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    Even With $900 Billion Stimulus, Biden Faces Fragile Economy

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    #masthead-section-label, #masthead-bar-one { display: none }The Presidential TransitionliveLatest UpdatesElectoral College ResultsBiden’s CabinetInaugural DonationsAdvertisementContinue reading the main storySupported byContinue reading the main story$900 Billion Won’t Carry Biden Very FarDespite new pandemic aid, he confronts an economic crisis unlike any since he last entered office in 2009. And political headwinds have only stiffened.The challenges greeting President-elect Joseph R. Biden Jr. rival those of the Great Recession, when he became vice president.Credit…Amr Alfiky/The New York TimesJan. 4, 2021Updated 5:48 p.m. ETWith his presidential inauguration just weeks away, Joseph R. Biden Jr. is confronting an economic crisis that is utterly unparalleled and yet eerily familiar.Millions of Americans are out of work, small businesses are struggling to survive, hunger is rampant, and people across the country fear getting kicked out of their homes. The moment was similarly perilous exactly 12 years ago, when Mr. Biden was the vice president-elect and preparing to take office.“I remember the utter terror,” said Cecilia Rouse, who was an economic adviser in the Obama White House and has been chosen to lead Mr. Biden’s Council of Economic Advisers.The $900 billion pandemic relief plan that moderate lawmakers powered through Congress last month provides the incoming administration with some breathing room. This second tier of aid will deliver $600 stimulus checks, assist small businesses and extend federal unemployment benefits through mid-March.But as Mr. Biden has made clear, it is simply a “down payment” — a brief bridge to get through a dark winter and not nearly enough to restore the economy’s health.Roughly 19 million people are receiving some type of unemployment benefit, and many business owners wonder whether they will be able to survive the year. The coronavirus crisis has worsened longstanding inequalities, with workers at the lower end of the income spectrum — who are disproportionately Black and Hispanic — bearing the brunt of the pain.At the same time, bottlenecks in the Covid-19 vaccines’ rollout as well as fears about a much more transmissible variant of the virus could further delay the revival of large swaths of the economy like restaurants, travel, live entertainment and sports.“We are in for some choppy waters, even as we continue to get to the other side of the pandemic,” Ms. Rouse said.Yet despite the scorched earth left by the coronavirus, the economy is on a more stable footing in several ways than it was at the start of 2009.Instead of hurtling down a hole with no clear view of the bottom, Mr. Biden is taking office when the economy is on an upward trajectory. However anemic the growth, most analysts predict that 2021 will end better than it began even if there are stumbles along the way.While this pandemic-related recession was larger in terms of initial job losses and closings, it is what Ms. Rouse labeled “collateral damage” from a health emergency and not a crack in the underlying global financial system.“Now we know what to do: Provide the kind of social safety net for households, businesses and communities so they can get to the other side of the pandemic intact,” Ms. Rouse said.The Biden administration will also focus on attacking the deep-rooted inequalities that this crisis aggravated, she added.Volunteers distributing food donations in Bradenton, Fla. Four million U.S. workers have been unemployed for at least six months.Credit…Eve Edelheit for The New York TimesA closed flower shop in Tampa, Fla. The pandemic has shut down more businesses than the Great Recession did.Credit…Eve Edelheit for The New York TimesAdding to the positive side of the ledger, many households have socked away money, lifting the savings rate to a 40-year high. In contrast, the Great Recession razed storehouses of wealth, in retirement accounts and homes, virtually overnight.