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    Why is the US about to give away $52bn to corporations like Intel? | Robert Reich

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    Why is the US about to give away $52bn to corporations like Intel? Robert ReichThe Chips Act would provide an enormous subsidy to chipmakers for making their chips in the US. This is extortion Congress will soon put final touches on the Chips Act, which will provide more than $52bn to companies that design and make semiconductor chips.The subsidy is demanded by the biggest chipmakers as a condition for making more chips in America.It’s pure extortion.Fed chief vows to keep raising rates until ‘compelling evidence’ of falling inflationRead moreThe world’s biggest chipmaker (in terms of sales) is already an American corporation – Intel, based in Santa Clara, California.Intel hardly needs the money. Its revenue rose to $79bn last year. Its chief executive, Pat Gelsinger, got a total compensation package of $179m (which was 1,711 times larger than the average Intel employee).Intel designs, assembles, and tests its chips in China, Israel, Ireland, Malaysia, Costa Rica, and Vietnam, as well as in the US.The problem for the US is Intel is not helping America cope with its current shortage of chips by giving preference to producers in the United States. And it’s not keeping America on the cutting edge of new chip technologies.Obviously, Intel would like some of the $52bn Congress is about to throw at the semiconductor chip industry. But why exactly should Intel get the money?Among the other likely beneficiaries of the Chips Act will be GlobalFoundries, which currently makes chips in New York and Vermont – but in many other places around the world as well.GlobalFoundries isn’t even an American corporation. It’s a wholly owned subsidiary of Mubadala Investment Co.,the sovereign wealth fund of the United Arab Emirates.The nation where a chipmaker (or any other high-tech global corporation) is headquartered has less and less to do with where it designs and makes things.Which explains why every industry that can possibly be considered “critical” is now lobbying governments for subsidies, tax cuts, and regulatory exemptions, in return for designing and making stuff in that country.It’s a giant global shakedown.India, Japan and South Korea have all recently passed tax credits, subsidies and other incentives amounting to tens of billions of dollars for the semiconductor industry. The European Union is finalizing its own chips act with $30bn to $50bn in subsidies.Even China has extended tax and tariff exemptions and other measures aimed at upgrading chip design and production there.“Other countries around the globe … are making major investment in innovation and chip production,” says Senate majority leader Chuck Schumer. “If we don’t act quickly, we could lose tens of thousands of good-paying jobs to Europe.”But who is “we,” senator?John Neuffer, the chief executive of the Semiconductor Industry Association (the Washington lobbying arm of the semiconductor industry) warns that chipmaking facilities are often 25 to 50% cheaper to build in foreign countries than in the United States.Why is that? As he admits, it’s largely because of the incentives foreign countries have offered.As capital becomes ever more global and footloose, it’s easy for global corporations to play nations off against each other. As the then-chief executive of US-based ExxonMobil unabashedly stated: “I’m not a US company and I don’t make decisions based on what’s good for the US”People, by contrast, are rooted within nations, which gives them far less bargaining power.This asymmetry helps explain why Congress is ready to hand over $52bn to a highly profitable global industry but can’t come up with even $22.5bn the Biden administration says is necessary to cope with the ongoing public health crisis of Covid.If they are publicly owned, corporations must be loyal to their shareholders by maximizing the value of their shares. But over 40% of the shareholder value of American-based companies is owned by non-Americans.Besides, there’s no reason to suppose a company’s American owners will be happy to sacrifice investment returns for the good of the nation.The real question is what conditions the United States (or any other nation that subsidizes chipmakers) should place on receipt of such subsidies.It can’t be enough that chipmakers agree to produce more chips in the nation that’s subsidizing them, because chipmakers sell their chips to the highest bidders around the world regardless of where the chips are produced.If the US is going to subsidize them, it should demand chipmakers give highest priority to their American-based customers that use the chips in products made in the United States, by American workers.And Congress should demand they produce the highest value-added chipmaking in the US – design, design engineering, and high precision manufacturing – so Americans gain that technological expertise.What happens if every nation subsidizing chipmakers demands these for itself?Chipmakers will then have to choose. The extortion will then end.
    Robert Reich, a former US secretary of labor, is professor of public policy at the University of California at Berkeley and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His new book, The System: Who Rigged It, How We Fix It, is out now. He is a Guardian US columnist. His newsletter is at robertreich.substack.com
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      Biden’s proposed federal tax cut on gas could cost dearly in the future

