Happy Tuesday, or as we're calling it here, the day before the Fed's big announcement. Here's what's happening.
Biden Blames Republicans for Stalling Efforts to Fight Inflation
A fiery President Joe Biden defended his economic agenda and blasted his Republican critics Tuesday in a speech to union members gathered in Philadelphia.
At an AFL-CIO’s Constitutional Convention, held every four years, Biden touted the rebound from the pandemic, calling it the greatest job recovery in American history. He pointed to the falling budget deficit and plans to lower prescription drugs prices, and he called on billionaires and corporations to pay more taxes. He also took aim at Republicans who attack his spending proposals. "I don’t want to hear any more of these lies about reckless spending. We are changing people's lives," he said.
Biden acknowledged that inflation, which has climbed to a four-decade high, is "sapping the strength of a lot of families." But he blamed the GOP for failing to help.
"The problem is Republicans in Congress are doing everything they can to stop my plans to bring down costs on ordinary families. That's why my plan is not finished and why the results aren't finished either," he said. “Jobs are back, but prices are still too high. Covid is down, but gas prices are up. Our work isn’t done. But here's the deal: America still has a choice to make. A choice between a government by the few for the few or a government for all of us. Democracy for all of us. An economy where all of us have a fair shot and a chance to earn our place in the economy."
Biden sought to contrast his policies with those of former President Donald Trump. “So many Americans lost their jobs that my predecessor became just the second president in history to leave office with fewer jobs in America than when he took office,” Biden said. “The other one, by the way, was Herbert Hoover.”
And Biden again took aim at an agenda proposed by Republican Sen. Rick Scott of Florida, which includes a call for all federal legislation to sunset after five years. "Really ask yourself, how are they going to sleep at night knowing that every five years, Ted Cruz and the other ultra-MAGA Republicans are going to vote on whether you'll have Social Security, Medicare, Medicaid?" Biden said. "That's what this is about. They've always wanted to cut Social Security. They've always wanted to cut Medicare. They've always wanted to cut Medicaid."
Republicans have blamed Biden’s $1.9 trillion American Rescue Plan Act, enacted last year, for fueling inflation. "Biden talks about his Scranton roots, but he couldn't care less about the struggles hardworking Pennsylvanians face today,” Republican National Committee Chairwoman Ronna McDaniel said in a statement. “Soaring inflation, record gas prices, and a baby formula shortage are only a few of the crises he’s dealt Keystone State families.”
Republicans issue proposals to combat inflation: Democrats have criticized the GOP for failing to put forth any plan to combat inflation. Congressional Republicans are beginning to sketch out some proposals.
Sen. Chuck Grassley (R-IA) and three other GOP senators on Tuesday proposed legislation that they say would provide some relief for lower- and middle-income Americans.
“Middle class families, retirees, small businesses and farmers have watched as their savings erode in value while still facing taxes on gains that may not even keep pace with inflation,” Grassley said in a statement “This creates a perverse incentive to spend now rather than save, further fueling inflation. Our bill will ensure that those hurting most from inflation aren’t further burdened by those taxes.”
The GOP plan would, among other things, exclude up to $600 in interest income for married couples (or $300 for individuals) from taxation, lower some taxes on investments and index the 3.8% Net Investment Tax created by the Affordable Care Act to inflation. The plan would pay for those changes by extending the $10,000 cap on the deductibility of state and local taxes, without indexing it for inflation.
The House GOP is also working on inflation proposals: “Republicans on the House Ways and Means Committee are outlining their anti-inflation agenda,” The Wall Street Journal’s Richard Rubin reports. “The House outline includes policies that Republicans have advocated before, including rescinding unused federal spending, extending expiring tax cuts, increasing energy production and removing some regulations. Extending tax cuts set to lapse after 2025 could put more money into the economy and be inflationary, but Republicans will advocate that as a way to spur growth.”
Number of the Day: 3.48%
The yield on benchmark 10-year Treasury notes rose to its highest level in more than 11 years Tuesday as investors priced in the likelihood of the Federal Reserve raising rates more aggressively this week as it looks to fight inflation. “After ending May at 2.74%, the 10-year yield has rocketed higher this month as hot inflation readings caused investors to dump bonds and ratcheted up their bets for aggressive Fed tightening,” CNBC reports. The 10-year yield started the year at 1.53%.
The 10-year yield saw its biggest jump since March 2020 on Monday after a Wall Street Journal report suggested that Fed officials would consider raising rates by 0.75 percentage points, the biggest increase since 1994, rather than the half-point hike that had been widely expected. The more aggressive action was made likely by a brutal inflation reading released late last week. The CME Group’s FedWatch Tool now sees a 95.8% chance of a 0.75 percentage point hike on Wednesday, up from 34.6% yesterday and 3.9% a week ago — and a similar likelihood of another 0.75 percentage point increase in July.
