
Happy Monday and welcome to what’s likely
to be a relatively quiet Thanksgiving Week on the fiscal front as
lawmakers head home for the holiday or travel abroad on
congressional delegations. President Biden made some big economic
news, today, though, by renominating Jerome Powell for another
four-year term as head of the Federal Reserve. Here's what you need
to know:
Biden Bets on Powell for Another Term as Fed Chair
With the U.S. economy still suffering from the lingering
effects of the recession caused by the Covid-19 pandemic as well as
a surge in inflation that has accompanied the reopening of
businesses across the country, President Joe Biden on Monday said
he would renominate Jerome Powell to lead the Federal Reserve for
another term.
Biden also said he would nominate Fed governor Lael
Brainard, who had been backed by prominent liberal Democrats for
the top spot at the central bank, as vice chair of the central
bank’s board of governors.
The nominations indicate that the Biden administration is
sticking with its current approach to the economy as it seeks to
balance support for post-recession growth in the labor market with
rising concerns about rapidly escalating prices in many sectors of
the economy.
"Why am I not picking fresh blood or taking the Fed in a
different direction?" Biden asked in remarks at the White House.
"Put directly, at this moment both of enormous potential and
enormous uncertainty for our economy, we need stability and
independence at the Federal Reserve."
Balancing the dual mandate: In a statement, Biden
said that Powell and Brainard have pushed the Fed to pay more
attention to the second part of its dual mandate – maximum
sustainable employment – along with its more typical focus on price
stability.
Saying the pair had overseen "a landmark re-evaluation of
the Federal Reserve’s objectives to refocus its mission on the
needs of workers of all backgrounds," Biden said they shared his
administration’s goal of "ensuring that economic growth broadly
benefits all workers."
At the same time, inflation has surged to levels not seen
in decades, worrying critics who have called for a more aggressive
response by the Fed —possibly including an increase in interest
rates, which the Fed has kept near zero since the pandemic began to
encourage growth.
Although economists remain divided on the cause and
expected duration of the current flurry of price hikes, many agree
that raising rates could help restrain inflation, though likely at
the cost of job growth. The U.S. labor market is still millions of
jobs below where it was when the pandemic started in March
2020.
In comments at the White House, Powell said he remains
focused on both aspects of the Fed’s mission. "We will use our
tools both to support the economy and a strong labor market, and to
prevent higher inflation from becoming entrenched," he
said.
A peace offering to critics on the left: Powell’s
nomination was met with bipartisan expressions of support, but some
liberals have charged that Powell, a Republican who was first
tapped to lead the Fed by President Donald Trump, has been too easy
on Wall Street and insufficiently attentive to issues including
ethics, climate change and income inequality. Biden’s nomination of
Brainard, who was pushed as a more progressive replacement for
Powell, is seen by many as an effort to placate those critics. Sen.
Elizabeth Warren (D-MA), who has criticized Powell as "a dangerous
man," said Monday that she will vote against his nomination but
would support Brainard’s.
Biden hinted Monday that his future selections for Fed
positions would please progressives. "While Jay and Lael bring
continuity and stability to the Fed, my additions will bring new
perspectives and new voices," he said.
What’s next: Despite opposition from Warren and
some other liberals, Powell appears to have an easy path to being
confirmed again by the Senate. "I look forward to supporting his
confirmation," Sen. Pat Toomey (R-PA), the ranking Republican on
the Banking Committee, said Monday.
Brainard, who would replace Richard Clarida as vice chair,
is expected to face some level of resistance from Republicans
concerned about her tough stance on bank regulation, though it’s
not clear if it will be enough to derail her nomination.
Once in place, the Fed leaders will face some of the most
difficult issues the bank has had to deal with in its 107-year
history, with inflation — and the political price Biden could pay
for it at the polls — at the top of the list.
The bank has started to taper its bond purchasing effort
as it moves to withdraw emergency supports for the economy put in
place during the pandemic. While interest rate hikes aren’t
expected until midway through next year, the troubling persistence
of inflation puts the central bank at the center of the ongoing
battle over the fate of Biden’s broader agenda.
Fueled by Federal Aid, State Spending Rises by Most in
Decades
Spending by U.S. states rose 16.2% in fiscal year 2021, the
fastest pace in at least 35 years, according to a
report released Friday by the National Association of
State Budget Officers.
Total state spending reached $2.65 trillion last year, up from
$2.28 trillion in fiscal year 2020.
The surge was driven by federal pandemic relief funds. Spending
from states own funds rose by 5.7%, while spending of federal funds
soared by 35.7%. States reported spending nearly $322 billion in
federal Covid-19 aid in fiscal 2021, lifting the two-year total for
federal pandemic aid spent by states to $427.9 billion.
