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    Rapid Inflation Fuels Debate Over What’s to Blame: Pandemic or Policy

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    The White House is emphasizing that inflation is worldwide. Economists say that’s true — but stimulus-spurred consumer buying is also to blame.The price increases bedeviling consumers, businesses and policymakers worldwide have prompted a heated debate in Washington about how much of today’s rapid inflation is a result of policy choices in the United States and how much stems from global factors tied to the pandemic, like snarled supply chains.At a moment when stubbornly rapid price gains are weighing on consumer confidence and creating a political liability for President Biden, White House officials have repeatedly blamed international forces for high inflation, including factory shutdowns in Asia and overtaxed shipping routes that are causing shortages and pushing up prices everywhere. The officials increasingly cite high inflation in places including the euro area, where prices are climbing at the fastest pace on record, as a sign that the world is experiencing a shared moment of price pain, deflecting the blame away from U.S. policy.But a chorus of economists point to government policies as a big part of the reason U.S. inflation is at a 40-year high. While they agree that prices are rising as a result of shutdowns and supply chain woes, they say that America’s decision to flood the economy with stimulus money helped to send consumer spending into overdrive, exacerbating those global trends.The world’s trade machine is producing, shipping and delivering more goods to American consumers than it ever has, as people flush with cash buy couches, cars and home office equipment, but supply chains just haven’t been able to keep up with that supercharged demand.Kristin J. Forbes, an economist at the Massachusetts Institute for Technology, said that “more than half of the increase, at least, is due to global factors.” But “there is also a domestic demand component that is important,” she said.The White House has tried to address inflation by boosting supply — announcing measures to unclog ports and trying to ramp up domestic manufacturing, all of which take time. But rising inflation has already imperiled Mr. Biden’s ability to pass a sprawling social policy and climate bill over fears that more spending could add to inflation. Senator Joe Manchin III, the West Virginia Democrat whose vote is critical to getting the legislation passed, has cited rising prices as one reason he won’t support the bill.The demand side of today’s price increases may prove easier for policymakers to address. The Federal Reserve is preparing to raise interest rates to make borrowing more expensive, slowing spending down, in a recipe that could help to tame inflation. Fading government help for households may also naturally bring down demand and soften price pressures.Inflation has accelerated sharply in the United States, with the Consumer Price Index climbing by 7 percent in the year through December, its fastest pace since 1982. But in recent months, it has also moved up sharply across many countries, a fact administration officials have emphasized.“The inflation has everything to do with the supply chain,” President Biden said during a news conference on Wednesday. “While there are differences country by country, this is a global phenomenon and driven by these global issues,” Jen Psaki, the White House press secretary, said after the latest inflation data were released.It is the case that supply disruptions are leading to higher inflation in many places, including in large developing economies like India and Brazil and in developed ones like the euro area. Data released in the United Kingdom and in Canada on Wednesday showed prices accelerating at their fastest rate in 30 years in both countries. Inflation in the eurozone, which is measured differently from how the U.S. calculates it, climbed to an annual rate of 5 percent in December, according to an initial estimate by the European Union statistics office.“The U.S. is hardly an island amidst this storm of supply disruptions and rising demand, especially for goods and commodities,” said Eswar Prasad, a professor of trade policy at Cornell University and a senior fellow at the Brookings Institution.But some economists point out that even as inflation proves pervasive around the globe, it has been more pronounced in America than elsewhere.“The United States has had much more inflation than almost any other advanced economy in the world,” said Jason Furman, an economist at Harvard University and former Obama administration economic adviser, who used comparable methodologies to look across areas and concluded that U.S. price increases have been consistently faster.The difference, he said, comes because “the United States’ stimulus is in a category of its own.”White House officials have argued that differences in “core” inflation — which excludes food and fuel — have been small between the United States and other major economies over the past six months. And the gaps all but disappear if you strip out car prices, which are up sharply and have a bigger impact in the United States, where consumers buy more automobiles. (Mr. Furman argued that people who didn’t buy cars would have spent their money on something else and that simply eliminating them from the U.S. consumption basket is not fair.)Administration officials have also noted that the United States has seen a robust rebound in economic growth. The International Monetary Fund said in October that it expected U.S. output to climb by 6 percent in 2021 and 5.2 percent in 2022, compared with 5 percent growth last year in the euro area and 4.3 percent growth projected for this year.“To the extent that we got more heat, we got a lot more growth for it,” said Jared Bernstein, a member of the White House Council of Economic Advisers.While many nations spent heavily to protect their economies from coronavirus fallout — in some places enough to push up demand, and potentially inflation — the United States approved about $5 trillion in spending in 2020 and 2021. That outstripped the response in other major economies as a share of the nation’s output, according to data compiled by the International Monetary Fund.Many economists supported protecting workers and businesses early in the pandemic, but some took issue with the size of the $1.9 trillion package last March under the Biden administration. They argued that sending households another round of stimulus, including $1,400 checks, further fueled demand when the economy was already healing.Consumer spending seemed to react: Retail sales, for instance, jumped after the checks went out.Americans found themselves with a lot of money in the bank, and as they spent that money on goods, demand collided with a global supply chain that was too fragile to catch up.Jutharat Pinyodoonyachet for The New York TimesAdam Posen, president of the Peterson Institute for International Economics, said the U.S. government spent too much in too short a time in the first half of 2021.“If there had not been the bottlenecks and labor market shortages, it might not have mattered as much. But it did,” he said.Inflation F.A.Q.Card 1 of 6What is inflation? More

