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“House Republicans have successfully blocked every penny of President Biden’s tax hikes on families, farmers, and small businesses in the debt ceiling deal and protected the 2017 Tax Cuts and Jobs Act from repeal," said U.S. House Ways and Means Chairman Jason Smith.

The Missouri Republican added that Americans want Congress to build on the Trump tax cuts "with more tax relief."

Federal policymakers enacted substantial relief and recovery measures in 2020 and 2021 to support the economy and relieve hardship. These measures helped fuel an economic recovery beginning in May 2020 that made the deepest recession in the post-World War II era also the shortest. (According to the National Bureau of Economic Research, the acknowledged arbiter of business-cycle dating, the contraction in economic activity marking the pandemic recession lasted only two months: March and April 2020.) The expansion in economic activity in the recovery proved to be stronger and faster than initial projections.

These projections may have been colored by what happened in the Great Recession of 2007-2009, which at the time was by far the worst recession since the Great Depression and the recovery from which was disappointingly slow, with high unemployment lasting years after the economy began to grow. But the causes of and policy responses to the two recessions were quite different. In particular:

In recent days, critics of the Inflation Reduction Act (IRA) have used a misleading and incomplete analysis to claim that the breakthrough legislation would be a “tax increase on everyone.” These opponents’ claims are based on an analysis by the Joint Committee on Taxation (JCT)—released by Senate Finance Committee Ranking Member Mike Crapo (R-ID) on July 30, 2022—that assumes that taxes levied on large corporations that currently pay little or no corporate income taxes represent a tax increase on individuals and families.

However, this simply is not true. The IRA closes tax loopholes exploited by large corporations that currently pay little or no tax and by wealthy investment fund managers. It also cracks down on tax dodging, especially by the wealthy, which currently accounts for the largest share of unpaid taxes. Contrary to critics’ claims, the IRA does not raise taxes on individuals earning less than $400,000 or on any but the largest and most profitable corporations.

And finally: It’s not too early to regret that the deal doesn’t include a tax increase. Unlike during the last two big debt limit fights, in 2011 and 2013, Democrats never uttered the word “tax” out loud until negotiations were near an end. By then, it was too late.

At a May 10 appearance at SUNY Westchester Community College, Biden faulted Republicans for refusing to consider undoing $2 trillion in tax cuts enacted under President Donald Trump. These tax cuts are set to expire in 2025.

