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    US National Debt Tops $31 Trillion for First Time

    America’s borrowing binge has long been viewed as sustainable because of historically low interest rates. But as rates rise, the nation’s fiscal woes are getting worse.WASHINGTON — America’s gross national debt exceeded $31 trillion for the first time on Tuesday, a grim financial milestone that arrived just as the nation’s long-term fiscal picture has darkened amid rising interest rates.The breach of the threshold, which was revealed in a Treasury Department report, comes at an inopportune moment, as historically low interest rates are being replaced with higher borrowing costs as the Federal Reserve tries to combat rapid inflation. While record levels of government borrowing to fight the pandemic and finance tax cuts were once seen by some policymakers as affordable, those higher rates are making America’s debts more costly over time.“So many of the concerns we’ve had about our growing debt path are starting to show themselves as we both grow our debt and grow our rates of interest,” said Michael A. Peterson, the chief executive officer of the Peter G. Peterson Foundation, which promotes deficit reduction. “Too many people were complacent about our debt path in part because rates were so low.”The new figures come at a volatile economic moment, with investors veering between fears of a global recession and optimism that one may be avoided. On Tuesday, markets rallied close to 3 percent, extending gains from Monday and putting Wall Street on a more positive path after a brutal September. The rally stemmed in part from a government report that showed signs of some slowing in the labor market. Investors took that as a signal that the Fed’s interest rate increases, which have raised borrowing costs for companies, may soon begin to slow.Higher rates could add an additional $1 trillion to what the federal government spends on interest payments this decade, according to Peterson Foundation estimates. That is on top of the record $8.1 trillion in debt costs that the Congressional Budget Office projected in May. Expenditures on interest could exceed what the United States spends on national defense by 2029, if interest rates on public debt rise to be just one percentage point higher than what the C.B.O. estimated over the next few years.The Fed, which slashed rates to near zero during the pandemic, has since begun raising them to try to tame the most rapid inflation in 40 years. Rates are now set in a range between 3 and 3.25 percent, and the central bank’s most recent projections saw them climbing to 4.6 percent by the end of next year — up from 3.8 percent in an earlier forecast.Federal debt is not like a 30-year mortgage that is paid off at a fixed interest rate. The government is constantly issuing new debt, which effectively means its borrowing costs rise and fall along with interest rates.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Inflation Report Dampens Biden’s Claims of Economic Progress

    The president is trying once again to accentuate the positives in the recovery from recession, but stubbornly high prices are complicating the message.The Consumer Price Index report for August showed inflation had not cooled as the administration had hoped and Americans had lost buying power over the last year as prices rose faster than wages.Sarah Silbiger for The New York TimesWASHINGTON — President Biden gathered with top Democrats at the White House on Tuesday to celebrate their inflation fight at an inopportune moment, as a sobering new report showed just how far the economy still has to go to bring soaring consumer prices under control.The Consumer Price Index report for August contained a large dose of unwelcome news for the president, who has sought to defuse Republican attacks over rising prices in the run-up to November’s midterm elections. It showed that inflation had not cooled as White House economists and other forecasters had hoped, and that workers had lost buying power over the last year as prices increased faster than wages.Another report, from the Census Bureau, showed that the typical American household saw its inflation-adjusted income fall slightly in 2021 from 2020. Perhaps more troubling for a president who has promised to close the gap between the very wealthy and the middle class, it showed that income inequality increased last year for the first time in a decade.Those developments challenged Mr. Biden’s renewed efforts to reframe the economy as a winning issue for him and his party before the midterms — though the president seemed unfazed.Mr. Biden welcomed thousands of supporters to the White House lawn to toast a new law that he says will help reduce the cost of electricity, prescription drugs and other staples of American life.The event was essentially a rally for the so-called Inflation Reduction Act, which raised taxes on large corporations, targeted nearly $400 billion in spending and tax incentives to reduce the fossil fuel emissions driving climate change, and took steps to reduce prescription drug costs for seniors on Medicare and premium costs for Americans who buy health insurance through the Affordable Care Act.Mr. Biden called the law “the single most important legislation passed in the Congress to combat inflation and one of the most significant laws in our nation’s history.”