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    Intel to Invest at Least $20 Billion in New Chip Factories in Ohio

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    Building up U.S. chip production has been a focus of lawmakers and companies alike amid a global shortage of the crucial components.Intel has selected Ohio for a new chip manufacturing complex that would cost at least $20 billion, ramping up an effort to increase U.S. production of computer chips as users grapple with a lingering shortage of the vital components.Intel said Friday that the new site near Columbus would initially have two chip factories and would directly employ 3,000 people, while creating additional jobs in construction and at nearby businesses. Patrick Gelsinger, who became Intel’s chief executive last year, has rapidly increased the company’s investments in manufacturing to help reduce U.S. reliance on foreign chip makers while lobbying Congress to pass incentives aimed at increasing domestic chip production. He has said that Intel might invest as much as $100 billion over a decade in its next U.S. manufacturing campus, linking the scope and speed of that expansion to expected federal grants if Congress approves a spending package known as the CHIPS Act.“We will go bigger and broader if it gets funded,” Mr. Gelsinger, 60, said in a recent interview. “But our recovery plans don’t rely on the CHIPS act.”President Biden will meet with Mr. Gelsinger at the White House on Friday to discuss the project, Intel said. Administration officials have aggressively pushed the CHIPS Act.Intel’s move has geopolitical implications, as well as significance for supply chains. Chips, which act as the brains of computers and many other devices, are largely manufactured in Taiwan, which China has expressed territorial claims toward. During the pandemic, they have also been in short supply because of overwhelming demand and Covid-related disruptions to manufacturing and labor supply, raising questions about how to ensure a consistent chip pipeline. The move is Intel’s first to a new state for manufacturing in more than 40 years. The company, based in Silicon Valley, has U.S. factories in Oregon, New Mexico and Arizona. Last March, Mr. Gelsinger chose an existing complex near Phoenix for a $20 billion expansion, which is now underway.But Mr. Gelsinger had also asserted that a new location was needed to provide additional talent, water, electrical power and other resources for the complex process of making chips. Intel has combed the country for sites, prompting states to compete for one of the biggest economic development prizes in recent memory.The site chosen for the new plant, in New Albany, a suburb east of Columbus, is in an area known for inexpensive land and housing. Nearby Ohio State University is a major source of graduates with engineering degrees whom Intel could recruit. Columbus is also centrally located for receiving supplies and for shipping finished chips.Construction of the first two factories is expected to begin later this year with production to start by 2025, Intel said. The site is more than 1,000 acres — enough space to hold up to eight total factories and related operations, Intel said.“Intel’s new facilities will be transformative for our state, creating thousands of good-paying jobs in Ohio manufacturing strategically vital semiconductors,” Mike DeWine, the governor of Ohio, said in a statement.Mr. Gelsinger, a 30-year Intel veteran who became chief of the software maker VMware in 2012, returned to the chip maker last year to become chief executive as the semiconductor shortage began hobbling carmakers and other companies. While the shortage was partly rooted in the pandemic, another long-term factor was the shifting of chip manufacturing to Asian countries that offer subsidies to companies that build factories there. The United States accounts for about 12 percent of global chip production, down from 37 percent in 1990. Europe’s share has declined to 9 percent from 40 percent over that period.Many of the most advanced chips come from Taiwan Semiconductor Manufacturing Company, whose proximity to China has worried Pentagon officials.Legislation passed by the Senate with bipartisan support last June would provide $52 billion in subsidies for the chip industry, including grants to companies that build new U.S. factories. The package has since gotten caught up in House bickering over the Biden administration’s priorities, though Mr. Gelsinger and others have said they are hopeful it will pass in the coming months.In Europe, Mr. Gelsinger has also lobbied officials for a similar package of subsidies that could aid the construction of a big new Intel factory there, with a projected price tag comparable to the U.S. expansion.Ohio has not previously had a chip manufacturing presence. Moving to a state without existing chip factories presents challenges, such as obtaining permits and persuading suppliers of gases, chemicals and production machines to set up nearby offices, said Dan Hutcheson, an analyst at VLSI Research. On the other hand, having plants in more states provides lobbying leverage in Washington, he said.Intel is not the only company expanding U.S. production. T.S.M.C. began construction last year on a $12 billion complex about 50 miles from Intel’s site near Phoenix. Samsung Electronics selected Taylor, Texas, for a $17 billion factory, with construction set to begin in 2022.Mr. Gelsinger’s strategy is based partly on a bet that Intel can rival T.S.M.C. and Samsung in manufacturing chips to order for other companies. For most of its existence, Intel has built only the microprocessors and other chips it designs and sells itself.The strategy is risky, as Intel has fallen behind its Asian rivals in packing more circuitry onto each slice of silicon, which increases the capabilities of devices like smartphones and computers. Mr. Gelsinger has said that Intel is on track to catch up over several years, but it won’t be easy, as those companies continue to make new developments of their own.Intel “is catching up, but they have not caught up,” Mr. Hutcheson said. More

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    As Broadway Struggles, Governor Hochul Proposes Expanded Tax Credit

