Economy – manitimes.com

Can Europe Save Forests Without Killing Jobs in Malaysia?

Press Room — Thu, 14 Mar 2024 10:21:56 +0000

The European Union’s upcoming ban on imports linked to deforestation has been hailed as a “gold standard” in climate policy: a meaningful step to protect the world’s forests, which help remove planet-killing greenhouse gases from the atmosphere.

The law requires traders to trace the origins of a head-spinning variety of products — beef to books, chocolate and charcoal, lipstick and leather. To the European Union, the mandate, set to take effect next year, is a testament to the bloc’s role as a global leader on climate change.

The policy, though, has gotten caught in fierce crosscurrents about how to navigate the economic and political trade-offs demanded by climate change in a world where power is shifting and international institutions are fracturing.

Developing countries have expressed outrage — with Malaysia and Indonesia among the most vocal. Together, the two nations supply 85 percent of the world’s palm oil, one of seven critical commodities covered by the European Union’s ban. And they maintain that the law puts their economies at risk.

In their eyes, rich, technologically advanced countries — and former colonial powers — are yet again dictating terms and changing the rules of trade when it suits them. “Regulatory imperialism,” Indonesia’s economic minister declared.

The view fits with complaints from developing countries that the reigning international order neglects their concerns.

The palm oil dispute also encapsulates a central tension in the economics of climate change: the argument that lower- and middle-income nations are being compelled to bear the cost of ruinous environmental shifts caused mostly by the world’s wealthiest nations.

“We’re not questioning the need to fight deforestation,” said Nik Nazmi Nik Ahmad, Malaysia’s environment minister. “But it’s not fair when countries that have deforested their own land for centuries, or are responsible for much of our deforestation, can unilaterally impose conditions on us.”

In addition, many government officials, industry representatives and farmers contend that the European Union’s rules are really a form of economic protectionism, a way to shield European farmers who grow competing oilseed crops like rapeseed or soybeans.

The European Union’s law, which was passed last year, bars products that use palm oil and other commodities like rubber and wood that come from forestland that was converted to agriculture after 2020.

Proving compliance could turn out to be complex and expensive for vast numbers of small suppliers.

In Malaysia and Indonesia, the prime minister and president said the livelihoods of their citizens were threatened. They jointly vowed to combat what they called “highly detrimental discriminatory measures against palm oil.”

The concerns have been echoed by anti-poverty advocates and even some environmentalists.

“A lot of people are going to be caught flat-footed when this kicks in next year,” said Pamela Coke-Hamilton, executive director of the International Trade Center, a United Nations agency created to help poor countries build wealth through trade.

Most small farmers don’t even know about the looming ban, let alone how to prove their compliance, Ms. Coke-Hamilton said.

In a week of interviews with The New York Times at plantations in the Malaysian state of Sabah on the island of Borneo, not a single small farmer had heard of the deforestation rules.

“They’re going to get kicked out of the market,” which could further harm the environment, Ms. Coke-Hamilton said. “We know deforestation is linked to poverty.”

Endless Rows of Oil Palms

The Chinese New Year was a national holiday in Malaysia, but Awang Suang, 77, had been up since dawn, carrying a roaring engine on his back and swinging a hand-held grass cutter around the oil palm trees on his plantation.

“Plantation” is a bit grand to describe the small overgrown plot in Membakut in Sabah that Mr. Awang farms mostly on his own. His holdings amount to 12 acres.

He has been cultivating oil palms for more than 50 years after switching from rubber trees. Palms require less labor and produce more frequent harvests — roughly every two weeks, year round — providing a steadier income, he explained.

The work in Borneo’s humid equatorial heat is exhausting. For tall palms, farmers like Mr. Awang maneuver an extendable pole with a scythe on the end to slice through spiny 50-pound bunches cradled at the top of the trunk. Then they must carry or cart the fallen fruit to a road.

In a good month, Mr. Awang said, he can grow about eight tons of fruit.

Later, over sweet milky tea in a living room lined with six overstuffed, regal-style couches, Mr. Awang explained that most property owners he knew grew oil palms. Many supplement their income by, say, raising goats, fishing, contracting work or doing government jobs.

In recent decades, the world’s appetite for the viscous red oil has exploded. Roughly half the products on supermarket shelves contain palm oil.

The bulk of it comes from multibillion-dollar corporations, which have gulped up miles and miles of land.

Across Sabah, oil palms stretch as far as the eye can see. The landscape is picturesque. But compared with the riotous diversity of a rainforest, the columns — like brigades of upright feather dusters — can become as monotonous as elevator music.

Smallholders — defined in Malaysia as farmers who own fewer than 40 hectares, or nearly 100 acres — grow 27 percent of the country’s oil palms.

The palm oil gold rush has helped reduce rural poverty, build wealth from exports and create jobs. Roughly 4.5 million people in Malaysia and Indonesia work in the industry, according to the World Economic Forum.

For a while the oil was even promoted as environmentally friendly, a “supercrop.” One acre can produce four to 10 times as much oil as the same area of soybeans, rapeseed or sunflowers.

But environmental benefits accrue only if existing cropland is converted to oil palms. Instead, producers clear-cut or burned pristine rainforests and peatlands to make way for crops. The elimination of these precious carbon sinks released titanic amounts of greenhouse gases into the atmosphere, unleashing an environmental catastrophe.

Malaysia lost nearly a fifth of its primary tropical forest between 2001 and 2022, according to the World Resources Institute. Habitats for thousands of species, including orangutans, sun bears and pygmy elephants, were destroyed, putting some animals in danger of extinction.

Environmental watchdogs like the World Wildlife Fund and a wide range of industry players and multinationals teamed up in 2004 to create the Roundtable on Sustainable Palm Oil, a voluntary organization that set standards to reduce destructive practices.

But critics maintain that while there have been improvements, voluntary agreements alone could not preserve and restore the world’s forests. A report from the European Parliament concluded in 2020 that self-policing “should only be complementary to binding measures.”

The European Union introduced exactly that. To ensure that any product sold in the 27 countries of the bloc could be traced back to its source, the legislation demands that nearly all producers who cultivate palm oil, coffee, cocoa, cattle, soybeans, rubber and wood map the precise borders of their farmland to show that the commodities are not linked to deforestation.

It is up to exporters to prove that the rules were followed at every point along the supply chain.

To many Malaysians, though, the European Union’s mandate reflects a deep misunderstanding. Tracing each fat, acorn-shaped bunch of fruit to a small farm in remote areas is much more complicated than lawmakers in Brussels realize, smallholder groups say.

Hard-to-Trace Sources

Smallholders mostly sell to traders, dealers and collectors — layer upon layer of middlemen who end up mixing together bunches of palm oil fruit from hundreds of plantations.

Tracing is further complicated because the dealer, wary of competition, “doesn’t want to tell the mill where all his suppliers come from,” said Reza Azmi, executive director of Wild Asia, a nonprofit based in Malaysia that works with smallholders to improve environmental practices.

Smaller independent producers and traders could get squeezed out, expanding the reach of agribusinesses.

