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      The Fed’s Struggle With Inflation Has the Markets on Edge

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      The central bank’s success or failure will affect your wallet and, maybe, the next election, our columnist says.Clarity about the future of inflation and the stock and bond markets would be wonderful right now, but that’s just what we don’t have.What we do have are enormous quantities of inconclusive data. There is something for everyone, and for every possible interpretation.The Federal Reserve is intent on whipping inflation now — to borrow an infamous phrase from the Ford administration, which failed spectacularly to “WIN” in the 1970s. But despite a series of steep interest rate increases by the Fed, and its stated intention to raise rates further this year, inflation remains intolerably high.“We’re stuck in the messy middle,” Josh Hirt, senior economist at Vanguard, said in a note this month.It’s a muddle right now, and the lurching stock and fixed-income markets reflect investors’ uncertainty.In testimony before Congress on Tuesday and Wednesday, Jerome H. Powell, the Fed chair, made it clear that the central bank not only intends to keep raising interest rates, but will increase them even more than “previously anticipated” if it deems that necessary to squelch inflation.It’s too soon to say how effective the measures taken by the Fed have been. The economy has been generating a lot of jobs and unemployment is quite low, but corporate earnings are beginning to fall. At some point, the economy is going to slow down — Vanguard thinks that may not happen until the end of the year. We may be heading into a recession. Or we may not be. The verdict isn’t in yet.Really long-term investors can ride out the turmoil, and those who prize safety above all else have reasonably good options now, too: There are plenty of attractive, high-interest places to park your cash.But what transpires in the next few months will still be critical for consumers and investors, and may even determine the outcome of the next presidential election. Considering what’s at stake, it is worth wading a little more deeply into this morass.The Fed and InflationThe Fed finds itself in a difficult spot. It has declared that it intends to bring inflation down to its longtime 2 percent target, but prices keep rising much faster than that.Our Coverage of the Investment WorldThe decline of the stock and bond markets this year has been painful, and it remains difficult to predict what is in store for the future.Value and Growth Stocks: Eight tech giants are no longer “pure growth” stocks, while Exxon and Chevron are, according to a new study. Here is what that means for investors.2023 Predictions: There are plenty of forecasts coming for where the S&P 500 will be at the end of the year. Should you be paying attention to them?May I Speak to a Human?: Younger investors who are navigating market volatility and trying to save for retirement are finding that digital investment platforms lack the personal touch.Tips for Investors: When you invest and where matters for taxes. But a few rules of thumb can stave off some nasty surprises.That 2 percent target is an arbitrary number, without much science to it. Whether 2 percent inflation is better than, say, 1.5 or 2.5 or 3 percent inflation — and how the inflation rate should be measured — are all open for debate. Let’s save those issues for another day.For now, the Fed has drawn a red line at 2 percent, and its credibility is at stake. The Consumer Price Index in January rose at more than three times that target rate.  The Personal Consumption Expenditures price index, which the Fed favors — and which, not coincidentally, generally produces lower readings than the C.P.I. — rose at a 5.4 percent annual rate in January, which was more than in the previous month. No matter how you slice it, inflation is ugly.So the Fed has few immediate options. It will keep raising the federal funds rate, the short-term interest rate it controls, in an effort to slow the economy and squelch inflation. The only questions are how high it will go and how rapidly it will get there. Traders in the bond market, who set longer-term rates through bidding and purchases, have had trouble coming up with consistent answers.  