The wide margin of support reflected a sense of urgency among lawmakers in both parties about shoring up the technological and industrial capacity of the United States to counter Beijing.WASHINGTON — The Senate overwhelmingly passed legislation on Tuesday that would pour nearly a quarter-trillion dollars over the next five years into scientific research and development to bolster competitiveness against China. More
A swath of recommendations calls for more investments, new supply chains and less reliance on other countries for crucial goods.WASHINGTON — The Biden administration on Tuesday planned to issue a swath of actions and recommendations meant to address supply chain disruptions caused by the coronavirus pandemic and decrease reliance on other countries for crucial goods by increasing domestic production capacity. More
The Treasury secretary worked with finance ministers from the G7 to win support for a global minimum tax. But selling the idea to Republican lawmakers will not be easy.Treasury Secretary Janet L. Yellen secured a landmark international tax agreement over the weekend, one that has eluded the United States for nearly a decade. But with a narrowly divided Congress and resistance from Republicans and business groups mounting, closing the deal at home may be an even bigger challenge.The Biden administration is counting on more than $3 trillion in tax increases on corporations and wealthy Americans to help pay for its ambitious jobs and infrastructure proposals. Republicans have expressed opposition to any rise in taxes and have warned that President Biden’s big spending plans are fueling inflation and will deter business investment. Business groups have complained that higher taxes pose a threat to the economic recovery and will put American companies at a competitive disadvantage.Persuading members of the Group of 7 advanced economies to agree on Saturday to a global minimum tax of at least 15 percent was intended to help the Biden administration win support for its U.S. tax increases. If enacted, the global minimum tax would require that companies pay at least a 15 percent tax on income, regardless of where they are based, making it less advantageous to relocate operations to countries with lower tax rates.In an interview on Sunday, Ms. Yellen acknowledged the legislative challenge ahead and defended the Biden administration’s plans to raise taxes on corporations. She stood behind Mr. Biden’s proposal to raise the corporate tax rate in the United States to 28 percent from 21 percent.“We think it’s a fair way to collect revenues,” Ms. Yellen said on her flight back to the United States from London after attending two days of meetings with G7 finance ministers. “I honestly don’t think there’s going to be a significant impact on corporate investment.”Ms. Yellen played down the relationship between tax rates and business spending, arguing that the $1.5 trillion tax cuts that Republicans passed in 2017 did little to lift American investment. She said that the changes to the international tax code would ultimately be beneficial to U.S. firms and that even those who face higher taxes, such as Amazon, Facebook and Google, would gain from the additional certainty about their tax bills.But the fate of Mr. Biden’s proposals is not certain, and Ms. Yellen now faces the task of convincing lawmakers that large tax and spending increases will not hinder the economic recovery.Mr. Biden has been negotiating with Republican lawmakers and has expressed a willingness to narrow the scope of his tax and spending plans to rebuild the nation’s roads and bridges. The president has offered to drop his proposal to raise the corporate rate to 28 percent to secure bipartisan support, though White House officials expect to try to push that higher rate through in a separate legislative vehicle that can pass without any Republican support.Ms. Yellen acknowledged that compromise on the corporate tax rate might be necessary and said that she hoped for a bipartisan infrastructure agreement. Republicans are resisting any changes to the 2017 tax law, which cut the corporate tax rate to 21 percent.It is unclear if Republicans will support the international tax agreement, particularly a decision to impose a new tax on big, multinational corporations — even if they have no physical presence in the countries where they sell those services. That part of the agreement was offered by the United States to put to rest a fight with European countries over their digital services taxes that would hit large American technology companies.Some lawmakers have already criticized the idea as ceding taxing authority to other governments, and many business groups were still absorbing the agreement over the weekend. Ms. Yellen believes that the concept will not cost the United States much in terms of lost tax revenue. However, the fact that European countries are not dropping their digital services taxes until a deal is fully enacted has already been criticized by top Republicans in the House and Senate given it could take four years for the agreement to be put in place.If the Biden administration cannot shepherd the tax legislation through