“What we’re hearing in Sabah,” Mr. Azmi said, “is that independent mills are looking to sell to big corporate guys because they don’t have resources to make sure of compliance.”

The challenges of tracing oil back to its source can be glimpsed at a tiny collecting station in Gomantong, where farmers sell their daily or weekly palm oil harvests.

Starting at 6 a.m., dozens of big trucks from plantations, as well as smallholders’ pickups, rolled one by one onto a large platform scale before moving on to dump their loads onto a single swelling pile.

When Riduan Amil’s turn came, he jumped onto the flatbed of his white Isuzu, which can hold about a ton of palm oil fruit. Under a broiling sun, he used a sharp pike to pitch each bunch onto the hodgepodge.

By the end of the day, roughly 80 tons of fruit will have accumulated. The haul is then delivered to a mill.

When it comes to the European Union’s mandates, produce from a single uncertified farm would make the entire lot ineligible for use in any export to the bloc, the world’s third-largest importer of palm oil.

Olivier Tichit, director of sustainability for Indonesia’s Musim Mas Group, one of the world’s largest integrated palm oil companies, said the group bought fruit from up to a million smallholders.

“If one is not compliant, you have to exclude the entire mill,” he said, adding that his company will “take no risks.”

The European Commission, according to a spokesperson, “is committed to providing all the necessary support to make sure that smallholders are fully prepared for the change in rules.” The bloc has pledged 110 million euros to provide technical and financial support.

Farmers with fewer than 10 acres can use a smartphone to map their land. “GPS coordinates can be generated easily and for free,” an E.U. primer explains.

But critics insist that mapping farms and then verifying the data is much more complex, time-consuming and expensive, not to mention plagued by a lack of documented land titles and other complications.

In Malaysia, government officials complain the European Union’s law ignores the licensing and deforestation rules that the country already has. Since Jan. 1, 2020, all growers and businesses have been required to be certified by the Malaysian Sustainable Palm Oil board. The standards match many set by the European Union, although there is no requirement for geolocation mapping.

The effort has had some success. In its annual 2022 survey, the World Resources Institute found that Malaysia was one of the few places where deforestation did not get worse.

A new task force that includes the European Commission and government ministers from Malaysia and Indonesia is meeting to work on putting the deforestation rules into practice. Malaysian officials have asked the commission to accept the country’s own certification system, and to exempt smallholders from the law.

Still, the perception that European powers are dictating to their governments stings.

“You can’t impose legislation and then come after and say, ‘Come have a dialogue,’” said Belvinder Kaur Sron, executive director of the Malaysian Palm Oil Council, a trade organization.

There is also resentment that a double standard seems to apply to rich countries.

“We are told about upholding stringent standards,” on free trade and climate, Mr. Nik Nazmi, the environment minister, said. But when the interests of more economically powerful regions are at stake, the rules are relaxed.

“We feel our voices are not heard.”

U.S. Judge Blocks Rule Extending Reach of Labor Law to Franchisers

Press Room — Wed, 13 Mar 2024 05:19:56 +0000

The U.S. Chamber of Commerce, which led a group of business groups challenging the rule, applauded the ruling. “It will prevent businesses from facing new liabilities related to workplaces they don’t control, and workers they don’t actually employ,” Suzanne P. Clark, chief executive of the chamber, said in a statement.

The labor board’s chair, Lauren McFerran, who was named by President Biden, said in a statement that the ruling was “a disappointing setback,” but “not the last word” on the joint-employer standard. If the board appeals the ruling, the case would move to the conservative U.S. Court of Appeals for the Fifth Circuit. The labor agency pushed for the case to be moved to Washington, but Judge Barker denied that request.

The rule in dispute, issued in October by the labor board’s Democratic majority, would classify a parent company as a joint employer if it has control — direct or indirect — over even one condition of employment. The current standard, adopted in 2020 when the board was led by Republicans, classifies a company as a joint employer only if it exerts direct control over workers.

Nurses hired by a staffing agency, for example, may work at a hospital that determines their schedules but does not directly establish their pay. If those nurses seek to unionize, they may argue that the hospital indirectly determines their pay based on how much it pays to contract their work. Under the rule issued in October, the hospital would probably be considered a joint employer, but under the current standard, it would have an easier time arguing that the onus falls only on the staffing agency that signs the nurses’ paychecks.

The new rule “would treat virtually every entity that contracts for labor as a joint employer because virtually every contract for third-party labor has terms that impact, at least indirectly, at least one of the specified ‘essential terms and conditions of employment,’” Judge Barker wrote in his decision.

Biden Budget Lays Out Battle Lines Against Trump

Press Room — Tue, 12 Mar 2024 17:24:27 +0000

President Biden in his budget this week staked out major economic battle lines with former President Donald J. Trump, the presumptive Republican presidential nominee. The proposal offers the nation a glimpse of the diverging directions that retirement programs, taxes, trade and energy policy could take depending on the outcome of the November election.

During the past three years, Mr. Biden has enacted key pieces of legislation aimed at bolstering the green energy economy, making infrastructure investments and reinforcing America’s domestic supply chain with subsidies for microchips, solar technology and electric vehicles. Few of those priorities are shared by Mr. Trump, who has pledged to cut more taxes and erect new trade barriers if re-elected.

The inflection point will be arriving as the economy enters the final stretch of what economists are now expecting to be a “soft landing” after two years of high inflation. However, the prospect of a second Trump administration has injected increased uncertainty into the economic outlook, as companies and policymakers around the world brace for what could be a dramatic shift in the economic stewardship of the United States.

Here are some of the most striking differences in the economic policies of the two presidential candidates.

Sparring over the social safety net

At first glance, Mr. Biden and Mr. Trump might appear to have similar positions on the nation’s social safety net programs. In 2016, Mr. Trump broke with his fellow Republicans and refused to support cuts to Social Security or Medicare. Mr. Biden has long insisted that the programs should be protected and has hammered Republicans who have suggested cutting or scaling back the programs.

In his budget proposal on Monday, Mr. Biden reiterated his commitment to preserving the nation’s entitlement system. He called for new efforts to improve the solvency of Social Security and Medicare, including making wealthy Americans pay more into the health program. However, his plans were light on details regarding how to ensure both programs’ long-term sustainability.

Separately on Monday, Mr. Trump appeared to suggest that he was open to entitlement cuts. He said on CNBC that there is “a lot you can do in terms of entitlements in terms of cutting and in terms of also the theft and the bad management of entitlements, tremendous bad management of entitlements.”

The Trump campaign clarified that the former president was referring to cutting waste, but the Biden campaign seized on the comment. It quickly released an advertisement contrasting Mr. Trump’s remarks with Mr. Biden’s vow at the State of the Union to stop anyone who tries to cut Social Security or Medicare or raise the retirement age.

Although Mr. Trump never signed cuts to Social Security or Medicare as president, he has previously flirted with the idea. Asked about entitlements cuts in a CNBC interview in 2020, he said, “At the right time, we will take a look at that.”

To tax or not to tax?

One of the biggest contrasts between Mr. Biden and Mr. Trump revolves around who — if anyone — should pay more in taxes.

