The Biden administration reportedly spent months preparing for an inflation spike that hasn’t come yet – and it’s still worried

President Joe Biden and Janet Yellen White House.JPG
President Joe Biden meets with Treasury Secretary Janet Yellen in the Oval Office at the White House in Washington, U.S., January 29, 2021.

  • White House and Treasury officials spent months testing inflation scenarios, the NYT reports.
  • No scenario showed inflation rising so quickly that the Fed would lose control of price growth.
  • The findings open the door for Biden to spend trillions more on infrastructure and social care.
  • See more stories on Insider’s business page.

The Biden administration spent much of its first days in office testing how further stimulus might drive inflation higher. No modeled scenario saw price growth surge out of control, The New York Times reported on Wednesday.

Still, the report said repeatedly that White House and Treasury officials are “worried” about the issue.

The inflation debate has loomed large over the White House since before President Joe Biden was even inaugurated. The president unveiled a $1.9 trillion relief proposal in January, pitching the plan as an additional boost for the US economic recovery. Largely Democrat-affiliated economists have fiercely debated the inflation risks of such large deficit-financed spending, led by former Obama- and Clinton-administration official Larry Summers.

Democrats largely backed the measure, saying the risks of retracting government support were greater than the risks of spending too much. But Republicans – and even some moderate Democrats – balked at the hefty price tag and cited fears that another set of stimulus checks could spark a dangerous surge in inflation.

“This is the least responsible fiscal macroeconomic policy we’ve had for the last 40 years,” Summers said in a March interview with Bloomberg TV, adding the measures are a product of “intransigence” among Democrats and “irresponsible behavior” among Republicans.

Democrats went ahead without any Republican votes, passing the bill via reconciliation, and Biden signed it into law on March 11. Still, the stimulus push wasn’t without some trepidation. A handful of officials in the Treasury Department spent several months modeling how Americans would deploy new fiscal support, and whether any outcome could lead to stifling inflation, according to The Times. Treasury Secretary and former Federal Reserve Chair Janet Yellen even helped create the models.

Their observations were encouraging and lend new support to Biden’s latest spending proposal. The team tested a range of potentialities for how quickly Americans would spend stimulus, where they would deploy cash, and how the labor market’s recovery would affect inflation. Yet no outcome saw inflation charge out of the Fed’s control and risk a new recession, the Times reported.

The findings have been hinted at in statements from the White House and the Treasury in recent weeks. Long-term scarring in the labor market poses a greater risk than inflation, Yellen told ABC’s “This Week” in March. Economic reopening is expected to drive a jump in prices, but the effects will likely be temporary and fail to drive sustained inflation, she added.

The administration’s Council of Economic Advisors mirrored Yellen in a Monday blog post. A temporary rise in inflation is consistent with trends seen after other major events like wars or past labor-market rebounds, economists Ernie Tedeschi and Jared Bernstein said. The White House will continue to monitor consumer prices, but it expects inflation to fade as actual price growth “runs more in line with longer-run expectations,” they added.

Fed Chair Jerome Powell has repeatedly backed up such an outlook. The central bank chief said last month that the Fed will “be patient” in monitoring inflation and eventually lifting interest rates. The most likely scenario during the recovery is that prices move higher but fail to stay elevated as the country enters a new sense of normalcy, Powell said in early March.

Although the Fed operates independently from the executive branch and doesn’t play a role in fiscal spending, officials testing inflation scenarios told the Times that the Biden administration trusts the Fed to intervene and stave off price growth should it accelerate faster than expected.

The latest data signals the country is far from any sort of inflation scare. The Consumer Price Index – a popular gauge of overall inflation – rose 0.6% in March as stimulus, reopening, and vaccination fueled stronger economic activity. Economists expected a 0.5% gain.

Consumer prices rose 2.6% year-over-year, also exceeding estimates. The measure is skewed somewhat by year-ago data, since prices initially dropped when the pandemic first slammed the US economy. Those readings present a lower bar for year-over-year inflation. Though the data points to stronger inflation, price growth still has a ways to go before it trends at the Fed’s above-2% level and warrants serious concern.