Congress, the agreement on the global minimum tax — and a separate deal that was reached on Saturday on a system for taxing large companies based on where their goods and services are sold — will be for naught. Negotiators are hoping to broaden the agreement to more countries at the Group of 20 meetings in Italy next month and then finalize a pact in October. Then countries, including the United States, will have to change their laws accordingly.The G7 summit was Ms. Yellen’s first trip abroad as Mr. Biden’s top economic diplomat. In London, Ms. Yellen received praise from her counterparts for restoring American leadership and for the Biden administration’s embrace of multilateralism after four years of President Donald J. Trump’s “America First” policies.The Treasury secretary described the job as more grueling than her previous role as chair of the Federal Reserve, pointing to the scale of the relief programs that she is overseeing and the department’s vast portfolio. An economist who has focused for years on monetary policy, Ms. Yellen is now in charge of sanctions policy, tax policy, overseeing regulators and dealing regularly with Congress.Beyond the tax negotiations, Ms. Yellen is grappling with the sensitive question of inflation and whether the president’s policies are going to stoke higher prices for a sustained period. Businesses in the United States have expressed growing concern about rising prices, along with a shortage of commodities, and a lack of available workers.Ms. Yellen maintained that she believed rising prices were a short-term issue related to the reopening of the economy and snarled supply chains. Still, the chance of a sustained jump in prices remains a concern that she is tracking closely.To determine if inflation is more than a temporary matter, Ms. Yellen is monitoring two key metrics: inflation expectations and wage increases for low-paid workers. Rising pay for the lowest-wage workers could potentially lead to “an inflationary trend” if there is broad excess demand for workers in the labor market, she warned.“We don’t want a situation of prolonged excess demand in the economy that leads to wage and price pressures that build and become endemic,” Ms. Yellen said. “Looking at wage increases, you can have a wage price spiral, so you need to be careful.”She added: “I do not see that happening now.”At the G7 meeting, Ms. Yellen raised eyebrows when she said that inflation could remain higher for the rest of the year, with rates around 3 percent. However, in the interview, she said that the comment was misinterpreted. She said that she expected inflation rates to be elevated for the next few months but then settle down to be consistent with the 2 percent rate that is the Federal Reserve’s long-term target.“I don’t see any evidence that inflation expectations are getting out of control,” Ms. Yellen said.Critics have suggested that the Biden administration’s extension of pandemic unemployment insurance is fueling the labor shortage by encouraging workers to stay at home and collect generous benefits. At least 20 states have moved to cut off benefits early to encourage people to go back to work.Ms. Yellen said the difference in how states were handling jobless benefits could shed new light on the dynamic, but that she still saw no evidence that the supplement was slowing job creation. She pointed to a lack of child care and positions that were permanently lost because of the pandemic as the more probable reason that employers in some sectors were struggling to find staff.“We wanted to support people,” Ms. Yellen said. “This isn’t something that should be in place forever.”Although the economy is improving, Ms. Yellen said that seven million jobs that were lost since the pandemic still had not been restored. Some of them might never come back.“We’re not in a tight labor market at this point,” she said. More
As Republicans blame enhanced unemployment insurance for slower-than-expected job gains, the White House stresses that the benefit will expire in September as planned.With fresh data showing that American employers added jobs at a decent but unexceptional pace in May, President Biden on Friday emphasized that his administration would not try to extend enhanced unemployment benefits that Republicans have criticized as a key factor in fueling a labor shortage.The extent to which the extra $300 in weekly jobless benefits may be keeping workers sidelined is unclear. Some economists say insufficient child care and health concerns may be the main drivers behind Americans not seeking jobs, while unemployment insurance and other pandemic-era policies are giving people the financial flexibility to choose to remain out of work.But the pace of hiring has been somewhat disappointing in recent months, and business complaints about worker shortages abound. The U.S. added 559,000 jobs in May, a solid number but one that fell short of analyst expectations of 675,000 jobs. The prior month was a more significant miss: Just 278,000 jobs were added at a time when analysts were expecting a million.The Biden administration on Friday celebrated the May job gains as a sign that the labor market is healing from the pandemic downturn and that its policies are working. But White House officials indicated they would not try to renew the enhanced jobless benefits, which expire in September, saying they were meant to be temporary.