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      Biden’s proposed federal tax cut on gas could cost dearly in the futureExperts warn cutting the 18 cents will take a toll on highway upkeep and cause prices to rise further when the holiday ends America’s hard-pressed drivers may be about to receive a holiday. On Wednesday Joe Biden called on Congress to suspend the federal tax on gas and diesel until September as the country struggles with soaraway costs at the pump. But experts warned the tax holiday is unlikely to have a major impact on prices and will probably further harm the US’s already battered roads and bridges. If the tax cut even gets passed.Biden’s ‘cursed presidency’: gas prices are latest headache as midterms loomRead moreBlaming Russia’s invasion of Ukraine for the surge in gas prices Biden proposed cutting the 18-cents-a-gallon federal taxes on fuel until September and called on states to cut their gas taxes too. “Together, these actions could help drop the price at the pump by up to $1 a gallon or more. It doesn’t reduce all the pain, but it will be a big help,” said Biden.The tax cut’s first obstacle may be its last. The Senate Republican leader, Mitch McConnell, called the plan an “ineffective stunt” and other critics in his own party may join Republicans in blocking any cut.But with prices still soaring and midterm elections looming the administration is increasingly looking for ways to spare the public from prices at the pump, currently averaging at just under $5 a gallon.The non-partisan Tax Foundation called the plan a “uniquely ill-suited policy for addressing rising prices”. Pointing out that the money from the tax is the primary funding source for highway construction and its suspension could cost $10bn in funding.“Anything that could help the price at the pump is good, but it’ll come at a significant cost to the federal government that supposedly uses that money for the highway fund to maintain highways,” said Mark Finley, fellow in energy and global oil at the center for energy studies at Rice University.US energy economists also warn that dropping taxes on gasoline – a similar program has been suggested in the UK and other countries – does not address the fundamental issues of high demand.In a February report, the committee for a responsible federal budget found a federal gas tax holiday could “further increase demand for gasoline and other goods and services at a time when the economy has little capacity to absorb it”.“Gas prices are high because supply and demand are tight in the US and around the world both for oil and refined products. The prices are a signal that producers should produce more and consumers should consume less. You don’t fix the problem and you may exacerbate it, if you try to hide those signals,” said Finley.Moreover, prices may surge when the tax is lifted, according to a study released from the Wharton School at the University of Pennsylvania. Earlier this year, Maryland introduced a month-long gas tax holiday. The study found that prices rose when it expired and the tax may have cost the state $100m.Other states have tried similar measures. New York suspended its 16-cents-a-gallon tax this month for the rest of the year. Others, including Georgia, Florida and Connecticut, are cutting the tax but for shorter periods. California may send $400 to every registered vehicle owner.The debate over energy prices threatens to become one of the most contentious of the election season. This week, Exxon Mobil said global oil markets may remain tight for another three to five years, largely because of a lack of investment since the pandemic began. Biden has responded to rising prices at the pump – and a decline in his approval rating – by lobbying Opec+ countries, which include Russia, to accelerate production increases.Biden will travel to Saudi Arabia next month to ask the kingdom to turn on the spigots. But studies indicate that the Saudis are themselves at the limits of current capacity. The venture comes with a political cost, undercutting the administration’s commitment to renewable energy and an election pledge to make Saudi Arabia a “pariah” state after the murder of the Washington Post journalist Jamal Khashoggi.Other measures that the administration has undertaken to reduce energy costs, including releasing millions of barrels of crude oil from the strategic petroleum reserve and greater ethanol blending, have not turned the tide on rising prices. According to Ed Hirs at the University of Houston’s department of economics, Biden’s actions, including a stern letter to refiners to produce more gasoline and diesel, will not keep the average price at the pump from reaching $6 by September.The debate over energy has in a sense been misframed, said Hirs. “We don’t see lines at the pump, there is no shortage of oil, all we see is a higher price and that’s in essence because Opec wants a higher price,” Hirs says.The message to the US consumer is equally blunt. After 2008, when oil hit $147 a barrel, US automakers had to accept government bailouts as the consumers jumped away from gas-guzzling SUVs and pick-up trucks.“If the war in Ukraine continues we could easily see the same thing by this time next year,” Hirs predicted. “We have to think of this in a different way. A lot of folks in the west think we’re entitled to gasoline and diesel, in the same way we’re entitled to iPhones. But we haven’t operated the economy like that.”Put plainly, there’s little the administration can do. “We’ve reached a point where supplies of gasoline, diesel and crude oil are below our five-year averages, so it appears we’ve been exporting as much as we can,” said Hirs. “As long as the conflict, really between the US and Russia, persists, the EU nations will be additional buyers. So the fellow in London looking to fill his car, and the woman in France, are competing with someone on I-95.”TopicsOilUS politicsBiden administrationanalysisReuse this content More