The president proposed more than $5 trillion in tax increases on corporations and the wealthy this week, including a new 25 percent minimum tax on the wealthiest Americans and an increase in the corporate tax rate to 28 percent from 21 percent.

Mr. Biden paired his proposed tax increases on the wealthy with tax relief for the middle class. He called for an expansion of the child tax credit, which many Republicans have opposed, broadening eligibility for the earned-income tax credit and new tax credits that aim to make housing more affordable for first-time buyers.

Mr. Trump signed into law the 2017 Tax Cuts and Jobs Act, which included nearly $2 trillion in tax cuts, much of which benefited companies and the rich. Many of those tax cuts expire in 2025, meaning that whoever is president will have a big say in whether they are extended or allowed to sunset.

Mr. Biden wants to roll back much of the 2017 law, except for the parts that benefit taxpayers earning less than $400,000.

Mr. Trump has offered few specifics about his tax plans, but suggested at a rally in February that he envisioned another round of cuts.

“You’re all getting the biggest tax cuts because we’re doing additional cuts and a brand-new Trump economic boom like you’ve never seen before,” Mr. Trump said.

Speaking to CNBC on Monday, Mr. Trump said it would be “very bad for this country” if the Trump tax cuts were not extended.

The Friendshorer vs. the Tariff Man

While Democrats and Republicans have become more polarized in recent years, trade policy is one of the few areas where views seem to have converged.

For all their differences, Mr. Biden has largely left the trade agenda that Mr. Trump handed to him intact. The tariffs on hundreds of billions of dollars of Chinese imports that Mr. Trump imposed have yet to be rolled back, Mr. Biden has intensified scrutiny of Chinese investments in the United States and of American investment in China, and the Biden administration’s industrial policy has rankled relations with some European countries.

If he is re-elected, Mr. Biden is likely to continue his policy of deepening trade ties with American allies — a policy referred to as friendshoring — and reducing supply chain reliance on adversaries such as China. The Biden administration is expected to complete a review of the China tariffs in the coming months and could reduce some levies on consumer products and raise others that would further protect the burgeoning U.S. electric vehicle sector.

Mr. Trump has indicated that he is gearing up for a new round of trade wars. The former president and self-proclaimed “Tariff Man” has discussed imposing a 10 percent tariff on all imports in a second term and a tariff of 60 percent or more on Chinese goods.

Clashing on clean energy

The Inflation Reduction Act of 2022 has become Mr. Biden’s signature piece of legislation and its future — and the trajectory of U.S. climate policy — depends on who wins the election.

Mr. Biden’s economic team has been racing to roll out regulations associated with the tax and climate law to entrench investments in clean energy and the electric vehicle supply chain into the economy. The Biden administration hopes that the law could prove to be enduring because many of these investments are being made in states that are led by Republicans.

However, Mr. Trump, who has long derided electric vehicles as overpriced, underpowered and a threat to American jobs, should not be counted on to embrace much of the law if elected.

“We are a nation whose leaders are demanding all electric cars, despite the fact that they don’t go far, cost too much and whose batteries are produced in China,” Mr. Trump said at a rally in New Hampshire in January.

The former president, who pulled the United States out of the Paris climate agreement, is also unlikely to prioritize other clean energy investments.

For years, Mr. Trump has argued that solar power is ineffective and that wind turbines are responsible for the slaughter of birds.

Biden’s $7.3 Trillion Budget Proposal Highlights Divide With Trump and GOP

Press Room — Tue, 12 Mar 2024 02:15:00 +0000

President Biden proposed a $7.3 trillion budget on Monday packed with tax increases on corporations and high earners, new spending on social programs and a wide range of efforts to combat high consumer costs like housing and college tuition.

The proposal includes only relatively small changes from the budget plan Mr. Biden submitted last year, which went nowhere in Congress, though it reiterates his call for lawmakers to spend about $100 billion to strengthen border security and deliver aid to Israel and Ukraine.

Most of the new spending and tax increases included in the fiscal year 2025 budget again stand almost no chance of becoming law this year, given that Republicans control the House and roundly oppose Mr. Biden’s economic agenda. Last week, House Republicans passed a budget proposal outlining their priorities, which are far afield from what Democrats have called for.

Instead, the document will serve as a draft of Mr. Biden’s policy platform as he seeks re-election in November, along with a series of contrasts intended to draw a distinction with his presumptive Republican opponent, former President Donald J. Trump.

Mr. Biden has sought to reclaim strength on economic issues with voters who have given him low marks amid elevated inflation. This budget aims to portray him as a champion of increased government aid for workers, parents, manufacturers, retirees and students, as well as the fight against climate change.

Speaking in New Hampshire on Monday, Mr. Biden heralded the budget as a way to raise revenue to pay for his priorities by raising taxes on the wealthiest Americans and big corporations.

“I’m not anti-corporation,” he said. “I’m a capitalist, man. Make all the money you want. Just begin to pay your fair share in taxes.”

The budget proposes about $5 trillion in new taxes on corporations and the wealthy over a decade. Administration officials said Monday that those increases would be split equally between corporations and the nation’s highest earners, and that Americans earning less than $400,000 a year would enjoy tax cuts totaling $750 billion under their plans.

“We can do all of our investments by asking those in the top 1 and 2 percent to pay more into the system,” Shalanda Young, the director of the White House budget office, told reporters.

The president has already begun trying to portray Mr. Trump as the opposite: a supporter of further tax cuts for the well-off. “Do you really think the wealthy and big corporations need another $2 trillion tax break?” Mr. Biden asked in New Hampshire, referencing Mr. Trump — but not by name. “Because that’s what he wants to do.”

Speaker Mike Johnson and other members of House Republican leadership criticized Mr. Biden in a statement released Monday afternoon. “The price tag of President Biden’s proposed budget is yet another glaring reminder of this administration’s insatiable appetite for reckless spending and the Democrats’ disregard for fiscal responsibility,” they said.

Polls have found that Americans are dissatisfied with Mr. Biden’s handling of the economy and favor Mr. Trump’s approach to economic issues. But the president has been unwavering in his core economic policy strategy, and the budget shows that he is not deviating from that plan.

Mr. Biden’s budget proposes about $3 trillion in new measures to reduce the federal deficit over the next decade. That is in line with his budget proposal last year, which narrowed deficits by raising taxes on businesses and the rich and by allowing the government to bargain more aggressively with pharmaceutical companies to reduce spending on prescription drugs.

The budget again calls for raising the corporate tax rate to 28 percent from 21 percent, the level Mr. Trump set in the tax bill he signed in late 2017. It increases a new minimum tax on large corporations and quadruples a tax on stock buybacks, among other efforts to raise more revenue from companies and individuals who make more than $400,000 a year.

Those savings would build on discretionary spending limits that Mr. Biden and congressional Republicans agreed on last year to resolve a standoff over raising the nation’s borrowing limit. They still would leave the nation with historically high budget deficits: about $1.6 trillion a year on average over the next decade, by administration forecasts. As a share of the economy, deficits would decline in that time — but total government debt as a share of the economy would tick upward.