Inflation fell to its lowest annual rate in more than two years during June, the product both of some deceleration in costs and easy comparisons against a time when price increases were running at a more than 40-year high. The consumer price index, which measures inflation, increased 3% from a year ago, which is the lowest level since March 2021. On a monthly basis, the index, which measures a broad swath of prices for goods and services, rose 0.2%. That compared with Dow Jones estimates for respective increases of 3.1% and 0.3%. Stripping out volatile food and energy prices, core CPI rose 4.8% from a year ago and 0.2% on a monthly basis. Consensus estimates expected respective increases of 5% and 0.3%. The annual rate was the lowest since October 2021. In sum, the numbers could give the Federal Reserve some breathing room as it looks to bring down inflation that was running around a 9% annual rate at this time in 2022, the highest since November 1981. “There has been significant progress made on the inflation front, and today’s report confirmed that while most of the country is dealing with hotter temperatures outside, inflation is finally cooling,” said George Mateyo, chief investment officer at Key Private Bank. “The Fed will embrace this report as validation that their policies are having the desired effect – inflation has fallen while growth has not yet stalled.” However, central bank policymakers tend to look more at core inflation, which is still running well above the Fed’s 2% annual target. Mateyo said the report is unlikely to stop the central bank from raising rates again later this month. Fed officials expect the inflation rate to continue falling, particularly as costs ease for shelter, which makes up about one-third of the weighting in the CPI. However, the shelter index rose 0.4% last month and was up 7.8% on an annual basis. That monthly gain accounted for about 70% of the increase in headline CPI, the Bureau of Labor Statistics said. “Housing costs, which account for a large share of the inflation picture, are not coming down meaningfully,” said Lisa Sturtevant, chief economist at Bright MLS. “Because rates had been pushed so low by the Fed during the pandemic and then increased so quickly, the Federal Reserve’s rate increases not only reduced housing demand — as intended — but also severely limited supply by locking homeowners into homes they would have otherwise listed for sale.” Wall Street reacted positively to the report, with futures tied to the Dow Jones Industrial Average up nearly 200 points. Treasury yields were down across the board. Traders are still pricing in a strong possibility that the Fed will enact a quarter percentage point rate hike when it meets July 25-26. However, market pricing is pointing toward that being the last increase as officials pause to allow the series of hikes to work their way through the economy. When inflation first began to accelerate in 2021, Fed officials and most Wall Street economists thought it would be “transitory,” or likely to fade once factors specific to the Covid pandemic wore off. They included surging demand for goods over services and supply chain clogs that created scarcity for vital items such as semiconductors. However, when inflation proved more stubborn than anticipated, the Fed began hiking, ultimately raising benchmark rates by 5 percentage points through a series of 10 increases since March 2022. The muted increase for the headline CPI came even though energy prices increased 0.6% for the month. However, the energy index decreased 16.7% from a year ago, a time when gasoline prices at the pump were running around $5 a gallon. Food prices rose just 0.1% on the month while used vehicle prices, a primary source for the inflation surge in the early part of 2022, declined 0.5%. Airline fares fell 3% on the month and now are down 8.1% on an annual basis. The easing in the CPI helped boost worker paychecks: Real average hourly earnings, adjusted for inflation rose 0.2% from May to June and increased 1.2% on a year-over-year basis. During the inflation surge that peaked last June, worker wages had run consistently behind the cost-of-living increases.

WASHINGTON (AP) — Showing surprising resilience in the face of higher interest rates, the U.S. economy grew at a 2% annual pace from January through March as consumers spent at the fastest pace in nearly two years.

Thursday’s revised figure from the Commerce Department sharply upgraded its assessment of first-quarter growth from its previous estimate of a 1.3% annual rate.

US economic growth was stronger than previously reported at the start of the year - news that could help bolster the case for higher interest rates in the world's largest economy.

The Commerce Department said the latest data showed the US economy grew at an annual rate of 2% in the first three months of the year.

WASHINGTON — America’s employers pulled back on hiring but still delivered another month of solid gains in June, adding 209,000 jobs, a sign that the economy’s resilience is confounding the Federal Reserve’s drive to slow growth and inflation.

The latest evidence of economic strength makes it all but certain that the Fed will resume its interest rate hikes later this month after having ended a streak of 10 rate increases intended to slow inflation.

Second-quarter economic activity has picked up for the US, based on the median estimate via several sources compiled by CapitalSpectator.com. The firmer nowcast offers fresh support for expecting that the US economy will extend a moderate expansion into Q2 in the official quarterly report that’s scheduled for release later this month.

Growth is on track to rise 1.9% (seasonally adjusted annual rate for GDP) for the April-through-June period, according to the median nowcast. The projection is fractionally below the 2.0% increase in Q1. The Bureau of Economic Analysis will publish its initial Q2 estimate for GDP on July 27.

