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    Biden Adopts Recommendations for Promoting Union Membership

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    The White House on Monday released a report outlining several dozen steps it intends to take to promote union membership and collective bargaining among both public and private sector employees.The report is the product of a task force that President Biden created through an executive order in April. A White House statement said the president had accepted the task force’s nearly 70 recommendations.Many of the steps would make it easier for federal workers and employees of contractors to unionize, including ensuring that union organizers have access to employees on federal property, which does not always happen today.The report also recommends creating preferences in federal grant and loan programs for employers who have strong labor standards, preventing employers from spending federal contract money on anti-union campaigns and making employees aware of their organizing rights.When the task force was created, some White House officials indicated that they supported considering labor union membership as a factor in awarding government contracts, but the task force recommendations generally did not emphasize this approach.Under federal procurement law, the government generally cannot deny contracts to companies it deems hostile to labor unions. But it may be able to consider a company’s posture toward unions as a factor in certain narrow cases — for example, when labor strife resulting from an aggressive anti-union campaign could substantially delay the provision of some important good or service.The executive order Mr. Biden signed creating the task force required it to submit recommendations within 180 days, at which point the president would review them.One key premise of the task force was that the National Labor Relations Act, the 1935 law that protects federal labor rights, explicitly encourage collective bargaining, and yet, according to the Biden White House, no previous administration had explored ways that the executive branch could do so systematically.The ambition of the task force was twofold: to enact policies for federal agencies and contractors that encourage unionization and to model best practices for employers in the public and private sectors.The president’s task force will submit a second report describing progress on its recommendations and proposing additional ones in six months.Union officials and labor experts consider Mr. Biden to be among the most pro-labor presidents ever. He moved quickly to oust Trump appointees viewed as unsympathetic to labor and to undo Trump-era rules that weakened protections for workers, and signed legislation that secured tens of billions of dollars to stabilize union pension plans.Mr. Biden has occasionally used his bully pulpit to urge employers not to undermine workers’ labor rights or bargaining positions, as when he warned against coercing workers who were weighing unionizing during a prominent union election at Amazon last year. He later called Kellogg’s plan to permanently replace striking workers “an existential attack” on its union members.Last week, Mr. Biden signed an executive order requiring so-called project labor agreements — agreements between construction unions and contractors that set wages and working conditions — on federal construction projects worth more than $35 million, a move that the White House estimates could affect nearly 200,000 workers. He had previously signed an executive order raising the minimum wage for federal contractors to $15 per hour from $10.95.But despite Mr. Biden’s backing, and polls showing widespread public support for unions, the rate of union membership nationwide remains stuck at a mere 10 percent, its lowest in decades.The Protecting the Right to Organize Act, or PRO Act, which Mr. Biden supports, would make it easier to unionize by preventing companies from holding mandatory anti-union meetings and imposing financial penalties on employers that retaliate against workers seeking to unionize. It passed the House in March but remains a long shot in the Senate. Democrats may seek to pass some of its provisions along party lines this year. More

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    U.S. National Debt Tops $30 Trillion as Borrowing Surged