House Republicans released a budget last week that seeks to reduce deficits much faster — balancing the budget by the end of the decade. Their savings relied on economic growth forecasts that are well above mainstream forecasters’ expectations, along with steep and often unspecified spending cuts.

The nonpartisan Committee for a Responsible Federal Budget called the Republican plan “unrealistic in its assumptions and outcomes.” On Monday, the group called Mr. Biden’s proposed deficit reduction “a welcome start, but a too timid one.”

Mr. Biden and his aides have repeatedly said they believed the projected deficits in his budgets would not hurt the economy. Ms. Young and Jared Bernstein, who leads the White House Council of Economic Advisers, repeated that position on Monday, even after acknowledging that the budget now forecasts higher government borrowing costs over the next decade than previous budgets have.

Instead of turning toward more aggressive deficit reduction, as prior Democratic presidents have done after losing control of a chamber of Congress, Mr. Biden has leaned into the need for new spending programs and targeted tax incentives to bolster growth and the middle class.

The new proposal continues that trend. It would create a national program of paid leave for workers. It would reinstate an expanded child tax credit that Mr. Biden created temporarily in his $1.9 trillion economic stimulus law in 2021. That credit helped reduce child poverty significantly over the span of a year before expiring. That reinstatement would last for only a year, but administration officials said Monday that they hope to make it permanent as part of a broader debate on taxes in 2025.

The budget also includes new efforts to help Americans struggling with high costs. That issue has dogged Mr. Biden with voters since inflation soared on his watch to its highest levels in four decades, even as price increases have cooled over the past year. Mr. Biden previewed many of those efforts in his State of the Union speech last week, including new tax credits for certain home buyers and expanded assistance for people to buy health insurance through the Affordable Care Act.

Mr. Biden also called for new efforts to improve the solvency of Social Security and Medicare. In the budget, he opposed benefit cuts for the programs and any additional contributions from workers earning less than $400,000 a year.

On Monday, Ms. Young implied that Mr. Biden would look to shore up Social Security in part by targeting a cap on income subject to the payroll taxes that feed the program — a move he has specifically endorsed for Medicare. She said Mr. Biden would improve its solvency “by asking high-income Americans to pay their fair share. If you make a million dollars in this country, you are done paying your Social Security taxes sometime in February.”

In another key area, Mr. Biden’s proposal punts on key details: what to do about the provisions of the 2017 Republican tax law, including tax cuts for individuals, that expire in 2025. The budget calls that expiration, which was written into the law in order to hold down its estimated cost, “fiscally reckless.” But it does not specify how Mr. Biden would handle the expirations if he wins a second term.

Instead, the budget says Mr. Biden would seek to extend tax breaks for people earning less than $400,000 a year, offset with “additional reforms to ensure that wealthy people and big corporations pay their fair share.”

How Trump’s Justice Dept. Derailed an Investigation of a Major Company

Press Room — Sun, 10 Mar 2024 03:43:51 +0000

In December 2018, a team of federal law enforcement agents flew to Amsterdam to interview a witness in a yearslong criminal investigation into Caterpillar, which had avoided billions of dollars of income taxes by shifting profits to a Swiss subsidiary.

A few hours before the interview was set to begin, the agents were startled to hear that the Justice Department was telling them to cancel the long-planned meeting.

The interview was never rescheduled, and the investigation would limp along for another few years before culminating, in late 2022, with a victory for Caterpillar. The Internal Revenue Service told the giant industrial company to pay less than a quarter of the back taxes the government once claimed that Caterpillar owed and did not impose any penalties. The criminal investigation was closed without charges being filed — and even without agents having the chance to review records seized from the company.

Caterpillar appears to have defused the investigation at least in part by deploying a type of raw legal power that rarely becomes publicly visible. This account is based on interviews with people familiar with the investigation, regulatory filings and internal Justice Department emails provided to Senate investigators and reviewed by The New York Times.

In the months leading up to the canceled interview in the Netherlands, Caterpillar had enlisted a small group of well-connected lawyers to plead the company’s case. Chief among those was William P. Barr, who had served as attorney general in the George H.W. Bush administration.

Caterpillar’s attorneys met with senior federal officials, including the Justice Department’s top tax official, Richard Zuckerman, according to agency emails. The lawyers sharply criticized the conduct of one of the agents working on the Caterpillar case and questioned the legal basis for the investigation.

A week before the agents were to interview the witness in the Netherlands, President Donald J. Trump nominated Mr. Barr to return to the Justice Department as the next attorney general. Mr. Zuckerman then ordered the interview to be canceled and the inquiry halted, without getting input from the prosecutor overseeing the Caterpillar investigation, according to the emails.

The sequence of events alarmed some federal officials and set off calls for an internal investigation.

“It appears that Caterpillar was given special political treatment that the average U.S. citizen cannot obtain,” Jason LeBeau, one of the agents who worked on the investigation, wrote to the Justice Department’s inspector general late last year.

Justice Department and I.R.S. representatives declined to comment.

“Caterpillar cooperated with the government in its review of the issues, and we were pleased to have reached the resolution with the I.R.S.,” said Joan Cetera, a spokeswoman for the company.

The roots of the investigation into Caterpillar, which makes trucks, asphalt pavers and a variety of industrial parts and equipment, dated back to 2009, when a former employee filed an I.R.S. whistle-blower claim asserting that Caterpillar had fraudulently dodged billions of dollars in U.S. income taxes by improperly parking profits in a small Swiss subsidiary.

The I.R.S. later accused Caterpillar of using “an abusive tax shelter” to understate its profits in the United States by $3 billion. A Senate committee also dug into the tax strategy, unearthing internal communications and interviewing Caterpillar’s employees and outside advisers, and raised questions about its legality.

That piqued the interest of the U.S. attorney near Caterpillar’s headquarters in Peoria, Ill. A veteran prosecutor, Eugene Miller, was assigned to the case. He worked with agents from the I.R.S. and the Federal Deposit Insurance Corporation’s Office of Inspector General, including Mr. LeBeau. (The F.D.I.C. office investigates bank and securities fraud.) Mr. Miller soon convened a grand jury and began issuing subpoenas.

Investigations of corporate tax dodges are generally civil, not criminal. This was a rare exception, indicating that the federal authorities believed that Caterpillar might have engaged in deliberate wrongdoing. (The I.R.S., too, sought the Justice Department’s approval to open a criminal investigation, though it is not clear whether the agency got that clearance.)

“I suspect this is one of the bigger paper cases you (we) will ever do,” the head of the F.D.I.C. inspector general’s office emailed Mr. LeBeau in 2016. “It’s a great case.”

In early 2017, federal agents searched and seized records from several Caterpillar buildings in and around Peoria as part of the investigation.

Two weeks later, the company announced that it was hiring some Washington heavy hitters for help. Mr. Barr was one. He was joined by James Cole, who had been the No. 2 official in the Obama Justice Department.

By early 2018, the I.R.S. had informed Caterpillar that the agency was seeking taxes and penalties totaling $2.3 billion. The U.S. attorney’s criminal investigation was also moving ahead.

