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    Democrats’ Divide: Should Obama-Era Economic Ideas Prevail in 2021?

    A more traditional view is competing against a newer approach that has become mainstream among economists.Over the last dozen years, there has been a sea change in how economists view many crucial questions related to deficits, public debt and the long-term payoffs of social spending.Most Democratic elected officials have embraced this new thinking, and it permeates the Biden domestic agenda. But a handful of Democrats are unpersuaded, holding to a view that was more widespread in the early Obama years, focusing on the risks of debt and spending.That tension, and how it resolves itself — or doesn’t — will be central to the evolution of the Biden presidency and American economic policy for years to come. On the surface, there is a clash between lawmakers with different political instincts. But there is also a clash over whether a more traditional view will prevail over a newer approach that has become mainstream among economists — especially those who lean left, but with some acceptance among center-right thinkers.“I just don’t want our society to move to an entitlement society,” Senator Joe Manchin of West Virginia has said. T.J. Kirkpatrick for The New York TimesIn the older view, it is irresponsible to increase long-term budget deficits because it will curtail private investment and risk a fiscal crisis. Social policies should be seen as a zero-sum trade-off between alleviating poverty and encouraging work. And any major new spending should be coupled with enough revenue-raising measures that the number-crunchers at the Congressional Budget Office conclude the numbers will balance over the next 10 years.This was the approach that the Obama administration and congressional Democrats took in passing the Affordable Care Act, a process made lengthier and more complex by these self-imposed constraints.But since those days, the intellectual ground has shifted in important ways.For one, long-term interest rates have fallen precipitously, even as very large budget deficits have become the norm. That implies the United States can maintain higher public debt than once seemed possible without excessively constraining private investment or facing excessive interest costs.“The long-term downward move in interest rates is the most important macroeconomic development that has occurred over the last couple of decades,” said Karen Dynan, a former official at the Federal Reserve and at the Obama Treasury Department who now teaches at Harvard. (One of her classes is on the economic crises of the 21st century, including a unit on the evolution in thinking they have prompted.)“Lower rates make deficit-financed spending less costly in budget terms and lowers the economic cost, because you can think of lower rates as a signal that the private sector has less demand for that money,” Professor Dynan sad.During the early Obama years, there was extensive discussion, including from some Democrats, that a loss of confidence in America’s debts could cause a fiscal crisis. The experience of the last decade has offered reassurance that in a nation like the United States, with a credible and competent central bank, such an event is unlikely.Republican legislators like Jeff Sessions and Paul Ryan, back, led the charge against spending in 2011 during the Obama era. Michael Reynolds/European Pressphoto Agency“I would have worried 10 years ago that as debt rose to 100 percent or more of G.D.P., folks lending to the U.S. government would start to feel differently about it, and the answer is that they don’t,” said Wendy Edelberg, a former chief economist of the C.B.O. who is now director of the Hamilton Project at the Brookings Institution. “I personally feel like I’ve learned a lot more in the last decade about how monetary and fiscal policy interact, especially in a crisis.”As evidence: The federal government, with extensive help from the Federal Reserve, launched a multitrillion dollar response to the pandemic despite coming into the crisis with an elevated public debt. Rather than spur a crisis of confidence in U.S. government bonds, their values have surged.The evolution in thinking is hardly universal, with some more conservative economists pointing to the risks that conditions could change.“Any economic policy that begins with the premise, ‘Let’s just assume interest rates stay below 2008 levels forever,’ is extraordinarily hubristic and naïve,” said Brian Riedl, a senior fellow at the Manhattan Institute. “Particularly because there is no backup plan if they are wrong and rates ever do revert to pre-2008 levels. At that point, the policies driving the debt will be nearly impossible to reverse, and we could face a severe fiscal crisis.”That is very much the argument that Senator Joe Manchin has made in holding up the party’s social spending bill, seeking to lower its total cost and seek offsetting revenue increases that would reduce the deficit.“While my fellow Democrats will disagree, I believe that spending trillions more dollars not only ignores present economic reality, but makes it certain that America will be fiscally weakened when it faces a future recession or national emergency,” Senator Manchin wrote in a commentary for The Wall Street Journal last month.The national debt clock in New York in August 2020. Amr Alfiky/The New York TimesA similar shift has taken place in how many economists view the potential long-term economic benefits of certain forms of social welfare spending.Not long ago, research into the trade-offs of welfare spending tended to focus on narrow questions like how much a given benefit might discourage people from working. In the last few decades, researchers have used novel statistical techniques (including those that won a Nobel Prize last week) and rich new sources of data to try to determine what long-term benefits they might offer to the overall economy.Take, for example, spending that keeps children well-fed and out of poverty, such as school lunch programs and assistance payments to low-income parents. These appear to have long-lasting benefits for future employment and earning power — creating supply-side benefits, or increasing the economy’s overall potential.“If we give people more resources when they’re young, they can eat better and do better in school, and this could have lasting impacts,” said Hilary Hoynes, a professor at the University of California, Berkeley, and an author of extensive research along these lines. “It doesn’t seem like such a crazy thing to assert, but we had no evidence on that 15 years ago.”This is part of the thinking beneath major elements of Democratic legislation under consideration, including universal preschool and an extension of a child tax credit. Professor Hoynes said she had received many calls from congressional staff members in the last few years seeking to understand the emerging evidence.Senator Manchin, meanwhile, has said, “I just don’t want our society to move to an entitlement society,” suggesting he is focused on the ways these benefits might create a near-term disincentive to work.Beyond the intraparty divide over the risk of deficits and the benefits of social spending, there is a simmering debate over how the costs of the bill should be offset. Centrist Democrats insist upon provisions that raise money so as to keep the programs from raising the deficit, but it’s less clear what that means in practice.During the passage of the Affordable Care Act, that meant a very specific thing — achieving a “score” from the C.B.O. attesting that by its best estimates, the legislation would have a neutral to positive effect on cumulative deficits.This scoring incentivizes an odd gaming of the system, including programs that phase in or out, and revenue-raising measures that are backloaded to avoid near-term pain while making the numbers balance. It also inserts a false precision into the legislative process — as if anyone knows what economic growth and federal revenue will be a decade down the road.“I very much worry that there’s going to be some absurd emphasis on the C.B.O. score, whether it is slightly on one side of zero or the other side of zero,” Ms. Edelberg said. “This is a really important package that will change people’s lives, and that should be the guiding principle. The 10-year window is arbitrary. Aiming for deficit neutrality is arbitrary — it’s arbitrariness on top of arbitrariness.”The Biden agenda, in other words, could depend on just how much the entire range of Democrats in Congress view the strategies and instincts of the Obama years as a model to follow or a cautionary tale. More