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      The Crypto Crash: all Ponzi schemes topple eventually

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      The Crypto Crash: all Ponzi schemes topple eventually Robert ReichWe’re back to the wild west finances of the 1920s as the crypto industry pours huge money into political campaigns One week ago, as cryptocurrency prices plummeted, Celsius Network – an experimental cryptocurrency bank with more than one million customers that has emerged as a leader in the murky world of decentralized finance, or DeFi – announced it was freezing withdrawals “due to extreme market conditions.”Earlier this past week, Bitcoin dropped 15 percent over 24 hours to its lowest value since December 2020. Last month, TerraUSD, a stablecoin – a system that was supposed to perform a lot like a conventional bank account but was backed only by a cryptocurrency called Luna – collapsed, losing 97 percent of its value in just 24 hours, apparently destroying some investors’ life savings.Eighty-nine years ago, Franklin D Roosevelt signed into law the Banking Act of 1933 – also known as the Glass-Steagall Act. It separated commercial banking from investment banking – Main Street from Wall Street – to protect people who entrusted their savings to commercial banks from having their money gambled away.Glass-Steagall’s larger purpose was to put an end to the giant Ponzi scheme that had overtaken the American economy in the 1920s and led to the Great Crash of 1929.Americans had been getting rich by speculating on shares of stock and various sorts of exotica (roughly analogous to crypto). These risky assets’ values rose solely because a growing number of investors put money into them.But at some point, Ponzi schemes topple of their own weight. When the toppling occurred in 1929, it plunged the nation and the world into a Great Depression. The Glass-Steagall Act was a means of restoring stability.But by the 1980s, America forgot the financial trauma of 1929. As the stock market soared, speculators noticed they could make lots more money if they could gamble with other people’s money – as speculators did in the 1920s. They pushed Congress to deregulate Wall Street, arguing that the United States financial sector would otherwise lose its competitive standing relative to other financial centers around the world.Finally, in 1999, Bill Clinton and Congress agreed to ditch what remained of Glass-Steagall.As a result, the American economy once again became a betting parlor. Inevitably, Wall Street suffered another near-death experience from excessive gambling. Its Ponzi schemes began toppling in 2008, just as they had in 1929.The difference was this time the US government bailed out the biggest banks and financial institutions. The wreckage was contained. Still, millions of Americans lost their jobs, their savings, and their homes (and not a single banking executive went to jail).Which brings us to the crypto crash.The current chair of the Securities and Exchange Commission, Gary Gensler, has described cryptocurrency investments as “rife with fraud, scams, and abuse.” In the murky world of crypto DeFi, it’s hard to know who provides money for loans, where the money flows, or how easy it is to trigger currency meltdowns.There are no standards for risk management or capital reserves. There are no transparency requirements. Investors often don’t know how their money is being handled. Deposits are not insured. We’re back to the wild west finances of the 1920s.Before the crypto crash, the value of cryptocurrencies had kept rising by attracting an ever-growing number of investors and some big Wall Street money, along with celebrity endorsements. But, again, all Ponzi schemes topple eventually. And it looks like crypto is now toppling.Why isn’t this market regulated? Mainly because of intensive lobbying by the crypto industry, whose kingpins want the Ponzi scheme to continue.Trillion-dollar crypto collapse sparks flurry of US lawsuits – who’s to blame?Read moreThe industry is pouring huge money into political campaigns.And it has hired scores of former government officials and regulators to lobby on its behalf – including three former chairs of the Securities and Exchange Commission, three former chairs of the Commodity Futures Trading Commission, three former US senators, one former White House chief of staff, and the former chair of the Federal Deposit Insurance Corporation.Former Treasury Secretary Lawrence Summers advises crypto investment firm Digital Currency Group Inc. and sits on the board of Block Inc., a financial-technology firm that is investing in cryptocurrency-payments systems.If we should have learned anything from the crashes of 1929 and 2008, it’s that regulation of financial markets is essential. Otherwise, they turn into Ponzi schemes that eventually leave small investors with nothing and destabilize the entire economy.It’s time for the Biden administration and Congress to regulate crypto.
      Robert Reich, a former US secretary of labor, is professor of public policy at the University of California at Berkeley and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His new book, The System: Who Rigged It, How We Fix It, is out now. He is a Guardian US columnist. His newsletter is at robertreich.substack.com
      TopicsCryptocurrenciesOpinionE-commerceInternetUS politicsBiden administrationcommentReuse this content More

