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    After a Burst of New Businesses, a Cooling Economy Intrudes

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    The pandemic has brought a boom in entrepreneurship, but higher interest rates, a chill in venture capital and fears of recession now pose obstacles.An unexpected result of the pandemic era has been a surge in entrepreneurial activity. Since 2020, applications to start new businesses have skyrocketed, reversing a decades-long slump.The reasons for the boom are manifold. Millions of people were suddenly laid off, giving them the time, and inclination, to start new businesses. Personal savings jumped, buoyed partly by a frothy stock market and government stimulus payments, providing would-be entrepreneurs with the means to fulfill their visions. Rock-bottom interest rates made money cheap and widely available.But the ebullient economic environment that helped foster this entrepreneurial spirit has given way to high inflation, rising interest rates and dwindling savings. That has left these nascent businesses to navigate challenging financial crosscurrents — and a possible recession — at a moment when they are at their most fragile. Even under normal conditions, roughly half of new businesses fail within five years.“Young businesses are inherently vulnerable,” said John Haltiwanger, an economist at the University of Maryland who studies entrepreneurship. “They’re likely to fail, and they are especially likely to fail in a recession.”In 2021, Americans filed applications to start 5.4 million new businesses, according to data from the Census Bureau. That was on top of the 4.4 million applications filed in 2020, which had been the highest by far in the more than 15 years the government had been keeping track. (Filings last year through November were running ahead of 2020 but behind 2021; figures for December will be released this week.)Data on actual business formation will not become available for several years, so it is not possible yet to measure the effects of the cooling economy on new ventures. Whether these new businesses pull through could have broad implications for the health and dynamism of the overall economy.“Innovation drives gains in productivity,” said John Dearie, president of the Center for American Entrepreneurship, an advocacy organization. “And innovation comes disproportionately from new businesses.”Jennifer Sutton started a juice and wellness bar in Park City, Utah. She is worried about the prospect of a recession and how it would affect the tourism that supports her business.Kim Raff for The New York TimesBut he cautioned that the Federal Reserve’s monetary policy — intended to tamp down the fastest price increases in decades — is “ramping up the headwinds facing entrepreneurs to gale force by crushing demand and by increasing the price of money.”In interviews, entrepreneurs expressed a mix of resolve and resignation about the months ahead. Some said they had learned lessons from the pandemic’s upheaval about how to endure financial adversity that they believed had recession-proofed their business models. Others were cleareyed about needing outside funding that they feared would no longer arrive.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    The Long Road to Driverless Trucks

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    Self-driving eighteen-wheelers are now on highways in states like California and Texas. But there are still human “safety drivers” behind the wheel. What will it take to get them out?This article is part of our series on the Future of Transportation, which is exploring innovations and challenges that affect how we move about the world.In March, a self-driving eighteen-wheeler spent more than five straight days hauling goods between Dallas and Atlanta. Running around the clock, it traveled more than 6,300 miles, making four round trips and delivering eight loads of freight.The result of a partnership between Kodiak Robotics, a self-driving start-up, and U.S. Xpress, a traditional trucking company, this five-day drive demonstrated the enormous potential of autonomous trucks. A traditional truck, whose lone driver must stop and rest each day, would need more than 10 days to deliver the same freight.But the drive also showed that the technology is not yet ready to realize its potential. Each day, Kodiak rotated a new team of specialists into the cab of its truck, so that someone could take control of the vehicle if anything went wrong. These “safety drivers” grabbed the wheel multiple times.Tech start-ups like Kodiak have spent years building and testing self-driving trucks, and companies across the trucking industry are keen to reap the benefits. At a time when the global supply chain is struggling to deliver goods as efficiently as businesses and consumers now demand, autonomous trucks could alleviate bottlenecks and reduce costs.Now comes the most difficult stretch in this quest to automate freight delivery: getting these trucks on the road without anyone behind the wheel.Companies like Kodiak know the technology is a long way from the moment trucks can drive anywhere on their own. So they are looking for ways to deploy self-driving trucks solely on highways, whose long, uninterrupted stretches are easier to navigate than city streets teeming with stop-and-go traffic.“Highways are a more structured environment,” said Alex Rodrigues, chief executive of the self-driving-truck start-up Embark. “You know where every car is supposed to be going. They’re in lanes. They’re headed in the same direction.”Restricting these trucks to the highway also plays to their strengths. “The biggest problems for long-haul truckers are fatigue, distraction and boredom,” Mr. Rodrigues explained on a recent afternoon as one of his company’s trucks cruised down a highway in Northern California. “Robots don’t have a problem with any of that.”It’s a sound strategy, but even this will require years of additional development.Part of the challenge is technical. Though self-driving trucks can handle most of what happens on a highway — merging into traffic from an on-ramp, changing lanes, slowing for cars stopped on the shoulder — companies are still working to ensure they can respond to less common situations, like a sudden three-car pileup.As he continued down the highway, Mr. Rodrigues said his company has yet to perfect what he calls evasive maneuvers. “If there is an accident in the road right in front of the vehicle,” he explained, “it has to stop itself quickly.” For this and other reasons, most companies do not plan on removing safety drivers from their trucks until at least 2024. In many states, they will need explicit approval from regulators to do so.But deploying these trucks is also a logistical challenge — one that will require significant changes across the trucking industry.In shuttling goods between Dallas and Atlanta, Kodiak’s truck did not drive into either city. It drove to spots just off the highway where it could unload its cargo and refuel before making the return trip. Then traditional trucks picked up the cargo and drove “the last mile” or final leg of the delivery.In order to deploy autonomous trucks on a large scale, companies must first build a network of these “transfer hubs.” With an eye toward this future, Kodiak recently inked a partnership with Pilot, a company that operates traditional truck stops across the country. Today, these are places where truck drivers can shower and rest and grab a bite to eat. The hope is that they can also serve as transfer hubs for driverless trucks.