The central bank has already raised the short-term federal funds rate substantially and quickly, to a range of 4.5 to 4.75 percent, up from near zero just a year ago. But the federal funds rate is a blunt instrument, and the economic effects of these rate increases operate with a significant lag,The Fed could easily plunge the economy into a major recession. In a misguided bet that the Fed would beat inflation quickly or that a recession would arrive so definitively that the Fed could reverse course, bond traders began moving longer-term rates lower in October. That optimism also set off a stock market rally.But lately, with inflation and the economy failing to respond as traders had expected, the outlook has turned gloomier. Treasury yields reached or exceeded 5 percent for so-called risk-free securities in the range of three months to two years. That’s an attractive proposition in comparison with the stock market, and it’s no accident that stocks have fallen.Bonds and StocksEven 10-year Treasury yields have ascended to the 4 percent range. Compared with stocks, Treasuries in a murky market are, for the moment, exceptionally attractive.Falling earnings haven’t helped the stock market, either. For the last three months of 2022, the earnings of companies in the S&P 500 declined 3.2 percent from a year earlier, according to the latest I/B/E/S data from Refinitiv. And if you exclude the windfall from the energy sector, where prices were bolstered by Russia’s war in Ukraine, earnings fell 7.4 percent, the data showed.Corporate prospects for 2023 have begun to dim a bit, too, executives and Wall Street analysts are concluding. On Feb. 21, both Home Depot and Walmart warned that consumer spending had come under strain. The S&P 500 fell 2 percent that day, the worst performance for the short year to that date, in what Howard Silverblatt, a senior analyst for S&P Dow Jones Indices, called a “turnaround point” for the stock market.Whipping InflationIt’s early yet in 2023, but so far, stock investors are maintaining a relentless focus on the Fed, whose policymakers next meet March 21 and 22 and are all but certain to raise short-term interest rates further. The only questions are by how much, and how high rates will end up before the Fed concludes that it has accomplished its objective.  But with Mr. Powell aspiring to achieve the performance of his illustrious predecessor Paul A. Volcker, who vanquished inflation in the 1980s and set off two recessions to do it, it’s a fair bet that the Fed won’t back off its rate tightening policy soon.Bring down inflation and you are likely to be remembered as a hero. Bungle the job and you may well be memorialized as officials in President Gerald R. Ford’s administration have been, for their hapless effort to “whip inflation now.” In a widely derided public relations stunt in 1974, when inflation was running above 12 percent, the Ford White House distributed buttons with the WIN acronym, but that administration never beat inflation.It wasn’t until the next president, Jimmy Carter, appointed Mr. Volcker that the Fed even began to get control of inflation — and Mr. Volcker didn’t finish the job until the Reagan administration was well underway.The 2024 ElectionThe outcome of the next presidential election could well depend on whether the Fed gets the job done this time — and whether it causes a severe recession in the process.Ray Fair, a Yale economics professor who has been predicting presidential and congressional elections for decades, points out in a succinct note on his website that the political effects of the Fed’s efforts will be large. In his work, Professor Fair relies only on economic variables — and not the customary staples of political analysis — to forecast elections. His record is excellent.He outlines two paths for the economy. Because President Biden is an incumbent, and is likely to run for re-election, good economic results would be expected to help his cause.“In the positive case for the Democrats, if inflation is 3 percent in 2023 and 2 percent in 2024,” Professor Fair wrote, and if the economy grows at 4 percent rate in 2024 before the election, his economic model says the Democratic candidate is highly likely to win the presidency.On the other hand, he said, “in the negative case for the Democrats, if inflation is 5 percent in 2023 and 4 percent in 2024” and if the economy shrinks 2 percent in 2024 — in a recession — a Republican is highly likely to be the next president. He added, “Somewhere in between regarding the economy will mean a close election.”These statements assume that only the two main political parties mount credible campaigns. A well run third-party candidacy would complicate matters considerably.I’m not making any bets, either on politics or on the economy.  It’s all too complex and confused now.As always, for investments of at least a decade and, preferably, longer, low-cost index funds that mirror the entire markets are a good choice.Bonds are a safe and well-paying option right now. So is cash, held in money market funds or high-yield bank savings accounts.We may well be at a turning point, but taking us where, exactly? Unless you somehow know, it may be wise to play it safe for a while. More

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      The Truth About America’s Economic Recovery