“It’s going to expire in 90 days,” Mr. Biden said, speaking in Rehoboth Beach, Del. “That makes sense.”At least 25 states have already moved to end the extra $300 beginning this month, a decision that Jen Psaki, the White House press secretary, said on Friday was completely within their purview. While the administration views the benefit as an “extra helping hand” for workers, some governors disagree and “that’s OK,” she said.“Every governor is going to make their own decision,” she said.The White House’s move to de-emphasize the benefit, which Democrats included in the $1.9 trillion economic relief bill that passed in March, risks angering progressives. But it could also help to shift the narrative toward the broader set of priorities the Biden administration hopes to pass in the months ahead, including a huge infrastructure plan.“This is progress — historic progress,” Mr. Biden said. “Progress that’s pulling our economy out of the worst crisis it’s been in in 100 years.”He added that the recovery was not going to be smooth — “we’re going to hit some bumps along the way” — and that further support that bolsters the economy for the longer term was needed.“Now’s the time to build on the foundation we’ve laid,” Mr. Biden said.Payrolls are still 7.6 million jobs below their prepandemic level. Economic officials, including those at the Federal Reserve, had been hoping for a series of strong labor market reports this spring as vaccinations spread and the economy reopens more fully from state and local lockdowns that were meant to contain the pandemic. In April, Jerome H. Powell, the Fed chair, pointed approvingly to the March jobs report, which had shown payrolls picking up by nearly a million positions.“We want to see a string of months like that,” he said.Instead, gains have proceeded unevenly. Job openings are high and wages are rising, suggesting that at least part of the disconnect comes from labor shortages. That is surprising at a time when the unemployment rate is officially 5.8 percent, and even higher after accounting for people who have dropped out of the labor market during the pandemic.Economists say many things could be driving the worker shortage — it takes time to reopen a large economy, and there is still a pandemic — but the trend has opened a line of attack for Republicans. They blame the enhanced unemployment benefits for discouraging people from returning to work and holding back what could be a faster recovery.“Long-term unemployment is higher than when the pandemic started, and labor force participation mirrors the stagnant 1970s,” Representative Kevin Brady of Texas, the top Republican on the House Ways and Means Committee, said in a news release. “It’s time for President Biden to abandon his attack on American jobs, his tax increases, his anti-growth regulations and his obsession with more emergency spending and endless government checks.”Republican governors across the country have in recent weeks moved to end the supplemental unemployment benefits that began under President Donald J. Trump. The idea is that doing so will prod would-be workers back into jobs.A gas station near Rehoboth Beach offers incentives for new hires. Critics of the Biden administration say enhanced unemployment benefits are discouraging people from returning to work.Alyssa Schukar for The New York TimesMany progressives disagree with that assessment. Democratic leaders in Congress cited the latest employment report as a sign that lawmakers should move to enact the rest of Mr. Biden’s plans to invest in roads, water pipes, low-emission energy deployment, home health care, paid leave and a variety of other infrastructure and social programs — but also that the government should continue to support workers who remain on the sidelines.“The American people need all the support they can get, especially Black and Hispanic communities that were among the hardest hit by the pandemic,” Representative Donald S. Beyer Jr., Democrat of Virginia and the chairman of Congress’s Joint Economic Committee, said in a news release, urging lawmakers to “step up.”Fed officials, who are in charge of setting the stage for full employment and stable prices by guiding the cost of borrowing money, are likely to interpret the May report cautiously. The acceleration in job growth was good news, but the report also offered clear evidence that the labor market remains far from healed.“I view it as a solid employment report,” Loretta J. Mester, president of the Federal Reserve Bank of Cleveland, said on CNBC following the release. “But I’d like to see further progress.”The central bank is buying $120 billion in bonds each month and holding its main policy interest rate at near-zero, policies that keep borrowing cheap and help to stoke demand. Fed officials have said they would need to see “substantial” further progress toward their two goals — maximum employment and stable inflation — before beginning to remove monetary support by scaling down their bond buying program.Ms. Mester made clear that the May report did not reach that standard.