The global economy could suffer a brutal one-two punch of stagnant growth and surging prices, Nouriel Roubini warned in The Guardian this week.
The economics professor at NYU Stern, whose nickname is “Dr. Doom,” thanks to his penchant for dire predictions, warned that central banks and governments are “setting the stage for the mother of stagflationary debt crises over the next few years.”
The Federal Reserve and Treasury, along with their equivalents around the world, have relied on ultra-loose fiscal and monetary policies to drive economic growth over the past decade. They doubled down on that approach during the pandemic, spending trillions of dollars on stimulus checks and bond purchases, and keeping interest rates near zero. Those efforts have further inflated the prices of stocks, houses, and other assets, and also encouraged aggressive borrowing, Roubini said.
The economist pointed to the hype around cryptocurrencies, meme stocks, special-purpose acquisition companies (SPACs), and retail trading as proof of “irrational exuberance.” He expects immense demand to fuel inflation, and supply pressures such as protectionism, the break-up of global supply chains, and cyberattacks on key infrastructure to push up prices too.
Moreover, governments have borrowed vast amounts of money to finance their stimulus plans, and are far more indebted now than they were 50 years ago, Roubini said. They might struggle to service their debts as well as bail out banks, companies, and households if markets crash and the global economy slides into recession, he cautioned.
Central banks are in a bind as a result, according to Roubini. They risk sparking a wave of defaults and crippling economic growth if they taper their stimulus efforts, and fueling double-digit inflation if they keep going, Roubini said. “Damned if they do and damned if they don’t,” he continued.
“This slow-motion trainwreck looks unavoidable,” Roubini added. “The stagflation of the 1970s will soon meet the debt crises of the post-2008 period. The question is not if but when.”
President Joe Biden promised his Cabinet would be the most diverse in history. Recently released data revealed his progress.
After saying he wanted his administration to “look like America” in December last year, the 78-year-old president has mostly succeeded in his plan to diversify the executive branch, according to an analysis by Insider in February.
As the country tries to emerge from the worst economic crisis since the 1930s, Biden has installed a diverse team to forward his economic and business agenda, which includes tackling entrenched inequities.
Last week marked the first 100 days of the Biden administration. We take a look at some of the actions taken since his January inauguration to promote diversity in business, the workplace and support communities disproportionately affected by the Covid-19 pandemic.
A $2 trillion infrastructure plan that targets funding towards underserved neighborhoods
Biden’s proposed $2 trillion infrastructure bill sets out to repair the country’s dilapidated road and bridge network, expand access to high-speed broadband and accelerate the clean energy transition.
The American Jobs Plan targets infrastructure projects towards historically underserved communities. The plan includes proposals to replace lead pipes that disproportionately harm Black children and a $20 billion investment to “reconnect” previously cut-off areas to affordable public transportation systems.
However, Republicans have opposed the bill, citing its “far-left” priorities and the corporate tax hike Biden has said will finance the plan.
Proposed funding to build a diverse clean-energy workforce, with investments targeted towards historically Black colleges
Biden’s administration is pushing for more solar panels to be installed in communities disproportionately affected by pollution, as part of his American Jobs Plan.
The Department of Energy announced on Tuesday that $15.5 million would go into installing solar panels in underserved communities and training a diverse clean-energy workforce.
The DOE also committed $17.3 million to fund internship and research programs, with a focus on training more students of color in STEM fields. More than $5 million will be directed to 11 colleges, including historically Black universities Howard and Florida A&M.
Historically Black colleges have long been denied equal access to federal funding opportunities, DOE secretary Jennifer Granholm said in a roundtable discussion at Howard University on Monday.
“This administration is really committed to making the transition to clean energy an inclusive transition, offering benefits to every community,” Granholm said.
A plan to introduce 12 weeks of paid family leave – and Biden hopes it will encourage women to stay in the workforce
The plan is estimated to cost $225 billion over 10 years.
The Biden administration hopes that introducing 12-weeks of paid family leave will help mothers to keep working, reduce racial disparities in lost wages, and improve children’s health.