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      As we approach the midterm elections, most political coverage I see frames the contest as a struggle between Republicans taking advantage of a bad economy and Democrats trying to scare voters about the G.O.P.’s regressive social agenda. Voters do, indeed, perceive a bad economy. But perceptions don’t necessarily match reality.In particular, while political reporting generally takes it for granted that the economy is in bad shape, the data tell a different story. Yes, we have troublingly high inflation. But other indicators paint a much more favorable picture. If inflation can be brought down without a severe recession — which seems like a real possibility — future historians will consider economic policy in the face of the pandemic a remarkable success story.When assessing the state of the economy, what period should we use for comparison? I’ve noted before that Republicans like to compare the current economy with an imaginary version of January 2021, one in which gas was $2 a gallon but less pleasant realities, like sky-high deaths from Covid and deeply depressed employment, are airbrushed from the picture. A much better comparison is with February 2020, just before the pandemic hit with full force.So how does the current economy compare with the eve of the pandemic?First, we’ve had a more or less complete recovery in jobs and production. The unemployment rate, at 3.5 percent, is right back where it was before the virus struck. So is the percentage of prime-age adults employed. Gross domestic product is close to what the Congressional Budget Office was projecting prepandemic.This good news shouldn’t be taken for granted. In the early months of the pandemic, there were many predictions that it would lead to “scarring,” persistent damage to jobs and growth. The sluggish recovery from the 2007-9 recession was still fresh in economists’ memories. So the speed with which we’ve returned to full employment is remarkable, so much so that we might dub it the Great Recovery.Still, while workers may have jobs again, hasn’t their purchasing power taken a big hit from inflation? The answer may surprise you.In September, consumer prices were 15 percent higher than they were on the eve of the pandemic. However, average wages were up by 14 percent, almost matching inflation. Wages of nonsupervisory workers, who make up more than 80 percent of the work force, were up 16 percent. So there wasn’t a large hit to real wages overall, although gas and food — which aren’t much affected by policy, but matter a lot to people’s lives — did become less affordable.Obligatory note: There are other measures of both prices and wages, and if you pick and choose you can make the story look a bit worse or a bit better. More important, some Americans are especially exposed to prices that have gone up a lot. On average, however, there hasn’t been a huge hit to living standards.But won’t bringing inflation down require an ugly recession? Maybe, and widespread predictions of recession may be taking a toll on public perceptions. But they are predictions, not an established fact — and many economists don’t agree with those predictions. I won’t rehash that ongoing debate here, except to say that there are plausible arguments to the effect that disinflation will be much easier this time than it was after the 1970s.Despite what I’ve said, however, the public has very negative economic perceptions. Doesn’t that tell us that the economy really is in bad shape?No, it doesn’t. People know how well they, themselves, are doing. Their views about the national economy, however, can diverge sharply from their personal experience.A Federal Reserve survey found that in 2021 there was a huge gap between the rising number of people with a positive view of their own finances and the falling number with a positive view of the economy; perceptions about the local economy, which people can see with their own eyes, were somewhere in between. I suspect that when we get results for 2022 they’ll look similar.To be fair, the resurgence of inflation after decades of quiescence, combined with fears of possible recession, has unnerved many Americans. The point, however, isn’t that the public is wrong to be concerned; it is that negative public views of the economy don’t refute the proposition that the economy is doing well in many though not all dimensions.Now, I’m not suggesting that Democrats spend their final campaigning days telling voters that the economy is actually just fine. It isn’t.But Democrats shouldn’t concede that the overall economy is in bad shape, either. Some very good things have happened on their watch, above all a jobs recovery that has exceeded almost everyone’s expectations. And they have every right to point out that while Republicans may denounce inflation, Republicans have no plan whatsoever to reduce it.The Times is committed to publishing a diversity of letters to the editor. We’d like to hear what you think about this or any of our articles. Here are some tips. And here’s our email: letters@nytimes.com.Follow The New York Times Opinion section on Facebook, Twitter (@NYTopinion) and Instagram. More

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      The Market Usually Rises After the Midterms. Will This Time Be Different?

