WASHINGTON — President Biden was at a private meeting discussing student debt forgiveness this year when, as happens uncomfortably often these days, the conversation came back to inflation.
“He said with everything he does, Republicans are going to attack him and use the word ‘inflation,’” said Representative Tony Cárdenas, Democrat of California, referring to Mr. Biden’s meeting with the Congressional Hispanic Caucus in April. Mr. Cárdenas said Mr. Biden was aware he would be attacked over rising prices “no matter what issue we’re talking about.”
The comment underscored how today’s rapid price increases, the fastest since the 1980s, pose a glaring political liability that looms over every major policy decision the White House makes — leaving Mr. Biden and his colleagues on the defensive as officials discover that there is no good way to talk to voters about inflation.
The administration has at times splintered internally over how to discuss price increases and has revised its inflation-related message several times as talking points fail to resonate and new data comes in. Some Democrats in Congress have urged the White House to strike a different — and more proactive — tone ahead of the November midterm elections.
increased by 8.3 percent in the year through April, and data this week is expected to show inflation at 8.2 percent in May. Inflation averaged 1.6 percent annual gains in the five years leading up to the pandemic, making today’s pace of increase painfully high by comparison. A gallon of gas, one of the most tangible household costs, hit an average of $4.92 this week. Consumer confidence has plummeted as families pay more for everyday purchases and as the Fed raises interest rates to cool the economy, which increases the risk of a recession.
a series of confidential memos sent to Mr. Biden last year by one of his lead pollsters, John Anzalone. Inflation has only continued to fuel frustration among voters, according to a separate memo compiled by Mr. Anzalone’s team last month, which showed the president’s low approval rating on the economy rivaling only his approach to immigration.
wrote in a tweet that went viral this weekend.
The White House knows it is in a tricky position, and the administration’s approach to explaining inflation has evolved over time. Officials spent the early stages of the current price burst largely describing price pressures as temporary.
When it became clear that rising costs were lasting, administration officials began to diverge internally on how to frame that phenomenon. While it was clear that much of the upward pressure on prices came from supply chain shortages exacerbated by continued waves of the coronavirus, some of it also tied back to strong consumer demand. That big spending had been enabled, in part, by the government’s stimulus packages, including direct checks to households, expanded unemployment insurance and other benefits.
Some economists in the White House have begun to emphasize that inflation was a trade-off: To the extent that Mr. Biden’s stimulus spending spurred more inflation, it also aided economic growth and a faster recovery.
have claimed credit for strong economic growth.
“Some have a curious obsession with exaggerating impact of the Rescue Plan while ignoring the degree high inflation is global,” Gene Sperling, a senior White House adviser overseeing the implementation of the stimulus package, wrote on Twitter last week, adding that the law “has had very marginal impact on inflation.”
Brian Deese, the director of the National Economic Council, acknowledged in an interview last week that there were some disagreements among White House economic officials when it came to how to talk about and respond to inflation, but he portrayed that as a positive — and as something that is not leading to any kind of dysfunction.
“If there wasn’t healthy disagreement, debate and people feeling comfortable bringing issues and ideas to the table, then I think we would be not serving the president and the public interest well,” he said.
He also pushed back on the idea that the administration was deeply divided on the March 2021 package’s aftereffects, saying in a separate emailed comment that “there is agreement across the administration that many factors contributed to inflation, and that inflation has been driven by elevated demand and constrained supply across the globe.”
How to portray the Biden administration’s stimulus spending is far from the only challenge the White House faces. As price increases last, Democrats have grappled with how to discuss their plans to combat them.
deficit reduction as a way to lower inflation and arguing that Republicans have a bad plan to deal with rising costs. Mr. Biden regularly acknowledges the pain that higher prices are causing and has emphasized that the problem of taming inflation rests largely with the Fed, an independent entity whose work he has promised not to interfere with.
The administration has also highlighted that inflation is widespread globally, and that the United States is better off than many other nations.
Student Loans: Key Things to Know
Card 1 of 4
Corinthian Colleges. In its largest student loan forgiveness action ever, the Education Department said that it would wipe out $5.8 billion owed by 560,000 students who attended Corinthian Colleges, one of the nation’s biggest for-profit college chains before it collapsed in 2015.
The renewed messaging comes as Mr. Biden and his top aides have grown increasingly concerned about the public’s negative views of the economy, according to an administration official. Economists within the administration are more sidelined when it comes to setting the tone on issues like inflation than in previous White Houses, another person familiar with the discussions said.
So far, the talking points have done little to change public perception or to mollify concerns on Capitol Hill, where some Democrats are pushing for the White House to find a more compelling story.
“There has to be more of a laser focus on the economy, a bolder message, a clearer story,” said Representative Ro Khanna, a California Democrat who wrote a New York Times opinion piece last week saying that Democrats need a more ambitious plan for fighting inflation. He added that “rhetoric about ‘Well, we’re doing really well’ does not capture the profound sense of anxiety that Americans feel.”
Part of the difficulty is that there is only so much politicians can do to fight price increases.
suspended a ban on summertime sales of higher-ethanol gasoline blends to try to temper price increases at the pump, spurring frustration among climate activists still angry over the collapse of the president’s climate and social-spending package.
