitigate rising debt. The office’s projections “suggest that, over the long term, changes in fiscal policy would need to be made to address the rising costs of interest and mitigate other adverse consequences of high and rising debt,” Mr. Swagel wrote in a slide deck presented to lawmakers.From 2024 to 2033, the budget office projects, deficits will total more than $20 trillion, driving gross federal debt to nearly $52 trillion.Mr. Biden’s proposals, if enacted in full, would reduce that growth by about 15 percent. They are not likely to be. Republicans have tried already this year to repeal tax increases and the Medicare prescription drug savings measures he signed last year.Through new laws he has signed and executive actions he has issued, Mr. Biden has approved policies that would add about $5 trillion to the national debt over a decade, according to estimates by the Committee for a Responsible Federal Budget in Washington. Those include his 2021 economic aid law and debt relief for certain student loan borrowers, which is under challenge at the Supreme Court.It is unclear how Mr. Biden settled on the ultimate figure of nearly $3 trillion for his budget’s deficit reduction, or to what extent he agrees with Republicans who claim that the nation’s current levels of debt and deficits pose a risk to the economy.Karine Jean-Pierre, the White House press secretary, did not directly answer a reporter’s questions this week on how Mr. Biden arrived at his preferred level of deficit reduction or whether the path of growth in the national debt is hurting the economy.“The president understands his fiscal responsibility. He understands how important it is to lower the deficit,” Ms. Jean-Pierre said.“He’s going to put forward a fiscal budget that is going to be responsible,” she added.Catie Edmondson More

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    U.S. Could Default on Its Debt Between July and September, C.B.O. Says

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    The nonpartisan budget office also said that if tax receipts fall short of projections, and Congress fails to act on the debt limit, the U.S. could run out of cash before July.WASHINGTON — The Treasury Department’s ability to continue paying its bills and prevent the United States from defaulting on its debt could be exhausted sometime between July and September if Congress does not raise or suspend the cap on how much the nation can borrow, the nonpartisan Congressional Budget Office said on Wednesday.The estimate suggests that lawmakers could have slightly more leeway than Treasury Secretary Janet L. Yellen estimated last month, when she told Congress that her department’s ability to keep financing America’s obligations could be exhausted in June.The United States borrows huge sums of money by selling Treasury securities to investors across the globe. That funding helps pay for military salaries, retiree benefits and interest payments to bondholders who own U.S. debt. The nation hit its statutory $31.4 trillion borrowing cap last month, forcing the Treasury Department to employ a series of accounting maneuvers to help ensure the government can continue paying its bills without breaching the debt limit.“If the debt limit is not raised or suspended before the extraordinary measures are exhausted, the government would be unable to pay its obligations,” the C.B.O. said in the report on Wednesday. “As a result, the government would have to delay making payments for some activities, default on its debt obligations or both.”However, the budget office noted that the timing of the so-called X-date is uncertain because it depends on how much tax revenue comes into the federal government over the coming months. The office said that if receipts fall short of its estimates, the Treasury could run out of funds before July.Ms. Yellen has been employing extraordinary measures since January to keep the government running. Those have included redeeming some existing investments and suspending new investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund.In a speech on Tuesday, Ms. Yellen warned that a default would be catastrophic.“In my assessment — and that of economists across the board — a default on our debt would produce an economic and financial catastrophe,” Ms. Yellen said at the National Association of Counties Legislative Conference. “Household payments on mortgages, auto loans and credit cards would rise, and American businesses would see credit markets deteriorate.”Calling on Congress to act, she added: “This economic catastrophe is preventable.”It remains unclear how quick or easy it will be to raise or suspend the debt cap. Republican lawmakers have insisted that President Biden agree to undefined spending cuts in order to win their vote to raise the cap. Mr. Biden has insisted he will not negotiate spending cuts as part of any debt limit legislation, arguing that the cap has to be raised to fund obligations that Congress — including Republicans — already approved.A separate C.B.O. report out on Wednesday showing the federal government will add $19 trillion in debt over the next decade and run $2 trillion annual deficits is likely to inflame those tensions.In a tweet on Wednesday, Speaker Kevin McCarthy once again called for pairing discussions about spending cuts to raising the borrowing cap. More

