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Double-Barreled Economic Threat Puts Congress on Edge

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Republicans and Democrats disagree over how recent bank closures should impact the debt limit stalemate, and have taken divergent lessons from past economic crises.WASHINGTON — In 2008, an imminent collapse of the banking system consumed Congress before lawmakers delivered a bailout. Three years later, a debt limit crisis enveloped Washington and led to a series of spending cuts after a dangerous brush with default and a first-ever downgrade in the nation’s credit rating.Now unease about the banking system’s stability and a stalemate over raising the debt limit are engulfing the capital simultaneously, ratcheting up an already high level of financial anxiety as two economic challenges Congress has experienced before become intertwined.“The stakes are exceptionally high when you are dealing with what amounts to a one-two punch of economic peril,” said Senator Ron Wyden, Democrat of Oregon and chairman of the Senate Finance Committee. “The messages that you send to the economy and the public with respect to banking and the full faith and credit of the United States — it doesn’t get more consequential than that.”Republicans and Democrats acknowledge it is a scary case of déjà vu times two. But they diverge sharply on how recent bank failures — and uncertainty over how Congress should respond to them, if at all — will influence the debt limit fight later this summer.At their just-concluded retreat in Florida, House Republicans took the line that shakiness in the banking system should strengthen their hand in the coming showdown over the debt limit. They argued that a Democrat-led spending spree spurred inflation, forced up interest rates and led to a precarious situation for all but the largest banks. The clear answer, to them, remains deep spending cuts, and they say they will still insist on cuts before making any move to raise the debt ceiling.Treasury Secretary Janet L. Yellen said on Tuesday that the president was willing to talk federal spending with Republicans, just not under the threat of a debt default.Pete Marovich for The New York Times“That should wake everybody up,” Speaker Kevin McCarthy, Republican of California, told reporters on Tuesday when asked about the intersection of banking stability and the debt limit. “Why are we having a crisis? Because the government spent too much and created inflation.”“I believe to get to a debt ceiling limit, you have to be spending less than we spent before,” he said.But Jerome H. Powell, the Fed chair, on Wednesday disputed the notion that spending remained the chief driver of inflation.“Spending was of course tremendously high during the pandemic,” he said at a news conference announcing an increase in interest rates. “As pandemic programs rolled off, spending actually came down.”“Fiscal impulse is actually not what’s driving inflation right now,” he said. “It was at the beginning perhaps, but that’s not the story right now.”Democrats say House Republicans are doing the exact opposite of what is required at a critical moment, even as the Fed offers assurances about the soundness of the banking system. They say the fallout from any banking instability should persuade Republicans that the last thing the economy needs is the specter of a default from a failure to raise the debt limit, which is projected to be reached as early as July without action by Congress.Senator Chuck Schumer, Democrat of New York and the majority leader, on Wednesday assailed the Republican stance as “reckless and truly clueless.”.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.“Instead of calling for calm, House Republicans are sowing chaos by threatening a default at a time when banks need stability,” he said. “The right answer is for Republicans in the House to stop saber-rattling, drop the hostage-taking and brinkmanship and work together, work in a bipartisan way, to extend the debt ceiling without strings attached.”Other Democrats shared those sentiments, dismissing calls from some Republicans to prioritize federal payments should Congress fail to agree on a debt-limit increase. They say that approach is unworkable and default by another name.“The banking crisis highlights the importance of paying our bills on time,” said Senator Chris Van Hollen, Democrat of Maryland and a member of the Banking Committee. “We don’t want to create any more uncertainty in the financial markets and the economy. Because of what happened with the banks, it is more important than ever that Republicans don’t allow us to get close to the cliff.”“Because of what happened with the banks, it is more important than ever that Republicans don’t allow us to get close to the cliff,” said Senator Chris Van Hollen, Democrat of Maryland.Pete Marovich for The New York TimesThe 2008 and 2011 economic crises were earthshaking events on Capitol Hill. In the fall of 2008, in response to warnings from Treasury and Fed officials that the nation’s banks were about go under, Congress dove into a titanic, market-rattling debate over the $700 billion Troubled Asset Relief Program, ultimately approving a historic government intervention in the economy.Three years later, a new House Republican majority and the Obama administration took their clash over spending to the brink of financial ruin, bringing the country close to a federal default before striking a last-minute deal on spending cuts cleared the way for an increase in the debt ceiling, averting disaster.Lawmakers say they drew many lessons from those painful experiences. But the two parties did not draw the same ones.For Democrats, the 2011 experience hardened their opposition to negotiating over increasing the debt limit, confirming their belief that it should be raised without conditions since it is simply making good on spending already approved by Congress, with the support of members of both political parties. Republicans, by contrast, say that same experience persuaded them that the only way to exact real spending cuts is to use the threat of a federal debt default as leverage.The clashing approaches now have the parties again dug in over increasing the debt limit. Scant progress has been made toward finding a resolution that could avoid undermining the economy, even as the banking system exhibits signs of stress.Some Republicans say that they see the high-profile failure of the Silicon Valley Bank as an isolated incident, in contrast to the widespread fear of a total banking collapse in 2008 before Congress intervened.“This is not ’08 and ’09 when the banking industry was crazy on their asset side,” said Senator Mike Braun, Republican of Indiana. “That side of the economy I think learned its lesson.”He and other Republicans said they need to continue to push for spending reductions as part of any agreement to raise the debt limit and called on Democrats and President Biden to drop their refusal to negotiate.“This is not just a one-way street,” said Senator John Cornyn, Republican of Texas. “Hopefully Biden and the administration will get real when it comes to negotiating something, rather than saying, ‘I am not going to negotiate anything.’”In an appearance on Tuesday before the American Bankers Association, Treasury Secretary Janet L. Yellen said that the president was willing to talk federal spending with Republicans, just not with the debt limit sword held at his throat.“Having this conversation needs to happen over time and in the appropriations process and not through the threat of forcing a default,” she told members of the group. “It is essential that Congress raise the debt ceiling and that they do it promptly in order not to inflict a truly catastrophic wound on our economy and our financial system.”Republicans and Democrats credit consumer confidence for holding off economic calamity and so far preventing Congress from entering the crisis atmosphere that permeated both 2008 and 2011. But there is no guarantee that confidence can be maintained, and lawmakers warn of the possibility of cascading events should the banking system become viewed as unstable or the debt limit standoff go on too long.“It has,” warned Senator Richard Blumenthal, Democrat of Connecticut, “the makings of a perfect storm.” More