Talks over whether to roll back Trump-era tariffs on Chinese goods have also gotten caught in the inflation maw. Ms. Yellen has said she supports relaxing tariffs to help ease prices, but other Democrats are wary that removing them would make Mr. Biden look weak on China.
Inflation is also influencing conversations about whether to forgive student loan debt, one of Mr. Biden’s key campaign promises. Economists in the administration think that loan forgiveness would, at most, push inflation up a little bit by giving people with outstanding student debt more financial wiggle room. But some economists in the administration’s orbit have expressed concern about the possibility of doing something that could stimulate demand — even slightly — at a moment when it is already hot.
To help mute the inflationary effect, forgiveness would most likely be accompanied by a resumption of interest payments on all student loans that have been paused since the pandemic.
For now, the administration is considering forgiving at least $10,000 for borrowers in a certain income range, according to people familiar with the matter. Mr. Cárdenas said that Mr. Biden knew he would be attacked over inflation but that he did not think the issue would prevent the president from canceling at least $10,000 worth of debt.
“Will it affect him going beyond that? It may,” he said.
The problem is that the alternative to a Fed response is, at the moment, not obvious. The Biden administration’s attempts at tamping down price increases — longer port hours, release of strategic petroleum reserves, calling out corporate price gouging — have mostly tinkered around the edges of the issue.
Those kinds of precise moves to counter inflation are what M.M.T. economists would recommend, though. Ms. Kelton laid out other suggestions M.M.T. economists have made in a recent blog post. Among them: Medicare for All, cutting the Pentagon budget, repealing some tariffs and unclogging the ports.
Not exactly “easy peasy,” to borrow a phrase of hers.
“M.M.T. was already pretty marginal,” said Jason Furman, a Harvard economist, noting that, in his view, most policymakers and prominent academics ignored it already. Even if policy in the pandemic effectively embraced the idea that you do not have to pay for your spending, that idea, he said, was also Keynesian.
And the M.M.T crowd, while dismissing the Fed’s role, has not come up with a clear and obviously workable idea for how to stem inflation, he argued, adding, “If you were open-minded, this would discredit it still further.”
In Washington, the suite of ideas has clearly been dealt a setback. Deficit concerns have returned. Mr. Biden’s sweeping policy agenda has not passed because Senator Joseph Manchin, a West Virginia Democrat and member of his own party, has opposed it on concerns about government debt and inflation.
Despite that, some of M.M.T.’s proponents are still sounding celebratory.
“We’ve won the debate on the intellectual level — there are no flaws,” Mr. Wray said.
Flaws or not, there are questions.
Questions like: “Did Congress ‘experiment’ with MMT, and does the run-up in inflation mean that MMT has ‘failed’?”
Rocketing inflation has become a headache for U.S. consumers, and President Biden has a go-to prescription. He says a key way to help relieve increasing prices is to pass a $1.85 trillion collection of spending programs and tax cuts that is currently languishing in the Senate.
A wide range of economists agree with the president — but only in part. They generally accept his argument that in the long run, the bill and his infrastructure plan could make businesses and their workers more productive, which would help to ease inflation as more goods and services are produced across the economy.
But many researchers, including a forecasting firm that Mr. Biden often cites to support the economic benefits of his proposals, say the bill is structured in a way that could add to inflation next year, before prices have had time to cool off.
Some economists and lawmakers worry about the timing, arguing that the risk of fueling more inflation when it has reached record highs outweighs the potential benefits of passing a big spending bill that could help to keep prices in check while addressing other social goals. Prices have picked up by 6.2 percent over the past year, the fastest pace in 31 years and far above the Federal Reserve’s inflation target.
Joe Manchin III of West Virginia, has questioned whether high and rising prices should persuade lawmakers to tone down their ambitions.
“West Virginians are concerned about rising inflation,” he said on Twitter last week. “We cannot throw caution to the wind & continue to pile on debt that our country can’t afford.”
Democrats preparing to push it to a House vote as early as next week. But timing is uncertain in the Senate, where a vote is likely to be changed or delayed in response to Mr. Manchin’s concerns.
The extent to which Mr. Biden’s $1.85 trillion bill exacerbates inflation largely depends on how much it stimulates the economy and whether Americans increase their spending as a result of the legislation — and when all of that occurs.
Many economists say it could create a short-term stimulus because the plan is structured to raise money gradually by taxing wealthier Americans, who are less likely to spend each additional dollar they have, and redistribute it quickly to people who earn less and are more likely to spend newfound cash.
Because of the difference in timing between when the government spends money and when it starts to bring in more revenue, the bill is expected to pump money into the economy in its early years. Moody’s Analytics — the firm that the White House typically cites when arguing in favor of its legislation — estimates that the government will spend $163 billion more on the package than it takes in next year. And the redistribution could make the money more potent as economic stimulus.
“The spending is designed to go to the people who are more likely to spend it than to save it,” said Ben Ritz, the director of the Progressive Policy Institute’s Center for Funding America’s Future. But more than any specific program, “the bigger inflationary issue is the math.”