This was a busy week for economic data, and it looks like the US may be on the right track. Americans are feeling good about the state of the economy heading into the summer as gas prices fall and inflation slows in other categories. As a result, plenty of Americans are still shopping, which means businesses can continue to hire. That's reflected in low unemployment and strong job growth at a time when hourly wages finally caught up to inflation. This also reflects rises in manufacturing, especially in motor vehicles, as the nation continues building factories at a very fast rate. All of this good news contributes to an economy that gave the Federal Reserve the confidence to skip its string of interest rate hikes this month. Let's take a closer look at the more encouraging numbers that came out in just the last week. Americans are still shopping Retail sales rose 0.3% from April to May, following a 0.4% jump from March to April, according to the Commerce Department. Consumers spent more across the board, including at the grocery store and car dealerships, with the exception of gasoline, indicative of falling gas prices. Overall retail spending for the last 12 months increased 1.6%, rising slower than price increases. The retail spending rise was closely comparable with inflation when taking out gasoline prices. According to the AAA on Friday, a gallon of regular gas averaged around $3.59, an elevated number compared with previous years but a major drop from a year ago when prices averaged around $5. As Americans prepare for summer travel, gasoline prices fell 5.6% in May – and have fallen 19.7% over the last year – while fuel oil prices dropped 7.7%, according to the May CPI report. CPI increased 4% from May 2022 to May 2023, the Labor Department said on Tuesday, the lowest year-over-year inflation rate since March 2021. This came in well under the year-over-year percent increase of 4.9% in April. CPI rose 0.1% month over month, per seasonally adjusted data, less than the 0.4% month-over-month growth in April. Core CPI, which excludes food and energy, increased 5.3% in May from a year earlier, which suggests consumers are still feeling the weight of somewhat easing price pressures. This included a 4.4% jump in used vehicle prices and a 0.6% increase in shelter prices, up from 0.4% for April 2023. Grocery inflation is also slowing, according to the Council of Economic Advisers. In May, grocery inflation on a three-month annualized basis fell 1.7%, a stark difference from the 15.7% rise in July 2022. This was driven in part by rapidly falling egg prices, which decreased 13.8% between April and May, as well as declines in produce prices. Inflation is slowing, while jobs and wages stay strong In a separate release Tuesday, the Bureau of Labor Statistics reported a 0.3% increase in average hourly earnings, adjusted for inflation, for May. Real earnings rose 0.2% annually after being negative for much of the inflation surge. US inflation also cooled below expectations on the wholesale level, according to Producer Price Index (PPI) data released Wednesday. These numbers were supplemented this week by data revealing the jobs market remains quite strong. The Labor Department on Thursday said new applications for unemployment benefits were steady last week, suggesting that layoffs remain low. Through May, employers have added around 1.6 million jobs in 2023. The rise in consumer spending and higher wages, which accounts for around two-thirds of economic output, suggests demand has remained steady even amid rising prices and interest rates that have stayed the same after Wednesday's Fed decision.

Recent economic data is showing the US economy is doing quite well, but many Americans are not convinced. Why would they be when lots of available jobs and increased gross domestic product haven't often translated to paychecks that can keep up with rent and grocery prices? And when business leaders are crying recession. Some say the US is in a "vibecession," a disconnect between how the economy performs and how Americans feel about its performance. Still-rising prices, a correction from the unusual economic conditions of the coronavirus pandemic, and public conversation about a still-looming threat of a recession may have overshadowed healthy economic data. Even now, with slower inflation, paused interest-rate hikes, and a healthy job market, Americans can't give up the idea that the economy is in trouble. Public discourse about a looming recession and skepticism of progress Americans' views of the economy, as tracked in a long-running survey by the University of Michigan, were around the lowest they've been since 1980 last summer. Despite a small jump since July 2022, consumer sentiment fell between February and May, with an improvement in June, and these levels more or less match those of the Great Recession. Sentiment is expected to rise further over the next few months, Joanne Hsu, director of the Surveys of Consumers, told Insider. The sentiment crosses party lines. In a Pew Research survey conducted in late March and early April, a large majority of Republicans and Democrats alike still had a negative outlook on the economy. Democrats and Republicans surveyed by Pew have consistently rated the economy lower under President Joe Biden than they did during the Trump administration. This could be caused by pessimism carried over from the start of the pandemic, negative news headlines, and some very real data showing more Americans are experiencing homelessness and attending food banks. It could also be because of falling real wages, or pay when adjusted for the cost of inflation, compared with the past three years. According to the Bureau of Labor Statistics, real hourly compensation for all workers has fallen more since 2020 than at any time at least since World War II. For that reason, people could just be feeling the stark difference from when they were flush with cash early in the pandemic. After household savings reached a record high in early 2020, real disposable personal income — what Americans can spend after inflation and taxes — is now back to pre-pandemic levels. If you're comparing your financial situation with that of three years ago, you're likely to feel as if the economy has gotten worse, even though it's actually gotten better. "If unemployment falls but real wages do not rise, the public will not feel positively about the economy," Darren Grant, an associate professor of economics at Sam Houston State University, told Insider. "That's not vibes, it's common sense." And finally, it could also be attributed to what Kyla Scanlon, who founded the financial-education company Bread, calls the "Black Mirror-ification" of the economy, in which people become skeptical of improvements. Despite unemployment at historic lows, a large majority of people still report hearing news about heightened unemployment, Scanlon pointed out. The bank failures of this year have led some to believe a recession may be more likely. Jamie Dimon, the CEO of JPMorgan Chase, told CNN in April that financial turmoil was "recessionary" though wouldn't "necessarily force a recession." The New York Fed puts the likelihood of a recession by May 2024 at just under 71%, while The Conference Board, a business membership and research organization, estimated earlier this year a 99% chance. Last month, Goldman Sachs lowered its prediction that a recession would occur to 25% after the debt-ceiling deal. But there are still many signs pointing away from a recession at all in 2023, including the Fed's rate-hike pause and job growth. The US has the lowest inflation and highest GDP growth since the pandemic's start of the G7 countries, an informal bloc of industrialized nations. While some economists may be cheering slowing inflation and a pause in interest-rate hikes, many Americans may have little interest, as prices are still up 15% since early 2021. With many Americans making similar to what they were pre-pandemic, a slight increase in food prices or a subtle drop in transportation costs may mean little if the prices of groceries and housing are still high.