“The industry can’t afford to build this kind of infrastructure from scratch,” said Kodiak’s chief executive, Don Burnette. “We have to find ways of working with the existing infrastructure.”They must also consider the impact on truck drivers: They aim to make long-haul drivers obsolete, but they will need more drivers for the short haul.Executives like Mr. Burnette and Mr. Rodrigues believe that drivers will happily move from one job to the other. The turnover rate among long-haul drivers is roughly 95 percent, meaning the average company replaces nearly its entire work force each year. It is a stressful, monotonous job that keeps people away from home for days on end. If they switch to city driving, they can work shorter hours and stay close to home.But a recent study from researchers at Carnegie Mellon University and the University of Michigan questions whether the transition will be as smooth as many expect. Truck drivers are typically paid by the mile. A shift to shorter trips, the study says, could slash the number of miles traveled and reduce wages.Certainly, some drivers fear they cannot make as much money driving solely in cities. Others are loath to give up their time on the highway.“There are many drivers like me,” said Cannon Bryan, a 28-year-old long-haul trucker from Texas. “I wasn’t born in the city. I wasn’t raised in the city. I hate city driving. I enjoy picking up a load in Dallas and driving to Grand Rapids, Mich.”Building and deploying self-driving trucks is far from easy. And it is enormously expensive — on the order of hundreds of millions of dollars a year. TuSimple, a self-driving truck company, has faced concerns that the technology is unsafe after federal regulators revealed that one of its trucks had been involved in an accident. Aurora, a self-driving technology company with a particularly impressive pedigree, is facing challenging market conditions and has floated the possibility of a sale to big names like Apple or Microsoft, according to a report from Bloomberg News.If these companies can indeed get drivers out of their vehicles, this raises new questions. How will driverless trucks handle roadside inspections? How will they set up the reflective triangles that warn other motorists when a truck has pulled to the shoulder? How will they deal with blown tires and repairs?Eventually, the industry will also embrace electric trucks powered by battery rather than fossil fuel, and this will raise still more questions for autonomous trucking. Where and how will the batteries get recharged? Won’t this prevent self-driving trucks from running 24 hours a day, as the industry has promised?“There are so many issues that in reality are far more complex than they might seem on paper,” said Steve Viscelli, an economic and political sociologist at the University of Pennsylvania who specializes in trucking. “Though the developers and their partners are putting a lot of effort into thinking this through, many of the questions about what needs to change cannot yet be answered. We are going to have to see what reality looks like.”Some solutions will be technical, others logistical. The start-up Embark plans to build a roaming work force of “guardians” who will locate trucks when things go wrong and call for repairs as needed.The good news for the labor market is that this technology will create jobs even as it removes them. And though experts say that more jobs will ultimately be lost than gained, this will not happen soon. Long-haul truckers will have years to prepare for a new life. Any rollout will be gradual.“Just when you think this technology is almost here,” said Tom Schmitt, the chief executive of Forward Air, a trucking company that just started a test with Kodiak’s self-driving trucks, “it is still five years away.” More

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    Biden Administration Releases Plan for $50 Billion Investment in Chips

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    The Commerce Department issued guidelines for companies angling to receive federal funding aimed at bolstering the domestic semiconductor industry.WASHINGTON — The Department of Commerce on Tuesday unveiled its plan for dispensing $50 billion aimed at building up the domestic semiconductor industry and countering China, in what is expected to be the biggest U.S. government effort in decades to shape a strategic industry.About $28 billion of the so-called CHIPS for America Fund is expected to go toward grants and loans to help build facilities for making, assembling and packaging some of the world’s more advanced chips.Another $10 billion will be devoted to expanding manufacturing for older generations of technology used in cars and communications technology, as well as specialty technologies and other industry suppliers, while $11 billion will go toward research and development initiatives related to the industry.The department is aiming to begin soliciting applications for the funding from companies no later than February, and it could begin disbursing money by next spring, Gina Raimondo, the secretary of commerce, said in an interview.The fund, which was approved by Congress in July, was created to encourage U.S. production of strategically important semiconductors and spur research and development into the next generation of chip technologies. The Biden administration says the investments will lessen dependence on a foreign supply chain that has become an urgent threat to the country’s national security.“This is a once-in-a-lifetime opportunity, a once-in-a-generation opportunity, to secure our national security and revitalize American manufacturing and revitalize American innovation and research and development,” Ms. Raimondo said. “So, although we’re working with urgency, we have to get it right, and that’s why we are laying out the strategy now.”Trade experts have called the fund the most significant investment in industrial policy that the United States has made in at least 50 years.It will come at a pivotal moment for the semiconductor industry.Tensions between the United States and China are rising over Taiwan, the self-governing island that is the source of more than two-thirds of the most advanced semiconductors. Shortages of semiconductors have also helped to fuel inflation globally, by increasing delivery times and prices for electronics, appliances and cars.Semiconductors are crucial components in mobile phones, pacemakers and coffee makers, and they are also the key to advanced technologies like quantum computing, artificial intelligence and unmanned drones.With midterm elections fast approaching, the Biden administration is under pressure to demonstrate that it can use this funding wisely and lure manufacturing investments back to the United States. The Commerce Department is responsible for choosing which companies receive the money and monitoring their investments.In its strategy paper, the Commerce Department said that the United States remained the global leader in chip design, but that it had lost its leading edge in producing the world’s most advanced semiconductors. In the last few years, China has accounted for a substantial portion of newly built manufacturing, the paper said.The high cost of building the kind of complex facilities that manufacture semiconductors, called fabs, has pushed companies to separate their facilities for designing chips from those that manufacture them. Many leading companies, like Qualcomm, Nvidia and Apple, design chips in the United States, but they contract out their fabrication to foundries based in Asia, particularly in Taiwan. The system creates a risky source of dependence for the chips industry, the White House says.The department said the funding aimed to help offset the higher costs of building and operating facilities in the United States compared with other countries, and to encourage companies to build the larger type of fabs in the United States that are now more common in Asia. Domestic and foreign companies can apply for the funds, as long as they invest in projects in the United States.To receive the money, companies will need to demonstrate the long-term economic viability of their project, as well as “spillover benefits” for the communities they operate in, like investments in infrastructure and work force development, or their ability to attract suppliers and customers, the department said.Projects that involve economically disadvantaged individuals and businesses owned by minorities, veterans or women, or that are based in rural