“Walking in this time, there is at least a cushion,” said Jason Furman, who led President Barack Obama’s Council of Economic Advisers and is now an economist at Harvard University’s John F. Kennedy School of Government.The Presidential TransitionLatest UpdatesUpdated Jan. 4, 2021, 6:43 p.m. ETSenator Kelly Loeffler of Georgia says she will join the vote to overturn Biden’s electors.The leader of the far-right Proud Boys was arrested in Washington.In Georgia, Jon Ossoff warns Trump not to ‘mess with our voting rights.’But if the Biden administration will have a bit more running room on the economy, it is likely to have a lot less politically than Mr. Obama did in the first two years of his presidency, when his party controlled both houses of Congress.If the Democrats retake control of the Senate by winning both seats in the Georgia runoff election on Tuesday, Mr. Biden’s path will be much easier. Otherwise, the new president will have to deal with a Republican Senate led by Mitch McConnell of Kentucky, who has stymied legislation from the Democratic-controlled House.In that case, the administration will have an uphill slog persuading lawmakers to approve more aid when this round ends. With a Democrat headed for the Oval Office, many Republicans who put aside their concerns about debt when it came to cutting taxes in 2017 have rediscovered their inner deficit hawk.Mr. McConnell successfully resisted President Trump’s calls — echoed by Democrats — to increase the latest stimulus payments to $2,000 from $600.The failure to extend or expand federal aid when it expires this spring not only would cause significant hardships and needless suffering but could seriously scar the economy, said Joseph Stiglitz, a Nobel Prize-winning economist.Even though economic activity will most likely be on an upswing, the economy will remain weakened, Mr. Stiglitz said. Eviction moratoriums and mortgage forbearance have prevented families from losing their homes, but their housing debt has been accumulating even if it has not yet shown up on household balance sheets.Covid-19 vaccinations are crucial to getting the economy back on track.Credit…Alex Welsh for The New York TimesA coronavirus testing site in Los Angeles. Cities and states also have a big role to play in distributing vaccines. Credit…Alex Welsh for The New York TimesMany small businesses, particularly in the hard-hit service sector, which has been a source of low-wage jobs, will not survive. Economic inequality will increase.“There’s been a lot of long-term damage,” Mr. Stiglitz said.At the same time, the ranks of workers who have been unemployed for six months or longer have swelled to more than four million, increasing the chances that they may never find another job. Growing numbers of men and women are also dropping out of the labor force altogether.None of those problems can really begin to be addressed without widely distributing the vaccines and reopening the schools so that parents, particularly mothers, can return to the work force.That is why economists say that funneling direct aid to state and local governments is so crucial.“That sector has been gutted,” said Abigail Wozniak, a labor economist at the Federal Reserve Bank of Minneapolis, but it “is the sector that allows all the other sectors to operate.”States and localities will play a critical role in the vaccine rollout and in providing emergency medical personnel. They will also be responsible for sending teachers back to classrooms that are safe, and helping disadvantaged students regain lost ground.Senate Republicans have been dead set against providing that kind of direct aid. Mr. McConnell has criticized it as a “blue-state bailout,” even though many red and blue states — and rural areas in particular — have lost revenues and public sector jobs.Senator Mitch McConnell, the Republican majority leader, has opposed direct aid to state and local governments.Credit…Stefani Reynolds for The New York TimesEconomists say Congress and the White House must recognize the differences as well as the similarities between the pandemic and the Great Recession.Credit…Stefani Reynolds for The New York TimesEconomists on the right and left agree that while there are echoes from the Great Recession, there are also important distinctions. Restoring the economy this time, they warn, will require a kind of economic serenity prayer: recognizing the similarities, identifying the contrasts, and having the wisdom to know the difference.For Michael R. Strain, an economist at the conservative American Enterprise Institute, the economy has repaired itself more quickly than expected. He worries that some aid proposals, particularly those that prop up specific industries, would keep some dying businesses alive and “slow down the process of adjustment to a new post-virus economy.“The faster that process happens, the faster the economy heals,” Mr. Strain said.Many liberal economists, though, including those on the Biden team, warn against ignoring a crucial lesson from the last recession: Failing to move quickly to provide sufficient money to the people and businesses that need it can damage the economy far into the future.Brian Deese, whom Mr. Biden has picked to lead the National Economic Council, where he worked as an assistant during the Obama administration, said making public investments was necessary to ensure economic growth.“We’re in a moment where the risk of doing too little outweighs the risk of doing too much,” he said.AdvertisementContinue reading the main story More