“There’s an extraordinary story being written in America today by this administration,” Mr. Biden said, adding, “This bill cut costs for families, helped reduce inflation at the kitchen table.”On Wednesday, Mr. Biden will head to the Detroit auto show, where he will champion his policies to bolster manufacturing and low-emission sources of energy.But the country’s economic reality remains more muddled than Mr. Biden’s rosy message, as the inflation report underscored. Food prices are continuing to spike, straining lower-income families in particular. The global economy is slowing sharply, and threats remain to the American recovery if European sanctions force millions of barrels of Russian oil off the global market in the months to come.The State of the 2022 Midterm ElectionsWith the primaries winding down, both parties are starting to shift their focus to the general election on Nov. 8.Polling Warnings: Democratic Senate candidates are polling well in the same places where surveys overestimated President Biden in 2020 and Hillary Clinton in 2016.Democrats’ Dilemma: The party’s candidates have been trying to signal their independence from the White House, while not distancing themselves from President Biden’s base or agenda.Intraparty G.O.P. Fight: Ahead of New Hampshire’s primary, mainstream Republicans have been vying to stop a Trump-style 2020 election denier running for Senate.Abortion Ballot Measures: First came Kansas. Now, Michigan voters will decide whether abortion will remain legal in their state. Democrats are hoping referendums like these will drive voter turnout.A possible railroad strike could disrupt domestic supply chains. The White House press secretary, Karine Jean-Pierre, told reporters on Tuesday that the president had called union and company leaders on Monday in an attempt to broker an agreement to avert the strike.Most important — and perhaps most damaging for Mr. Biden and Democrats — Americans’ wages have struggled to keep pace with fast-rising prices, an uncomfortable truth for a president who promised to make real wage gains a centerpiece of his economic program. Inflation-adjusted average hourly earnings ticked up across the economy in August, the Labor Department said on Tuesday, but they remain down nearly 3 percent from a year ago.Republicans were quick to criticize Mr. Biden after the report on Tuesday. “Every day, Americans endure Biden’s economic crisis,” said Representative Blaine Luetkemeyer of Missouri, the top Republican on the Small Business Committee. “The Democrats’ inflation continues to drive up costs and leads more and more small businesses and families questioning their future.”.css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-ok2gjs{font-size:17px;font-weight:300;line-height:25px;}.css-ok2gjs a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.Mr. Biden and his aides have celebrated falling gasoline prices on a daily basis throughout the summer. Those decreasing prices have helped inflation moderate from its high point this year, though not enough to offset rising rent, food and other costs last month.Even as he acknowledges the pain of rapid price increases across the economy, Mr. Biden has claimed progress in the fight against inflation, including with the signing last month of the energy, health care and tax bill that Democrats called the Inflation Reduction Act. On Tuesday morning, he sought to put a positive shine on the August data, saying in a statement issued by the White House that it was a sign of “more progress” in bringing down inflation.At his celebration on Tuesday afternoon, Mr. Biden barely mentioned the word “inflation.” Instead, he talked about reducing medical and energy costs — and, to a much larger extent, about the law’s efforts to combat climate change.Near the end of the speech, he gave a strident defense of his administration’s economic record, including strong job creation, record small-business formation and a rebound of the manufacturing sector.“And guess what?” Mr. Biden said. “For all the criticism I got and the help you gave me for gas prices bringing — they’re down more than $1.30 a gallon since the start of the summer. We’re making progress. We’re getting other prices down as well. We have more to do. But we’re getting there.”Recent weeks have brought signs of hope for administration officials, among both consumers and companies. The National Federation of Independent Business reported on Tuesday that its Small Business Optimism Index rose in August as inflation anxiety eased, continuing a rebound from its depths this year. The Federal Reserve Bank of New York reported on Monday that consumer inflation expectations were also falling.Officials inside the administration and at the Federal Reserve say strong job growth and consumer spending this summer have put to rest fears that the country slipped into recession in the first half of the year.