Democratic presidential candidate Joe Biden speaks in Tampa, Florida on September 15, 2020 during a roundtable discussion with Tampa-area veterans and military families.
Jim Watson | AFP | Getty Images
Joe Biden’s anti-poverty plan to expand the child tax credit suggests that his potential presidency would likely mean a White House more focused on progressive economic policies than those seen during the Obama and Clinton years.
Aimed at reducing childhood poverty rates, Biden’s proposed expansion would be dramatic and open the allowance to families who would otherwise fail to qualify. It would increase a family’s annual, per-child credit to $3,000 from $2,000 and would be awarded in installments each month instead of the current springtime lump sum. Children under age 6 would be credited $3,600.
“You saw in 2009, the Obama-Biden administration did an expansion of the child tax credit then, and it was an important expansion,” said Seth Hanlon, special assistant for economic policy to then-President Barack Obama. “But it was more incremental, whereas this is more transformative.”
The prospective tax credit overhaul, included in a broader Biden campaign tax plan released on Sept. 17, comes as millions of Americans struggle to find employment or keep their small businesses afloat due to the Covid-19 pandemic. Though jobless figures slowly improved throughout the summer, economists say it could take years for the unemployment rate to drop from its current 8.4% back to pre-coronavirus levels, especially as jobless claims continue to exceed expectations into the fall.
The economic hardship has not been evenly distributed. Low-income workers have suffered some of the worst employment losses that threaten to exacerbate poverty for those already most at risk.
Between January and July, employment rates among U.S. workers in the bottom wage quartile (those who make less than $27,000) decreased by 16.1% compared with more modest declines of 5.3% for middle-wage workers ($27,000 – $60,000) and 1.6% for high-wage workers (greater than $60,000), according to tracktherecovery.org.
To be sure, President Donald Trump’s Tax Cuts and Jobs Act did accomplish something similar in bumping the child tax credit from $1,000 to $2,000 and reducing the income threshold for claiming it to $2,500. The law is perhaps best known on Wall Street for reducing the corporate tax rate from 35% to 21% and capping the state and local tax deduction at $10,000.
Neither the Biden nor Trump campaigns responded to CNBC’s request for comment.
Progressive proponents of Biden’s plan say its most exciting change is extension of the credit to families making less than $2,500 per year. Under current law, households must earn at least $2,500 per year to qualify for the credit since those making less don’t have tax liability.
That would mean an American parent without taxable income — including those who lost their job as a result of the pandemic — would nonetheless qualify for the credit.
Sen. Michael Bennet speaks in the second Democratic presidential primary debate, hosted by NBC News, June 27, 2019.
Saul Loeb | AFP | Getty Images
Biden’s big-ticket plan is based on a bill called the American Family Act, a piece of legislation introduced by Sens. Michael Bennet, D-Colo., and Sherrod Brown, D-Ohio, in 2017 as a counter to Trump’s tax overhaul.
The American Family Act has support from virtually every Democrat in the Senate including Biden’s running mate, Sen. Kamala Harris. Progressive leaders Sens. Elizabeth Warren, D-Mass., and Bernie Sanders, I-Vt., also support the bill, almost guaranteeing its odds of passage if Democrats manage to take control of the Senate in the 2020 elections.
Hanlon said Biden’s plan doesn’t make the tax credit changes permanent, but he and other Democrats would favor doing so.
The AFA’s fact sheet says the credit would be expanded “as long as economic conditions require it,” said Hanlon, who now works for the left-leaning Center for American Progress. But “notwithstanding the pandemic, which of course makes it more urgent, it certainly should be a permanent priority.”
“It’s really a game changer for low-income families,” he added.
Research conducted by the Columbia University Center on Poverty and Social Policy and touted by the bill’s drafters finds that that AFA would reduce the number of children in poverty by 4 million (from 14.8% to 9.5%) and the number of kids in deep poverty by 1.6 million (from 4.6% to 2.4%).
Debt and growth
Longtime Biden advisor Jared Bernstein, for example, touted the AFA in March 2019 for including more families and expanding the credit to 27 million kids who do not get the full credit.
“Underinvesting in kids is not just a cost borne by their families. It is a cost borne by all of us,” Bernstein wrote in a Washington Post op-ed last year. “Children who grow up in poverty face stressors with lasting negative effects, for themselves and for the rest of us (e.g., less educational attainment, reduced earnings, worse health outcomes).”
“The AFA’s extra credit for young children is thus a particularly attractive attribute, as providing such resources has been shown to improve adult outcomes of poor children,” he added.
Bernstein and other Democratic economists have for years pushed back on a long-held belief that programs that reduce income or wealth inequality come at a cost of shrinking the overall economic “pie” while also ballooning the national debt.