That opening paves the way for additional spending. Biden unveiled a $2.3 trillion infrastructure proposal late last month that includes funds for nationwide broadband, improved roads and bridges, and affordable housing. The package is expected to be spent over eight years, compared to the weeks-long rollout seen with much of Biden’s stimulus plan. Such long-term deployment would present little inflationary risk, and Biden has portrayed the plan as an investment in American industry, jobs, and research as opposed to an emergency relief measure.

The March uptick in inflation, however, does signal that price growth is trending higher. Future CPI readings are set to be closely watched releases as the administration balances its spending goals with a red-hot economy. Economists and officials are anticipating stronger inflation. How price growth trends from there will determine whether the Biden administration was successful or created new risks.

Read the original article on Business Insider

Investors should stick with 4 kinds of stocks as Biden’s infrastructure plan pumps up to $4 trillion into the economy, Bank of America says

file photo construction
In

  • Bank of America estimates Biden’s infrastructure plan could pump up to $4 trillion into the economy.
  • Investors should focus on stocks that will benefit from an explosion of capex.
  • Cyclical stocks, value stocks, and small-and-mid cap stocks will also perform well as the fiscal stimulus accelerates the economic recovery.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

The next fiscal package out of Washington could total $3 trillion-$4 trillion and focus heavily on infrastructure, climate change, education and inequality, and investors should position their portfolios accordingly, says Bank of America.

A team of strategists led by Savita Subramanian said that investors stick with cyclical stocks, value stocks, small-and-mid-cap stocks, and stocks that will benefit from the explosion of capital expenditures that come out of the stimulus bill.

Industrials and metals are two sectors poised to be clear beneficiaries of the bill that will increase “picks & shovels” capex, BofA said.

The infrastructure plan will also be heavily focused on investments in greener public transit, EV charging stations, and energy efficient buildings. Bank of America sees industrials and materials as two sectors poised to gain from green spending. The firm also warned that commodities-driven companies may face headwinds unless they aggressively move towards greener goals.

The stimulus could boost US GDP up to 7% in 2021, and BofA likes GDP-sensitive cyclical stocks, small-caps and value stocks against the backdrop of a strong economic recovery.

However, more fiscal spending will likely lead to higher inflation as well, and energy and materials have historically been winners in periods of rising inflation, according to BofA data.

Read the original article on Business Insider

The $5 trillion in pandemic-era stimulus is more than triple Great Recession-era aid – and suggests a permanent shift in the way Congress spends

Biden stimulus
  • Passage of President Biden’s stimulus plan brings the total pandemic-relief bill to $5 trillion.
  • The relief packages handily surpass past measures and mark a turning point for how Congress spends.
  • Americans largely back the new approach, with 66% supporting Biden’s measure in a recent poll.
  • Visit the Business section of Insider for more stories.

The amount of fiscal stimulus used to keep the US economy afloat over the past year blows past packages out of the water. But Americans don’t seem all that worried. In fact, one could say they’re getting used to it.

House Democrats passed President Joe Biden’s $1.9 trillion relief package on Wednesday, sending the bill to the Resolute desk for a final signature. The plan’s approval brings the sum of federal aid passed during the pandemic to roughly $5 trillion, a level practically unimaginable just 10 years ago.

All three stimulus packages passed during the pandemic have each handily surpassed the largest relief measure approved during the financial crisis. When compared to even older aid measures, the pandemic-era bills are gargantuan.

The scope of the virus’s economic fallout is just one reason for the packages’ hefty price tags. Others have critiqued past plans as inadequate and urged Congress to err on the side of overspending.

Yet even adjusting for inflation, the deals passed by President Biden and President Donald Trump exist in a league of their own. And despite the swelling price tags, several recent polls suggest Americans are largely on board.

Bridging the last crisis

For comparison, stimulus passed by President George W. Bush at the start of the financial crisis totaled just $152 billion. The Troubled Asset Relief Program created soon after allocated $700 billion for buying up banks’ toxic assets. Yet only $426 billion was invested through the program.

President Barack Obama’s first major legislative accomplishment came in February 2009 when he signed the American Recovery and Reinvestment Act into law. The stimulus plan included some $831 billion in aid spread across tax cuts, expanded unemployment benefits, education funding, and aid for state and local governments.