“What is most notable about where we are right now is the resilience of the labor market recovery, the resilience of American consumers and households, and that we are beginning to see some signs that prices may be moderating,” Brian Deese, the director of Mr. Biden’s National Economic Council, said in an interview this week.“There’s more work to do,” Mr. Deese said. “But I think that is a signal that the economic decisions that this president has made are bearing fruit.”But polls continue to show that inflation is hurting Mr. Biden and his party at a pivotal moment, as Democrats seek to retain control of the House and the Senate. High prices loom as the top issue for voters in national opinion polls, and Americans say they trust Republicans more to handle inflation and the economy overall than Democrats.On Tuesday, stock markets recorded their largest daily loss in two years, driven by investor fears of stubborn inflation pushing the Federal Reserve to raise interest rates higher and faster than many expected.Economists on Wall Street and in policy circles are debating whether the U.S. economy can achieve a so-called soft landing, with economic and job growth slowing in order to bring inflation down — but not slowing so much as to push millions of Americans out of work. Some, like the former Treasury Secretary Lawrence H. Summers, have warned that the unemployment rate will need to rise significantly to bring price growth down to historical levels.Mark Zandi, the chief economist at Moody’s Analytics, whose analyses of Mr. Biden’s policy proposals are often promoted by the White House, said on Twitter on Tuesday that “job and wage growth must sharply slow” to reduce price increases in the service sector. “This is on the Fed, which must hike rates to get job and wage growth down without pushing the economy under.”Tuesday’s inflation report, he added, “suggests that while still doable, it won’t be easy.” More

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    Inflation Came in Faster Than Expected in August Even as Gas Prices Fell

    Overall inflation moderated less than anticipated, and a closely watched measure of price pressures jumped, bad news for the Federal Reserve.Price increases remained uncomfortably rapid in August as a broad array of goods and services became more expensive even as gas prices fell, evidence that the sustainable inflation slowdown the Federal Reserve and White House have been hoping for remains elusive.Prices rose 8.3 percent from a year earlier, a fresh Consumer Price Index report released on Tuesday showed. While slightly better than July’s 8.5 percent, the rate was not as much of a moderation as economists had expected as rent costs, restaurant meals and medical care became more expensive. Compounding the bad news, a core measure of inflation that strips out gas and food to get a sense of underlying price trends accelerated more than forecast.Stocks plummeted on Tuesday, with the S&P 500 falling 4.3 percent — its biggest drop since the depths of the pandemic in 2020 — as the data appeared to cement the case for another unusually large interest rate increase of three-quarters of a percentage point at the Fed’s meeting next week. That would be the third consecutive move of that size and bring rates to a range of 3 to 3.25 percent. Investors speculated that officials could even opt for a more drastic adjustment of a full percentage point this month or extend their campaign of swift rate moves for longer.Fed officials have been raising interest rates since March to slow the economy in a bid to tame America’s worst bout of inflation in four decades, but the data suggested that their efforts were not yet having much of an effect. Inflation’s relentlessness may force central bankers to clamp down on the economy harder, potentially pushing up unemployment more starkly, as they try to wrestle prices back under control.“Inflation momentum accelerated in all the wrong places,” said Blerina Uruci, a U.S. economist at T. Rowe Price, explaining that strong household balance sheets may be helping to sustain demand even as interest rates rise and borrowing becomes expensive.“In this environment, monetary policy has to do that much more to cool down demand and have an effect on prices,” Ms. Uruci said.Prices, including rapid increases for food away from home, climbed from July to August.Hiroko Masuike/The New York TimesThe inflation data also contained unwelcome news for the White House. President Biden, whose popularity with voters has suffered amid rising costs, sought to put a positive spin on the new data by noting that prices overall have been essentially flat over the past two months thanks to cheaper gas. But the fact that inflation retains so much staying power is likely to detract from the administration’s positive talking points.That’s because the latest report’s details offered plenty to worry about.Two products that had been major factors in inflation over the past year — gas and used cars — are now falling in price, a widely expected and important development. But the cost of other goods and services is rising so much that it is more than offsetting those declines.Prices climbed 0.1 percent from July as rapid increases hit a variety of products and services, including food away from home, new cars, dental care and vehicle repair. Given how much gas prices fell in August, the price index had been forecast to decline on a monthly basis.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Yellen Embarks on Economic Victory Tour as Midterm Elections Approach