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    Analysis Deems Biden’s Climate and Tax Bill Fiscally Responsible

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    Despite Republican claims, the new legislation would be only a modest corporate tax increase, Congress’s Joint Committee on Taxation found.After more than a year of trying — and failing — to pack much of President Biden’s domestic agenda into a single tax-and-spend bill, Democrats appear to have finally found a winning combination. They’ve scrapped most of the president’s plans, dialed down the cost and focused on climate change, health care and a lower budget deficit.As soon as party leaders announced that new bill last week, Republicans began attacking it in familiar terms. They called it a giant tax increase and a foolish expansion of government spending, which they alleged would hurt an economy reeling from rapid inflation.But outside estimates suggest the bill would not cement a giant tax increase or result in profligate federal spending.An analysis by the Joint Committee on Taxation, a congressional nonpartisan scorekeeper for tax legislation, suggests that the bill would raise about $70 billion over 10 years. But the increase would be front-loaded: By 2027, the bill would actually amount to a net tax cut each year, as new credits and other incentives for low-emission energy sources outweighed a new minimum tax on some large corporations.That analysis, along with a broader estimate of the bill’s provisions from the nonpartisan Committee for a Responsible Federal Budget, suggests that the legislation, if passed, would only modestly add to federal spending over the next 10 years. By the end of the decade, the bill would be reducing federal spending, compared with what is scheduled to happen if it does not become law.And because the bill also includes measures to empower the Internal Revenue Service to crack down on corporations and high-earning individuals who evade taxes, it is projected to reduce the federal budget deficit over a decade by about $300 billion.Adding up the headline cost for what Democrats are calling the Inflation Reduction Act is more complicated than it was for many previous tax or spending measures that lawmakers approved. The bill blends tax increases and tax credits, just as Republicans did when they passed President Donald J. Trump’s signature tax package in 2017. But it also includes a spending increase meant to boost tax revenues and a spending cut meant to put more money in consumers’ pockets.Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, said the composition of the deal was vastly different from a larger bill that Democrats failed to push through the Senate in the fall. It included several spending programs that were set to expire after a few years, and budget hawks warned that the overall package would add heavily to federal debt if those programs were eventually made permanent, as Washington has been known to do, without offsetting tax increases.Ms. MacGuineas called the original idea, known as Build Back Better, “a massive gimmicky budget buster.” She had kinder words for the new package, saying it “manages to push against inflation, reduce the deficit, and, once fully phased in, it would actually cut net spending, without raising net taxes.”“That is a pretty monumental improvement,” she added.The bill springs from an agreement between Senator Chuck Schumer of New York, the majority leader, and Senator Joe Manchin III of West Virginia, a key centrist Democrat. President Biden blessed it last week, and it carries what remains of what was once his $4 trillion domestic agenda.Understand What Happened to Biden’s Domestic AgendaCard 1 of 7‘Build Back Better.’ More

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    U.S. National Debt Tops $30 Trillion as Borrowing Surged