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      Federal Reserve announces biggest interest rate hike since 1994

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      Federal Reserve announces biggest interest rate hike since 1994Fed confirms 0.75 percentage-point increase as Americans across country hit hard by rising prices and shortages of key items With soaring inflation and the shadow of recession hanging over the United States, the Federal Reserve announced a 0.75 percentage-point increase in interest rates on Wednesday – the largest hike since 1994.Until this week the Fed had been expected to announce a smaller increase. At a press conference, the Fed chair, Jerome Powell, said the central bank decided that a larger hike was needed after recent economic news, including last week’s announcement that inflation had risen to a 40-year high.He made clear that a similarly outsized rate rise should be expected at its next meeting in July unless price rises softened. “We at the Fed understand the hardship inflation is causing,” he said. “Inflation can’t go down until it flattens out. That’s what we’re looking to see.”The hike will increase the Fed’s benchmark federal-funds rate to a range between 1.5% and 1.75% and officials said they expected rates to rise to at least 3% this year.Powell acknowledged that the Fed’s attempt to cool spending is likely to lead to job losses. The Fed expects unemployment to rise to 4.1% from the current rate of 3.6% as it attempts to bring inflation back down to its target rate of 2%.“We never seek to put people out of work,” Powell said. But, he added: “You really cannot have the kind of labor market we want without price stability.”The rate rise came after more bad news on inflation late last week sent US stock markets into a tailspin, presenting the Fed and the Biden administration with an escalating crisis amid fears that runaway inflation has now spread through the economy.Over a third of US population urged to stay indoors amid record-breaking heatRead moreThe Fed cut rates to near zero at the start of the coronavirus pandemic, as the US and global economies effectively shut down. It increased rates for the first time since 2018 in March this year, but the increase did nothing to tamp down rising prices.Powell initially described rising prices as “transitory”, but has changed his view and says the Fed intends to aggressively increase rates in order to bring prices back under control. There are already signs that consumers are cutting back in the face of rising inflation. Retail spending fell for the first time this year in May, the commerce department said on Wednesday. Home sales have fallen for three consecutive months and consumer confidence hit a record low between May and June.Last week the labor department announced consumer prices were 8.6% higher in May than they were a year ago. The increase was broad-based, with food and fuel prices rising alongside rent, airfares and car prices.Across the country, consumers are being confronted by rising prices and shortages. Nationally, gas now costs an average of $5 per gallon, close to $2 higher than a year ago. In California, a gallon of gas now costs more than $6, up from just over $4 a year ago.Supply chain disruptions and other issues have led to shortages of basic necessities including tampons and baby formula.On Wednesday, Joe Biden summoned top oil executives to the White House to discuss ways they can “work with my administration to bring forward concrete, near-term solutions that address the crisis”.Biden’s handling of the inflation issue has battered his poll numbers. With crucial midterm elections, and control of Congress, coming up in November, Biden’s approval rating is 33%, according to Quinnipiac University’s national poll, equal to the lowest rating for his administration.Many parts of the economy remain strong and the Fed is aiming for a “soft landing” – hoping it can tame inflation by raising rates without sharply increasing the unemployment rate – but Powell acknowledged some risks, including the war in Ukraine, were beyond the influence of the Fed.Nearly 70% of the academic economists polled by the Financial Times and the University of Chicago’s Booth School of Business now believe the US economy will tip into a recession next year.TopicsFederal ReserveUS interest ratesUS economyInflationUS politicsBiden administrationEconomicsnewsReuse this content More