Biden’s plan also commits to providing support for low- and middle-income families to access childcare, ensuring this does not account for more than 7% of their income, and investing in the childcare workforce.
The new order instead advances a “whole-of-government” approach to addressing racial inequities, and asks federal agencies to consider whether their policies and programs create barriers for underserved communities to access their benefits and services.
Targeted Covid-19 relief, including protections for those in insecure work
The landmark $1.9 trillion stimulus package includes funding commitments to help communities that have been disproportionately affected by the pandemic.
In the law, signed in March, $5 billion is provided to farmers of color to invest in their business, buy equipment and repay loans.
“This is a big deal for us,” John Boyd, Jr., president of the National Black Farmers Association, told CBS. “We see this as a great opportunity to help thousands.”
In the package, unemployment insurance for self-employed and gig workers, such as ride-share and takeout delivery drivers, has been extended until September.
In announcing the plan, Biden called on businesses to provide back hazard pay to frontline workers – who are disproportionately Black, Latino and Asian American and Pacific Islander – in retail and grocery sectors. It was employers’ “duty,” the proposal stated, to compensate workers who had risked their lives to keep businesses running.
Biden still faces a challenging road ahead
The president’s administration has taken bold and swift action in its first 100 days, even winning praise from more left-leaning members of his own party. But the impact of Biden’s policies will only be felt in the coming months and years.
Biden still faces an uphill battle to get his Jobs Plan and Families Plan through Congress in the face of Republican opposition and with a razor-thin majority.
At the end of his time in office, Barack Obama famously compared the presidency to an ocean liner. “Sometimes the task of government is to make incremental improvements or try to steer the ocean liner two degrees north or south so that, ten years from now, suddenly we’re in a very different place than we were,” he told podcaster Marc Maron in a 2016 interview.
Obama was arguing against using the power of the presidency to affect change too rapidly. If you try to make a hairpin turn with a Carnival cruise ship, you’re going to kill a lot of people and destroy a very expensive boat. Instead, Obama believed in making small policy course corrections that would eventually result in enormous societal outcomes like a greener economy and a more inclusive society.
Before his inauguration, most people (myself included) would have predicted that President Joe Biden would subscribe to his former boss’s ocean-liner theory of governance – slowly moving government to a more equitable place through steady, incremental change. Those predictions turned out to be entirely wrong.
On March 31st, President Biden delivered an economic speech that represented a clean break from the dominant economic paradigm of the last 40 years. In the speech, Biden laid out an economic vision for America that was a clear refutation of the neoliberal trickle-down economics theory promoted by the Reagan Administration and accepted as truth by every following presidential administration – Democrat or Republican – up until this year.
While the trickle-down philosophy centers corporations and the wealthy as the job-creating, wealth-producing engines of the economy, Biden offered a new understanding of where American prosperity is created. In the speech announcing his infrastructure bills, The American Jobs Plan and the American Families Plan, Biden described an economy in which “we all will do better when we all do well. It’s time to build our economy from the bottom up and from the middle out,” he announced.
“Wall Street didn’t build this country,” Biden said. “You, the great middle class, built this country.” He declared that his infrastructure plan would “build a fair economy that gives everybody a chance to succeed-and it’s going to create the strongest, most resilient, innovative economy in the world.”
A clean break
The next day, Bloomberg’s Peter Coy recognized Biden’s speech as a clean break from the past. In his embrace of “middle out economics,” Biden, Coy wrote, “was siding with the populist, liberal wing of the [Democratic] party and implicitly distancing himself from the low-tax, pro-business wing associated with former Treasury secretaries Robert Rubin and Lawrence Summers, among others.”
In his column, Coy says “Pitchfork Economics” host Nick Hanauer coined the phrase “middle-out economics” with his coauthor Eric Liu in their 2011 book “The Gardens of Democracy.” “The Biden administration is the first administration in my lifetime to actually believe that the neoliberal framework is wrong and to advance a counter-narrative and new agenda,” Hanauer told Coy.