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    27 Places Raising the Minimum Wage to $15 an Hour

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    AdvertisementContinue reading the main storySupported byContinue reading the main storyOnce a Fringe Idea, the $15 Minimum Wage Is Making Big GainsThe new year brings another round of increases, nearly a decade after workers started campaigning for higher pay.Demonstrators calling for a $15 minimum hourly wage outside a Marriott hotel in Des Moines in 2016. Credit…Gabriella Demczuk for The New York TimesDec. 31, 2020, 5:34 p.m. ETIt started in 2012 with a group of protesters outside a McDonald’s demanding a $15 minimum wage — an idea that even many liberal lawmakers considered outlandish. In the years since, their fight has gained traction across the country, including in conservative states with low union membership and generally weak labor laws.On Friday, 20 states and 32 cities and counties will raise their minimum wage. In 27 of these places, the pay floor will reach or exceed $15 an hour, according to a report released on Thursday by the National Employment Law Project, which supports minimum-wage increases. The movement’s strength — a ballot measure to increase the minimum wage in Florida to $15 by 2026 was passed in November — could put renewed pressure on Congress to increase the federal minimum wage from $7.25 per hour, where it has been since 2009. President-elect Joseph R. Biden Jr. has endorsed $15 an hour at the federal level and other changes sought by labor groups, like ending the practice of a lower minimum wage for workers like restaurant workers who receive tips.But even without congressional action, labor activists said they would keep pushing their campaign at the state and local levels. By 2026, 42 percent of Americans will work in a location with a minimum wage of at least $15 an hour, according to an Economic Policy Institute estimate cited in the NELP report.“These wages going up in a record number of states is the result of years of advocacy by workers and years of marching on the streets and organizing their fellow workers and their communities,” said Yannet Lathrop, a researcher and policy analyst for the group.The wage rates are increasing as workers struggle amid a recession caused by the coronavirus pandemic that has left millions unemployed.“The Covid crisis has really exacerbated inequalities across society,” said Greg Daco, chief U.S. economist for Oxford Economics. “This has given more strength to these movements that try to ensure that everyone benefits from a strong labor market in the form a sustainable salary.”Workers during the pandemic have been subject to furloughs, pay cuts and decreased hours. Low-wage service workers have not had the option of working from home, and the customer-facing nature of their jobs puts them at greater risk for contracting the virus. Many retailers gave workers raises — or “hero pay” — at the beginning of the pandemic, only to quietly end the practice in the summer, even as the virus continued to surge in many states.“The coronavirus pandemic has pushed a lot of working families into deep poverty,” said Anthony Advincula, director of communications for Restaurant Opportunities Centers United, a nonprofit focused on improving wages and working conditions. “So this minimum wage increase will be a huge welcome boost for low-wage workers, especially in the restaurant industry.”Mary Kay Henry, international president of the Service Employees International Union, said the labor movement would make getting even more workers to $15 an hour or more a priority in 2021.