“I would like to see a little bit more on the labor market to really see that we’re on track,” she said.Officials have an even higher hurdle for lifting interest rates: They want to see a return to full employment and signs that inflation is likely to stay above 2 percent for some time.Inflation has been moving higher this year, but Fed officials have said they expect much of the pop in prices to be temporary, caused by data quirks and a temporary mismatch as the economy reopens and demand outpaces supply.While the Fed is primarily in charge of controlling inflation, the Biden administration has also been reviewing supply chain issues and hoping to address some of them.Brian Deese, the director of the White House’s National Economic Council, said the administration had identified concrete steps and a long-term strategy to make supply chains for things like semiconductors more resilient. In other areas, like housing materials, the solution may involve convening private-sector actors to figure out a possible strategy.Ms. Psaki said the White House would talk about their plans “when we have more details to share, and hopefully that will be next week.” More
The president offered new concessions this week, including dropping his plan to reverse some of the 2017 tax cuts, as he tries to win support from Senate Republicans.WASHINGTON — President Biden offered a series of concessions to try to secure a $1 trillion infrastructure deal with Senate Republicans in an Oval Office meeting this week, narrowing both his spending and tax proposals as negotiations barreled into the final days of what could be an improbable agreement or a blame game that escalates quickly. More
Researchers found that sharp declines in food shortages, financial instability and anxiety coincided with the two most recent rounds of payments.WASHINGTON — Julesa Webb resumed an old habit: serving her children three meals a day. Corrine Young paid the water bill and stopped bathing at her neighbor’s apartment. Chenetta Ray cried, thanked Jesus and rushed to spend the money on a medical test to treat her cancer.In offering most Americans two more rounds of stimulus checks in the past six months, totaling $2,000 a person, the federal government effectively conducted a huge experiment in safety net policy. Supporters said a quick, broad outpouring of cash would ease the economic hardships caused by the coronavirus pandemic. Skeptics called the policy wasteful and expensive.The aid followed an earlier round of stimulus checks, sent a year ago, and the results are being scrutinized for lessons on how to help the needy in less extraordinary times.A new analysis of Census Bureau surveys argues that the two latest rounds of aid significantly improved Americans’ ability to buy food and pay household bills and reduced anxiety and depression, with the largest benefits going to the poorest households and those with children. The analysis offers the fullest look at hardship reduction under the stimulus aid.Among households with children, reports of food shortages fell 42 percent from January through April. A broader gauge of financial instability fell 43 percent. Among all households, frequent anxiety and depression fell by more than 20 percent.While the economic rebound and other forms of aid no doubt also helped, the largest declines in measures of hardship coincided with the $600 checks that reached most people in January and the $1,400 checks mostly distributed in April.“We see an immediate decline among multiple lines of hardship concentrated among the most disadvantaged families,” said H. Luke Shaefer, a professor at the University of Michigan who co-authored the study with a colleague, Patrick Cooney.Given the scale of the stimulus aid — a total of $585 billion — a reduction in hardship may seem like a given, and there is no clear way to measure whether the benefits were worth the costs.The study does not address the critics’ main complaints, that the spending swelled the deficit, that much of the money went to economically stable families who did not really need it and that the checks were part of a pattern of aid over the last year that left some people with less incentive to find jobs. Some analysts say hardship would have fallen anyway as a result of job growth and other safety net programs.Still, the aggressive use of stimulus checks coincides with growing interest in broad cash payments as a tool in social policy, and the evidence that they can have an immediate effect on the economic strains afflicting many households could influence that debate.Starting in July, the government will mail up to $300 a month per child to all but the most affluent families in a yearlong expansion of the child tax credit that Democrats want to make permanent.Ms. Ray had to contribute $600 to the cost of a CT scan for her cancer diagnosis. The stimulus check in April allowed her to afford it.Callaghan O’Hare for The New York TimesWhile the ability of cash payments to reduce hardship might seem obvious, Mr. Shaefer pointed out that critics of such aid often warn that the needy might waste it. He argued that the size, speed and variety of the hardship reductions vindicated the use of broad cash relief. While other forms of pandemic aid have been better targeted, some have taken many months to distribute and can be used only for dedicated purposes like food or housing.