Economic Conditions and Trends

Latest story

150 Shares41 Views

As U.S. Prospects Brighten, Fed’s Powell Sees Risk in Global Vaccination Pace

by

Some countries are lagging behind in vaccinations, and policymakers warned that no economy is secure until the world is safe from coronavirus variants.Jerome H. Powell, the Federal Reserve chair, and the managing director of the International Monetary Fund, Kristalina Georgieva, emphasized the economic need for worldwide vaccinations on Thursday.Pool photo by Stefani ReynoldsJerome H. Powell, the Federal Reserve chair, stressed on Thursday that even as economic prospects look brighter in the United States, getting the world vaccinated and controlling the coronavirus pandemic remain critical to the global outlook.“Viruses are no respecters of borders,” Mr. Powell said while speaking on an International Monetary Fund panel. “Until the world, really, is vaccinated, we’re all going to be at risk of new mutations and we won’t be able to really resume activity with confidence all around the world.”While some advanced economies, including the United States, are moving quickly toward widespread vaccination, many emerging market countries lag far behind: Some have administered as little as one dose per 1,000 residents.Mr. Powell joined a chorus of global policy officials in emphasizing how important it is that all nations — not just the richest ones — are able to widely protect against the coronavirus. Kristalina Georgieva, the managing director of the International Monetary Fund, said policymakers needed to remain focused on public health as the key policy priority.“This year, next year, vaccine policy is economic policy,” Ms. Georgieva said, speaking on the same panel as Mr. Powell. “It is even higher priority than the traditional tools of fiscal and monetary policy. Why? Without it we cannot turn the fate of the world economy around.”Still, she also warned against pulling back on monetary policy support prematurely, saying that clear communication from the United States is helpful and important. The Fed is arguably the world’s most critical central bank thanks to the widely used dollar, and unexpected policy changes in the United States can roil global markets and make it harder for less developed economies to recover.“Premature withdrawal of support can cut the recovery short,” she cautioned.The Fed has held interest rates near zero since March 2020 and has been buying about $120 billion in government-backed bonds per month, policies meant to stoke spending by keeping borrowing cheap. Officials have been clear that they will continue to support the economy until it is closer to their goals of maximum employment and stable inflation — and that while the situation is improving, it is not there yet.“There are a number of factors that are coming together to support a brighter outlook for the U.S. economy,” Mr. Powell said, noting that tens of millions of Americans are now fully vaccinated, so the economy should be able to fully reopen fairly soon. “The recovery though, here, remains uneven and incomplete.”Employers added more than 900,000 workers to payrolls last month, but the country is still missing millions of jobs compared with February 2020 and fresh data showed that state jobless claims climbed last week. Mr. Powell pointed out that the burden is falling heavily on those least able to bear it: Lower-income service workers, who are heavily minorities and women, have been hit hard by the job losses.When asked what keeps him awake at night, Mr. Powell said that “there’s a pretty substantial tent city” he drives past on his way home from work in Washington. “We just need to keep reminding ourselves that even though some parts of the economy are just doing great, there’s a very large group of people who are not.”Given the pandemic’s role in exacerbating inequality, both Mr. Powell and Ms. Georgieva said it was critical to support workers and make sure they can find their way into new and fitting jobs.The Fed chair said policy tended to focus too much on short-term, palliative measures and not enough on longer-term solutions that help to expand economic possibility.“I think we need to, really as a country — and I’m not talking about any particular bill — invest in things that will increase the inclusiveness of the economy and the longer-term potential of it,” Mr. Powell said. “Particularly invest in people, so that they can take part in, contribute to and benefit from the prosperity of our economy.”Those comments come as the Biden administration is pushing for an ambitious $2 trillion infrastructure package that would include provisions for labor market training, technological research and widespread broadband. The administration has proposed paying for the package by raising corporate taxes.“For quite some time, we have been in favor of more investment in infrastructure. It helps to boost productivity here in the United States,” Ms. Georgieva said, calling climate-focused and “social infrastructure” provisions positive. She said they had not had a chance to fully assess the plan, but “broadly speaking, yes, we do support it.”But the White House’s plan has already run into resistance from Republicans and some moderate Democrats, who are wary of raising taxes or engaging in another big spending package after several large stimulus bills.Some commentators have warned that besides expanding the nation’s debt load, the government’s virus spending — particularly the recent $1.9 trillion stimulus package — could cause the economy to overheat. Fed officials have been less worried. “There’s a difference between essentially a one-time increase in prices and persistent inflation,” Mr. Powell said on Thursday. “The nature of a bottleneck is that it will be resolved.”If price gains and inflation expectations moved up “materially,” he said, the Fed would react.“We don’t think that’s the most likely outcome,” he said. More

More stories

  • 88 Shares37 Views

    in Economy

    I.M.F. Seminar Stresses Importance of Global Vaccinations

    by

    Whether it’s reporting on conflicts abroad and political divisions at home, or covering the latest style trends and scientific developments, Times Video journalists provide a revealing and unforgettable view of the world.Whether it’s reporting on conflicts abroad and political divisions at home, or covering the latest style trends and scientific developments, Times Video journalists provide a revealing and unforgettable view of the world. More