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    To Tap Federal Funds, Chip Makers Will Need to Provide Child Care

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    The move seeks to help more women join the work force as industry leaders complain of labor shortages.WASHINGTON — The Biden administration plans to leverage the federal government’s expansive investment in the semiconductor industry to make progress on another goal: affordable child care.On Tuesday, the Commerce Department will announce that any semiconductor manufacturer seeking a slice of nearly $40 billion in new federal subsidies will need to essentially guarantee affordable, high-quality child care for workers who build or operate a plant.Last year, a bipartisan group of lawmakers passed the CHIPS Act, which devoted $39 billion to directly boost U.S. semiconductor factories as part of $52 billion in subsidies for the industry, in hopes of making the nation less reliant on foreign suppliers for critical chips that power computers, video games, cars and more.Companies that receive the subsidies to build new plants will be able to use some of the government money to meet the new child care requirement. They could do that in a number of ways, in consultation with Commerce officials, who will set basic guidelines but not dictate how companies ensure workers have access to care they can afford.That could include building company child-care centers near construction sites or new plants, paying local child-care providers to add capacity at an affordable cost for workers, directly subsidizing workers’ care costs or other, similar steps that would ensure workers have access to care for their children.American employers, including manufacturers, are increasingly raising concerns that a lack of access to affordable child care is blocking millions of Americans from looking for work, particularly women. President Biden pushed Congress to address those concerns over the last two years, proposing hundreds of billions of dollars for new child care programs, but he was unable to corral support from even a majority of Senate Democrats.But Mr. Biden did convince lawmakers to approve a range of new spending programs seeking to boost American manufacturing. Now, Commerce is trying to utilize a centerpiece of those efforts, which aims to expand American semiconductor manufacturing, to make at least a small dent in his large goals for the so-called care economy.The Global Race for Computer ChipsA Ramp-Up in Spending: Amid a tech cold war with China, U.S. companies have pledged nearly $200 billion for chip manufacturing projects since early 2020. But the investments have limits.Crackdown on China: The United States has been aiming to prevent China from becoming an advanced power in chips, issuing sweeping restrictions on the country’s access to advanced technology.Arizona Factory: Internal doubts are mounting at Taiwan Semiconductor Manufacturing Company, the world’s biggest maker of advanced chips, over its investment in a new factory in Phoenix.CHIPS Act: Semiconductor companies, which united to get the sprawling $280 billion bill approved last year, have set off a lobbying frenzy as they argue for more cash than their competitors.It joins a growing list of administration efforts to expand the reach of Mr. Biden’s economic policies beyond their primary intent. For instance, administration officials have attached stringent labor standards and “Buy America” provisions to money from a bipartisan infrastructure law. The child care requirement will be flexible for chip makers, but it will almost certainly divert some subsidy dollars that are meant to expand factory capacity and create jobs.The Commerce Department is expected to release its application on Tuesday, allowing companies to begin making a case for federal subsidies that the industry lobbied hard to secure from Congress.The prospect of accessing those funds has already enticed domestic and foreign-owned chip makers to announce billions of dollars in plans for new investments in Arizona, central New York and elsewhere.But even as they ramp up investments, companies are complaining of difficulties in finding workers to build and operate manufacturing facilities.America’s child care industry has not fully rebounded from the pandemic recession. It is still about 58,000 workers, or 5 percentage points, short of its prepandemic peak, according to an analysis of Labor Department data by the Center for the Study of Childcare Employment at the University of California-Berkeley.Shortly before the pandemic, the Bipartisan Policy Center in Washington surveyed 35 states and found more than 11 million children had a potential need for child care — yet fewer than 8 million slots were available.That shortage is particularly acute in some of the areas where manufacturers are set to begin building new chip plants spurred by the new legislation. Commerce Department officials calculate that in the Syracuse area, where Micron announced a $100 billion chip making investment last year after Mr. Biden signed the new law, the need for slots in child care facilities is nearly three times the size of the actual care capacity in the region.In Phoenix, where semiconductor manufacturing is booming, child care costs consume about 18 percent of a typical construction or manufacturing worker’s salary. That share is higher than the national average.Commerce Secretary Gina Raimondo, center, with Gov. Kathy Hochul of New York, said that the child care requirements should help companies hire mothers, easing a labor shortage.Sarah Silbiger for The New York TimesGina Raimondo, the Commerce secretary, said in an interview that the child-care requirements should help companies cope with a tight labor market by making it easier for them to attract and retain caregivers who have been kept from working by difficulties finding care for their children.In a speech last week, Ms. Raimondo called efforts to attract more women to the work force “a simple question of math” for industries complaining of labor shortages. “We need chip manufacturers, construction companies and unions to work with us toward the national goal of hiring and training another million women in construction over the next decade to meet the demand not just in chips, but other industries and infrastructure projects as well,” she said.Only about 3 in 10 U.S. manufacturing workers are women. Ms. Raimondo said the CHIPS Act would fail if the administration did not help companies change those numbers, by bringing in women who have children.“You will not be successful unless you find a way to attract, train, put to work and retain women, and you won’t do that without child care,” Ms. Raimondo said in an interview.The Commerce requirement would represent a relatively small step toward Mr. Biden’s much larger, and as-yet unfulfilled, child care ambitions.Mr. Biden unveiled a $4 trillion economic agenda in the months after he took office. It was split into two parts. One focused on physical investments: repairing bridges and water pipes, laying broadband cable, spurring a shift to low-emission sources of energy and catalyzing new manufacturing capacity to compete on a global stage. It was a source of repeated legislative success for the president, who signed a bipartisan infrastructure bill, the CHIPS bill and a climate, health and tax bill that passed with only Democratic votes.But Mr. Biden failed to persuade centrist holdouts in his party, like Senators Kyrsten Sinema of Arizona and Joe Manchin III of West Virginia, to back most of the provisions in the second half of his agenda. Those were largely the president’s plans to invest in people: federally guaranteed paid leave; subsidized care for children, the disabled and older Americans; universal prekindergarten; free community college for all, and more.The lopsided nature of Mr. Biden’s success threatens to exacerbate existing gender disparities in the economy. Some economists warn they could hinder future economic growth. Many of Mr. Biden’s people-focused programs were deliberately aimed at boosting female participation in the work force.It could be years before Democrats have another opportunity to pass those programs. Republicans won control of the House of Representatives last fall and roundly oppose Mr. Biden on new spending proposals and the tax increases on corporations and high earners that he has called for to cover that spending. Progressive groups and liberal lawmakers largely concede there is little chance of a child care bill making its way to Mr. Biden’s desk before the 2024 election.When it became clear last year that sweeping plans to expand and subsidize child care would not make it into the climate, health and tax bill that marked the culmination of Mr. Biden’s economic efforts in Congress, Ms. Raimondo gathered aides around a conference table. She told them, she said, that “if Congress wasn’t going to do what they should have done, we’re going to do it in implementation” of the bills that did pass.Some American manufacturers have already turned to on-site care facilities to help meet workers needs. The automaker Toyota has provided 24-hour care at a factory in Kentucky since 1993 and one in Indiana since 2004.Chad Moutray, director of the Center for Manufacturing Research at the Manufacturing Institute, which is affiliated with the National Association of Manufacturers, wrote in a report late last year that child care availability is part of the reason women do not seek more jobs in manufacturing.“Women represent a sizable talent pool that manufacturers cannot ignore,” he wrote. More

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    The U.S. Hit Its Debt Limit. What Happens Next?