White House economists have countered those arguments. If the bill passes, they say, it would do relatively little to spur increased consumer spending next year and not nearly enough to fully offset the loss of government stimulus to the economy as pandemic aid expires. That the program spends more heavily next year is a feature, they say, because it will partly blunt the economic drag as fiscal help fades. They note that the bill is intended to be offset completely by tax increases and other revenue savings.
And they argue that by increasing the economy’s capacity to churn out goods and services, the president’s infrastructure plan and his broader program could both help to moderate costs over time.
Mr. Summers has argued.
There is less economic or political debate about Mr. Biden’s $1 trillion infrastructure plan, which cleared Congress last week and which the president will sign on Monday. Economists — including conservative ones — largely agree that it is likely to eventually expand the capacity of the economy, and that it is small and spread out enough that it will not meaningfully fuel faster inflation in the near term.
Among Democrats, there is widespread support for the economic ambitions contained in the administration’s broader spending bill, which aims to create more equity for low- and middle-class earners and a bigger safety net for working parents. But the measure is drawing more complicated reviews when it comes to its immediate effect on inflation.
Economists at Moody’s found in a recent analysis that the administration’s full agenda would slightly increase inflation in 2022, though they did not expect the program to ultimately raise it because of benefits that would later ease supply constraints. It estimates that with the infrastructure bill alone, inflation will be running at a 2.1 percent annual rate by the final quarter of next year. If the larger spending bill also passes, that grows to 2.5 percent.
Understand the Supply Chain Crisis
Card 1 of 5
Almost anything manufactured is in short supply. That includes everything from toilet paper to new cars. The disruptions go back to the beginning of the pandemic, when factories in Asia and Europe were forced to shut down and shipping companies cut their schedules.
Now, ports are struggling to keep up. In North America and Europe, where containers are arriving, the heavy influx of ships is overwhelming ports. With warehouses full, containers are piling up. The chaos in global shipping is likely to persist as a result of the massive traffic jam.
But Moody’s baseline assumption that inflation will moderate by the end of next year is relatively optimistic. Bank of America’s economics team said that core consumer prices would still rise at a 3.2 percent rate at the end of next year, incorporating the assumption that Mr. Biden’s plan passes.
companies scramble for workers, prices rise and supply chains struggle to keep pace with booming demand, this is the wrong moment to hit the economy with any added juice.
“We don’t have a lot of spare capacity,” said Kristin J. Forbes, an economist at the Massachusetts Institute of Technology. “We certainly don’t have a lot of spare workers today.”
Inflation looms more significantly in the near term because it is currently high, and if it remains that way for an extended period, consumers could change their behaviors and expectations, locking in faster gains. People who worry about the proposals say that 2022 is the wrong time to hand households more money.
Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, said she was unsure whether the package would fuel inflation. But given the current pace of price increases, “you have to be more careful than you would be otherwise.”
The White House says the provisions of the bill that put money in families’ pockets, such as child care help, are not simple stimulus. They will allow caregivers into the labor market, they argue, an investment in the economy’s future that will allow it to produce more with time.
That makes the new program different from the spending passed earlier this year. The Biden administration increasingly acknowledges that sending households checks and offering expanded unemployment insurance supplemented savings, and that as households had more wherewithal to spend it helped to drive up prices.
Mr. Biden said in Baltimore on Wednesday. But the White House contends that this program is not the same as the previous package, and that it will make the price situation better, not worse.
“According to the economic experts, this bill is going to ease inflationary pressures,” the president said on Wednesday.
Still, the 17 Nobel Prize-winning economists that the White House regularly cites have specified that capacity improvements will ease inflation over time rather than imminently.
“Because this agenda invests in long-term economic capacity and will enhance the ability of more Americans to participate productively in the economy,” they wrote, “it will ease longer-term inflationary pressures.”
Distressed homeowners with loans owned by private banks or investors should contact their mortgage servicer to see what options they’re offering. Some of them have followed a framework similar to federally backed loans, but others’ terms may be murkier.
No matter what type of loan you have, the most important action to take now is to reach out to your mortgage servicer to find out when your payments will resume and how much they will be. If you cannot afford them, the servicer can lay out your options. For more guidance, you can also seek out a housing counselor.
The changes made to food stamps — now largely known as the Supplemental Nutrition Assistance Program — during the pandemic were complicated.
But one significant change, a 15 percent bump in benefits for all recipients, runs only through Sept. 30. So if you currently receive SNAP benefits, they may go down then. (Congress is considering an extension, SNAP policy experts said, and other changes unrelated to the pandemic — including a regular inflation adjustment, along with a potential change to the basket of food that benefits are based on — could also help offset any potential cuts.)
A number of other temporary changes will remain in many states for several more months.
Those changes increased benefits for the program, which is federally funded but run through the states. Beneficiaries have received emergency allotments, which increased their monthly benefits to the maximum amounts permitted or higher. All told, the average daily benefit per person rose to $7 from $4 by April of this year, according to Ellen Vollinger, legal director at the Food Research & Action Center.
Access to the program also became somewhat easier: Certain college students became eligible, unemployed people under 50 without children weren’t subject to time limits and there were fewer administrative hurdles to remaining enrolled, experts said.