Several recent works on China and Sino–US relations have made substantial contributions to the current understanding of how and under what circumstances a combination of nuclear deterrence and economic interdependence may reduce the risk of war between major powers. At least four conclusions can be drawn from the review above: first, those who say that interdependence may both inhibit and drive conflict are right. Interdependence raises the cost of conflict for all sides but asymmetrical or unbalanced dependencies and negative trade expectations may generate tensions leading to trade wars among inter-dependent states that in turn increase the risk of military conflict (Copeland, 2015: 1, 14, 437; Roach, 2014). The risk may increase if one of the interdependent countries is governed by an inward-looking socio-economic coalition (Solingen, 2015); second, the risk of war between China and the US should not just be analysed bilaterally but include their allies and partners. Third party countries could drag China or the US into confrontation; third, in this context it is of some comfort that the three main economic powers in Northeast Asia (China, Japan and South Korea) are all deeply integrated economically through production networks within a global system of trade and finance (Ravenhill, 2014; Yoshimatsu, 2014: 576); and fourth, decisions for war and peace are taken by very few people, who act on the basis of their future expectations. International relations theory must be supplemented by foreign policy analysis in order to assess the value attributed by national decision-makers to economic development and their assessments of risks and opportunities. If leaders on either side of the Atlantic begin to seriously fear or anticipate their own nation’s decline then they may blame this on external dependence, appeal to anti-foreign sentiments, contemplate the use of force to gain respect or credibility, adopt protectionist policies, and ultimately refuse to be deterred by either nuclear arms or prospects of socioeconomic calamities. Such a dangerous shift could happen abruptly, i.e. under the instigation of actions by a third party – or against a third party. Yet as long as there is both nuclear deterrence and interdependence, the tensions in East Asia are unlikely to escalate to war. As Chan (2013) says, all states in the region are aware that they cannot count on support from either China or the US if they make provocative moves. The greatest risk is not that a territorial dispute leads to war under present circumstances but that changes in the world economy alter those circumstances in ways that render inter-state peace more precarious. If China and the US fail to rebalance their financial and trading relations (Roach, 2014) then a trade war could result, interrupting transnational production networks, provoking social distress, and exacerbating nationalist emotions. This could have unforeseen consequences in the field of security, with nuclear deterrence remaining the only factor to protect the world from Armageddon, and unreliably so. Deterrence could lose its credibility: one of the two great powers might gamble that the other yield in a cyber-war or conventional limited war, or third party countries might engage in conflict with each other, with a view to obliging Washington or Beijing to intervene.