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    With Omicron complicating Broadway’s return, Gov. Kathy Hochul proposed more assistance for commercial theater, which her budget director called “critical for the economy.”As Broadway continues to reel from the economic effects of the coronavirus pandemic, Gov. Kathy Hochul is proposing to expand and extend a pandemic tax credit intended to help the commercial theater industry rebound.Ms. Hochul on Tuesday proposed budgeting $200 million for the New York City Musical and Theatrical Production Tax Credit, which provides up to $3 million per show to help defray production costs.“They were starting to recover before Omicron, and then, as you have all seen, a lot of these performance venues had to shut down again, and those venues are critical for the economy,” the state budget director, Robert Mujica, told reporters.The tax credit program, which began last year under Gov. Andrew Cuomo, was initially capped at $100 million. Early indications are that interest is high: Nearly three dozen productions have told the state they expect to apply, said Matthew Gorton, a spokesman for Empire State Development, the state’s economic development agency.The Hochul administration decided to seek to expand the tax credit program — and to extend the initial application deadline, from Dec. 31, 2022 to June 30, 2023 — as it became clear that Broadway’s recovery from its lengthy pandemic shutdown would be bumpier than expected.Shows began resuming performances last summer, and many were drawing good audiences — Ms. Hochul visited “Chicago” and “Six” in October, while Mr. Gorton saw “The Lehman Trilogy” and “To Kill a Mockingbird.”But the industry is now struggling after a spike in coronavirus cases prompted multiple cancellations over the ordinarily lucrative holiday season, and then attendance plunged. Last week, 66 percent of Broadway seats were occupied, according to the Broadway League; that’s up from 62 percent the previous week, but down from 95 percent during the comparable week before the pandemic.“Clearly, we’re not out of the woods yet,” said Jeff Daniel, who is the chairman of the Broadway League’s Government Relations Committee, as well as co-chief executive of Broadway Across America, which presents touring shows in regional markets. Mr. Daniel, still recovering from his own recent bout of Covid, welcomed the governor’s proposal, and said the League would work to urge the Legislature to approve it.“Every show we can open drives jobs and economic impact,” said Mr. Daniel, who noted the close economic relationship between Broadway and other businesses, including hotels and restaurants. “If we can maximize Broadway, we maximize tourism.”Under the program, shows can receive tax credits to cover up to 25 percent of many production expenditures, including labor. As a condition of the credit, shows must have a state-approved diversity and arts job training program, and take steps to make their productions accessible to low-income New Yorkers. More

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    Tech Start-Ups Reach a New Peak of Froth

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    SAN FRANCISCO — How crazy is the money sloshing around in start-up land right now?It’s so crazy that more than 900 tech start-ups are each worth more than $1 billion. In 2015, 80 seemed like a lot.It’s so crazy that hot start-ups no longer have to pitch investors for money. The investors are the ones pitching them.It’s so crazy that founders can start raising money on a Friday afternoon and have a deal closed by Sunday night.It’s so crazy that even sports metaphors fall short.“It’s not like one jump ball — it’s 10,000 jump balls at once,” said Roy Bahat, an investor with Bloomberg Beta, the start-up investment arm of Bloomberg. “You don’t even know which way to look, it’s all just wild.” He now carves out two hours a day for whatever “emergency deal of the day” pops up.The funding frenzy follows nearly two years of a pandemic when people and businesses increasingly relied on tech, creating bottomless opportunities for start-ups to exploit. It follows breakthroughs in artificial intelligence, nuclear technology, electric vehicles, space travel and other areas that investors say are poised to change the world. And it follows nearly a decade in which tech companies have dominated the stock market.The activity has crossed into even frothier territory in recent months, as tech start-ups offering food delivery, remote-work software and telehealth services realized that they not only would survive the pandemic but were in higher demand than ever. The money hit a fever pitch in the final months of 2021 as investors chased a limited pool of start-ups and as tech stocks like Apple, which topped a valuation of $3 trillion, reached new heights.When Roy Bahat, left, an investor with Bloomberg Beta, thought past tech bubbles would burst, “every single time it’s become the new normal,” he said.Andrew Spear for The New York TimesThe result is a booming ecosystem of highly valued, cash-rich start-ups in Silicon Valley and beyond that are expanding at breakneck speed and trying to unseat stalwart companies in all kinds of fields. Few in the industry see a limit to the growth.“The pot of gold at the end of the rainbow has become bigger than ever,” said Mike Ghaffary, an investor at Canvas Ventures. “You can invest in a company that could one day be a trillion-dollar company.”Astonishing data for 2021 tell the story. U.S. start-ups raised $330 billion, nearly double 2020’s record haul of $167 billion, according to PitchBook, which tracks private financing. More tech start-ups crossed the $1 billion valuation threshold than in the previous five years combined. The median amount of money raised for very young start-ups taking on their first major round of funding grew 30 percent, according to Crunchbase. And the value of start-up exits — a sale or public offering — spiked to $774 billion, nearly tripling the prior year’s returns, according to PitchBook.The big-money headlines have carried into this year. Over a few days this month, three private start-ups hit eye-popping valuations: Miro, a digital whiteboard company, was valued at $17.75 billion; Checkout.com, a payments company, was valued at $40 billion; and OpenSea, a 90-person start-up that lets people buy and sell nonfungible tokens, known as NFTs, was valued at $13.3 billion.Investors announced big hauls, too. Andreessen Horowitz, a venture capital firm, said it had raised $9 billion in new funds. Khosla Ventures and Kleiner Perkins, two other venture firms, each raised nearly $2 billion.The good times have been so good that warnings of a pullback inevitably bubble up. Rising interest rates, expected later this year, and uncertainty over the Omicron variant of the coronavirus have deflated