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    The record red ink, fueled by spending to combat the coronavirus, comes as interest rates are expected to rise, which could add to America’s costs.WASHINGTON — America’s gross national debt topped $30 trillion for the first time on Tuesday, an ominous fiscal milestone that underscores the fragile nature of the country’s long-term economic health as it grapples with soaring prices and the prospect of higher interest rates.The breach of that threshold, which was revealed in new Treasury Department figures, arrived years earlier than previously projected as a result of trillions in federal spending that the United States has deployed to combat the pandemic. That $5 trillion, which funded expanded jobless benefits, financial support for small businesses and stimulus payments, was financed with borrowed money.The borrowing binge, which many economists viewed as necessary to help the United States recover from the pandemic, has left the nation with a debt burden so large that the government would need to spend an amount larger than America’s entire annual economy in order to pay it off.Some economists contend that the nation’s large debt load is not unhealthy given that the economy is growing, interest rates are low and investors are still willing to buy U.S. Treasury securities, which gives them safe assets to help manage their financial risk. Those securities allow the government to borrow money relatively cheaply and use it to invest in the economy.For years, presidents have promised to limit federal borrowing and bring down the nation’s budget deficit, which is the gap between what the nation spends and what it takes in. Under President Bill Clinton, the United States actually ran a budget surplus between 1998 and 2001.But taming deficits had fallen out of fashion in recent years, including during the Trump administration, when lawmakers blew through budget caps and borrowed money to fund tax cuts and other federal spending.Now, deficit concerns have resurfaced, helping to stall negotiations over President Biden’s $2 trillion safety net and climate spending proposal. Senator Joe Manchin III of West Virginia, a Democrat whose vote is key to passing Mr. Biden’s package, cited “staggering debt” as a reason he could not support the legislation.Senator Joe Manchin on Capitol Hill last month.Tom Brenner for The New York TimesThe lingering pandemic has slowed the momentum of the economic recovery, fueling inflation rates unseen since the early 1980s and raising the prospect of higher interest rates, which could add to America’s fiscal burden.“Hitting the $30 trillion mark is clearly an important milestone in our dangerous fiscal trajectory,” said Michael A. Peterson, the chief executive officer of the Peter G. Peterson Foundation, which promotes deficit reduction. “For many years before Covid, America had an unsustainable structural fiscal path because the programs we’ve designed are not sufficiently funded by the revenue we take in.”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.The gross national debt represents debt held by the public, such as individuals, businesses and pension funds, as well as liabilities that one part of the federal government owes to another part.Renewed concerns about debt and deficits in Washington follow years of disregard for the consequences of big spending. During the Trump administration, most Republicans ceased to be fiscal hawks and voted along party lines in 2017 to pass a $1.5 trillion tax cut along with increased federal spending.While Republican lawmakers helped run up the nation’s debt load, they have since blamed Mr. Biden for putting the nation on a rocky fiscal path by funding his agenda. After a protracted standoff in which Republicans refused to raise America’s borrowing cap, threatening a first-ever federal default, Congress finally agreed in December to raise the nation’s debt limit to about $31.4 trillion.In January 2020, before the pandemic spread across the United States, the Congressional Budget Office projected that the gross national debt would reach $30 trillion by around the end of 2025. The total debt held by the public outpaced the size of the American economy last year, a decade faster than forecasters projected.The nonpartisan office warned last year that rising interest costs and growing health spending as the population ages would increase the risk of a “fiscal crisis” and higher inflation, a situation that could undermine confidence in the U.S. dollar.The Biden administration has said the $1.9 trillion pandemic relief package the Democrats passed last year was a necessary measure to protect the economy from further damage. Treasury Secretary Janet L. Yellen has argued that such large federal investments are affordable because interest costs as a share of gross domestic product are at historically low levels thanks to persistently low interest rates.But that backdrop could start to change as the Federal Reserve prepares to raise interest rates, which have been set near-zero since the start of the pandemic, to curb inflation.The Fed indicated last week that it was on track to begin increasing rates at its next meeting in March. Investors are