The Obama administration at one point aimed to pass a $1 trillion bill but gave up on such plans after considering how difficult it would be to market the legislation to more moderate lawmakers, according to the former president’s memoir. Still, the approved bill was then the largest-ever stimulus package by a large margin.

But stimulus measures aren’t the only laws to boast increasingly massive price tags. The Tax Cut and Jobs Act signed by Trump in 2017 is estimated to raise the federal deficit by $1.9 trillion from 2018 to 2028, according to the nonpartisan Congressional Budget Office.

The bill included the largest ever cut to the corporate tax rate. Still, analysis by the Committee for a Responsible Budget pegs it as the eighth-largest in US history when measured as a proportion of the country’s gross domestic product.

Looking further back, it’s clear that Washington has grown more comfortable with spending swaths of cash in response to crises. Just weeks after the 9/11 terrorist attacks froze the travel industry, Congress passed a measure to extend $15 billion in relief to struggling airlines. That sum amounts to roughly $22.2 billion when adjusted for inflation.

Even New Deal policies enacted throughout the 1930s pale in comparison to the COVID-19 rescue packages. The collection of programs and laws is estimated to have cost $41.7 billion at the time, according to a 2015 study by economists Price Fishback and Valentina Kachanovskaya. That equates to about $789 billion in today’s dollars, less than Obama’s stimulus package and roughly 40% the size of Biden’s plan.

Pay now, worry later

Passage of the third major pandemic-relief bill marks a turning point in how Congress spends, but Americans are generally for the change. Two-thirds of Americans back Biden’s plan while just 25% oppose it, according to a late February poll conducted by The Economist and YouGov. That’s makes it more popular than Obama’s stimulus bill, the 2008 TARP plan, and Trump’s 2017 tax cut.

Studies of the $2.2 trillion CARES Act passed in March 2020 suggest the main tenets of the package – $1,400 direct payments and expanded unemployment benefits – will quickly lift consumer spending and accelerate growth. Americans receiving checks from the first stimulus measure immediately raised spending by $604 on average, according to research from the Federal Reserve Bank of Chicago.

Americans living paycheck-to-paycheck spent 62% of their stimulus payment in just two weeks. That compares to 35% for Americans who save most of their monthly income, the Fed researchers said. The data signals that targeting lower- and middle-income Americans with additional aid is the most efficient way to spur growth.

Wall Street is also optimistic Biden’s bill can supercharge the climb to pre-pandemic strength. Morgan Stanley and UBS lifted their growth forecasts this week, citing the plan and its size for their rosier outlooks. The plan’s passage and fast-acting effects on spending can bring US GDP to levels seen before the pandemic by the end of the month, economists at Morgan Stanley said.

To be sure, the unprecedented amount of federal spending has racked up a similarly historic bill. Federal debt was expected to reach 102% of GDP this year even before Biden’s plan was approved, the CBO said last month. The office also pegged the pre-stimulus budget deficit at $2.3 trillion, meaning the bill’s passage stands to lift the shortfall to its largest level ever.

Yet officials at the Fed aren’t immediately concerned with paying for the trillions of dollars in aid. The central bank has signaled it plans to hold interest rates near zero through 2023, ensuring that the cost the US pays to service its debt won’t rise to dangerous levels.

Chair Jerome Powell reiterated to lawmakers in February that, although the debt can’t remain at such elevated levels, Congress’s focus should remain on reviving the economy.

“I think that we will need to get back on a sustainable fiscal path,” Powell said while testifying to the Senate Banking Committee. “That’s going to need to happen, but it doesn’t have to happen now.”

Read the original article on Business Insider

Biden cuts 16 million people off from stimulus checks after striking deal with moderate Senate Democrats, study says

Biden
President Joe Biden.

  • A preliminary analysis indicates roughly 16 million people won’t a third stimulus check under a new compromise.
  • Biden struck a deal to cap the checks at a lower income threshold, which affects wealthier Americans.
  • The checks will phase out for individuals making over $80,000 and for married couples above $160,000.
  • Visit the Business section of Insider for more stories.

A faster phaseout for the $1,400 checks in President Joe Biden’s stimulus plan would exclude more than 16 million Americans from receiving one, according to a preliminary analysis from the left-leaning Institute on Taxation and Economic Policy.