tech stock prices. Shares of start-ups that went public through special purpose acquisition vehicles last year have slumped. One of the first start-up initial public offerings expected this year was postponed by Justworks, a provider of human resources software, which cited market conditions. The price of Bitcoin has sunk nearly 40 percent since its peak in November.But start-up investors said that had not yet affected funding for private companies. “I don’t know if I’ve ever seen a more competitive market,” said Ambar Bhattacharyya, an investor at Maverick Ventures.Even if things slow down momentarily, investors said, the big picture looks the same. Past moments of outrageous deal making — from Facebook’s acquisitions of Instagram and WhatsApp to the soaring private market valuations of start-ups like Uber and WeWork — have prompted heated debates about a tech bubble for the last decade. Each time, Mr. Bahat said, he thought the frenzy would eventually return to normal.Instead, he said, “every single time it’s become the new normal.”Investors and founders have adopted a seize-the-day mentality, believing the pandemic created a once-in-a-lifetime opportunity to shake things up. Phil Libin, an entrepreneur and investor, said the pandemic had changed every aspect of society so much that start-ups were accomplishing five years of progress in one year.“The basic fabric of the world is up for grabs,” he said, calling this time “the changiest the world has ever been.” In mid-2020, he started Mmhmm, a video communication provider for remote workers, and has landed $136 million in funding. Mr. Libin said he heard from interested investors a few times a week.Phil Libin has attracted $136 million in funding for Mmhmm, the video communication service he founded.Andrej Sokolow/picture alliance, via Getty ImagesIn less frothy times, young, fast-growing tech companies sought new investment every 18 months. Now they are re-upping multiple times a year.For Daniel Perez, a co-founder of Hinge Health, a provider of online physical therapy programs, the unsolicited emails from investors started in late 2020. They contained pitch decks packed with the elaborate research that the investment firms had done on Hinge, including interviews with dozens of its customers and data on its competitors.These “reverse pitches,” which numbered in the 20s, were meant to persuade Mr. Perez to take money from the investment firms. He also got several term sheets, or investment contracts, from investors he had never met before.“Often when we’re speaking to investors, they’d cut me off and say, ‘Let me show you what I already know about you,’” Mr. Perez said. The reverse pitch from Tiger Global, the firm that Hinge picked to help lead a $300 million funding round alongside the investment firm Coatue Management last January, was 90 pages.A few months after Hinge announced that funding, the reverse pitches started rolling in again. Three different investors sent Mr. Perez videos from celebrities they had hired on Cameo to make their case. One was from Andrei Kirilenko, a former Utah Jazz player whom Mr. Perez was a fan of.“It was a constant drumbeat that got a bit more feverish,” Ms. Perez said. In October, Hinge raised another $600 million led by Coatue and Tiger.Mr. Bhattacharyya said this kind of “pre-work” had become table stakes for firms looking to land a hot investment. The goal is to pre-empt the company’s formal fund-raising process and show how excited the firm is about the start-up, while possibly sharing some useful data.“It’s part of the selling process,” he said.Vijay Tella, founder of Workato, an automation software start-up in Mountain View, Calif., said the dossiers sent by prospective investors during his company’s latest round of funding in November were so elaborate that one firm had interviewed 30 of Workato’s customers. Afterward, Mr. Tella worried that his customers had been spammed by prospective investors and even apologized to some.Workato, which raised $310 million across two rounds of funding last year and is valued at $5.7 billion, is not currently seeking more money. But, Mr. Tella said, “I would bet right now that those calls are still happening.” More

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    China’s Economy Is Slowing, a Worrying Sign for the World

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    Economic output climbed 4 percent in the last quarter of 2021, slowing from the previous quarter. Growth has faltered as home buyers and consumers become cautious.BEIJING — Construction and property sales have slumped. Small businesses have shut because of rising costs and weak sales. Debt-laden local governments are cutting the pay of civil servants.China’s economy slowed markedly in the final months of last year as government measures to limit real estate speculation hurt other sectors as well. Lockdowns and travel restrictions to contain the coronavirus also dented consumer spending. Stringent regulations on everything from internet businesses to after-school tutoring companies have set off a wave of layoffs.China’s National Bureau of Statistics said Monday that economic output from October through December was only 4 percent higher than during the same period a year earlier. That represented a further deceleration from the 4.9 percent growth in the third quarter, July through September.The world’s demand for consumer electronics, furniture and other home comforts during the pandemic has produced record-setting exports for China, preventing its growth from stalling. Over all of last year, China’s economic output was 8.1 percent higher than in 2020, the government said. But much of the growth was in the first half of last year.A port in Qingdao, in China’s eastern Shandong Province, earlier this month. China’s exports have remained strong.CHINATOPIX, via Associated PressThe snapshot of China’s economy, the main locomotive of global growth in the last few years, adds to expectations that the broader world economic outlook is beginning to dim. Making matters worse, the Omicron variant of the coronavirus is now starting to spread in China, leading to more restrictions around the country and raising fears of renewed disruption of supply chains.The slowing economy poses a dilemma for China’s leaders. The measures they have imposed to address income inequality and rein in companies are part of a long-term plan to protect the economy and national security. But officials are wary of causing short-term economic instability, particularly in a year of unusual political importance.Next month, China hosts the Winter Olympics in Beijing, which will focus an international spotlight on the country’s performance. In the fall, Xi Jinping, China’s leader, is expected to claim a third five-year term at a Communist Party congress.Mr. Xi has sought to strike an optimistic note. “We have every confidence in the future of China’s economy,” he said in a speech on Monday to a virtual session of the World Economic Forum.But with growth in his country slowing, demand slackening and debt still at near-record levels, Mr. Xi could face some of the biggest economic challenges since Deng Xiaoping began lifting the country out of its Maoist straitjacket four decades ago.