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      If you have money in stocks during this bear market, you are probably having a rough year. The bond market has been miserable, too. There have been few bright spots for investors.Yet there is one positive portent right now: the calendar.With a surprising degree of consistency over the past 100 years or so, stocks have followed a broad pattern that coincides with presidential terms. The months leading up to midterm elections have generally been the worst in what is known as the four-year presidential election cycle. But the stock market is about to enter a sweet spot. Stocks have usually rallied in the year after the midterms — no matter which side wins.Market veterans take these patterns seriously but aren’t counting on them in an economy plagued by soaring inflation, rising interest rates and fears of a recession.“We’ve studied the presidential cycle carefully, and there’s something to it,” said Philip Orlando, the chief equity market strategist for Federated Hermes, a global asset manager based in Pittsburgh. “But it’s possible that this year we will need to invoke the four most dangerous words in investors’ lexicon: ‘This time is different.’”Gloom in the MarketsConsider, first, the overall pessimism in the markets.In the current climate, this comment, from Mark Hackett, the chief of investment research at Nationwide, counts as fairly upbeat. “We are now entering a stage where all signs point to a recession — assuming we aren’t already in one,” Mr. Hackett said. But, he added, “the recession may already be priced into the markets, in which case the next bull run may be faster and come earlier than many investors expect,” he said.The latest government figures show that the economy grew at a 2.6 percent annual rate in the third quarter. But the Federal Reserve says interest rates need to rise and stay high until the inflation numbers come down. The Fed’s monetary tightening is aimed at slowing the U.S. economy. Whether the consequences for working people will be mild or savage isn’t clear.In the meantime, the coronavirus pandemic festers, the death toll from Russia’s war in Ukraine mounts, interest rates are rising elsewhere around the world, global energy costs remain elevated and U.S. relations with China are fracturing. All these concerns are weighing on the markets.The State of the 2022 Midterm ElectionsElection Day is Tuesday, Nov. 8.Bracing for a Red Wave: Republicans were already favored to flip the House. Now they are looking to run up the score by vying for seats in deep-blue states.Pennsylvania Senate Race: The debate performance by Lt. Gov. John Fetterman, who is still recovering from a stroke, has thrust questions of health to the center of the pivotal race and raised Democratic anxieties.G.O.P. Inflation Plans: Republicans are riding a wave of anger over inflation as they seek to recapture Congress, but few economists expect their proposals to bring down rising prices.Polling Analysis: If these poll results keep up, everything from a Democratic hold in the Senate and a narrow House majority to a total G.O.P. rout becomes imaginable, writes Nate Cohn, The Times’s chief political analyst.The Presidential CycleThe party of a sitting president tends to lose seats in Congress in midterm elections, and high inflation makes matters worse for incumbents. Those are key findings of Ray Fair, a Yale economist whose long-running election model relies only on economic factors and shows the Democratic Party in an uphill climb this year.His model, along with the polls, the prediction markets and many forecasters, suggests that Republicans are likely to win control of the House of Representatives. The Senate is up for grabs.The issues in this election are enormous, and the vast differences between the two political parties are well chronicled. .css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.Yet, for the stock market, history suggests that the outcome of the elections may not matter much. Shocking though this may be, since 1950, the midterm elections have brought an upturn for stocks, no matter which party has won, and no matter the issues.The market has generally flagged in the months before the midterms and prospered after them. And it has often excelled in the year after the midterms, typically the best of the four-year presidential cycle.Ned Davis Research, an independent investment research firm, compared stock returns for 1948 through 2021, broken down by the four years of a standard presidential term. It used the S&P 500 and a predecessor index:12.9 percent for Year 1.6.2 percent for Year 2, the year of the midterms.16.7 percent for Year 3, the year after the midterms.7.3 percent for Year 4.The data was similar for the Dow Jones industrial average going back to 1900.But why? There is no certain answer — and it could even be a series of coincidences — though there are plenty of explanations. The one I prefer is that presidents are politicians who try to stimulate the economy — and, indirectly, bolster stocks — for maximum effect in presidential elections.Their first year in office is the best time to make politically painful moves, which often lead to weak markets by the time the midterms come around. After losses in the midterms, though, presidents