areas, will be prioritized, the department said. So will projects that help make the supply chain more secure by, for example, providing another production location for advanced chips that are manufactured in Taiwan. Companies are encouraged to demonstrate that they can obtain other sources of funding, including private capital and state and local investment.The Commerce Department is setting up two new offices housed under the National Institute of Standards and Technology to set up the programs.One of the department’s biggest challenges will be ensuring that the government funds add to, rather than displace, money that chip making companies were already planning to invest. Companies including GlobalFoundries, Micron, Qualcomm and Intel have announced plans to make major investments in U.S. facilities that may qualify for government funding.The chips bill specifies that companies that accept funding cannot make new, high-tech investments in China or other “countries of concern” for at least a decade, unless they are producing lower-tech “legacy chips” destined to serve only the local market.The Commerce Department said it would review and audit companies that receive the funding, and claw back funds from any company that violates the rules. The guidelines also forbid recipients from engaging in stock buybacks, so that taxpayer money doesn’t end up being used to reward a company’s investors.“We’re going to run a serious, competitive, transparent process,” Ms. Raimondo said. “We are negotiating for every nickel of taxpayer money.”In addition to the new prohibitions on investing in chip manufacturing facilities in China, officials in the Biden administration have agreed that the White House should take executive action to scrutinize outbound investment in other industries as well, Ms. Raimondo said.But she added that the administration was still working through the details of how to put such a policy in place.Earlier versions of the chips bill also proposed setting up a broader system to review investments that U.S. companies make abroad to prevent certain strategic technologies from being shared with U.S. adversaries. That provision, which would have applied to cutting-edge technologies beyond the chips sector, was stripped out of the bill, but officials in the Biden administration have been considering an executive order that would establish a similar review process.The United States has a review system for investments that foreign companies make in the United States, but not vice versa.The Biden administration has also taken steps to restrict the types of advanced semiconductors and equipment that can be exported out of the United States.In statements last week, Nvidia and Advanced Micro Devices, both based in Silicon Valley, said they had been notified by the U.S. government that exports to China and Russia of certain high-end chips they produce for use in supercomputers and artificial intelligence were now restricted. These chips help power the kind of supercomputers that can be used in weapons development and intelligence gathering, including large-scale surveillance. Ms. Raimondo declined to discuss the export controls in detail but said the department was “constantly evaluating” its efforts, including how best to work with allies to deny China the equipment, software and tooling the country uses to enhance its semiconductor industry. More

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    Democrats Renew Push for Industrial Policy Bill Aimed at China

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    A major competitiveness bill passed the Senate last year with bipartisan support, only to stall. Democrats hope to revive it in the House, but first they will have to bridge big differences.WASHINGTON — Biden administration officials and Democrats in Congress are pushing to revive stalled legislation that would pour billions of dollars into scientific research and development and shore up domestic manufacturing, amid deep differences on Capitol Hill about the best way to counter China and confront persistent supply chain woes.House Democrats unveiled a 2,900-page bill on Tuesday evening that would authorize $45 billion in grants and loans to support supply chain resilience and American manufacturing, along with providing billions of dollars in new funding for scientific research. Speaker Nancy Pelosi said in a statement that she hoped lawmakers would quickly begin negotiations with the Senate, which passed its own version of the bill last June, to settle on compromise legislation that could be sent to President Biden for his signature.But the effort faces obstacles in Congress, where attempts to sink significant federal resources into scientific research and development to bolster competitiveness with China and combat a shortage of semiconductors have faltered. The Senate-passed measure fizzled last year amid ideological disputes with the House and a focus on efforts to pass Mr. Biden’s infrastructure and social policy bills. For months, the competitiveness measure was rarely even mentioned, except perhaps by Senator Chuck Schumer, Democrat of New York and the majority leader, who has personally championed it.But facing a disruptive semiconductor shortage that has broken down supply chains and helped fuel inflation, Democrats are now vigorously pressing ahead on the bill. With Mr. Biden’s domestic agenda sputtering, the party is eager for a legislative victory, and top administration officials and lawmakers have said they hope to send a compromise bill to the president’s desk in a matter of months.“We have no time to waste in improving American competitiveness, strengthening our lead in global innovation and addressing supply chain challenges, including in the semiconductor industry,” Mr. Schumer said.Both the House bill and the one that passed the Senate last year would send a lifeline to the semiconductor industry during a global chip shortage that has shut auto plants and rippled through the economy. The bills would offer chip companies $52 billion in grants and subsidies with few restrictions.The measures would also pour billions more into scientific research and development pipelines in the United States, create grants and foster agreements between companies and research universities to encourage breakthroughs in new technologies, and establish new manufacturing jobs and apprenticeships.“The proposals laid out by the House and Senate represent the sort of transformational investments in our industrial base and research and development that helped power the United States to lead the global economy in the 20th century,” Mr. Biden said in a statement. “They’ll help bring manufacturing jobs back to the United States, and they’re squarely focused on easing the sort of supply chain bottlenecks like semiconductors that have led to higher prices for the middle class.”The semiconductor shortage has disrupted the economy, broken down supply chains and helped fuel inflation.Sarahbeth Maney/The New York TimesLawmakers will still need to overcome differing views in the House and Senate over how best to take on China and, perhaps more crucially, how to fund the nation’s scientific research.“There are disagreements, legitimate disagreements,” Gina Raimondo, the commerce secretary, said in an interview. “How do we do this? How do we get it right? There doesn’t seem to be much disagreement over the core $52 billion appropriation for chips. There is disagreement around how we make investments in research and development in basic science.”One major difference is that while the Senate bill invests heavily in specific fields of cutting-edge technology, such as artificial intelligence and quantum computing, the House bill places few stipulations on the new round of funding, other than to say that it should go toward fundamental research.In a memo on the legislation, House aides wrote that their measure was “focusing on solutions first, not tech buzzwords.”Some experts argue that approach lacks urgency. Stephen Ezell, the vice president for global innovation policy at the Information Technology and Innovation Foundation, a policy group that receives funding from telecommunications and tech companies, called the House bill “not sufficient to enable the United States to win the advanced technology competition with China.” He argued that the focus on advanced technology in the Senate-passed bill would do more to increase American competitiveness.How the Supply Chain Crisis UnfoldedCard 1 of 9The pandemic sparked the problem. More

