WASHINGTON — At a meeting with Treasury Secretary Janet L. Yellen last month, Jeff Williams, the mayor of Arlington, Texas, laid out his grim economic predicament: Heavy spending on coronavirus testing and vaccine distribution had dwarfed dwindling tax revenue, forcing the city to consider painful cuts to services and jobs. While sluggish sales and tourism were partly to blame, the big worry, Mr. Williams said, is the empty buildings.Those dormant offices, malls and restaurants that have turned cities around the country into ghost towns foreshadow a fiscal time bomb for municipal budgets, which are heavily reliant on property taxes and …
WASHINGTON — As top Democrats continued to push a $1.9 trillion economic aid package through the House, some lawmakers and aides to President Biden raised the prospect of borrowing even more money to finance the president’s next set of spending plans, on infrastructure, buoyed by new projections that showed the nation’s fiscal picture was not as dire as officials feared in the fall.On Thursday, the nonpartisan Congressional Budget Office released updated forecasts that showed a $2.3 trillion deficit for the 2021 fiscal year, an amount lower than last year’s $3 trillion deficit but still the second highest since World War II. …
But last week seemed to be a breaking point. Big business could evidently tolerate working with Mr. Trump despite his chauvinism, his flirtations with white nationalism and his claims of impunity, but the president’s apparent willingness to undermine democracy itself appeared to be a step too far.“This thing was a little different. I mean, we had sedition and insurrection in D.C.,” said Jamie Dimon, the chief executive of JPMorgan Chase. “No C.E.O. I know condones that in any way, shape or form. We shouldn’t have someone, you know, gassing up a mob.”The fallout …
And while running big deficits might have once stoked fears about inflation — as too many dollars chased too few goods — price gains have been too low for comfort for years. Add to that the emergency needs prompted by the pandemic, and even the Fed’s leader, who had long warned about the nation’s debt load, has said this is a reasonable time to spend money.“As a general rule, it is important to be on a sustainable fiscal path,” the Fed chair, Jerome H. Powell, a Republican, said at a news conference last month. “From my way of thinking …
“It’s the worst thing I could possibly imagine,” she said. “If you told me a year ago that the entire country would be suffering the way it is now, with no help from the government, I would have told you that would never happen. We live in America.”More than 20 million Americans are collecting unemployment benefits and the unemployment rate stands at 6.7 percent. A year ago, before the pandemic hit, the jobless rate touched 3.5 percent, tying a 50-year low.For those living on the edge, the recent political gamesmanship has been infuriating.“We don’t have time for them …
The congressional agreement on Sunday on another dose of aid to fuel the slowing economic recovery has probably spared millions of Americans from a winter of poverty and kept the country from falling back into recession.For much of the economy — especially people and industries that have been insulated from the worst effects of the pandemic — it may provide a bridge to a vaccine-fueled rebound. That is especially likely if the vaccine is quickly and widely distributed, and the swelling number of coronavirus cases doesn’t force another round of widespread shutdowns.The injection of money comes months too late …
The economic recovery, slowing for months, is in danger of going into reverse. That’s why a growing list of economists, business lobbyists and other advocacy groups are urging lawmakers to rally around the $908 billion aid package currently gaining bipartisan support in Congress.A plan of that size would fall short of doing everything that economists argue Congress should do to help workers and businesses during the coronavirus pandemic. But they said that if lawmakers could get the details right, Congress should do it anyway.“It’s within the range where you could argue it does enough good that it …
President-elect Joseph R. Biden Jr.’s first economic test is coming months before Inauguration Day, as a slowing recovery and accelerating coronavirus infections give new urgency to talks on government aid to struggling households and businesses.
With a short window for action in the lame-duck congressional session, Mr. Biden must decide whether to push Democratic leaders to cut a quick deal on a package much smaller than they say is needed or to hold out hope for a larger one after he takes office.
A continued standoff over aid could set the stage for sluggish growth that persists long into Mr. Biden’s presidency. Republican and Democratic leaders remain far apart on the size and contents of a rescue package, though both sides say lawmakers should act quickly.
