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    Maui Economy, 6 Months After Wildfire, Is Still Reeling

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    Twisted and charred aluminum mixed with shards of glass still lines the floor of the industrial warehouse where Victoria Martocci once operated her scuba diving business. After a wildfire tore through West Maui, all that remained of her 36-foot boat, the Extended Horizons II, were a pair of engines.That was six months ago, but Ms. Martocci and her husband, Erik Stein, who are weighing whether to rebuild the business, which he started in 1983, said the same questions filled their thoughts. “What will this island look like?” Ms. Martocci asked. “Will things ever be close to being the same?”In early August, what began as a brush fire burst into the town of Lahaina, a popular tourist destination, all but leveling it, destroying large swaths of West Maui and killing at least 100 people in the nation’s deadliest wildfire in more than a century.The local economy remains in crisis.Rebuilding the town, according to some estimates, will cost more than $5 billion and take several years. And tense divisions still remain over whether Lahaina, whose economy long relied almost entirely on tourism, should consider a new way forward.Debates about the ethics of traveling to decimated tourist destinations played out on social media after an earthquake in Morocco and wildfires in Greece last year. But the situation is particularly dire for Maui.State and federal officials scrambled last summer to find shelter for thousands of residents who had lost their homes, relocating people to local hotels and short-term rentals where many still live, often sharing a wall with vacationing families whose realities feel far from their own. Other displaced residents live in tents on the beach, and some restaurant owners pivoted to working out of food trucks.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    A City Built on Steel Tries to Reverse Its Decline

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    Gary, Ind., was once a symbol of American innovation. The home of U.S. Steel’s largest mill, Gary churned out the product that built America’s bridges, tunnels and skyscrapers. The city reaped the rewards, with a prosperous downtown and vibrant neighborhoods.Gary’s smokestacks are still prominent along Lake Michigan’s sandy shore, starkly juxtaposed between the eroding dunes and Chicago’s towering silhouette to the northwest. But now they represent a city looking for a fresh start.More than 10,000 buildings sit abandoned, and the population of 180,000 in the 1960s has dropped by more than half. Poverty, crime and an ignoble moniker — “Scary Gary” — deter private investors and prospective homeowners.As U.S. Steel stands at a crossroads — a planned acquisition would put it under foreign control — so does the city that was named for the company’s founder and helped build its empire. A new mayor and planned revitalization projects have rekindled hope that Gary can forge an economic future beyond steel, the kind of renaissance that many industrial cities in the Midwest have managed.In theory, the potential is there. Gary sits in the country’s third-largest metropolitan area, astride major railroad crossings and next to a shipping port. A national park, Indiana Dunes, is a popular destination for park-loving tourists and curious drivers.“We have the recipe for success,” said Eddie Melton, the newly elected mayor. “We have to change the narrative and make it clear to the world that Gary is open to business.”We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Choice Hotel Franchise Owners Push Back on Merger With Wyndham

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    Franchisees are fighting Choice Hotels’ attempted takeover of its biggest rival, which would create a dominant player in the budget hotel sector.When Patrick Pacious, the chief executive of a large portfolio of hotel brands, promoted a blockbuster attempt to acquire a competitor in October, he said the proposed merger would lower costs and attract more customers for the families and small businesses that own most of the company’s locations.“Our franchisees instantly grasped the strategic benefit this would bring to their hotels,” Mr. Pacious, who leads Choice Hotels, said on CNBC.As the weeks have passed, however, the reaction has not been positive. Wyndham Hotels and Resorts, the target of the proposed deal, rejected the offer from Choice, which is now pursuing a hostile takeover. And in early December, an association representing the majority of hoteliers who own Choice and Wyndham-branded properties came out strongly against it.“We all don’t know what’s driving this merger. Many of us feel it’s not needed,” said Bharat Patel, the chairman of the organization, the Asian American Hotel Owners Association. The group surveyed its 20,000 members and found that about 77 percent of respondents who own hotels under either brand or both thought a merger would hurt their business.“I’m not against Choice or Wyndham,” said Mr. Patel, who owns two Choice hotels. “We just need robust competition in the markets.”That opposition illustrates a growing resistance to consolidation in industries that have grown more concentrated in recent years. Even some Wall Street analysts have expressed skepticism that Choice’s proposal is a good idea.The views of hotel owners could become a hurdle for Choice as it seeks approval for a merger from the Federal Trade Commission, which has taken an interest in franchising as evidence has mounted that the economic and legal relationship has increasingly tilted in favor of brand owners and away from franchisees.To understand why franchisees are worried, it’s helpful to understand how hotels are structured.About 70 percent of the nation’s 5.7 million hotel rooms operate under one of the several big national brands like Marriott or Hilton, according to the real estate data firm CoStar. The rest are independent.Over the past few decades, franchise chains have bought one another and merged to the point where the top six companies by number of rooms — Marriott, Hilton, InterContinental, Best Western, Choice and Wyndham — account for about 80 percent of all branded hotels.How a Choice/Wyndham merger would stack upCombining the two companies would create America’s largest branded hotel chain