The idea that the agenda of Joe Biden would be positive for the economy is taken to mean that his plan to increase taxes would also be positive for the economy. However, it is a mistake to think the corporate or individual income taxes can be raised without negative effects.

His campaign recently told the New York Times, “Tax increases now would accelerate growth by funding a stream of spending proposals that would help the economy.” So the argument seems to go that because higher tax rates could fund new programs, higher tax rates would help the economy. But as noted by Douglas Holtz Eakin, “The taxes are bad but all the better news for growth, if there is any, is in the spending proposals.” That means tax increases on business and higher earners would inflict damage on the economy no matter how the revenue would be spent.

Since the 1980s, policies in countries like the United States have often been based on arguments that higher taxes on the wealthy have a negative influence on economic growth.5

Tax Cuts and the Economy

WASHINGTON (AP) — Showing surprising resilience in the face of higher interest rates, the U.S. economy grew at a 2% annual pace from January through March as consumers spent at the fastest pace in nearly two years.

Thursday’s revised figure from the Commerce Department sharply upgraded its assessment of first-quarter growth from its previous estimate of a 1.3% annual rate.

In early 2016, Obama Treasury Secretary Jack Lew cautioned that the dollar’s dominance as a global currency rested, in part, on the U.S. government’s reluctance to fully weaponize it. If foreign markets and governments “feel that we will deploy sanctions without sufficient justification or for inappropriate reasons,” he warned, “we should not be surprised if they look for ways to avoid doing business in the United States or in U.S. dollars.” Lew’s case stemmed from the more fundamental view that the dollar’s international role is “a source of tremendous strength for our economy, a benefit for U.S. companies and a driver of U.S. global leadership”—in other words, a role worth keeping. This view is emblematic of American financial governance since the Second World War. U.S. economic analysts, especially at the Treasury, have jealously guarded the dollar’s role and the many benefits it offers: the ability to run large deficits at low cost and disproportionate influence over the structure of the global economy, among others.

Yet in their recent article in The New Republic, David Adler and Daniel Bessner argue the U.S. should abandon these advantages. In their view, the dollar’s role has encouraged American militarism and should be relinquished to curb such behavior. Dollar hegemony is not without cost, but to renounce it would be a profound mistake. Adler and Bessner’s view neglects the sizable economic benefits the dollar’s role confers on the U.S., as well as its possible use as an antidote to military adventurism. It ignores the enormous good that can be done with deficit spending, much of which has gone to the American military but could instead fund progressive programs. And it elides the inability of the U.S. and its global trading partners to shift away from dollar dominance without creating worldwide financial distress. Adler and Bessner are right that the U.S. has misused its privilege, but Washington should not abandon it; rather, American leaders should seek to transform it.

Economic renewal and fiscal reform have become the preeminent issues, not only for domestic and economic policy but for foreign policy as well. As the former chairman of the Joint Chiefs of Staff, Adm. Michael G. Mullen, was fond of saying, national debt has become perhaps our top national security threat. And neither major presidential candidate is doing enough about it. This issue needs to be framed as crucial not just for our future prosperity but for international stability as well.

The United States has been running trillion-dollar deficits, resulting in a huge explosion in the country’s indebtedness. Publicly held debt now equals 70% of gross domestic product, a threshold many economists consider significant and highly worrisome. Making matters worse, half of our current deficit financing is being provided by foreigners. We are getting by with low interest rates and tolerable levels of domestic investment only because they find U.S. debt attractive, which may not last.

After World War II, the United States emerged as the largest economy and the most powerful military and political force in the world. In 1944, at the Bretton Woods Conference in New Hampshire, the US and other major countries agreed to establish a new international monetary system based on fixed exchange rates, with the US dollar as the anchor currency. Under this system, other countries could peg their currencies to the US dollar, and the US would guarantee to exchange dollars for gold at a fixed rate of $35 per ounce.

