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Biden, Allies Agonize Over Cutting Economy Plan to Eke Out a Win – BNN

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(Bloomberg) — President Joe Biden’s team and Democratic lawmakers are agonizing over the size and scope of his multi-trillion dollar economic plan, as Biden’s approval rating sags and upcoming elections threaten to show his party’s vulnerability.

Negotiations over the legislation — a package of social programs, tax increases and climate measures Biden calls “Build Back Better” — have dragged on for weeks. White House officials are trying to raise pressure for the talks to wrap up, according to one administration official.

Speaker Nancy Pelosi and Democratic centrists want to scale back the bill to focus on a handful of well-funded programs that can be quickly implemented, so Democrats can boast about the accomplishments in 2022 mid-term campaigns. But progressives want to keep the legislation expansive, even if programs are partially funded or expire after only a few years.

Senior White House aides recognize that Biden’s legacy is bound to the economic plan. The legislation would bring into law a number of his campaign promises, including ensuring greater racial equity, fighting climate change and helping women, seniors, children and working families. Without it, the president and his party will be open to criticism from Republicans that they’re unable to govern.

The political repercussions may be imminent. Virginia will elect a new governor on Nov. 2, and the contest, between former Democratic Governor Terry McAuliffe and Republican Glenn Youngkin, may foreshadow midterm congressional elections in 2022.

Polls show a tighter race than Democrats had hoped. First lady Jill Biden and former President Barack Obama plan to travel to the state this month to try to boost McAuliffe.

Only Chance

Many Democratic lawmakers, meanwhile, regard the “Build Back Better” legislation as their only chance to advance favored policies in a narrowly divided Congress, including climate and tax measures. Some have threatened to withhold their support unless their pet projects are included.

“The problem they have is getting 218 votes,” in the House, said Thomas Kahn, a former Democratic staff director of the House Budget Committee who now teaches at American University. “The way to get there is to offer everyone a little something.”

But he added that it’s “much better to have two, three or four programs that you really fund and get off the ground and can point to when the bill is enacted and say, for example, ‘I got you the child tax credit.”’

House and Senate Democratic leaders are split on whether to concentrate spending on a handful of programs and eliminate others entirely or enact the full menu of programs but only for a few years, setting up expiration dates in the not-too-distant future.

While Pelosi wants fewer programs, Senator Dick Durbin, the no. 2 Democratic leader, said he’s confident popular programs with short expiration dates would be renewed by future Congresses. Senate Finance Committee Chairman Ron Wyden told reporters he’d also “favor a shorter number of years” over eliminating programs. 

One potential casualty of the negotiations is an expansion of Medicare, the health program for the elderly and disabled, that would add dental, vision and hearing benefits. The provision is favored by progressives, but at $350 billion over 10 years, it is one of the costliest pieces of the bill. Worse, the new benefits wouldn’t begin until 2028, providing little immediate political benefit.

But Senator Bernie Sanders, a Vermont independent, and some other liberals have called the Medicare expansion non-negotiable.

Senators have also discussed scaling back the bill’s child tax credit, viewed as an especially popular provision. Senator Mark Warner, a Virginia Democrat, has floated restricting the credit to people under an income threshold, while Senator Joe Manchin, a West Virginia Democrat, has suggested requiring parents to prove they’re employed to claim the tax break. 

The House version of the bill would extend the credit through 2025 at an estimated cost of $556 billion. Biden allies say both the president and Pelosi are strong proponents of keeping the child tax credit intact.

Time for ‘Choices’

“There are choices that need to be made,” White House Press Secretary Jen Psaki said at a briefing this week. Biden’s view, she said, is that even a scaled-back bill “can still do something historic and that will fundamentally change — change the economy for the American people.”

Ultimately, Pelosi and Senate Majority Leader Chuck Schumer will likely have to combine paring back the cost of programs and cutting some altogether in order to appease both liberals in the House and the Senate’s two holdout centrists, Manchin and Kyrsten Sinema of Arizona. 

The House-passed bill costs at least $3.5 trillion over a decade, while Manchin has said he won’t support more than $1.5 trillion. Biden has floated a range of about $2 trillion as a compromise.Representative Pramila Jayapal, who co-chairs the House Progressive Caucus, said that the left flank of the party is willing to negotiate, but largely prefers shorter expiration dates for programs rather than erasing them from the bill. “If we have to cut the numbers slightly, then we would reduce the number of years because the universality of benefits and the immediacy of benefits is absolutely critical,” Jayapal said. “Something we’re willing to look at is cutting back the years, say for example, on free community college.” 

But she said that’s more difficult for programs with longer-term impact, such as measures to combat climate change. And reducing funding or expiration dates for some programs, such as paid family and medical leave or funding for child and senior care, could backfire. States and organizations responsible for implementing the programs might not bother if it’s uncertain the funding will continue.