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    The Treasury Department has started employing “extraordinary measures,” but the path to raising the debt ceiling is likely to be a long one.The United States hit a limit this week on how much money it can borrow, forcing the Treasury Department to initiate so-called extraordinary measures to make sure the nation has enough cash to fulfill its financial obligations.Treasury Secretary Janet L. Yellen has told lawmakers that those measures will allow the United States to keep paying military salaries, retiree benefits and interest to bondholders through at least early June.But initiating those extraordinary measures is just the first step in a series of moves that will take place as the Treasury tries to keep the United States from defaulting on its debt. Ultimately, it will be up to Congress to decide whether to let the country borrow more money or allow it to default on its debt by failing to pay investors who expect interest and other payments.At stake is the fate of the U.S. economy, which could face a financial crisis and fall into a deep recession if lawmakers cannot reach an agreement.Among the looming questions is when the United States will hit the so-called X-date — the point at which the government can no longer find creative ways to stay beneath the $31.4 trillion debt limit and will need to borrow more money or fail to pay its bills.The other big question: Will Congress agree to raise the borrowing cap?So far, House Republicans have vowed to oppose any increase in the debt limit without spending cuts. President Biden has said the debt limit needs to be raised without conditions. That has set up what could be a protracted fight to ensure that the United States does not default on its debt.Here are some of the key moments to expect over the next few months.A Spring Budget BattleThe White House is expected to unveil its annual budget proposal in early March, outlining Mr. Biden’s spending priorities. That could serve as an opening bid for any negotiations between the Biden administration and Republicans in Congress, who have been calling for spending cuts and are likely to seize on this document as evidence of what they say is “runaway spending.”Understand the U.S. Debt CeilingCard 1 of 5What is the debt ceiling? More

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    U.S. Will Hit Debt Limit on Thursday, Yellen Tells Congress

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    The Treasury Department expects to begin taking “extraordinary measures” to continue paying the government’s obligations before what is expected to be a big fight to raise the borrowing cap.WASHINGTON — Treasury Secretary Janet L. Yellen warned on Friday that she would have to begin employing “extraordinary measures” on Thursday to continue paying the nation’s bills if lawmakers did not act to raise the statutory debt limit and that her powers to delay a default could be exhausted by early June.Ms. Yellen’s letter to Congress was the first sign that resistance by House Republicans to lifting the borrowing cap could put the U.S. economy at risk and signals the beginning of an intense fight in Washington this year over spending and deficits.“Failure to meet the government’s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans and global financial stability,” Ms. Yellen wrote.Ms. Yellen said on Friday that considerable uncertainty surrounded how long she could use measures to delay a default. She said she would begin suspending new investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund and suspending reinvestment of the Government Securities Investment Fund of the Federal Employees Retirement System Thrift Savings Plan this month to avoid breaching the debt limit.The letter is the beginning of what is expected to be a protracted and potentially damaging economic fight. Republicans, who assumed control of the House last week, have insisted that any increase to the debt limit be accompanied by significant spending curbs, most likely including cuts to both the military and domestic issues.Speaker Kevin McCarthy has cited reducing the national debt — which topped $31 trillion last year and has increased during both Republican and Democratic administrations, including about a 40 percent increase under former President Donald J. Trump — as a central focus of his party’s agenda.“The American people are the ones that’s demanding the cut in spending,” Representative Jason Smith, a Missouri Republican and the chairman of the powerful House Ways and Means Committee, said Friday on Fox News. “We have to have fiscal reforms moving forward. We cannot just give an unlimited credit card.”Understand the U.S. Debt CeilingCard 1 of 4What is the debt ceiling? More

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    Republicans Denounce Inflation, but Few Economists Expect Their Plans to Help