The extra allotments can continue to be paid as long as the federal government has declared a public health emergency, which is likely to remain for at least the rest of the year. But the state administering the benefits must also have an emergency declaration in place, and at least six states — Arkansas, Florida, Idaho, North Dakota, South Dakota and South Carolina — have either ended or will soon begin to pull back that extra amount, according to the Center on Budget and Policy Priorities.
WASHINGTON — From California to Virginia, many states that faced devastating shortfalls in the depths of the pandemic recession now find themselves flush with tax revenues because of a rebounding economy and a soaring stock market. Lawmakers who worried about budget cuts are now proposing lucrative increases in school spending, tax cuts and direct payments to their residents.
That turnaround is partly the product of strong income tax receipts, particularly in states that heavily tax high earners and the wealthy, whose finances have fared well in the crisis. The unexpectedly rosy picture is raising pressure on President Biden to repurpose hundreds of billions of dollars of federal aid approved this year, in order to help fund a potential bipartisan infrastructure deal.
Last week, Senator Mitt Romney, Republican of Utah, suggested that Mr. Biden and Republican negotiators look to “some of the funding that’s been sent to states already under the last few bills” to help pay for that agreement. “They don’t know how to use it,” Mr. Romney said. “They could use that money to finance part of the infrastructure relating to roads and bridges and transit.”
Some economists and budget experts support that push, arguing that the money could be better spent elsewhere and that states’ spending plans could add to a risk of rapid inflation breaking out across the country. Other researchers and local budget officials say that the federal aid is rescuing harder-hit cities and states, like New York City and Hawaii, from a cascade of layoffs and spending cuts.
$1.9 trillion economic assistance package that Mr. Biden signed in March. They say the aid will help ensure that the economic rebound does not repeat the years of state and local budget cutting that followed the 2008 financial crisis, which slowed the recovery from recession and contributed to millions of Americans waiting years to reap its benefits.
“We still feel strongly that the state and local plan is critical to ensuring we have a strong insurance policy for the type of strong growth we want, the type of equitable recovery the country deserves,” Gene Sperling, a senior adviser to Mr. Biden who oversees fulfillment of the March assistance package, said in an interview, “and to coming back from the 1.3 million jobs lost at the state and local level.”
Even if the administration wanted to recoup or divert the funds, it is unlikely that it could repurpose the money or make significant changes to how it is used without congressional action.
The debate over the state and local funding comes as Mr. Biden navigates a critical week of negotiations with Republicans over infrastructure in search of a deal, and as he prepares to travel to Cleveland on Thursday to speak about the economy. How to pay for any new spending is a primary hurdle in the talks, with Mr. Biden pushing to raise taxes on corporations and Republicans preferring increased user fees like the gas tax.
Repurposing unspent funds could help advance an agreement, particularly given Republican opposition to bankrolling state aid in previous rescue packages. Democrats pushed hard to include lucrative financial assistance for states, cities and tribes in Mr. Biden’s rescue bill. Republicans fought those efforts, warning they would serve as a “bailout” to high-tax, high-spend liberal states. They also cited a series of projections from Wall Street firms and other analysts suggesting that many states’ revenues were faring better than officials had feared in the early months of the pandemic.
do not need more federal money. That is particularly true in states that do not rely primarily on the tourism or hospitality industries for tax revenues. Those with progressive tax systems that have caught surging revenues from investment income enjoyed by wealthy residents — like Silicon Valley moguls — are also faring well.
California officials expect a $15 billion surplus this fiscal year, after fearing a $54 billion shortfall. Virginia has seen nearly $2 billion in unanticipated revenues. As has Oregon, where economists recently upgraded the state’s revenue forecasts — moving it from projected deficits to surplus — in a report that surprised and delighted many lawmakers.
“It’s extremely surprising,” said Mark McMullen, the Oregon state economist.
“Obviously, when the shutdowns first set in and we saw these catastrophic employment losses, we treated them as a normal recession in our forecasts,” he said.
But surging income tax revenues and several rounds of federal assistance have now put the state “above our prepandemic forecasts,” Mr. McMullen added.
The strong revenue figures come as more federal relief money is just beginning to roll out the door. The Treasury Department began sending funds to states this month and has so far distributed more than $100 billion — about half of what is available to be disbursed immediately. Local governments are expected to receive the rest next year, although states still experiencing a sharp rise in unemployment will get a lump sum right away.
as a much lower risk than Mr. Summers does.
Other analysts warn that state budget situations could sour if the stock market dips sharply or economic growth fizzles. Many cities, like New York, have struggled with sluggish tax revenues and still are reliant on federal to help avoid further layoffs.
New York expects to receive more than $22 billion in Covid-19 federal aid, according to the nonpartisan Citizens Budget Commission. Despite the funds, the city is still anticipating budget gaps in the coming years, the result of declining revenues like property taxes.
In retrospect, said Lucy Dadayan, a senior research associate at the Tax Policy Center, the March law should have included “more targeted funding” for the states and cities that need it most.
$8.8 billion from the federal government. Ben Watkins, the director of the Florida Division of Bond Finance, said the state was using the relief money to invest in infrastructure and water quality projects and directing some of its surplus funds to hurricane preparedness.