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    The record red ink, fueled by spending to combat the coronavirus, comes as interest rates are expected to rise, which could add to America’s costs.WASHINGTON — America’s gross national debt topped $30 trillion for the first time on Tuesday, an ominous fiscal milestone that underscores the fragile nature of the country’s long-term economic health as it grapples with soaring prices and the prospect of higher interest rates.The breach of that threshold, which was revealed in new Treasury Department figures, arrived years earlier than previously projected as a result of trillions in federal spending that the United States has deployed to combat the pandemic. That $5 trillion, which funded expanded jobless benefits, financial support for small businesses and stimulus payments, was financed with borrowed money.The borrowing binge, which many economists viewed as necessary to help the United States recover from the pandemic, has left the nation with a debt burden so large that the government would need to spend an amount larger than America’s entire annual economy in order to pay it off.Some economists contend that the nation’s large debt load is not unhealthy given that the economy is growing, interest rates are low and investors are still willing to buy U.S. Treasury securities, which gives them safe assets to help manage their financial risk. Those securities allow the government to borrow money relatively cheaply and use it to invest in the economy.For years, presidents have promised to limit federal borrowing and bring down the nation’s budget deficit, which is the gap between what the nation spends and what it takes in. Under President Bill Clinton, the United States actually ran a budget surplus between 1998 and 2001.But taming deficits had fallen out of fashion in recent years, including during the Trump administration, when lawmakers blew through budget caps and borrowed money to fund tax cuts and other federal spending.Now, deficit concerns have resurfaced, helping to stall negotiations over President Biden’s $2 trillion safety net and climate spending proposal. Senator Joe Manchin III of West Virginia, a Democrat whose vote is key to passing Mr. Biden’s package, cited “staggering debt” as a reason he could not support the legislation.Senator Joe Manchin on Capitol Hill last month.Tom Brenner for The New York TimesThe lingering pandemic has slowed the momentum of the economic recovery, fueling inflation rates unseen since the early 1980s and raising the prospect of higher interest rates, which could add to America’s fiscal burden.“Hitting the $30 trillion mark is clearly an important milestone in our dangerous fiscal trajectory,” said Michael A. Peterson, the chief executive officer of the Peter G. Peterson Foundation, which promotes deficit reduction. “For many years before Covid, America had an unsustainable structural fiscal path because the programs we’ve designed are not sufficiently funded by the revenue we take in.”Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: We asked readers to send questions about inflation. Top experts and economists weighed in.What’s to Blame: Did the stimulus cause prices to rise? Or did pandemic lockdowns and shortages lead to inflation? A debate is heating up in Washington.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.The gross national debt represents debt held by the public, such as individuals, businesses and pension funds, as well as liabilities that one part of the federal government owes to another part.Renewed concerns about debt and deficits in Washington follow years of disregard for the consequences of big spending. During the Trump administration, most Republicans ceased to be fiscal hawks and voted along party lines in 2017 to pass a $1.5 trillion tax cut along with increased federal spending.While Republican lawmakers helped run up the nation’s debt load, they have since blamed Mr. Biden for putting the nation on a rocky fiscal path by funding his agenda. After a protracted standoff in which Republicans refused to raise America’s borrowing cap, threatening a first-ever federal default, Congress finally agreed in December to raise the nation’s debt limit to about $31.4 trillion.In January 2020, before the pandemic spread across the United States, the Congressional Budget Office projected that the gross national debt would reach $30 trillion by around the end of 2025. The total debt held by the public outpaced the size of the American economy last year, a decade faster than forecasters projected.The nonpartisan office warned last year that rising interest costs and growing health spending as the population ages would increase the risk of a “fiscal crisis” and higher inflation, a situation that could undermine confidence in the U.S. dollar.The Biden administration has said the $1.9 trillion pandemic relief package the Democrats passed last year was a necessary measure to protect the economy from further damage. Treasury Secretary Janet L. Yellen has argued that such large federal investments are affordable because interest costs as a share of gross domestic product are at historically low levels thanks to persistently low interest rates.But that backdrop could start to change as the Federal Reserve prepares to raise interest rates, which have been set near-zero since the start of the pandemic, to curb inflation.The Fed indicated last week that it was on track to begin increasing rates at its next meeting in March. Investors are predicting the central bank could usher in five rate increases this year, bringing rates to a range of 1 to 1.25 percent.Trillions in federal spending has left the United States approaching levels of red ink not seen since World War II.Sarah Silbiger/ReutersThe Fed has also been keeping long-term interest rates low by buying government-backed debt and holding those securities on its balance sheet. Those purchases are set to wrap up next month, and last week, the Fed signaled it planned to “significantly” shrink its bond holdings.Esther L. George, the president of the Federal Reserve Bank of Kansas City, suggested during a speech this week that the Fed’s big bond holdings might be lowering longer-term interest rates by as much as 1.5 percentage points — nearly cutting the interest rate on 10-year government debt in half. While shrinking the balance sheet risks roiling markets, she warned that if the Fed remained a big presence in the Treasury market, it could distort financial conditions and imperil the central bank’s prized independence from elected government.Inflation F.A.Q.Card 1 of 6What is inflation? More