  • 175 Shares87 Views

    in Economy

    Suez Canal Is Open, but the World is Still Full of Giant Container Ships

    by

    As global trade has grown, shipping companies have steadily increased ship sizes — but the Suez Canal blockage showed that bigger is not always better.The traffic jam at the Suez Canal will soon begin easing, but behemoth container ships like the one that blocked that crucial passageway for almost a week and caused headaches for shippers around the world aren’t going anywhere.Global supply chains were already under pressure when the Ever Given, a ship longer than the Empire State Building and capable of carrying furnishings for 20,000 apartments, wedged itself between the banks of the Suez Canal last week. It was freed on Monday, but left behind “disruptions and backlogs in global shipping that could take weeks, possibly months, to unravel,” according to A.P. Moller-Maersk, the world’s largest shipping company.The crisis was short, but it was also years in the making.For decades, shipping lines have been making bigger and bigger vessels, driven by an expanding global appetite for electronics, clothes, toys and other goods. The growth in ship size, which sped up in recent years, often made economic sense: Bigger vessels are generally cheaper to build and operate on a per-container basis. But the largest ships can come with their own set of problems, not only for the canals and ports that have to handle them but for the companies that build them.“They did what they thought was most efficient for themselves — make the ships big — and they didn’t pay much attention at all to the rest of the world,” said Marc Levinson, an economist and author of “Outside the Box,” a history of globalization. “But it turns out that these really big ships are not as efficient as the shipping lines had imagined.”Despite the risks they pose, however, massive vessels still dominate global shipping. According to Alphaliner, a data firm, the global fleet of container ships includes 133 of the largest ship type — those that can carry 18,000 to 24,000 containers. Another 53 are on order.The world’s first commercially successful container trip took place in 1956 aboard a converted steamship, which transported a few dozen containers from New Jersey to Texas. The industry has grown steadily in the decades since, but as global trade accelerated in the 1980s, so did the growth of the shipping industry — and ship size.One container ship among many that were anchored in February outside the Port of Los Angeles, where congestion kept ships waiting to unload for days.  Coley Brown for The New York TimesIn that decade, the average capacity of a container ship grew 28 percent, according to the International Transport Forum, a unit of the Organization for Economic Cooperation and Development. Container ship capacity grew an additional 36 percent in the 1990s. Then, in 2006, Maersk introduced the Emma Maersk, a massive vessel that could hold about 15,000 containers, almost 70 percent more than any other vessel.“Instead of this pattern of small increases in capacity over time, all of a sudden we had a quantum leap, and that really set off an arms race,” Mr. Levinson said.Today, the largest ships can hold as many as 24,000 containers — a standard 20-foot box can hold a pair of midsize sport utility vehicles or enough produce to fill one or two grocery store aisles.The growth of the shipping industry and ship size has played a central role in creating the modern economy, helping to make China a manufacturing powerhouse and facilitating the rise of everything from e-commerce to retailers like Ikea and Amazon. To the container lines, building bigger made sense: Larger ships allowed them to squeeze out savings on construction, fuel and staffing.“Ultra Large Container Vessels (U.L.C.V.) are extremely efficient when it is about transporting large quantities of goods around the globe,” Tim Seifert, a spokesman for Hapag-Lloyd, a large shipping company, said in a statement. “We also doubt that it would make shipping safer or more environmentally friendly if there would be more or less-efficient vessels on the oceans or in the canals.”Maersk said it was premature to blame Ever Given’s size for what happened in the Suez. Ultra-large ships “have existed for many years and have sailed through the Suez Canal without issues,” Palle Brodsgaard Laursen, the company’s chief technical officer, said in a statement on Tuesday.But the growth in ship size has come at a cost. It has effectively pitted port against port, canal against canal. To make way for bigger ships, for example, the Panama Canal expanded in 2016 at a cost of more than $5 billion.That set off a race among ports along the East Coast of the United States to attract the larger ships coming through the canal. Several ports, including those in Baltimore, Miami and Norfolk, Va., began dredging projects to deepen their harbors. The Port Authority of New York and New Jersey spearheaded a $1.7 billion project to raise the Bayonne Bridge to accommodate mammoth ships laden with cargo from Asia and elsewhere.Three large cranes arrived at the Port of Oakland in January, allowing it to receive the biggest ships in North America.Jim Wilson/The New York TimesThe race to accommodate ever-larger ships also pushed ports and terminal operators to buy new equipment. This month, for example, the Port of Oakland erected three 1,600-ton cranes that would, in the words of one port executive, allow it to “receive the biggest ships.”But while ports incurred costs for accommodating larger ships, they didn’t reap all of the benefits, according to Jan Tiedemann, a senior analyst at Alphaliner.“The savings are almost exclusively on the side of the carrier, so there was an argument that the carriers have been in the driving seat and have just pushed through with this big tonnage, while terminal operators, ports and, in some cases, the taxpayer have footed the bill,” he said.The shift to bigger ships also coincided with and contributed to industry consolidation that has both limited competition among shipping giants and made the world more vulnerable to supply disruptions. Buying and maintaining large vessels is expensive, and shippers that couldn’t afford those costs had to find ways to become bigger themselves. Some firms merged, and others joined alliances that allowed them to pool their ships to offer more frequent service.Those trends aren’t necessarily all bad. The alliances allow shippers to offer expanded service and help keep costs low for customers. And the fact that bigger ships cut fuel costs has helped the industry make the case that it is doing its part to reduce planet-warming emissions.But the argument for even bigger ships may finally be fading, even for container lines themselves — a concept known in economics as the law of diminishing returns.For one, the benefits of building bigger tend to shrink with each successive round of growth, according to Olaf Merk, the lead author of a 2015 International Transport Forum report on very big ships. According to the report, the savings from moving to ships that can carry 19,000 containers were four to six times smaller than those realized by the previous expansion of ship size. And most of the savings came from more efficient ship engines than the size of the ship.“There’s still economies of scale, but less and less as the ships become bigger,” Mr. Merk said.The bigger vessels can also call on fewer ports and navigate through fewer tight waterways. They are also harder to fill, cost more to insure and pose a greater threat to supply chains when things go wrong, like Ever Given’s beaching in the Suez Canal. Giant ships are also designed for a world in which trade is growing rapidly, which is far from guaranteed these days given high geopolitical and economic tensions between the United States and China, Britain and the European Union, and other large trading partners. More