He described the windfall as staggering.
“It’s a good problem to have,” Mr. Watkins said, “but that doesn’t mean that it’s not excessive.”
States have substantial leeway in how they use the money, though they are prohibited from using the funds to subsidize tax cuts. Several Republican-led states have sued the Treasury Department, arguing that the restriction infringes on state sovereignty.
The lawsuits do not appear to be slowing the delivery of the funds. Ohio failed to win an injunction blocking the restrictions from being enforced this month, and Missouri had its case thrown out of court after a federal judge said the state did not demonstrate that the law caused it harm.
$26 million corporate tax cut last week, and lawmakers have told The Omaha World-Herald that they believe that by keeping the federal funds in a separate account from the state’s general fund, they will be in compliance with the law.
Nicholas Fandos and Dana Goldstein contributed reporting.
WASHINGTON — The Biden administration sent Senate Republicans an offer on Friday for a bipartisan infrastructure agreement that sliced more than $500 billion off the president’s initial proposal, a move that White House officials hoped would jump-start the talks but that Republicans swiftly rejected.
The lack of progress emboldened liberals in Congress to call anew for Mr. Biden to abandon his hopes of forging a compromise with a Republican conference that has denounced his $4 trillion economic agenda as too expensive and insufficiently targeted. They urged the president instead to begin an attempt to move his plans on a party-line vote through the same process that produced his economic stimulus legislation this year.
Mr. Biden has said repeatedly that he wants to move his infrastructure plans with bipartisan support, which key centrist Democrats in the Senate have also demanded. But the president has insisted that Republicans spend far more than they have indicated they are willing to.
He also says that the bill must contain a wide-ranging definition of “infrastructure” that includes investments in fighting climate change and providing home health care, which Republicans have called overly expansive.
countered with a $568 billion plan, though many Democrats consider that offer even smaller because it includes extensions of some federal infrastructure spending at expected levels. In a memo on Friday to Republicans, obtained by The New York Times, Biden administration officials assessed the Republican offer as no more than $225 billion “above current levels Congress has traditionally funded.”
The president’s new offer makes no effort to resolve the even thornier problem dividing the parties: how to pay for that spending. Mr. Biden wants to raise taxes on corporations, which Republicans oppose. Republicans want to repurpose money from Mr. Biden’s $1.9 trillion economic aid package, signed in March, and to raise user fees like the gas tax, which the president opposes.
Mr. Biden “fundamentally disagrees with the approach of increasing the burden on working people through increased gas taxes and user fees,” administration officials wrote in their memo to Republican negotiators. “As you know, he made a commitment to the American people not to raise taxes on those making less than $400,000 per year, and he intends to honor that commitment.”
Still, the new proposal shows some movement from the White House. It cuts out a major provision of Mr. Biden’s “American Jobs Plan”: hundreds of billions of dollars for advanced manufacturing and research and development efforts meant to position the United States to compete with China for dominance in emerging industries like advanced batteries. Lawmakers have included some, but not all, of the administration’s proposals in those areas in a bipartisan bill currently working its way through the Senate.
Mr. Biden’s counteroffer would also reduce the amount of money he wants to spend on broadband internet and on highways and other road projects. He would essentially accept the Republicans’ offer of $65 billion for broadband, down from $100 billion, and reduce his highway spending plans by $40 billion to meet them partway. And it would create a so-called infrastructure bank, which seeks to use public seed capital to leverage private infrastructure investment — and which Republicans have pushed for.
Republican senators who were presented the offer in a conference call with administration officials on Friday expressed disappointment in it, even as they vowed to continue talks.
“During today’s call, the White House came back with a counteroffer that is well above the range of what can pass Congress with bipartisan support,” said Kelley Moore, a spokeswoman for Senator Shelley Moore Capito of West Virginia, who is leading the Republican negotiating group.
“There continue to be vast differences between the White House and Senate Republicans when it comes to the definition of infrastructure, the magnitude of proposed spending, and how to pay for it,” Ms. Moore said. “Based on today’s meeting, the groups seem further apart after two meetings with White House staff than they were after one meeting with President Biden.”
The updated White House offer drew immediate pushback from progressives as well, illustrating the extent to which the forces pushing against a deal are bipartisan. Senator Edward J. Markey, Democrat of Massachusetts, urged his party not to “waste time” haggling over details with Republicans who do not share their vision for what the country needs.
“A smaller infrastructure package means fewer jobs, less justice, less climate action, and less investment in America’s future,” Mr. Markey said in a news release.
Democratic leaders on Capitol Hill have watched the talks skeptically, wary that Republicans will eat up valuable time on the legislative calendar and ultimately refuse to agree to a deal large enough to satisfy liberals. While they have given the White House and Republican senators latitude to pursue an alternative, party leaders are under increasing pressure from progressives to move a bill unilaterally through the budget reconciliation process in the Senate.
They have quietly taken steps to make that possible in case the talks collapse. Aides to Senators Chuck Schumer, Democrat of New York and the majority leader, and Bernie Sanders, independent of Vermont and the chairman of the Budget Committee, met on Thursday with the Senate parliamentarian to discuss options of proceeding without Republicans under the rules.