    DEARBORN, Mich. — Emerging from months of inflation and recession fears, the Biden administration is pivoting to recast its stewardship of the U.S. economy as a singular achievement. In their pitch to voters, two months before midterm elections determine whether Democrats will maintain full control of Washington, Biden officials are pointing to a postpandemic resurgence of factories and “forgotten” cities.The case was reinforced on Thursday by Treasury Secretary Janet L. Yellen, who laid out the trajectory of President Biden’s economic agenda on the floor of Ford Motor’s electric vehicle factory in Dearborn. Mich. Surrounded by F-150 Lightning trucks, Ms. Yellen described an economy where new infrastructure investments would soon make it easier to produce and move goods around the country, bringing prosperity to places that have been left behind.“We know that a disproportionate share of economic opportunity has been concentrated in major coastal cities,” Ms. Yellen said in a speech. “Investments from the Biden economic plan have already begun shifting this dynamic.”Her comments addressed a U.S. economy that is at a crossroads. Some metrics suggest that a run of the highest inflation in four decades has peaked, but recession fears still loom as the Federal Reserve continues to raise interest rates to contain rising prices. The price of gasoline has been easing in recent weeks, but a European Union embargo on Russian oil that is expected to take effect in December could send prices soaring again, rattling the global economy. Lockdowns in China in response to virus outbreaks continue to weigh on the world’s second-largest economy.In her speech on Thursday, Ms. Yellen said the legislation that Mr. Biden signed this year to promote infrastructure investment, expand the domestic semiconductor industry and support the transition to electric vehicles represented what she called “modern supply-side economics.” Rather than relying on tax cuts and deregulation to spur economic growth, as Republicans espouse, Ms. Yellen contends that investments that make it easier to produce products in the United States will lead to a more broad-based and stable economic expansion. She argued that an expansion of clean energy initiatives was also a matter of national security.“It will put us well on our way toward a future where we depend on the wind, sun and other clean sources for our energy,” Ms. Yellen said as Ford’s electric pickup trucks were assembled around her. “We will rid ourselves from our current dependence on fossil fuels and the whims of autocrats like Putin,” she said, referring to President Vladimir V. Putin of Russia.The remarks were the first of several that top Biden administration officials and the president himself are planning to make this month as midterm election campaigns around the country enter their final stretch. After months of being on the defensive in the face of criticism from Republicans who say Democrats fueled inflation by overstimulating the economy, the Biden administration is fully embracing the fruits of initiatives such as the $1.9 trillion American Rescue Plan of 2021, which disbursed $350 billion to states and cities.At the factory, Ms. Yellen met with some of Ford’s top engineers and executives. During her trip to Michigan, she also made stops in Detroit at an East African restaurant, an apparel manufacturer and a coffee shop that received federal stimulus funds. She dined with Detroit’s mayor, Mike Duggan, and Michigan’s lieutenant governor, Garlin Gilchrist.Detroit was awarded $827 million through the relief package and has been spending the money on projects to clean up blighted neighborhoods, expand broadband access and upgrade parks and recreation venues.Although Ms. Yellen is helping to lead what Treasury officials described as a victory lap, some of her top priorities have yet to be addressed..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-ok2gjs{font-size:17px;font-weight:300;line-height:25px;}.css-ok2gjs a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.The so-called Inflation Reduction Act, which Congress passed last month, did not contain provisions to put the United States in compliance with the global tax agreement that Ms. Yellen brokered last year, which aimed to eliminate corporate tax havens, leaving the deal in limbo. On Thursday, she said she would continue to “advocate for additional reforms of our tax code and the global tax system.”Despite Ms. Yellen’s belief that some of the tariffs that the Trump administration imposed on Chinese imports were not strategic and should be removed, Mr. Biden has yet to roll them back. In her speech, Ms. Yellen accused China of unfairly using its