Universal Health Care Could Have Saved 330,000 Lives During Covid: Report
The U.S. has recorded the highest number of deaths from Covid-19 in the world, at more than 1 million. According to a new analysis by a group of public health researchers, the uneven and fragmented nature of the American health care system has played a major role in running up that grim tally.
The researchers argue that a single-payer universal healthcare system would have performed far better, saving as many as 330,000 lives during the first two years of the pandemic, as well as billions of dollars.
In a report published in the Proceedings of the National Academy of Sciences, a team of 10 researchers, most affiliated with the Yale School of Public Health, estimated “excess mortality” rates for those who were uninsured before the pandemic began or lost their health insurance due to becoming unemployed during the economic crisis sparked by Covid-19. Excess deaths attributable to a lack of health insurance came to 212,000 in the first year of the pandemic alone.
Bad for health: The higher death rates for the uninsured were driven by a lack of access and worries about cost, with repercussions that affect the entire population. “At the individual level, concerns over medical expenses delay diagnosis and treatment, elevating case fatality rates,” the researchers say. “At the population level, postponement of diagnosis, and thus of case isolation, fuels transmission. In addition, fear of losing employer-sponsored health insurance during a pandemic may make it untenable for people to miss work even when they feel unwell.”
Bad for budgets: In addition to lives saved, the researchers estimate that the U.S. could have saved billions of dollars with universal health care. In general, a universal system would generate savings in multiple ways, including better preventative care to reduce the incidence of comorbidities such as diabetes; lower administrative costs; and lower prices for drugs, equipment and services. The researchers estimate that a universal health care system would save the U.S. $438 billion a year under normal, non-pandemic conditions. With Covid, a universal system would have provided another $105 billion in savings, the researchers estimate, thanks in large part to lower hospitalization costs.
The bottom line: While the analysis deals with a hypothetical and is necessarily uncertain, the projected savings are consistent with what public health experts have been saying for years — namely, that the U.S. health care system is more expensive and less effective than the universal systems in virtually every other industrialized nation. “Medicare for All would be both an economic stimulus and life-saving transformation of our health care system,” lead author Alison Galvani told Scientific American. “It will cost people far less than the status quo.”
- Fed Set to Lift Rates as ‘Soft-ish Landing’ Becomes a Harder Sell – New York Times
- Biden’s ‘Never Been More Optimistic’ Despite Troubled US Economy – Bloomberg
- Biden to AFL-CIO: ‘How Well Are You Going to Sleep at Night’ Under Scott Tax Plan? – The Hill
- GOP Offers Tax, Trade Policies Aimed at Combating Inflation – Wall Street Journal
- Biden Leans Toward Easing Some of Trump's China Tariffs – Axios
- Democrats Unveil Opening Bid for Defense Spending – The Hill
- US Failed to Stop Fraud in COVID Loan Program, Clyburn Says – Associated Press
- FDA Advisers Back Moderna’s COVID-19 Vaccine for Older Kids – Associated Press
- No Recession Alarm Bells for Corporate America ... Yet – CNN Business
- Sanders, Graham Square Off on Climate, Gas Prices in Debate – Roll Call
- Federal Railroad Administration Sends $2 Million in Funding to 25 Projects in 13 States – The Hill
- Car Company CEOs Push to Lift Electric Vehicle Tax Credit Limit – The Hill
- White House Fires Back at Rick Scott Ads, Says He Is 'Exploiting Inflation to Rip Off Working Families' – Fox News
Views and Analysis
- Inflation Isn’t Going to Bring Back the 1970s – Ben S. Bernanke, New York Times
- Biden Strains for a Message on Deteriorating Economy – Jonathan Lemire and Ben White, Politico
- Inflation Demands Bold Fed Action – Mickey D. Levy and Charles I. Plosser, Wall Street Journal
- Why Gas Prices Are So High – Ella Koeze and Clifford Krauss, New York Times
- Abandoning Decades of Antitrust Precedent Won’t Reduce Inflation – Richard J. Pierce, Jr. – The Hill
- Why the US Federal Reserve’s Options Are Limited – J. Bradford DeLong, Project Syndicate
- Americans Have Gone Back to Work. Now We Can Move Toward Steady Growth – Marty Walsh and Cecilia Elena Rouse, Washington Post
- Why Biden Is Getting More Bipartisan Laws Than Expected – Jonathan Chait, New York
- VA Bill Will Cost Hundreds of Billions of Dollars – Committee for a Responsible Federal Budget
- The Defense Production Act Is Biden’s Gridlock-Buster – Grace Segers, The New Republic
- America’s Hospitals Are in Transition – Daniela J. Lamas, New York Times