“I’m afraid that the operation and development of China’s economy in the next several years may be relatively difficult,” Li Daokui, a prominent economist and Chinese government adviser, said in a speech late last month. “Looking at the five years as a whole, it may be the most difficult period since our reform and opening up 40 years ago.”China also faces the problem of a rapidly aging population, which could create an even greater burden on China’s economy and its labor force. The National Bureau of Statistics said on Monday that China’s birthrate fell sharply last year and is now barely higher than the death rate. Private Sector StrugglesAs costs for many raw materials have risen and the pandemic has prompted some consumers to stay home, millions of private businesses have crumbled, most of them small and family owned.That is a big concern because private companies are the backbone of the Chinese economy, accounting for three-fifths of output and four-fifths of urban employment.Kang Shiqing invested much of his savings nearly three years ago to open a women’s clothing store in Nanping, a river town in Fujian Province in the southeast. But when the pandemic hit a year later, the number of customers dropped drastically and never recovered.As in many countries, there has been a broad shift in China toward online shopping, which can undercut stores by using less labor and operating from inexpensive warehouses. Mr. Kang was stuck paying high rent for his store despite the pandemic. He finally closed it in June.“We can hardly survive,” he said.Another persistent difficulty for small businesses in China is the high cost of borrowing, often at double-digit interest rates from private lenders.Chinese leaders are aware of the challenges private companies face. Premier Li Keqiang has promised further cuts in taxes and fees to help the country’s many struggling small businesses.On Monday, China’s central bank made a small move to reduce interest rates, which could help reduce slightly the interest costs of the country’s heavily indebted real estate developers. The central bank pushed down by about a tenth of a percentage point its interest rate benchmarks for one-week and one-year lending.Construction StallsThe building and fitting out of new homes has represented a quarter of China’s economy. Heavy lending and widespread speculation have helped the country erect the equivalent of 140 square feet of new housing for every urban resident in the past two decades.This autumn, the sector faltered. The government wants to limit speculation and deflate a bubble that had made new homes unaffordable for young families.China Evergrande Group is only the largest and most visible of a lengthening list of real estate developers in China that have run into severe financial difficulty lately. Kaisa Group, China Aoyuan Property Group and Fantasia are among other developers that have struggled to make payments as bond investors become more wary of lending money to China’s real estate sector.An idle construction site for a China Evergrande residential project in Taiyuan, in China’s northern Shanxi Province.Gilles Sabrié for The New York TimesAs real estate companies try to conserve cash, they are starting fewer construction projects. And that has been a big problem for the economy. The price of steel reinforcing bars for the concrete in apartment towers, for example, dropped by a quarter in October and November before stabilizing at a much lower level in December.Understand the Evergrande CrisisCard 1 of 6What is Evergrande? More

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    Supply Chain Woes Could Worsen as China Imposes Covid Lockdowns

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    American manufacturers are worried that China’s zero-tolerance coronavirus policy could throw a wrench in the global conveyor belt for goods this year.WASHINGTON — Companies are bracing for another round of potentially debilitating supply chain disruptions as China, home to about a third of global manufacturing, imposes sweeping lockdowns in an attempt to keep the Omicron variant at bay.The measures have already confined tens of millions of people to their homes in several Chinese cities and contributed to a suspension of connecting flights through Hong Kong from much of the world for the next month. At least 20 million people, or about 1.5 percent of China’s population, are in lockdown, mostly in the city of Xi’an in western China and in Henan Province in north-central China.The country’s zero-tolerance policy has manufacturers — already on edge from spending the past two years dealing with crippling supply chain woes — worried about another round of shutdowns at Chinese factories and ports. Additional disruptions to the global supply chain would come at a particularly fraught moment for companies, which are struggling with rising prices for raw materials and shipping along with extended delivery times and worker shortages.China used lockdowns, contact tracing and quarantines to halt the spread of the coronavirus nearly two years ago after its initial emergence in Wuhan. These tactics have been highly effective, but the extreme transmissibility of the Omicron variant poses the biggest test yet of China’s system.So far, the effects of the lockdowns on Chinese factory production and deliveries have been limited. Four of China’s largest port cities — Shanghai, Dalian, Tianjin and Shenzhen — have imposed narrowly targeted lockdowns to try to control small outbreaks of the Omicron variant. As of this weekend, these cities had not locked down their docks. Still, Volkswagen and Toyota announced last week that they would temporarily suspend operations in Tianjin because of lockdowns.Analysts warn that many industries could face disruptions in the flow of goods as China tries to stamp out any coronavirus infections ahead of the Winter Olympics, which will be held in Beijing next month. On Saturday, Beijing officials reported the city’s first case of the Omicron variant, prompting the authorities to lock down the infected person’s residential compound and workplace.If extensive lockdowns become more widespread in China, their effects on supply chains could be felt across the United States. Major new disruptions could depress consumer confidence and exacerbate inflation, which is already at a 40-year high, posing challenges for the Biden administration and the Federal Reserve.