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    Number of hotel rooms in the United States
    Note: Data is as of Dec. 19.Source: CoStar GroupBy The New York TimesUnlike fast food franchisees, hotel owners typically develop or buy their own buildings, representing a multimillion-dollar investment for each property. The industry has drawn thousands of immigrant entrepreneurs from South Asia. Some owners accumulate sprawling portfolios, but most end up with just a few hotels.The average member of the Asian American owners’ group owns just two hotels, most commonly with one of the economy or midscale brands. Choice and Wyndham dominate that segment, with 6,270 and 5,907 hotels in the United States, including Days Inn, Howard Johnson, Quality Inn and Econo Lodge.Being part of a franchise network provides a recognized name, a business plan and collective purchasing that is supposed to give small businesses the benefits of scale. In exchange, hotel owners pay the brands a fee to join, ongoing royalties and other payments for marketing, technology and consulting.As a result, franchisees are effectively customers of the hotel brands. Less competition between hotel chains can leave owners with fewer options and, thus, less leverage to demand better services for a lower cost.Consider the frustrations of Jayanti Patel, who owns a Comfort Inn — one of Choice’s 22 brands — in Gettysburg, Pa.He said Choice had been taking a larger cut, via charges like an $18 monthly fee for reporting his property’s energy use, discounts for rooms booked with rewards programs and penalties when guests file complaints. Mr. Patel also laments declining service, such as from revenue management consultants who are supposed to provide advice that increases his profits. Choice has outsourced this work to a service that operates partly overseas.Mr. Patel said his profit margins had become “thinner and thinner,” and he’s considering signing up with a different brand when his franchise agreement ends in a couple of years. Friends who own Wyndham-branded properties seem happy, so he might adopt one of its brands as long as Choice doesn’t acquire that chain.“When my window comes up in 2026, 99 percent I don’t want to renew my agreement,” Mr. Patel said. “And maybe If I want to go to Wyndham, they have nearly 20 brands, and I lose that opportunity, because it will be the same thing.”Choice argues that as its rivals have expanded and merged, it also needs to grow to offer hotel owners bigger savings on supplies like signage and bedsheets. The company is also promising to bargain down the commissions that hotel owners pay websites like Expedia and Booking.com, which are particularly crucial in the budget segment.“Combining with Wyndham would enable us to continue to deliver enhanced profitability for franchisees — by helping to lower their costs and grow their direct revenue while providing our best-in-class technology platform,” Choice said in a statement.However, many hotel owners say that even if Choice did negotiate lower prices, they are skeptical that they would reap those benefits. In 2020, 90 franchisees filed a lawsuit that accused the company of, among other things, not passing along rebates from contracts with vendors. A judge ruled that hotel owners would have to pursue their claims in separate arbitration cases, and several did.Rich Gandhi, a hotelier in New Jersey, supports a campaign for state legislation that would improve the rights of franchisees in the hospitality industry.Hannah Yoon for The New York TimesChoice prevailed in two of those proceedings. But in one, brought by a hotelier in North Dakota, an arbitrator found this past summer that Choice had “made virtually no efforts to leverage its size, scale and distribution to obtain volume discounts.” He ordered Choice to pay $760,008 in legal fees and compensation. Choice is contesting the award.The case is just one example, but it squares with recent economic research. A 2017 study found that while being part of a hotel franchise system helped bring in guests, it did not lower the cost of doing business compared with operating an independent hotel.But litigating on your own is expensive, which is why few franchisees do so even when they feel they’ve been mistreated.Rich Gandhi, a hotelier in New Jersey, is supporting a campaign for state legislation that would improve the rights of franchisees in the hospitality industry. He leads a three-year-old group called Reform Lodging that is also opposing the merger.Mr. Gandhi has turned four of his Choice-branded hotels into Best Westerns and Red Roof Inns, both non-Choice brands that he said offered better assistance, fewer restrictions and more reasonable fees. Choice, he argued, introduced too many competitors to his area because it makes money from selling new franchises and controlling more of the market, even if the practice squeezes existing owners.“They want the biggest pie, because to them it’s all incremental revenue,” Mr. Gandhi said. “If you keep accumulating all these buildings and provide no support, it’s like one of those old pyramid schemes that’s ready to fall apart, which is exactly what’s happening.”A representative for Choice referred The New York Times to four hoteliers who it said would speak favorably of the merger. Two of them, including the chairman of the Choice Hotels Owners Council — to which all franchisees must belong and pay dues — declined to comment on the record. A third, who owns three Radisson hotels and was happy when Choice bought the brand, said the purchase of Wyndham — a much bigger company — could pose problems.The fourth, a Florida hotelier, Azim Saju, said that despite the loss of competition, if Choice acquired Wyndham the company would still have an incentive to make sure franchisees stayed afloat.“The concern is valid, but the bottom line is that franchising doesn’t do well unless the franchisees are profitable,” Mr. Saju said. “I think Choice has become more conscientious of the importance of franchisee profitability in order to further their success.”The dissatisfaction of hotel owners could hurt Choice’s ability to absorb Wyndham, especially if more franchisees switch to other brands. That prospect has soured some Wall Street analysts on the deal.“In hotel franchising, the critical constituency, as much as consumers walking in the door, is that franchising community,” said David Katz, an analyst who covers the hospitality and gambling industries for Jefferies & Company. “They’re going to own more than 50 percent of the limited service and economy hotels in the United States, and not have the full support of the largest franchisee organization out there? I think that merits further debate.”Franchisee support isn’t important just for morale. It could also sway federal regulators, who have started to take into account the effect of corporate mergers not just on their consumers but also on suppliers like book authors, chicken farmers and Amazon sellers.“Traditionally in antitrust there’s this consumer welfare standard, which is focused on ‘Is this going to be good or bad for consumers?’” said Brett Hollenbeck, an associate professor at the Anderson School of Management of the University of California, Los Angeles. “If the F.T.C. doesn’t feel like this argument will hold sway, they could try a more novel theory, which is that it could hurt franchisees.”Choice said it anticipated that its deal would be approved and was expecting to complete the transaction within a year. Its offer to buy all outstanding Wyndham shares extends through March, when it will try to replace the directors on the company’s board with people who will approve the sale. More