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    Proposed tax and spending cuts by the G.O.P., which is making a push to take back Congress, are unlikely to bring down rapidly rising prices any time soon.WASHINGTON — Republicans are riding a wave of anger over inflation as they seek to recapture the House and the Senate this fall, hammering Democrats on President Biden’s economic policies, which they say have fueled the fastest price gains in 40 years.Republican candidates have centered their economic agenda on promises to help Americans cope with everyday price increases and to increase growth. They have pledged to reduce government spending and to make permanent parts of the 2017 Republican tax cuts that are set to expire over the next three years — including incentives for corporate investment and tax reductions for individuals.And they have vowed to repeal the corporate tax increases that Mr. Biden signed into law in August while gutting funding for the Internal Revenue Service, which was given more money to help the United States go after high-earning and corporate tax cheats.“The very fact that Republicans are poised to take back majorities in both chambers is an indictment of the policies of this administration,” said Senator Bill Cassidy, Republican of Louisiana, noting that “if you look at the spending that they did on a partisan basis, we certainly would be able to stop that.”But while Republicans insist they will be better stewards of the economy, few economists on either end of the ideological spectrum expect the party’s proposals to meaningfully reduce inflation in the short term. Instead, many say some of what Republicans are proposing — including tax cuts for high earners and businesses — could actually make price pressures worse by pumping more money into the economy.“It is unlikely that any of the policies proposed by Republicans would meaningfully reduce inflation in 2023, when rapidly rising prices will still be a major problem for the economy and for consumers,” said Michael R. Strain, an economist at the conservative American Enterprise Institute.As they position themselves for the midterm elections, Republicans have also indicated that they might try to hold the nation’s borrowing limit hostage to achieve spending cuts. The debt ceiling, which caps how much the federal government can borrow, has increasingly become a fraught arena for political brinkmanship.The State of the 2022 Midterm ElectionsBoth parties are making their final pitches ahead of the Nov. 8 election.Florida Governor’s Debate: Gov. Ron DeSantis and Charlie Crist, his Democratic challenger,  had a rowdy exchange on Oct. 24. Here are the main takeaways from their debate.Strategy Change: In the final stretch before the elections, some Democrats are pushing for a new message that acknowledges the economic uncertainty troubling the electorate.Last Dance?: As she races to raise money to hand on to her embattled House majority, Speaker Nancy Pelosi is in no mood to contemplate a Democratic defeat, much less her legacy.Secretary of State Races: Facing G.O.P. candidates who spread lies about the 2020 election, Democrats are outspending them 57-to-1 on TV ads for their secretary of state candidates. It still may not be enough.Multiple top Republicans have signaled that unless Mr. Biden agrees to reduce future government spending, they will refuse to lift the borrowing cap. That would effectively bar the federal government from issuing new bonds to finance its deficit spending, potentially jeopardizing on-time payments for military salaries and safety-net benefits, and roiling bond markets.Mr. Biden has tried to push back against the Republicans and cast the election not as a referendum on his economic policies, but as a choice between Democratic policies to reduce costs on health care and electricity and Republican efforts to repeal those policies. He has accused Republicans of stoking further price increases with tax cuts that could add to the federal budget deficit, and of risking financial calamity by refusing to raise the debt limit.“We, the Democrats, are the ones that are fiscally responsible. Let’s get that straight now, OK?” Mr. Biden said during remarks on Monday to workers at the Democratic National Committee. “We’re investing in all of America, reducing everyday costs while also lowering the deficit at the same time. Republicans are fiscally reckless, pushing tax cuts for the very wealthy that aren’t paid for, and exploiting the deficit that is making inflation worse.”The challenge for Mr. Biden is that voters do not seem to be demanding details from Republicans and are instead putting their trust in them to turn around an economy that voters believe is headed in the wrong direction. Polls suggest Americans trust Republicans by a wide margin to handle inflation and other economic issues.In a nationwide deluge of campaign ads and in public remarks, Republicans have pinned much of their inflation-fighting agenda on halting a stimulus spending spree that began under President Donald J. Trump and continued under Mr. Biden, in an effort to help people and businesses survive the pandemic recession. Those efforts have largely ended, and Mr. Biden has shown no desire to pass further stimulus legislation at a time of rapid price growth.Representative Jason Smith of Missouri, the top Republican on the House Budget Committee, said in a statement that “the first step in combating inflation is to stop the historically reckless spending spree occurring under one-party Democrat rule in Washington, and that will only happen with a Republican majority in 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.“Republicans,” he added, “will fight to bring down the cost of living and impose fiscal restraint in Washington, and that begins by ensuring Democrats are not able to impose round after round of new inflationary spending.”Economists largely agree that the Federal Reserve is most responsible for fighting inflation, which policymakers are trying to do with rapid interest rates increases. But they say Congress could plausibly help the Fed by reducing budget deficits, in order to slow the amount of consumer spending power in the economy.One way to do that would be to significantly and quickly reduce federal spending. Such a move could result in widespread government layoffs and reduced support for low-income individuals — who would be less able to afford increasingly expensive food and other staples — and could prompt a recession. “The amount of cuts you’d have to do to move the needle on inflation are completely off the table,” said Jon Lieber, a former aide to Senator Mitch McConnell of Kentucky who is now the Eurasia Group’s managing director for the United States.Still, Mr. Lieber said that likelihood would not sully the Republican pitch to voters this fall. “Midterm votes are a referendum on the party in power,” he said, “and the party in power has responsibility for inflation.”“The very fact that Republicans are poised to take back majorities in both chambers is an indictment of the policies of this administration,” said Senator Bill Cassidy, a Republican.Haiyun Jiang/The New York TimesBiden administration officials contend that the Republican plans, rather than curbing inflation, could worsen America’s fiscal situation.Administration economists estimate that two policies favored by Republicans — repealing a new minimum tax on large corporations included in the Inflation Reduction Act and extending some business tax cuts from Mr. Trump’s 2017 legislation — could collectively increase the federal budget deficit by about $90 billion next year.Such an increase could cause the Federal Reserve to raise rates even faster than it already is, further choking economic growth. Or, alternatively, it could add a small amount to the annual inflation rate — perhaps as much as 0.2 percentage points. Fully repealing the Inflation Reduction Act would also mean raising future costs for prescription drugs for seniors on Medicare, including for insulin, and potentially raising future electricity costs.“Their plan to repeal the I.R.A. and double down on the Trump tax cuts for the wealthy will worsen inflation,” said Jared Bernstein, a member of Mr. Biden’s Council of Economic Advisers. “On top of that, they’re also explicit that they’re coming for Social Security and Medicare, making this a terribly destructive agenda that starts by fighting the Fed and moves on to devastating vulnerable seniors.”Conservative economists say the inflation impact of extending Mr. Trump’s tax cuts could be much smaller, because those extensions could lead businesses to invest more, people to work more and growth to increase across the economy. They also say Republicans could help relieve price pressures, particularly for electricity and gasoline, by following through on their proposals to reduce federal regulations governing new energy development.“Those things are going to be positive for investment, job creation and capacity” in the economy, said Donald Schneider, a former chief economist for Republicans on the House Ways and Means Committee and the deputy head of U.S. policy at Piper Sandler.A budget proposal unveiled this year by the Republican Study Committee, a conservative policy group within the House Republican conference, included plans to permanently extend the Trump tax cuts and to impose work requirements on federal benefits programs, in hopes of reducing federal spending on the programs and increasing the number of workers in the economy.“We know for a fact that federal spending continues to keep inflation high, which is why a top priority in next year’s Republican majority will be to root out waste, fraud and abuse of taxpayer money,” Representative Kevin Hern, Republican of Oklahoma, said in a statement. Mr. Hern, who helped devise the budget, called it “one of many proposals to address the dire situation we’re in.”As they eye the majority, top Republicans have suggested that they will consider an economically risky strategy to potentially force Mr. Biden to agree to spending cuts, including for safety-net programs. Representative Kevin McCarthy of California, who is the minority leader and is seen as the clear pick to be speaker should Republicans win control of the House, suggested to Punchbowl News this month that he would be open to withholding Republican votes to raise the federal borrowing limit unless Mr. Biden and Democrats agreed to policy changes that curb spending.How to use that leverage has divided Republicans. Some, like Representative Nancy Mace of South Carolina, who fended off a Trump-backed primary challenger, are supportive of that option.But other Republicans — particularly candidates laboring to present a more centrist platform in swing districts held by Democrats — have shied away from openly supporting cuts to safety-net programs.“Absolutely not,” Lori Chavez-DeRemer, a Republican and former mayor running in Oregon’s Fifth Congressional District, said when asked if she would support cuts to Medicare and Social Security as a way to rein in federal spending. “Cutting those programs is not where I, as a Republican, see myself. I want to make sure that we can fill those coffers.” More