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    Economists Pin More Blame on Tech for Rising Inequality

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    Recent research underlines the central role that automation has played in widening disparities.Daron Acemoglu, an influential economist at the Massachusetts Institute of Technology, has been making the case against what he describes as “excessive automation.”The economywide payoff of investing in machines and software has been stubbornly elusive. But he says the rising inequality resulting from those investments, and from the public policy that encourages them, is crystal clear.Half or more of the increasing gap in wages among American workers over the last 40 years is attributable to the automation of tasks formerly done by human workers, especially men without college degrees, according to some of his recent research.Globalization and the weakening of unions have played roles. “But the most important factor is automation,” Mr. Acemoglu said. And automation-fueled inequality is “not an act of God or nature,” he added. “It’s the result of choices corporations and we as a society have made about how to use technology.”Mr. Acemoglu, a wide-ranging scholar whose research makes him one of most cited economists in academic journals, is hardly the only prominent economist arguing that computerized machines and software, with a hand from policymakers, have contributed significantly to the yawning gaps in incomes in the United States. Their numbers are growing, and their voices add to the chorus of criticism surrounding the Silicon Valley giants and the unchecked advance of technology.Paul Romer, who won a Nobel in economic science for his work on technological innovation and economic growth, has expressed alarm at the runaway market power and influence of the big tech companies. “Economists taught: ‘It’s the market. There’s nothing we can do,’” he said in an interview last year. “That’s really just so wrong.”Anton Korinek, an economist at the University of Virginia, and Joseph Stiglitz, a Nobel economist at Columbia University, have written a paper, “Steering Technological Progress,” which recommends steps from nudges for entrepreneurs to tax changes to pursue “labor-friendly innovations.”Erik Brynjolfsson, an economist at Stanford, is a technology optimist in general. But in an essay to be published this spring in Daedalus, the journal of the American Academy of Arts and Sciences, he warns of “the Turing trap.” The phrase is a reference to the Turing test, named for Alan Turing, the English pioneer in artificial intelligence, in which the goal is for a computer program to engage in a dialogue so convincingly that it is indistinguishable from a human being.For decades, Mr. Brynjolfsson said, the Turing test — matching human performance — has been the guiding metaphor for technologists, businesspeople and policymakers in thinking about A.I. That leads to A.I. systems that are designed to replace workers rather than enhance their performance. “I think that’s a mistake,” he said.The concerns raised by these economists are getting more attention in Washington at a time when the giant tech companies are already being attacked on several fronts. Officials regularly criticize the companies for not doing enough to protect user privacy and say the companies amplify misinformation. State and federal lawsuits accuse Google and Facebook of violating antitrust laws, and Democrats are trying to rein in the market power of the industry’s biggest companies through new laws.Mr. Acemoglu testified in November before the House Select Committee on Economic Disparity and Fairness in Growth at a hearing on technological innovation, automation and the future of work. The committee, which got underway in June, will hold hearings and gather information for a year and report its findings and recommendations.Despite the partisan gridlock in Congress, Representative Jim Himes, a Connecticut Democrat and the chairman of the committee, is confident the committee can find common ground on some steps to help workers, like increased support for proven job-training programs.“There’s nothing partisan about economic disparity,” Mr. Himes said, referring to the harm to millions of American families regardless of their political views.Representative Jim Himes, who leads a panel on economic disparity, is confident it can find ways to help workers, like increased support for proven job-training programs.Samuel Corum for The New York TimesEconomists point to the postwar years, from 1950 to 1980, as a golden age when technology forged ahead and workers enjoyed rising incomes.But afterward, many workers started falling behind. There was a steady advance of crucial automating technologies — robots and computerized machines on factory floors, and specialized software in offices. To stay ahead, workers required new skills.Yet the technological shift evolved as growth in postsecondary education slowed and companies began spending less on training their workers. “When technology, education and training move together, you get shared prosperity,” said Lawrence Katz, a labor economist at Harvard. “Otherwise, you don’t.”Increasing international trade tended to encourage companies to adopt automation strategies. For example, companies worried by low-cost competition from Japan and later China invested in machines to replace workers.Today, the next wave of technology is artificial intelligence. And Mr. Acemoglu and others say it can be used mainly to assist workers, making them more productive, or to supplant them.Mr. Acemoglu, like some other economists, has altered his view of technology over time. In economic theory, technology is almost a magic ingredient that both increases the size of the economic pie and makes nations richer. He recalled working on a textbook more than a decade ago that included the standard theory. Shortly after, while doing further research, he had second thoughts.“It’s too restrictive a way of thinking,” he said. “I should have been more open-minded.”Mr. Acemoglu is no enemy of technology. Its innovations, he notes, are needed to address society’s biggest challenges, like climate change, and to deliver economic growth and rising living standards. His wife, Asuman Ozdaglar, is the head of the electrical engineering and computer science department at M.I.T.But as Mr. Acemoglu dug deeply into economic and demographic data, the displacement effects of technology became increasingly apparent. “They were greater than I assumed,” he said. “It’s made me less optimistic about the future.”Mr. Acemoglu’s estimate that half or more of the increasing gap in wages in recent decades stemmed from technology was published last year with his frequent collaborator, Pascual Restrepo, an economist at Boston University. The conclusion was based on an analysis of demographic and business data that details the declining share of economic output that goes to workers as wages and the increased spending on machinery and software.Mr. Acemoglu and Mr. Restrepo have published papers on the impact of robots and the adoption of “so-so technologies,” as well as the recent analysis of technology and inequality.So-so technologies replace workers but do not yield big gains in productivity. As examples, Mr. Acemoglu cites self-checkout kiosks in grocery stores and automated customer service over the phone.Today, he sees too much investment in such so-so technologies, which helps explain the sluggish productivity growth in the economy. By contrast, truly significant technologies create new jobs elsewhere, lifting employment and wages.The rise of the auto industry, for example, generated jobs in car dealerships, advertising, accounting and financial services.Market forces have produced technologies that help people do their work rather than replace them. In computing, the examples include databases, spreadsheets, search engines and digital assistants.But Mr. Acemoglu insists that a hands-off, free-market approach is a recipe for widening inequality, with all its attendant social ills. One important policy step, he recommends, is fair tax treatment for human labor. The tax rate on labor, including payroll and federal income tax, is 25 percent. After a series of tax breaks, the current rate on the costs of equipment and software is near zero.Well-designed education and training programs for the jobs of the future, Mr. Acemoglu said, are essential. But he also believes that technology development should be steered in a more “human-friendly direction.” He takes inspiration from the development of renewable energy over the last two decades, which has been helped by government research, production subsidies and social pressure on corporations to reduce carbon emissions.