market advantages as leverage against other countries but said maintaining “mutually beneficial trade” was important.Ms. Yellen also made no mention in her speech of Mr. Biden’s recent decision to cancel student loan debt for millions of Americans. She believed the policy, which budget analysts estimate could cost the federal government $300 billion, could fuel inflation.Treasury Department officials said Detroit, the center of the American automobile industry, exemplified how many elements of the Biden administration’s economic agenda are coming together to benefit a place that epitomized the economic carnage of the 2008 financial crisis. Legislation that Democrats passed this year is meant to create new incentives for the purchase of electric vehicles, improve access to microchips that are critical for car manufacturing and smooth out supply chains that have been disrupted during the pandemic.“There will be greater certainty in our increasingly technology-dependent economy,” Ms. Yellen said.But the transition to a postpandemic economy has had its share of turbulence.Ford said last month that it was cutting 3,000 jobs as part of an effort to reduce costs and become more competitive amid the industry’s evolution to electric vehicles. The company also cut nearly 300 workers in April.“People in Michigan can be pretty nervous about the transition to electric vehicles because they actually require by some estimation a lot less labor to assemble because there are fewer parts,” said Gabriel Ehrlich, an economist at the University of Michigan. “There are questions about what does that mean for these jobs.”Republicans in Congress continue to assail the Biden administration’s management of the economy.“Inflation continues to sit at a 40-year high, eating away at paychecks and sending costs through the roof,” Representative Tim Walberg, a Michigan Republican, said on Twitter on Thursday. “While in Michigan today, Secretary Yellen should apologize for being so wrong about the inflation-fueling impact of the Biden administration’s runaway spending.”Ms. Yellen will be followed to Michigan next week by Mr. Biden, who will attend Detroit’s annual auto show.The business community in Detroit, noting the magnetism of Michigan’s swing-state status, welcomed the attention.“We’re about as purple as it gets right now,” Sandy K. Baruah, the chief executive of the Detroit Regional Chamber, a business group.Noting the importance of the automobile industry to America’s economy, Mr. Baruah added: “When you think about blue-collar jobs and the transitioning nature of blue-collar jobs, especially in the manufacturing space, Michigan has the perfect optics.” More

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    Biden Administration Releases Plan for $50 Billion Investment in Chips

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

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    This Remote Mine Could Foretell the Future of America’s Electric Car Industry

    Hiding a thousand feet below the earth’s surface in this patch of northern Minnesota wetlands are ancient mineral deposits that some view as critical to fueling America’s clean energy future.Tim Gruber for The New York TimesA company called Talon Metals is drilling here around the clock, extracting samples of rock rich with nickel in a bid to become the country’s sole source of a material used to power zero-emission vehicles.But some locals are fighting the mine, for fear it could pollute their environment. The pushback hints at how difficult it may be to build an all-American supply chain that powers the country’s transition to electric vehicles.This Remote Mine Could Foretell the Future of America’s Electric Car IndustryTAMARACK, Minn. — In this isolated town of about 100 people, dozens of employees are at work for Talon Metals, drawing long cylinders of rock from deep in the earth and analyzing their contents. They liken their work to a game of Battleship — each hole drilled allows them to better map out where a massive and long-hidden mineral deposit is lurking below.The company is proposing to build an underground mine near Tamarack that would produce nickel, a highly sought-after mineral that is used to power electric vehicles. It would be a profitable venture for Talon, which has a contract to supply nickel for Tesla’s car batteries, and a step forward in the country’s race to develop domestic supply chains to feed the growing demand for electric vehicles.But mines that extract metal from sulfide ore, as this one would, have a poor environmental record in the United States, and an even more checkered footprint globally. While some in the area argue the mine could bring good jobs to a sparsely populated region, others are deeply fearful that it could spoil local lakes and streams that feed into the Mississippi River. There is also concern that it could endanger the livelihoods and culture of Ojibwe tribes whose members live just over a mile from Talon’s land and have gathered wild rice here for generations.Talon says it will invest heavily to design the world’s greenest and most responsible mine yet, one that they say “Joe Biden can love.” But some people in the community remain skeptical, including about the company’s promises to respect Indigenous rights, like the tribes’ authority over lands where their members hunt and gather food. Part of that mistrust stems from the fact that Talon’s minority partner, Rio Tinto, provoked outrage in 2020 by blowing up a 46,000-year-old system of Aboriginal caves in Australia in a search for iron ore.Kelly Applegate, the commissioner of natural resources for the Mille Lacs Band of Ojibwe, said he was “very concerned” about how the mine might damage the environment. “This again is an assault on Native culture, a disturbance of our way of being, another trauma that could potentially happen to our people,” he said.He described it as a “huge environmental justice issue” to mine local resources for electric cars that the tribe’s members would be unable to afford. Except for some wealthy homeowners who spend their summers around the lakes, the area is one of the poorest parts of Minnesota. Native Americans in Minnesota experience poverty at higher rates than any other racial or ethnic group in the state. Locals say the only Tesla for miles is Talon’s company car.“Talon and Rio Tinto will come and go — greatly enriched by their mining operation. But we, and the remnants of the Tamarack mine, will be here forever,” Mr. Applegate said.The project, which lies 50 miles west of Lake Superior, highlights some of the challenges that are emerging as the Biden administration tries to transition America to electric vehicles. The administration has said it wants to make the supply chains for batteries more resilient by sourcing minerals inside North America. But that desire could bring its own potential for environmental damage and infringement of the rights of Indigenous Americans. Much of the nation’s supply of battery materials is near tribal land.The world urgently needs to switch to cleaner cars to limit the global damage from climate change, many climate activists say. Last week, California approved a plan to ban the sale of new gas-powered cars by 2035.But current supply chains for electric vehicle batteries — and the batteries that would be needed for the electric grid that would charge that fleet of vehicles — rely on some adversarial and heavily polluting foreign nations. Much of the nickel that goes into car batteries is produced by strip mines that have decimated rainforests in Indonesia and the Philippines, releasing vast amounts of carbon dioxide before being refined in Chinese factories powered by coal.Read More on Electric VehiclesBanning Gasoline Cars: California is leading the way in the push to electrify the nation’s car fleet with a plan to ban sales of new internal-combustion vehicles by 2035, but the rule will face several challenges.Inflation Reduction Act: The law extends tax incentives in an effort to steer more U.S. consumers toward electric cars. But new rules complicate the qualification process.Plug-In Hybrids: After falling behind all-electric cars, U.S. sales of plug-in hybrids have been surging. The high cost of electric cars and gasoline have given them an opening.Car Crashes: Tesla and other automakers capture data from their vehicles to operate their products. Experts say the collected information could also improve road safety.Another source of nickel is a massive mining operation north of the Arctic Circle in Norilsk, Russia, which has produced so much sulfur dioxide that a plume of the toxic gas is big enough to be seen from space. Other minerals used in electric vehicle batteries, such as lithium and cobalt, appear to have been mined or refined with the use of child or forced labor.With global demand for electric vehicles projected to grow sixfold by 2030, the dirty origins of this otherwise promising green industry have become a looming crisis. The Democrats’ new tax and climate bill devotes nearly $400 billion to clean energy initiatives over the next decade, including electric vehicle tax credits and financing for companies that manufacture clean cars in the United States.New domestic high-tech mines and factories could make this supply chain more secure, and potentially less damaging to the global environment. But skeptics say those facilities may still pose a risk to the air, soil and water that surrounds them, and spark a fierce debate about which communities might bear those costs.The project is near lakes and streams that feed into the Mississippi River, and where Ojibwe tribes have gathered wild rice for generations.The potential risks to plants and wildlife come from the sulfide ores; the ores, in which materials like copper and nickel are lodged, can leach out sulfuric acid and heavy metals. More than a dozen former copper mines in the United States are now Superfund sites, contaminated locations where taxpayers can end up on the hook for cleanup.In January, the Biden administration canceled leases for another copper-nickel mine near a Minnesota wilderness area, saying the Trump administration had improperly renewed them.Talon Metals insists that it will have no such problems. “We can produce the battery materials