The president on Wednesday approved a compromise on the direct payments that would trim the number of people eligible for the payment. The checks would phase out entirely for individuals making more than $80,000 and for married couples making over $160,000.

The income caps were previously set at $100,000 for individuals and $200,000 for couples, in the legislation that House Democrats approved on Saturday.

Biden’s compromise leaves nearly 11.8 million adults ineligible for any payment at all, according to ITEP research. About 4.6 million fewer children will be in families that benefit from the new payment threshold.

This means a large number of these people will have received a stimulus check from the Trump administration, but not from Biden’s, as the past income thresholds were in place in earlier pandemic aid packages.

Still, the bottom 60% of Americans by income wouldn’t see any difference in the size of checks received, meaning the vast majority of people in need of financial assistance would receive a check from the federal government.

Joe Manchin
Sen. Joe Manchin (D-WV).

Changes follow moderate pushback

The compromise follows moderate Senate Democrats pushing the White House to keep wealthier Americans from receiving the payments. The group of moderates – nine of them in particular – led an effort in recent days to curtail direct aid provisions from reaching wealthier households.

Two Democratic aides confirmed to Insider on Wednesday that federal unemployment benefits included in the stimulus proposal remain at $400 per week through the end of August. Sen. Joe Manchin – one of the Democratic lawmakers urging a faster phaseout – said Tuesday he supported a $300 supplement that would expire earlier in the summer.

Sen. Michael Bennet of Colorado called the shift a “more appropriate way of bringing [stimulus talks] to a conclusion.” Sen. Jeanne Shaheen of New Hampshire had previously suggested funding a pool of cash for broadband and healthcare providers by cutting down on stimulus-check eligibility.

Calls for fiscal support to provide aid to lower-income Americans have generated a divide in the Democratic party, breaking down between Senate and House lines.

Pramila Jayapal
Rep. Pramila Jayapal (D-WA).

Progressive House members decry ‘Senate silliness’

Some progressive Democrats in the House criticized the changes to the package. The adjustment is “more of the Senate silliness” that’s holding back much-needed relief, Rep. Mark Pocan of Wisconsin said Wednesday.

“People are getting big heads over the one or two people who can hold things up, and because of it they’ll negotiate anything stupid just to say they negotiated,” he added. “I don’t know if it pays to just jockey back and forth.”

The direct payments were the “easiest, simplest, most popular, populist” elements of the $1.9 trillion proposal, Rep. Pramila Jayapal of Washington said.

“If this is the only change that’s one thing, if there are other changes that’s going to be a different thing,” Jayapal told reporters on Wednesday.

Senate Democrats are slated to debate the stimulus package on Wednesday. An amendment process will follow on Thursday. Biden has indicated he aims to approve the plan before expanded unemployment insurance lapses in mid-March.

Read the original article on Business Insider

Too many people are still falling for harmful myths about raising the minimum wage

fight for 15 minimum wage protest
Demonstrators participate in a protest outside of McDonald’s corporate headquarters on January 15, 2021 in Chicago, Illinois.

  • The Congressional Budget Office released a report last week on the impact of raising the minimum wage to $15 an hour. 
  • The report has been reduced to snappy headlines highlighting the projected price tag while ignoring the policy’s benefits. 
  • It’s concerning how many people are getting the facts wrong about raising the minimum wage. 
  • Jonathan Schleifer is the Executive Director of The Fairness Project, a non-partisan nonprofit focused on ballot initiative campaigns that have included minimum wage increases, Medicaid expansion, paid leave, and fair lending practices.
  • This is an opinion column. The thoughts expressed are those of the author. 
  • Visit the Business section of Insider for more stories.

As Congress moves forward with President Joe Biden’s highly anticipated American Rescue Plan, one aspect of the stimulus package is generating outsized debate: the minimum wage increase.

The latest fight has been over the Congressional Budget Office’s (CBO) report on the impact of raising the minimum wage to $15 per hour over the course of five years, as the plan proposes. This significant report has been reduced to snappy headlines highlighting the projected price tag, while critics of the wage hike have glossed over the tremendous impact of lifting nearly one million people out of poverty. Not only is taking action to end poverty a moral imperative, but the aforementioned costs are wildly overblown.