“We need to redirect technology so it works for people,” Mr. Acemoglu said, “not against them.” More

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    Even Your Allergist Is Now Investing in Start-Ups

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    The once-clubby world of start-up deal making known as “angel investing” has had an influx of new participants. It’s part of a wider boom in ever-riskier investments.SAN FRANCISCO — On a recent Wednesday evening, 60 people gathered in a virtual conference room to discuss start-up investments. Among them were a professional poker player from Arizona, an allergist in California and a kombucha maker from Tennessee. All were members of Angel Squad, a six-month $2,500 program that aims to help people break into the clubby world of venture capital as individual investors, known as “angels.”The group listened as Eric Bahn, the instructor, rattled off anecdotes and advice from the front lines of start-up investing. “The most important question when you are an early stage investor is: What happens if things go right?” he said, stepping back from his desk and raising his hands for emphasis.Caroline Howard, 29, one of the founders of Walker Brothers Beverage, a kombucha company in Nashville, said the class taught her how to evaluate deals. “I think it’s so fun to see companies when they’re so young and have a germ of an idea and back them,” she said.Founded in January, Angel Squad is one of several ways that people from outside Silicon Valley’s investing elite are now joining the ranks of angel investors. The influx — which includes art curators, dentists, influencers and retirees — is transforming the way that start-ups raise money, upending the pecking order in venture capital and pushing a niche corner of the investing world toward mass adoption.“It is absolutely going mainstream,” said Kingsley Advani, founder of Allocations, a tech platform for angel investors. “It’s accelerating and it’s getting faster and faster.” He said even his mother, a retired schoolteacher in Australia, has invested in 41 start-ups over the last few years.More than 3,000 new angel investors are projected to make their first deal this year, up from 2,725 last year, according to the research firm PitchBook. And the amount of money that angels are pouring into start-ups has swelled, reaching $2.1 billion in the first six months of this year, compared with $2.6 billion for all of 2020, according to the National Venture Capital Association and PitchBook.Until recently, such investing was off-limits to most people. Securities rules restricted it to the wealthy because of the level of risk involved, since most start-ups fail. Even those who qualified often lacked the connections to find deals. And start-ups preferred to raise big slugs of cash from a handful of investors, rather than deal with the costs and headaches of processing dozens of tiny checks.But over the last year, many of those roadblocks have dissipated. Last year, the Securities and Exchange Commission loosened restrictions and began allowing people to become accredited investors — those allowed to back private start-ups — after passing a test. New tech tools are making the process of raising funds from many small investors cheaper and faster. And start-ups have become eager to add potentially helpful angels to their rosters of backers.The boom is part of a rush into ever-riskier forms of investment, driven by low interest rates, stimulus money and a little bit of “why not?” chutzpah. Nowhere is that sentiment stronger than in the tech industry, where start-ups are flush with cash, initial public stock offerings have been plentiful and Big Tech is delivering blockbuster profits.“Overnight, the entire world just woke up and went, ‘Oh, wow, we want to go invest in technology,’” said Avlok Kohli, chief executive of AngelList Venture, a company that provides tools for start-up fund-raising.Many new angel investors have some connection to the tech industry but are not the V.I.P.s who are normally invited into deals. Some are complete outsiders. Many are broadcasting their activity on social media and turning the investing into a branding opportunity, a hobby, a networking play, a social status or a way to give back.Karin Dillie, 33, an executive at an e-commerce company in New York, said she hadn’t realized that she could be an angel investor. But in June, when a business school classmate emailed asking her to help fund a calendar app called Arrange, Ms. Dillie decided to go for it. She invested $5,000.“I probably needed someone to give me permission to play the game because investing always seemed so elusive,” she said.Karin Dillie, 33, an executive at an e-commerce company in New York, said she hadn’t realized that she could be an angel investor.Elianel Clinton for The New York TimesMs. Dillie has since joined several informal investing groups, listened to podcasts and set up news alerts for terms like “preseed funding” (the earliest money a start-up usually raises from outside investors). She said she was motivated to support female founders, who raise less than 2 percent of all venture funding.In London, Ivy Mukherjee, 28, a product designer, and Shashwat Shukla, 30, a private equity investor, also started putting money into start-ups together this year to learn new skills and network with others in the industry. They said they were proceeding cautiously, with checks of $2,000 to $5,000, knowing they could lose it all.“If we happen to make our money back, that’s good enough for us,” Mr. Shukla said.The new angels have the potential to transform a venture capital industry that has been stubbornly clubby. They could also put pressure on bad actors in the industry who get away with things ranging from rudeness to sexual harassment, said Elizabeth Yin, a general partner at Hustle Fund, a venture capital firm. The firm also created Angel Squad and shares deals with its members.“More competition brings about better behavior,” Ms. Yin said. (In addition to investing in start-ups, Hustle Fund sells mugs that say “Be Nice, Make Billions.”)The angel boom has, in turn, created a miniboom of companies that aim to streamline the investing process. Allocations, the start-up run by Mr. Advani, offers group deal making. Assure, another start-up, helps with the administrative work. Others, including Party Round and Sign and Wire, help angels with money transfers or work with start-ups to raise money from large groups of investors.AngelList, which has enabled such deals for over a decade, has steadily expanded its menu of options, including rolling funds (for people to subscribe to an angel investor’s deals) and roll-up vehicles (for start-ups to consolidate lots of small checks). Mr. Kohli said his company runs a “fund factory” that compresses a month of legal paperwork and wire transfers into the push of a button.Still, getting access to the next hot tech start-up as a total outsider takes time.Ashley Flucas, 35, a real estate lawyer in Palm Beach County, Fla., began investing in start-ups three years ago. She said it was a chance to create generational wealth, something underrepresented people did not typically get access to.