Biden administration officials were frustrated that Republicans did not move more toward the president in a new offer they presented this week in negotiations on Capitol Hill. They made clear to Republicans on Friday that they expected to see significant movement in the next counteroffer, and that the timeline for negotiations was growing short, a person familiar with the discussions said.
The administration may soon find itself negotiating with multiple groups of senators. A different, bipartisan group plans to meet on Monday night to discuss spending levels and proposals to pay for them. Members of the group — which includes Mitt Romney of Utah, Susan Collins of Maine, Bill Cassidy of Louisiana and Rob Portman of Ohio, all Republicans, as well as Kyrsten Sinema of Arizona and Joe Manchin III of West Virginia, both Democrats — helped draft a bipartisan coronavirus relief bill in December.
The United States Department of Agriculture said on Friday that it will begin making loan forgiveness payments in June to thousands of minority farmers as part of the Biden administration’s $4 billion debt relief program.
The initiative, part of the $1.9 trillion economic relief package that Congress passed in March, has been criticized by white farmers, who claim that it is a form of reverse discrimination, and by banks, which have complained they are losing out on profits from lost interest payments. Delays in implementing the program have frustrated Black farmer organizations, whose members have struggled financially for years and received little help from the Trump administration’s farm bailouts last year.
The U.S.D.A. will initially make debt relief payments for about 13,000 loans that were made directly by the agency to minority farmers. The next phase will apply to the approximately 3,000 loans that were made by banks and guaranteed by the U.S.D.A. That will begin “no later” than 120 days from Friday, the agency said.
“The American Rescue Plan has made it possible for U.S.D.A. to deliver historic debt relief to socially disadvantaged farmers and ranchers,” Tom Vilsack, the secretary of agriculture, said in a statement. “U.S.D.A. is recommitting itself to gaining the trust and confidence of America’s farmers and ranchers using a new set of tools provided in the American Rescue Plan to increase opportunity, advance equity and address systemic discrimination in U.S.D.A. programs.”
The U.S.D.A has said that it does not have the authority to cover the banks’ lost interest income.
WASHINGTON — The Biden administration’s efforts to provide $4 billion in debt relief to minority farmers is encountering stiff resistance from banks, which are complaining that the government initiative to pay off the loans of borrowers who have faced decades of financial discrimination will cut into their profits and hurt investors.
The debt relief was approved as part of the $1.9 trillion stimulus package that Congress passed in March and was intended to make amends for the discrimination that Black and other nonwhite farmers have faced from lenders and the United States Department of Agriculture over the years. But no money has yet gone out the door.
Instead, the program has become mired in controversy and lawsuits. In April, white farmers who claim that they are victims of reverse discrimination sued the U.S.D.A. over the initiative.
Now, three of the biggest banking groups — the American Bankers Association, the Independent Community Bankers of America and National Rural Lenders Association — are waging their own fight and complaining about the cost of being repaid early.
They also want other investors who bought the loans in the secondary market to get government money that would make up for whatever losses they might incur from the early payoff.
Bank lobbyists, in letters and virtual meetings, have been asking the Agriculture Department to make changes to the repayment program, a U.S.D.A. official said. They are pressing the U.S.D.A. to simply make the loan payments, rather than wipe out the debt all at once. And they are warning of other repercussions, including long-term damage to the U.S.D.A.’s minority lending program.
In a letter sent last month to Tom Vilsack, the agriculture secretary, the banks suggested that they might be more reluctant to extend credit if the loans were quickly repaid, leaving minority farmers worse off in the long run. The intimation was viewed as a threat by some organizations that represent Black farmers.
they wrote to Mr. Vilsack in April.
The U.S.D.A. has shown no inclination to reverse course. An agency official said that obliging the banks would put an undue burden on taxpayers and that the law did not allow the agency to pay interest costs or reimburse secondary market investors. The agency hopes to be able to begin the debt relief process in the coming weeks, according to the official, who requested anonymity because they were not authorized to comment on the program.
The relief legislation that Congress passed in March provided “sums as may be necessary” from the Treasury Department to help minority farmers and ranchers pay off loans granted or guaranteed by the Agriculture Department. Most of the loans are made directly to farmers, but about 12 percent, or 3,078, are made through lenders and guaranteed by the U.S.D.A.
The Congressional Budget Office estimated that the loan forgiveness provision would cost $4 billion over a decade.
While America’s banks have flourished in the last century, the number of Black-owned farms has declined sharply since 1920, to less than 40,000 today from about a million. Their demise is the result of industry consolidation as well as onerous loan terms and high foreclosure rates.
Black farmers have been frustrated by the delays and say they are angry that banks are demanding additional money, slowing down the debt relief process.
“Look at the two groups: You have the Black men and women who have gone through racism and discrimination and have lost their land and their livelihood,” said Bill Bridgeforth, a farmer in Alabama who is on the board of the National Black Growers Council. “And then you have the American Bankers Association, which represents the wealthiest folks in the land, and they’re whining about the money they could potentially lose.”