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      Palantir, the all-seeing US data company keen to get into NHS health systems | Arwa Mahdawi

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      Palantir, the all-seeing US tech company, could soon have the data of millions of NHS patients. My response? Yikes!Arwa MahdawiYou might never have heard of tech billionaire Peter Thiel’s CIA-backed analytics company. But it could know all about you if it wins a contract to manage NHS data Peter Thiel has a terrible case of RBF – reclusive billionaire face. I’m not being deliberately mean-spirited, just stating the indisputable fact that the tech entrepreneur, a co-founder of PayPal, doesn’t exactly give off feel-good vibes. There is a reason why pretty much every mention of Thiel tends to be peppered with adjectives such as “secretive”, “distant” and “haughty”. He has cultivated an air of malevolent mystique. It’s all too easy to imagine him sitting in a futuristic panopticon, torturing kittens and plotting how to overthrow democracy.It’s all too easy to imagine that scenario because (apart from the torturing kittens part, obviously), that is basically how the 54-year-old billionaire already spends his days. Thiel was famously one of Donald Trump’s biggest donors in 2016; this year, he is one of the biggest individual donors to Republican politics. While it is hardly unusual for a billionaire to throw money at conservative politicians, Thiel is notable for expressing disdain for democracy, and funding far-right candidates who have peddled Trump’s dangerous lie that the election was stolen from him. As the New York Times warned in a recent profile: “Thiel’s wealth could accelerate the shift of views once considered fringe to the mainstream – while making him a new power broker on the right.”When he isn’t pumping money into far-right politicians, Thiel is busy accelerating the surveillance state. In 2004, the internet entrepreneur founded a data-analytics company called Palantir Technologies (after the “seeing stones” used in The Lord of the Rings), which has been backed by the venture capital arm of the CIA. What dark magic Palantir does with data is a bit of a mystery but it has its fingers in a lot of pies: it has worked with F1 racing, sold technology to the military, partnered with Space Force and developed predictive policing systems. And while no one is entirely sure about the extent of everything Palantir does, the general consensus seems to be that it has access to a huge amount of data. As one Bloomberg headline put it: “Palantir knows everything about you.”Soon it might know even more. The Financial Times recently reported that Palantir is “gearing up” to become the underlying data operating system for the NHS. In recent months it has poached two top executives from the NHS, including the former head of artificial intelligence, and it is angling to get a five-year, £360m contract to manage the personal health data of millions of patients. There are worries that the company will then entrench itself further into the health system. “Once Palantir is in, how are you going to remove them?” one source with knowledge of the matter told the FT.How worried should we be about all this? Well, according to one school of thought, consternation about the potential partnership is misplaced. There is a line of argument that it is just a dull IT deal that people are getting worked up over because they don’t like the fact that Thiel gave a bunch of money to Trump. And to be fair, even if you think Thiel is a creepy dude with creepy beliefs, it is important to note that he is not the only guy in charge of Palantir: the company was co-founded in 2003 by Alex Karp, who is still the CEO; he voted for Hillary Clinton and has described himself as a progressive (although, considering his affinity for the military, he certainly has a different view of progress than I do).My school of thought, meanwhile, is best summarised as: yikes. Anyone who has had any experience of the abysmal US healthcare system should be leery of private American companies worming their way into the NHS. Particularly when the current UK government would privatise its own grandmother if the price was right. I don’t know exactly what Palantir wants with the NHS but I do know it’s worth keeping an eye on it. It’s certainly keeping an eye on you.
      Arwa Mahdawi is a Guardian columnist
      Do you have an opinion on the issues raised in this article? If you would like to submit a letter of up to 300 words to be considered for publication, email it to us at guardian.letters@theguardian.comTopicsTechnologyOpinionArtificial intelligence (AI)NHSUS politicsHealthcommentReuse this content More