predicting the central bank could usher in five rate increases this year, bringing rates to a range of 1 to 1.25 percent.Trillions in federal spending has left the United States approaching levels of red ink not seen since World War II.Sarah Silbiger/ReutersThe Fed has also been keeping long-term interest rates low by buying government-backed debt and holding those securities on its balance sheet. Those purchases are set to wrap up next month, and last week, the Fed signaled it planned to “significantly” shrink its bond holdings.Esther L. George, the president of the Federal Reserve Bank of Kansas City, suggested during a speech this week that the Fed’s big bond holdings might be lowering longer-term interest rates by as much as 1.5 percentage points — nearly cutting the interest rate on 10-year government debt in half. While shrinking the balance sheet risks roiling markets, she warned that if the Fed remained a big presence in the Treasury market, it could distort financial conditions and imperil the central bank’s prized independence from elected government.Inflation F.A.Q.Card 1 of 6What is inflation? More

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    Debt Ceiling Window Is Narrowing, Bipartisan Policy Center Warns

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    The United States faces a default sometime between Dec. 21 and Jan. 28 if Congress does not act to raise or suspend the debt ceiling, a Washington think tank warned on Friday.The projection from the think tank, the Bipartisan Policy Center, was a narrower window than it provided last month, and the nonpartisan group suggested that the actual deadline, or X-date, could be toward the earlier end of that range.Democrats and Republicans appear to have tempered their tone around raising the debt limit this time around. While lawmakers have not settled on a path to lifting the borrowing cap, they are exploring a series of ways to raise it, including some that could ultimately hand more power to the White House to avoid the kind of standoffs that have routinely crippled Washington.Republicans continue to publicly insist that Democrats must act alone to address the issue, while Democrats have countered that raising the borrowing cap is a shared responsibility given that both political parties have incurred big debts over the last several years.“Those who believe the debt limit can safely be pushed to the back of the December legislative pileup are misinformed,” said Shai Akabas, the director of economic policy at the Bipartisan Policy Center. “Congress would be flirting with financial disaster if it leaves for the holiday recess without addressing the debt limit.”Treasury Secretary Janet L. Yellen warned lawmakers in November that the United States could be unable to pay its bills soon after Dec. 15. During testimony before the Senate Banking Committee this week, she underscored the urgency of the matter.“I cannot overstate how critical it is that Congress address this issue,” Ms. Yellen said. “America must pay its bills on time and in full. If we do not, we will eviscerate our current recovery.”In September, Ms. Yellen called for the debt limit to be eliminated, explaining that it had become a destructive policy that posed unnecessary risks to the economy. After approaching the first default in American history, Congress in October raised the statutory debt limit by $480 billion, an amount the Treasury Department estimated would allow the government to continue borrowing through early December.Congressional leaders have been quietly discussing ways to address the debt ceiling, after Republicans warned that they would not help Democrats clear the 60-vote threshold needed to break a Republican filibuster against legislation to raise the borrowing cap.Senators Chuck Schumer of New York, the majority leader, and Mitch McConnell of Kentucky, the minority leader, have spoken repeatedly in recent weeks about the issue, but they have remained tight-lipped in public about a possible solution.The debate has been further complicated by former President Donald J. Trump and his continued influence over the Republican Party. He has repeatedly railed at Mr. McConnell and the other Republican senators who backed a procedural vote in October that cleared the way for Democrats to raise the debt limit.But Mr. McConnell, while pushing for Democrats to raise the borrowing cap without help from his conference, pledged this week that a default would be avoided.Senators Chuck Schumer of New York, second from left, and Mitch McConnell of Kentucky, center, have spoken repeatedly in recent weeks about the debt ceiling.Al Drago for The New York Times“Let me assure everyone the government will not default, as it never has,” Mr. McConnell said on Tuesday. Pressed further, he added, “We’re having