“It’s the same people doing deals with each other and sharing in the wealth, and I’m thinking, how do I break into that?” said Ms. Flucas, who is Black.But it took cold emails, research, building her reputation on AngelList and participating in three angel investing fellowships to get access to deals and construct a portfolio of more than 200 companies, she said. Things especially took off this spring after she invested in several companies that had just graduated from Y Combinator, the start-up accelerator. Some of her investments have appreciated enough on paper to return more than she has put in.Now, Ms. Flucas said, she is getting asked to join venture firms or raise her own fund. “The seeds I planted at the beginning of the journey are bearing fruit,” she said.“It’s the same people doing deals with each other and sharing in the wealth, and I’m thinking, how do I break into that?” Ms. Flucas said.Ysa Pérez for The New York TimesSome longtime angels have cautionary words for those just beginning their start-up investments. Aaron Houghton, 40, an entrepreneur, said he lost $50,000 that he had invested in a friend’s start-up in 2014, along with a $10,000 deal that went belly-up. He sarcastically called the losses a “really nice, somewhat inexpensive wake-up call” that showed he needed to spend more than a few hours researching companies before investing.But that isn’t always an option in today’s frenzied market. Mr. Houghton said he had recently been given little more than a pitch presentation, a high price tag and a few hours to decide whether he was in or out of an investment.“It’s all so hot right now,” he said.In the recent Angel Squad class, one participant asked if investors should be concerned about valuations. Mr. Bahn said it was up to each investor, but he added that there was an upside to the skyrocketing prices. Some tech companies were becoming huge, worth $10 billion or more on paper, creating bigger returns for investors who got in early. That was the exciting thing about investing in young start-ups, he said.“The alpha,” he said, referring to an investor’s ability to beat the broader market, “just continues to grow.” More

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    Senate Passes Bill to Bolster Competitiveness With China

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    The wide margin of support reflected a sense of urgency among lawmakers in both parties about shoring up the technological and industrial capacity of the United States to counter Beijing.WASHINGTON — The Senate overwhelmingly passed legislation on Tuesday that would pour nearly a quarter-trillion dollars over the next five years into scientific research and development to bolster competitiveness against China. More

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    Here Are 17 Reasons to Let The Economic Optimism Begin

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    #masthead-section-label, #masthead-bar-one { display: none }Biden’s Stimulus PlanBiden’s AddressWhat to Know About the BillBenefits for Middle ClassChild Tax CreditAdvertisementContinue reading the main storyUpshotSupported byContinue reading the main story17 Reasons to Let the Economic Optimism BeginA reporter who has tracked decades of gloomy trends sees things lining up for roaring growth.March 13, 2021, 5:00 a.m. ETCredit…Jordy van den NieuwendijkThe 21st-century economy has been a two-decade series of punches in the gut.The century began in economic triumphalism in the United States, with a sense that business cycles had been vanquished and prosperity secured for a blindingly bright future. Instead, a mild recession was followed by a weak recovery followed by a financial crisis followed by another weak recovery followed by a pandemic-induced collapse. A couple of good years right before the pandemic aside, it has been two decades of overwhelming inequality and underwhelming growth — an economy in which a persistently weak job market has left vast human potential untapped, helping fuel social and political dysfunction.Those two decades coincide almost precisely with my career as an economics writer. It is the reason, among my colleagues, I have a reputation for writing stories that run the gamut from ominous to gloomy to terrifying.But strange as it may seem in this time of pandemic, I’m starting to get optimistic. It’s an odd feeling, because so many people are suffering — and because for so much of my career, a gloomy outlook has been the correct one.Predictions are a hard business, of course, and much could go wrong that makes the decades ahead as bad as, or worse than, the recent past. But this optimism is not just about the details of the new pandemic relief legislation or the politics of the moment. Rather, it stems from a diagnosis of three problematic mega-trends, all related.There has been a dearth of economy-altering innovation, the kind that fuels rapid growth in the economy’s productive potential. There has been a global glut of labor because of a period of rapid globalization and technological change that reduced workers’ bargaining power in rich countries. And there has been persistently inadequate demand for goods and services that government policy has unable to fix.There is not one reason, however, to think that these negative trends have run their course. There are 17.Credit…Jordy van den Nieuwendijk1. The ketchup might be ready to flowIn 1987, the economist Robert Solow said, “You can see the computer age everywhere but in the productivity statistics.” Companies were making great use of rapid improvements in computing power, but the overall economy wasn’t really becoming more productive.This analysis was right until it was wrong. Starting around the mid-1990s, technological innovations in supply chain management and factory production enabled companies to squeeze more economic output out of every hour of work and dollar of capital spending. This was an important reason for the economic boom of the late 1990s.The Solow paradox, as the idea underlying his quote would later be called, reflected an insight: An innovation, no matter how revolutionary, will often have little effect on the larger economy immediately after it is invented. It often takes many years before businesses figure out exactly what they have and how it can be used, and years more to work out kinks and bring costs down.In the beginning, it may even lower productivity! In the 1980s, companies that tried out new computing technology often needed to employ new armies of programmers as well as others to maintain old, redundant systems.But once such hurdles are cleared, the innovation can spread with dizzying speed.It’s like the old ditty: “Shake and shake the ketchup bottle. First none will come and then a lot’ll.”Or, in a more formal sense, the economists Erik Brynjolfsson, Daniel Rock and Chad Syverson call this the “productivity J-curve,” in which an important new general-purpose technology — they use artificial intelligence as a contemporary example — initially depresses apparent productivity, but over time unleashes much stronger growth in economic potential. It looks as if companies have been putting in a lot of work for no return, but once those returns start to flow, they come faster than once seemed imaginable.There are several areas where innovation seems to be at just such a point, and not just artificial intelligence.2. 