Mr. Barr and his colleagues met with Mr. Miller’s boss, the U.S. attorney for the central district of Illinois, and asked him to end the investigation.

In May 2018, Mr. Barr escalated the matter. He and Mr. Cole sent a 28-page letter to Mr. Zuckerman, the Justice Department’s top tax official, and the deputy attorney general, Rod Rosenstein.

The letter argued that the investigation violated a requirement that federal criminal tax investigations be approved by the Justice Department’s tax division. And it took particular aim at Mr. LeBeau, saying he had a “basic misunderstanding of the relevant tax rules” and was pursuing a “conspiracy theory.” The attacks were an unusual effort to undermine the credibility of an individual investigator.

To press Caterpillar’s case, Mr. Cole met several times with Mr. Zuckerman. Whereas Mr. Cole was a powerhouse lawyer in Washington, Mr. Zuckerman had only recently moved to the capital from Michigan to join the Justice Department.

Mr. Zuckerman was not a tax specialist. He had worked for years at a Detroit law firm, where his expertise was defending companies and executives. Before that, he had been a prosecutor and in the late 1970s helped investigate the disappearance of the Teamsters boss Jimmy Hoffa.

Despite the pressure from Mr. Barr and Mr. Cole, the investigation continued. Mr. LeBeau and others traveled the world to interview former Caterpillar employees.

Then, on Dec. 6, 2018, word leaked that Mr. Trump was poised to nominate Mr. Barr to succeed Jeff Sessions as attorney general. The news quickly spread through the Justice Department.

That afternoon, a lawyer in the tax division wrote to Mr. Miller, the federal prosecutor in Illinois, to ask about the extent of Caterpillar’s objections to the ongoing investigation. Mr. Miller responded that he knew of several instances of the company’s representatives protesting. He also asked what steps would be taken to wall off Mr. Barr from the investigation.

Five days later, internal emails show, Mr. Zuckerman contacted the U.S. attorney in the central district of Illinois. Mr. Zuckerman directed him not to conduct any further investigation into Caterpillar. The U.S. attorney relayed the order to Mr. Miller.

Mr. Miller was surprised. He still had not briefed Mr. Zuckerman on the investigation. Yet he was now halting the probe after recently meeting with Caterpillar’s lawyer, Mr. Cole, according to Justice Department emails.

“I wanted to confirm the direction we just received from your office,” Mr. Miller wrote to two Justice Department tax officials. Agents had already landed in the Netherlands, and two more were about to board a flight to join them. The interview with a former Caterpillar manager was due to start in 16 hours. Canceling at the last minute “may compromise our ability” to ever interview the former manager, Mr. Miller wrote.

Mr. Miller made a plea for an explanation about why the investigation was being paused. “Perhaps if we understood the underlying reasoning, we could address those concerns and still conduct the interview,” which had taken months to arrange, he wrote.

Kevin Sweeney, who spent six years in Justice Department’s tax division, said in a recent interview that the situation sounded “very unusual” based on The Times’ description. “I would not expect the tax division to stop an investigation based on representations made by defense counsel without first having a discussion with the lead prosecutor,” he said.

Two hours after Mr. Miller sent the email, he got a response: Senior Justice Department officials had decided “that no further action,” including the planned interview, should be taken “until further notice.” (That direction was reported by Reuters in 2020.)

The agents were at a holiday party hosted by the U.S. ambassador to the Netherlands when they got a call telling them to stand down.

In early 2019, Mr. Barr’s nomination was up for Senate confirmation. He told senators that he would abide by the Justice Department’s ethics rules regarding recusing himself from matters involving clients like Caterpillar.

Shortly after the Senate voted to confirm Mr. Barr, Mr. Miller proposed to officials in Washington that the investigation be restarted. In April, he was told to hold off, an email shows.

Judith Friedman, a Justice Department lawyer who had helped arrange the canceled interview in the Netherlands, was disturbed. “I am very concerned about this case and would like to be assured that there is no political interference going on,” she wrote to a law enforcement colleague that month in an email reviewed by The Times. She suggested that someone notify the inspector general, who can field complaints about internal misconduct.

In September 2022, Caterpillar reached a settlement with the I.R.S., which assessed $490 million in taxes over a 10-year period, plus $250 million in interest. It was a fraction of the more than $2 billion in taxes that the agency previously said Caterpillar owed. (The $490 million included other issues in addition to the Swiss strategy at the heart of the investigation.) The company noted at the time that it “vigorously contested” the I.R.S.’s interpretation of the tax rules at issue.

After the Biden administration took over in 2021, the Justice Department still didn’t pursue the investigation. At the end of 2022, the department’s tax division informed Caterpillar “that it does not have a pending criminal tax matter,” according to a securities filing. Last year, the government began returning the materials that agents had seized in the 2017 raids.

In his letter to the Justice Department’s inspector general, Mr. LeBeau said that investigators had not even been allowed to review most of the seized records, which he said was “completely unprecedented” in his 22-year career.

Glenn Thrush contributed reporting. Kitty Bennett contributed research.

The Surprising Left-Right Alliance That Wants More Apartments in Suburbs

Press Room — Sat, 09 Mar 2024 21:39:47 +0000

For years, the Yimbytown conference was an ideologically safe space where liberal young professionals could talk to other liberal young professionals about the particular problems of cities with a lot of liberal young professionals: not enough bike lanes and transit, too many restrictive zoning laws.

The event began in 2016 in Boulder, Colo., and has ever since revolved around a coalition of left and center Democrats who want to make America’s neighborhoods less exclusive and its housing more dense. (YIMBY, a pro-housing movement that is increasingly an identity, stands for “Yes in my backyard.”)

But the vibes and crowd were surprisingly different at this year’s meeting, which was held at the University of Texas at Austin in February. In addition to vegan lunches and name tags with preferred pronouns, the conference included — even celebrated — a group that had until recently been unwelcome: red-state Republicans.

The first day featured a speech on changing zoning laws by Greg Gianforte, the Republican governor of Montana, who last year signed a housing package that YIMBYs now refer to as “the Montana Miracle.”

Day 2 kicked off with a panel on solutions to Texas’s rising housing costs. One of the speakers was a Republican legislator in Texas who, in addition to being an advocate for loosening land-use regulations, has pushed for a near-total ban on abortions.

Anyone who missed these discussions might have instead gone to the panel on bipartisanship where Republican housing reformers from Arizona and Montana talked with a Democratic state senator from Vermont. Or noticed the list of sponsors that, in addition to foundations like Open Philanthropy and Arnold Ventures, included conservative and libertarian organizations like the Mercatus Center, the American Enterprise Institute and the Pacific Legal Foundation.

“There aren’t many ideologically diverse spaces in American civil life at the moment, and one of the pillars of the conference was the idea of a big tent,” said Liz McGehee, one of Yimbytown’s organizers. “The more we can find areas of agreement, the more we can adjust to each other with less fear, and maybe that will help drive down the polarization.”

Housing, Framed Two Ways

As the lack of available and affordable housing has become one of America’s defining economic issues, it is increasingly a political problem. Politicians from both parties have found themselves inundated by constituents who have been priced out of ownership, forced into long commutes, and embittered by rising rents and multiplying homeless encampments.