“Pelosi has a very difficult job. I think she has to gather the things that are going to be the most dispositive, the most impactful, for the largest number of member votes,” said Chris Campbell, a former staff director for the Senate Finance Committee and former Treasury official. “There are going to be a lot of sleepless nights between now and December.”

©2021 Bloomberg L.P.

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Turkey’s Erdogan replaces finance minister amid economic turmoil – Aljazeera.com

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Nureddin Nebati takes on the role of finance minister after Lutfi Elvan resigns.

Turkish President Recep Tayyip Erdogan has replaced the country’s finance minister after weeks of economic turmoil in which inflation soared as the lira plummeted to record lows.

The currency has lost more than 40 percent of its value against the US dollar this year, making it the worst-performing of all emerging market currencies.

According to a presidential decree issued near midnight on Wednesday, Erdogan accepted the resignation of Lutfi Elvan and appointed his deputy, Nureddin Nebati, as the new finance minister.

Nebati, 57, has a bachelor’s degree in public administration and a master’s degree in social sciences from Istanbul University. He also holds a doctoral degree in political science and public administration from Turkey’s Kocaeli University.

His predecessor had only been in the role since November 2020, when he was appointed after the resignation of Erdogan’s son-in-law, Berat Albayrak.

Elvan’s year-long tenure was marked by numerous crises.

Earlier on Wednesday, the Turkish Central Bank intervened in markets to prop up the nosediving lira, which has lost nearly 30 percent in value against the dollar in just a month.

Under pressure from Erdogan, Turkey’s officially independent central bank lowered its key interest rate in November for the third time in less than two months. It did so despite inflation approaching 20 percent – four times the government’s target.

Erdogan believes that high interest rates cause high inflation – the exact opposite of conventional economic thinking – and has insisted he would keep rates low.

Turkey’s currency hit yet another record low of more than 14 to the dollar before recouping some losses on Wednesday after a central bank move to sell reserves. One dollar bought 13.22 lira as of Wednesday afternoon.

The recovery, however, was short-lived after Erdogan appeared again to defend his “new economic model” against the “malice of interest”.

Since 2019, Erdogan has sacked three central bank governors who opposed his desire for lower interest rates. The president, who has blamed the lira’s troubles on foreigners sabotaging Turkey’s economy and on their supporters in the country, believes lower rates will fight inflation, boost economic growth, power exports and create jobs.

On Tuesday, figures showed Turkey’s economy had grown by 7.4 percent in the third quarter, compared with a year earlier, but some analysts believe the surge could be short-lived due to the high inflation and currency meltdown.

Meanwhile, public discontent appears to be on the rise.

Last week, demonstrators protested economic policies in the largest city of Istanbul and the capital, Ankara, while the main opposition Republican People’s Party plans a rally for early elections on Saturday in the southern city of Mersin.

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Dollar recovers in face of Omicron; commodity currencies slide

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The U.S. dollar recovered from a loss on Wednesday after reports the Omicron coronavirus variant is spreading and oil prices turned down, hurting commodity currencies.

The dollar index against major currencies was up 01% in the afternoon in New York after having fallen 0.3% in the morning. The greenback gained against the dollars of Canada, Australia and New Zealand and against the euro and British pound.

“What you are seeing is a classic risk-off move in FX markets and that means the dollar outperforms against the commodity currencies,” said Erik Bregar, an independent foreign exchange analyst.

The dollar lost to the Japanese yen currency, which is often seen as a safer haven, giving up 0.3% to 112.805.

The shifts underscored the hour-to-hour fragility of foreign exchange rates as traders weigh what the Omicron variant might do to plans that Federal Reserve Chair Jerome Powell signaled on Tuesday to move more quickly to raise U.S. interest rates.

The variant is becoming dominant in South Africa and has appeared in the United States.

“We’ve gotten these conflicting claims about the new variant, and Powell’s comments really threw the markets for a loop,” said Marc Chandler, chief market strategist at Bannockburn Global Forex.

“People are still pretty nervous,” Chandler said.

The dollar’s rebound started as a report from the Institute for Supply Management came out showing that U.S. manufacturing activity picked up in November amid strong demand for goods, keeping inflation high as factories continued to struggle with pandemic-related shortages of raw materials.

An earlier report on U.S. private payrolls suggested that Friday will bring a “solid jobs report” when the government posts more comprehensive payroll numbers, Chandler said.

“Friday’s U.S. jobs data is the next big thing,” he said.

The greenback is up nearly 7% this year. November was its strongest month since June.

The euro lost 0.2% on the day to $1.1314 at 3:21 pm ET (1507 GMT).