The trickle-down theory
Many of us are familiar with the arguments of neoliberal, trickle-down economics, because they’ve been unthinkingly repeated by politicians across the political spectrum since the early 1980s: If you raise wages, you get fewer jobs. If you raise taxes, you’ll kill business. If you create regulations, you’ll strangle economic growth.
American leaders have treated those statements as uncontested gospel. They slashed taxes, deregulated business, and kept wages low in order to push money up to the wealthiest Americans, and they’ve waited for all that money to come trickling down to ordinary Americans. Four decades later, we can officially declare the experiment to be a disastrous failure. Inequality is dangerously high – in fact, the richest Americans have hoarded 50 trillion dollars that used to go to the paychecks of ordinary Americans.
Clearly, it’s time for a big new idea, and President Biden is betting on middle-out economics to turn this economy around. But what’s at the heart of this bold new strategy? Earlier this month, Hanauer explained to Democracy Journal that middle-out economics is “centered around the simple idea that the economy is ultimately made out of people, and the better people do the better the economy does; the focus of policymaking therefore should not be on enriching the few, but on improving the lot of the many.”
Hanauer continued, “When you help the broad population – the middle – become secure and prosperous, you not only have much faster rates of overall economic growth, but also a much more stable and secure democracy.”
By calling for huge investments that directly improve the lives of a majority of Americans, Biden is effectively making a 180-degree turn from the economic policies of the half-dozen presidents who came before him. Some neoliberals argue that this change is too much, too fast. But Biden seems to be confidently following the trail that was blazed by the last president to cast austerity aside and invest in the American people – Franklin Delano Roosevelt.
Biden is arguing that America can’t survive the kind of economic inequality we’re living with today, and that drastic action is necessary to fix the economy before it’s too late. Obama’s ocean liner analogy, after all, conveniently forgets the lesson of history’s most famous ocean liner – the ridiculously luxurious cruise ship holding some of the world’s wealthiest people which stayed steadfast on its course in dangerous waters, only to meet a disastrous end. You know the one. You’ve probably even seen the movie they made about it.
Sorry folks: You won’t be able to easily buy a PlayStation 5 for at least a few more months.
That’s according to PlayStation boss Jim Ryan, who confirmed as much in a series of interviews published this week. The PlayStation 5 isn’t expected to be readily available at retailers until the latter half of 2021.
Demand for Sony’s latest PlayStation console has overshot supply since the PS5 launched in mid-November 2020. That level of demand paired with the impact of the ongoing pandemic on manufacturing, as well as the ongoing microchip shortage, rendered Sony unable to make as many PlayStation 5 consoles as it would’ve liked, Ryan said.
“Demand was greater than we anticipated. That, along with the complexities of the supply chain issues, resulted in a slightly lower supply than we initially anticipated,” he told the Washington Post.
Even in late February, it’s still nearly impossible to buy a PlayStation 5 from a retail outlet.
When re-supplies of the console go live online, they are swept up nearly instantly. Many are still being swept up by resellers, some of whom are using bots to beat out human buyers.
Ryan said he’s hoping the situation will improve sooner than later.
“It will increase as each month passes,” he told GQ. “And the situation will start to get better hopefully quite quickly. We have been relentless in terms of trying to increase production.”
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A group of 10 Senate Republicans announced on Sunday they will soon unveil a $600 billion stimulus package in an effort to strike a compromise with the Biden administration.
The Senate Republicans, led by Sen. Susan Collins of Maine, also requested a meeting with President Joe Biden to discuss their proposal. The plan’s size is less than a third of the $1.9 trillion plan envisioned by Biden and most Democratic leaders in Congress.
“We recognize your calls for unity and want to work in good faith with your Administration to meet the health, economic, and societal challenges of the COVID crisis,” the letter said.
In addition to Collins, it was signed by Sens. Rob Portman of Ohio, Mitt Romney of Utah, Todd Young of Indiana, Lisa Murkowski of Alaska, Bill Cassidy of Louisiana, Thom Tillis of North Carolina, Shelley Moore Capito of West Virginia, Mike Rounds of South Dakota, and Jerry Moran of Kansas.