With the report taking center stage in the debate over raising wages, and anti-worker politicians weaponizing it to slow momentum for higher pay, it’s concerning that so many people are getting the facts in this debate wrong. After all, the minimum wage is not a new phenomenon, and states around the country have been increasing wages for years.

Myths about raising the minimum wage

First, the premise that increasing wages inherently leads to job cuts is an outdated myth. A survey released in 2019 that analyzed 139 state minimum wage increases over the last four decades found no impact on disemployment, and similar studies have made it increasingly clear that raising wages doesn’t decrease employment. It’s unclear from the report why the CBO relies so heavily on the assumption that higher wages necessarily lead to significant disemployment and why it plays such a central role in their model. In fact, without it, most of their cost argument falls apart.

Second, price increases and the impact they have on spending are overemphasized. One study showed that wage increases of 10% accounted for less than a 0.36% increase in prices. While on the high end, another study on the impact of raising the minimum wage at McDonald’s showed a 1.2% increase. Ask yourself: Would you even notice a 50 cent increase to your meal price? Would it really impact your spending? If you knew it meant lifting nearly a million people out of poverty, wouldn’t you consider that a worthwhile cost? I would.

Finally, if we are going to boost the economy, consumers need money to spend. Increasing the minimum wage would do just that, all while decreasing reliance on government programs like food stamps, increasing tax revenue for local governments, and saving businesses money by increasing productivity and decreasing turnover. Furthermore, women and people of color are disproportionately paid poverty wages and are those most impacted by the current economic downturn. It’s no secret that raising the minimum wage would go a long way toward decreasing inequality, whereas resistance to it only reinforces this gap. 

Not to mention, raising wages is wildly popular. Deep red states like Arkansas, Florida, and Missouri have passed minimum wage increases with more than 60% of the vote – and you just don’t win 60% of the vote on very many issues in this country anymore. When it comes to the minimum wage, the biggest gap isn’t between Republicans and Democrats; it’s between politicians who don’t want to raise the wage and the people they represent. 

Right now, Congress has the chance to improve the lives of more than a million Americans, and if that means we all pay a few more cents per burger, so be it.

Jonathan Schleifer is the Executive Director of The Fairness Project, a non-partisan nonprofit focused on ballot initiative campaigns that have included minimum wage increases, Medicaid expansion, paid leave, and fair lending practices. A lifelong activist, educator, and advocate, he is dedicated to enacting policy that addresses economic inequity.

Read the original article on Business Insider

Biden says it’s an ‘easy choice’ to push Republicans aside if it means getting his $1.9 trillion stimulus package approved faster

Joe Biden walking
  • Biden strongly indicated that he is prepared to pass his $1.9 trillion stimulus package with only Democratic votes.
  • “They’re just not willing to go as far as I think we have to go,” Biden said of talks with Republicans.
  • He suggested negotiations risked delaying the passage of urgently needed federal aid.
  • Visit the Business section of Insider for more stories.

President Joe Biden gave one of the strongest indications yet on Friday that he is prepared to pass his $1.9 trillion emergency spending package with only Democratic votes.

While delivering remarks at the White House, Biden said he wanted to “act fast” and emphasized his large plan was designed to address the immense challenges facing the nation.

“I’d like to be doing it with the support of Republicans. I’ve met with Republicans, there’s some really fine people want to get something done,” he said. “But they’re just not willing to go as far as I think we have to go.”

Biden continued: “I’ve told both Republicans and Democrats, that’s my preference to work together. But if I had to choose between getting help right now to Americans who are hurting so badly and getting bogged down in a lengthy negotiation, or compromising on a bill that’s up to the crisis it’s an easy choice.”

The remarks appeared to reflect a new willingness from the president to embark on a partisan path to get his rescue package approved faster. Democrats kicked off efforts this week to pass the plan through budget reconciliation. It’s a legislative maneuver allowing bills to be enacted through a simple majority of 51 votes instead of the 60 generally required in the Senate.

The plan includes $1,400 stimulus checks, $400 federal unemployment benefits through September, and assistance to state and local governments among other provisions. It has generated strong opposition from Republicans who argue it is a colossal level of untargeted spending on progressive priorities.