2020s battery technology looks kind of like 1990s microprocessorsRemember Moore’s Law? It was the idea that the number of transistors that could be put on an integrated circuit would double every two years as manufacturing technology improved. That is the reason you may well be wearing a watch with more computer processing power than the devices that sent people into outer space in the 1960s.Battery technology isn’t improving at quite that pace, but it’s not far behind it. The price of lithium-ion battery packs has fallen 89 percent in inflation-adjusted terms since 2010, according to BloombergNEF, and is poised for further declines. There have been similar advances in solar cells, raising the prospect of more widespread inexpensive clean energy.Another similarity: Microprocessors and batteries are not ends unto themselves, but rather technologies that enable lots of other innovation. Fast, cheap computer chips led to software that revolutionized the modern economy; cheap batteries and solar cells could lead to a wave of innovation around how energy is generated and used. We’re only at the early stages of that process.3. Emerging innovations can combine in unexpected waysIn the early part of the 20th century, indoor plumbing was sweeping the nation. So was home electricity. But the people installing those pipes and those power lines presumably had no idea that by the 1920s, the widespread availability of electricity and free-flowing water in homes would enable the adoption of the home washing machine, a device that saved Americans vast amounts of time and backbreaking labor.It required not just electricity and running water, but also revolutions in manufacturing techniques, production and distribution. All those innovations combined to make domestic life much easier.Could a combination of technologies now maturing create more improvement in living standards than any of them could in isolation?Consider driverless cars and trucks. They will rely on long-building research in artificial intelligence software, sensors and batteries. After years of hype, billions of dollars in investment, and millions of miles of test drives, the possibilities are starting to come into view.Waymo, a sister company of Google, has opened a driverless taxi service to the public in the Phoenix suburbs. Major companies including General Motors, Tesla and Apple are in the hunt as well, along with many smaller competitors.Apply the same logic to health care, to warehousing and heavy industry, and countless other fields. Inventions maturing now could be combined in new ways we can’t yet imagine.4. The pandemic has taught us how to work remotelyBeing cooped up at home may pay some surprising economic dividends. As companies and workers have learned how to operate remotely, it could allow more people in places that are less expensive and that have fewer high-paying jobs to be more productive. It could enable companies to operate with less office space per employee, which in economic terms means less capital needed to generate the same output. And it could mean a reduction in commuting time.Even after the pandemic recedes, if only 10 percent of office workers took advantage of more remote work, that would have big implications for the United States’ economic future — bad news if you are a landlord in an expensive downtown, but good news for overall growth prospects.5. Even Robert Gordon is (a little) more optimistic!Mr. Gordon wrote the book on America’s shortfall in innovation and productivity in recent decades — a 784-page book in 2016, to be precise. Now Mr. Gordon, a Northwestern University economist, is kind of, sort of, moderately optimistic. “I would fully expect growth in the decade of the 2020s to be higher than it was in the 2010s, but not as fast as it was between 1995 and 2005,” he said recently.Credit…Jordy van den Nieuwendijk6. Crises spur innovationThe mobilization to fight World War II was a remarkable feat. Business and government worked together to drastically increase the productive capacity of the economy, put millions to work, and advance countless innovations like synthetic rubber and the mass production of aircraft.Similarly, the Cold War generated a wave of public investment and innovation, such as satellites (a byproduct of the space race) and the internet (originally intended to provide decentralized communication in the event of a nuclear attack).Could our current crises spur similar ambition? Already the Covid-19 pandemic has accelerated the usage of mRNA technology for creating new vaccines, which could have far-reaching consequences for preventing disease.And as the 2020s progress, the deepening sense of urgency to reduce carbon emissions and cope with the fallout of climate change is the sort of all-encompassing challenge that could prove as galvanizing as those experiences — with similar implications for investment and innovation.7. Tight labor markets spur innovation, tooWhy did the Industrial Revolution begin in Britain instead of somewhere else? One theory is that relatively high wages there (a result of international trade) created an urgency for firms to substitute machinery for human labor. Over time, finding ways to do more with fewer workers generated higher incomes and living standards.But why might the labor market of the 2020s be a tight one? It boils down to two big ideas: shifts in the global economy and demographics that make workers scarcer in the coming decade than in recent ones; and a newfound and bipartisan determination on the part of policymakers in Washington to achieve full employment.8. There’s only one ChinaImagine an isolated farm town with 100 people.Five of the 100 own the farms. An additional 10 act as managers on behalf of the owners. And there are five intellectuals who sit around thinking big thoughts. The other 80 people are laborers.What would happen if suddenly another 80 laborers showed up, people who were used to lower living standards?The intellectuals might tell a complex story about how the influx of labor would eventually make everyone better off, as more land was cultivated and workers could specialize more. The owners and their managers would be happy because they would be instantly richer (they could pay people less to plow the fields).But the existing 80 laborers — competing for their jobs with an influx of lower-paid people — would see only immediate pain. The long-term argument that everybody gets richer in the end wouldn’t carry much weight.That’s essentially what has happened in the last few decades as China has gone from being isolated to being deeply integrated in the world economy. When the country joined the World Trade Organization in 2001, its population of 1.28 billion was bigger than that of the combined 34 advanced countries that make up the Organization for Economic Cooperation and Development (1.16 billion).But that was a one-time adjustment, and wages are rising rapidly in China as it moves beyond low-end manufacturing and toward more sophisticated goods. India, the only other country with comparable population, is already well integrated into the world economy. To the degree globalization continues, it should be a more gradual process.9. There’s only one MexicoFor years, American workers were also coming into competition with lower-earning Mexicans after enactment of the North American Free Trade Agreement in 1994. As with China, the new dynamic improved the long-term economic prospects for the United States, but in the short run it was bad for many American factory workers.But it too was a one-time adjustment. Even before President Trump, trade agreements under negotiation were for the most part no longer focused on making it easier to import from low- labor-cost countries. The main aim was to improve trade rules for American companies doing business in other rich countries.10. The offshoring revolution is mostly played outOnce upon a time, if you were an American company that needed to operate a customer service call center or carry out some labor-intensive information technology work, you had no real choice but to hire a bunch of Americans to do it. The emergence of inexpensive, instant global telecommunication changed that, allowing you to put work wherever costs were the lowest.In the first decade of the 2000s, American companies did just that on mass scale, locating work in countries like India and the Philippines. It’s a slightly different version of the earlier analogy involving the farm; a customer service operator in Kansas was suddenly in competition with millions of lower-earning Indians for a job.But it’s not as if the internet can be invented a second time.Sensing a theme here? In the early years of the 21st century, a combination of globalization and technological advancements put American workers in competition with billions of workers around the world.It created a dynamic in which workers had less bargaining power, and companies could achieve cost savings not by creating more innovative ways of doing things but exploiting a form of labor cost arbitrage. That may not be the case in the 2020s.Credit…Jordy van den Nieuwendijk11. Baby boomers can’t work foreverThe surge of births that took place in the two decades after World War II created a huge generation with long-reaching consequences for the economy. Now, their ages ranging from 57 to 76, the baby boomers are retiring, and that means opportunity for the generations that came behind them..