Details about the forthcoming Republican plan trickled out on Sunday. Portman said in an interview on CNN’s “State of the Union” it would aim the new round of direct payments to Americans who earn less than $50,000 a year and married couples making below $100,000.
According to Cassidy in a separate Fox News appearance, the direct payment amount would be cut from the current $1,400 Democratic proposal to $1,000. The Biden proposal has a provision for a fresh wave of $1,400 stimulus checks for Americans.
The Republican letter also sketched out more about the plan’s provisions. It would extend the $300 federal unemployment benefit; provide $160 billion in funds for virus testing and vaccine distribution; and provide extra money for the Paycheck Protection Program as well as schools.
Portman, who just last week announced that he would retire in 2022 after two terms, implored Democrats not to push a large relief bill through Congress using the reconciliation process, which only requires a simple majority.
Portman and the other nine GOP senators are calling on Biden to act on his call for “unity” and confer with the GOP group in crafting a smaller compromise package.
“My hope is the president will meet with us,” Portman said.
Since being sworn in, Biden has emphasized he is open to seeking a bipartisan deal with Republicans on an economic relief package. Brian Deese, a top White House economic advisor, said that was still the case.
Biden “is open to ideas wherever they may come,” Deese told NBC News on Sunday. “What he’s uncompromising about is the need to move with speed on a comprehensive plan.”
Democrats, though, are preparing to circumvent Republicans using reconciliation. Senate Majority Leader Chuck Schumer said that Democrats would vote on a budget resolution this week, the first step in the process.
It appears unlikely the Biden administration will sign onto or adopt many elements of a GOP plan which curtails some of their top relief priorities like strengthened unemployment insurance.
“We have learned from past crises that the risk is not doing too much,” Biden said at the White House on Friday. “The risk is not doing enough.”
In December 2020, Congress passed a $900 billion bipartisan coronavirus relief package, which included $600 direct payments to individual Americans and $300 federal unemployment benefits until March 14.
Democratic leaders have set mid-March as a deadline for legislative action because millions of Americans stand to lose their jobless aid after that date.
At the time, Biden made it clear that the December package was only “a down payment” on a more comprehensive bill that he would seek to pass once he was in office.
GOP Sen. Rand Paul of Kentucky on Friday came out swinging against President Joe Biden, saying that the Democratic president’s push for a $15 minimum wage would hurt Black youth.
During an interview with Fox host Sean Hannity, Paul alleged that a minimum wage increase would put 4 million people out of work.
“The people who lose their jobs first when you hike up the minimum wage are Black teenagers,” Paul said. “So, you know, ‘Why does Joe Biden hate Black teenagers?’ should be the question. Why does Joe Biden want to destroy all of these jobs?”
He added: “Even the government says that nearly 4 million people will lose their jobs.”
According to a Congressional Budget Office report, there’s a two-thirds chance that raising the minimum wage to $15 by 2025 would cause zero job losses on the low end of estimates to 3.7 million job losses on the high end of estimates, with a median CBO estimate of 1.3 million job losses.
However, the CBO also estimates that a $15 minimum wage would increase pay for 17 million workers.
“It’s kind of a strange beginning to an administration,” Paul said. “You’re going to put your best foot forward and the first thing you say is, ‘This is how I’m going to kill jobs’ … ‘I’m going to kill thousands of jobs of the Keystone pipeline with ending it.'”
While in office, former President Donald Trump championed the US-Canada project, saying it would create 28,000 US jobs, a number that was disputed by The Washington Post in 2017. That same year, ABC News also noted that the majority of the jobs involving the pipeline would be temporary.
Paul Constant is a writer at Civic Ventures, a cofounder of the Seattle Review of Books, and a frequent cohost of the “Pitchfork Economics” podcast with Nick Hanauer and David Goldstein.
In this week’s episode of Pitchfork Economics, Hanauer and guest cohost Jessyn Farrell spoke with Anat Admati, a finance professor at Stanford’s Graduate School of Business, on how banking is regulated in the US.
Admati says it’s natural for elected leaders to create more safety nets to make banking safe for American consumers.