Up until now, the White House has courted a group of 10 Republican senators to draw their votes and add a layer of bipartisanship to the relief effort. The group led by Sen. Susan Collins of Maine put forward a $618 billion measure on Monday, but Democrats rejected it as too meager. 

They said in a letter to the White House on Thursday that “we remain committed to working in a bipartisan fashion and hope that you will take into account our views as the legislative process moves forward.”

Senior administration officials have all but dismissed their plan at this stage.

“We’re not going to sit here and wait for an ongoing negotiation,” White House press secretary Jen Psaki said at a Friday news briefing. “Frankly we haven’t received an offer in return, a response offer to what the president has proposed.”

It remains unclear whether the GOP senators will attempt to continue negotiations with the White House.

Read more: Biden’s stimulus plan is heightening Wall Street’s worries that inflation will upend the stock market. We spoke to 4 experts on what the raging debate means for investors and how to take advantage of it.

Read the original article on Business Insider

Biden’s proposed stimulus package includes paid leave and childcare support. These policies need to be permanent.

Mother child reading book baby reading
With no national paid leave program in place, one in four mothers must find childcare for their infants at two weeks old, because they have no choice but to return to work.

  • More than 80% of Republicans and Democrats support a national paid leave policy. 
  • Biden’s economic relief package mandates paid leave and childcare subsidies, but the temporary fix needs to be permanent. 
  • Both paid leave and childcare infrastructure is critical to recover from the recession and support low-income families. 
  • Katie Bethell is the Founder and Executive Director of Paid Leave for the US (PL+US).
  • Becka Klauber Richter is President and Co-founder of Helpr, a backup childcare company. 
  • This is an opinion column. The thoughts expressed are those of the authors. 
  • Visit Business Insider’s homepage for more stories.

On her first day back at work after her maternity leave, Meghan McCain, a Republican, called on the government to institute a national paid maternity leave policy for all new mothers. After experiencing an emergency C-section and postpartum health issues that left her physically unable to bathe or eat without help, she noted that she now understood just how critical maternity leave is to the wellbeing of our children and the wellbeing of women in this country. 

A conservative herself, she pointed out the hypocrisy of a Republican party that touts itself as the party of family values, while denying mothers even a few weeks of critical time needed to heal, bond, and care for their children at the beginning of their lives. 

McCain is a new arrival to the camp for a national paid leave program, but many of her fellow Republicans are not. For years, polls have consistently shown broad bipartisan support for paid leave, with more than 80% of Republican and Democrats favoring a national policy. But McCain’s recognition of the need for paid leave is just one part of the story; childcare infrastructure is just as essential.

Fortunately, President Joe Biden’s recently announced economic relief package mandates paid leave and childcare subsidies, but the bill is only temporary – A permanent policy needs to be in place.  

There is a critical link between paid leave and childcare infrastructure

With no national paid leave program in place, one in four mothers must find childcare for their infants at two weeks old, because they have no choice but to return to work. Most of these parents fall in lower income brackets or are Black or Latino. Rather than stay home to care for their infant and receive a stipend to cover their rent and bills, these women must not only go out to work with bodies still healing from childbirth, they must also spend money they may not have on childcare costs – which are exorbitant at the best of times – and even more so for infant care. 

That is, if a parent can even find a spot for their infant. The critical shortage of childcare in our country looks even worse if you are seeking care for an infant. Data from the American Center for Progress showed that in a sampling of 19 states and the District of Columbia, there are more than four children under age 3 for every licensed childcare spot available. This equates to enough childcare for only 23% of infants and toddlers.

More than 80% of the counties examined in the study would be classified as infant and toddler childcare deserts. Where this leaves us is with parents who have to quit their jobs to care for newborns, or parents who have no choice but to resort to patchwork solutions.

We need paid leave and childcare to recover from the recession 

Recent studies show that if we don’t address this need for paid leave and childcare, our economy will have difficulty recovering from this pandemic. Only half of the childcare jobs that were lost earlier in the pandemic have returned, and that translates into millions of spots in daycares around the country gone. 

With no childcare, many essential jobs – from manufacturing to healthcare – simply cannot be done. With no paid leave, millions of parents will have to choose between a job and caring for their child. A recent analysis done by the Center for American Progress revealed that 700,000 working parents with children under the age of 5 have left the workforce. Most of them were women. 