try to give the economy a surge through expansionary fiscal and monetary policy, setting themselves (or their successors) up well for the election.Is This an Exception?Two powerful factors — the negative effect of a slowing economy and the beneficial influence of the midterm elections — may be in conflict, Ed Clissold, the chief U.S. strategist of Ned Davis Research, said in an interview.On the positive side for stocks, Wall Street usually responds well to gridlock — the stasis that can grip Washington when power is divided — and such a division is the consensus expectation for the midterms. But, over the last century, when bear markets have been associated with recessions, no bear market has ever ended before a recession started, Mr. Clissold has found. The last time there was a recession in the year following the midterms occurred after the 1930 elections, during the Great Depression, a terrible era for stocks and the economy.“A recession would be expected to be more important than the election cycle,” he said.Practical StepsThere are many ways of making bets on specific election outcomes, though they entail risk that I don’t favor.For example, if Democrats defy the odds and hold onto both houses of Congress, infrastructure spending will be expected to increase. Matthew J. Bartolini, the head of exchange-traded fund research at State Street Global Advisors, said, to bet that way, you might try SPDR S&P Kensho Intelligent Structures ETF. It includes “intelligent infrastructure” companies — like Badger Meter, which supplies utilities with water-metering equipment, and Stem, which provides software and engineering for green energy storage.If you want to bet on gridlock, you may assume that a split government will be bullish for the overall market. Then again, the need to raise the federal debt ceiling in 2023 could become a market crisis. Republicans have vowed to use the issue as leverage, forcing President Biden to cut federal spending. Similar maneuvering in 2011 led to the downgrading of U.S. Treasuries by Standard & Poor’s, sending tremors through global markets.Tactical bets on election or economic outcomes are unreliable. That’s why what makes sense to me, regardless of the immediate future, is long-term investing in diversified stocks and bonds using low-cost index funds that track the entire market. This approach requires a steady hand, a horizon of at least a decade and enough money to safely pay the bills.Short term, try to fortify your portfolio and build up your cash so you can handle any economic or electoral outcome.My only specific political advice in this financial column is this: Make your voice heard. However the stock market behaves, this is an important election.Vote. More

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      Fact-Checking a GOP Attack Ad That Blames a Democrat for Inflation

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      In a Nevada tossup race that could help decide whether Republicans gain control of the House, a super PAC aligned with congressional G.O.P. leaders recently mounted an economically driven attack against Representative Dina Titus.In a 30-second ad released on Saturday, the Congressional Leadership Fund accused Ms. Titus, a Democrat who represents Las Vegas, of supporting runaway spending that has exacerbated inflation.Here’s a fact check.WHAT WAS SAID“Economists said excessive spending would lead to inflation, but she didn’t listen. Titus recklessly spent trillions of taxpayer dollars,” the ad’s narrator says, and, later: “Now we’re paying the price. Higher prices on everything. Economy in recession. Dina Titus. She spent big … and we got burned.”This lacks context. The implication here is that Democrats’ policies led to inflation. We recently put this question to our economics correspondent, Ben Casselman, who said: “True, although we can argue all day about how much.”He explains: “Here’s what I think we can say with confidence: Inflation soared last year, primarily for a bunch of pandemic-related reasons — snarled supply chains, shifts in consumer demand — but also at least in part because of all the stimulus money that we poured into the economy. Then, just when most forecasters expected inflation to start falling, it took off again because of the jump in oil prices tied to the war in Ukraine.The State of the 2022 Midterm ElectionsWith the primaries over, both parties are shifting their focus to the general election on Nov. 8.A Focus on Crime: In the final phase of the midterm campaign, Republicans are stepping up their attacks about crime rates, but Democrats are pushing back.Pennsylvania Governor’s Race: Doug Mastriano, the Trump-backed G.O.P. nominee, is being heavily outspent and trails badly in polling. National Republicans are showing little desire to help him.Megastate G.O.P. Rivalry: Against the backdrop of their re-election bids, Gov. Greg Abbott of Texas and Gov. Ron DeSantis of Florida are locked in an increasingly high-stakes contest of one-upmanship.Rushing to Raise Money: Senate Republican nominees are taking precious time from the campaign trail to gather cash from lobbyists in Washington — and close their fund-raising gap with Democratic rivals.