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    Biden's Stimulus Is Stoking Inflation, Fed Analysis Suggests

    Inflation is likely getting a temporary boost from the $1.9 trillion coronavirus relief package that the Biden administration ushered in early this year, new Federal Reserve Bank of San Francisco research released on Monday suggested.The analysis may add fuel to a hot debate in Washington over whether the administration’s policies are contributing to a spike in prices. Critics of the government spending package that was signed into law in March, including former Treasury Secretary Lawrence H. Summers, have said it was poorly targeted and risked overheating the economy. Supporters of the relief program have said it provided critical aid to workers and businesses still struggling through the pandemic.The new paper comes down somewhere in the middle, finding that the spending had some effect on inflation but suggesting that it is most likely to be temporary. The economists estimated that it would add 0.3 percentage points to the core Personal Consumption Expenditures inflation index in 2021 and “a bit more” than 0.2 percentage points in 2022. Core inflation strips out volatile items like food and fuel.While those numbers are significant, they are not what most people would consider “overheating” — the Fed aims for 2 percent inflation on average over time, and a few tenths of a percent here or there are not a reason for much alarm.But the result is only a rough estimate, one the researchers came up with to help inform an continuing political and economic debate.Both the Trump and Biden administrations signed trillions of dollars in virus relief spending into law. The packages included two bipartisan bills in 2020 that pumped more than $3 trillion into the economy, including direct checks to individuals and generous unemployment benefits. Another $1.9 trillion — called the American Rescue Plan — was passed this year by Democrats after they took control of both Congress and the White House.“The later timing and large size of the A.R.P. stirred debate about whether it is causing an overheating of the economy and fueling a sustained increase in inflation,” the San Francisco Fed researchers noted.The economists tried to answer that question by looking at how much spare capacity is in the economy using a labor market measure — the ratio of job openings to unemployment. The logic is that inflation tends to pick up when there is very little labor market slack, because businesses raise wages to attract workers and then raise prices to cover their climbing labor costs.Government stimulus can push up the number of job openings in the economy as it fuels demand while constraining the number of available workers because it gives would-be employees a financial cushion, allowing them to take their time as they search for a new job.Based on the package’s size and using historical evidence on how fiscal spending affects the labor market, the researchers found that the American Rescue Plan might raise the vacancy-to-unemployment ratio close to its historical peak in 1968, fueling some inflation — but that the price impact would be small and short-lived.U.S. Inflation & Supply Chain ProblemsCard 1 of 6Covid’s impact on supply continues. More

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    Biden’s Plans Raise Questions About What U.S. Can or Cannot Afford to Do