“There’s millions more workers who need to have more money in their pockets,” she said, adding that the election of Mr. Biden and Vice President-elect Kamala Harris would bolster the effort. “We have an incredible opportunity.”Because many hourly service workers are Black, Hispanic, Native American and Asian, people of color stand to gain the most from minimum-wage increases. A 2018 study from the Economic Policy Institute found that workers of color are far more likely to be paid poverty-level wages than white workers.“It’s the single most dramatic action to create racial equality,” Ms. Henry said.Some economists say lifting the minimum wage will benefit the economy and could be an important part of the recovery from the pandemic recession. That is partly because lower-income workers typically spend most of the money they earn, and that spending primarily takes place where they live and work.Kate Bahn, director of labor market policy at the Washington Center for Equitable Growth, said that after the 2007-9 recession, growth was anemic for years as pay stagnated and the job market slowly clawed its way back.A shopkeeper in Los Angeles waited for customers. Business groups say increasing the minimum wage can hurt small businesses, already beleaguered by the coronavirus pandemic.Credit…Philip Cheung for The New York Times“There’s been a broader acknowledgment that the lackluster wage growth we’ve seen in the past 30 years and since the Great Recession reflects structural imbalances in the economy, and structural inequality,” Ms. Bahn said.Many business groups counter that increasing the minimum wage will hurt small businesses, already beleaguered by the pandemic. More than 110,000 restaurants have closed permanently or for the long term during the pandemic, according to the National Restaurant Association.Increasing the minimum wage could lead employers to lay off some workers in order to pay others more, said David Neumark, an economics professor at the University of California, Irvine.“There’s a ton of research that says increasing minimum wages can cause some job loss,” he said. “Plenty workers are helped, but some are hurt.”A 2019 Congressional Budget Office study found that a $15 federal minimum wage would increase pay for 17 million workers who earned less than that and potentially another 10 million workers who earned slightly more. According to the study’s median estimate, it would cause 1.3 million other workers to lose their jobs.In New York, State Senate Republicans had urged Gov. Andrew M. Cuomo, a Democrat, to halt increases that went into effect on Thursday, arguing that they could amount to “the final straw” for some small businesses.While increases to the minimum wage beyond a certain point could lead to job losses, Ms. Bahn of the Washington Center for Equitable Growth argued that “we are nowhere near that point.”Economic research has found that recent minimum-wage increases have not had caused huge job losses. In a 2019 study, researchers at the Federal Reserve Bank of New York found that wages had increased sharply for leisure and hospitality workers in New York counties bordering Pennsylvania, which had a lower minimum, while employment growth continued. In many cases, higher minimum wages are rolled out over several years to give businesses time to adapt.Regardless of whether there is federal action, more state ballot initiatives will seek to raise the minimum wage, said Arindrajit Dube, an economics professor at the University of Massachusetts Amherst.“At a basic level, people think that this is an issue of fairness,” Mr. Dube said. “There’s broad-based support for the idea that people who are working should get a living wage.”Jeanna Smialek More