Politicians in both parties appear less concerned about the level of national debt than they did even a few years ago. Senate Majority Leader Mitch McConnell, who has weighed in against stimulus packages in the past, himself backed a trillion-dollar stimulus plan in July amid an effort to help the U.S. economy through the pandemic. Trump signed his hallmark tax cuts at the end of 2017, when the economy was humming with the unemployment rate at 4.1% and GDP growth at an annualized rate of 3.9%.
Even so, it remains unlikely the Senate GOP would back Biden’s economic proposals. Nevertheless, Democrats argue that programs designed to assist the lower and middle classes are actually a positive for the U.S. economy over time.
Heather Boushey, who is reportedly advising the Biden campaign and is CEO of the Washington Center for Equitable Growth, makes similar arguments.
“Some argue that focusing on inequality is misplaced, and that the most important goal is to grow the pie and just to focus on growth. To be very clear, the empirical evidence from the economics profession shows that this is wrong,” Boushey told the House Budget Committee last September.
“Our inequality-filled economy now grows slower than it did when we were less unequal. Over the past few decades we have grown at an annual pace of about 1.3%, compared to a larger 1.7% in the 1960s and 1970s,” she added at the time. “There is a large and growing body of research that shows that we cannot create strong or broadly shared economic gains through a policy agenda that presumes that growth follows from allowing those at the top to reap the bulk of the gains.”
President Donald Trump refused Wednesday to commit to a peaceful transition of power if he loses the 2020 election to Democratic nominee Joe Biden.
“Well, we’ll have to see what happens. You know that. I’ve been complaining very strongly about the ballots. And the ballots are a disaster,” Trump said at a news conference at the White House. It appeared Trump was referring to mail-in ballots, which he has repeatedly condemned, without evidence, as susceptible to massive fraud.
The president had been asked by a reporter if he would commit to a peaceful transferral of power, “win, lose or draw.”
When the reporter noted that “people are rioting,” Trump replied: “Get rid of the ballots, and you’ll have a very – you’ll have a very peaceful – there won’t be a transfer, frankly, there’ll be a continuation.”
“The ballots are out of control,” Trump said, adding, “The Democrats know it better than anybody else.”
Minutes later, the president abruptly left the briefing room, telling the press, “I have to leave to take an emergency phone call.”
The White House did not immediately respond to CNBC’s request for details on Trump’s departure.
Trump in his brief time at the rostrum also discussed his upcoming announcement of a nominee to fill the Supreme Court seat vacated by the passing of Justice Ruth Bader Ginsburg.
“I think it will be a great nominee, a brilliant nominee,” Trump said, noting that he had already committed to selecting a female judge for the Supreme Court.
Ginsburg, the Court’s senior liberal associate justice, died Friday evening at age 87 due to complications from pancreatic cancer.
Trump and most Senate Republicans, especially Senate Majority Leader Mitch McConnell of Kentucky, have signaled eagerness to have Ginsburg’s seat filled before the Nov. 3 election.
Doing so would likely cement a conservative majority on the nine-member bench, which could alter the trajectory of U.S. law for decades to come.
It could also play a central role in the near term. With the coronavirus pandemic spurring massive changes to vote-by-mail rules in numerous states, the 2020 election has already become a battlefield of partisan litigation.
The president has already predicted that the high court will decide the winner.
“I think this well end up in the Supreme Court and I think it’s very important that we have nine justices, and I think the system’s going to go very quickly,” Trump said at the White House earlier Wednesday.
This is breaking news. Please check back for updates.
Speaker of the House Nancy Pelosi (D-CA) speaks during her weekly news conference at the U.S. Capitol on August 6, 2020 in Washington, DC.
Stefani Reynolds | Getty Images
The House passed a bill Tuesday that would fund the government into December and avoid a shutdown before a Sept. 30 deadline.
After clearing the House in an overwhelming vote, the legislation heads to the Republican-held Senate. Earlier Tuesday, House Speaker Nancy Pelosi said she reached a spending agreement with Treasury Secretary Steven Mnuchin and Republicans.
Pelosi said the proposal would include $8 billion for nutrition assistance for schoolchildren and families. It renews Pandemic EBT, a program that provides food benefits while schools are closed set to expire at the end of September, for a full year.
It also adds increased accountability for farm aid money to prevent it from gong to large oil companies, according to Pelosi. Senate Majority Leader Mitch McConnell had criticized a lack of farm assistance funds in a bill House Democrats released Monday.