Mr. Biden has until now sided with top Democrats in Congress. A Biden transition adviser said Friday that he had begun to have conversations with lawmakers about what a lame-duck package should look like.
The shifting dynamics of both the pandemic and the recovery are complicating the debate. Even as it has slowed, the economy has proved more resilient than many experts expected early in the coronavirus outbreak, leading Republicans, in particular, to resist a big new dose of federal aid. But the recent surge in hospitalizations and deaths from the virus has increased the risk that the economy could slow further.
Last spring, economists were nearly unanimous in urging Congress to provide as much money as possible, as quickly as it could. Now, many conservative economists say a much smaller follow-up package would suffice. Even as progressives point to slowing job creation and soaring long-term unemployment rates to argue for trillions of dollars in aid, a growing number of liberal economists are urging Democrats to compromise and accept a smaller package to get money flowing quickly.
“A meaningful something is a lot better than nothing,” said Jason Furman, who was a top economic adviser to former President Barack Obama. “Preventing damage to the economy today puts it in a better position a year from now.”
But others with ties to Mr. Biden’s team see the economic and political trade-offs differently. William E. Spriggs, a Labor Department official under Mr. Obama, agreed that it was vital for Congress to act quickly. But he urged Democrats not to accept too small a deal because it might prove insufficient and make it harder to win support for more aid later on.
“You will get people saying it didn’t work, so we don’t need to do it again,” said Mr. Spriggs, whom prominent Democrats have pushed for a role in the Biden administration. “You make it harder to go to the well again.”
Polls continue to show strong bipartisan support for more spending, including another round of direct payments to households. But it appears increasingly likely that if Congress reaches a deal by the end of the year, it will be for a package that is far smaller than the deal that Democrats and the White House were discussing before the election, which called for an outlay of more than $1.5 trillion.
Senator Mitch McConnell of Kentucky, the majority leader, said relatively strong employment numbers for October showed that the economy was “really moving to get back on its feet” without much government aid.
Mr. Biden will almost certainly propose a broader stimulus effort, but unless Democrats take control of the Senate — which would require them to win two runoff elections in Georgia in January — his ability to push a deal through Congress will be limited. Republicans have cited concerns about the record budget deficit in opposing another large round of government spending.
Prospects for a new relief bill have been further clouded by ambiguous economic readings that can support seemingly any policy preferences.
To those pushing for a smaller package, recent data suggests the economy is on firmer footing. The trillions of dollars that Congress provided in the spring largely succeeded in buoying the economy, and while progress has slowed, it has not stopped: Employers have added almost three million jobs in the last three months, and the unemployment rate — nearly 15 percent in April — has fallen by more than half.
“We have an unemployment rate below 7 percent right now,” said Michael R. Strain, an economist at the conservative American Enterprise Institute. “That calls for a very different amount of stimulus than if the unemployment rate were in the range of 10 percent, which is where we all thought it would be.”
Many progressives, however, argue those aggregate figures obscure more severe harm beneath the surface. White-collar professionals, many of whom can work from home and have benefited from the strong stock market, have done relatively well during the pandemic, and some industries, like construction and automaking, have bounced back. But service businesses, like restaurants and hotels, are still suffering, with little chance of revival before a vaccine is widely available.
“Things have improved more quickly than I expected, but we still have an enormous gap,” said Heidi Shierholz, a Labor Department economist in the Obama administration who is the policy director for the liberal Economic Policy Institute in Washington. She said the economy still needed trillions of dollars of support over the next two years.
The need is particularly acute among historically disadvantaged groups that have been hit hardest by the recession. The unemployment rate for Black Americans remains in the double digits, and hundreds of thousands of women are no longer working or seeking work, often because they must care for children who are home from school. More than 3.5 million Americans have been unemployed for more than six months.
“To say we don’t need as much aid is ridiculous,” said Olugbenga Ajilore, an economist at the Center for American Progress, a liberal group. “What that signals is all we care about is white men and no one else matters.”