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    West Hollywood Minimum Wage, Highest in U.S., Irks Merchants

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    Josiah Citrin, the owner and chef of a Santa Monica restaurant with two Michelin stars, opened a new steakhouse a few months ago off the Sunset Strip. He is already concerned about whether the restaurant can survive.The reason, Mr. Citrin said, is singular: a West Hollywood city mandate that workers be paid at least $19.08 an hour, the highest minimum wage in the country.“It’s very challenging,” Mr. Citrin, 55, said of the new minimum wage, which took effect about two weeks before he opened his doors in July. “Really, it’s almost impossible to operate.”His sentiment is widely shared among business owners in West Hollywood, a city of 35,000 known for restaurants, boutiques and progressive politics. In recent weeks, many owners have written to lawmakers, pleading for a moratorium on further increases to the minimum wage; another is scheduled for July, based on inflation. And last month, several marched to a local government building carrying signs that read, “My WeHo” and “R.I.P. Restaurants in West Hollywood.”Their sense of duress arises partly from geography. The jaggedly shaped city is bordered by Beverly Hills to the west and Los Angeles to the north, south and east. Some streets begin in Los Angeles, slice through West Hollywood and end in Beverly Hills. You can be in three cities — barring, of course, traffic — in a matter of minutes.And that means West Hollywood’s small businesses have competitors down the street with lower costs.Beyond raising the minimum wage, the West Hollywood ordinance, which the City Council approved in 2021, requires that all full-time employees receive at least 96 hours a year of paid time off for sick leave, vacation or other personal necessities, as well as 80 hours that they can take off without pay.The State of California’s hourly minimum wage is $15.50, the third highest in the nation, trailing only the District of Columbia at $17 and Washington State at $15.74. But just as each state’s minimum wage can supersede the federal minimum of $7.25 an hour, more than two dozen cities across California, including West Hollywood and several in the Bay Area, have higher minimum wages than the state, according to the Economic Policy Institute, a nonpartisan think tank.The number of workers at Charcoal Sunset restaurant in West Hollywood has fallen to 35 from around 50. The owner is wondering about his future in the city.Mark Abramson for The New York TimesIn San Francisco, it’s $18.07; in Los Angeles, $16.78.Chris Tilly, a professor at the University of California, Los Angeles, who studies labor markets and public policies that shape the workplace, said research had shown that gradual and moderate increases to the minimum wage had no significant impact on employment levels.“The claim that minimum wage increases are job-killers is overblown,” Mr. Tilly said. But “there are possible downsides,” he added. “One is that economic theory tells us an overly large increase in the minimum is bound to deter businesses from hiring.”Over the past year, workers in several California industries have seen significant pay raises due, in many instances, to wins by organized labor. Health care workers at Kaiser Permanente facilities secured a contract that includes a $25-an-hour minimum wage in the state. Fast food workers across the state will soon make a minimum wage of $20 per hour, and hotel workers have received significant pay bumps across Southern California.Until recently, West Hollywood followed the state’s minimum wage increases, which have risen every year since 2017, often by a dollar at a time. But that changed with the new ordinance, which included a series of increases.Genevieve Morrill, president of the West Hollywood Chamber of Commerce, said that while her group wanted workers to earn a living wage in an increasingly expensive part of the country, she felt that the ordinance had done more to hurt workers, who have lost hours or, in some cases, their jobs after places have shuttered.Around the time the recent wage bump took effect, Ms. Morrill helped more than 50 local businesses, including Mr. Citrin’s restaurant, write a letter to the City Council outlining their concerns. They called for a moratorium on further minimum wage increases through 2025 or until the rate aligns with the Los Angeles