    Democrats are debating whether doing nothing will cost more than doing something to deal with climate change, education, child care, prescription drugs and more.WASHINGTON — As lawmakers debate how much to spend on President Biden’s sprawling domestic agenda, they are really arguing about a seemingly simple issue: affordability.Can a country already running huge deficits afford the scope of spending that the president envisions? Or, conversely, can it afford to wait to address large social, environmental and economic problems that will accrue costs for years to come?It is a stealth battle over the fiscal future at a time when few lawmakers in either party have prioritized addressing debt and deficits. Each side believes its approach would put the nation’s finances on a more sustainable path by generating the strongest, most durable economic growth possible.The debate has shaped a discussion among lawmakers about what to prioritize as they scale back Mr. Biden’s initial proposal to dedicate $3.5 trillion over 10 years to programs and tax cuts that would curb greenhouse gas emissions, make child care more affordable, expand access to college and lower prescription drug prices, among other priorities. The smaller bill under discussion could increase the total amount of government spending on all current programs by about 1.5 percent to 2.5 percent over the next decade, depending on its size and components. Mr. Biden has proposed fully paying for this with a series of tax increases on businesses and the wealthy — including raising the corporate tax rate, increasing taxes on multinational corporations and cracking down on wealthy people who evade taxes — along with reducing government spending on prescription drugs for older Americans.As the negotiations continue, Democrats are considering cutting back or jettisoning programs to shave hundreds of billions of dollars off the final price to get it to a number that can pass the House and Senate along party lines. One key part of Mr. Biden’s climate agenda — a program to rapidly replace coal- and gas-fired power plants with wind, solar and nuclear energy — is likely to be dropped from the bill because of objections from a coal-state senator: Joe Manchin III, Democrat of West Virginia.The discussions have focused attention on Washington’s longstanding practice of using budgetary gimmicks to make programs appear to be paid for when they are not, as well as opening a new sort of discussion about what affordable really means.The debate about what the United States can afford used to be pegged to its growing budget deficits and warnings that the government, which spends much more than it brings in, could saddle future generations with mountains of debt, sluggish economic growth, runaway inflation and enormous tax hikes. But those concerns receded after no such crisis materialized. The country experienced tepid inflation and low borrowing costs for a decade after the 2008 financial crisis, despite increased borrowing for economic stimulus under President Barack Obama and for tax cuts under President Donald J. Trump.In its place is a new debate, one focused on the long-term costs and benefits of the government’s spending decisions.Many Democrats fear the United States cannot afford to wait to curb climate change, help more women enter the work force and invest in feeding and educating its most vulnerable children. In their view, failing to invest in those issues means the country risks incurring painful costs that will slow economic growth.“We can’t afford not to do these kinds of investments,” David Kamin, a deputy director of the White House National Economic Council, said in an interview.Take climate change: The Democratic think tank Third Way estimates that if Congress passes an aggressive plan to reduce greenhouse gas emissions, U.S. companies will invest an additional $1.3 trillion in the construction and deployment of low-emission energy like wind and solar power and energy-efficient technologies over the next decade, and $10 trillion by 2050. White House officials say that if the country fails to reduce emissions, the federal government will face mounting costs for relief and other aid to victims of climate-related disasters like wildfires and hurricanes.“Those are the table stakes for the reconciliation and infrastructure debate,” said Josh Freed, the senior vice president for climate and energy at Third Way. “It’s why we think the cost of inaction, from an economic perspective, is so enormous.”But to some centrist Democrats, who have expressed deep reservations about spending $2 trillion on a bill to advance Mr. Biden’s plans, “affordable” still means what it did in decades past: not adding to the federal debt. The budget deficit has swelled in recent years, reaching $1 trillion in 2019 from additional spending and tax cuts that did not pay for themselves, before topping $3 trillion last year amid record spending to combat the coronavirus pandemic.Mr. Manchin says he fears too much additional spending would feed rising inflation, which could push up borrowing costs and make it harder for the country to manage its budget deficit. He has made clear that he would like the final bill to raise more revenue than it spends in order to reduce future deficits and the threat of a debt crisis. Mr. Biden says his proposals would help fight inflation by reducing the cost of child care, housing, education and more.A few economists agree with Mr. Manchin, warning that even fully offsetting spending and tax cuts could fuel inflation. Michael R. Strain, a centrist economist at the conservative American Enterprise Institute who supported many of the pandemic spending programs, said in an interview this year that additional spending that stoked consumer demand would “exacerbate pre-existing inflationary pressures.”President Biden visited the Capitol Child Development Center in Hartford, Conn., on Friday. He has warned that if Congress does not act to invest in children, the United States will face slower economic growth for generations to come.Sarahbeth Maney/The New York TimesRepublicans, who have vowed to fight any version of the spending bill, argue that the national economy cannot afford the burden of taxes on high earners and businesses that Democrats have proposed to help offset their plans. They say the increases will chill growth when the recovery from the pandemic recession remains fragile.“The tax hikes are going to slow growth, flatten out wages and both drive U.S. jobs overseas and hammer small businesses,” said Representative Kevin Brady of Texas, the top Republican on the Ways and Means Committee. “There will be a significant economic price to all this spending.”U.S. Inflation & Supply Chain ProblemsCard 1 of 6Covid’s impact on supply continues. More

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    Biden to Announce Expansion of Port of Los Angeles's Hours