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

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    Polls show voters liked direct payments from President Biden’s 2021 economic rescue bill. But they have become fodder for Republican inflation attacks.In the midst of a critical runoff campaign that would determine control of the Senate, the Rev. Raphael Warnock promised Georgia voters that, if elected, he would help President-elect Biden send checks to people digging out of the pandemic recession.Mr. Warnock won. Democrats delivered payments of up to $1,400 per person.But this year, as Mr. Warnock is locked in a tight re-election campaign, he barely talks about those checks.Democratic candidates in competitive Senate races this fall have spent little time on the trail or the airwaves touting the centerpiece provisions of their party’s $1.9 trillion economic rescue package, which party leaders had hoped would help stave off losses in the House and Senate in midterm elections. In part, that is because the rescue plan has become fodder for Republicans to attack Democrats over rapidly rising prices, accusing them of overstimulating the economy with too much cash.The economic aid, which was intended to help keep families afloat amid the pandemic, included two centerpiece components for households: the direct checks of up to $1,400 for lower- to middle-class individuals and an expanded child tax credit, worth up to $300 per child per month. It was initially seen as Mr. Biden’s signature economic policy achievement, in part because the tax credit dramatically reduced child poverty last year. Polls suggested Americans knew they had received money and why — giving Democrats hope they would be rewarded politically.Liberal activists are particularly troubled that Democratic candidates are not focusing more on the payments to families.“It’s a missed opportunity and a strategic mistake,” said Chris Hughes, a founder of Facebook and a senior fellow at the Institute on Race, Power, and Political Economy at The New School, who is a co-founder of the liberal policy group Economic Security Project Action. “Our public polling and our experience suggest the child tax credit is a sleeper issue that could influence the election, a lot more than a lot of candidates realized.”Celinda Lake, a Democratic pollster who has surveyed voters in detail on the child credit, said data suggest the party’s candidates should be selling Americans on the pieces of Mr. Biden’s policies that helped families cope with rising costs.“We have a narrative on inflation,” Ms. Lake said in an interview. “We just aren’t using it.”Many campaign strategists disagree. They say voters are not responding to messages about pandemic aid. Some Democrats worry that voters have been swayed by the persistent Republican argument that the aid was the driving factor behind rapidly rising prices of food, rent and other daily staples.Economists generally agree that the stimulus spending contributed to accelerating inflation, though they disagree on how much. Biden administration officials and Democratic candidates reject that characterization. When pressed, they defend their emergency spending, saying it has put the United States on stronger footing than other wealthy nations at a time of rapid global inflation.Republicans have spent nearly $150 million on inflation-themed television ads across the country this election cycle, according to data from AdImpact. The State of the 2022 Midterm ElectionsWith the primaries over, both parties are shifting their focus to the general election on Nov. 8.The Final Stretch: With less than one month until Election Day, Republicans remain favored to take over the House, but momentum in the pitched battle for the Senate has seesawed back and forth.A Surprising Battleground: New York has emerged from a haywire redistricting cycle as perhaps the most consequential congressional battleground in the country. For Democrats, the uncertainty is particularly jarring.Arizona’s Governor’s Race: Democrats are openly expressing their alarm that Katie Hobbs, the party’s nominee for governor in the state, is fumbling a chance to defeat Kari Lake in one of the most closely watched races.Herschel Walker: The Republican Senate nominee in Georgia reportedly paid for an ex-girlfriend’s abortion, but members of his party have learned to tolerate his behavior.In Georgia alone, outside groups have hammered Mr. Warnock with more than $7 million in attack ads mentioning inflation. “Senator Warnock helped fuel the inflation squeeze, voting for nearly $2 trillion in reckless spending,” the group One Nation, which is aligned with Senator Mitch McConnell of Kentucky, the Republican leader, says in an ad that aired in the state in August.Democrats have tried to deflect blame, portraying inflation as the product of global forces like crimped supply chains while touting their efforts to lower the cost of electricity and prescription drugs. They have aired nearly $50 million of their own ads mentioning inflation, often pinning it on corporate profit gouging. “What if I told you shipping container companies have been making record profits while prices have been skyrocketing on you?” Mr. Warnock said in an ad aired earlier this year.Candidates and independent groups that support the stimulus payments have spent just $7 million nationwide on advertisements mentioning the direct checks, the child tax credit or the rescue plan overall, according to data from AdImpact.Far more money has been spent by Democrats on other issues, including $27 million on ads mentioning infrastructure, which was another early economic win for Mr. Biden, and $95 million on ads that mention abortion rights..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-ok2gjs{font-size:17px;font-weight:300;line-height:25px;}.css-ok2gjs a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.Mr. Warnock has not cited any of the rescue plan’s provisions in his advertisements, focusing instead on issues like personal character, health care and bipartisanship, according to AdImpact data.Senator Raphael Warnock, who is locked in a tight re-election campaign this year, barely mentions the relief checks.Nicole Craine for The New York TimesFor months after the rescue plan’s passage, Democratic leaders were confident that they had solved an economic policy dilemma that has vexed Democrats and Republicans stretching back to the George W. Bush administration: They were giving Americans money, but voters weren’t giving them any credit.Tax cuts and direct spending aid approved by Mr. Bush, President Barack Obama and President Donald J. Trump failed to win over large swaths of voters and spare incumbent parties from large midterm losses. Economists and strategists concluded that was often because Americans had not noticed they had benefited from the policies each president was sure would sway elections.That was not the case with the direct checks and the child tax credit. People noticed them. But they still have not turned into political selling points at a time of rapid inflation.As the November elections approach, most voters appear to be motivated by a long list of other issues, including abortion, crime and a range of economic concerns.Mr. Warnock’s speech last week to a group of Democrats in an unfinished floor of an office space in Dunwoody, a northern Atlanta suburb, underscored that shift in emphasis.He began the policy section of the rally with a quick nod to the child credit, then ticked through a series of provisions from bills that Mr. Biden has signed in the last two years: highways and broadband internet tied to a bipartisan infrastructure law, semiconductor plants spurred by a China competitiveness law, a gun safety law and aid for veterans exposed to toxic burn pits. He lingered on one piece of Mr. Biden’s Inflation Reduction Act: a cap on the cost of insulin for Medicare patients, which Mr. Warnock cast as critical for diabetics in Georgia, particularly in Black communities.The direct payments never came up.When asked by a reporter why he was not campaigning on an issue that had been so central to his election and whether he thought the payments had contributed to inflation, Mr. Warnock deflected.“We in Georgia found ourselves trying to claw back from a historic pandemic, the likes of which we haven’t seen in our lifetime, which created an economic shutdown,” he said. “And now, seeing the economy open up, we’ve experienced major supply chain issues, which have contributed to rising costs.”Direct pandemic payments were begun under Mr. Trump and continued under Mr. Biden, with no serious talk of another round after the ones delivered in the rescue plan. Most Democrats had hoped the one-year, $100 billion child credit in the rescue plan would be made permanent in a new piece of legislation.But the credit expired, largely because Senator Joe Manchin III, Democrat of West Virginia and a key swing vote, opposed its inclusion in what would become the Inflation Reduction Act, citing concerns the additional money would exacerbate inflation.Senator Michael Bennet, Democrat of Colorado, was one of the Senate’s most vocal cheerleaders for that credit and an architect of the version included in the rescue plan. His campaign has aired Spanish-language radio ads on the credit in his re-election campaign, targeting a group his team says is particularly favorable toward it, but no television ads. In an interview last week outside a Denver coffee shop, Mr. Bennet conceded the expiration of the credit has sapped some of its political punch.“It certainly came up when it was here, and it certainly came up when it went away,” he said. “But it’s been some months since that was true. I think, obviously, we’d love to have that right now. Families were getting an average of 450 bucks a month. That would have defrayed a lot of inflation that they’re having to deal with.”Mr. Biden’s advisers say the rescue plan and its components aren’t being deployed on the trail because other issues have overwhelmed them — from Mr. Biden’s long list of economic bills signed into law as well as the Supreme Court decision overturning Roe v. Wade that has galvanized the Democratic base. They acknowledge the political and economic challenge posed by rapid inflation, but say Democratic candidates are doing well to focus on direct responses to it, like the efforts to reduce costs of insulin and other prescription drugs.Ms. Lake, the Democratic pollster, said talking more about the child credit could help re-energize Democratic voters for the midterms. Mr. Warnock’s speech in Dunwoody — an admittedly small sample — suggested otherwise.Mr. Warnock drew cheers from the audience after he called the child tax credit “the single largest tax cut for middle- and working-class families in American history.”But his biggest ovation, by far, came when the economics section of his speech had ended, and Mr. Warnock had moved on to defending abortion rights. More