“Cash aid offers families great flexibility to address their most pressing problems, and getting it out quickly is something the government knows how to do,” Mr. Shaefer said. Extrapolating from the survey data, he concluded that 5.2 million children had escaped food insufficiency since the start of the year, a figure he called dramatic.The experience of Ms. Ray, a warehouse worker at a recycling company in Houston, captures the hardships that the pandemic imposed and the varied ways that struggling families have used stimulus checks to address them. Earning $13 an hour, Ms. Ray had an unforgiving budget even before business closures reduced trash collection and cut her hours by a third.Her car insurance lapsed. Her lights were shut off. She skipped meals, even with food pantry aid, and re-wore dirty work clothes to save on laundromat costs. When her daughter discovered that they owed thousands in rent, she offered to quit high school and work, which Ms. Ray forbid. A stimulus payment in January — $1,200 for the two of them — let her pay small parts of multiple bills and restock the freezer.“It bridged a gap,” Ms. Ray said, while she waited for slower forms of assistance, like rental aid.Then she got cancer. To confirm the diagnosis and guide her treatment, she had to contribute $600 to the cost of a CT scan, which she did with the help of a payment in April totaling $2,800.In addition to providing for the test, Ms. Ray said, the checks brought hope. “I really got down and depressed,” she said. “Part of the benefit of the stimulus to me was God saying, ‘I got you.’ Spiritual and emotional reassurance. It took a lot of stress off me.”Scott Winship, who studies poverty at the American Enterprise Institute, questioned the reliability of the census data used in the University of Michigan study, noting that fewer than one in 10 of the households the government contacts answer the biweekly surveys.He also argued that hardship would have fallen anyway, since the last round of stimulus checks coincided with tax season, which sends large sums to low-wage workers through tax credits. Between the earned-income tax credit and the child tax credit, a single parent with two children can receive up to nearly $8,500 a year.Researchers at Columbia University estimate that poverty fell sharply in March, but Zachary Parolin, a member of the Columbia team, said that about half the decline would have occurred without the pandemic relief, primarily because of the tax credits.Noting that the stimulus checks allocated as much to households with incomes above $100,000 as they did to those below $30,000, Mr. Winship called them inefficient and a poor model for future policy. “It’s not sustainable to just give people enough cash to eliminate poverty,” he said. “And in the long run it can have negative consequences by reducing the incentives to work and marry.”Analysts have long debated the merits of cash versus targeted assistance like food stamps or housing subsidies. Cash is easy to send and flexible to use. But targeted benefits offer more assurance that the aid is used as intended, and they attract political support from related businesses like grocers and landlords.Throughout the pandemic, policymakers have employed both approaches. The first round of stimulus checks, $1200 per adult and $500 per child last year, started before the Census Bureau surveys began, so it is harder to gauge its effect.With full eligibility extending to families with incomes of up to $150,000, the stimulus checks could reach nearly 300 million Americans. While that greatly increased the cost, Mr. Shaefer said it reduced the resentment that could accompany aid to the chronically needy and noted that hardships have expanded up the income ladder.Even among households that had prepandemic incomes of $50,000 to $75,000, more than 11 percent of those with children sometimes or often lacked food at the start of the year — a figure that has since fallen in half, according to the Census data.Ms. Ray said she had skipped meals and reworn dirty work clothes to save on laundry costs during the economic downturn.Callaghan O’Hare for The New York TimesWhen some people heard the latest checks were coming, they considered the news too good to be true. Ms. Webb, a St. Louis nursing aide with three young children, lost about two-thirds of her earnings when the pandemic left fewer patients seeking in-home care. She found another job but lost it after catching Covid. Food was the first casualty.“We’d have breakfast a little later than normal, and then dinner — no lunch,” she said. “Sometimes the kids would have dry cereal because we didn’t have milk.”Despite her skepticism, Ms. Webb received $8,000 for her four-person family between the two rounds. She used the money to pay back family loans and reduce her overdue rent, and she started serving lunch and an afternoon snack “to make sure the kids were full-full.”