    The expansion of the Port of Los Angeles’s hours comes as the administration has struggled to untangle kinks in global supply chains and curb the resulting inflation.WASHINGTON — President Biden will announce on Wednesday that the Port of Los Angeles will begin operating around the clock as his administration struggles to relieve growing backlogs in the global supply chains that deliver critical goods to the United States.Product shortages have frustrated American consumers and businesses and contributed to rising prices that are hurting the president politically. And the problems appear poised to worsen, enduring into late next year or beyond and disrupting shipments of necessities like medications, as well as holiday purchases.Mr. Biden is set to give a speech on Wednesday addressing the problems in ports, factories and shipping lanes that have helped produce shortages, long delivery times and rapid price increases for food, televisions, automobiles and much more. The resulting inflation has chilled consumer confidence and weighed on Mr. Biden’s approval ratings. The Labor Department is set to release a new reading of monthly inflation on Wednesday morning.Administration officials say that they have brokered a deal to move the Port of Los Angeles toward 24/7 operations, joining Long Beach, which is already operating around the clock, and that they are encouraging states to accelerate the licensing of more truck drivers. UPS, Walmart and FedEx will also announce they are moving to work more off-peak hours.Mr. Biden’s team, including a supply chain task force he established earlier this year, is working to make tangible progress toward unblocking the flow of goods and helping the retail industry return to a prepandemic normal. On Wednesday, the White House will host leaders from the Port of Los Angeles, the Port of Long Beach, and the International Longshore and Warehouse Union to discuss the difficulties at ports, as well as hold a round table with executives from Walmart, UPS and Home Depot.But it is unclear how much the White House’s efforts can realistically help. The blockages stretch up and down supply chains, from foreign harbors to American rail yards and warehouses. Companies are exacerbating the situation by rushing to obtain products and bidding up their own prices. Analysts say some of these issues may last into late next year or even 2023.Administration officials acknowledged on Tuesday in a call with reporters that the $1.9 trillion economic aid package Mr. Biden signed into law in March had contributed to supply chain issues by boosting demand for goods, but said the law was the reason the U.S. recovery has outpaced those of other nations this year.Consumer demand for exercise bikes, laptops, toys, patio furniture and other goods is booming, fueled by big savings amassed over the course of the pandemic.Imports for the fourth quarter are on pace to be 4.7 percent higher than in the same period last year, which was also a record-breaking holiday season, according to Panjiva, the supply chain research unit of S&P Global Market Intelligence.Meanwhile, the pandemic has shut down factories and slowed production around the world. Port closures, shortages of shipping containers and truck drivers, and pileups in rail and ship yards have led to long transit times and unpredictable deliveries for a wide range of products — problems that have only worsened as the holiday season approaches.Home Depot, Costco and Walmart have taken to chartering their own ships to move products across the Pacific Ocean. On Tuesday, 27 container ships were anchored in the Port of Los Angeles waiting to unload their containers, and the average anchorage time had stretched to more than 11 days.Jennifer McKeown, the head of the Global Economics Service at Capital Economics, said that worsening supplier delivery times and conditions at ports suggested that product shortages would persist into mid- to late next year.“Unfortunately, it does look like things are likely to get worse before they get better,” she said.Ms. McKeown said governments around the world could help to smooth some shortages and dampen some price increases, for example by encouraging workers to move into industries with labor shortages, like trucking.President Biden is set to give a speech on Wednesday addressing the problems in ports, factories and shipping lanes that have helped create shortages.Stefani Reynolds for The New York Times“But to some extent, they need to let markets do their work,” she said.Phil Levy, the chief economist at the logistics firm Flexport and a former official in the George W. Bush administration, said a Transportation Department official gathering information on what the administration could do to address the supply chain shortages had contacted his company. Flexport offered the administration suggestions on changing certain regulations and procedures to ease the blockages, but warned that the problem was a series of choke points “stacked one on top of the other.”“Are there things that can be done at the margin? Yes, and the administration has at least been asking about this,” Mr. Levy said. However, he cautioned, “from the whole big picture, the supply capacity is really hard to change in a noteworthy way.”The shortages have come as a shock for many American shoppers, who are used to buying a wide range of global goods with a single click, and seeing that same product on their doorstep within hours or days.The political risk for the administration is that shortfalls, mostly a nuisance so far, turn into something more existential. Diapers are already in short supply. As aluminum shortages develop, packaging pharmaceuticals could become a problem, said Robert B. Handfield, a professor of supply chain management at North Carolina State University.And even if critical shortages can be averted, slow deliveries could make for slim pickings this Christmas and Hanukkah.“I think Johnny is going to get a back-order slip in his stocking this year,” Dr. Handfield said. Discontent is only fueled by the higher prices the shortages are causing. Consumer price inflation probably climbed by 5.3 percent in the year through September, data from the Bureau of Labor Statistics is expected to show on Wednesday. Before the pandemic, that inflation gauge had been oscillating around 2 percent.Officials at the White House and the Federal Reserve, which has primary responsibility for price stability, have repeatedly said that they expect the rapid price increases to fade. They often point out that much of the surge has been spurred by a jump in car prices, caused by a lack of computer chips that delayed vehicle production.But with supply chains in disarray, it is possible that some new one-off could materialize. Companies that had been trying to avoid passing on higher costs to customers may find that they need to as higher costs become longer lived.Others have been raising prices already. Tesla, for instance, had been hoping to reduce the cost of its electric vehicles and has struggled to do that amid the bottlenecks.“We are seeing significant cost pressure in our supply chain,” Elon Musk, the company’s chief executive, said during an annual shareholder meeting Oct. 7. “So we’ve had to increase vehicle prices, at least temporarily, but we do hope to actually reduce the prices over time and make them more affordable.”For policymakers at the White House and the Fed, the concern is that today’s climbing prices could prompt consumers to expect rapid inflation to last. If people believe that their lifestyles will cost more, they may demand higher wages — and as employers lift pay, they may charge more to cover the cost.What happens next could hinge on when — and how — supply chain disruptions are resolved. If demand slumps as households spend away government stimulus checks and other savings they stockpiled during the pandemic downturn, that could leave purveyors of couches and lawn furniture with fewer production backlogs and less pricing power down the road.If buying stays strong, and shipping remains problematic, inflation could become more entrenched.Some of the factors leading to supply chain disruptions are temporary, including shutdowns in Asian factories and severe weather that has led to energy shortages. Consumer habits, including spending on travel and entertainment, are expected to slowly return to normal as the pandemic subsides.But most companies have enormous backlogs of orders to work through. And company inventories, which provide a kind of insulation from future shocks to the supply chain, are extremely low.To get their own orders fulfilled, companies have placed bigger orders and offered to pay higher prices. The prospect of inflation has further encouraged companies to lock in large purchases of products or machinery in advance.“The customers that are willing to pay the most are most likely to get those orders filled,” said Eric Oak, an analyst at Panjiva. “It’s a vicious cycle.”Emily Cochrane More