John Boyd Jr., president of the National Black Farmers Association, a nonprofit, said he found it upsetting that the banks said little about years of discriminatory lending practices and instead complained about losing profits.
“They’ve never signed on to a letter or supported us to end discrimination, but they were quick to send a letter to the secretary telling him how troublesome it’s going to be for the banks,” Mr. Boyd said. “They need to think about the trouble they’ve caused not working with Black farmers and the foreclosure process and how troublesome that was for us.”
Mr. Boyd urged Mr. Vilsack not to let the debt relief stall.
“It’s planting season and Black farmers and farmers of color really could use this relief,” Mr. Boyd said.
Cornelius Blanding, executive director of the Federation of Southern Cooperatives/Land Assistance Fund, said that the letter from the banks appeared to be a veiled threat.
“They are prioritizing profits over people,” Mr. Blanding said, expressing concern that the backlash from banks and white farmers could delay the debt relief. “Debt has been a burden on the back of many farmers and especially farmers of color. Them holding this up really prolongs justice.”
Although the government is paying 120 percent of the outstanding loan amounts to cover additional taxes and fees, banks say that unless they get more, they will be on the losing end of the bailout.
The banking industry groups could not offer an estimate of how much additional money they would need to be satisfied. The Agriculture Department said it would cost tens of millions of dollars to meet the banks’ demands.
In the letter to Mr. Vilsack, the bank lobbyists pointed to one large community bank, which they said had a $200 million portfolio of loans to socially disadvantaged farmers that would lose millions of dollars of net income per year if the loans were quickly paid off. They warned that such a move would “undoubtedly reduce the bank’s ability to retain employees.”
The American Bankers Association defended the request, arguing that lenders have been a lifeline to minority farmers. It said that the matter primarily affects the group’s smaller members that have large portfolios of loans from socially disadvantaged borrowers. Representatives for Goldman Sachs, JPMorgan Chase and Citigroup said that the debt relief program had not been on their radar and that they had not been lobbying against it.
“We recognize the need for U.S.D.A. to carry out this act of Congress, and we support the goal of providing financial relief to socially disadvantaged farmers and ranchers,” said Sarah Grano, a spokeswoman for the American Bankers Association. “We believe it would be helpful if the U.S.D.A. implemented this one-time action without causing undue financial harm to the very lenders who have been supporting farmers with much-needed credit.”
Danny Creel, the executive director of the National Rural Lenders Association, said he had no comment. An official from the Independent Community Bankers of America said that the group was not currently considering litigation and that it anticipated that the federal government would find a way to accommodate its requests.
Lawmakers who helped craft the relief legislation have expressed little sympathy for the banks and are pressing the agriculture department to get the money out the door.
Senator Cory Booker, a New Jersey Democrat, said: “U.S.D.A. should now take this first step toward addressing the agency’s history of discrimination by quickly implementing the law that Congress passed and moving forward without delay to pay off in full all direct and guaranteed loans of Black farmers and other socially disadvantaged farmers.”
The banks are not the only ones who have been fighting the debt relief initiative. A group of white farmers in Wisconsin, Minnesota, South Dakota and Ohio are suing the Agriculture Department, arguing that offering debt relief on the basis of skin color is discriminatory. America First Legal, a group led by the former Trump administration official Stephen Miller, filed a lawsuit making a similar argument in U.S. District Court for the Northern District of Texas this month.
Mr. Vilsack said at a White House press briefing this month that his department would not be deterred by pushback against its plans to help minority farmers.
“I think I have to take you back 20, 30 years, when we know for a fact that socially disadvantaged producers were discriminated against by the United States Department of Agriculture,” Mr. Vilsack said. “So, the American Rescue Plan’s effort is to begin addressing the cumulative effect of that discrimination in terms of socially disadvantaged producers.”
Administration officials express confidence that recent price surges in used cars, airfare and other sectors of the economy will prove temporary, and that job growth will speed up again as more working-aged Americans are vaccinated against Covid-19 and regain access to child care during work hours. They say Mr. Biden’s $1.9 trillion economic aid package, which he signed in March, will lift job growth in the coming months, noting that new claims for unemployment fell to a pandemic-era low on Thursday.
The officials also said it was appropriate for the president to look past the current crisis and push efforts to strengthen the economy long term.
The two halves of Mr. Biden’s $4 trillion agenda, the American Jobs Plan and the American Families Plan, are premised on the economy returning to a low unemployment rate where essentially every American who wants to work is able to find a job, Cecilia Rouse, the chair of the Council of Economic Advisers, said in an interview.
“The American Rescue Plan was rescue,” Dr. Rouse said. “It was meant as stimulus as we work through this hopefully once-in-a-century, if not longer, pandemic. The American Jobs Plan, American Families Plan are saying, look, that’s behind us, but we knew going into the pandemic that there were structural problems in our country and in our economy.”
Mr. Biden’s plans would raise taxes on high earners and corporations to fund new federal spending on physical infrastructure, care for children and older Americans, expanded access to education, an accelerated transition to low-carbon energy and more.
Those efforts “reflect the empirical evidence that a strong economy depends on a solid foundation of public investment, and that investments in workers, families and communities can pay off for decades to come,” Mr. Biden’s advisers wrote. “These plans are not emergency legislation; they address longstanding challenges.”