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.As the boomers seek to continue consuming — spending their amassed savings, pensions and Social Security benefits — there will be relatively stable demand for goods and services and a relatively smaller pool of workers to produce them.According to the Social Security Administration’s projections of the so-called “dependency ratio,” in 2030 for every 100 people in their prime working years of 20 to 64, there will be 81 people outside that age range. In 2020 that number was 73.That is bad news for public finances and for the headline rate of G.D.P. growth, but good news for those in the work force. It should give workers more leverage to demand raises and give employers incentives to invest in productivity-enhancing software or machinery.12. The millennials are entering their primeSpending has a life cycle. Young adults don’t make much money. As they age, they start to earn more. Many start families and begin spending a lot more, buying houses and cars and everything else it takes to raise children. Then they tend to cut back on spending as the kids move out of the house.That, anyway, is what the data says takes place on average. The rate of consumption spending soars for Americans in their 20s and 30s, and peaks sometime in their late 40s. It’s probably not a coincidence that some of the best years for the American economy in recent generations were from 1983 to 2000, when the ultra-large baby boom generation was in that crucial high-spending period.Guess what generation is in that life phase in the 2020s? The millennials, an even larger generation than the boomers.They’ve had a rough young adulthood, starting their careers in the shadow of the Great Recession. But all that adult-ing they’re starting to do could have big, positive economic consequences for the decade ahead.13. Everybody likes it hotTwelve years ago, a Democratic president took office at a time of economic crisis. He succeeded at ending the crisis, but the expansion that followed was a disappointment, with years of slow growth at a time millions were either unemployed or out of the work force entirely.The overwhelming tone of the economic policy discussion during those years, however, was different. President Obama spoke of his plans to reduce the budget deficit. Republicans in Congress demanded even more fiscal restraint. Top Federal Reserve officials fretted about inflation risks, even when unemployment was high and inflation persistently low.The Trump presidency changed that discussion. Even as tax cuts widened the budget deficit, interest rates stayed low. Even as the jobless rate fell to levels not seen in nearly five decades, inflation stayed low. It was evident, based on how the economy performed in 2018 and 2019, and up until the pandemic began, that the U.S. economy could run hotter than the Obama-era consensus seemed to allow. That insight has powerful implications for the 2020s.14. Joe Biden wants to let it ripPresident Biden and congressional Democrats were determined to learn the lessons of the Obama era. Mr. Biden was deeply involved in that stimulus plan, which proved inadequate to the task of creating and sustaining a robust recovery.The lesson that Mr. Biden and the Democratic Party took from 2009 was straightforward: Do whatever it takes to get the economy humming, and the politics will work in your favor.That thinking helped lead to the $1.9 trillion relief bill signed on Thursday.15. Jay Powell wants to let it rip“To call something hot, you need to see heat,” Federal Reserve Chair Jerome Powell said in 2019. That’s as good a summary of the Fed’s approach to the economy as any.In more formal terms, the Fed has a new framework for policy called “Flexible Average Inflation Targeting.” It is in effect a repudiation of past Fed strategies of pre-emptively slowing the economy to prevent an outbreak of inflation predicted by economic models.Now, the Fed says it will raise interest rates in response to actual inflation in the economy, not just forecasts, and will not act simply because the unemployment rate is lower than models say it can sustainably get.Nearly every time he speaks, Mr. Powell sounds like a true believer in the church of full employment.16. Republicans are getting away from austerity politicsConsider an event that took place less than three months ago (that may feel like three years ago): Overwhelming bipartisan majorities in Congress passed a $900 billion pandemic relief bill. Then a Republican president threatened to veto it, not because it was too generous, but because it was too stingy.President Trump didn’t get his way on increasing $600 payments to most Americans to $2,000 payments, and he signed the legislation anyway, grudgingly. But the episode reflects a shift away from the focus on fiscal austerity that prevailed in the Obama era.With the current stimulus bill, opposition in conservative talk radio was relatively muted. Republicans voted against it, but there hasn’t been quite the fire-and-brimstone sense of opposition evident toward the Obama stimulus a dozen years ago.As the party becomes more focused on the kinds of culture-war battles that Mr. Trump made his signature, and its base shifts away from business elites, it wouldn’t be surprising if we saw the end of an era in which cutting government spending was its animating idea. This would imply a U.S. government that aims to keep flooding the economy with cash no matter who wins the next few elections.17. The post-pandemic era could start with a bangThe last year has been terrible on nearly every level. But it’s easy to see the potential for the economy to burst out of the starting gate like an Olympic sprinter.That could have consequences beyond 2021. A rapid start to the post-pandemic economy could create a virtuous cycle in which consumers spend; companies hire and invest to fulfill that demand; and workers wind up having more money in their pockets to consume even more.Americans have saved an extra $1.8 trillion during the pandemic, reflecting government help and lower spending. That is money that people can spend in the months ahead, or it could give them a comfort level that they have adequate savings and can spend more of their earnings.Things are also primed for a boom time in the executive suite. C.E.O. confidence is at a 17-year high, and near-record stock market valuations imply that companies have access to very cheap capital. There is no reason corporate America can’t hire, invest and expand to take advantage of the post-pandemic surge in activity.And on a psychological level, doesn’t everybody desperately want to return to feeling a sense of joy, of exuberance? That is an emotion that could prove the most powerful economic force of them all.Economics may be a dismal science, and those of us who write about it are consigned to see what is broken in the world. But sometimes, things align in surprising ways, and the result is a period in which things really do get better. This is starting to look like one of those times.AdvertisementContinue reading the main story More