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    World’s Growth Cools and the Rich-Poor Divide Widens

    The International Monetary Fund says the persistence of the coronavirus and global supply chain crisis weighs on economies.As the world economy struggles to find its footing, the resurgence of the coronavirus and supply chain chokeholds threaten to hold back the global recovery’s momentum, a closely watched report warned on Tuesday.The overall growth rate will remain near 6 percent this year, a historically high level after a recession, but the expansion reflects a vast divergence in the fortunes of rich and poor countries, the International Monetary Fund said in its latest World Economic Outlook report.Worldwide poverty, hunger and unmanageable debt are all on the upswing. Employment has fallen, especially for women, reversing many of the gains they made in recent years.Uneven access to vaccines and health care is at the heart of the economic disparities. While booster shots are becoming available in some wealthier nations, a staggering 96 percent of people in low-income countries are still unvaccinated.“Recent developments have made it abundantly clear that we are all in this together and the pandemic is not over anywhere until it is over everywhere,” Gita Gopinath, the I.M.F.’s chief economist, wrote in the report.The outlook for the United States, Europe and other advanced economies has also darkened. Factories hobbled by pandemic-related restrictions and bottlenecks at key ports around the world have caused crippling supply shortages. A lack of workers in many industries is contributing to the clogs. The U.S. Labor Department reported Tuesday that a record 4.3 million workers quit their jobs in August — to take or seek new jobs, or to leave the work force.A street in São Paulo, Brazil, in July. Poverty in many nations is on the upswing.Mauricio Lima for The New York TimesIn the United States, weakening consumption and large declines in inventory caused the I.M.F. to pare back its growth projections to 6 percent from the 7 percent estimated in July. In Germany, manufacturing output has taken a hit because key commodities are hard to find. And lockdown measures over the summer have dampened growth in Japan.Fear of rising inflation — even if likely to be temporary — is growing. Prices are climbing for food, medicine and oil as well as for cars and trucks. Inflation worries could also limit governments’ ability to stimulate the economy if a slowdown worsens. As it is, the unusual infusion of public support in the United States and Europe is winding down.“Overall, risks to economic prospects have increased, and policy trade-offs have become more complex,” Ms. Gopinath said. The I.M.F. lowered its 2021 global growth forecast to 5.9 percent, down from the 6 percent projected in July. For 2022, the estimate is 4.9 percent.The key to understanding the global economy is that recoveries in different countries are out of sync, said Gregory Daco, chief U.S. economist at Oxford Economics. “Each and every economy is suffering or benefiting from its own idiosyncratic factors,” he said.For countries like China, Vietnam and South Korea, whose economies have large manufacturing sectors, “inflation hits them where it hurts the most,” Mr. Daco said, raising costs of raw materials that reverberate through the production process.The pandemic has underscored how economic success or failure in one country can ripple throughout the world. Floods in Shanxi, China’s mining region, and monsoons in India’s coal-producing states contribute to rising energy prices. A Covid outbreak in Ho Chi Minh City that shuts factories means shop owners in Hoboken won’t have shoes and sweaters to sell.South Africa has sent a train with vaccines into one of its poorest provinces to get doses to areas where health care facilities are stretched.Jerome Delay/Associated PressThe I.M.F. warned that if the coronavirus — or its variants — continued to hopscotch across the globe, it could reduce the world’s estimated output by $5.3 trillion over the next five years.The worldwide surge in energy prices threatens to impose more hardship as it hampers the recovery. This week, oil prices hit a seven-year high in the United States. With winter approaching, Europeans are worried that heating costs will soar when temperatures drop. In other spots, the shortages have cut even deeper, causing blackouts in some places that paralyzed transport, closed factories and threatened food supplies.In China, electricity is being rationed in many provinces and many companies are operating at less than half of their capacity, contributing to an already significant slowdown in growth. India’s coal reserves have dropped to dangerously low levels.And over the weekend, Lebanon’s six million residents were left without any power for more than 24 hours after fuel shortages shut down the nation’s power plants. The outage is just the latest in a series of disasters there. Its economic and financial crisis has been one of the world’s worst in 150 years.Oil producers in the Middle East and elsewhere are lately benefiting from the jump in prices. But many nations in the region and North Africa are still trying to resuscitate their pandemic-battered economies. According to newly updated reports from the World Bank, 13 of the 16 countries in that region will have lower standards of living this year than they did before the pandemic, in large part because of “underfinanced, imbalanced and ill-prepared health systems.”Other countries were so overburdened by debt even before the pandemic that governments were forced to limit spending on health care to repay foreign lenders.A power outage on Monday in Beirut. Lebanon’s economic and financial crisis has been one of the world’s worst in 150 years.Agence France-Presse — Getty ImagesIn Latin America and the Caribbean, there are fears of a second lost decade of growth like the one experienced after 2010. In South Africa, over one-third of the population is out of work.And in East Asia and the Pacific, a World Bank update warned that “Covid-19 threatens to create a combination of slow growth and increasing inequality for the first time this century.” Businesses in Indonesia, Mongolia and the Philippines lost on average 40 percent or more of their typical monthly sales. Thailand and many Pacific island economies are expected to have less output in 2023 than they did before the pandemic.Overall, though, some developing economies are doing better than last year, partly because of the increase in the prices of commodities like oil and metals that they produce. Growth projections ticked up slightly to 6.4 percent in 2021 compared with 6.3 percent estimated in July.“The recovery has been incredibly uneven,” and that’s a problem for everyone, said Carl Tannenbaum, chief economist at Northern Trust. “Developing countries are essential to global economic function.”The outlook is clouded by uncertainty. Erratic policy decisions — like Congress’s delay in lifting the debt ceiling — can further set back the recovery, the I.M.F. warned.But the biggest risk is the emergence of a more infectious and deadlier coronavirus variant.Ms. Gopinath at the I.M.F. urged vaccine manufacturers to support the expansion of vaccine production in developing countries.Earlier this year, the I.M.F. approved $650 billion worth of emergency currency reserves that have been distributed to countries around the world. In this latest report, it again called on wealthy countries to help ensure that these funds are used to benefit poor countries that have been struggling the most with the fallout of the virus.“We’re witnessing what I call tragic reversals in development across many dimensions,” said David Malpass, the president of the World Bank. “Progress in reducing extreme poverty has been set back by years — for some, by a decade.”Ben Casselman More