The bill would fund the government through Dec. 11, avoiding a potentially chaotic shutdown during the coronavirus pandemic and before the Nov. 3 election. Lawmakers then aim to hash out an agreement to fund the government through Sept. 30, 2021, the end of the next fiscal year.
Lawmakers have said they want to get past the shutdown threat to focus on passing more coronavirus relief, which they have failed to do for months amid disagreements over the size of a fifth aid package.
Larry Kudlow, director of the U.S. National Economic Council, speaks to members of the media outside the White House in Washington, D.C., U.S., on Monday, June 15, 2020.
Stefani Reynolds | Bloomberg | Getty Images
Larry Kudlow, President Donald Trump’s top economic advisor, said Tuesday afternoon that the broad economic recovery from Covid-19 doesn’t necessarily require additional fiscal stimulus even if select industries or businesses could benefit from additional aid.
“I don’t think the V-shaped recovery depends on the package, but I do think a targeted package could be a great help,” Kudlow said from the White House. “Even though I think the economy is improving nicely, it could use some help in some key, targeted places.”
Kudlow added that the White House has for weeks championed more funding for schools and the Paycheck Protection Program, a facility established by the Cares Act earlier this year that provides loans to small businesses so long as employers agree to use the funds to keep staff on payrolls.
He also acknowledged that while the overall U.S. economy appears to be in the middle of a comeback after a recession, there are still industries that are suffering as a result of the virus and efforts to contain its spread.
“We also wanted to extend the assistance plan, the PPP plan, to small business. I mean, we actually had money – it’s over $100 billion – that could be repurposed to go back in through that plan,” Kudlow added. “I think that plan was very effective. I think it did save, perhaps, 50 million jobs.”
“Unfortunately, we couldn’t reach agreement with the other side. And so that was before the judicial issues came up,” he added. “I wish we could break the stalemate.”
Kudlow’s suggestion that the U.S. economy could continue in a sharp rebound without further aid appeared to mark a deviation from statements made by both Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin just hours earlier.
In testimony before the House Financial Services Committee, both Mnuchin and Powell suggested that additional stimulus may be needed — especially in certain industries — until Americans resume their everyday business per usual.
For his part, Powell said that most forecasters who project further economic recovery in the U.S. assume that Congress will be able to reach a compromise on additional coronavirus relief.
Though the central bank chief was clear to say that economic growth is in the middle of a rebound, he added that there are risks to employment and GDP growth if lawmakers can’t agree on an additional relief package.
“I would say many, most, [forecasters] assume some fiscal action. Fiscal action underlies many, many current forecasts,” Powell said. “What’s happened lately is the economy has proved resilient both to the broader spread of the disease over the summer in some of the southwestern states and also to the expiration of the Cares Act benefits.”
“The risk is that, over time, they go through those savings, they haven’t been able to find employment yet because it’s going to take a while to get 11 million people back to worth, so their spending will decline,” he added. “Their ability to stay in their homes will decline. So, the economy will begin to feel those negative effects at some time.”
Mnuchin said in his testimony that the White House was ready to reach a bipartisan agreement and that he believes “a targeted package is still needed.”
The comments from all three officials came as Wall Street continued to lose faith that no more stimulus is coming. The U.S. stock market is down the past three weeks in part thanks to gridlocked negotiations between Mnuchin, White House chief of staff Mark Meadows and Democratic House Speaker Nancy Pelosi.
The rift between the two sides appeared to widen after the death of Supreme Court Justice Ruth Bader Ginsburg and Republican efforts to fill her seat.
The U.S. Capitol building stands in Washington, D.C., on Tuesday, Sept. 8, 2020.
Stefani Reynolds | Bloomberg | Getty Images
Government and business debt soared in the second quarter as the U.S. dealt with the coronavirus pandemic, even as personal net worth rose and consumer credit plunged at a record level.
A Federal Reserve report released Monday showed the total household balance sheet in the U.S. rose to nearly $119 trillion in the April-through-June period, a 6.8% increase from the first quarter.
The gain in net worth was driven almost exclusively by the stock market.
Thanks in large part to unprecedented fiscal and monetary stimulus, the S&P 500 gained 20% during the quarter. That in turn led to a $5.7 trillion gain in net worth, or 75% of the total increase. Real estate contributed $500 million.
As financial assets increased, debt, at least at the household level, went nowhere.
In fact, consumer credit tumbled at a post-World War II record 6.6% annual pace thanks in large part to a decline in credit card balances to $953.8 billion from $1.02 trillion. Student loan debt was little changed at $1.68 trillion while auto loans edged higher to just shy of $1.2 trillion.
That came as the federal government and businesses continued to ratchet up debt. In all, domestic nonfinancial debt totaled $59.3 trillion.