rate. They also asked that the city roll back the mandated paid time-off policy.West Hollywood has promoted itself as “a leader in many critical social movements.”Mark Abramson for The New York TimesA journey of mere blocks can pass through Los Angeles, West Hollywood and Beverly Hills.Mark Abramson for The New York TimesWest Hollywood, which was incorporated in 1984, was the first city in the nation to have a City Council with a majority of members who were openly gay. It has promoted itself as “a leader in many critical social movements,” including, among other things, advocacy for H.I.V. causes, affordable housing and women’s rights, according to a post on the city’s website.When you walk along Santa Monica Boulevard, which cuts through the center of this city, a bustling energy fills the sidewalks. Several residents are catching up with phone calls while out walking their dogs, and others are grabbing a latte or strolling through an art gallery. People are doing calisthenics in a park. At night, the city’s vibrant bar and restaurant scene brings a buzz.Mayor Sepi Shyne, who was sworn in this year, said businesses had long been a part of the fabric of the community.“Our businesses are also the backbone of support for workers: Lifting workers with fair pay is part of securing economic justice and a brighter future for everyone,” said Ms. Shyne, who supports the minimum wage ordinance but said she was seriously listening to resistance from the business community.Last month, the City Council, of which Ms. Shyne is a member, approved about $2.8 million in waivers, credits and marketing dollars to help the business community. The City Council, she said, has also directed staff members to get feedback from workers about the effect of paid time off.A major supporter of the ordinance was UNITE HERE Local 11, which represents 30,000 workers at hotels and restaurants across Southern California.West Hollywood has a vibrant bar and restaurant scene that brings a buzz to the city.Mark Abramson for The New York TimesSunset Plaza is a center of various businesses on the Sunset Strip in West Hollywood.Mark Abramson for The New York TimesKurt Petersen, co-president of the local, said West Hollywood was setting a standard that should be replicated across California and the country. “It has raised living standards and given workers the security of paid time off,” he said.Near the intersection of Santa Monica and La Cienega Boulevards, Paul Leonard plans to open a location for his pet grooming business, Collar & Comb. He has operated at other locations, a few blocks away in Los Angeles, since 2019. The most popular service, Mr. Leonard said, is a full-spectrum specialty groom for dogs under 20 pounds at $166.In an interview, Mr. Leonard said he was not concerned about the minimum wage because he paid his groomers at least $23 an hour.“Everything is going up, and so should wages,” he said.Steve Lococo, who has been a part of the business community for decades, said small-business owners “have not at all been heard” over the last two years in West Hollywood. He has raised prices — an average haircut, previously $150, is now $195 — and his business, B2V Salon, which he co-owns with Alberto Borrelli, has cut back to five employees from nine. At the start of the new year, Mr. Lococo said, the salon will assess staffing again.“There need to be modifications to this ordinance,” he said. “Lately, it’s just like, you feel as if you have no say as a business owner in how things are done in the city.”Paul Leonard of Collar & Comb with his dog, Lincoln. “Everything is going up,” Mr. Leonard said, “and so should wages.”Mark Abramson for The New York TimesMeanwhile, Mr. Citrin, who has run restaurants in the Los Angeles area for more than 25 years, said the staff at his West Hollywood restaurant, Charcoal Sunset, which specializes in prime cuts of meat, had fallen to 35 from around 50.At high-end restaurants like his, Mr. Citrin noted, servers often make good money — sometimes more than $50 an hour when tips are included, he said. Most nights, his West Hollywood restaurant makes revenue comparable to what his Los Angeles and Santa Monica restaurants bring in, but his overhead costs are higher in West Hollywood. For now, he said, he is unsure of his future in the city.He often wonders if it’s easier to simply focus on his restaurants elsewhere in the area.“That’s something I need to answer in the coming months,” he said. More