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    U.S. Workers Quitting Their Jobs Hit a Record in August

    As the economy struggles to get back on track amid the pandemic, businesses are struggling to find employees — and workers are discovering that they have leverage.Nearly 4.3 million workers voluntarily quit their jobs in August, the Labor Department said Tuesday. That was up from four million in July and is by far the most in the two decades the government has been keeping track.

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    Number of People Who Left Their Jobs Voluntarily by Month
    Note: Seasonally adjusted. Voluntary quits exclude retirements.Source: Bureau of Labor StatisticsBy The New York TimesThe explosion of quitting is the latest evidence that the balance of power in the labor market has swung toward workers, at least temporarily. Average hourly earnings have surged in recent months, particularly for the lowest-paid workers, and yet many businesses report they are still having difficulty finding workers.The abundance of opportunities may be helping to fuel the wave of quitting: The government’s tally includes people who left jobs to take other, perhaps better-paying, positions — or who didn’t have another job lined up but were confident they could find one — as well as those choosing to leave the work force. (The figure does not include retirements, which are counted separately.)The number of open jobs actually fell somewhat in August, to 10.4 million from a record 11.1 million in July, as the latest wave of the pandemic took a bite out of consumer demand, especially in the service sector. But the slowdown did little to ease the hiring logjam: There were more open jobs than unemployed workers in August. Openings were particularly elevated in the leisure and hospitality sector, where the number of people quitting was also highest. Economists said the spread of the more-contagious Delta variant of the coronavirus could be contributing to workers’ reluctance to return to work.At the same time, hiring fell in August. That is consistent with data released earlier showing that job growth slowed in late summer. That data, also from the Labor Department but based on different surveys, showed that the Delta-driven slowdown continued in September. So did the hiring difficulties: The labor force shrank in September, as higher wages failed to draw people back to work.“We know that the Delta variant has likely made it more difficult to unlock labor supply because there are some workers who are concerned about health risks — and then on top of that, many school reopenings were disrupted,” said Daniel Zhao, an economist at the career site Glassdoor. “It’s possible that as the Delta wave recedes, then we will realize some of those benefits of reopened schools and a revitalized economy, but that is going to take some time.” More

