Biden Bets Big on Powell for Another Term as Fed Chair

Plus, state spending surges ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ [The Fisc](   By Yuval Rosenberg and Michael Rainey Happy Monday and welcome to what’s likely to be a relatively quiet Thanksgiving Week on the fiscal front as lawmakers head home for the holiday or travel abroad on congressional delegations. President Biden made some big economic news, today, though, by renominating Jerome Powell for another four-year term as head of the Federal Reserve. Here's what you need to know: Biden Bets on Powell for Another Term as Fed Chair With the U.S. economy still suffering from the lingering effects of the recession caused by the Covid-19 pandemic as well as a surge in inflation that has accompanied the reopening of businesses across the country, President Joe Biden on Monday said he would renominate Jerome Powell to lead the Federal Reserve for another term. Biden also said he would nominate Fed governor Lael Brainard, who had been backed by prominent liberal Democrats for the top spot at the central bank, as vice chair of the central bank’s board of governors. The nominations indicate that the Biden administration is sticking with its current approach to the economy as it seeks to balance support for post-recession growth in the labor market with rising concerns about rapidly escalating prices in many sectors of the economy. "Why am I not picking fresh blood or taking the Fed in a different direction?" Biden asked in remarks at the White House. "Put directly, at this moment both of enormous potential and enormous uncertainty for our economy, we need stability and independence at the Federal Reserve." Balancing the dual mandate: In a statement, Biden said that Powell and Brainard have pushed the Fed to pay more attention to the second part of its dual mandate – maximum sustainable employment – along with its more typical focus on price stability. Saying the pair had overseen "a landmark re-evaluation of the Federal Reserve’s objectives to refocus its mission on the needs of workers of all backgrounds," Biden said they shared his administration’s goal of "ensuring that economic growth broadly benefits all workers." At the same time, inflation has surged to levels not seen in decades, worrying critics who have called for a more aggressive response by the Fed —possibly including an increase in interest rates, which the Fed has kept near zero since the pandemic began to encourage growth. Although economists remain divided on the cause and expected duration of the current flurry of price hikes, many agree that raising rates could help restrain inflation, though likely at the cost of job growth. The U.S. labor market is still millions of jobs below where it was when the pandemic started in March 2020. In comments at the White House, Powell said he remains focused on both aspects of the Fed’s mission. "We will use our tools both to support the economy and a strong labor market, and to prevent higher inflation from becoming entrenched," he said. A peace offering to critics on the left: Powell’s nomination was met with bipartisan expressions of support, but some liberals have charged that Powell, a Republican who was first tapped to lead the Fed by President Donald Trump, has been too easy on Wall Street and insufficiently attentive to issues including ethics, climate change and income inequality. Biden’s nomination of Brainard, who was pushed as a more progressive replacement for Powell, is seen by many as an effort to placate those critics. Sen. Elizabeth Warren (D-MA), who has criticized Powell as "a dangerous man," said Monday that she will vote against his nomination but would support Brainard’s. Biden hinted Monday that his future selections for Fed positions would please progressives. "While Jay and Lael bring continuity and stability to the Fed, my additions will bring new perspectives and new voices," he said. What’s next: Despite opposition from Warren and some other liberals, Powell appears to have an easy path to being confirmed again by the Senate. "I look forward to supporting his confirmation," Sen. Pat Toomey (R-PA), the ranking Republican on the Banking Committee, said Monday. Brainard, who would replace Richard Clarida as vice chair, is expected to face some level of resistance from Republicans concerned about her tough stance on bank regulation, though it’s not clear if it will be enough to derail her nomination. Once in place, the Fed leaders will face some of the most difficult issues the bank has had to deal with in its 107-year history, with inflation — and the political price Biden could pay for it at the polls — at the top of the list. The bank has started to taper its bond purchasing effort as it moves to withdraw emergency supports for the economy put in place during the pandemic. While interest rate hikes aren’t expected until midway through next year, the troubling persistence of inflation puts the central bank at the center of the ongoing battle over the fate of Biden’s broader agenda. Fueled by Federal Aid, State Spending Rises by Most in Decades Spending by U.S. states rose 16.2% in fiscal year 2021, the fastest pace in at least 35 years, according to a [report]( released Friday by the National Association of State Budget Officers. Total state spending reached $2.65 trillion last year, up from $2.28 trillion in fiscal year 2020. The surge was driven by federal pandemic relief