Legislators in states including California, Minnesota, Montana, New York, Oregon, and Texas have reached for a similar basket of solutions. Invariably, they revolve around loosening zoning and development laws to speed construction, expanding renter protections for tenants and increasing funding for subsidized housing.

In plenty of places across the country — particularly blue states, where land use tends to be more heavily regulated — there is serious and organized opposition to these policies. Especially at a local level, voters have blocked developments of all sizes. (In many places, the divide over what to do about housing comes down to homeowners versus renters, rather than breaking along more typical political lines.)

And not all of these housing measures would be considered bipartisan. Republican legislators tend to be leery of price caps like rent control. Democratic legislators often push for streamlining measures to be paired with new funds for subsidized housing, for instance.

But since the highest-impact policies revolve around increasing the pace of building to backfill the decades-old housing shortage that is the root of America’s housing woes, there is still plenty of overlap. So much so that two frequently opposing think tanks — the American Enterprise Institute and the Progressive Policy Institute — recently hosted a joint event in Washington on increasing housing supply.

“Some issues become a horseshoe,” said Cody Vasut, a Republican member of the Texas House of Representatives’ Freedom Caucus, using a very Texas analogy. “We have different views of government but sometimes we arrive at the same conclusion.”

Housing has several features that make it an ideal issue for bipartisanship, said Jake Grumbach, a public policy professor at the University of California, Berkeley. Housing laws are hyperlocal and so don’t get much attention from national parties, which tend to push toward polarization. The subject is full of dense and wonky material that gets litigated through binder-thick planning reports instead of sound bites. It’s also hard to weaponize, since someone’s position on housing can be framed in ways that hew to either party’s ideology.

Take, for instance, the YIMBY mantra of allowing taller buildings and reducing the permitting hurdles to build them. Is this, as many Democrats say, a way to create more affordable housing, reduce neighborhood segregation and give low-income households access to high-amenity areas and schools?

Or is it, as Republicans say, a pro-business means of reducing regulation and enhancing property rights by giving landowners the freedom to develop housing?

Is it, somehow, both?

At this year’s Yimbytown, the message was that the political framing doesn’t really matter as long as you pass the bill.

Consider Montana, which last year passed a package of new laws that essentially ended single-family zoning by allowing backyard homes and duplexes on most lots in the state. Or Arizona, where a bipartisan group of legislators passed similar changes this week.

These laws followed, and in some cases were modeled on, state-level zoning changes that have already swept through legislatures in California and Oregon dominated by Democrats. To sell them in more conservative territory, advocates who had worked behind the scenes in Arizona and Montana gave tips to other Yimbytown attendees. They suggested hiring both liberal and conservative lobbyists and crafting pitches that lean into each party’s politics.

“We can focus on approaching a lot of the Republicans who are concerned about how zoning impacts property rights, how zoning is going to affect our communities and how they’re growing,” said Kendall Cotton, the chief executive of the Frontier Institute, a free-market think tank in Helena, Mont. “And then other groups that have connections on the left can talk to those folks about the climate change impacts of zoning, and building denser, more walkable cities, and the social justice end of it.”

In an interview after the panel, Mr. Cotton talked about one of housing’s most divisive subjects: single-family zoning, or laws that ban duplexes and apartments in certain neighborhoods and now define suburban character across large swaths of America. When legislators in blue states have moved to curb single-family zoning laws in the name of equity and the environment, conservatives have assailed them for trying to destroy what former President Donald J. Trump once called the “Suburban Lifestyle Dream.”

So when Montana tried to change zoning at the state level, advocates like Mr. Cotton took a different tack. To sell legislators on the plan, Mr. Cotton said he would pull out photos of cities like Missoula in the frontier days, when the streets were a jumble of one-room shotgun houses, duplexes and triplexes.

Today, like most of America, the city’s landscape involves a sprawl of subdivisions built around cars. How to revive the free spirit of that frontier past?

“END CALIFORNIA-STYLE ZONING,” according to a flyer Mr. Cotton distributed to Republican legislators, which also called for them to “Restore the right to build.”

A More Widespread Problem

Pitches like that one would have been unimaginable at the first Yimbytown eight years ago in Boulder, which was a glorified party of amateurs whose programming included an event at a beer garden where drunk people riffed about housing policy in haiku. This year’s conference had 600 attendees and featured a talk with Julian Castro, the former secretary of housing and urban development, a sign of the movement’s increasing professionalization and influence.

In the years between, as the YIMBY movement grew from a blue-city curiosity to a fund-raising and legislative force, the central conflict at Yimbytown remained the movement’s difficulty working with hard-left political organizations that have protested several events and view a “pro-housing” agenda as a progressive-sounding wrapper on trickle-down Reaganism. This continued in Austin: During the morning panel on the Texas Legislature, a group of protesters disrupted the conversation to assail the “pro-capitalist” speakers and chant “real affordable housing now” before being shooed out the door.

But when it comes to the brass tacks of moving bills, legislators from the right have turned out to be important partners. As the impact of rising costs has moved further up the income ladder and beyond a relative handful of tech-centric cities, Republicans in red states have become just as eager to show they are working on one of their constituents’ biggest problems. At the same time, many YIMBY groups have become focused on bypassing city councils and instead passing state-level legislation — which in most places is impossible without Republican votes.

“When you’re dealing with an issue that is as busted as housing is and where it’s affecting as many people as it is, you don’t really have the privilege of caring about what signal you’re sending,” said Henry Honorof, the director of the Welcoming Neighbors Network, a national umbrella organization for state and local YIMBY groups. “You care about getting something accomplished, and that means you have to be much more open to working with people that are often uncomfortable to work with.”

The conference was still an overwhelmingly center-left crowd, with panels on antiracism, building public housing and expanding tenants’ rights. But there was a sense among many attendees that they were building something distinct, a coalition with members from both parties.

Right or left, many of the conference attendees were young people in their prime homebuying years. They also tended to be people whose interest in politics was sparked by economic policy. Whichever party they identified with, they shared a collective belief that what America needs most is “abundance,” a new buzzword to denote a broader pro-growth mind-set of which YIMBYism is part.

“What’s so exciting is this supply side coalition that is emerging,” Mr. Cotton said. “There’s a group of people, Republicans and Democrats, who want to slow down growth — they’re preservationists, they’re protectionists. And there is the other side of things which says let’s build things again.”

Getting Things Done Quietly

Even so, many of the housing, climate change and social justice advocates who have long made up the bulk of the conference’s roster were deeply uncomfortable with the idea of sitting next to people whose name tags identified them as employees of conservative groups like Americans for Prosperity, backed by the Koch Network. Most refused to talk about their reservations on the record or publicly at the conference. They didn’t want to undermine red-state YIMBYs.

But in side conversations and at bar gatherings, they expressed their angst. YIMBYism is supposed to be about making cities more welcoming by reducing housing costs, one person pointed out, and wondered: If you work with a legislator to make housing more plentiful, then that legislator goes and votes for a law to prevent transgender people from using bathrooms, is that really welcoming?