“Will the Chinese be able to control it or not I think is a really important question,” said Craig Allen, the president of the U.S.-China Business Council. “If they’re going to have to begin closing down port cities, you’re going to have additional supply chain disruptions.”The potential for setbacks comes just as many companies had hoped they were about to see some easing of the bottlenecks that have clogged global supply chains since the pandemic began.The Yantian port in Shenzhen, China. Four of the country’s largest port cities, including Shenzhen, have imposed targeted lockdowns to try to control small outbreaks of the Omicron variant.Martin Pollard/ReutersThe combination of intermittent shutdowns at factories, ports and warehouses around the world and American consumers’ surging demand for foreign goods has thrown the global delivery system out of whack. Transportation costs have skyrocketed, and ports and warehouses have experienced pileups of products waiting to be shipped or driven elsewhere while other parts of the supply chain are stymied by shortages.Understand the Supply Chain CrisisThe Origins of the Crisis: The pandemic created worldwide economic turmoil. We broke down how it happened.Explaining the Shortages: Why is this happening? When will it end? Here are some answers to your questions.Lockdowns Loom: Companies are bracing for more delays, worried that China’s zero-tolerance Covid policy will shutter factories and ports.A Key Factor in Inflation: In the U.S., inflation is hitting its highest level in decades. Supply chain issues play a big role.For the 2021 holiday season, customers largely circumvented those challenges by ordering early. High shipping prices began to ease after the holiday rush, and some analysts speculated that next month’s Lunar New Year, when many Chinese factories will idle, might be a moment for ports, warehouses and trucking companies to catch up on moving backlogged orders and allow global supply chains to return to normal.But the spread of the Omicron variant is foiling hopes for a fast recovery, highlighting not only how much America depends on Chinese goods, but also how fragile the supply chain remains within the United States.American trucking companies and warehouses, already short of workers, are losing more of their employees to sickness and quarantines. Weather disruptions are leading to empty shelves in American supermarkets. Delivery times for products shipped from Chinese factories to the West Coast of the United States are as long as ever — stretching to a record high of 113 days in early January, according to Flexport, a logistics firm. That was up from fewer than 50 days at the beginning of 2019.The Biden administration has undertaken a series of moves to try to alleviate bottlenecks both in the United States and abroad, including devoting $17 billion to improving American ports as part of the new infrastructure law. Major U.S. ports are handling more cargo than ever before and working through their backlog of containers — in part because ports have threatened additional fees for containers that sit too long in their yards.Yet those greater efficiencies have been undercut by continuing problems at other stages of the supply chain, including a shortage of truckers and warehouse workers to move the goods to their final destination. A push to make the Port of Los Angeles operate 24/7, which was the centerpiece of the Biden administration’s efforts to address supply chain issues this fall, has still seen few trucks showing up for overnight pickups, according to port officials, and cargo ships are still waiting for weeks outside West Coast ports for their turn for a berth to dock in.West Coast ports could see further disruptions this year as they renegotiate a labor contract for more than 22,000 dockworkers that expires on July 1. Previous negotiations led to work slowdowns and shipping delays.“If you have four closed doors to get through and one of them opens up, that doesn’t necessarily mean quick passage,” said Phil Levy, the chief economist at Flexport. “We should not delude ourselves that if our ports become 10 percent more efficient, we’ve solved the whole problem.”Chris Netram, the managing vice president for tax and domestic economic policy at the National Association of Manufacturers, which represents 14,000 companies, said that American businesses had seen a succession of supply chain problems since the beginning of the pandemic.“Right now, we are at the tail end of one flavor of those challenges, the port snarls,” he said, adding that Chinese lockdowns could be “the next flavor of this.”Manufacturers are watching carefully to see whether more factories and ports in China might be forced to shutter if Omicron spreads in the coming weeks.Neither Xi’an nor Henan Province, the site of China’s most expansive lockdowns, has an economy heavily reliant on exports, although Xi’an does produce some semiconductors, including for Samsung and Micron Technology, as well as commercial aircraft components.How the Supply Chain Crisis UnfoldedCard 1 of 9The pandemic sparked the problem. 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    Critics Say I.M.F. Loan Fees Are Hurting Nations in Desperate Need

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    Democratic lawmakers say the global fund’s surcharges for emergency relief siphon away money that countries need to fight the pandemic.At a time when the coronavirus pandemic is fueling a rapid rise in inequality and debt, a growing number of policymakers and economists are pressuring the International Monetary Fund to eliminate extra fees it charges on loans to struggling nations because they siphon away scarce funds that could instead be used to battle Covid.The fund, which for decades has backstopped countries in financial distress, imposes these fees for loans that are unusually large or longstanding. They were designed to help protect against hefty losses from high-risk lending.But critics argue that the surcharges come at the worst possible moment, when countries are already in desperate need of funds to provide poverty aid and public health services. Some of the countries paying the fees, including Egypt, Ukraine and Armenia, have vaccinated only about a third of their populations. The result, the critics argue, is that the I.M.F. ends up undermining the financial welfare and stability of the very places it is trying to aid.In the latest critique, a letter this week to Treasury Secretary Janet L. Yellen from 18 Democrats in Congress, including Representatives Alexandria Ocasio-Cortez of New York and Pramila Jayapal of Washington, asked the United States to support ending the surcharge policy.The surcharge “discourages public health investment by developing countries,” the