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    Corporate America Has Dodged the Damage of High Rates. For Now.

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    Small businesses and risky borrowers face rising costs from the Federal Reserve’s moves, but the biggest companies have avoided taking a hit.The prediction was straightforward: A rapid rise in interest rates orchestrated by the Federal Reserve would confine consumer spending and corporate profits, sharply reducing hiring and cooling a red-hot economy.But it hasn’t worked out quite the way forecasters expected. Inflation has eased, but the biggest companies in the country have avoided the damage of higher interest rates. With earnings picking up again, companies continue to hire, giving the economy and the stock market a boost that few predicted when the Fed began raising interest rates nearly two years ago.There are two key reasons that big business has avoided the hammer of higher rates. In the same way that the average rate on existing household mortgages is still only 3.6 percent — reflecting the millions of owners who bought or refinanced homes at the low-cost terms that prevailed until early last year — leaders in corporate America locked in cheap funding in the bond market before rates began to rise.Also, as the Fed pushed rates above 5 percent, from near zero at the start of 2022, chief financial officers at those businesses began to shuffle surplus cash into investments that generated a higher level of interest income.The combination meant that net interest payments — the money owed on debt, less the income from interest-bearing investments — for American companies plunged to $136.8 billion by the end of September. It was a low not seen since the 1980s, data from the Bureau of Economic Analysis showed.That could soon change.While many small businesses and some risky corporate borrowers have already seen interest costs rise, the biggest companies will face a sharp rise in borrowing costs in the years ahead if interest rates don’t start to decline. That’s because a wave of debt is coming due in the corporate bond and loan markets over the next two years, and firms are likely to have to refinance that borrowing at higher rates.Overall Corporate Debt Interest Payments Have PlummetedAlthough the Fed has rapidly raised interest rates, net interest payments paid by corporations are reaching 40-year lows.