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    What a Disconnect From Swift Would Mean for Russia

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    A Belgian financial messaging service is once again at the center of an international sanctions fight.WASHINGTON — President Biden has pledged that if Russia invades Ukraine it will face “severe economic consequences,” with the United States likely to unleash a blistering package of sanctions that would effectively cut the Russian economy off from much of the global financial system.The United States has become increasingly reliant on sanctions in the last decade as a way to address diplomatic problems, but directing such tools at an economy the size of Russia’s would come with little precedent. The Biden administration has said that all options remain on the table, suggesting that it could impose an array of sanctions on Russian financial institutions and new restrictions on the exports of American products. But the biggest question among sanctions experts when it comes to inflicting economic pain on Russia is the fate of a critical financial conduit: Swift.In sanctions circles, a move by the United States and its European allies to cut Russia off from Swift has been characterized as a nuclear option. However, doing so is not as simple as it sounds and could yield unintended consequences because of Russia’s size and position in the world economy.“The Russian economy is a different beast,” said Adam M. Smith, who served as a senior sanctions official in the Obama administration’s Treasury Department. “It is twice the size of any economy the U.S. has ever sanctioned.”A Treasury Department spokeswoman said the Biden administration was assessing potential “spillovers” from any sanctions it imposes on Russia and exploring ways to reduce any unintended negative effects. Last week, Biden administration officials met with representatives from U.S. banks to discuss the risks and potential market impacts of sanctions on Russia, including the possible ramifications of cutting off Swift access for entities that had been hit with sanctions.Understand Russia’s Relationship With the WestThe tension between the regions is growing and Russian President Vladimir Putin is increasingly willing to take geopolitical risks and assert his demands.Competing for Influence: For months, the threat of confrontation has been growing in a stretch of Europe from the Baltic Sea to the Black Sea. Threat of Invasion: As the Russian military builds its presence near Ukraine, Western nations are seeking to avert a worsening of the situation.Energy Politics: Europe is a huge customer of Russia’s fossil fuels. The rising tensions in Ukraine are driving fears of a midwinter cutoff.Migrant Crisis: As people gathered on the eastern border of the European Union, Russia’s uneasy alliance with Belarus triggered additional friction.Militarizing Society: With a “youth army” and initiatives promoting patriotism, the Russian government is pushing the idea that a fight might be coming.What is Swift?Officially the Society for Worldwide Interbank Financial Telecommunications, Swift is a Belgian messaging service that connects more than 11,000 financial institutions as they transfer money around the world. It does not actually hold or transfer funds, but allows banks and other financial firms to alert one another of transactions that are about to take place.Swift is a global cooperative of financial institutions that is based in Belgium. It started in 1973 when 239 banks from 15 countries came together to figure out how to best handle cross-border payments.Despite its best efforts to be an apolitical cog in the international financial system, Swift has at times found itself embroiled in diplomatic disputes.Can Russia be booted from Swift?There have been continuing discussions between the United States and its allies in Europe over whether to block Russia’s access to Swift. However, the Biden administration could take that step unilaterally.If the United States decided to levy sanctions on Russian banks, it could then say that Swift was in violation of those sanctions by continuing to let those banks use its system. The Defending Ukraine Sovereignty Act of 2022, which Senate Democrats unveiled this month, would authorize sanctions on providers of specialized financial messaging services, such as Swift, but the Biden administration could also impose such sanctions without the approval of Congress.Cutting a country’s access to Swift is not without precedent.In 2012, Swift expelled as many as 30 Iranian financial institutions, including its central bank, in order to comply with European Union sanctions that were enacted in response to Iran’s disputed nuclear energy program. Services were reconnected after the 2015 nuclear deal, and then cut again in 2018 after the Trump administration withdrew from the pact and resumed sanctions.How would Russia respond to being removed?Russia has faced such threats before. In 2014, when Russia invaded and annexed Crimea, there were calls in Europe to exclude Russia from Swift. Dmitri A. Medvedev, then Russia’s prime minister, said at the time that such a move would be a “declaration of war.” According to the Carnegie Moscow Center, Russian forecasts at the time projected that being cut off from Swift would shrink the country’s gross domestic product by 5 percent.Last week, Nikolay Zhuravlev, the vice speaker of Russia’s Federation Council, told the government-run news agency TASS that removing Russia from Swift would also have economic consequences for European countries, which he said would not be able to receive imports of Russian oil, gas and metals as a result of Russia’s being unable to receive foreign currency.Mr. Smith, the former Treasury official, said the United States and Europe might look for ways to exempt certain Russian sectors, such as energy, from sanctions. However, moves to cut off Russia’s economy could have unintended consequences, such as Moscow retaliating, that could rattle global markets.“They are not without their own cards to play,” he said.A switch to Swift alternativesThe threat of being cut off from Swift might not be as dire as it was in the past.Several countries including Russia have developed their own financial messaging systems that, while less sophisticated than Swift, could allow Russian financial firms to maintain communications with the world. Russia began developing its system in 2014 amid threats of escalating sanctions from the United States.Mr. Medvedev, who is now the deputy chairman of the Security Council of Russia, said last week that the new system was functional and that financial flows would be able to continue within Russia if the country was cut off from Swift. He acknowledged that international financial transfers could be complicated if that happened.“Yes, they will be more difficult, it is obvious, but it won’t be a catastrophe,” Mr. Medvedev said.Some experts on Russia sanctions agree that Western officials are overplaying the potential effects of disconnecting Russia from Swift.“Cutting Russia off from Swift — it won’t be as painful for Russia as Western officials envision,” said Maria Snegovaya, a visiting scholar at George Washington University and a co-author of an Atlantic Council report on U.S. sanctions on Russia.Edward Wong More