letter said. “This perverse outcome will undermine global economic recovery.” The letter echoed several other appeals from more than two dozen emerging nations, including Argentina, South Africa and Brazil, as well as economists.Volunteers at a soup kitchen in Buenos Aires last spring. The coronavirus pandemic has further strained Argentina’s poor.Sarah Pabst for The New York Times“Attempts to force excessive repayments are counterproductive because they lower the economy’s productive potential,” the Nobel Prize-winning economist Joseph E. Stiglitz and Kevin Gallagher, a professor of global development at Boston University, wrote in a recent analysis. “Both creditors and the country itself are worse off.”They added: “The I.M.F. should not be in the business of making a profit off of countries in dire straits.”The fund primarily serves as a lender of last resort, although recently it has expanded its mission to include reducing extreme inequality and combating climate change.In addition to building up a reserve, the surcharges were designed to encourage borrowers to repay on time. The poorest countries are exempt.The fees have become a major source of revenue for the I.M.F., which is funded primarily by its 190 member nations, with the United States paying the largest share. The fund estimates that by the end of this year, borrowers will have shelled out $4 billion in extra fees — on top of their regular interest payments — since the pandemic began in 2020.The debate over the surcharge is emblematic of larger contradictions at the heart of the I.M.F.’s structure and mission. The fund was created to provide a lifeline to troubled economies so that they recover “without resorting to measures destructive of national or international prosperity.”But the terms and conditions that accompany its loans have at times ratcheted up the economic pain. “They penalize countries at a time when they are in an adverse situation, forcing them to make greater cuts in order to repay debts,” according to an analysis from the liberal Center for Economic and Policy Research in Washington.“Demanding these surcharges during an ongoing recession caused by a pandemic goes even more against” the I.M.F.’s founding principles, the center argues.Voting power in the fund’s governance is based on the size of each country’s monetary contribution, with only the United States having veto power. That means that countries most in need have the least say in how the I.M.F. carries out its role.In a statement, the Treasury Department reiterated support for the surcharges: “As the I.M.F.’s major shareholder we have an obligation to protect the financial integrity of the I.M.F.” And it pointed out that the interest rates charged by the fund were often far below market rates.A review of the surcharges last month by the fund’s executive directors ended without any agreement to halt the charges. An I.M.F. statement explained that while “some directors were open to exploring temporary surcharge relief” to free up resources to deal with the pandemic, most others preferred a comprehensive review later on in the context of the fund’s “overall financial outlook.”Strapped countries that are subject to the surcharges like Argentina balked earlier at the extra payments, but their campaign has picked up momentum with the spread of Covid-19.“I think the pandemic makes a big difference,” said Martín Guzmán, Argentina’s minister of economy.He argues that the pandemic has turned what may have once been considered unusual circumstances into the commonplace, given the enormous debt that many countries have taken on to meet its rising costs. Government debt in emerging countries has hit its highest level in a half a century.The number of nations subject to surcharges increased to 21 last year from 15 in 2020, according to the I.M.F. Pakistan, Egypt, Ukraine, Georgia, Albania, Tunisia and Ecuador are among those paying.Argentina, which has long had a contentious and bitter relationship with the fund relating to a series of bailouts and defaults that date back decades, has been a leading opponent of the surcharges.The country is trying to work out a new repayment schedule for $45 billion that the previous government borrowed as part of a 2018 loan package. By the end of 2024, the government estimates, it will have run up a tab of more than $5 billion in surcharges alone. This year, 70 percent of Argentina’s nearly $1.6 billion bill from the I.M.F. is for surcharges.A protest against a possible new deal with the I.M.F. in Buenos Aires last month.Alejandro Pagni/Agence France-Presse — Getty Images“The charges will be undermining the mission of the I.M.F., which is to ensure global stability and balance of payments,” Mr. Guzmán said.According to World Bank estimates, 124 million people were pushed into poverty in 2020, with eight out of 10 of them in middle-income countries.Meanwhile, the costs of basic necessities like food, heating and electricity are surging, adding to political strains. This week, the I.M.F. warned in its blog that continuing Covid outbreaks, combined with rising inflation, debt and interest rates, mean emerging economies should “prepare for potential bouts of economic turbulence.” More

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    Spike in Inflation Reignites Debate on Price Controls

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    A discussion over whether price controls would work to stem inflation is sweeping progressives. So far, it has little political acceptance.America’s recent inflation spike has prompted renewed interest in an idea that many economists and policy experts thought they had long ago left behind for good: price controls.The federal government last imposed broad-based limits on how much private companies could charge for their goods and services in the 1970s, when President Richard M. Nixon ushered in wage and price freezes over the course of a few years. That experiment was widely regarded as a failure, and ever since, the phrase “price controls” has, at least for many people, called to mind images of product shortages and bureaucratic overreach. In recent decades, few economists have bothered to study the idea at all.As consumer prices soared this fall, however, a handful of mostly left-leaning economists reignited the long-dormant debate, arguing in opinion columns, policy briefs and social-media posts that the idea deserves a second look. Few if any are arguing for a return to the Nixon-era policies. Many say they aren’t yet ready to endorse price controls, and just want the idea to be taken seriously.Even so, the renewed discussion brought a swift reaction from many mainstream economists on both the right and left, some of whom suggested it would be a mistake to even open the door to the idea. So far, decision makers in