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    Inflation Expectations Climb, Dogging Federal Reserve Officials

    A key measure of inflation expectations released on Tuesday showed continued acceleration, a survey that came as Richard H. Clarida, the Federal Reserve’s vice chair, indicated that central bankers were alert to the risk of high inflation.The combination underscored that the threat of a longer period of rising prices has become more pronounced.In remarks prepared for the Institute of International Finance’s annual meeting, Mr. Clarida said he believed that the “unwelcome” jump in inflation this year, “once these relative price adjustments are complete and bottlenecks have unclogged, will in the end prove to be largely transitory.”“That said, I believe, as do most of my colleagues, that the risks to inflation are to the upside, and I continue to be attuned and attentive to underlying inflation trends,” he added, “in particular measures of inflation expectations.”Fed officials received bad news on inflation expectations Tuesday morning. The Federal Reserve Bank of New York’s Survey of Consumer Expectations showed that medium-term inflation expectations — those for three years ahead — climbed to 4.2 percent in September from 4 percent in August. That is the highest since the series started in 2013. Short-term expectations jumped to 5.3 percent, also a new high.Central bankers have said for months that they expect this year’s rapid inflation to fade as consumers and businesses get back to normal because it is the product of surging demand when supply is struggling to catch up thanks to factory shutdowns and shipping bottlenecks. But it has become increasingly clear that the adjustment will be measured in quarters and years rather than weeks and months, and policymakers have increasingly braced for the possibility that quick price gains could last considerably longer than they had first anticipated.Even so, Mr. Clarida and his colleagues at the Fed are moving only gradually to remove their support from the economy, cognizant that millions of jobs are still missing compared with before the pandemic. The Fed signaled in its latest policy decision that it would soon begin to taper its large monthly asset purchases, which it has been using to keep many types of borrowing cheap.Mr. Clarida reiterated that belief on Tuesday, saying Fed officials “generally view that, so long as the recovery remains on track, a gradual tapering of our asset purchases that concludes around the middle of next year may soon be warranted.” But even once that process gets going, interest rates are expected to remain near zero for months or even years.Still, the Fed is staring down a challenging 2022, a year when it may have to decide whether it can keep rates near rock bottom while inflation is taking time to fade. Officials are still hoping price gains will slow to more normal levels, allowing them to be patient in removing policy support. More

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    As Democrats Trim Spending Bill, Some Americans Fear Being Left Behind