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    Biden's Economy Is Surging but Voters Still See Gloom

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    President Biden is suffering in the polls as high inflation saps confidence in the economy, even as growth comes in strong.President Biden is contending with an uncomfortable disconnect: The economy grew at the fastest pace since 1984 last year, but voters are downright pessimistic about economic conditions and their own financial prospects.The divide traces back to the lingering pandemic and high prices, economists said. Inflation is running at its fastest pace since 1982, eroding gains and eating away at paychecks as even robust wage increases struggle to keep pace. And despite vaccines, life has yet to return to normal in the way many people once expected.The disparity poses a significant challenge for Mr. Biden and his party ahead of the November midterm elections. Faltering consumer confidence in the economy — and in Mr. Biden’s handling of it — could be a liability as Democrats battle to keep control of both the House and Senate.Mr. Biden and his top advisers are trying to turn attention toward the positives: emphasizing how rapidly the economy has recovered and that wages are rising, and hailing efforts to fix snarled supply chains and rebuild domestic manufacturing.“We are finally building an American economy for the 21st century, with the fastest economic growth in nearly four decades, along with the greatest year of job growth in American history,” Mr. Biden said in a statement after the release of gross domestic product data on Thursday.But inflation has complicated that narrative.The new G.D.P. figures show that the economy has more than fully recovered from its pandemic hit, but a big chunk of that progress evaporates when you factor in recent price gains. In fact, growth is still falling short of its prepandemic trend after it’s adjusted for inflation. More

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    Democrats Renew Push for Industrial Policy Bill Aimed at China

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

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    Commerce Dept. Survey Uncovers ‘Alarming’ Chip Shortages