that are necessary for the energy transition and also protect the environment,” said Todd Malan, the company’s chief external affairs officer and head of climate strategy. “It’s not a choice.”The company is using high-tech equipment to map underground flows of water in the area and create a 3-D model of the ore, so it can mine “surgically” while leaving other parts of the earth undisturbed, Mr. Malan said. Talon is also promising to use technology that will safely store the mine’s toxic byproducts and do its mining far underground, in deep bedrock where groundwater doesn’t typically penetrate.Talon has teamed up with the United Steelworkers union on work force development. And Rio Tinto has won a $2.2 million Department of Energy grant to explore capturing carbon near the site, which may allow the mine to market its products as zero emission.“We can produce the battery materials that are necessary for the energy transition and also protect the environment,” said Todd Malan, the chief external affairs officer and head of climate strategy at Talon.In a statement, Talon said it was committed to “meaningful consultations with tribal sovereign governments and tribal people” and producing a mine plan that addressed their concerns, as well as working with tribal governments interested in economic benefit sharing.The company has held several informational meetings with tribal staff and members, but some tribal members say they still need far more details from Talon about its plans.If the mine comes online in 2026 as scheduled, it will be positioned to feed a hungry market. The United States currently has one operating nickel mine, in Michigan, but its resources will be exhausted by 2026.In Washington, a bipartisan consensus is growing that the country should reduce its reliance on risky overseas minerals. To limit global warming to the levels that advanced countries have agreed on, the International Energy Agency estimates, the world will need roughly 20 times as much nickel and cobalt by 2040 as it had in 2020 and 40 times as much lithium.Recycling could play a bigger role in supplying these materials by the end of the decade, and some new car batteries do not use any nickel. Yet nickel is still highly sought after for electric trucks and higher-end cars, because it increases a vehicle’s range.The infrastructure law passed last year devoted $7 billion to developing the domestic supply chain for critical minerals. The climate and tax law also sets ambitious thresholds for ensuring that electric vehicles that receive tax incentives are partly U.S.-made.Elisabeth Kachinske logged core samples containing nickel at Talon’s offices in Tamarack, Minn.Talon’s proposed mine could help Tesla meet those thresholds. Tesla gets its nickel from China, Australia, New Caledonia and Canada, and its chief executive, Elon Musk, has begged miners to produce more.Some environmental and left-leaning groups that have long been skeptical of domestic mining are adjusting those positions, arguing that resources are needed for the energy transition.Collin O’Mara, the chief executive of the National Wildlife Federation, said that there was a growing need for battery materials that were mined responsibly, and that Talon was promising to use state-of-the-art techniques to minimize the mine’s footprint.But he acknowledged that for local residents it would still take a leap of faith in new technologies and Talon’s ability to apply them. “There still isn’t an example of an existing mine that has had no impacts,” he said.The economic potential — and the environmental risks — may go far beyond a single mine. The entire region is home to deposits of nickel, copper and cobalt, which were formed 1.1 billion years ago from a volcano that spewed out miles of liquid magma.Talon has leased 31,000 acres of land in the area, covering an 11-mile geological feature deep under the swamp. The company has zealously drilled and examined the underground resources along one of those 11 miles, and discovered several other potential satellite deposits.Elizabeth Skinaway, a member of the Sandy Lake Band of Minnesota Chippewa, is especially concerned about damage to the wild rice, which she has gathered in lakes near the proposed mine for 43 years.In August, the company announced that it had also acquired land in Michigan’s Upper Peninsula to explore for more nickel.Talon will start Minnesota’s environmental review process within a few months, and the company says it anticipates a straightforward review. But legal challenges for proposed mines can regularly stretch to a decade or more, and some living near the project say they will do what they can to fight the mine.Elizabeth Skinaway and her sister, Jean Skinaway-Lawrence, members of the Sandy Lake Band of Minnesota Chippewa, are especially concerned about damage to the wild rice, which Ms. Skinaway has been gathering in lakes several miles from the proposed mine for 43 years.Ms. Skinaway acknowledges the need to combat climate change, which also threatens the rice. But she sees little justice in using the same kind of profit-driven, extractive industry that she said had long plundered native lands and damaged the global environment.“The wild rice, the gift from the creator, that’s going to be gone, from the sulfide that’s going to leach into the river and the lakes,” she said. “It’s just a really scary thought.”“We were here first,” said her sister. “We should be heard.”The Talon drill site near Tamarack. More