Then, there is the pandemic itself. Many epidemiologists warn that infection rates are likely to keep rising as people gather indoors and travel for the holidays. That could bring a wave of new layoffs as consumers pull back on activity and businesses face new restrictions.
“We do see the economy continuing on a solid path of recovery, but the main risk we see to that is clearly the further spread of the disease here in the United States,” Jerome H. Powell, the Federal Reserve chair, said Thursday. “People may lose confidence that it is safe to go out.”
Some forecasters are skeptical that the latest rise in cases will be as damaging, at least economically, as earlier waves. Businesses and consumers have learned to adapt to the virus — or, in some cases, have chosen to ignore the risks — and states have generally resisted reimposing the strict lockdown policies that were common last spring.
“I had really not appreciated how much economic activity we would keep doing in the face of a pandemic,” said Wendy Edelberg, director of the Hamilton Project, an economic policy arm of the Brookings Institution. “It could well be that the economy can continue to muddle along despite a surge in the virus this winter.”
But muddling along could have long-term consequences. After the last recession, the federal government pulled back on aid before the economy had fully recovered, leading to a slog that was particularly hard on Black and Hispanic households.
And without aid, the virus may push more businesses over the edge, setting off ripples through the entire economy.
“You’re never quite sure if you’re near to some kind of tipping point where the stimulus might be just enough to keep you from tipping,” said Chris Varvares, co-head of U.S. economics at IHS Markit, a forecasting firm. “Especially for those affected families that are about to be evicted or about to have foreclosure proceedings brought against them, or for small-business owners that are about to throw in the towel, the stimulus could provide that lifeline.”
Economists broadly agree that Congress should focus on aid to state and local governments, support for small businesses and an extension of the expanded unemployment benefit programs that are set to expire at the end of the year. Mr. Biden discussed a similar list of priorities on Thursday with the top congressional Democrats, Representative Nancy Pelosi of California and Senator Chuck Schumer of New York, according to a summary from the participants.
On Friday, a transition adviser to Mr. Biden, Jen Psaki, brushed aside several questions from reporters about the president-elect’s views on the size and timing of a stimulus package, other than to say that on Capitol Hill “there have been conversations started that he’s engaged with.”
“You should expect that he will continue to be engaged in those discussions,” Ms. Psaki said, “and certainly wants to see the American people receive the relief they need.”
The most important thing, many economists agree, is speed. Karen Dynan, a Harvard economist and a Treasury Department official in the Obama administration, said the better-than-expected economic data was no excuse to delay assistance. Rather, she said, it is evidence that the aid so far has been effective — and that as it fades, Congress needs to do more.
“We need to recognize that the economy has only done as well as it has because we had such aggressive fiscal stimulus early on,” she said.
Thomas Kaplan contributed reporting.
The nation’s balance of power is at stake as both senators from Georgia face runoff elections in early January. The campaigns have been bitter, and they stand to get more so.
But here is one matter that the four candidates agree on, even if some of them have come to it begrudgingly: Owning and trading individual shares of stock has stopped making sense.
One of the two Republican incumbents, Kelly Loeffler, sold all of her stock this year. Her trading in the early days of the pandemic, in the wake of a private Senate briefing, had come under scrutiny. The other, David Perdue, sold all but three stocks after his trades also generated controversy.
Ms. Loeffler’s Democratic challenger, the Rev. Dr. Raphael Warnock, owns only mutual funds and thinks all members of Congress should do the same. Jon Ossoff, the Democrat trying to take Mr. Perdue’s seat, also supports a stock ownership ban and would sell the more than $500,000 of Apple shares he owns if he won.
The potential for the reduction of conflicts of interest, or the appearance of them, is all for the good. But here’s the other thing that many of our 535 elected representatives should learn: Shunning stock trading is a better way to build bigger balances.