“Now, inflation is falling again. Overall consumer prices were up just 0.1 percent in August, and a separate measure showed prices falling in July. But a lot of that is because of the recent drop in gas prices, which we all know could reverse at any time. So-called core inflation, which sets aside volatile food and energy prices, actually accelerated in August.“All of which means we don’t know how long the recent pause in inflation will last, and we definitely don’t know whether Biden will get credit for it if it does.”Backing up a bit, it’s worth noting that not all of the stimulus spending was at the direction of President Biden and Democrats. The first two rounds were approved during the Trump administration. And, economists were not united in warning about inflation.As for the economy being in recession? “Most economists still don’t think the United States meets the formal definition,” Mr. Casselman wrote in July, and he said that remained true as we head into October. But such calls are only made in retrospect. “Even if we are already in a recession, we might not know it — or, at least, might not have official confirmation of it — until next year,” Mr. Casselman said.What was said“Tax breaks for luxury electric cars.”This is true. The Inflation Reduction Act contains a tax credit for electric vehicles. Their final assembly must be completed in North America to be eligible for the credit, which, indeed, extends to several luxury automakers. The list includes Audi, BMW, Lincoln and Mercedes, but also non-luxury models like the Ford Escape and Nissan Leaf. What about Tesla? It made the list of 2022 models, but it has already reached a federal cap of the number of vehicles eligible for the credit, according to the Energy Department.What was said“Even a billion dollars to prisoners, including the Boston Bomber.”This is exaggerated. Dzhokhar Tsarnaev, who was convicted of helping carry out the 2013 Boston Marathon bombings, received a $1,400 Covid-19 stimulus rebate from the federal government in June 2021. The money was part of the American Rescue Plan Act, which President Biden signed into law after it passed the House on a mostly party-line vote, with Ms. Titus supporting it.But what the Republican attack ad failed to disclose was that Mr. Tsarnaev was required by a federal judge to return the money as part of restitution payments to his victims. Another glaring omission was the fact that inmates were previously eligible for Covid-19 relief payments when former President Donald J. Trump was in office, though the Internal Revenue Service and some Republicans had later tried to rescind the payments. A federal judge thwarted those efforts, ruling that inmates could keep the payments.Those nuances haven’t stopped Republicans from latching onto the issue of inmates receiving Covid-19 payments against Democrats in key races across the nation, including Senator Raphael Warnock of Georgia and Senator Mark Kelly of Arizona. More

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      Maybe Joe Biden Knows Joe Manchin Better Than We Thought

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      Gail Collins: Never really thought I’d be leading off with a toast to Joe Manchin, Bret, but troubled times require low expectations.Bret Stephens: You came around!Gail: Joe came around! Or caved, which sounds a little more satisfying. Of course we’ve still got his Senate colleague Kyrsten Sinema and her tax obsessions to worry about. But if it all comes together this week, we’ll get the big Biden program to battle climate change. Will that make you as happy as it would make me, hmm?Bret: Your happiness sounds like it’s an 8 or a 9 on a 10-point scale, and mine is probably around a 5. The Senate just passed a $280 billion bill to support the semiconductor industry under the guise of standing up to China, which is really just a huge giveaway to Intel and other U.S. chip makers. Now we’re dropping another $369 billion, and a lot of that will be in the form of corporate subsidies for companies like Tesla and General Motors. I know Manchin and Larry Summers are saying this will help bring down inflation. But pumping a lot of money into an economy usually has the opposite effect.On the other hand, it’s a whole lot less than the trillions the administration wanted to spend last year, so I’ll take that as a victory. It might keep the nuclear industry alive, which is also vital if we are serious about tackling climate change, and it might also reduce some of the permitting bottlenecks that get in the way of energy infrastructure. And the two bills are solid legislative wins for President Biden, who really, really needed them.Gail: As did all of us who are still Friends of Biden — although I guess we’d prefer not to be called F.O.B.s.Bret: Shame the news arrives the same week we get the second straight quarter of negative economic growth, which is … not a recession?Gail: I prefer to think of it as an, um, a very relaxed financial time.Bret: Not sure how much it would help Biden if he were to say, “Folks, the economy isn’t stalling. It’s relaxing.” Sorry, go on.Gail: And while of course politics is utterly beside the point — who in the world would worry about the entire makeup of Congress? — this legislation has got to help the Democrats come election time. Lots of good reasons we’re