useful discussions about the way forward.”Cut out of both the $1.9 trillion coronavirus relief package that passed in March and the $2.2 trillion climate, tax and spending plan that Democrats are trying to push through the Senate, Republicans have refused to help Democrats accommodate debt incurred by both parties. They have taken that position even though leaders of both parties signed off on the spending that helped the debt balloon.Democrats, in turn, have balked at a Republican demand to use a fast-track process known as budget reconciliation to raise the debt limit without Republican votes. Democrats used the process to pass the coronavirus relief package and they are using it again for the climate, tax and spending plan, but they have argued that Republicans should help keep the government from defaulting.Understand the U.S. Debt CeilingCard 1 of 6What is the debt ceiling? More

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    Missing Foreign Workers Add to Hiring Challenges

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    Fewer foreign people have been able to work in the U.S. amid the coronavirus, leaving a hole in the potential labor force.Neha Mahajan was a television journalist in India before her husband’s job moved her family to the United States in 2008. She spent years locked out of the labor market, confined by what she calls the “gilded cage” of her immigration status — one that the pandemic placed her back into.Ms. Mahajan started working after an Obama administration rule change in 2015 allowed people on spousal visas to hold jobs, and she took a new job in business development at an immigration law firm early in 2021. But processing delays tied to the pandemic caused her work authorization to expire in July, forcing her to take leave.“It just gets to you emotionally and drains you out,” said Ms. Mahajan, 39, who lives in Scotch Plains, N.J.Last week brought reprieve, if only temporarily. She received approval documents for her renewed work authorization, enabling her to return to the labor force. But a process that should have taken three months stretched to 10, leaving her sidelined all summer. And because her visa is linked to her husband’s, she will need to reapply for authorization again in December when his visa comes up for renewal.Hundreds of thousands of foreign workers have gone missing from the labor market as the global coronavirus pandemic drags on, leaving holes in white-collar professions like the one Ms. Mahajan works in and in more service-oriented jobs in beach towns and at ski resorts. Newcomers and applicants for temporary visas were initially limited by policy changes under former President Donald J. Trump, who used a series of executive actions to slow many types of legal immigration. Then pandemic-era travel restrictions and bureaucratic backlogs caused immigration to drop precipitously, threatening a long-term loss of talent and economic potential.Some of those missing would-be employees will probably come and work as travel restrictions lift and as visa processing backlogs clear, as Ms. Mahajan’s example suggests. But the recent immigration lost to the pandemic is likely to leave a permanent hole. Goldman Sachs estimated in research this month that the economy was short 700,000 temporary visa holders and permanent immigrant workers, and that perhaps 300,000 of those people would never come to work in the United States.Employers consistently complain that they are struggling to hire, and job openings exceed the number of people actively looking for work, even though millions fewer people are working compared with just before the pandemic. The slump in immigration is one of the many reasons for the disconnect. Companies dependent on foreign workers have found that waves of infections and processing delays at consulates are keeping would-be employees in their home countries, or stuck in America but simply unable to work.“Employers are having to wait a long time to get their petitions approved, and renewals are not being processed in a timely manner,” said Stephen Yale-Loehr, an immigration lawyer who teaches at Cornell Law School. “It’s going to take a long time for them to work through the backlog.”Worker inflows had already slowed sharply before the pandemic, the result of a crackdown by the Trump administration that made it harder for foreign workers, refugees and migrant family members to enter the United States. But the pandemic took that decline and accelerated it dramatically: Overall visa issuance dropped by 4.7 million last year.Many of those visas would have gone to short-term visitors and tourists — people who likely will come back as travel restrictions lift. But hundreds of thousands of the visas would have gone to workers. Without them, some employers have been left struggling.Guests at Penny Fernald’s inn on Mount Desert Island in Maine had to swing by the front desk to pick up towels this summer. Turndown service was limited, because only one of the four foreign housekeepers Ms. Fernald would employ in a typical summer could make it through a consulate and into the country this year.Vacationers who wanted a reimagined Waldorf salad at Salt & Steel, a nearby restaurant, needed to call ahead for reservations and hope it wasn’t Sunday, when the short-staffed restaurant was closed.