  • 88 Shares179 Views

    in Economy

    Photos: How Covid Changed New York’s Economy

    by

    Aug. 23, 2020 Times Square Oct. 1, 2020 Inside the Astoria, Queens, home of a couple while they worked alongside their two small children As the virus marched across the United States last year,over 20 million jobs vanished in just one month, the worst toll since the Great Depression. In New York, where cases peaked […] More

  • 100 Shares119 Views

    in Economy

    Move Over, Nerds. It’s the Politicians’ Economy Now.

    by

    #masthead-section-label, #masthead-bar-one { display: none }Biden’s Stimulus PlanWhat to Know About the BillSenate PassageWhat the Senate Changed$15 Minimum WageChild Tax CreditAdvertisementContinue reading the main storyUpshotSupported byContinue reading the main storyMove Over, Nerds. It’s the Politicians’ Economy Now.Leaders of both parties have become willing to act directly to extract the nation from economic crisis, taking that role back from the central bank.March 9, 2021Updated 4:58 p.m. ETPresident Biden at a roundtable meeting where he listened to some Americans who would benefit from the pandemic relief measure.Credit…Samuel Corum/Getty ImagesAmerican political leaders have learned a few things in the last 12 years, since the nation last tried to claw its way out of an economic hole.Among them: People like having money. Congress has the power to give it to them. In an economic crisis, budget deficits don’t have to be scary. And it is better for both the economy and the democratic legitimacy of a rescue effort when elected leaders choose to help people by spending money, versus when pointy-headed technocrats help by obscure interventions in financial markets.Lawmakers rarely phrase things so bluntly, but those are the implications of a pivot in American economic policy over the last year, culminating with the Biden administration’s $1.9 trillion pandemic relief bill. It is set to pass the House within days and be signed by President Biden soon after. And while this vote will fall along partisan lines, stimulus bills with similar goals passed with bipartisan support last year.Leaders of both parties have become more willing to use their power to extract the nation from economic crisis, taking the primary role for managing the ups and downs of the economy that they ceded for much of the last four decades, most notably in the period after the 2008 global financial crisis.It is an implicit rejection of an era in which the Federal Reserve was the main actor in trying to stabilize the nation’s economy. Now, elected officials are embracing the government’s ability to borrow and spend — the “great fiscal power of the United States” as Fed Chair Jerome Powell has called it — as the primary tool to fight a crisis.“That’s really been the story of this recovery,” Mr. Powell said at a recent hearing. “Fiscal policy has really stepped up.”The new relief bill is similarly a rejection of the concerns of centrist economists, including the former Treasury secretary Larry Summers and the former I.M.F. chief economist Olivier Blanchard, that its size and structure invite inflation or other problems. Democratic lawmakers have concluded that the favorable politics of this plan outweigh such risks.If sustained, this assertion of control over economic management by elected leaders would be as momentous a change as the one that followed the Paul Volcker Fed in the 1980s.“This is an enduring regime shift,” said Paul McCulley, who teaches at Georgetown’s McDonough School of Business. “Having the tools of economic stabilization work a whole lot more through the fiscal channel and a whole lot less through the monetary channel is a profound, pro-democracy policy mix.”It is in distinct contrast with the experience after the 2008 financial crisis.There was a large 2009 fiscal stimulus action, but a mix of legislative politics and deficit concerns by some officials in President Barack Obama’s inner circle restrained its size. Many of its components were relatively invisible to the average voter. And when the economy remained weak into 2010 and beyond, Republicans and many Democrats focused on deficit reduction. “Stimulus” became a dirty word in Washington.The Fed stepped in, undertaking quantitative easing (essentially, buying bonds with newly created money) and other untested strategies in an effort to keep the expansion going.But central bankers’ tools are limited. They can adjust interest rates and push money into the financial system in hope of making credit easier to obtain. That can spur more investment and spending, which in turn can generate more jobs and higher wages.Sound circuitous? It is — the economics equivalent of a triple bank shot in billiards.In the 2010s, the strategy sort of worked. There was no dip back into recession, and the expansion was the longest on record, until the pandemic ended it. But it took years and years for the economy to return to health, and it was a deeply unequal recovery in which owners of financial assets saw the biggest gains. That the effort was led by unelected central bankers reduced its democratic legitimacy, by appearing as if it were merely an effort by elitist institutions to protect the rich and powerful at the expense of everyone else.“You can do it and it can be successful, but the income and wealth inequality consequences of it will stink to high heaven,” Professor McCulley said. “You can do it that way, but it is anathema to democratic inclusion.”By contrast, fiscal authorities can spend money directly, funneling it where it is needed, without expectation of being paid back. The United States has done exactly that over the last year on a scale with no parallel since World War II.The new $1.9 trillion package includes, among other provisions, $1,400 payments to most Americans, a new child care tax credit that will put $300 per month in the bank accounts of most parents of a young child, help for those facing eviction or foreclosure, and billions of dollars in grants for small businesses. Public opinion polling finds it considerably more popular than other major domestic policy legislation in recent years.“For all the failures and weaknesses of American democracy over recent months, this is a dramatic demonstration of democracy’s power to act,” said Adam Tooze, a Columbia University economic historian who has written extensively of the aftermath of the financial crisis. “When it comes to delivering popular policies at the right moment, working on the basis of established constitutional norms, they’re doing that, which is infinitely to be preferred to an economic policy that depends on well-meaning enlightened technocrats.”Some lawmakers, especially on the left, have raised the notion that relying on congressional action to support the economy improves democratic legitimacy..css-yoay6m{margin:0 auto 5px;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}@media (min-width:740px){.css-yoay6m{font-size:1.25rem;line-height:1.4375rem;}}.css-1dg6kl4{margin-top:5px;margin-bottom:15px;}.css-k59gj9{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-flex-direction:column;-ms-flex-direction:column;flex-direction:column;width:100%;}.css-1e2usoh{font-family:inherit;display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-box-pack:justify;-webkit-justify-content:space-between;-ms-flex-pack:justify;justify-content:space-between;border-top:1px solid #ccc;padding:10px 0px 10px 0px;background-color:#fff;}.css-1jz6h6z{font-family:inherit;font-weight:bold;font-size:1rem;line-height:1.5rem;text-align:left;}.css-1t412wb{box-sizing:border-box;margin:8px 15px 0px 15px;cursor:pointer;}.css-hhzar2{-webkit-transition:-webkit-transform ease 0.5s;-webkit-transition:transform