The under-the-radar evolution in housing laws sweeping across the states is one of the few areas of policy where both the right and left can claim an ideological victory. And yet in today’s charged environment, winning with a partner you otherwise disagree with is often considered losing. Which is the reality both sides are worried they’ll one day have to grapple with, even as they quietly get things done.

“I have a great fear that land use and property rights will get coded left,” said Chance Weldon, the director of litigation at the Texas Public Policy Foundation, a conservative think tank in Austin. “That would be a tragedy, because we have been on the right side of this issue for a long time. But in a polarized environment, a lot of times people will support or oppose something just because of who’s attached to it.”

U.S. Employers Add 275,000 Jobs in Another Strong Month

Press Room — Sat, 09 Mar 2024 00:44:16 +0000

If the economy is slowing down, nobody told the labor market.

Employers added 275,000 jobs in February, the Labor Department reported Friday, in another month that exceeded expectations even as the unemployment rate rose.

It was the third straight month of gains above 200,000, and the 38th consecutive month of growth — fresh evidence that four years after going into pandemic shutdowns, America’s jobs engine still has plenty of steam.

“We’ve been expecting a slowdown in the labor market, a more material loosening in conditions, but we’re just not seeing that,” said Rubeela Farooqi, chief economist at High Frequency Economics.

Previously reported figures for December and January were revised downward by a total of 167,000, reflecting the higher degree of statistical volatility in the winter months. That does not disrupt a picture of consistent, robust increases.

At the same time, the unemployment rate, based on a survey of households rather than businesses, increased to a two-year high of 3.9 percent. The increase from 3.7 percent in January was driven by people losing or leaving jobs as well as those entering the labor force to look for work.

A more expansive measure of slack labor market conditions, which includes people working part time who would rather work full time, has been steadily rising and now stands at 7.3 percent.

In a positive sign, the labor force participation rate for people in their prime working years — ages 25 to 54 — jumped to 83.5 percent, matching a level from last year that was the highest since the early 2000s. The participation rate for those over age 55 remains markedly below its prepandemic level, potentially in part because the booming housing and stock markets have allowed more people to retire.

Average hourly earnings rose by 4.3 percent over the year. Wages have outpaced prices since last May, though the pace of increases has been fading.

“We’ve recently seen gains in real wages, and that’s encouraged people to re-enter the labor market, and that’s a good development for workers,” said Kory Kantenga, a senior economist at the job search website LinkedIn. As wage growth slows, he said, the likelihood that more people will start looking for work falls.

As late as last fall, economists were predicting much more modest employment increases, with hiring concentrated in a few industries. Some pandemic-inflated industries have shed jobs, but expected downturns in sectors like construction have not materialized.

The last few months have been studded with strong economic data, prompting analysts surveyed by the National Association for Business Economics to raise their forecasts for gross domestic product and lower their expectations for the trajectory of unemployment. Inflation has eased, leading the Federal Reserve to telegraph its plans for interest rate cuts sometime this year, which many see as insurance should the job market stumble.

Mervin Jebaraj, director of the Center for Business and Economic Research at the University of Arkansas, helped tabulate the survey responses. He said the mood was buoyed partly by fading trepidation over federal government shutdowns and draconian budget cuts, after several close calls since the fall. And there’s no harm, he said, in a tamer but more sustainable pace.

“If we gain 150,000 jobs every month this year, that would still be an incredible year, but it would still be cooling compared to last year,” Mr. Jebaraj said. “And maybe we want both things.”

Moreover, some of the cooling may have allowed for more durable growth. As extreme labor shortages eased and the wave of job quitting subsided, employers unable to win bidding wars for workers have had an easier time filling positions. And as people stick around longer, productivity has improved, which makes it easier to pay more without increasing prices.

Health care and government again led the payroll gains in February, while construction continued its steady increase. Retail, restaurants, transportation and warehousing, which have been flat to negative in recent months, picked up.

No major industries lost a substantial number of jobs. High interest rates continue to suppress manufacturing, however, while credit intermediation continued its downward slide — that sector, which mostly includes commercial banking, has lost about 123,000 jobs since early 2021.

Few businesses are more emblematic of the power behind recent employment gains than home health services for older people, which count 164,000 more jobs than before the pandemic — fully offsetting the decline of nursing and residential care facilities, which have been less popular since Covid-19 ripped through them in 2020.

Elaine Flores is the chief operating officer of Medical Home Care Professionals, an agency in Redding, Calif., that employs 102 clinical staff members and caregivers. That’s up about 20 percent since early 2020, though the net gain underestimates how many people she’s had to hire as experienced providers have left the profession.

“More and more nurses are retiring out,” Ms. Flores said. “That’s probably the most difficult discipline to recruit, and we compete against hospitals, which have beautiful benefits packages that, on home health margins, we can’t do.”

Elevated levels of immigration may help with that problem in the coming years. According to an analysis by the Brookings Institution, the influx over the last two years has approximately doubled the number of jobs that the economy could add per month in 2024 without putting upward pressure on inflation, to a range of 160,000 to 200,000.

That does not mean the employment landscape looks rosy to everyone. Employee confidence, as measured by the company rating website Glassdoor, has been falling steadily as layoffs by tech and media companies have grabbed headlines. That is especially true in white-collar professions like human resources and consulting, while those in occupations that require working in person — such as health care, construction and manufacturing — are more upbeat.

“It is a two-track labor market,” said Aaron Terrazas, Glassdoor’s chief economist, noting that job searches are taking longer for people with graduate degrees. “For skilled workers in risk-intensive industries, anyone who’s been laid off is having a hard time finding new jobs, whereas if you’re a blue-collar or frontline service worker, it’s still competitive.”

Those having a hard time finding steady employment turn increasingly to gig work, Mr. Terrazas noted, which is not picked up in the payrolls data. That has been true for Clifford Johnson, 70, who retired from his accounting job in Orlando, Fla., three years ago and began drawing Social Security.

The outlook changed when Mr. Johnson separated from his husband and had to rent an apartment, which in the hot Orlando housing market costs $2,350 a month. He has not landed another accounting job, and a retail position did not work out. He has run through his limited savings, and for now he drives for Uber Eats full time — even on the weekend — to stay afloat.

“I’m just doing what I can do to make money every day,” Mr. Johnson said. He’s hoping a couple of contract accounting positions come through, since driving that much is physically exhausting. “If you’re 25 or just graduating from college, it’s a lot different than if you’re 70 and still trying to make a living.”

The path forward for the labor market, which few have managed to accurately predict, remains hazy. Every seeming threat so far — including wars, substantial interest rate increases and bank collapses — has been met with unflappability.

Thomas Simons, senior economist at the investment banking firm Jefferies, thinks the economy will look weaker at the end of the year than it does now, despite the lack of any obvious potholes.

“It’s been 30-plus years since we’ve had an economic cycle like this, where we are waiting for enough drag to coalesce between different sectors to take the whole number down,” Mr. Simons said. “I still believe it’s unlikely that it’s going to continue indefinitely, even without a discrete catalyst.”