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    What Giant Skeletons and Puppy Shortages Told Us About the 2020 Economy

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    @media (pointer: coarse) { .at-home-nav__outerContainer { overflow-x: scroll; -webkit-overflow-scrolling: touch; } } .at-home-nav__outerContainer { position: relative; display: flex; align-items: center; /* Fixes IE */ overflow-x: auto; box-shadow: -6px 0 white, 6px 0 white, 1px 3px 6px rgba(0, 0, 0, 0.15); padding: 10px 1.25em 10px; transition: all 250ms; margin-bottom: 20px; -ms-overflow-style: none; /* IE 10+ */ […] More

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    Most Americans Are Expected to Save, Not Spend, Their $600 Check

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    #masthead-section-label, #masthead-bar-one { display: none }The Coronavirus OutbreakliveLatest UpdatesMaps and CasesThe Stimulus PlanVaccine InformationF.A.Q.TimelineAdvertisementContinue reading the main storySupported byContinue reading the main storyMost Americans Are Expected to Save, Not Spend, Their $600 CheckWhile lawmakers debate increasing the stimulus payments to $2,000, experts say it would make far more sense to give more money to the unemployed.Galen Gilbert, a 71-year old lawyer who lives in a Boston suburb, plans to deposit his stimulus check into savings. “I’m not really suffering financially,” he said.Credit…Katherine Taylor for The New York TimesNelson D. Schwartz and Dec. 30, 2020Updated 4:49 p.m. ETGalen Gilbert knows just what he will do with the check he gets from Washington as part of the pandemic relief package, whatever the amount: put it in the bank.“I’ve got more clients than I can handle right now and I’ve made more money than I usually do,” said Mr. Gilbert, a 71-year-old lawyer who lives in a Boston suburb. “So I’m not really suffering financially.”Cheryl K. Smith, an author and editor who lives in Low Pass, Ore., isn’t in a rush to spend the money, either. She plans to save a portion, too, while donating the rest to a local food bank. “I’m actually saving money right now,” Ms. Smith said.President Trump’s demand to increase the already-approved $600 individual payment to $2,000, with backing from congressional Democrats, has dominated events in Washington this week and redefined the debate for more stimulus during the pandemic. Mitch McConnell, the Senate majority leader, said on Wednesday he would not allow a vote on a standalone bill increasing the checks to $2,000, dooming the effort, at least for now.Whatever the amount, the reality is that most Americans right now are much more likely to save the money they receive.Of course, the money will be a lifesaver for the roughly 20 million people collecting unemployment benefits and others who are working reduced hours or earning less than they used to. Yet, for the majority of the estimated 160 million individuals and families who will receive it, spending the money is expected not to be a high priority.After an earlier round of $1,200 stimulus checks went out in the spring, the saving rate skyrocketed and remains at a nearly 40-year high. That largely reflects the lopsided nature of the pandemic recession that has put some Americans in dire straits while leaving many others untouched.Economists on the right and left of the political spectrum said that when otherwise financially secure people receive an unexpected windfall, they almost invariably save it. The free-market economist Milton Friedman highlighted this phenomenon decades ago.Many experts said a truly stimulative package would have earmarked the payments for those who need it most — the unemployed.“We know where the pockets of need are,” said Greg Daco, chief economist at Oxford Economics. “Putting it there would be a much more efficient use of the stimulus.”And because the money will immediately be put to work — the jobless don’t have the luxury of saving it — it would also have a much bigger impact on the overall economy, through what experts refer to as the multiplier effect. In essence, each dollar given to a person in need is likely to benefit the economy more because it would be used to pay for, say, groceries or rent.“Providing $2,400 to a family of four in the same financial situation as they were at the end of 2019 doesn’t do much to boost the overall economy right now,” Mr. Daco said. “It’s not whether it’s a positive or not. It’s their potency that’s in question.”Individuals with an adjusted gross income in 2019 of up to $75,000 will receive the $600 payment, and couples earning up to $150,000 a year will get twice that amount. There is also a $600 payment for each child in families that meet those income requirements. People making more than those limits will receive partial payments up to certain income thresholds.A more effective approach, experts say, would have raised unemployment insurance benefits to the jobless by $600 a week, matching the supplement under the stimulus package Congress passed last spring, rather than the $300 weekly subsidy the new legislation provides. Democrats had pushed for larger payments to the jobless and included it in legislation that passed the House, which they control. But the measure met stiff resistance from Republicans, who control the Senate, and was not included in the final compromise bill.The Coronavirus Outbreak More

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    Buried in Covid Relief Bill: Billions to Soothe the Richest