ease 0.5s;transition:transform ease 0.5s;}.css-t54hv4{-webkit-transform:rotate(180deg);-ms-transform:rotate(180deg);transform:rotate(180deg);}.css-1r2j9qz{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-e1ipqs{font-size:1rem;line-height:1.5rem;padding:0px 30px 0px 0px;}.css-e1ipqs a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;}.css-e1ipqs a:hover{-webkit-text-decoration:none;text-decoration:none;}.css-1o76pdf{visibility:show;height:100%;padding-bottom:20px;}.css-1sw9s96{visibility:hidden;height:0px;}#masthead-bar-one{display:none;}#masthead-bar-one{display:none;}.css-1cz6wm{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;font-family:’nyt-franklin’,arial,helvetica,sans-serif;text-align:left;}@media (min-width:740px){.css-1cz6wm{padding:20px;width:100%;}}.css-1cz6wm:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-1cz6wm{border:none;padding:20px 0 0;border-top:1px solid #121212;}Frequently Asked Questions About the New Stimulus PackageThe stimulus payments would be $1,400 for most recipients. Those who are eligible would also receive an identical payment for each of their children. To qualify for the full $1,400, a single person would need an adjusted gross income of $75,000 or below. For heads of household, adjusted gross income would need to be $112,500 or below, and for married couples filing jointly that number would need to be $150,000 or below. To be eligible for a payment, a person must have a Social Security number. Read more. Buying insurance through the government program known as COBRA would temporarily become a lot cheaper. COBRA, for the Consolidated Omnibus Budget Reconciliation Act, generally lets someone who loses a job buy coverage via the former employer. But it’s expensive: Under normal circumstances, a person may have to pay at least 102 percent of the cost of the premium. Under the relief bill, the government would pay the entire COBRA premium from April 1 through Sept. 30. A person who qualified for new, employer-based health insurance someplace else before Sept. 30 would lose eligibility for the no-cost coverage. And someone who left a job voluntarily would not be eligible, either. Read moreThis credit, which helps working families offset the cost of care for children under 13 and other dependents, would be significantly expanded for a single year. More people would be eligible, and many recipients would get a bigger break. The bill would also make the credit fully refundable, which means you could collect the money as a refund even if your tax bill was zero. “That will be helpful to people at the lower end” of the income scale, said Mark Luscombe, principal federal tax analyst at Wolters Kluwer Tax & Accounting. Read more.There would be a big one for people who already have debt. You wouldn’t have to pay income taxes on forgiven debt if you qualify for loan forgiveness or cancellation — for example, if you’ve been in an income-driven repayment plan for the requisite number of years, if your school defrauded you or if Congress or the president wipes away $10,000 of debt for large numbers of people. This would be the case for debt forgiven between Jan. 1, 2021, and the end of 2025. Read more.The bill would provide billions of dollars in rental and utility assistance to people who are struggling and in danger of being evicted from their homes. About $27 billion would go toward emergency rental assistance. The vast majority of it would replenish the so-called Coronavirus Relief Fund, created by the CARES Act and distributed through state, local and tribal governments, according to the National Low Income Housing Coalition. That’s on top of the $25 billion in assistance provided by the relief package passed in December. To receive financial assistance — which could be used for rent, utilities and other housing expenses — households would have to meet several conditions. Household income could not exceed 80 percent of the area median income, at least one household member must be at risk of homelessness or housing instability, and individuals would have to qualify for unemployment benefits or have experienced financial hardship (directly or indirectly) because of the pandemic. Assistance could be provided for up to 18 months, according to the National Low Income Housing Coalition. Lower-income families that have been unemployed for three months or more would be given priority for assistance. Read more.“This legislation has everything to do with restoring the confidence of the American people in democracy and in their government, and if we can’t respond to the pain of working families today, we don’t deserve to be here,” said Senator Bernie Sanders of the Biden bill, known as the American Rescue Plan Act.Republicans unanimously opposed the Biden legislation, but it has not been quite the scorched-earth opposition to deficit-widening action seen during the Obama administration.A signing ceremony last April for one of the several rounds of pandemic relief that the Trump administration put together with bipartisan support last year.Credit…Anna Moneymaker/The New York TimesAs evidenced by previous rounds of pandemic relief, there has been enough common ground between Democrats and Republicans to reach bipartisan agreements of relatively large scale, including the $2 trillion CARES Act enacted last March.“A relief package like this one might not have been everything both parties wanted, but a compromise deal that provides help to Americans is better than no deal at all,” said Tom Cole, Republican of Oklahoma, at the outset of the House debate on a $900 billion bipartisan bill in late December.All in all, Congress and the Trump and Biden administrations have authorized about $6 trillion in pandemic relief spending over the last year, about 28 percent of 2019 G.D.P. (Less than that will ultimately be spent, because the economy’s improvement has left some programs with more money allocated than they needed.)The bipartisan agreement around many of the components of the pandemic aid legislation suggests a future model for how the United States government responds to economic crises. For example, in the past the federal government has extended the duration that jobless people are eligible for unemployment insurance payments during recessions, but has not expanded the size of those payments.The CARES Act, by contrast, increased unemployment checks by $600 a week, aiming to replace the income lost by those forced out of work. Subsequent legislation has included smaller increases. Economists generally say that this has been a well-targeted policy that has helped temporarily jobless people to keep paying their bills — and has softened the collapse of demand in the economy.“We’re at a watershed moment where this type of tool will be used in future recessions,” said Constance Hunter, chief economist of the global accounting firm KPMG. “What we did here is different and unique, and we are going to learn whether it was effective at providing a bridge to the other side of the pandemic.”There are risks in the Biden administration’s approach, of course. If the concerns described by Mr. Summers and Mr. Blanchard about the size of the new relief bill materialize, and the result is excessive inflation or some type of crisis, Democrats will pay a price for their actions.But that’s the thing about democracy: It has much clearer mechanisms for holding elected officials accountable for their economic policy decisions than it does for scrutinizing appointed experts for their interest rate policies. If Americans don’t like the results, they have a straightforward way to make it known: at the ballot box in November 2022 and November 2024.AdvertisementContinue reading the main story More