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    Increased demand for the semiconductors that power cars, electronics and electrical grids have stoked inflation and could cause more factory shutdowns in the United States.WASHINGTON — The United States is facing an “alarming” shortage of semiconductors, a government survey of more than 150 companies that make and buy chips found; the situation is threatening American factory production and helping to fuel inflation, Gina M. Raimondo, the commerce secretary, said in an interview on Monday.She said the findings showed a critical need to support domestic manufacturing and called on Congress to pass legislation aimed at bolstering U.S. competitiveness with China by enabling more American production.“It’s alarming, really, the situation we’re in as a country, and how urgently we need to move to increase our domestic capacity,” Ms. Raimondo said.The findings show demand for the chips that power cars, electronics, medical devices and other products far outstripping supply, even as global chip makers approach their maximum production capacity.While demand for semiconductors increased 17 percent from 2019 to 2021, there was no commensurate increase in supply. A vast majority of semiconductor fabrication plants are using about 90 percent of their capacity to manufacture chips, meaning they have little immediate ability to increase their output, according to the data that the Commerce Department compiled.The need for chips is expected to increase, as technologies that use vast amounts of semiconductors, like 5G and electric vehicles, become more widespread.The combination of surging demand for consumer products that contain chips and pandemic-related disruptions in production has led to shortages and skyrocketing prices for semiconductors over the past two years.Chip shortages have forced some factories that rely on the components to make their products, like those of American carmakers, to slow or suspend production. That has dented U.S. economic growth and led to higher car prices, a big factor in the soaring inflation in the United States. The price of a used car grew 37 percent last year, helping to push inflation to a 40-year high in December.The Commerce Department sent out a request for information in September to global chip makers and consumers to gather information about inventories, production capacity and backlogs in an effort to understand where bottlenecks exist in the industry and how to alleviate them.The results of that survey, which the Commerce Department published Tuesday morning, reveal how scarce global supplies of chips have become.The median inventory among buyers had fallen to fewer than five days from 40 days before the pandemic, meaning that any hiccup in chip production — because of a winter storm, for example, or another coronavirus outbreak — could cause shortages that would shut down U.S. factories and again destabilize supply chains, Ms. Raimondo said.“We have no room for error,” she added.To help address the issue, Biden administration officials have coalesced behind a bill that the Senate passed in June as an answer to some of the nation’s supply chain woes.The bill, known in the Senate as the U.S. Innovation and Competition Act, would pour nearly a quarter-trillion dollars into scientific research and development to bolster competitiveness against China and prop up semiconductor makers by providing $52 billion in emergency subsidies.Momentum on the legislation stalled amid ideological disputes between the House and Senate over how to direct the funding. In June, House lawmakers passed a narrower bill, eschewing the Senate’s focus on technology development in favor of financing fundamental research.But administration officials, led by Ms. Raimondo, have begun prodding lawmakers behind the scenes in an effort to help bridge their differences to swiftly pass the bill, emphasizing the urgency of quickly signing solutions into law.“There’s no getting around this. There is no other solution,” Ms. Raimondo said. “We need more facilities.”On Tuesday evening, House Democrats unveiled a sweeping, 2,900-page bill that lawmakers said they hoped would be a starting point for negotiations with the Senate, in an effort to ultimately pass a manufacturing and supply chain bill into law. In a statement minutes after the bill text was made public, President Biden hailed both proposals and encouraged “quick action to get this to my desk as soon as possible.”Understand the Global Chip ShortageCard 1 of 7In short supply. More

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    Why Critics Fear the Fed's Policy Shift May Prove Late and Abrupt