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    #masthead-section-label, #masthead-bar-one { display: none }The Coronavirus OutbreakliveLatest UpdatesMaps and CasesThe Stimulus DealThe Latest Vaccine InformationF.A.Q.AdvertisementContinue reading the main storySupported byContinue reading the main storyBuried in Pandemic Aid Bill: Billions to Soothe the RichestThe voluminous coronavirus relief and spending bill that blasted through Congress on Monday includes provisions — good, bad and just plain strange — that few lawmakers got to read.Senator Joe Manchin III, Democrat of West Virginia, at the Capitol last week. He said leadership intentionally waited until the last minute to unveil final proposals to the spending bill.Credit…Anna Moneymaker for The New York TimesLuke Broadwater, Jesse Drucker and Dec. 22, 2020WASHINGTON — Tucked away in the 5,593-page spending bill that Congress rushed through on Monday night is a provision that some tax experts call a $200 billion giveaway to the rich.It involves the tens of thousands of businesses that received loans from the federal government this spring with the promise that the loans would be forgiven, tax free, if they agreed to keep employees on the payroll through the coronavirus pandemic.But for some businesses and their high-paid accountants, that was not enough. They went to Congress with another request: Not only should the forgiven loans not to be taxed as income, but the expenditures used with those loans should be tax deductible.“High-income business owners have had tax benefits and unprecedented government grants showered down upon then. And the scale is massive,” said Adam Looney, a fellow at the Brookings Institution and a former Treasury Department tax official in the Obama administration, who estimated that $120 billion of the $200 billion would flow to the top 1 percent of Americans.The new provision allows for a classic double dip into the Payroll Protection Program, as businesses get free money from the government, then get to deduct that largess from their taxes.And it is one of hundreds included in a huge spending package and a coronavirus stimulus bill that is supposed to help businesses and families struggling during the pandemic but, critics say, swerved far afield. President Trump on Tuesday night blasted it as a disgrace and demanded revisions.“Congress found plenty of money for foreign countries, lobbyists and special interests, while sending the bare minimum to the American people who need it,” he said in a video posted on Twitter that stopped just short of a veto threat.The measure includes serious policy changes beyond the much-needed $900 billion in coronavirus relief, like a simplification of federal financial aid forms, measures to address climate change and a provision to stop “surprise billing” from hospitals when patients unwittingly receive care from physicians out of their insurance networks.But there is also much grumbling over other provisions that lawmakers had not fully reviewed, and a process that left most of them and the public in the dark until after the bill was passed. The anger was bipartisan.“Members of Congress have not read this bill. It’s over 5000 pages, arrived at 2pm today, and we are told to expect a vote on it in 2 hours,” Representative Alexandria Ocasio-Cortez, Democrat of New York, tweeted on Monday. “This isn’t governance. It’s hostage-taking.”Senator Ted Cruz, Republican of Texas, agreed — the two do not agree on much.“It’s ABSURD to have a $2.5 trillion spending bill negotiated in secret and then—hours later—demand an up-or-down vote on a bill nobody has had time to read,” he tweeted on Monday.The items jammed into the bill are varied and at times bewildering. The bill would make it a felony to offer illegal streaming services. One provision requires the C.I.A. to report back to Congress on the activities of Eastern European oligarchs tied to President Vladimir V. Putin of Russia. The federal government would be required to set up a program aimed at eradicating the murder hornet and to crack down on online sales of e-cigarettes to minors.It authorizes 93 acres of federal lands to be used for the construction of the Teddy Roosevelt Presidential Library in North Dakota and creates an independent commission to oversee horse racing, a priority of Senator Mitch McConnell, Republican of Kentucky and the majority leader.Mr. McConnell inserted that item to get around the objections of a Democratic senator who wanted it amended, but he received agreement from other congressional leaders.Alexander M. Waldrop, the chief executive of the National Thoroughbred Racing Association, said on Tuesday that Mr. McConnell had “said many times he feared for the future of horse racing and the impact on the industry, which of course is critical to Kentucky.”The Coronavirus Outbreak More

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    Biden and His Economic Team Urge Quick Action on Stimulus as Risks Mount

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    #masthead-section-label, #masthead-bar-one { display: none }The Presidential TransitionliveLatest UpdatesFormal Transition BeginsBiden’s CabinetSecretary of StateElection ResultsAdvertisementContinue reading the main storySupported byContinue reading the main storyBiden and His Economic Team Urge Quick Action on Stimulus as Risks MountThe president-elect introduced key nominees in Delaware, while lawmakers exchanged new proposals with prospects for a deal still dim.President-elect Joseph R. Biden Jr. acknowledged that any stimulus agreement would necessarily fall far short of the trillions of dollars that Democratic leaders have insisted on for months.Credit…Kriston Jae Bethel for The New York TimesBy More