  • 138 Shares199 Views

    in Economy

    Amid Shortfalls, Biden Signs Executive Order to Bolster Critical Supply Chains

    by

    #masthead-section-label, #masthead-bar-one { display: none }The Coronavirus OutbreakliveLatest UpdatesMaps and CasesRisk Near YouVaccine RolloutNew Variants TrackerAdvertisementContinue reading the main storySupported byContinue reading the main storyAmid Shortfalls, Biden Signs Executive Order to Bolster Critical Supply ChainsThe order is intended to help insulate the economy from future shortages of critical imported components by making the United States less reliant on foreign supplies.President Biden on Wednesday signed an executive order requiring his administration to review critical supply chains with the aim of bolstering American manufacturing.Credit…Doug Mills/The New York TimesJim Tankersley and Feb. 24, 2021Updated 7:28 p.m. ETWASHINGTON — Automakers have been forced to halt production because of a lack of computer chips. Health care workers battling the coronavirus pandemic had to make do without masks as the United States waited on supplies from China. And pharmaceutical executives worried that supplies of critical drugs could dry up if countries tried to stockpile key ingredients and block exports.Deep disruptions in the global movement of critical goods during the pandemic prompted President Biden on Wednesday to take steps toward reducing the country’s dependence on foreign materials. He issued an executive order requiring his administration to review critical supply chains with the aim of bolstering American manufacturing of semiconductors, pharmaceuticals and other cutting-edge technologies.In remarks at the White House, the president cast the move as an important step toward creating well-paying jobs and making the economy more resilient in the face of geopolitical threats, pandemics and climate change.“This is about making sure the United States can meet every challenge we face in the new era,” he said.But the effort, which has bipartisan support, will do little to immediately resolve global shortages, including in semiconductors — a key component in cars and electronic devices. A lack of those components has forced several major American auto plants to close or scale back production and sent the administration scrambling to appeal to allies like Taiwan for emergency supplies.Administration officials said the order would not offer a quick fix but would start an effort to insulate the American economy from future shortages of critical imported components.Mr. Biden discussed the issue in the Oval Office on Wednesday afternoon with nearly a dozen Republican and Democratic members of Congress. Senator Chuck Schumer, Democrat of New York and the majority leader, called for the crafting and passage of a bill this spring to address supply chain vulnerabilities.“Right now, semiconductor manufacturing is a dangerous weak spot in our economy and in our national security,” Mr. Schumer said. “Our auto industry is facing significant chip shortages. This is a technology the United States created; we ought to be leading the world in it. The same goes for building-out of 5G, the next generation telecommunications network. There is bipartisan interest on both these issues.”Republicans emerged from the White House meeting optimistic that such efforts could soon move forward. Representative Michael McCaul, Republican of Texas, said he was pleased to see that the White House made the issue a top priority and that the president was receptive. “His words were, ‘Look, I’m all in,’” he said.Mr. McCaul said that much of the conversation revolved around legislation that Congress had passed last year to incentivize the chips industry — but which still needs funding for research grants and a refundable investment tax credit — as well as the current chips shortage and possible looming job losses in the auto industry.“China is looking at investing $1 trillion in their digital economy,” Mr. McCaul said. “If we’re going to be competitive, we have to incentivize these companies to manufacture these advanced chips in the United States.”Mr. Biden called the meeting one of the best of his presidency so far. “It was like the old days,” he said. “People were actually on the same page.”A global semiconductor shortage has led to production delays for American automakers.Credit…Mohamed Sadek for The New York TimesThe president ordered yearlong reviews of six sectors and a 100-day review of four classes of products where American manufacturers rely on imports: semiconductors, high-capacity batteries, pharmaceuticals and their active ingredients, and critical minerals and strategic materials, like rare earths.The Coronavirus Outbreak More