An analysis by the National Women’s Law Center showed that in September, Black women and Latinas both saw double-digit unemployment rates, nearly double the unemployment rates for white men and white women.

Previous emergency paid leave provisions filled some of these gaps, but those have expired now. Last week, President Biden released details of the American Rescue Package which includes emergency paid leave and sick leave for all working people and expanded childcare subsidies. Beyond that, the Biden administration has signaled support for policies that support working families, including a childcare tax credit for low- and middle-income families, an infusion of capital into childcare providers, and emergency paid leave in the relief package. 

The emergency provisions should be thought of as a blueprint for what we can build towards on a permanent basis. The pandemic has laid bare just how much has been wrong for families for how long, but it was not the cause of our broken system. It merely revealed just how broken it was.

Paid leave and other policies that support working families, such as childcare subsidies, have been proven to be very beneficial to businesses as well. Employers in the state of California, where there is a state-wide paid family leave program, report that paid family leave has an overwhelmingly positive impact on productivity, profitability and employee morale. Unemployment and labor shortages too cannot be addressed without a combination of paid time off for parents and childcare. 

We need to come together to care for families

As advocates for paid leave and better childcare infrastructure, we celebrate that a prominent Republican is using her platform to turn up the pressure for paid leave, and that the incoming Biden administration already recognizes its importance. We are in a moment where we can make actual political progress on one issue many of us already agree on. On Colorado’s recent paid leave ballot initiative (which resoundingly succeeded), people across the political spectrum voted for paid leave

Biden’s emergency relief bill is a good first step. Now is the time for the Senate to pass a federal policy that not only gives infants time with their parents at the beginning of their lives, but also sets up businesses with the childcare infrastructure that will provide millions of working parents the solid foundation they need to thrive at work and at home. 

We must come together to pass policies that reflect the values we share. Whether we are Republican, Democrat, or independent voters, family is very important to us, both personally and as a nation. Paid leave may not heal our country, but it will be good for our kids and our economy.   

Read the original article on Business Insider

Legendary investor Jeremy Grantham says Biden’s $1.9 trillion stimulus plan will make the stock market bubble even worse

Jeremy Grantham

Legendary investor Jeremy Grantham warned investors during a Bloomberg interview that the $1.9 trillion in federal aid President Joe Biden is seeking from Congress will further inflate the stock market bubble.

The GMO co-founder told Erik Schatzker that he has “no doubt” some of the stimulus aid will end up in the market. He said the “sad truth” about the last stimulus bill passed in 2020 was that it didn’t increase capital spending and didn’t increase real production, but it certainly flowed into stocks. 

The plan that Biden is proposing contains a $1,400 boost to stimulus checks, robust state and local aid, and vaccine-distribution funds. Grantham said that if the package passed is worth $1.9 trillion, it could lead to the dangerous end of the bubble.  

“If it’s as big as they talk about, this would be a very good making of a top for the market, just of the kind that the history books would enjoy,” said Grantham.

“We will have a few weeks of extra money and a few weeks of putting your last, desperate chips into the game, and then an even more spectacular bust,” he added. 

Read more: A notorious market bear who called the dot-com bubble says he sees ‘fresh deterioration’ in the market indicator that first signaled the 1929 and 1987 crashes – and warns that stocks are ripe for a 70% drop

Grantham has long-warned of the ballooning bubble he sees in the US stock market. In his investor outlook letter in the beginning of January, he detailed how extreme overvaluations, explosive price increases, frenzied issuance, and “hysterically speculative investor behavior” all demonstrate that the stock market is in a bubble that not even the Fed can stop from bursting.

“When you have reached this level of obvious super-enthusiasm, the bubble has always, without exception, broken in the next few months, not a few years,” Grantham told Bloomberg.

Grantham also said that the combination of fiscal stimulus and emergency Fed programs that helped inflate the bubble could increase inflation.

“If you think you live in a world where output doesn’t matter and you can just create paper, sooner or later you’re going to do the impossible, and that is bring back inflation,” Grantham said. “Interest rates are paper. Credit is paper. Real life is factories and workers and output, and we are not looking at increased output.”

He told investors to seek out stocks outside of US markets, as many other countries haven’t seen the huge bull market the US has. He called emerging markets stocks “handsomely priced.”