I learned this the hard way, albeit with much less money than the senators are playing around with. In 1994, I was in and out of a regional bank stock, but even when a bigger institution bought the company, I didn’t make much more money than I would have in a mutual fund that owned every stock in the market. In the wake of the terrorist attacks in 2001, I bought a stock related to airport security with similarly middling results.
Then, in 2002, I went to work for The Wall Street Journal, where strict rules kept reporters away from any individual securities. In the absence of owning any stock aside from that of the newspaper’s parent company, editors could assign reporters to anything without worrying about conflicts. Hopefully, staff would also steer clear of the temptation to try to trade on information that was about to be in the articles. The New York Times had similar rules when I arrived in 2008, and they remain in place.
It was a relief, frankly. No knock on people who enjoy gambling and trade stocks as a hobby (using only money they can afford to lose), but trying to predict a stock’s performance and outsmart other investors just wasn’t my idea of a good time.
Then, as I learned more on the job about the stock market, I realized how much better my odds of long-term financial security were going to be if I didn’t trade stocks or try to beat the market. Far better to stick to mutual funds that simply owned most or all of a particular market segment.
The evidence is everywhere, and someone ought to spend 15 minutes shoving it under the nose of every member of Congress who shows up in Washington for the first time. Where to start?
Extremely active investors, as Ms. Loeffler and Mr. Perdue were, might begin with the classic 2000 paper “Trading Is Hazardous to Your Wealth,” which used the records of over 66,000 households to show that the annual returns of people who traded the most were 6.5 percentage points lower than the overall market.
Next, they could move on to what a different set of academics believed was the first-ever analysis of the actual portfolios of members of Congress between 2004 and 2008. It turned out they weren’t great at this investing thing and would have done better in basic index funds. If they had invested $100 that way, they would have ended that harrowing period with $80. Instead, the average member who felt above average ended up with $69.
Stocks bounce around a lot. Past performance is no indication of future success. If you don’t believe it, check out the Stock Pickers chart on the site of a firm called Index Fund Advisors. It re-ranks the performance of 18 household-name stocks over each of 20 years, before your very eyes.
To take this thought further, consider a bit of analysis from Dimensional Fund Advisors: If you examine the entire top 10 percent of stocks each year since 1994, fewer than a fifth, on average, make the top 10 the next year. “Investors with concentrated portfolios may actually miss out on the very stocks that deliver the best of what the market has to offer,” the firm notes.
In fact, according to a different bit of research, the best-performing 4 percent of stocks contributed the stock market’s entire net gain since 1926. Buy index funds, the logic of which is apparent in several research notes on Vanguard’s website, and you’ll get every security that makes up whatever the 4 percent might be for the next 100 years.
So why do so many individuals use other strategies instead? One reason could be ignorance. Or hubris born of the past decade, when stocks have mostly gone up. Also, plenty of people like gambling. And now that companies like Robinhood have lowered the transaction costs of active trading, it’s just so tempting to press one’s luck, especially when you’re bored during a pandemic.
I suspect something else is at work with the Georgia senators. Both denied using inside information they got on the job to inform their trades (and were cleared when investigators looked into it), and both said they had outside advisers trading without their knowledge.
But the success and drive that allowed Ms. Loeffler and Mr. Perdue to succeed in business and gave them the confidence to run for office could easily extend to a wrongheaded investment strategy. If you’re a person who keeps winning in life, it’s tempting to talk yourself into believing you can pick investments that outperform an index fund — or pick advisers who can do so for you, even after you compute the impact of their fees on your returns.
Congress could make this issue go away, and some members have introduced bills that would restrict stock ownership. It could also create or extend workarounds for the newly elected that would make it easier for people like Mr. Ossoff to enter public service and sell a bunch of Apple stock without generating a large tax bill.
But let’s be real. Bills like that aren’t going to be a high priority anytime soon. Better, then, that members of Congress erase any perception of impropriety on their own — and protect their portfolios to boot — by getting out of individual stocks altogether, voluntarily.
I tip my cap to the four candidates in Georgia, to varying degrees, for doing this already or getting close. I look forward to asking every new member of Congress to do the same thing come January.