    Note: Data consists of interest paid by private enterprises (minus interest income received) as well as rents and royalties paid by private enterprises.Source: Bureau of Economic AnalysisBy The New York TimesThe junk bond market faces a ‘refinancing wall.’Roughly a third of the $1.3 trillion of debt issued by companies in the so-called junk bond market, where the riskiest borrowers finance their operations, comes due in the next three years, according to research from Bank of America.The average “coupon,” or interest rate, on bonds sold by these borrowers is around 6 percent. But it would cost companies closer to 9 percent to borrow today, according to an index run by ICE Data Services.Credit analysts and investors acknowledge that they are uncertain whether the eventual damage will be containable or enough to exacerbate a downturn in the economy. The severity of the impact will largely depend on how long interest rates remain elevated.“I think the question that people who are really worrying about it are asking is: Will this be the straw that breaks the camel’s back?” said Jim Caron, a portfolio manager at Morgan Stanley. “Does this create the collapse?”The good news is that debts coming due by the end of 2024 in the junk bond market constitute only about 8 percent of the outstanding market, according to data compiled by Bloomberg. In essence, less than one-tenth of the collective debt pile needs to be refinanced imminently. But borrowers might feel higher borrowing costs sooner than that: Junk-rated companies typically try to refinance early so they aren’t reliant on investors for financing at the last minute. Either way, the longer rates remain elevated, the more companies will have to absorb higher interest costs.Among the firms most exposed to higher rates are “zombies” — those already unable to generate enough earnings to cover their interest payments. These companies were able to limp along when rates were low, but higher rates could push them into insolvency.Even if the challenge is managed, it can have tangible effects on growth and employment, said Atsi Sheth, managing director of credit strategy at Moody’s.“If we say that the cost of their borrowing to do those things is now a little bit higher than it was two years ago,” Ms. Sheth said, more corporate leaders could decide: “Maybe I’ll hire less people. Maybe I won’t set up that factory. Maybe I’ll cut production by 10 percent. I might close down a factory. I might fire people.”Small businesses have a different set of problems.Some of this potential effect is already evident elsewhere, among the vast majority of companies that do not fund themselves through the machinations of selling bonds or loans to investors in corporate credit markets. These companies — the small, private enterprises that are responsible for roughly half the private-sector employment in the country — are already having to pay much more for debt.They fund their operations using cash from sales, business credit cards and private loans — all of which are generally more expensive options for financing payrolls and operations. Small and medium-size companies with good credit ratings were paying 4 percent for a line of credit from their bankers a couple of years ago, according to the National Federation of Independent Business, a trade group. Now, they’re paying 10 percent interest on short-term loans.Hiring within these firms has slowed, and their credit card balances are higher than they were before the pandemic, even as spending has slowed.“This suggests to us that more small businesses are not paying the full balance and are using credit cards as a source of financing,” analysts at Bank of America said, adding that it points to “financial stress for certain firms,” though it is not yet a widespread problem.Corporate buyouts are also being tested.Carvana renegotiated its debt this year to defer mounting interest costs.Caroline Brehman/EPA, via ShutterstockIn addition to small businesses, some vulnerable privately held companies that do have access to corporate credit markets are already grappling with higher interest costs. Backed by private-equity investors, who typically buy out businesses and load them with debt to extract financial profits, these companies borrow in the leveraged loan market, where borrowing typically comes with a floating interest rate that rises and falls broadly in line with the Fed’s adjustments.Moody’s maintains a list of companies rated B3 negative and below, a very low credit rating reserved for companies in financial distress. Almost 80 percent of the companies on this list are private-equity-backed leveraged buyouts.Some of these borrowers have sought creative ways to extend the terms of their debt, or to avoid paying interest until the economic climate brightens.The used-car seller Carvana — backed by the private-equity giant Apollo Global Management — renegotiated its debt this year to do just that, allowing its management to cut losses in the third quarter, not including the mounting interest costs that it is deferring.Leaders of at-risk companies will be hoping that a serene mix of economic news is on the horizon — with inflation fading substantially as overall economic growth holds steady, allowing Fed officials to end the rate-increase cycle or even cut rates slightly.Some recent research provides a bit of that hope.In September, staff economists at the Federal Reserve Bank of Chicago published a model forecast indicating that “inflation will return to near the Fed’s target by mid-2024” without a major economic contraction. If that comes to pass, lower interest rates for companies in need of fresh funds could be coming to the rescue much sooner than previously expected.Few, at this point, see that as a guarantee, including Ms. Sheth at Moody’s.“Companies had a lot of things going for them that may be running out next year,” she said.Emily Flitter More

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    Biden to Travel to Minnesota to Highlight Rural Investments