    President Biden had an ambitious agenda to remake the economy. But under the duress of negotiations and Senate rules, he has shelved a series of proposals, some of them indefinitely.WASHINGTON — Democrats in Congress are curbing their ambitions for President Biden’s economic agenda, and Jennifer Mount, a home health care aide, worries that means she will not get the raise she needs to pay more than $3,000 in medical bills for blindness in one eye.Edison Suasnavas, who came to the United States from Ecuador as a child, has grown anxious about the administration’s efforts to establish a pathway to citizenship, which he hoped would allow him to keep doing molecular tests for cancer patients in Utah without fear of deportation.And Amy Stelly wonders — thanks to a winnowing of Mr. Biden’s plans to invest in neighborhoods harmed by previous infrastructure projects like highways that have harmed communities of color — whether she will continue to breathe fumes from a freeway that she says constantly make her home in New Orleans shudder. She has a message for the president and the Democrats who are in the process of trying to pack his sprawling agenda into a diminishing legislative package.“You come up and live next to this,” Ms. Stelly said. “You live this quality of life. We suffer while you debate.”Mr. Biden began his presidency with an expensive and wide-ranging agenda to remake the U.S. economy. But under the duress of negotiations and Senate rules, he has shelved a series of his most ambitious proposals, some of them indefinitely.He has been thwarted in his efforts to raise the federal minimum wage and create a pathway to citizenship for undocumented immigrants. He has pared back investments in lead pipe removal and other efforts that would help communities of color. Now, as the president tries to secure votes from moderates in his party, he is reducing what was originally a $3.5 trillion collection of tax cuts and spending programs to what could be a package of $2 trillion or less.That is still an enormous spending package, one that Mr. Biden argues could shift the landscape of the economy. But a wide range of Americans who have put their faith in his promises to reshape their jobs and lives are left to hope that the programs they are banking on will survive the cut; otherwise, they face the prospect of waiting years or perhaps decades for another window of opportunity in Washington.“The problem now is this may be the last train leaving the station for a long time,” said Jason Furman, an economist at the Harvard Kennedy School who was a top economic adviser to President Barack Obama. “It could be five, 10, 20 years before there’s another shot at a lot of these issues.”President Biden entered the White House with an expensive and ambitious agenda to remake the U.S. economy. He has pared back those plans.Tom Brenner for The New York TimesMr. Furman and other former Obama administration officials saw firsthand how quickly a presidential agenda can shrink, and how presidential and congressional decisions can leave campaign priorities unaddressed for years. Mr. Obama prioritized an economic stimulus package and the creation of the Affordable Care Act over sweeping immigration and climate legislation in the early years of his presidency.Stimulus and health care passed. The other two did not. A similar fate now could befall Mr. Biden’s plans for home care workers, paid leave, child care subsidies, free prekindergarten and community college, investments in racial equity and, once again, immigration and climate change.If Mr. Biden is able to push through a compromise bill with major investments in emissions reduction, “he’s got an engine that he’s working with” to fight climate change, said John Podesta, a former top aide to Mr. Obama and President Bill Clinton. “If he can’t get it, then I think, you know, we’re really kind of in soup, facing a major crisis.”Republicans have criticized the spending and the tax increases that would help fund it, claiming that the Democratic package would hurt the economy. Democrats “just have an insatiable appetite to raise taxes and spend more money,” Representative Steve Scalise, Republican of Louisiana, said on “Fox News Sunday” this week. “It would kill jobs.”Amy Stelly said she wondered whether she would continue to breathe fumes from the Claiborne Expressway, which is near her home in New Orleans.Edmund D. Fountain for The New York TimesThe threat of Republican filibusters has blocked Mr. Biden’s plans for gun and voting-rights legislation.For now, though, the president’s biggest problem is his own party. He is negotiating with progressives and moderates over the size of the larger tax and spending package. Centrists like Senators Joe Manchin III of West Virginia and Kyrsten Sinema of Arizona have pushed for the price tag to fall below $2 trillion. Mr. Manchin has said he wants to limit the availability of some programs to lower- and middle-income earners. Progressive groups are jockeying to ensure that their preferred plans are not cut entirely from the bill.The House has proposed investing $190 billion in home health care, for example, less than half of what Mr. Biden initially asked for. If the price tag continues to decrease, Democrats would almost certainly have to choose between two concurrent aims: expanding access to older Americans in need of caretakers or raising the wages of those workers, a group that is disproportionately women of color.Another proposal included in Mr. Biden’s original infrastructure bill was an investment of $20 billion to address infrastructure that has splintered communities of color, although the funding was slashed to $1 billion through a compromise with Republican senators.Ms. Stelly thought the funds, plus the president’s sweeping proposals to address climate change — which might also be narrowed to appease centrist Democrats — would finally result in elected officials addressing the highway emissions that have filled her lungs and darkened the windows of her home.Ms. Stelly, an urban designer, has since limited her expectations. She said she hoped the funding would be enough to at least issue another study of the highway, which claimed dozens of Black-owned businesses and the once-thriving neighborhood of Tremé.The Claiborne Expressway bisects the residential neighborhood of Tremé in New Orleans. Ms. Stelly said she hoped the funding would be enough for another study on the effects of the highway.William Widmer for The New York TimesSome Democrats are eager to pack as much as they can into the bill because they fear losing the House, the Senate or both in the midterm elections next year. Mr. Podesta has urged lawmakers to see the package as a chance to avoid those losses by giving Democratic incumbents a batch of popular programs to run on, and also giving the president policy victories that could define his legacy.Mr. Biden has promoted some of his policies as ways to reverse racial disparities in the economy and lift families that are struggling in the coronavirus pandemic from poverty.Ms. Mount, who immigrated to the United States from Trinidad and Tobago, said she was appreciative of her job helping older Americans and the disabled eat and bathe and assisting them in their homes. But her wages for her long hours — working about 50 hours a week for $400, at times — have made it effectively impossible to stay on top of payments for basic needs.She had hoped Mr. Biden’s plan to raise the minimum wage or salaries for home health care aides meant she would no longer need to choose between her electric bills and her medical expenses. She said the treatment had improved her blindness, but without a salary increase for her field, she is more convinced that she will be working for the rest of her life.“I have to make a choice: Do I go to the grocery store or pay my mortgage? Do I pay my water bill or pay my electric bill?” said Ms. Mount, who lives in Philadelphia. “With that, retirement looks B-L-E-A-K, all uppercase. What do I have there for retirement?”When Mr. Biden initially proposed two years of free community college, Ms. Mount, 64, was encouraged about future opportunities for her six grandchildren in the United States. But she fears that effort could also be cut.“That’s politics from on top,” she said. “At times, they always seem detached.”Protesters gathered in front of the White House in August in support of the DACA program, which protects young immigrants from deportation.Andrew Caballero-Reynolds/Agence France-Presse — Getty ImagesSome measures that Democrats have long promised voters have run afoul of Senate rules that dictate which policies the administration should include in bills that use a special process to bypass the filibuster, including a minimum-wage increase and a plan to offer citizenship to immigrants brought to the United States as children.When the Senate parliamentarian rejected the strategy, it made Mr. Suasnavas, who has lived in the United States since he was 13, consider the prospect of eventually being deported; he would have to leave behind his job as a medical technology specialist, and his 6-year-old daughter and 2-year-old son.“We’ve been having the hopes that politicians in Washington — Democrats and Republicans — will see not only the economic impact we can bring to the country but also we’re still people with families,” said Mr. Suasnavas, 35. “Our hearts have been broken so many times that it feels like another wound in your skin.” More