The jobs report comes as the Fed considers the timing of interest rate cuts.

Press Room — Fri, 08 Mar 2024 17:40:14 +0000

The Federal Reserve is considering when and how much to cut interest rates, and the employment report on Friday will give policymakers an up-to-date hint at how the economy is evolving ahead of their next policy meeting.

Fed officials meet on March 19-20, and they are widely expected to leave interest rates unchanged at that gathering. But investors think that they could begin to lower interest rates as early as June, a view that Jerome H. Powell, the Fed chair, did little to either strongly confirm or upend during his congressional testimony this week.

“We’re waiting to become more confident that inflation is moving sustainably to 2 percent,” Mr. Powell told lawmakers on Thursday. “When we do get that confidence, and we’re not far from it, it will be appropriate to dial back the level of restriction.”

The Fed is primarily watching progress on inflation as it contemplates its next steps, but it is also keeping an eye on the labor market. If job growth is strong and the labor market is so robust that wages rise quickly, that could keep price increases higher for longer as companies try to cover their costs. On the other hand, if the job market begins to slow sharply, that could nudge Fed officials toward earlier interest rate cuts.

For now, unemployment has remained low and wage growth has been solid — but not as strong as the peaks it reached in 2022. That has given Fed officials comfort that the supply of workers and the demand for new employees is coming back into balance, even without a painful economic slowdown.

“Although the jobs-to-workers gap has narrowed, labor demand still exceeds the supply of available workers,” Mr. Powell said this week.

If the recent progress in restoring balance continues, it could allow the Fed to pull off what is often called a “soft landing”: a situation in which the economy cools and inflation moderates so the Fed can back away from aggressive interest rate policy without a recession.

Biden Portrays Next Phase of Economic Agenda as Middle-Class Lifeline

Press Room — Fri, 08 Mar 2024 10:53:17 +0000

President Biden used his State of the Union speech on Thursday to remind Americans of his efforts to steer the nation’s economy out of a pandemic recession, and to lay the groundwork for a second term focused on making the economy more equitable by raising taxes on companies and the wealthy while taking steps to reduce costs for the middle class.

Mr. Biden offered a blitz of policies squarely targeting the middle class, including efforts to make housing more affordable for first-time home buyers. The president used his speech to try and differentiate his economic proposals with those supported by Republicans, including former President Donald J. Trump. Those proposals have largely centered on cutting taxes, rolling back the Biden administration’s investments in clean energy and gutting the Internal Revenue Service.

Many of Mr. Biden’s policy proposals would require acts of Congress and hinge on Democrats winning control of the House and the Senate. However, the president also unveiled plans to direct federal agencies to use their powers to reduce costs for big-ticket items like housing at a time when the lingering effects of inflation continue to weigh on economic sentiment.

From taxes and housing to inflation and consumer protection, Mr. Biden had his eye on pocketbook issues.

Raising Taxes on the Rich

Many of the tax cuts that Mr. Trump signed into law in 2017 are set to expire next year, making tax policy among the most critical issues on the ballot this year.

On Thursday night, Mr. Biden built upon many of the tax proposals that he has been promoting for the last three years, calling for big corporations and the wealthiest Americans to pay more. He proposed raising a new corporate minimum tax to 21 percent from 15 percent and proposed a new 25 percent minimum tax rate for billionaires, which he said would raise $500 billion over a decade.

Criticizing the cost of the 2017 tax cuts, Mr. Biden asked, “Do you really think the wealthy and big corporations need another $2 trillion in tax breaks?”

Help for the Housing Market

High interest rates have made housing unaffordable for many Americans, and Mr. Biden called for a mix of measures to help ease those costs. That included tax credits and mortgage assistance for first-time home buyers and new incentives to encourage the construction and renovation of affordable housing.

Mr. Biden called on Congress to make certain first-time buyers eligible for a $10,000 credit, along with making some “first generation” home buyers eligible for up to $25,000 toward a down payment.

The president also unveiled new grants and incentives to encourage the construction of affordable housing. He also said the Consumer Financial Protection Bureau would be pursuing new rules to address “anticompetitive” closing costs that lenders impose on buyers and sellers, and called for more scrutiny of landlords who collude to raise rents and sneak hidden fees into rental agreements.

Protecting Consumers From “Shrinkflation”

There is only so much that a president can do to tame rapid inflation, but Mr. Biden used his remarks to lean into his favorite new boogeyman: shrinkflation.

“Same size bag, put fewer chips in it,” Mr. Biden said. He called on lawmakers to pass legislation to put an end to the corporate practice of reducing the size of products without reducing their price tag.

The president also touted his efforts to cut credit card late charges and “junk” fees and to eliminate surprise fees for online ticket sales, and he claimed to be saving Americans billions of dollars from various forms of price gouging.

Building and Buying American

One of the mysteries that consume Mr. Biden’s advisers is why he does not get sufficient credit for the major pieces of legislation that have been enacted during the last three years.

The president blitzed through those accomplishments, reminding his audience of the construction of new roads and bridges and investments in the development of microchips and clean energy manufacturing.

Veering off script, Mr. Biden ribbed Republicans for voting against some of those policies while reaping the benefits of the investments in their states.

Tackling China

As president, Mr. Biden has prioritized stabilizing America’s economic relationship with China while also trying to reduce the United States’ reliance on Chinese products. Mr. Biden took aim at Mr. Trump, saying that while the former president portrayed himself as tough on China, the Biden administration’s policies were having a bigger impact on shrinking the bilateral trade deficit and powering U.S. economic growth.

The president added that his administration had been pushing back against China’s unfair trade practices and keeping exports of sensitive American technology away from the Chinese military. He said that Republicans who claim that the U.S. is falling behind China were wrong.

“America is rising,” Mr. Biden said. “We have the best economy in the world.”

Rivian Will Delay Construction of a $5 Billion Factory in Georgia

Press Room — Thu, 07 Mar 2024 22:46:55 +0000

“Our Georgia site remains really important to us,” Rivian’s chief executive, R.J. Scaringe, said at an event on Thursday where he unveiled two new sport-utility vehicles. “It’s core to scaling across all these vehicles.”

One of the S.U.V.s, called the R2, is a five-passenger vehicle that is expected to be available in the first half of 2026. Originally, the R2 was supposed to be the first vehicle produced in Georgia. Shifting production to Normal, Ill., where the company has an operating factory, will allow Rivian to begin delivering the vehicle to customers sooner, Mr. Scaringe said.

The R2 will have a starting price of about $45,000, he said, which is $30,000 less than its larger S.U.V., the R1S. The R2, Mr. Scaringe said, “combines capability, performance, utility, storage, functionality in a way that we think really fits with a huge customer need.”

Rivian also introduced the R3, a compact S.U.V., and a high-performance version of that vehicle, the R3X. The company did not say when or where those models would be produced.

Delaying construction of the new factory is a setback for Georgia and its governor, Brian Kemp, a Republican, who had promoted the construction as the largest economic development project in the state’s history. Rivian had said it expected the plant to create 7,500 jobs and eventually produce 400,000 vehicles a year.