Federal government debt exploded at a 58.9% pace as Congress passed the CARES Act to support an economy that had gone into lockdown at the end of the first quarter to combat the Covid-19 spread.
Nonfinancial business debt rose by 14%, which actually was below the 18.4% rise in Q1 but still well above any pre-pandemic level going back to at least 1980. State government rose by 3.5%, its quickest since 2009.
The data comes from the Fed’s quarterly Financial Accounts survey, previously known as the flow of funds.
After spending more throughout the summer as economies reopened and stimulus checks hit their bank accounts, U.S. consumers have again started rein in their budgets on everything from lawnmowers to movie rentals.
JPMorgan, which tracks the amount its card users purchase from restaurants to grocery stores, said in a note published Friday that its tracker of consumer spending declined 3 percentage points from the prior week.
Americans who use Chase cards last week spent 6.5% less than they did one year ago, marking a fall from the prior week’s print that showed a year-over-year decline of about 3.5%.
Though not yet an established trend, the decline in consumer spending may represent a concerning early sign that the effects of federal support for the U.S. economy made be starting to fade. And, since consumer spending represents about two-thirds of U.S. economic activity, economists worry that a more persistent decline could lead to a slump in GDP at the end of the third quarter and into the fourth.
That may have implications for top U.S. lawmakers, who despite recent encouragement from President Donald Trump remain unable to come to an agreement over additional stimulus.
Source: Opportunity Insights, tracktherecovery.org
“National accounts data reveal that most of the initial reduction in GDP following the COVID-19 shock came from a reduction in consumer spending (rather than business investment, government purchases, or exports),” Brown University economist John Friedman wrote in a paper published earlier this month.
Consumer spending first fell back in March, when Covid-19 and government efforts to contain its spread brought the U.S. economy to an abrupt standstill. Year-over-year data shows that spending on Chase cards in late March 2020 was down more than 40% compared to the same time in 2019.
Tracking that steep decline in consumer spending, U.S. GDP declined at an annual rate of 31.7% in the second quarter of 2020. Of that 31.7% decline, personal consumption expenditures — spending by average American households — accounted for 24.76 percentage points annualized.
But the initial decline in spending quickly reversed course as the summer began, with $1,200 stimulus checks from the federal government helping everyday Americans resume some of their normal habits and purchases. Gradual reopening of state economies also contributed a modest improvement to a resumption of normal consumer shopping.
That echoes the results of comprehensive calculations Friedman, Harvard’s Raj Chetty and their team have conducted in the aftermath of the disease’s outbreak. Friedman and Chetty have constructed a novel database that complies millions of anonymous transactions reported by credit card processors, payroll firms, and banks since January.
Their public database, housed on tracktherecovery.org, provides granular statistics on consumer spending, business revenues, employment rates, job postings, and other key indicators specific to geography (ZIP code or county), industry, income level, and business size.
Using their data based on New York City commerce yields results strikingly similar to JPMorgan’s. Their website shows national consumer spending is down 7.3% as of August 31 compared to January and also shows a deceleration around the start of September.
In New York City, as of August 30, 2020, total spending by all consumers decreased by 12.6% compared to January 2020. Consumer spending at restaurants and hotels in New York over the same period decreased by 36% while spending at grocery stores is up 14%.
“Because the root cause of the shock is self-isolation driven by health concerns, there is limited capacity to restore economic activity without addressing the virus itself,” Friedman added. “In particular, we find that state-ordered reopenings of economies have only modest impacts on economic activity; stimulus checks increase spending particularly among low-income households.”
But since consumers still fear contracting Covid-19, Americans will still ultimately spend less after the one-time boost of a stimulus check wears off. This tend will likely continue, Friedman wrote, until Americans are comfortable returning to crowded restaurants, salons or subways at the levels they were prior to the pandemic.
Members of the press and White House staffers are stopped for medical screening and temperature checks in response to the COVID-19 coronavirus pandemic ahead of a task force briefing at the entrance of the James S. Brady Press Briefing Room at the White House on Wednesday, March 18, 2020 in Washington, DC.
Jabin Botsford | The Washington Post | Getty Images
President Donald Trump confirmed Wednesday that a White House staff member tested positive for the coronavirus.
But the unnamed person who contracted the disease did not “affect” the large, in-person gathering with a number of world leaders that took place on the White House south lawn a day earlier, Trump’s spokeswoman assured.
Questions had arisen earlier in the day about another Covid-19 infection at the White House, when a journalist there reported hearing about “a couple of positives today.”
At a briefing, White House press secretary Kayleigh McEnany declined to comment on whether any staff members had tested positive, saying, “I don’t share people’s personal medical information.”