The five-page brief focuses on arguments about what drives productivity, wage growth, innovation and equity in the economy. The issues predate the coronavirus recession and recovery, and Democrats in particular have pledged for years to address them.
The Biden administration is moving in a new direction. It is trying to help low-income Americans by pushing for direct cash assistance in addition to expanding health insurance.
Each is a laudable goal. But doing both at once may not be feasible, as lawmakers raise concerns about the total price tag of Biden’s plans.
If the administration has to make hard choices, it can do more to help the poor by prioritizing cash transfers over expanded health insurance. That’s because cash helps recipients directly, while health insurance would pay mainly for care that many uninsured people were already receiving at low or no cost.
For over a decade, health insurance expansions have dominated the budget and politics of legislation directed toward the poor. In 2019, the government spent more than $600 billion on Medicaid — the major health insurance program for low-income Americans. This was more than 10 times the amount spent on the largest cash transfer program, the earned-income tax credit.
legislation enacted in March brought a welcome shift in focus toward cash benefits. Among its temporary provisions were about $100 billion in increased payments to low-income families with children and $15 billion in stepped-up wage subsidies for low-income workers, overshadowing the approximately $35 billion in new spending for health insurance.
The evidence indicates that for the low-income recipients of these programs, cash transfers will provide a greater bang for the government’s buck. Two separate studies that my collaborators and I conducted found that, on average, low-income adults would benefit more from a dollar in cash than a dollar of government spending on health insurance.
These kinds of comparisons are inherently difficult. One approach we took to measuring the value of health insurance to recipients was to see how much they were willing to pay for it. Another was to estimate the effects of such insurance on their lives, like improved health and increased economic security. Neither approach is airtight.
But they gave very similar answers: The benefit of Medicaid coverage received by a newly insured adult is less than half what that coverage costs taxpayers, which is about $5,500 a year.
The reason is simple: The uninsured already receive a substantial amount of health care, but pay for only a very small portion of it, especially when their medical bills are high.
estimated that 60 percent of government spending to expand Medicaid to new recipients ends up paying for care that the nominally uninsured already receive, courtesy of taxpayer dollars and hospital resources. In other words, from the recipient’s perspective the alternatives are $5,500 in cash or only about 40 percent of that — $2,200 — in health insurance benefits, on top of the care they were already receiving.
The United States has a longstanding tradition of providing free medical services to the indigent. Hospitals emerged in the 18th century largely to care for those with no other sources of help. In modern times, federal and state governments have enacted a grab bag of policies to help defray some of the costs incurred by hospitals and clinics in providing humanitarian care.
The result is today’s health care safety net for the uninsured. It is grossly inadequate and inefficient. It needs a radical overhaul.
But in the meantime, the direct benefits from expanding insurance to the low-income uninsured are, paradoxically, limited by the imperfect patches currently in place. Hospitals are major beneficiaries of health insurance expansions, which reduce their financial burdens and increase their profit margins.
Health insurance has always been an important financial tool for hospitals. During the Great Depression, they pioneered the first widespread health insurance in the United States to help ensure payment for provided care.
More recently, in 2006, when Senator Mitt Romney was the Republican governor of Massachusetts, he embraced the state’s health insurance expansion — which became the blueprint for Obamacare — as a way to reduce the costs that uninsured patients imposed on hospitals and taxpayers. Hospitals later used similar logic in lobbying for Medicaid expansions under Obamacare and against their repeal.
Of course, the newly insured have also benefited greatly from health insurance expansions. On this point, the evidence from Obamacare is in, and the research results are clear: Medicaid coverage is better than the safety-net care available to the uninsured.
saved lives. They also increased access to medical care and reduced medical debt, which can impose substantial financial and emotional pain on patients and their families, even though most of it is never repaid. Covering some of the remaining 30 million Americans who are still uninsured would most likely produce similar benefits.
But people in need also benefit greatly from cash. And there is evidence that cash transfers can also save lives.
In addition, a large body of work shows that wage subsidies to low-income workers with children help lift their families out of poverty, increase economic self-sufficiency, and improve their health and well-being. A recent experiment found that wage subsidies very similar to the ones that were temporarily expanded in March also increase employment and earnings for low-income adults without dependent children. Likewise, direct cash transfers provide important benefits to families and their children, whose academic achievement and physical and mental health can improve as a result.
In an ideal world, everyone would have health insurance and sufficient income. But in the real world, budgetary and political constraints often force wrenching trade-offs.
There are powerful moral imperatives for making sure that everyone has adequate medical care, as well as sufficient income for their nonmedical needs. It’s hard for economists to weigh competing moral imperatives.
But we can, at least, stack dollars on scales. And the good done by cash transfers tips the scale in their favor.
The Biden administration is now trying to make permanent its temporary expansions of both cash subsidies and health insurance. If forced to prioritize how best to help those who are struggling economically — either because of the coronavirus pandemic or from longer-term, structural obstacles — it’s time to recognize that cash is more effective than insurance.
Amy Finkelstein is the John and Jennie S. MacDonald professor of economics at the Massachusetts Institute of Technology.