The concept of government ‘deregulation’ won’t result in less regulations, Admati explains, but instead will allow banks to create their own regulations that can be prone to negligence and fraud.
It’s quite possible that the greatest trick that trickle-downers ever pulled was framing the battle over government’s relationship to business as regulation versus deregulation. It sounds simple, a binary choice between all or none: Either you want businesses to be regulated, or you want to deregulate the market. “Deregulation” in this context sounds sleek, minimalist, and freeing, while “regulation” sounds cumbersome and complicated.
But here’s the dirty little secret about deregulation: It doesn’t really exist.
There’s no such thing as “fewer regulations,” only a shell game that shifts ownership of regulations from one authority to another. What we call “deregulation” simply stands for a belief that corporations should act only in ways that suit their preferences – with no consideration for anything beyond shareholder value.
In other words, human activity within a society is always regulated – the only question is who’s doing the regulating.
All that really changes when, say, the Trump administration moves to roll back regulations on oil drilling in the Alaskan Arctic, is that the government cedes control over drilling regulations, handing the reins to the oil industry. While the government’s regulations sought to protect unspoiled public lands, the oil industry’s “regulations” seek to enrich shareholders and executives at the public’s expense by exploiting irreplaceable environmental resources in exchange for a quick buck.
Back in 2008, we saw what happened when the federal government systematically ceded control of regulations to the banking industry over the span of decades. Left to their own devices, the banks set in motion a mortgage crisis by building up a pyramid scheme that nearly brought down the global economy. The banks’ regulations favored immediate profits over long-term sustainability, and the rest of us paid the price.
That economic collapse is part of the reason why this week’s guest on the Pitchfork Economics podcast, Anat Admati, half-jokingly refers to herself as “a recovering finance professor.” Admati, who still teaches finance at the Stanford Graduate School of Business, says the egregious failures of unfettered capitalism have caused her to look at banking regulations in a new way.
“I’ve become very interested in why capitalism and democracy are failing us altogether,” Admati told Pitchfork Economics hosts Nick Hanauer and Jessyn Farrell. Admati’s fascination with regulatory collapses led her to her role as director of the Corporations and Society Initiative, which seeks “to promote more accountable capitalism and governance,” and also inspired her to coauthor a book titled “The Bankers’ New Clothes: What’s Wrong with Banking and What to Do About It.”
Admati realized that the financial industry was ill-equipped to regulate itself in 2013, when Wells Fargo CEO John Stumpf argued against new Federal Reserve regulations that would require the bank to stop making risky, debt-laden bets like those that caused the financial crisis. Stumpf bragged that “because we have this substantial self-funding with consumer deposits we don’t have a lot of debt.”
Admati was astonished. “In other words,” she explained, “he forgot that my deposit is basically his debt to me, and he forgot that it’s a liability to him. Why? Because I don’t behave like a creditor.”
Even though Wells Fargo technically owes its customers the money that they entrust them with, the FDIC insures those deposits and the government has proven that it’s ready and eager to protect giant banks from crises of their own creation.
It’s only natural that elected leaders create “more and more safety nets to make [banking] safe.”
“But the safety net has enabled more recklessness because perversely it created ever more complacency and also removed any market forces from this system,” Admati added.
In short, a CEO whose bank was buffered by one comprehensive set of federal regulations that were created to protect consumers from financial negligence was arguing against other industry regulations that would have caused Wells Fargo to behave responsibly. It’s a deeply layered ecosystem of regulations – seen and unseen – that often contradict each other in complicated ways.
To a trickle-downer, this might sound like a story highlighting the importance of deregulation. But remember – that’s just an argument for letting Wells Fargo create its own regulations, which isn’t a terrific idea, given the institution’s extensive history of fraud. The best answer is to regulate smarter – to realistically gauge the purpose of each regulation, ascertain how it can benefit the broadest number of people, and enact it so that it functions as efficiently and successfully in the real world as it does in theory.
“We have to have a system in which the government works for us,” Admati concluded. “If we don’t understand that we need an effective government – not big or small, just competent and effective – to actually create an economy that functions, then that’s why we’re in the trouble we’re in.”