funds. Spending from states own funds rose by 5.7%, while spending of federal funds soared by 35.7%. States reported spending nearly $322 billion in federal Covid-19 aid in fiscal 2021, lifting the two-year total for federal pandemic aid spent by states to $427.9 billion. "States tapped funds to pay for programs ranging from public assistance to Medicaid, transportation and education," Bloomberg’s Nic Querolo [reports](. "The largest increase was in a category that includes Covid-specific expenditures such as public-health programs, unemployment insurance and emergency management. States have until the end of calendar 2024 to allocate money from their Coronavirus State and Local Fiscal Recovery Funds." States also saw revenues rise sharply in fiscal 2021, climbing 12.8%. That reversed a decline from the year before, the first time state revenues had fallen since fiscal 2010. Federal aid played a part in that reversal, the state budget officers’ report says: "Several factors help explain recent improvements in states’ revenue outlooks, including: federal stimulus measures infused additional money into the economy, which helped to lessen state revenue losses; high-income earners have been relatively insulated from the COVID-19 pandemic’s economic effects, which has limited impacts on personal tax collections; the types of consumption most curtailed by the pandemic comprise a relatively small portion of states’ sales tax bases; and the greater ability to tax online sales following the Supreme Court’s decision in Wayfair v. South Dakota. Fiscal 2021 revenue collections were also impacted by the shifting of the 2020 tax deadline from April 15 to July 15." Number of the Day: 90% More than 90% of 3.5 million federal workers will have gotten at least one dose of Covid-19 vaccine by the end of the day, meeting the deadline set by President Biden in September, the White House said Monday. The vast majority of those workers have reportedly received both doses. The White House said that, in all, 95% of federal workers have gotten at least one shot or have a pending religious or medical exemption request. "Looking at the federal workforce vaccination data makes one thing obvious: Vaccination requirements work," White House coronavirus response coordinator Jeff Zients told [Reuters](. News - [Biden Renames Powell to Lead Fed, Risking the Left’s Wrath]( – Politico - [Fed’s Powell, Brainard Stress U.S. Inflation Battle Is Priority]( – Bloomberg - [Fed Under Powell to Prioritize Full Employment, White House Adviser Says]( – Bloomberg - [Behind the Powell Pick: A Bet the Economy Has Room to Grow and Inflation Will Fade]( – New York Times - [Harris Announces $1.5B Investment in Health Care Workforce]( – Associated Press - [Democrats Optimistic as Social Spending Bill Heads to Senate]( – The Hill - [With Back Channels to Manchin and Sinema, Pelosi Found a Path to a Deal]( – New York Times - [Biden Eyes Strategic Petroleum Reserves Crude Oil Release in Coming Days]( – Politico - [Doctors Are Mad About Surprise Billing Rules. Becerra Says Stop Gouging Patients]( – NPR - [Democrats Push to Narrow Gaps in Cross-Border Corporate Tax Rates as Biden’s Agenda Advances]( – Wall Street Journal - [Medical Debt Is Crushing Black Americans, and Hospitals Aren’t Helping]( – Bloomberg Businessweek - [Americans Should Get Vaccine Boosters Ahead of Possibly ‘Dangerous’ Winter Spike, Fauci Says]( – Washington Post - [Concerns Grow Over Safety of Aduhelm After Death of Patient Who Got the Drug]( – Bloomberg - [More Americans Say They’re Not Planning to Have a Child, New Poll Says, as U.S. Birthrate Declines]( – Washington Post Views and Analysis - [Biden Bets Big on Continuity at the Fed]( – Neil Irwin, New York Times - [President Biden Stands Up for an Independent Fed]( – Washington Post Editorial Board - [Why a ‘Dangerous Man’ Was a Safe Fed Pick for Biden]( – Brian Chappatta, Bloomberg - [Biden Is Smart to Reappoint Jerome Powell to the Federal Reserve]( – Timothy Noah, New Republic - [Powell Stays as Chair—of a Transformed Fed]( – Robert Kuttner, American Prospect - [Dismissing Inflation While Cutting Taxes for the Wealthy Is Not a Winning Strategy for Democrats]( – Megan McArdle, Washington Post - [Democrats Shouldn’t Be Afraid to Tell Voters What the Build Back Better Act Is All About]( – Michael Tomasky, New Republic - [Inflation Is Not a Tide That Lifts All Boats Equally]( – Nir Kaissar, Bloomberg - [Overheating the Economy Now Could Mean Trouble Later]( – Michael R. Strain, New York Times - [The Real Inflation Problem Is Corporate Profiteering]( – Faiz Shakir, New Republic - [Biden’s Inflation Pitch Doesn’t Pass the Laugh Test]( – Ramesh Ponnuru, Bloomberg - [There’s a Lot to Like in the Build Back Better Bill. But There’s a Lot That Needs Improving Too]( – Washington Post Editorial Board - [How Much to Cut Hospital Payments Is Another Build Back Better Battle]( – Rachael Roubein, Washington Post - [The White House Learns How to Message Its Successes]( – Jennifer Rubin, Washington Post - [Moderate Democrats Know the Build Back Better Bill Will Haunt Them. They Voted for It Anyway]( – Henry Olsen, Washington Post - [Pelosi’s Presidio Deal Is a Reminder That Power Has Its Perks]( – Hugh Hewitt, Washington Post Copyright © 2020 The Fiscal Times, All rights reserved. You are receiving this newsletter because you subscribed at our website or through Facebook. 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