  • 88 Shares119 Views

    in Economy

    In Canada, Americans Are Missed, With Limits

    by

    #masthead-section-label, #masthead-bar-one { display: none }The Coronavirus OutbreakliveLatest UpdatesMaps and CasesSee Your Local RiskNew Variants TrackerVaccine RolloutAdvertisementContinue reading the main storySupported byContinue reading the main storyIn Canada, Americans Are Missed, With LimitsU.S. visitors usually mean big business for Canada’s tourism industry. But the pandemic has blunted lonesomeness for the country’s best friend.Before the pandemic, American visitors were frequent guests at the Fairmont le Château Frontenac, a castlelike hotel in Quebec City.Credit…GettyFeb. 10, 2021, 5:00 a.m. ETDavid McMillan, the co-owner of Montreal’s famed temple of gluttony, Joe Beef, used to spend his days obsessing over his signature dishes like rabbit with mustard sauce, and lobster spaghetti. These days, however, he has another preoccupation: Studying American vaccination rates.Before the pandemic, so many American gastronomy pilgrims from New York, Boston and Los Angeles came each week to Joe Beef that many local residents, facing a 10-week waiting list, all but gave up trying. The Americans, Mr. McMillan recalled wistfully, thought nothing of buying expensive bottles of Champagne and sucking down oysters until midnight, before purchasing his prophetic-sounding cookbook “Surviving the Apocalypse.”“Ah, how I miss the Americans,” said Mr. McMillan, who presides over a mini-empire of four restaurants in the city, including Liverpool House, where Justin Trudeau once bromanced President Obama. American tourists, he added, accounted for half of Joe Beef’s pre-pandemic weekly revenue of about $118,000, or about 150,000 Canadian dollars. “When the Americans were here every night it felt like we were putting on a Broadway show.”David McMillan is the co-owner of Montreal’s Joe Beef, a restaurant which attracted American gastronomy pilgrims before the pandemic.Credit…David Giral for The New York Times“Now, I look every day at how the U.S. vaccination is going,” he added. “And I get messages every day from American clients asking when they can get back in.”It’s a question many in the Canadian tourism industry have also been asking, ever since the Canada-U. S. border was closed to nonessential travelers in March. The loss of American visitors, armed with their strong dollars and consuming zeal, has buffeted popular destinations like Montreal, Quebec City and Vancouver, already reeling from a debilitating pandemic. Canadian airlines have been forced to make thousands of layoffs.More than two thirds of the 21 million international tourists who came to Canada in 2019 were from the United States, according to government data, with Americans pumping about $8.7 billion into the economy. That’s compared to the nearly $1.3 billion spent by Chinese visitors, about $1 billion by Britons and about $735 million by the French.The absence of American tourists feels acute in many quarters of Canada. Above, a deserted stretch of Rue Notre Dame West in Montreal.Credit…David Giral for The New York TimesAbsence makes the heart grow fonder — but not enough to open borders.Canadians have long had a love-hate relationship with their larger, showier neighbor south of the border. That ambivalence was magnified during the Trump administration, when the mercurial American president slapped punishing tariffs on the country, suggested Canada had burned down the White House during the War of 1812 (the country didn’t then exist) and called its prime minister, Justin Trudeau, “very dishonest” and “weak.”But it has always been more love than hate when it comes to travel between the two countries, with Americans drawn by Canada’s proximity, its common language in most regions and its mix of cosmopolitan cities and natural landscapes.The inauguration of President Joe Biden and Vice President Kamala Harris, who spent her disco-dancing teenage years in Montreal, has renewed the ardor between the two allies, while vaccination has created cautious optimism about taming the pandemic. Still, while the tourism industry is experiencing one of its worst crises since World War II, recent polls show that the vast majority of Canadians want the borders to remain closed. Canadians, a typically rule-abiding people with a deference to scientific authority, have looked with some horror at the spiraling infection rates in the United States, and the handling of the coronavirus during the Trump administration.Mélanie Joly, Canada’s minister of economic development, who is responsible for tourism, said keeping the borders closed was a matter of pragmatism. “We can’t talk about reopening the economy until we stop the spread of the virus,” she said in an interview. Lamenting the absent Americans, she added: “It’s a bit like losing your best friend but you are sick and your best friend is sick and everyone is better off staying at home.”She said she hoped the travel industry would be “back on its feet” by September, as vaccination in Canada and the United States accelerated. The border, she stressed, would remain closed until the pandemic is contained.The Musée d’Art Contemporain de Montréal is popular with American visitors. Credit…David Giral for The New York TimesAt the Musée d’Art Contemporain de Montreal, American museum-goers from New York, Massachusetts and Vermont helped turn a pre-pandemic exhibition on Leonard Cohen, the gravelly-voiced Montreal-born balladeer, into a blockbuster. But the museum’s director, John Zeppetelli, said knowing friends and colleagues in the art world who had contracted the virus while attending art fairs last year in the United States and elsewhere had underscored the need for caution. “Public health has to supersede economic concerns,” Mr. Zeppetelli said.Covid-19 tests, quarantines and a cruise ship ban create obstacles to travel.As it is, Canada itself is experiencing a lethal second wave, with a curfew in effect in Quebec, a lockdown in most parts of Ontario, the country’s most populous province, and border restrictions in each of the country’s Atlantic coast provinces that have required even Canadians from other provinces to quarantine.The Coronavirus Outbreak More

