Biden Seeks Billions in Aid for Ukraine

Plus, inflation could rise further, but recession unlikely, analysts say ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ [The Fisc](   By Yuval Rosenberg and Michael Rainey Welcome to the weekend — though it’s not exactly a relaxing time. Here’s what’s going on: White House Asks Congress for $6.4 Billion for Ukraine, Refugee Aid: Report As the Russian invasion of Ukraine continues, the White House on Friday reportedly asked Congress for $6.4 billion in additional funding to deal with the crisis and its humanitarian fallout. Bloomberg’s Erik Wasson [reports]( that $2.9 billion would be used to address humanitarian and security needs for Ukraine and neighboring nations, while $3.5 billion would go toward the Defense Department response. "The funds are in addition to the $650 million in security aid and $52 million in humanitarian aid the US already committed to Ukraine over the last year as well as a previous $1 billion sovereign loan guarantee," Wasson reports. The request comes as congressional lawmakers are looking to pass a spending bill providing billions of dollars to help the Ukrainian military and refugees fleeing the conflict. The new money could be added to a broader, full-year spending package that Congress is looking to pass by March 11. Sen. Chris Coons (D-DE), who chairs the Senate Appropriations subcommittee that oversees foreign aid, told reporters Friday that there is strong bipartisan support in Congress for additional funding. "There is strong enthusiasm to provide ongoing resupply and training and whatever other covert and overt support is necessary and appropriate for the Ukrainian resistance," he [told reporters]( a day after returning from a week-long trip to Germany, Poland and Lithuania. Coons predicted that $10 billion or more will be needed. "I am confident that we will need billions of dollars to support the likely millions of refugees that will flood into Poland and a half-dozen other countries throughout NATO and Eastern Europe," he said. "It would be a wild guess on my part, but I would be supportive of an emergency supplemental of at least $10 billion, perhaps more, to meet these vital national security and humanitarian needs." About 100,000 Ukrainians have already been displaced, according to estimates from the United Nations High Commissioner for Refugees cited by [The Wall Street Journal](. Coons noted that his $10 billion estimate for the size of the aid package is likely low because it does not factor in what may yet be a "robust" request from the Defense Department. He added that lawmakers should be prepared to provide additional funding for global Covid response and public health needs, and he emphasized that he would not support shifting money from existing programs. "Before this crisis we were going to fall well short of the funding we need to meet what is a record number of refugees and food insecurity globally, so the idea that we would shift billions of dollars from meeting the need of refugees in other places in the world … I strongly oppose that, and I’ve been speaking up about this with the administration for weeks now." Lawmakers in both parties have voiced support for a sizable military and humanitarian aid package. Sen. Lindsey Graham (R-SC), who also sits on the Appropriations Committee, [said]( this week he wanted Congress to move ahead with an emergency Ukraine spending bill when lawmakers return from their recess next week. Politico’s Andrew Desiderio, Connor O’Brien and Jennifer Scholtes [write]( that, despite the bipartisan desire to provide aid funding and calls from some lawmakers for quick action, it could still take weeks to finalize the additional aid — and that may be too late to make a near-term difference. They point to comments by House Armed Services Chair Adam Smith (D-WA), who warned on CNN Thursday about the limits of providing more equipment to the Ukrainian military at this point: "I don’t think it’s realistic to think that we’re going to be able to reinforce them enough in the short-term to repel the invasion," Smith said. "We do need to try and help them as much as possible, and it is quite possible that what we’re looking at here is a more long-term insurgency." The bottom line: Lawmakers in both parties have made clear that they see the need for a military and humanitarian aid package, but the specific amount and timing of any additional funding remain unclear for now. Russian Invasion of Ukraine Could Send Shockwaves Through US Economy Inflation is expected to run higher following the Russian invasion of Ukraine, as supply chains face increased pressure and prices rise for basic commodities such as food and fuel. Economic growth will likely take a hit, as well, though most analysts do not expect to see a