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    Biden Tries to Reassure Voters on Health Care Costs Before Election

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    At an event in Southern California, the president says his administration is working to keep costs down and warns that Republicans will drive prices higher if they gain power.LOS ANGELES — President Biden on Friday tried to reassure Americans stung by high inflation that his administration was working to keep health care costs down, promising a community college audience in Southern California that he was committed to doing even more.But his remarks in Irvine, Calif. — the first of two West Coast speeches devoted to health care costs — come just days after government data revealed that overall inflation remains high as voters prepare to go to the polls for midterm elections early next month.Surveys show that Americans are deeply frustrated by the impact of sharply higher prices on their pocketbooks. They are expected to rebuke the president and his party in the elections, with most analysts predicting that Democrats will lose control of one or both chambers in Congress.Speaking to a friendly audience, Mr. Biden argued that Republicans would drive prices higher if they gained power. He noted their opposition to his efforts to allow Medicare to negotiate drug prices, which he said would force prices down for medication for millions of seniors. And he said Democrats had pushed through price caps on critical drugs like insulin.“If Republicans in Congress have their way, it’s going to mean the power we just gave Medicare to negotiate lower prescription drug prices and other costs over time goes away — gone,” Mr. Biden said, standing in front of signs that said “Lowering Costs for American Families.” “Two-thousand-dollar cap on prescription drugs goes away — gone. The $35 month cap on insulin for Medicare is gone.”The State of the 2022 Midterm ElectionsWith the primaries over, both parties are shifting their focus to the general election on Nov. 8.The Final Stretch: With less than one month until Election Day, Republicans remain favored to take over the House, but momentum in the pitched battle for the Senate has seesawed back and forth.A Surprising Battleground: New York has emerged from a haywire redistricting cycle as perhaps the most consequential congressional battleground in the country. For Democrats, the uncertainty is particularly jarring.Arizona’s Governor’s Race: Democrats are openly expressing their alarm that Katie Hobbs, the party’s nominee for governor in the state, is fumbling a chance to defeat Kari Lake in one of the most closely watched races.Herschel Walker: The Republican Senate nominee in Georgia reportedly paid for an ex-girlfriend’s abortion, but members of his party have learned to tolerate his behavior.Mr. Biden’s three-state, four-day trip is also intended to boost the fortunes of Democratic candidates by using the presidential bully pulpit to highlight the party’s accomplishments. On Wednesday in Colorado, he stood next to Michael Bennet, one of the state’s two Democratic senators, to announce a new national monument — a key campaign promise for the embattled lawmaker.In Los Angeles on Thursday, Mr. Biden hailed the use of money from his infrastructure legislation to help complete a new subway line. During his remarks, he made certain to single out Representative Karen Bass, a Democrat who had fought for a provision that directs jobs on the project to local workers.“Local workers can be first in line for these jobs thanks to Karen,” Mr. Biden said. “I really mean it, Karen. Thank you very much.”At the community college in Irvine, Mr. Biden focused his attention on health care — and on Representative Katie Porter, a two-term Democrat running for re-election in a key swing district in Orange County.Ms. Porter, who is facing Scott Baugh, a Republican former state assemblyman, pushed for the drug pricing measure. At the event on Friday, Mr. Biden singled her out, crediting the success of Democratic legislation to her efforts to fight on behalf of her constituents..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-ok2gjs{font-size:17px;font-weight:300;line-height:25px;}.css-ok2gjs a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.“That’s why Katie’s leadership and the work of the Democrats in Congress was so consequential,” he said. “Katie, I’m not just being nice because I’m in your district. It happens to be true. No, no. I mean, you’re a fighter. You’re decent. You’re honorable and everybody respects you.”Friday’s event at the Irvine Valley Community College was an official one, not a campaign rally. But Ms. Porter used her time at the podium to assail Republicans.“Every single Republican in Washington voted against patients, against families and against taxpayers,” she said. “In the Senate, Republican politicians voted to limit how much Americans can save on prescription drugs and to prevent all patients from getting insulin. And House Republican Leader Kevin McCarthy has vowed that next term it’s his priority to return Big Pharma its unchecked power to charge patients whatever it wants.”She called that a “slap in the face” to the Californians she represents.Republicans sought to portray the president’s efforts to bolster candidates’ prospects as in vain. “Joe Biden is the last person Democrat candidates want to see on the campaign trail,” Michael McAdams, the communications director for the National Republican Campaign Committee, said after the event, noting reports that Democrats recently shifted money away from some California districts to candidates need help more.“His policies are so unpopular House Democrats are being forced to abandon spending in California districts he won by double-digits,” Mr. McAdams said.Friday evening, Mr. Biden was scheduled to fly to Portland, Ore., a liberal community where the Democratic Party would not normally need the help of the sitting president. But Mr. Biden is hoping to help boost the fortunes of Tina Kotek, the Democratic candidate for governor.Although the state has not elected a Republican leader in decades, polls suggest that Ms. Kotek is in a tight, three-way race with Christine Drazan, the Republican candidate, and Betsy Johnson, a former Democrat who is being financed by Phil Knight, the co-founder of Nike. The White House is hoping that a visit by Mr. Biden will help underscore the party’s commitment to her.Republicans predicted that the president’s trip will not prevent their party from grabbing the top electoral prize in the state.“Joe Biden’s disastrous policies continue to hurt Oregon families, and there has been no bigger fan of his out-of-touch approach,” said Kaitlin Price, a spokeswoman for the Republican Governors Association, citing Ms. Kotek, Ms. Johnson and Kate Brown, the state’s current Democratic governor.“This last-ditch effort from national Democrats is proof of their hysteria as they watch Christine Drazan take hold of once deep-blue Oregon that is desperate for change,” Ms. Price said. More