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    Biden’s Big Dreams Meet the Limits of ‘Imperfect’ Tools

    The student loan plan is the latest example of Democrats practicing the art of the possible on the nation’s most pressing economic challenges and ending up with risky or patchwork solutions.WASHINGTON — President Biden’s move this week to cancel student loan debt for tens of millions of borrowers and reduce future loan payments for millions more comes with a huge catch, economists warn: It does almost nothing to limit the skyrocketing cost of college and could very well fuel even faster tuition increases in the future.That downside is a direct consequence of Mr. Biden’s decision to use executive action to erase some or all student debt for individuals earning $125,000 a year or less, after failing to push debt forgiveness through Congress. Experts warn that schools could easily game the new structure Mr. Biden has created for higher education financing, cranking up prices and encouraging students to load up on debt with the expectation that it will never need to be paid in full.It is the latest example, along with energy and health care, of Democrats in Washington seeking to address the nation’s most pressing economic challenges by practicing the art of the possible — and ending up with imperfect solutions.There are practical political limits to what Mr. Biden and his party can accomplish in Washington.Democrats have razor-thin margins in the House and Senate. Their ranks include liberals who favor wholesale overhaul of sectors like energy and education and centrists who prefer more modest changes, if any. Republicans have opposed nearly all of Mr. Biden’s attempts, along with those of President Barack Obama starting more than a decade ago, to expand the reach of government into the economy. The Supreme Court’s conservative majority has sought to curb what it sees as executive branch overreach on issues like climate change.As a result, much of the structure of key markets, like college and health insurance, remains intact. Mr. Biden has scored victories on climate, health care and now — pending possible legal challenges — student debt, often by pushing the boundaries of executive authority. Even progressives calling on him to do more agree he could not impose European-style government control over the higher education or health care systems without the help of Congress.The president has dropped entire sections of his policy agenda as he sought paths to compromise. He has been left to leverage what appears to be the most powerful tool currently available to Democrats in a polarized nation — the spending power of the federal government — as they seek to tackle the challenges of rising temperatures and impeded access to higher education and health care.Arindrajit Dube, an economist at the University of Massachusetts Amherst who consulted with Mr. Biden’s aides on the student loan issue and supported his announcement this week, said in an interview that the debt cancellation plans were necessarily incomplete because Mr. Biden’s executive authority could reach only so far into the higher education system.“This is an imperfect tool,” Mr. Dube said, “that is however one that is at the president’s disposal, and he is using it.”But because the policies pursued by Mr. Biden and his party do comparatively little to affect the prices consumers pay in some parts of those markets, many experts warn, they risk raising costs to taxpayers and, in some cases, hurting some consumers they are trying to help.Mr. Biden’s plan would forgive up to $10,000 in student debt for individual borrowers earning $125,000 a year or less and households earning up to $250,000, with another $10,000 for Pell grant recipients.Cheriss May for The New York Times“You’ve done nothing that changes the structure of education” with Mr. Biden’s student loan moves, said R. Glenn Hubbard, a Columbia University economist who was the chairman of the White House Council of Economic Advisers under President George W. Bush. “All you’re going to do is raise the price.”Mr. Hubbard said Mr. Biden’s team had made similar missteps on energy, health care, climate and more. “I understand the politics, so I’m not making a naïve comment here,” Mr. Hubbard said. “But fixing through subsidies doesn’t get you there — or it gets you such market distortions, you really ought to worry.”Mr. Biden said on Wednesday that his administration would forgive up to $10,000 in student debt for individual borrowers earning $125,000 a year or less and households earning up to $250,000, with another $10,000 in relief for people from low-income families who received Pell grants in school.What’s in the Inflation Reduction ActCard 1 of 8What’s in the Inflation Reduction ActA substantive legislation. More