“I was like, ‘Woo!’ This is the most money I ever seen in my bank account,” she said. “I’m still in a hole, but I’m starting to see more sunlight now.”Mr. Shaefer acknowledged that other aid and an improving economy might have helped reduce hardship, but he said the timing pointed toward the stimulus checks. Among families with children, nearly 90 percent of the improvement in food sufficiency this year occurred in the two weeks after each round of payments.The study cited another direct link between cash aid and hardship: after the government stopped supplementing jobless benefits last fall, food insufficiency among families with children rose nearly 25 percent.“Throughout the crisis, the level of hardship faced by U.S. households can be directly linked to the federal government’s response,” Mr. Shaefer and Mr. Cooney wrote.Low-income families often emphasize the stress that economic uncertainty brings, especially when it threatens needs as basic as shelter and food. At the start of this year, 73 percent of households with children reported spending at least several days a week feeling anxious. That figure has since fallen to 57 percent, according to the census data.“I really got down and depressed,” Ms. Ray said. “Part of the benefit of the stimulus to me was God saying, ‘I got you.’ Spiritual and emotional reassurance. It took a lot of stress off me.”Callaghan O’Hare for The New York TimesBut mental health might have improved for many reasons, Mr. Winship said, including increasing vaccinations, falling disease rates and the socialization that has accompanied the reopening of businesses and schools. “I would really question whether that’s the stimulus checks,” he said.Still, research in recent decades has emphasized the debilitating effect that stress can have on children raised in low-income households. And recipients of the stimulus payments often describe them as an emotional balm.For Ms. Young, 40, the problems of poverty and poor mental health are deeply entwined. A Chicago woman with schizophrenia, she is raising a teenager and a baby on food stamps and disability checks. Extra help from adult children lapsed during the pandemic when they lost work. The result was a disconnected water line and two weeks of toting jugs from her neighbor’s apartment.“It’s really depressing, having to worry about losing your lights and water,” Ms. Young said. “Very stressful. It was a very, very dark path.”She did not receive the stimulus payment that most people got at the start of the year, for reasons she does not understand. She checked her bank account in April, to see if she could buy a loaf a bread, when she found it swollen with a $1,400 stimulus check.Ms. Young bought the bread — two loaves — and paid down her utility bills to avoid more outages. “I did it that day,” she said. “You just don’t know — it was such a relief.” More
After a shift by the C.D.C., employers withdrew mask policies that workers felt were protecting them from unvaccinated customers.The Kroger supermarket in Yorktown, Va., is in a county where mask wearing can be casual at best. Yet for months, the store urged patrons to cover their noses and mouths, and almost everyone complied. More
For all the administration’s focus on transformational policies, it’s not forecasting an outburst of economic potential.President Biden’s budget proposal includes billions of dollars for clean energy, education and child care — ideas being sold for their potential to increase America’s economic potential. One thing it does not include: an outright economic boom.In the assumptions that underpin the administration’s budget, economic growth is strong in 2021 and 2022 — but strong enough only to return the economy to its prepandemic trend line, not to surge above the trajectory it was on throughout the 2010s.Then in 2023, the administration expects gross domestic product, the broadest measure of economic activity, to rise at a slower 2 percent rate, then 1.8 percent a year through the mid-2020s. That is lower than the 2.3 percent average annual growth rate experienced from 2010 to 2019.The administration’s outlook is consistent with projections by other forecasters, including at the Congressional Budget Office and in the private sector. But it means that the Biden White House is not — at least not formally — expecting the kind of rip-roaring growth that characterized periods like 1983 to 1989 (with an average annual G.D.P. growth of 4.4 percent) and 1994 to 2000 (4 percent).Those two episodes coincided with much more favorable demographic trends. They also helped propel two presidents to comfortable re-elections.If the new projections were to prove accurate, it would imply two years of strong growth paired with moderate inflation as the nation recovered from the pandemic heading into the 2022 midterm elections, but then comparatively low growth in the run-up to the 2024 election.The sober estimate contrasts with the approach Mr. Biden has taken to selling his agenda publicly. The framing of his signature plans for infrastructure and family support has been that they will enable the economy to become more vibrant and productive.