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    Inflation Report Dampens Biden’s Claims of Economic Progress

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    The president is trying once again to accentuate the positives in the recovery from recession, but stubbornly high prices are complicating the message.The Consumer Price Index report for August showed inflation had not cooled as the administration had hoped and Americans had lost buying power over the last year as prices rose faster than wages.Sarah Silbiger for The New York TimesWASHINGTON — President Biden gathered with top Democrats at the White House on Tuesday to celebrate their inflation fight at an inopportune moment, as a sobering new report showed just how far the economy still has to go to bring soaring consumer prices under control.The Consumer Price Index report for August contained a large dose of unwelcome news for the president, who has sought to defuse Republican attacks over rising prices in the run-up to November’s midterm elections. It showed that inflation had not cooled as White House economists and other forecasters had hoped, and that workers had lost buying power over the last year as prices increased faster than wages.Another report, from the Census Bureau, showed that the typical American household saw its inflation-adjusted income fall slightly in 2021 from 2020. Perhaps more troubling for a president who has promised to close the gap between the very wealthy and the middle class, it showed that income inequality increased last year for the first time in a decade.Those developments challenged Mr. Biden’s renewed efforts to reframe the economy as a winning issue for him and his party before the midterms — though the president seemed unfazed.Mr. Biden welcomed thousands of supporters to the White House lawn to toast a new law that he says will help reduce the cost of electricity, prescription drugs and other staples of American life.The event was essentially a rally for the so-called Inflation Reduction Act, which raised taxes on large corporations, targeted nearly $400 billion in spending and tax incentives to reduce the fossil fuel emissions driving climate change, and took steps to reduce prescription drug costs for seniors on Medicare and premium costs for Americans who buy health insurance through the Affordable Care Act.Mr. Biden called the law “the single most important legislation passed in the Congress to combat inflation and one of the most significant laws in our nation’s history.”“There’s an extraordinary story being written in America today by this administration,” Mr. Biden said, adding, “This bill cut costs for families, helped reduce inflation at the kitchen table.”On Wednesday, Mr. Biden will head to the Detroit auto show, where he will champion his policies to bolster manufacturing and low-emission sources of energy.But the country’s economic reality remains more muddled than Mr. Biden’s rosy message, as the inflation report underscored. Food prices are continuing to spike, straining lower-income families in particular. The global economy is slowing sharply, and threats remain to the American recovery if European sanctions force millions of barrels of Russian oil off the global market in the months to come.The State of the 2022 Midterm ElectionsWith the primaries winding down, both parties are starting to shift their focus to the general election on Nov. 8.Polling Warnings: Democratic Senate candidates are polling well in the same places where surveys overestimated President Biden in 2020 and Hillary Clinton in 2016.Democrats’ Dilemma: The party’s candidates have been trying to signal their independence from the White House, while not distancing themselves from President Biden’s base or agenda.Intraparty G.O.P. Fight: Ahead of New Hampshire’s primary, mainstream Republicans have been vying to stop a Trump-style 2020 election denier running for Senate.Abortion Ballot Measures: First came Kansas. Now, Michigan voters will decide whether abortion will remain legal in their state. Democrats are hoping referendums like these will drive voter turnout.A possible railroad strike could disrupt domestic supply chains. The White House press secretary, Karine Jean-Pierre, told reporters on Tuesday that the president had called union and company leaders on Monday in an attempt to broker an agreement to avert the strike.Most important — and perhaps most damaging for Mr. Biden and Democrats — Americans’ wages have struggled to keep pace with fast-rising prices, an uncomfortable truth for a president who promised to make real wage gains a centerpiece of his economic program. Inflation-adjusted average hourly earnings ticked up across the economy in August, the Labor Department said on Tuesday, but they remain down nearly 3 percent from a year ago.Republicans were quick to criticize Mr. Biden after the report on Tuesday. “Every day, Americans endure Biden’s economic crisis,” said Representative Blaine Luetkemeyer of Missouri, the top Republican on the Small Business Committee. “The Democrats’ inflation continues to drive up costs and leads more and more small businesses and families questioning their future.”.css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-ok2gjs{font-size:17px;font-weight:300;line-height:25px;}.css-ok2gjs a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.Mr. Biden and his aides have celebrated falling gasoline prices on a daily basis throughout the summer. Those decreasing prices have helped inflation moderate from its high point this year, though not enough to offset rising rent, food and other costs last month.Even as he acknowledges the pain of rapid price increases across the economy, Mr. Biden has claimed progress in the fight against inflation, including with the signing last month of the energy, health care and tax bill that Democrats called the Inflation Reduction Act. On Tuesday morning, he sought to put a positive shine on the August data, saying in a statement issued by the White House that it was a sign of “more progress” in bringing down inflation.At his celebration on Tuesday afternoon, Mr. Biden barely mentioned the word “inflation.” Instead, he talked about reducing medical and energy costs — and, to a much larger extent, about the law’s efforts to combat climate change.Near the end of the speech, he gave a strident defense of his administration’s economic record, including strong job creation, record small-business formation and a rebound of the manufacturing sector.“And guess what?” Mr. Biden said. “For all the criticism I got and the help you gave me for gas prices bringing — they’re down more than $1.30 a gallon since the start of the summer. We’re making progress. We’re getting other prices down as well. We have more to do. But we’re getting there.”Recent weeks have brought signs of hope for administration officials, among both consumers and companies. The National Federation of Independent Business reported on Tuesday that its Small Business Optimism Index rose in August as inflation anxiety eased, continuing a rebound from its depths this year. The Federal Reserve Bank of New York reported on Monday that consumer inflation expectations were also falling.Officials inside the administration and at the Federal Reserve say strong job growth and consumer spending this summer have put to rest fears that the country slipped into recession in the first half of the year.“What is most notable about where we are right now is the resilience of the labor market recovery, the resilience of American consumers and households, and that we are beginning to see some signs that prices may be moderating,” Brian Deese, the director of Mr. Biden’s National Economic Council, said in an interview this week.“There’s more work to do,” Mr. Deese said. “But I think that is a signal that the economic decisions that this president has made are bearing fruit.”But polls continue to show that inflation is hurting Mr. Biden and his party at a pivotal moment, as Democrats seek to retain control of the House and the Senate. High prices loom as the top issue for voters in national opinion polls, and Americans say they trust Republicans more to handle inflation and the economy overall than Democrats.On Tuesday, stock markets recorded their largest daily loss in two years, driven by investor fears of stubborn inflation pushing the Federal Reserve to raise interest rates higher and faster than many expected.Economists on Wall Street and in policy circles are debating whether the U.S. economy can achieve a so-called soft landing, with economic and job growth slowing in order to bring inflation down — but not slowing so much as to push millions of Americans out of work. Some, like the former Treasury Secretary Lawrence H. Summers, have warned that the unemployment rate will need to rise significantly to bring price growth down to historical levels.Mark Zandi, the chief economist at Moody’s Analytics, whose analyses of Mr. Biden’s policy proposals are often promoted by the White House, said on Twitter on Tuesday that “job and wage growth must sharply slow” to reduce price increases in the service sector. “This is on the Fed, which must hike rates to get job and wage growth down without pushing the economy under.”Tuesday’s inflation report, he added, “suggests that while still doable, it won’t be easy.” More