“This was the busiest season Bar Harbor has ever seen, and we turned people away nightly,” said Bobby Will, the chef and co-owner of Salt & Steel.He usually hires a few foreign workers who perform day jobs for other local businesses then work for him at night. This year, that was basically impossible. He found himself down six of 18 workers. He modified dishes to make them easier to plate — a lobster risotto with roasted chanterelles and hand-placed garnished became a seafood cassoulet — but labor-saving innovations were not enough of a fix. He ultimately had to close on Mondays, too, and he estimates that he missed out on $6,500 to $8,000 in sales per night.“It’s just been extremely difficult for Bar Harbor,” he said of his town, a summer tourism hot-spot nestled between Frenchman Bay and Acadia National Park.Many immigrants are missing from the labor market, causing staffing shortages both in white-collar professions and in more service-oriented jobs in vacation spots like Old Orchard Beach, Maine.Tristan Spinski for The New York TimesThe Biden administration lifted a Trump-era pandemic ban on legal immigration in February, and the number of foreign nationals coming into the United States on visas has been recovering this year. Monthly data show a nascent but incomplete rebound.But some visa categories that weren’t deemed high priority, including many temporary work authorizations, have been waiting long months for approval. Travel limitations tied to the pandemic have kept other foreign workers at home.The State Department reported that as of September, nearly half a million people remained in its immigrant visa backlog, compared with roughly 61,000 on average in 2019..css-1xzcza9{list-style-type:disc;padding-inline-start:1em;}.css-3btd0c{font-family:nyt-franklin,helvetica,arial,sans-serif;font-size:1rem;line-height:1.375rem;color:#333;margin-bottom:0.78125rem;}@media (min-width:740px){.css-3btd0c{font-size:1.0625rem;line-height:1.5rem;margin-bottom:0.9375rem;}}.css-3btd0c strong{font-weight:600;}.css-3btd0c em{font-style:italic;}.css-1kpebx{margin:0 auto;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}#NYT_BELOW_MAIN_CONTENT_REGION .css-1kpebx{font-family:nyt-cheltenham,georgia,’times new roman’,times,serif;font-weight:700;font-size:1.375rem;line-height:1.625rem;}@media (min-width:740px){#NYT_BELOW_MAIN_CONTENT_REGION .css-1kpebx{font-size:1.6875rem;line-height:1.875rem;}}@media (min-width:740px){.css-1kpebx{font-size:1.25rem;line-height:1.4375rem;}}.css-1gtxqqv{margin-bottom:0;}.css-1g3vlj0{font-family:nyt-franklin,helvetica,arial,sans-serif;font-size:1rem;line-height:1.375rem;color:#333;margin-bottom:0.78125rem;}@media (min-width:740px){.css-1g3vlj0{font-size:1.0625rem;line-height:1.5rem;margin-bottom:0.9375rem;}}.css-1g3vlj0 strong{font-weight:600;}.css-1g3vlj0 em{font-style:italic;}.css-1g3vlj0{margin-bottom:0;margin-top:0.25rem;}.css-19zsuqr{display:block;margin-bottom:0.9375rem;}.css-12vbvwq{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;}@media (min-width:740px){.css-12vbvwq{padding:20px;width:100%;}}.css-12vbvwq:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-12vbvwq{border:none;padding:10px 0 0;border-top:2px solid #121212;}.css-12vbvwq[data-truncated] .css-rdoyk0{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-12vbvwq[data-truncated] .css-eb027h{max-height:300px;overflow:hidden;-webkit-transition:none;transition:none;}.css-12vbvwq[data-truncated] .css-5gimkt:after{content:’See more’;}.css-12vbvwq[data-truncated] .css-6mllg9{opacity:1;}.css-qjk116{margin:0 auto;overflow:hidden;}.css-qjk116 strong{font-weight:700;}.css-qjk116 em{font-style:italic;}.css-qjk116 a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;text-underline-offset:1px;-webkit-text-decoration-thickness:1px;text-decoration-thickness:1px;-webkit-text-decoration-color:#326891;text-decoration-color:#326891;}.css-qjk116 a:visited{color:#326891;-webkit-text-decoration-color:#326891;text-decoration-color:#326891;}.css-qjk116 a:hover{-webkit-text-decoration:none;text-decoration:none;}It is not clear what the 2020 drop in immigration and the slow crawl back to normalcy will mean for the country’s labor pool going forward. The Goldman Sachs estimate that the U.S. is short 700,000 foreign workers was based on a rough methodology. The