“There’s a broad consensus of economists left, right and center, and they agree what I’m proposing will help create millions of jobs and generate historic economic growth,” Mr. Biden said in an address to Congress in April.It is a striking contrast with the approach taken by the Trump administration — a gap between presidential styles buried on Table S-9 of the two presidents’ budgets. The Trump administration’s final prepandemic budget proposal, published in February 2020, forecast that the economy would grow around 3 percent per year throughout the 2020s.If the Trump projections materialized, by 2030 the economy would be more than 11 percent bigger than what the Biden projections envision. However, the Trump administration persistently underdelivered on growth. G.D.P. rose an average of 2.5 percent in the three nonpandemic years of his presidency. The results are weaker still if you include the contraction of the economy in 2020.A wind farm in Carbon County, Wyo. The Biden administration says investment in clean energy will help America fulfill more of its long-term potential.Benjamin Rasmussen for The New York TimesCasey B. Mulligan, a University of Chicago economist who worked in the Trump White House, said in an email that the reduced growth forecasts were similar to those that career economic staff recommended in the Trump years. “They perennially overestimated Obama-era growth and underestimated Trump nonpandemic growth,” but you couldn’t see it in the published documents in the Trump years “because normally the political appointees such as me have a say in what is published.”The Biden administration has been inclined more broadly to a strategy of underpromising and overdelivering, most notably with the rollout of vaccines.Even before the budget’s official release, its growth projections became a subject of Republican attacks. “The Obama-Biden administration famously accepted slow growth as America’s ‘new normal’ while pursuing policies that sent jobs overseas,” House Republicans on the Ways and Means Committee said in a blog post. “President Biden appears to be lowering the bar even further.”Political volleys aside, it can be easy both to overestimate the ability of government policy to move the dial on overall growth — and to underestimate how much even small gains in productivity can mean when they compound over many years.In the 1980s boom, for example, the labor force was growing much more rapidly than it is now, helped by demographic trends and a rise in women entering work. In the 1990s boom, a surge in productivity resulted in large part from innovations in information technology, unconnected to government spending.“We are a really big economy where really big forces are shaping what happens to G.D.P. growth,” said Wendy Edelberg, director of the Hamilton Project at the Brookings Institution and a former C.B.O. chief economist.Even these moderate projections by the Biden administration imply that its policies will lift growth in economic activity by a few tenths of a percent each year over a decade. This is significant when comparing it with the growth that would be expected by simply looking at demographic factors and historical averages of productivity growth. The forecast is more inherently optimistic about Mr. Biden’s policies — and their potential to increase productivity and the size of the work force — than it might seem at first glance..css-1xzcza9{list-style-type:disc;padding-inline-start:1em;}.css-3btd0c{font-family:nyt-franklin,helvetica,arial,sans-serif;font-size:1rem;line-height:1.375rem;color:#333;margin-bottom:0.78125rem;}@media (min-width:740px){.css-3btd0c{font-size:1.0625rem;line-height:1.5rem;margin-bottom:0.9375rem;}}.css-3btd0c strong{font-weight:600;}.css-3btd0c em{font-style:italic;}.css-w739ur{margin:0 auto 5px;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}#NYT_BELOW_MAIN_CONTENT_REGION .css-w739ur{font-family:nyt-cheltenham,georgia,’times new roman’,times,serif;font-weight:700;font-size:1.375rem;line-height:1.625rem;}@media (min-width:740px){#NYT_BELOW_MAIN_CONTENT_REGION .css-w739ur{font-size:1.6875rem;line-height:1.875rem;}}@media (min-width:740px){.css-w739ur{font-size:1.25rem;line-height:1.4375rem;}}.css-9s9ecg{margin-bottom:15px;}.css-16ed7iq{width:100%;display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-align-items:center;-webkit-box-align:center;-ms-flex-align:center;align-items:center;-webkit-box-pack:center;-webkit-justify-content:center;-ms-flex-pack:center;justify-content:center;padding:10px 0;background-color:white;}.css-pmm6ed{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-align-items:center;-webkit-box-align:center;-ms-flex-align:center;align-items:center;}.css-pmm6ed > :not(:first-child){margin-left:5px;}.css-5gimkt{font-family:nyt-franklin,helvetica,arial,sans-serif;font-size:0.8125rem;font-weight:700;-webkit-letter-spacing:0.03em;-moz-letter-spacing:0.03em;-ms-letter-spacing:0.03em;letter-spacing:0.03em;text-transform:uppercase;color:#333;}.css-5gimkt:after{content:’Collapse’;}.css-rdoyk0{-webkit-transition:all 0.5s ease;transition:all 0.5s