  • 138 Shares179 Views

    in Economy

    The Clash of Liberal Wonks That Could Shape the Economy, Explained

    by

    AdvertisementContinue reading the main storyUpshotSupported byContinue reading the main storyThe Clash of Liberal Wonks That Could Shape the Economy, ExplainedThey all agree pandemic aid is warranted, but the question is how big and how quickly.Feb. 8, 2021Updated 5:43 p.m. ETJoe Biden in an October 2009 meeting with economic advisers, including Larry Summers, second from right. Mr. Summers, then the director of the National Economic Council, is one of the economists now questioning the scale of the Biden administration’s pandemic stimulus plan.Credit…Mandel Ngan/Agence France-Presse — Getty ImagesA fierce debate is underway among centrist and left-leaning economists, taking place in newspaper op-eds, heated exchanges on Twitter, and even at the White House lectern. Unlike most internecine battles within a narrow intellectual tribe, this one will shape the future of the American economy and the political fortunes of the Biden administration.The core question is whether the administration’s $1.9 trillion pandemic rescue plan is too big. Is action on that scale needed to contain the economic damage from the coronavirus and get the economy quickly on track to full health? Or is it far too big relative to the hole the economy’s in, thus setting the stage for a burst of inflation followed by a potential recession, as leading center-left economists including Larry Summers (the former Treasury secretary) and Olivier Blanchard (a former chief economist at the International Monetary Fund) have argued in recent days?This clash of ideas is taking place at a crucial moment. With the Senate at a 50-50 partisan divide, a single Democratic senator who finds the arguments of Mr. Summers and Mr. Blanchard persuasive could require President Biden to trim his ambitions, with far-reaching consequences for his presidency and the economy.The substance of the debate touches on important macroeconomic concepts like economic speed limits, the risks of deficits and the origins of inflation. But it is impossible to separate the substance from the personal history of those involved.It has created stark divides among economic policy thinkers who for the most part know one another, have worked together in government, have spoken at the same think tank events, and share mostly similar political views.Hanging over it all is the legacy of the Clinton-era Democratic policy establishment, and a continuing debate about past policy decisions.What is in dispute?President Biden’s pandemic aid plan includes direct spending for Covid testing and vaccine rollout, expanded unemployment insurance, money for schools and child care, and $1,400 payments to most Americans. It comes on the heels of a $900 billion bipartisan pandemic aid act enacted in December.For weeks, policy veterans have been fretting among themselves over the scale of Mr. Biden’s proposal, in private emails and text chains. Mr. Summers made those concerns public with an op-ed in The Washington Post last week. Mr. Blanchard has backed him on Twitter, as has Jason Furman to some degree, chairman of the Council of Economic Advisers under President Barack Obama.What is their argument?As Mr. Summers wrote, it is a good idea to spend whatever it takes to contain the virus and enable the economy to recover quickly from its pandemic-induced downturn. Provisions that strengthen the safety net for those who are suffering are worthwhile.The problem, he says, is that the plan’s total size reaches a scale that risks major future problems. In particular, the total money being proposed far exceeds most estimates of the “output gap.” (More on that below.) That implies that much of that spending will just slosh around the economy, causing prices to rise, potentially hindering the rest of Mr. Biden’s agenda and risking a new recession.This isn’t a conventional argument between doctrinaire deficit hawks and doves, but something more subtle. In the past, Mr. Summers in particular has repeatedly called for larger budget deficits to help combat “secular stagnation,” in which major world economies are mired in slow growth, and he has supported large pandemic aid packages.But Mr. Summers says any new spending package should pay out gradually over time and be devoted more substantially to long-term investments.“There is nothing wrong with targeting $1.9 trillion, and I could support a much larger figure in total stimulus,” he wrote in a follow-up article. “But a substantial part of the program should be directed at promoting sustainable and inclusive economic growth for the remainder of the decade and beyond, not simply supporting incomes this year and next.”What’s the output gap?Imagine a world in which the American economy is cranking at its full potential. Pretty much everyone who wants to work is able to find a job. Every factory is at its complete capacity. The output gap is, simply, how far away the economy is from that ideal state.A traditional approach to fiscal stimulus has been to estimate the size of that gap, apply some adjustments to account for the way federal spending circulates through the economy, and use that arithmetic to decide how big a stimulus action ought to be.In theory, if the government pumps too much money into the economy, it is trying to generate activity over and above potential output, which is impossible to sustain for long. Workers might put in overtime, and a factory might run extra hours for a while, but eventually the workers want a breather, and the machines need to shut down for maintenance. If there is more money floating around in the economy than there is supply of goods and services, the result won’t be increased prosperity, but rather higher prices as people bid up the things they want to buy.By that traditional thinking, Mr. Summers and other skeptics are on solid ground. The Congressional Budget Office is projecting an output gap for 2021 of only $420 billion, implying that $1.9 trillion in additional cash is much more than the economy needs to fill the gap. Even if you believe the C.B.O. is too pessimistic about America’s potential, we’re talking orders of magnitude of difference.There are problems with this argument, though. For one, potential output is a theoretical concept, not something we can ever know with precision. In fact, there is a solid case