The British pound, often considered a risk-on currency, fell back 0.2% against the dollar after having been up 0.4%. The pound is struggling to recover after reaching its lowest level in nearly a year earlier this week on fears over vaccine effectiveness against the Omicron variant.

The Australian dollar lost 0.4% to $0.7103 and the New Zealand dollar lost 0.3% to $0.6805. [AUD/]

Prior to the tailspin caused by Omicron’s advent, the main driver of exchange rates had been expectations of the different speeds at which central banks will raise interest rates.

In cryptocurrencies, bitcoin was up less than 1% at $57,220 at 3:17 pm ET (2017 GMT).

 

 

(Reporting by David Henry in New York; Additional reporting by Joice Alves and Elizabeth Howcroft in London; Editing by Jonathan Oatis and Andrea Ricci)

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Biden says economy 'in strong shape' ahead of holidays – BBC News

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Biden

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The US economy is in a strong position, President Joe Biden has said, thanks to action taken by the government to free up supply chain blockages and tackle the rising cost of living.

He predicted that prices, which have been rising sharply, would ease.

The president said policies to tackle bottlenecks at ports and lower the price of fuel were working.

“We’re heading into a holiday season on very strong shape,” he said. “It’s not because of luck,”

Asked how supply chains would weather disruption from the new variant of coronavirus, President Biden said he was an “optimist”, but that it was too soon to know what the impact might be.

As a result of the economic recovery a typical American family was now better off than before the pandemic struck, the president said, describing a 40% reduction in child poverty as “a moral victory”.

“Americans on average have about $100 (£75.33) more in their pockets every month than they did last year [and] about $350 more each month than they did before the pandemic, even after accounting for inflation,” the president said.

Since taking office, the Biden administration has pumped billions of dollars of stimulus into the US economy, including direct cheques to households and tax breaks.

Economic growth has rebounded as the impact of the pandemic began to ease, and after shrinking 30% in the first six months of 2020, the economy is now back at the size it was pre-pandemic.

However, higher demand for goods, and on-going disruptions to the supply and delivery of those goods, has helped push inflation up to 6.2% – the highest it has been for 31 years.

“I’ve used every tool available to address the price increases,” President Biden said.

Releasing part of the US’s oil reserves last month, in an action coordinated with several other nations, to try to bring down the price of fuel had been “making a difference”, he added.

Independent economic analysis indicated his Build Back Better bill would reduce inflationary pressures, he stressed.

The bill was fully paid for, and would contribute to deficit reduction, by “making the largest corporations and the richest Americans pay a little more in taxes”.

A change in mindset

The $1.9tn (£1.4tn) Build Back Better bill, which includes social and climate spending, still needs to be voted on in the US Senate.

Asked why he believed he would be able to bring down inflation when previous administrations in the 1970s and 1980s failed, the president said: “This is the first time I’ve seen labour and business so ready to cooperate.

“People are in a different state of mind than in the Carter and Nixon years.”

Earlier this week, President Biden hosted the chief executives of several of the countries’ largest manufacturers and retailers, including Walmart and CVS Health, Mattel and Best Buy.

The executives reported that their inventories were up and shelves well-stocked, ready to meet the consumer demand for the holidays, he said.

Biden meeting company bosses on Monday

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Biden said the administration had “broken up log jams” in the supply chain through various methods, such as by encouraging port operators to work longer hours.

He also pointed to the easing of rules over truck drivers’ hours. The measures were working, he said, with the number of containers left sitting on docks for over eight days down by 40%.

Michael Pearce, US economist at Capital Economics, thinks the president was right to suggest that some of the stresses on the economy were starting to ease, but that all the problems wouldn’t go away overnight.

“It’s still the case that there are very severe supply problems. Even if they’re starting to fade, it’ll take some time for that to work its way through, especially now that inventory for a lot of goods is so lean,” he told the BBC.

Inflation which remained would therefore persist well into next year, he said, in part thanks to the trillions of dollars pumped into the economy through the pandemic.

The Omicron variant, and expectations that it will hurt economic growth, were probably having a greater impact on the price of fuel, than the move to release oil reserves, Mr Pearce added.

Diane Swonk, chief economist at Grant Thornton, thinks Mr Biden’s Build Back Better bill could have a pro-inflationary impact in the short term unless it was tweaked further by lawmakers.

She felt Omicron, the easing of supply chain problems, and a reduction in government stimulus over the coming months would “take the steam out of inflation but it won’t cool it down enough”.

“The risk is until we can really wrestle the virus to its knees we’ll continue to see disruption, even as demand starts to slow again,” said Ms Swonk.

“We’re starting to see more broader based inflation that likely will linger longer.”

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