ease;-webkit-transform:rotate(180deg);-ms-transform:rotate(180deg);transform:rotate(180deg);}.css-eb027h{max-height:5000px;-webkit-transition:max-height 0.5s ease;transition:max-height 0.5s ease;}.css-6mllg9{-webkit-transition:all 0.5s ease;transition:all 0.5s ease;position:relative;opacity:0;}.css-6mllg9:before{content:”;background-image:linear-gradient(180deg,transparent,#ffffff);background-image:-webkit-linear-gradient(270deg,rgba(255,255,255,0),#ffffff);height:80px;width:100%;position:absolute;bottom:0px;pointer-events:none;}.css-1jiwgt1{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-box-pack:justify;-webkit-justify-content:space-between;-ms-flex-pack:justify;justify-content:space-between;margin-bottom:1.25rem;}.css-8o2i8v{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-flex-direction:column;-ms-flex-direction:column;flex-direction:column;-webkit-align-self:flex-end;-ms-flex-item-align:end;align-self:flex-end;}.css-8o2i8v p{margin-bottom:0;}.css-12vbvwq{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;}@media (min-width:740px){.css-12vbvwq{padding:20px;width:100%;}}.css-12vbvwq:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-12vbvwq{border:none;padding:10px 0 0;border-top:2px solid #121212;}.css-12vbvwq[data-truncated] .css-rdoyk0{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-12vbvwq[data-truncated] .css-eb027h{max-height:300px;overflow:hidden;-webkit-transition:none;transition:none;}.css-12vbvwq[data-truncated] .css-5gimkt:after{content:’See more’;}.css-12vbvwq[data-truncated] .css-6mllg9{opacity:1;}.css-1rh1sk1{margin:0 auto;overflow:hidden;}.css-1rh1sk1 strong{font-weight:700;}.css-1rh1sk1 em{font-style:italic;}.css-1rh1sk1 a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;text-underline-offset:1px;-webkit-text-decoration-thickness:1px;text-decoration-thickness:1px;-webkit-text-decoration-color:#ccd9e3;text-decoration-color:#ccd9e3;}.css-1rh1sk1 a:visited{color:#333;-webkit-text-decoration-color:#ccc;text-decoration-color:#ccc;}.css-1rh1sk1 a:hover{-webkit-text-decoration:none;text-decoration:none;}“Making the claim that your fiscal policies will boost growth by four-tenths of a point seems optimistic, but I can see how they could get there,” she said.Jason Furman, the Obama administration’s former top economist, said: “I think there’s a problem that people have in their head — more extravagant ideas about what economic policy can do and how quickly it can do it. When you’re talking about productivity enhancement, you’re talking about compounding that becomes a big deal for a long time.”In other words, the difference of a few tenths of a percent of G.D.P. growth might not mean much for a single year, but a gap of that size that persists for many years has a big impact on living standards.Some of the administration’s policies, by design, would focus on the very long-term impact on the nation’s economic potential. For example, additional money for community colleges might actually depress the size of the labor force, and thus G.D.P., in the short run if more adults go back to school. But it would then increase those workers’ productive potential, and thus contribution to growth, for the decades that follow.Conservatives, for their part, view the Biden agenda as likely to restrain growth, particularly once tax increases and new regulatory action go into effect. Mr. Mulligan, the Trump adviser, said he believed the Biden agenda would reduce the nation’s growth path by around 0.8 percentage points a year compared with its Trump-era trajectory. Douglas Holtz-Eakin, president of the American Action Forum, said he thought Mr. Biden’s policies could create faster growth in the short term but slower growth in the long run because of taxes and spending.The Biden White House is more optimistic about what is possible for American workers. After the post-pandemic recovery, it projects a 3.8 percent unemployment rate from 2023 on, which is a bit lower than the levels forecast by the C.B.O. (an average of 4.2 percent from 2023 to 2031) or the Fed (4 percent is the median longer-run unemployment forecast of its leaders). It’s also lower than the 4 percent post-2023 jobless rate included in the Trump budget.The administration is optimistic about the post-pandemic recovery in the job market, projecting a 3.8 percent unemployment rate from 2023 on.Hannah Beier for The New York TimesThis reflects the lessons of 2019, when the jobless rate was consistently below 4 percent without causing excessive inflation or other problems. It’s a welcome sign for anyone who thinks that running a tight labor market — a high-pressure economy, as Treasury Secretary Janet Yellen calls it — is a good thing.Forecasts, on their own, aren’t worth more than the paper on which they are printed. A bold prediction of the boom that’s coming wouldn’t mean much if it didn’t materialize. And the world described in the Biden team’s forecasts is hardly a gloomy one: Low unemployment, low inflation and steady growth is a nice combination, and one that could describe much of the period from 2016 to 2019.The question for Mr. Biden is whether that will be enough to qualify as building back better. More
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