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    Biden’s Big Dreams Meet the Limits of ‘Imperfect’ Tools

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    The student loan plan is the latest example of Democrats practicing the art of the possible on the nation’s most pressing economic challenges and ending up with risky or patchwork solutions.WASHINGTON — President Biden’s move this week to cancel student loan debt for tens of millions of borrowers and reduce future loan payments for millions more comes with a huge catch, economists warn: It does almost nothing to limit the skyrocketing cost of college and could very well fuel even faster tuition increases in the future.That downside is a direct consequence of Mr. Biden’s decision to use executive action to erase some or all student debt for individuals earning $125,000 a year or less, after failing to push debt forgiveness through Congress. Experts warn that schools could easily game the new structure Mr. Biden has created for higher education financing, cranking up prices and encouraging students to load up on debt with the expectation that it will never need to be paid in full.It is the latest example, along with energy and health care, of Democrats in Washington seeking to address the nation’s most pressing economic challenges by practicing the art of the possible — and ending up with imperfect solutions.There are practical political limits to what Mr. Biden and his party can accomplish in Washington.Democrats have razor-thin margins in the House and Senate. Their ranks include liberals who favor wholesale overhaul of sectors like energy and education and centrists who prefer more modest changes, if any. Republicans have opposed nearly all of Mr. Biden’s attempts, along with those of President Barack Obama starting more than a decade ago, to expand the reach of government into the economy. The Supreme Court’s conservative majority has sought to curb what it sees as executive branch overreach on issues like climate change.As a result, much of the structure of key markets, like college and health insurance, remains intact. Mr. Biden has scored victories on climate, health care and now — pending possible legal challenges — student debt, often by pushing the boundaries of executive authority. Even progressives calling on him to do more agree he could not impose European-style government control over the higher education or health care systems without the help of Congress.The president has dropped entire sections of his policy agenda as he sought paths to compromise. He has been left to leverage what appears to be the most powerful tool currently available to Democrats in a polarized nation — the spending power of the federal government — as they seek to tackle the challenges of rising temperatures and impeded access to higher education and health care.Arindrajit Dube, an economist at the University of Massachusetts Amherst who consulted with Mr. Biden’s aides on the student loan issue and supported his announcement this week, said in an interview that the debt cancellation plans were necessarily incomplete because Mr. Biden’s executive authority could reach only so far into the higher education system.“This is an imperfect tool,” Mr. Dube said, “that is however one that is at the president’s disposal, and he is using it.”But because the policies pursued by Mr. Biden and his party do comparatively little to affect the prices consumers pay in some parts of those markets, many experts warn, they risk raising costs to taxpayers and, in some cases, hurting some consumers they are trying to help.Mr. Biden’s plan would forgive up to $10,000 in student debt for individual borrowers earning $125,000 a year or less and households earning up to $250,000, with another $10,000 for Pell grant recipients.Cheriss May for The New York Times“You’ve done nothing that changes the structure of education” with Mr. Biden’s student loan moves, said R. Glenn Hubbard, a Columbia University economist who was the chairman of the White House Council of Economic Advisers under President George W. Bush. “All you’re going to do is raise the price.”Mr. Hubbard said Mr. Biden’s team had made similar missteps on energy, health care, climate and more. “I understand the politics, so I’m not making a naïve comment here,” Mr. Hubbard said. “But fixing through subsidies doesn’t get you there — or it gets you such market distortions, you really ought to worry.”Mr. Biden said on Wednesday that his administration would forgive up to $10,000 in student debt for individual borrowers earning $125,000 a year or less and households earning up to $250,000, with another $10,000 in relief for people from low-income families who received Pell grants in school.What’s in the Inflation Reduction ActCard 1 of 8What’s in the Inflation Reduction ActA substantive legislation. More