But Trump, speaking at a news conference in the White House briefing room Tuesday evening, was more willing to discuss what he had been told.
“I heard about it this morning at a very small level,” Trump began. But moments later, he said, “Last night I heard about it for the first time, and it’s a small number of cases.”
He then asked McEnany, who was sitting next to the podium, what she could share.
“We’re not going to confirm the identities,” she said, “But it did not affect the event and press was not around” the infected person.
“And it’s not anybody that was near me,” Trump added.
McEnany told Trump that just one person had tested positive for the virus. “It was one person,” Trump repeated, adding, “not a person that I was associated with.”
This is developing news. Please check back for updates.
Trump suggests he could back a bigger coronavirus stimulus as top aide says he’s more optimistic about a deal
White House Acting Chief of Staff Mark Meadows listens during the daily coronavirus task force briefing at the White House in Washington, D.C., April 18, 2020.
Al Drago | Reuters
President Donald Trump urged Republicans to embrace a larger coronavirus stimulus package Wednesday as a top White House aide showed more optimism about striking a deal with Democrats.
In a tweet, the president told GOP lawmakers to “go for the much higher numbers” in legislation designed to boost an economy and health-care system struggling under the weight of the pandemic. Many Republicans have embraced limited relief — or backed no new spending at all — as the major parties struggle to break a stalemate over a fifth relief bill.
Shortly after Trump tweeted, White House chief of staff Mark Meadows told CNBC’s “Squawk on the Street” he is “probably more optimistic about the potential for a deal in the last 72 hours than I have been in the last 72 days.” The comment from Meadows, one of the two leading Trump administration negotiators in stimulus talks, followed the Tuesday release of a roughly $1.5 trillion aid proposal by the bipartisan House Problem Solvers Caucus.
Democratic House committee chairs rejected the proposal Tuesday as party leaders call to inject at least $2.2 trillion into the coronavirus fight.
This story is developing. Please check back for updates.
U.S. President Donald Trump delivers remarks on judicial appointments during a brief appearance in the Diplomatic Room at the White House in Washington, September 9, 2020.
Jonathan Ernst | Reuters
President Donald Trump on Tuesday denied that he had downplayed the threat of the coronavirus, claiming he “up-played” the danger of the disease through his actions – despite privately admitting months earlier that “I wanted to always play it down.”
Trump, speaking at an ABC News town hall event with voters in Philadelphia, said his moves early on in the Covid-19 crisis saved lives and demonstrated “action, not with the mouth but in actual fact.”
The president’s assertion that “in many ways I up-played it in terms of action” came less than a week after the release of audio from an interview with veteran journalist Bob Woodward, in which Trump said of the coronavirus: “I wanted to always play it down … I still like playing it down, because I don’t want to create a panic.”
That clip was recorded in mid-March, more than a month after Trump reportedly told Woodward that he understood the virus was “more deadly than even your strenuous flu.”
Trump’s advisors, Woodward reported in his new book “Rage,” had warned him in late January that the coronavirus “will be the biggest national security threat you face in your presidency.”
In the town hall event Tuesday evening, Trump was asked by a student, “If you believe it’s the president’s responsibility to protect America, why would you downplay a pandemic that is known to disproportionately harm low income families and minority communities?”
The president responded, “Yeah, well I didn’t downplay it. I actually, in many ways I up-played it in terms of action.”
The student appeared to reference the president’s recorded comments with Woodward as she began a follow-up question: “Did you not admit to it yourself, saying that you…”
But Trump cut her off. “What I did was, with China I put a ban on. With Europe I put a ban on. And we would’ve lost thousands of more people had I not put the ban on,” he said.
“So that was called action, not with the mouth but in actual fact, we did a very, very good job when we put that ban on. Whether you call it talent or luck, it was very important. So we saved a lot of lives when we did that.”
ABC’s George Stephanopoulos, who hosted the town hall, said, “There were holes in the ban, and the European ban didn’t come for another month.”
The president replied, “Well, they were Americans, I mean the holes in were if you have somebody in China that’s an American citizen, we had to let them in.”
Multiple fact-checks of Trump’s claim that he imposed a “ban” on China note that thousands of foreign nationals had continued to come into the U.S. in the months after the policy took effect in early February.
The Associated Press in July noted that “more than 27,000 Americans returned from mainland China in the first month after the restrictions took effect.”
ABC’s 90-minute town hall, hosted at the National Constitution Center in Philadelphia in accordance with Pennsylvania’s social distancing rules, comes just seven weeks before the presidential election between Trump and Democratic challenger Joe Biden. It was set to air at 9 p.m. ET on Tuesday.