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      Feel the benefit: union workers receive far better pay and rights, Congress finds

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      Feel the benefit: union workers receive far better pay and rights, Congress findsStudy shows unionized workers earn 10.2% more than non-union peers, amid wave of organizing at some of largest US employers Workers represented by labor unions earn 10.2% higher wages than their non-union peers, have better benefits and collectively raise wages industry-wide, according to a report released by the House and Senate committees on Friday and first shared with the Guardian.Joe Biden has pledged to be the most pro-union president in generations, and the report outlining the economic benefits of union membership was released as his administration pushes for legislative and executive-action efforts to support workers’ rights to organize.According to the report, by the joint economic committee of Congress and the House education and labor committee, unionized workers are also 18.3% more likely to receive employer-sponsored health insurance, and employers pay 77.4% more per hour worked toward the cost of health insurance for unionized workers compared with non-unionized workers.Labor unions have also contributed to narrowing racial and gender pay disparities; unionization correlates to pay premiums of 17.3% for Black workers, 23.1% for Latino workers and 14.7% for Asian workers, compared with 10.1% for white workers. Overall, female union workers receive 4.7% higher hourly wages than their non-union peers and in female dominated service industries, union workers are paid 52.1% more than non-union workers.“Unions are the foundation of America’s middle class,” said congressman Don Beyer, chair of the Joint Economic Committee. “For too long, the wealthy have captured an increasing share of the economic pie. As this report makes clear, unions help address economic inequality and ensure workers actually see the benefits when the economy grows.”The Biden administration’s drive to increase union membership comes amid a wave of organizing among workers at some of America’s largest employers, including Amazon and Starbucks.But despite the recent uptick in organizing, union membership has declined markedly in recent decades, from 34.8% of all US wage and salary workers in 1954 to 10.3% in 2021. According to several studies the decline has contributed significantly to increasing wage inequality and stagnation.Corporate practices and legal changes have also eroded workers’ bargaining power, particularly from the 1970s, as employers increasingly attempted to break union organizing efforts and were issued only weak penalties for violating labor laws.The report cites the recent resurgence of the US labor movement, and strong public support for labor unions, as a call to action to improve wages and working conditions and support worker organizing.“As chair of the education and labor committee, I am committed to addressing the decades of anti-worker attacks that have eroded workers’ collective bargaining rights,” said education and labor committee chair congressman Bobby Scott.“With the release of this report, I once again call on the Senate to pass the Protecting the Right to Organize Act, which would take historic steps to strengthen workers’ right to organize, rebuild our middle class, and improve the lives of workers and their families.”TopicsUS unionsBiden administrationUS politicsnewsReuse this content More

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      UK economy will grind to a halt as it falls behind all G20 nations except Russia, OECD warns

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      Britain’s economy is set to grind to a halt next year as the country records zero growth and falls behind all other major developed nations except Russia, according to new analysis.The Organisation for Economic Co-operation and Development (OECD) forecasts that the UK will continue to be plagued by high inflation and will not grow at all next year.The international body warned that war in Ukraine had had immediately slowed the global economic recovery from Covid-19 and resulted in higher inflation.Europe has been impacted most severely because of the continent’s heavy reliance on energy imports, the OECD said, adding that the war had again underlined the need for energy security and an acceleration of the green transition.It slashed its forcecast for global growth to 2.8 per cent next year, down sharply from predictions made in October.“Countries worldwide are being hit by higher commodity prices, which add to inflationary pressures and curb real incomes and spending, dampening the recovery,” OECD Secretary-General Mathias Cormann said during a presentation on Wednesday. “This slowdown is directly attributable to Russia’s unprovoked and unjustifiable war of aggression, which is causing lower real incomes, lower growth and fewer job opportunities worldwide.”The euro area economy is expected to expand by just 1.6 per cent and the US by 1.2 per cent. UK growth is estimated to be zero, in line with Bank of England estimates. More