"States tapped funds to pay for programs ranging from public
assistance to Medicaid, transportation and education," Bloomberg’s
Nic Querolo
reports. "The largest increase was in a category
that includes Covid-specific expenditures such as public-health
programs, unemployment insurance and emergency management. States
have until the end of calendar 2024 to allocate money from their
Coronavirus State and Local Fiscal Recovery Funds."
States also saw revenues rise sharply in fiscal 2021, climbing
12.8%. That reversed a decline from the year before, the first time
state revenues had fallen since fiscal 2010. Federal aid played a
part in that reversal, the state budget officers’ report says:
"Several factors help explain recent improvements in states’
revenue outlooks, including: federal stimulus measures infused
additional money into the economy, which helped to lessen state
revenue losses; high-income earners have been relatively insulated
from the COVID-19 pandemic’s economic effects, which has limited
impacts on personal tax collections; the types of consumption most
curtailed by the pandemic comprise a relatively small portion of
states’ sales tax bases; and the greater ability to tax online
sales following the Supreme Court’s decision in Wayfair v. South
Dakota. Fiscal 2021 revenue collections were also impacted by
the shifting of the 2020 tax deadline from April 15 to July
15."
Number of the Day: 90%
More than 90% of 3.5 million federal workers will have
gotten at least one dose of Covid-19 vaccine by the end of the day,
meeting the deadline set by President Biden in September, the White
House said Monday. The vast majority of those workers have
reportedly received both doses. The White House said that, in all,
95% of federal workers have gotten at least one shot or have a
pending religious or medical exemption request. "Looking at the
federal workforce vaccination data makes one thing obvious:
Vaccination requirements work," White House coronavirus response
coordinator Jeff Zients told
Reuters.
News
Biden Renames Powell to Lead Fed, Risking the Left’s
Wrath – Politico
Fed’s Powell, Brainard Stress U.S. Inflation Battle Is
Priority – Bloomberg
Fed Under Powell to Prioritize Full Employment, White House
Adviser Says – Bloomberg
Behind the Powell Pick: A Bet the Economy Has Room to Grow
and Inflation Will Fade – New York Times
Harris Announces $1.5B Investment in Health Care
Workforce – Associated Press
Democrats Optimistic as Social Spending Bill Heads to
Senate – The Hill
With Back Channels to Manchin and Sinema, Pelosi Found a Path
to a Deal – New York Times
Biden Eyes Strategic Petroleum Reserves Crude Oil Release in
Coming Days – Politico
Doctors Are Mad About Surprise Billing Rules. Becerra Says
Stop Gouging Patients – NPR
Democrats Push to Narrow Gaps in Cross-Border Corporate Tax
Rates as Biden’s Agenda Advances – Wall Street
Journal
Medical Debt Is Crushing Black Americans, and Hospitals
Aren’t Helping – Bloomberg Businessweek
Americans Should Get Vaccine Boosters Ahead of Possibly
‘Dangerous’ Winter Spike, Fauci Says – Washington
Post
Concerns Grow Over Safety of Aduhelm After Death of Patient
Who Got the Drug – Bloomberg
More Americans Say They’re Not Planning to Have a Child, New
Poll Says, as U.S. Birthrate Declines – Washington
Post
Views and Analysis
Biden Bets Big on Continuity at the Fed –
Neil Irwin, New York Times
President Biden Stands Up for an Independent Fed
– Washington Post Editorial Board
Why a ‘Dangerous Man’ Was a Safe Fed Pick for
Biden – Brian Chappatta,
Bloomberg
Biden Is Smart to Reappoint Jerome Powell to the Federal
Reserve – Timothy Noah, New Republic
Powell Stays as Chair—of a Transformed Fed –
Robert Kuttner, American Prospect
Dismissing Inflation While Cutting Taxes for the Wealthy Is
Not a Winning Strategy for Democrats – Megan
McArdle, Washington Post
Democrats Shouldn’t Be Afraid to Tell Voters What the Build
Back Better Act Is All About – Michael Tomasky,
New Republic
Inflation Is Not a Tide That Lifts All Boats
Equally – Nir Kaissar, Bloomberg
Overheating the Economy Now Could Mean Trouble
Later – Michael R. Strain, New York
Times
The Real Inflation Problem Is Corporate
Profiteering – Faiz Shakir, New
Republic
Biden’s Inflation Pitch Doesn’t Pass the Laugh
Test – Ramesh Ponnuru,
Bloomberg
There’s a Lot to Like in the Build Back Better Bill. But
There’s a Lot That Needs Improving Too –
Washington Post Editorial Board
How Much to Cut Hospital Payments Is Another Build Back
Better Battle – Rachael Roubein, Washington
Post
The White House Learns How to Message Its
Successes – Jennifer Rubin, Washington
Post
Moderate Democrats Know the Build Back Better Bill Will Haunt
Them. They Voted for It Anyway – Henry Olsen,
Washington Post
Pelosi’s Presidio Deal Is a Reminder That Power Has Its
Perks – Hugh Hewitt, Washington
Post