recession as result. However, much depends on how the war in Europe plays out. "The primary impact is going to be on energy prices, but we’re likely going to see a slower recovery this year than we otherwise would have," Bill Adams, chief economist for Comerica Bank, [told The Washington Post](. "We’re already facing higher energy prices — both at the pump and for natural gas, which is raising home heating costs this winter — and both will get worse in the coming months." How bad could it get? Russia is one of the largest exporters of oil and natural gas in the world, and its actions can influence prices everywhere. Some of its most important gas pipelines cross Ukraine, and if they are damaged — or if Russia responds to sanctions by reducing the amount of oil it supplies to the world market — prices could surge significantly. Ukraine is a major exporter of fertilizer, wheat, corn and food oils, and the war will likely reduce output, putting upward pressure on the price of a variety of agricultural goods. The country is also a key supplier of neon gas, used in the production of semiconductors, and shortages would likely mean that manufacturers need to raise prices and reduce volumes. That could be particularly problematic for high-tech goods such as cars, which have been hounded by chip shortages for several years. The need to avoid airspace over Ukraine and Russia also threatens to further snarl global supply chains. "Russia and Ukraine are not as tightly integrated into the global supply chain as a lot of other major powers are, but they still supply certain commodities," Phil Levy, chief economist for logistics company Flexport, told The Post. "The indirect effects are potentially very big and hard to quantify." Investors aren’t too worried – yet: Oil jumped over $100 a barrel on Thursday as investors took in the news of the invasion, but prices eased later in the day and on Friday. Stock prices plunged on Thursday, too, before recovering later the day, and they surged on Friday, as investors decided that the war was unlikely to derail the U.S. economy. Still, Russian aggression adds unwelcome pressure to a recovering economy. As the Post’s Abha Bhattarai, Tony Romm and Rachel Siegel put it, "The geopolitical turmoil adds a heavy dose of uncertainty to a recovery that is already without a playbook." Former Treasury Department chief economist Karen Dynan said the biggest concern is how the war shapes expectations. "The broader worries are about how all of this affects consumer and business confidence," she told the Post. "There is a ton of uncertainty out there — that’s been true for a couple of years now because of the virus — but this is a very distinctive geopolitical event that could cause businesses to hesitate and to put off plans to hire and expand." Overall, most analysts think the economy will take a hit, but a relatively mild one. "What we’ve seen is oil prices have gone up, and equity prices at least initially retreated on all of this. Together, that’s a mild, stress mild, stagflationary hit to the economy," Wells Fargo chief economist Jay Bryson said. "It’s going to push inflation higher than it is and it’s probably going to slow growth. But it’s probably not enough to push the economy into recession." The Fed will keep up the fight against inflation: On Thursday, several Fed officials said they didn’t think the war would alter the central bank’s plan to start raising interest rates as part of the effort to reduce inflation. On Friday, Federal Reserve Bank of St. Louis President James Bullard, a noted inflation hawk, said that he isn’t worried about the potential hit to economic growth and still wants the central bank to start raising interest rates aggressively, sticking to his call for a full percentage point increase by July. "The direct linkages to the U.S. economy are minimal so I wouldn’t expect that much impact directly on the U.S. economy," Bullard said. "Of course, we will have to watch this very carefully and see what happens in days ahead." Quote of the Day "I think it’s the beginning of turning the curve against the opioid epidemic in small-town America. Looking back, I can’t think of any other situation where national litigation has put the money directly in the hands of small-town America. And they deserve it. They’re the ones that are fighting this battle." – Joe Rice, a lead lawyer for plaintiffs suing drug companies over the opioid epidemic, as quoted by [The Washington Post]( after the nation’s three major pharmaceutical distributors and Johnson & Johnson finalized a $26 billion settlement agreement with states and cities on Friday. --------------------------------------------------------------- Send your feedback to yrosenberg@thefiscaltimes.com. 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