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    The Federal Reserve is still buying bonds as prices surge. Some praise the central bank’s continuing policy pivot; others ask if it was fast enough.The Federal Reserve has moved at warp speed by central banking standards over the past six months as it prepares to lean against a surge in prices: first slowing its economy-stoking bond purchases, then deciding to end that buying program earlier and finally signaling that interest rate increases are coming.Some on Wall Street and in Washington are questioning whether it moved rapidly enough.Consumer prices increased by 7 percent in December from the prior year, the fastest pace since 1982, as rapid spending on goods collides with limited supply as a result of shuttered factories and backlogged ports. While price increases were initially expected to fade quickly, they have instead lasted and broadened to rents and restaurant meals.The Fed is charged with maintaining full employment and stable prices. The burst in inflation is causing some to question whether the central bank was too slow to recognize how persistent price increases were becoming, and whether it will be forced to respond so rapidly that it pushes markets into a free fall and the economy into a sharp slowdown or even recession.“The first policy mistake was completely misunderstanding inflation,” said Mohamed El-Erian, the chief economic adviser at the financial services company Allianz. He thinks the Fed now runs the risk of having to pull support away so rapidly that it disrupts markets and the economy. The Fed’s Board of Governors “maintained its transitory inflation narrative for 2021 way too long, missing window after window to slowly ease its foot off the stimulus accelerator.”Plenty of economists disagree with Mr. El-Erian, pointing out that the Fed reacted swiftly as it realized that conditions did not match its expectations. And market forecasts for inflation have remained under control, suggesting that investors believe that the Fed will manage to stabilize prices over the long run. Even so, stocks are shuddering and consumers are watching nervously as the central bank prepares for what could an unusually rapid withdraw of monetary support — ramping up pressure on its policymakers.“The downturn was faster, the upturn was faster: It was an unprecedented event, so not forecasting it properly was not the end of the world,” said Gennadiy Goldberg, a senior U.S. rates strategist at TD Securities. “What matters is what their readjustment is once the forecast has changed.”Jerome H. Powell, the Fed chair, and his colleagues meet this week in Washington and will release their latest policy decision at 2 p.m. on Wednesday.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: We asked readers to send questions about inflation. Top experts and economists weighed in.What’s to Blame: Did the stimulus cause prices to rise? Or did pandemic lockdowns and shortages lead to inflation? A debate is heating up in Washington.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.The Fed is on track to end its asset buying program in March, at which point markets expect policymakers to begin raising interest rates. Investors expect officials to raise interest rates as many as four times this year, while allowing their balance sheet of asset holdings to shrink. Both policy changes would work together to remove juice from the rapidly recovering economy.The path the Fed is now following differs starkly from the one it was projecting as recently as September, when many Fed officials had not come around to the idea that rates would rise in 2022. Likewise, the Fed began tapering off its bond buying program only in late 2021, so it is now in the uncomfortable position of making its final purchases — giving markets and the economy an added lift — even as inflation comes in hot.The central bank’s critics argue that it should have started to withdraw its help earlier and faster. That would have begun to cool off demand and inflation sooner, and it would allow for a more gradual drawdown of support now.“I don’t think the Fed caused this inflation problem, but I do think they were late to recognize it,” said Aneta Markowska, chief financial economist at Jefferies, an investment bank. “And, therefore, they will have to catch up very quickly.”Sudden Fed moves carry an economic risk: Failing to give markets time to digest and adjust often sends them into tumult. Rocky markets can make it hard for households and businesses to borrow money, causing the economy to slow sharply, and perhaps more than the central bank intended.That is why the Fed typically tries to engineer what policymakers often refer to as a “soft landing.” The goal is to avoid upending markets, and to allow the economy to decelerate without slowing it down so abruptly that it tips into recession.But the economy has surprised the central bank lately.In 2021, Fed policymakers bet that rapid inflation would fade as the economy got through an unusual reopening period and the pandemic abated. They wanted to be patient in removing support as the labor market healed, and they did not meaningfully change their plans for policy after Democrats took the White House and Senate and it became clear that they would pass a large stimulus package.The path the Fed is now following differs starkly from the one it was projecting as recently as September.Stefani Reynolds for The New York TimesAs those dollars trickled out into the economy and the pandemic persisted, though, demand remained strong, supply chains remained roiled, and inflation began to broaden out from pandemic-disrupted products like cars and airfares into rents, which move slowly and matter a lot to overall price increases. Workers returned to the job market more slowly than many economists expected, and wages began to pick up sharply as labor shortages surfaced.That caused the Fed to change course late last year — and to do so fairly abruptly.“Inflation really popped up in the late spring last year, and we had a view — it was very, very widely held in the forecasting community — that this would be temporary,” Mr. Powell said in December. But officials grew more concerned as employment cost data moved higher and inflation indicators showed hot readings, he said, so they pivoted on policy.Inflation F.A.Q.Card 1 of 6What is inflation? More

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    Cash Aid to Poor Mothers Increases Brain Activity in Babies, Study Finds