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    The president’s push to focus attention on the domestic economy comes as his administration has been dealing with events overseas after the terrorist attacks in Israel.The White House on Wednesday will announce more than $5 billion in funding for agriculture, broadband and clean energy needs in sparsely populated parts of the country as President Biden travels to Minnesota to kick off an administration-wide tour of rural communities.The president’s efforts to focus attention on the domestic economy ahead of next year’s campaign come after three weeks in which his administration has been seized by events overseas following the terrorist attacks in Israel and the state’s subsequent military action in Gaza.The trip will take place as Mr. Biden is urging Congress to quickly pass a $105 billion funding package that includes emergency aid to Israel and Ukraine, two conflicts he has described as threats to democracy around the globe.But the president and his aides are well aware that his hopes for a second term are likely to be determined closer to home. Rural voters like the ones he will address at a corn, soybean and hog farm south of Minneapolis are increasingly voting Republican. A recent poll showed that most voters had heard little or nothing about a health care and clean energy law that is the cornerstone of Mr. Biden’s economic agenda. And the president even faces a challenge within his own party, from Representative Dean Phillips of Minnesota, who announced his long-shot presidential bid last week.Karine Jean-Pierre, the White House press secretary, declined on Tuesday to speak about campaign issues, citing the Hatch Act, which limits political activity by federal officials, but said that Mr. Biden “loves Minnesota.” Administration officials have said Mr. Biden’s trip was planned before Mr. Phillips announced his candidacy.The White House has called the next two weeks of events the “Investing in Rural America Event Series.” It includes more than a dozen trips by Mr. Biden as well as cabinet secretaries and other senior administration officials. The White House said in a statement that the tour would highlight federal investments that “are bringing new revenue to farms, increased economic development in rural towns and communities, and more opportunity throughout the country.”Mr. Biden will be joined on Wednesday by Tom Vilsack, the agriculture secretary. Against the backdrop of a family farm that uses techniques to make crops more resilient to climate change, they will announce $1.7 billion for farmers nationwide to adopt so-called climate-smart agriculture practices.Agriculture Secretary Tom Vilsack will join President Biden in Minnesota and later travel to Indiana, Wyoming and Colorado.Haiyun Jiang for The New York TimesOther funding announcements include $1.1 billion in loans and grants to upgrade infrastructure in rural communities; $2 billion in investments as part of a program that helps rural governments work more closely with federal agencies on economic development projects; $274 million to expand high-speed internet infrastructure; and $145 million to expand access to wind, solar and other renewable energy, according to a White House fact sheet.“Young people in rural communities shouldn’t have to leave home to find opportunity,” Neera Tanden, director of the White House Domestic Policy Council, said Tuesday on a call with reporters.She said federal investments were creating “a pathway for the next generation to keep their roots in rural America.”Gov. Tim Walz of Minnesota, a Democrat, said he expected Mr. Biden to face serious headwinds in rural communities, in large part because of inflation levels.“It is a little challenging, there’s no denying, when prices go up,” Mr. Walz said. “The politics have gotten a little angrier. I think folks are feeling a little behind.”But Mr. Walz also praised Mr. Biden for spending time in rural communities. “Democrats need to show up,” he said.Kenan Fikri, the director of research at the Economic Innovation Group, a Washington think tank, said the Biden administration had made sizable investments over the past two and a half years in agriculture, broadband and other rural priorities.“The administration has a lot to show for its economic development efforts in rural communities,” he said, but “whether voters will credit Biden for a strong economic performance is another question.”Later in the week Mr. Vilsack will travel to Indiana, Wyoming and Colorado to speak with agricultural leaders and discuss land conservation. Deb Haaland, the interior secretary, will go to her home state of New Mexico to highlight water infrastructure investments.Energy Secretary Jennifer M. Granholm will be in Arizona to talk about the electricity grid and renewable energy investment in the rural Southwest.The veterans affairs secretary, Denis McDonough, plans to visit Iowa to discuss improving access to medical care for veterans in rural areas. Isabel Guzman, who leads the Small Business Administration, will travel to Georgia to talk about loans for rural small businesses.Miguel A. Cardona, the education secretary, will go to New Hampshire to promote how community colleges help students from rural areas. Xavier Becerra, the secretary of health and human services, will be in North Carolina to talk about health care access in rural areas. More

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    How High Interest Rates Sting Bakers, Farmers and Consumers

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    Home buyers, entrepreneurs and public officials are confronting a new reality: If they want to hold off on big purchases or investments until borrowing is less expensive, it’s probably going to be a long wait.Governments are paying more to borrow money for new schools and parks. Developers are struggling to find loans to buy lots and build homes. Companies, forced to refinance debts at sharply higher interest rates, are more likely to lay off employees — especially if they were already operating with little or no profits.Over the past few weeks, investors have realized that even with the Federal Reserve nearing an end to its increases in short-term interest rates, market-based measures of long-term borrowing costs have continued rising. In short, the economy may no longer be able to avoid a sharper slowdown.“It’s a trickle-down effect for everyone,” said Mary Kay Bates, the chief executive of Bank Midwest in Spirit Lake, Iowa.Small banks like Ms. Bates’s are at the epicenter of America’s credit crunch for small businesses. During the pandemic, with the Fed’s benchmark interest rate near zero and consumers piling up savings in bank accounts, she could make loans at 3 to 4 percent. She also put money into safe securities, like government bonds.But when the Fed’s rate started rocketing up, the value of Bank Midwest’s securities portfolio fell — meaning that if Ms. Bates sold the bonds to fund more loans, she would have to take a steep loss. Deposits were also waning, as consumers spent down their savings and moved money into higher-yielding assets.Higher Interest Rates Are Here More