This system worked well for several decades, as the US economy grew and the dollar became the primary currency for international trade and finance. However, in the 1960s, the US began to run large trade deficits and spend more on the Vietnam War, which led to a loss of confidence in the dollar and a rise in inflation. In 1971, President Nixon announced that the US would no longer redeem dollars for gold, effectively ending the Bretton Woods system and leading to a period of floating exchange rates and greater volatility in currency markets.

Stephen Miran, "Filling the Punch Bowl," City Journal, 5-8-2023, https://www.city-journal.org/article/high-government-spending-undermines-feds-inflation-measures-- 嘉玮

In response to persistently high inflation, the Fed’s hiking cycle, bringing rates to roughly 5 percent, is the fastest and most aggressive in 40 years. Yet we’ve seen very limited evidence of a slowdown in economic growth sufficient to bring inflation back down to the 2 percent target.

The economy is doing what it needs to do to achieve probably its best possible near-term outcome: inflation falling while keeping unemployment low, all the while staying out of a recession through the rest of this year. Recent data shows the labor market has performed well, inflation continues to cool after being at such a high rate, and the housing market is showing some signs of resilience. This may be music to the Federal Reserve's ears, as the central bank considers whether to slow the economy even further. The Fed's ideal "soft landing" is a balancing act between slowing the economy to bring inflation down while ensuring growth stays strong and unemployment doesn't get too high. That's exactly what's happening in the economy right now. The job market is cooling down but still strong Hiring slowed dramatically in June, while still remaining high compared to before the pandemic, adding 209,000 nonfarm payroll jobs, nearly 100,000 less than the revised growth in May. Job creation on the whole has slowed from the year's highs in January, with some industries such as retail losing jobs from May to June. The latest jobs report is "mostly what the Fed wants to see, which is the labor market sort of coming back into balance, no longer overheating and being sort of sustainable, steady, robust, those kinds of words, rather than sort of exceptionally hot and supply constrained," Julia Pollak, chief economist at ZipRecruiter, told Insider on Friday. Additionally, the most recent Job Openings and Labor Turnover Survey for May reveals job openings are still high, while continuing their overall downward trend, echoing the job growth figures in showing a cooling but still-strong labor market. And despite a year of the Fed raising interest rates to fight inflation, unemployment is still remarkably low. The unemployment rate fell in June to 3.6% after rising by 0.3 percentage points in May. Other measures also show that the job market is still very healthy. The prime-age employment-population ratio, the share of people in the 25 to 54 age range with a job, surged from 80.7% to 80.9%, the highest since April 2001. Nick Bunker, economic research director for North America at the Indeed Hiring Lab, told Insider that the slowing but still good employment data suggests the US is heading toward stronger and more sustainable growth. "It's just a matter of, is this pace of moderation quick enough for the Federal Reserve?" Bunker said. "Is this a trend that'll have more time to play out, or will tighter monetary policy or some other stumbling block get in the way of seeing how painless this recalibration can be?" Inflation is coming down as fast as it went up Inflation as measured by the Consumer Price Index rose by just 3.0% in June from a year prior, a great sign for Americans' wallets and the lowest rate since March 2021. Inflation had been dramatically cooling before the latest report out Wednesday. The year-over-year change in this index has slowed ever since peaking back in June 2022 at 9.1%. Core CPI, which excludes food and energy, has been extremely high, but it also cooled in June. After a year-over-year increase of 5.3% in May, the index rose by a smaller 4.8% year over year in June. Wage growth as seen by year-over-year changes in average hourly earnings has also plateaued. Despite that plateau, the fall in inflation means that real wages are up on average. Data from the National Federation of Independent Business released Tuesday revealed the number of small businesses that raised their prices fell in June to the lowest level since March 2021, dropping to just 29%. This suggests small businesses have adjusted to still-rising prices, despite about 90% of owners reporting they had few or no qualified applicants for job openings.