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    The research could have policy implications as President Biden pushes to revive his proposal to expand the child tax credit.WASHINGTON — A study that provided poor mothers with cash stipends for the first year of their children’s lives appears to have changed the babies’ brain activity in ways associated with stronger cognitive development, a finding with potential implications for safety net policy.The differences were modest — researchers likened them in statistical magnitude to moving to the 75th position in a line of 100 from the 81st — and it remains to be seen if changes in brain patterns will translate to higher skills, as other research offers reason to expect.Still, evidence that a single year of subsidies could alter something as profound as brain functioning highlights the role that money may play in child development and comes as President Biden is pushing for a much larger program of subsidies for families with children.“This is a big scientific finding,” said Martha J. Farah, a neuroscientist at the University of Pennsylvania, who conducted a review of the study for the Proceedings of the National Academies of Sciences, where it was published on Monday. “It’s proof that just giving the families more money, even a modest amount of more money, leads to better brain development.”The payments will continue until the children are at least 4 years old, and the researchers plan further tests.via Lauren Meyer/Baby’s First YearsAnother researcher, Charles A. Nelson III of Harvard, reacted more cautiously, noting the full effect of the payments — $333 a month — would not be clear until the children took cognitive tests. While the brain patterns documented in the study are often associated with higher cognitive skills, he said, that is not always the case.“It’s potentially a groundbreaking study,” said Dr. Nelson, who served as a consultant to the study. “If I was a policymaker, I’d pay attention to this, but it would be premature of me to pass a bill that gives every family $300 a month.”A temporary federal program of near-universal children’s subsidies — up to $300 a month per child through an expanded child tax credit — expired this month after Mr. Biden failed to unite Democrats behind a large social policy bill that would have extended it. Most Republicans oppose the monthly grants, citing the cost and warning that unconditional aid, which they describe as welfare, discourages parents from working.Sharing some of those concerns, Senator Joe Manchin III, Democrat of West Virginia, effectively blocked the Biden plan, though he has suggested that he might support payments limited to families of modest means and those with jobs. The payments in the research project, called Baby’s First Years, were provided regardless of whether the parents worked.Evidence abounds that poor children on average start school with weaker cognitive skills, and neuroscientists have shown that the differences extend to brain structure and function. But it has not been clear if those differences come directly from the shortage of money or from related factors like parental education or neighborhood influences.The study released on Monday offers evidence that poverty itself holds children back from their earliest moments.“This is the first study to show that money, in and of itself, has a causal impact on brain development,” said Dr. Kimberly G. Noble, a physician and neuroscientist at Teachers College, Columbia University, who helped lead the study.Dr. Noble and colleagues from six universities recruited a thousand mother-infant pairs within days of the babies’ birth and randomly divided the families into two groups. One group received a nominal $20 a month and another received $333.Using electroencephalograms, or EEG tests, to evaluate the children at age 1, the researchers found that those in the high-cash group had more of the fast brain activity other research has linked to cognitive development than those in the low-cash group. The differences were statistically significant by most, but not all, measures and were greatest in parts of the brain most associated with cognitive advancement.The payments will continue until the children are at least 4 years old, and the researchers plan further tests.Researchers are still trying to determine why the money altered brain development. It could have purchased better food or health care; reduced damaging levels of parental stress; or allowed mothers to work less and spend more time with their infants.The question of whether cash aid helps or hurts children is central to social policy. Progressives argue that poor children need an income floor, citing research that shows even brief periods of childhood poverty can lead to lower adult earnings and worse health. Conservatives say unconditional payments erode work and marriage, increasing poverty in the long run.President Bill Clinton changed the Democratic Party’s stance a quarter-century ago by abolishing welfare guarantees and shifting aid toward parents who work. Though child poverty subsequently fell to record lows, the reasons are in dispute, and rising inequality and volatility have revived Democratic support for subsidies.There are a variety of public and private programs underway in the United States to measure the effects of a guaranteed income on poor families, and many other rich countries offer broad children’s allowances without condition.The