“You will not make a handsome 10- or 20-year return from U.S. growth stocks,” said Grantham. “If you could do emerging, low-growth and green, you might get the jackpot.”

Read more: GOLDMAN SACHS: These 22 stocks still haven’t recovered to pre-pandemic levels – and are set to explode amid higher earnings in 2021 as the economy recovers

Read the original article on Business Insider

US stocks climb amid optimism around Biden’s COVID-19 plan and stimulus push

NYSE traders
  • US stocks gained on Thursday as investors cheered the Biden administration’s plan to better tackle the COVID-19 pandemic.
  • President Joe Biden on Wednesday revealed plans to accelerate testing, vaccine rollouts, and reopenings.
  • Initial jobless claims fell to 900,000 last week, according to the Labor Department. Economists expected claims to total 935,000.
  • Watch major indexes update live here.

US equities rose on Thursday as investors bet on the Biden administration to accelerate the nation’s economic recovery.

President Joe Biden unveiled new plans for how the government will tackle the coronavirus pandemic on Thursday. The president aims to sign 10 executive orders and invoke the Defense Production Act to accelerate testing, vaccine distribution, and reopen schools and businesses.

Efforts to better curb on the virus’s spread are set to join a push for additional fiscal support. The president called for a $1.9 trillion stimulus package earlier in the month that includes $1,400 direct payments, expanded unemployment insurance, and relief for states and municipalities.

Republicans are likely to oppose the measure, having previously balked at passing new aid for governments. Still, expectations for another large-scale spending bill have led analysts to lift growth forecasts and S&P 500 targets.

Here’s where US indexes stood shortly after the 9:30 a.m. ET open on Thursday:

Read more: The chief investment strategist at a $9.6 billion volatility-focused money manager breaks down why the stock market is poised to get more chaotic in 2021 – and shares how investors can take advantage of it

Tech stocks continued to climb after Netflix’s healthy earnings beat boosted indexes the session prior. Equities hit record highs on Wednesday as Biden’s inauguration amplified hopes for fresh fiscal stimulus and a stronger economic recovery. The jump was the largest Inauguration Day return in nearly a century.

In economic data, weekly filings for unemployment benefits totaled an unadjusted 900,000 last week as the labor market’s recovery continued to push up against elevated COVID-19 cases. Economists surveyed by Bloomberg expected claims to reach 935,000. 

Continuing claims, which track Americans receiving unemployment-insurance payments, fell to 5.1 million for the week that ended January 9. That came in below the median economist estimate of 5.3 million claims.

“Fiscal stimulus prospects, along with broader vaccine diffusion, are pointing to a brightening labor market outlook but with the pandemic still raging, claims are poised to remain elevated in the near-term,” Lydia Boussour, lead US economist at Oxford Economics, said.

Read more: We spoke to Winklevoss-backed crypto platform Gemini about bitcoin, how to use stable coins, and why regulation won’t kill the boom in digital currencies

United Airlines sank after its fourth-quarter report missed Wall Street expectations for revenue and profit. The company cautioned that, despite vaccines being distributed nationwide, the pandemic will weigh on travel activity throughout 2021.

Bitcoin slid below the $32,000 support level as sell-offs cut further into the cryptocurrency’s bullish momentum. The token hit a 24-hour low of $31,310.75 before paring some losses.

Gold dipped as much as 0.7%, to $1,858.42 per ounce. The dollar weakened against a basked of Group-of-20 currencies and Treasury yields climbed slightly.

Oil prices fell but remained above the $50 support level. West Texas Intermediate crude dropped as much as 1.1%, to $52.75 per barrel. Brent crude, oil’s international standard, declined 1%, to $55.51 per barrel, at intraday lows.

Now read more markets coverage from Markets Insider and Business Insider:

GOLDMAN SACHS: These 22 stocks still haven’t recovered to pre-pandemic levels – and are set to explode amid higher earnings in 2021 as the economy recovers

The S&P 500 will jump another 8% – but looming risks could spark a sudden pullback, RBC says

‘Final nail in the bear case coffin’: Here’s what 4 analysts had to say about Netflix’s 4th-quarter earnings

Read the original article on Business Insider