Washington haven’t embraced price caps, even in a more modest form.Here’s what to know about the push for price controls, the history of the idea and the possible outcomes if they were to be tried in 2022.Why do (most) economists dislike price controls?In the most basic economic models, prices are a function of supply and demand. If prices for a product are too high, people won’t buy as much of it. If prices are too low, companies won’t make as much money, and will make less of the product. In a free market, prices naturally settle at the point that balances out those two forces.In that model, when the government imposes an artificial cap on prices, supply falls (since companies won’t make as much money) and demand rises (since more people will want to buy at the government-imposed lower price). As a result, supply can’t meet demand, resulting in shortages.That’s the theory. In the real world, a variety of factors — imperfect competition between producers, unpredictable behavior by consumers, practical limits on how quickly operations can ramp up and down — mean that prices don’t always behave the way simple models predict.Still, most economists argue that the basic logic of that theory still holds: Artificially holding down prices leads to shortages, inefficiencies or other unintended consequences, like an increase in black-market activity. And while some economists say price controls on specific products can make sense in specific situations — to prevent price-gouging after a natural disaster, for example — most argue that they are a poor tool for fighting inflation, which is a broad increase in prices.In a recent survey of 41 academic economists conducted by the University of Chicago’s Booth School of Business, 61 percent said that price controls similar to those imposed in the 1970s would fail to “successfully reduce U.S. inflation over the next 12 months.” Others said the policy might bring down inflation in the short-term but would lead to shortages or other problems.“Price controls can of course control prices — but they’re a terrible idea!” David Autor, an economist at the Massachusetts Institute of Technology, wrote in response to the survey.Have price controls worked in the past?In August 1971, with consumer prices rising at their fastest pace since the Korean War, Mr. Nixon announced that he was imposing a 90-day freeze on most wages, prices and rents. Once the freeze ended, companies were allowed to raise prices, but subject to limits set by a council headed by Donald H. Rumsfeld, who later served as defense secretary for Presidents Gerald R. Ford and George W. Bush.The controls initially looked like a success. Inflation fell from a peak of more than 6 percent in 1970 to below 3 percent in the middle of 1972. But almost as soon as the government began to ease the restrictions, prices shot back up, leading Mr. Nixon to impose another price freeze, followed by another round of even more stringent controls. This time, the controls failed to tame inflation, in part because of the first Arab oil embargo. The price controls expired in 1974, shortly before Mr. Nixon resigned from office.Not all attempts at reining in prices have been such clear failures. During World War II, the Roosevelt administration imposed strict price controls to prevent wartime shortages from making food and other basic supplies unaffordable. Those rules were generally viewed as necessary at the time, and economists have tended to view them more favorably. In fact, there have been plenty of instances of wartime price controls throughout history, often paired with rationing and wage growth limits.Why do some economists want to reopen the debate?Few economists today defend the Nixon price controls. But some argue that it is unfair to consider their failure a definitive rebuttal of all price caps. The 1970s were a period of significant economic turmoil, including the Arab oil embargo and the end of the gold standard — hardly the setting for a controlled experiment. And the Nixon-era price caps were broad, whereas modern proponents suggest a more tailored approached.Many progressive economists in recent years have reconsidered once-scorned ideas like the minimum wage in response to evidence suggesting that real-world markets often don’t behave the way simple economic models would predict. Price controls, some economists argue, are due for a similar reappraisal.“This is a great suppressed topic,” said James K. Galbraith, an economist at the University of Texas. “It was absolutely mainstream from the start of World War II until the Reagan administration.”Isabella Weber, an economist at the University of Massachusetts Amherst, has pointed to the period after World War II, when the government quickly lifted wartime price controls and inflation spiked. In a recent opinion column in the Guardian newspaper, Dr. Weber argued that had the controls been removed more slowly, as many prominent economists suggested at the time, inflation might have been lower. The huge, unexpected wartime disruption, she said, might offer parallels for today.But other experts said there were key differences between the two periods. Wartime price caps typically came alongside rationing, in which the quantity of goods people were allowed to buy was limited, said Rebecca L. Spang, a money historian at Indiana University.“If you try to have price controls without rationing, you end up with shortages, you end up with purveyors pulling their goods from the market,” she said.Enforcing price controls is also difficult: It requires popular acceptance, agency personnel and wide governmental support. Broad buy-in of shared ideas is not a feature of the modern political landscape.“The cultural context has changed so much,” she said, noting that the world since World War II has begun to treat economics as an individual pursuit, emphasizing freedom and low regulation.What would price controls look like in 2022?Shoppers at a grocery store in Queens, N.Y., last year. As consumer prices soared this past fall, a handful of mostly left-leaning economists argued that price controls deserved a second look.Janice Chung for The New York TimesSo far, few people have offered specific proposals for price controls in response to the recent jump in inflation. But economists who are exploring the idea are focused on areas where the pandemic has disrupted supply chains.Those disruptions, this argument goes, may take time to resolve. In the meantime, if needed products — meat, computer chips, gas — come up short, it is not clear that market forces will be able to rapidly expand production to meet demand. That could lead to a situation where companies can make big profits by charging more for goods in short supply, and in which only the rich can afford some products.Inflation F.A.Q.Card 1 of 6What is inflation? More