Congressional Budget Office estimated late last year that 2.5 million fewer people would immigrate in the 2020s than it had estimated before the pandemic. Immigration tends to build on itself as legal permanent residents bring in family members, so this decade’s decline is expected to lead to another 840,000 fewer immigrants between 2031 and 2040.The “reduction occurs in part because of travel restrictions and reduced visa-processing capabilities related to the pandemic,” the office wrote in its September 2020 long-term budget outlook.Either number amounts to a relatively small sliver of the American work force, which is today 161 million people strong. But from an economic perspective — and from the viewpoint of many American businesses — the timing could hardly be worse. America’s population is aging, and fertility rates have been declining. Work force growth in recent years has been heavily driven by immigrants and their children. Fewer immigrants means fewer future workers.Unless businesses can figure out how to produce more with fewer people, a future in which the nation’s working-age population grows more slowly means that the economy is likely to have less room for expansion.The pandemic immigration slump isn’t the cause of that economic sclerosis, but it could cause the condition to progress faster.While millions of Americans remain out of work and potentially available for jobs, employers say hiring has been complicated by pandemic aftershocks. Some households lack child care or are afraid of virus resurgence. Others are rethinking careers in backbreaking industries after a perspective-shifting collective public health trauma. Often immigrants work jobs that struggle to attract native workers.Some companies are reluctant to pay enough to attract locals. Ms. Fernald did receive some applications for housekeeping positions, but she pays $16.50 per hour and the applicants had hoped for $20 to $23.Even for those who were willing to pay what would-be laborers demand — Mr. Will paid cooks $22 per hour and guaranteed 10 hours a week in overtime — it was difficult to make up for missing local exchange student workers and temporary seasonal employees from abroad. He’s hoping hiring will be easier in 2022.“Honestly, I don’t know what to expect,” he said.Ms. Mahajan in New Jersey offered a glint of hope that some sort of normalcy could return, but also apprehension that it will not.“I couldn’t believe it — I was like, ‘Wow,’” she said of the moment she received her approval. But the relief may be short-lived since her visa is inextricably linked to her husband’s lapsing one.“Even before summer, I could be back in the same situation,” she said. “This is like an infinite rut.” More

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    U.S. Deficit Expected to Hit $3 Trillion in 2021, Budget Office Says

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    WASHINGTON — The U.S. economy is rebounding from the pandemic downturn faster than expected and is on track to regain all the jobs lost during the coronavirus by the middle of next year, partly as a result of enormous amounts of federal spending that will push the budget deficit to $3 trillion for the 2021 fiscal year, the Congressional Budget Office said on Thursday.New forecasts that incorporate the $1.9 trillion stimulus package that President Biden signed into law in March give little credence to warnings by Republican lawmakers and some economists that runaway inflation from all that spending could cripple the economy. Instead, the budget office predicted that a recent spike in prices for cars, airline tickets and other products would be temporary and begin to recede this year.Administration officials downplayed the deficit projections and focused instead on the predictions for economic growth, saying the strong numbers validate Mr. Biden’s push to douse the economy in stimulus and reinforce their view that inflation poses little threat to the recovery.The budget office, which is nonpartisan, predicted the economy would grow 6.7 percent for the year, after adjusting for inflation. That would be the fastest annual growth in the United States since 1984. It is significantly faster than the budget office and the Biden administration had each projected this year.The unemployment rate is also estimated to fall below 4 percent next year and remain historically low for years to come, signaling a significant acceleration in job gains from what the office predicted in February. The C.B.O. said then that unemployment would not fall below 4 percent until 2026.Budget office officials said the uptick in growth and employment forecasts stemmed in large part from aggressive government stimulus. But the economy is also benefiting from consumers, who are rapidly spending savings they built up during the pandemic. Households were buttressed by multiple rounds of stimulus, including direct checks, passed under President Donald J. Trump, and by a faster-than-anticipated return to normalcy in the economy as vaccinations have spread.Mr. Biden’s aides claimed credit for many of those developments. They said the president’s push to accelerate vaccine production and distribution had fueled the reopening of the economy. David Kamin, a deputy director of the White House National Economic Council, said in an interview that Mr. Biden’s stimulus package, the American Rescue Plan, was intended to drive a more rapid return to low unemployment, and that the budget office’s projections were evidence it was succeeding.