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      Janet Yellen tells Congress US faces ‘unacceptable levels of inflation’

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      Janet Yellen tells Congress US faces ‘unacceptable levels of inflation’Treasury secretary admits she regrets describing inflation as ‘transitory’ and says it is ‘top economic problem at this point’ Janet Yellen told Congress that the US is facing “unacceptable levels of inflation” on Tuesday as the treasury secretary defended herself from criticism of her previous comments that rising prices were “transitory”.Although the hearing with the Senate finance committee was centered on Joe Biden’s budget for 2023, Yellen was forced to answer questions on inflation, including some on how she once said that inflation would be “transitory”, or temporary.In response to a question about how she had initially framed inflation, Yellen said: “When I said that inflation would be transitory, what I was not anticipating was a scenario in which we would end up contending with multiple variants of Covid that would be scrambling our economy and global supply chains.“I was not envisioning impacts on food and energy prices we’ve seen from Russia’s invasion of Ukraine.”Yellen said she and the Federal Reserve chair, Jerome Powell, “could have used a better term than transitory”.She said: “There’s no question that we have huge inflation pressures, that inflation is really our top economic problem at this point and that it’s critical that we address it. I do expect inflation to remain high, although I very much hope that it will be coming down now.”Last week, Yellen drew headlines for making similar comments to CNN, during an interview in which she had been “wrong then about the path inflation would take”.At the hearing on Tuesday, Yellen said: “We currently face macroeconomic challenges, including unacceptable levels of inflation, as well as the headwinds associated with the disruptions caused by the pandemic’s effect on supply chain and the effects of supply-side disturbances to oil and food market.”‘We’re still struggling’: low unemployment can’t hide impact of low wages and rising inflationRead moreThe Biden administration has been delicately walking the inflation tightrope over the last few months as they try to push an aggressive response while also emphasizing other indicators that prove the economy is still improving, particularly in the jobs market.Biden celebrated the figures shown in May’s jobs report, released last Friday, which showed that 390,000 new jobs were created that month.“Because of the enormous progress we’ve made on the economy, Americans can tackle inflation from a position of strength,” Biden said in remarks following the release of the jobs report.Republicans in Tuesday’s hearing repeatedly pointed to the passing of the $1.9bn American Rescue Plan, which was passed in March last year and delivered further coronavirus aid, as a key driver of inflation.In response, Yellen noted that Biden “inherited an economy with very high unemployment”.“We had to address the possibility that this could be the downturn that could match the Great Recession,” she said. “In the policy, there were various risks taken into account. Of course, inflation was one of them. But the overwhelming risk was that America would be marred by a deep and long recession.”Yellen pointed to the expansion of child tax credit, which gave extra assistance to families, in the stimulus package that “resulted in a dramatic reduction in childhood poverty and financial insecurity for American families and contributed little to nothing to inflation”.She also said the US is “not the only country that’s experiencing inflation – you can see that in virtually every developed country around the world”.TopicsInflationJanet YellenEconomicsUS politicsBiden administrationnewsReuse this content More

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      Saudi Crown Prince Mohammed bin Salman’s Heady Days

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      The Fair Observer website uses digital cookies so it can collect statistics on how many visitors come to the site, what content is viewed and for how long, and the general location of the computer network of the visitor. These statistics are collected and processed using the Google Analytics service. Fair Observer uses these aggregate statistics from website visits to help improve the content of the website and to provide regular reports to our current and future donors and funding organizations. The type of digital cookie information collected during your visit and any derived data cannot be used or combined with other information to personally identify you. Fair Observer does not use personal data collected from its website for advertising purposes or to market to you.As a convenience to you, Fair Observer provides buttons that link to popular social media sites, called social sharing buttons, to help you share Fair Observer content and your comments and opinions about it on these social media sites. These social sharing buttons are provided by and are part of these social media sites. They may collect and use personal data as described in their respective policies. Fair Observer does not receive personal data from your use of these social sharing buttons. It is not necessary that you use these buttons to read Fair Observer content or to share on social media. More