temporary expansion of the child tax credit, passed last year, offered subsidies to all but the richest parents at a one-year cost of more than $100 billion. Representative Suzan DelBene, Democrat of Washington, said the study strengthened the case for the aid by showing that “investing in our children has incredible long-term benefits.”Greg J. Duncan, an economist at the University of California, Irvine, who was one of nine co-authors of the study, said he hoped the research would refocus the debate, which he said was “almost always about the risks that parents might work less or use the money frivolously” toward the question of “whether the payments are good for kids.”But a conservative welfare critic, Robert Rector of the Heritage Foundation, argued that the study vindicated stringent welfare laws, which he credited with reducing child poverty by incentivizing parents to find and keep jobs.“If you actually believe that child poverty has these negative effects, then you should not be trying to restore unconditional cash aid,” he said. “You certainly don’t want to go in the business of reversing welfare reform.”Economists and psychologists once dominated studies of poor children, but neuroscientists have increasingly weighed in. Over the past 15 years, they have shown that poor children on average differ from others in brain structure and function, with the disparities greatest for the poorest children.EEG tests have found differences in electrical activity. Magnetic resonance imaging, or M.R.I.s, have shown differences in the size of the cerebral cortex, especially in areas linked to language development and executive functioning. One study found differences in cerebral cortex size may account for up to 44 percent of the achievement gap between high- and low-income adolescents.As with any group differences, averages do not predict individual outcomes. Many other factors beyond brain features influence cognitive development, and many low-income children thrive.To test the effects of cash aid, Baby’s First Years raised more than $20 million from public and private sources, including the National Institutes of Health. Researchers recruited participants from maternity wards in New York City, Minneapolis-St. Paul and the metro areas of New Orleans and Omaha, randomly assigning them to the high- and low-payment groups.The families had average incomes of about $20,000, below the official poverty line for an average-sized family, meaning those who received $333 a month experienced an income gain of approximately 20 percent. The mothers were told they could use the money as they wished.The researchers predicted that children in the high-cash group would show more high-frequency brain activity than those in the low-cash group and less low-frequency activity. Previous research has found such patterns are associated with higher cognitive skills and fewer attention problems.The results largely conformed to predictions, with the children who received the higher grants showing more of the fast brain activity (though no differences in slow brain activity).The scientists wrote that the money “appeared” to cause the changed brain patterns, though they were less equivocal in interviews. Dr. Noble said the evidence, though strong, was not “airtight,” in part because the coronavirus pandemic allowed them to test only 435 infants.Researchers are still trying to determine why the money altered brain development. It could have purchased better food or health care.Cody O’Loughlin for The New York TimesJohn Gabrieli, a neuroscientist at the Massachusetts Institute of Technology, said the evidence that cash aid altered brain activity was persuasive and “very important scientifically,” though he added, “We want to see if these differences result in improvements to cognition.”While the size of the recorded differences are modest (about a fifth of a standard deviation), the researchers said they were comparable to those produced by the average school experiment, like giving children tutors. While those services are often hard to administer, they added, cash can be distributed on a mass scale.Katherine Magnuson, a co-author of the study who directs the Institute for Research on Poverty at the University of Wisconsin, said she was surprised that only a year’s worth of aid made a difference. “It shows how sensitive the brain is to environments,” she said.Critics of unrestricted cash aid often warn that families will waste or abuse it. But Lisa A. Gennetian, an economist at Duke University and a co-author of the study, said the results indicated that parents could be trusted to make good decisions. “For one family, that might be food; for another, it might be housing,” she said. Additional research will examine how parents spent the money.Unlike last year’s expansion of the child tax credit, the experimental payments were narrowly targeted to poor newborns, which would make it less costly to replicate and possibly ease conservatives’ concerns about deterring work.One critic of the broader payments, Angela Rachidi of the American Enterprise Institute, said the study suggested the importance of infant bonding. Should the initial results hold up, she said, they could lend support for policies that help mothers spend more time with their newborns, including paid leave.But any cash aid, she said, should be “targeted to those with low incomes, time limited, and not erode work incentives in the long term.” More