to be made that technocrats have underestimated the economy’s true potential for years, given the absence of inflation in 2018 and 2019 despite a hot job market.For another, it imagines the economy as a series of hydraulic tubes, in which a skilled engineer can push the right buttons to achieve a predictable outcome. In macroeconomics, especially in the era of a once-a-century pandemic, things might not be so simple.How is the Biden administration responding?Aggressively.Treasury Secretary Janet Yellen and other top officials have taken to the airwaves in recent days to argue that their proposal is prudent and appropriately scaled.Administration officials have described the plan as “bottom-up,” meaning it was devised by starting with specific problems facing Americans — a lack of income for those out of work, bottlenecks in vaccine delivery, a lack of funds for school reopening — and then ending with forecasts of the sums necessary to solve those problems.Their argument is that the United States is in a do-whatever-it-takes moment, and that the most urgent goal is to try to ensure that the economy can fully reopen as quickly as possible while preventing potential lasting damage to families and businesses.“I think that the idea now is that we have to hit back hard; we have to hit back strong if we’re going to finally put this dual crisis of the pandemic and the economic pain that it has engendered behind us,” Jared Bernstein, a member of the White House Council of Economic Advisers, said in a news briefing Friday.They do not dismiss the possibility that there will be higher inflation down the road — but say it is a manageable risk.Inflation is “a risk that we have to consider,” Ms. Yellen said on CNN’s “State of the Union” on Sunday, but “we have the tools to deal with that risk if it materializes” and “we have a huge economic challenge here and tremendous suffering in the country.”“That’s the biggest risk,” she said.In the logic that has prevailed within the administration and among other former officials who support the approach, it misses the point to theorize about output gaps and inflation risks. They say this relief should be thought of differently than traditional fiscal stimulus.“Relief payments are life support,” wrote Austan Goolsbee, another former Obama adviser. “To avoid permanent damage, they need to last as long as the virus does. Without them, the chance of deterioration and irrevocable harm soars.”So if this passes, is there really going to be a huge burst of inflation?Maybe.The economy is in uncharted territory. With potentially trillions of pandemic aid spending on the way — in addition to vast accumulated savings over the last year because of Americans’ pandemic-constrained spending and stimulus-boosted incomes — there is a lot of money poised to be spent.And some things may reduce the supply of goods and services, like disruptions to global supply chains resulting from the pandemic and business closures.Lots of money chasing finite supply is an Economics 101 recipe for surging prices.But for the medium term, the more important question is whether any inflation surge would be a temporary not-so-harmful phenomenon or the start of something more lasting.Why does that matter?The Federal Reserve will be inclined to mostly ignore a one-time shock of post-pandemic inflation. Chair Jerome Powell said so in a news conference last month.There is a possibility “that as the economy fully reopens, there’ll be a burst of spending because people will be enthusiastic that the pandemic is over,” Mr. Powell said. “We would see that as something likely to be transient and not to be very large.”In that case, he said, “the way we would react is we’re going to be patient.”It might even help rebalance the economy after years in which the United States has depended on low interest-rate policies from the Fed to keep growth afloat. Somewhat higher inflation would mean lower “real,” inflation-adjusted interest rates, and might gain the Fed some credibility that it will not permit inflation to be persistently too low. It could, plausibly, get back to above-zero interest rates sooner than it would otherwise, taking the air out of financial bubbles and giving it more room to combat the next downturn.However, if surging prices were to create a vicious cycle of higher prices and higher wages, the Fed would be inclined to raise interest rates enough to try to break that cycle — potentially driving the economy into another recession in the process. That is the last thing that American workers need, let alone Democrats seeking to hold Congress in 2022 and the White House in 2024.So is this part of a wider philosophical divide among Democratic economists?There is no ideological chasm here.But there is a deeper division than just the technical question of the output gap’s size or what the risks are of too much versus too little pandemic aid. Rather, the Biden approach represents a rejection of the technocratic bent within the Democratic Party that many on the left believe has been deeply damaging to the country.President Bill Clinton and President Obama relied for economic advice on what might be called the Bob Rubin coaching tree. Mr. Rubin, who served as Treasury secretary in the 1990s, was a mentor to Mr. Summers, who was a mentor to Timothy Geithner, Mr. Obama’s first Treasury secretary, and so on.The policymakers in this tradition view themselves as rigorous, careful and pragmatic. Many liberals view them as excessively moderate, too deferential to Wall Street and clueless about the political dynamics that could make for durable policies to help the working class.The Biden administration includes many top officials from outside that tree, such as Ms. Yellen. And it is particularly seeking to correct what are seen as the mistakes of the early Obama administration, when Mr. Summers and Mr. Geithner were in top jobs.The new administration sees this as a moment of profound crisis, a time when it must act on a scale commensurate with the problem. It is betting that if it solves the problem, its political fortunes will be better rather than worse, and it can always deal with inflation or other side effects if they come.In a sense then, the debate over pandemic aid isn’t entirely about output gaps or risk trade-offs. It’s about which mode of policymaking ought to prevail in the Democratic Party.AdvertisementContinue reading the main story More