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    A Silver Lining From the Pandemic: A Surge in Start-ups

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    New research suggests that big shifts in consumer and company behavior — and maybe federal stimulus dollars — have fueled entrepreneurship.The Covid-19 pandemic hurt the U.S. economy in a lot of ways. It choked global supply chains, sent consumer prices soaring and briefly knocked millions of people out of work. But it might have also broken America out of a decades-long entrepreneurial slump.New research from economists at the University of Maryland and the Federal Reserve, set to be presented on Friday at the Brookings Institution, a think tank in Washington, documents a new and potentially durable surge in Americans starting businesses during and after the pandemic. The new companies range from restaurants and dry cleaners to high-tech start-ups.That surge appears to be a direct response to how the fallout of the virus quickly but permanently changed how many Americans live and work.Those changes opened doors for entrepreneurs, who, economists often contend, are best able to respond to sudden business opportunities. The opportunities came when the federal government was showering Americans with trillions of dollars in pandemic assistance, which may have given many people the capital needed to start a company and hire workers.Federal statistics showed early signs of the business-creation burst. Some economists dismissed it initially as a fluke of the pandemic — one likely to quickly fade.That hesitancy was based in part on studies showing that start-up activity had been declining for several decades. A paper this month by economists at the University of Chicago and the Fed showed that start-up activity and employment, as a share of the economy, had fallen since the 1980s. A handful of large firms increasingly dominate industries.But the new paper by John Haltiwanger of the University of Maryland and Ryan Decker of the Fed, two of the nation’s leading researchers in the study of economic dynamism, suggests that the pandemic may have broken those trends.“We find early hints of a revival of business dynamism,” Mr. Decker and Mr. Haltiwanger wrote.They cautioned that “in many respects it is too early to ascertain whether a durable reversal of prepandemic trends is occurring,” in part because the revival is still so young.Champions of policies to increase dynamism were less restrained. “This is evidence of a genuine resurgence of economic dynamism led by a spike in start-up activity unlike anything we’ve seen in the post-Great Recession era,” said John Lettieri, the president and chief executive of the Economic Innovation Group, a think tank in Washington.Mr. Haltiwanger and Mr. Decker drew evidence from a wide variety of publicly available sources on new and existing businesses. They found evidence of a sustained increase in new-business activity — and job creation from those businesses.The maps of that entrepreneurship track closely with the new realities of an economy in which more Americans work from home, with fewer start-ups in downtowns and a large increase of them in suburban areas.Monthly applications for new businesses that are likely to create jobs are 30 percent higher than they were in 2019, on the eve of the pandemic, the economists report. Those applications spiked shortly after the pandemic hit, when Congress first pumped stimulus into the economy. They fell briefly and then jumped again around the end of 2020 and start of 2021, when lawmakers sent more money to people and companies. In that time, relatively young companies have grown to account for a larger share of employment and total firms in the economy.The paper suggests those trends might be an overlooked reason that businesses spent the past several years complaining of a labor shortage in the United States, even as workers returned to the labor force faster and in greater numbers than after any other recession this century. Put simply, existing companies may have suddenly found themselves competing for workers with many more start-ups than they were used to.One question the study does not address directly is whether President Biden can rightfully claim any credit for those developments, as he has repeatedly tried to do.“A record 10.5 million new business applications were filed in my first two years, the largest number ever on record in a two-year period,” Mr. Biden said this spring.White House officials said on Thursday that they were encouraged by the study and continued to believe that the $1.9 trillion American Rescue Plan, which Mr. Biden signed into law in early 2021, helped support an entrepreneurial surge. It sent money to people, businesses, and state and local governments.“In the spirit of crisis equals opportunity, we’ve long believed that measures in the Rescue Plan helped create a supportive backdrop for entrepreneurs, especially small and minority-owned businesses,” Jared Bernstein, the chairman of Mr. Biden’s Council of Economic Advisers, said in an email. “This work shows extremely welcomed progress in that space, and credibly connects it to the strong job gains we’ve seen over the president’s watch.” More