“This report really goes to the very theory of the case as to why we pursued a rescue plan,” he said.Administration officials also heralded updated projections from the International Monetary Fund, released Thursday afternoon, which predicted the U.S. economy would grow 7 percent in 2021 after adjusting for inflation. In April, the I.M.F. forecast 4.6 percent growth for the year in the United States.Mr. Biden’s stimulus plan will push the federal budget deficit near record highs for the fiscal year, the budget office projected, but it will eventually leave the country in slightly better fiscal shape.The spending approved by Mr. Biden is projected to increase the deficit by $1.1 trillion for the fiscal year, which ends in September. The total deficit of $3 trillion would be the second-largest since 1945, in nominal terms and as a share of the economy, behind the 2020 fiscal year.But the increased growth that is accompanying the larger deficit this year will slightly improve the country’s fiscal outlook over the next decade, with the total deficit falling by about 1 percent, the budget office said.“Projected revenues over the next decade are now higher because of the stronger economy and consequent higher taxable incomes,” it wrote in its report.Mr. Biden’s rescue plan included direct payments of $1,400 each to low- and middle-income Americans, $350 billion to help states and municipalities patch what were expected to be budget shortfalls and hundreds of billions of dollars to accelerate vaccines and more widespread coronavirus testing. It also extended supplemental federal payments of $300 a week to unemployed workers through September, a benefit that Republican governors across the country have ended early as business owners complain of difficulties finding workers.The budget office cited those benefits as “dampening the supply of labor,” along with workers’ health concerns. It said the expiration of the benefits, along with less worry about contracting the virus, would help bolster employment growth in the second half of this year.Inflation, which has been a big topic in Washington, is projected to moderate in the months to come. The office forecast inflation rising above recent trends to hit 2.6 percent for the year, which is stronger growth than the February projection, yet officials see those price pressures subsiding in the second half of the year, as a variety of supply constraints ease in areas like lumber and automobiles.The forecasters expect economic growth to continue at a strong pace in 2022, hitting 5 percent in real terms. But they see it declining quickly in the years to follow, as the labor force grows more slowly than is typical. Budget office officials said that reflected, in part, the effects of more restrictive immigration policies adopted under Mr. Trump. By 2023, the office predicts, growth will slow to 1.1 percent.That forecast does not account for any additional economic policies Mr. Biden might enact in the intervening time. He is currently pushing Congress to approve as much as $4 trillion in spending and tax cuts meant to create jobs and aid growth by improving the productivity of workers and the broader economy, like repairing bridges and subsidizing child care costs to help more parents, particularly women, work additional hours.Fiscal hawks said the report’s long-term deficit projections underscored the need for any additional economic investments to be fully paid for, and not financed with federal borrowing. Debt held by the public rises to nearly $36 trillion by 2031, the budget office now predicts. That would be slightly larger — by just over 6 percent — than the size of the total American economy that year.“While it made sense to borrow to weather the pandemic and jumpstart the recovery,” said Maya MacGuineas, the president of the Committee for a Responsible Federal Budget in Washington, “the strong economic growth projections from C.B.O. show that it is time to pivot away from further deficit-financing and towards paying for things and, ultimately, decreasing the national debt from its current path.” More