in an economic … slump. But you’ve got to be able to deliver a plan for making things better.One of my favorite parts of the bill is the way it clamps down on pharmaceutical companies. Like giving the government power to negotiate on the prices of some drugs covered by Medicare.Bret: Terrible! Price controls inevitably lead to less innovation, fewer incentives to manufacture generics and biosimilars and crazy distortions as pharmaceutical companies jack up the price of some drugs to make up for lost revenue in others. It’s just as bad an idea as rent control and rent stabilization, which is great for some but distorts the overall market and makes the city more expensive.Gail: Hey, we the taxpayers are funding those drugs and we should get assurance that all our money isn’t going to Big Pharma’s profits.Sorry, go on.Bret: I still don’t see the legislation swinging a lot of votes to the Democrats in the midterms. Biden also got his big infrastructure bill passed last year and it didn’t help him one bit politically. The only thing that can save the Democrats now is Donald Trump and his dumb political endorsements.Gail: Anybody you’re thinking of in particular? For instance, that dweeb Blake Masters in Arizona who we talked about recently? The one who now graciously admits he “went too far” when he wrote a youthful essay implicitly criticizing American involvement in World War II. I believe you said if you were voting in Arizona and Masters won the primary, you’d support the — hehehehe — incumbent Democrat, Mark Kelly.Bret: Yes, reluctantly. As David Sedaris might put it, the choice between Democrats and most Republicans these days is like a choice between a day-old baloney sandwich with a sad little pickle on a stale roll versus a plate of rancid chicken served with a sprinkling of anthrax on a bed of broken glass.I’ll take the sandwich.Gail: Got some other big primaries coming up on Tuesday besides Arizona. I’m sure a lot of Missouri Republicans would be happy to see the end of Eric Greitens, a former governor, who now seems to be fading in his run for the Senate. Can’t imagine why, given that he was forced to resign from office in an ethics crisis that included a mind-boggling sex scandal.Bret: The fact that he was the front-runner, at least until recently, really tells you that the G.O.P. has reached its psychotic stage. To recap, Greitens, a former Rhodes Scholar and Navy SEAL, resigned in disgrace as governor four years ago after barely a year in office. Later, his ex-wife alleged in a sworn affidavit, which Greitens disputes, that he knocked her down and confiscated her cellphone, wallet and keys to keep her and their children prisoner in their home. Also, that he was physically violent toward their 3-year-old son.Gail: Which really should have sealed the deal.Bret: More recently, he filmed an ad that was a live-action fantasy of shooting RINOs — “Republicans in Name Only” — that struck many of us as a pretty open invitation to violence. Even Josh Hawley thinks he’s vile, which is like Nikita Khrushchev taking a strong moral exception to Mao Zedong.Gail: Seems like his fading in the polls shouldn’t require a celebration, but we’ll take what we can get.Bret: As for Masters, his candidacy seems to rest on his promotion of so-called replacement theory.Gail: Yes, the idea that Democrats are encouraging immigration so they can create a minority-majority of voters.Bret: It’s almost amusing, since the most significant replacement to happen in Arizona was the one in which white settlers stole sovereign Mexican territory in an unprovoked invasion and dispossessed Native American tribes.Gail: Bless you.Bret: It’s also a master class in political malpractice, since it only alienates Hispanic voters, who are often fairly conservative and increasingly open to voting for Republicans. Are you feeling optimistic?Gail: Have to admit I’m kinda worried that a lot of liberal voters — particularly the younger ones — are just so appalled by the way things have been going with abortion and guns, and so depressed by the state of the economy, that they’ll just sit this one out.Bret: Yeah, but don’t discount the rancid chicken factor. As in, for instance, the Senate race in Georgia, or the governors’ races in Maryland and Pennsylvania.Gail: Well, just to stick with Georgia for a second, it does seem a guy like Herschel Walker, with a really dreadful performance record as a father, should have tried not to build his campaign around being a family-values candidate.Bret: With luck, maybe after a few losses Republican voters will finally get the message that a Trump endorsement in the primary is the political kiss of death in the general election.Then again, it would also help Democrats if someone cured Biden of his habit of saying things that quickly prove totally wrong. The other day he said there wasn’t going to be a recession. Before that, inflation was “temporary.” Last summer, it was that the Taliban wasn’t going to overrun Kabul. You can almost know what’s coming by expecting the opposite of whatever he predicts. That’s why I’m confident he won’t run for a second term. He keeps insisting that he will.Gail: I still don’t see any point in Biden’s announcing he won’t run this early in the calendar. He should wait until the end of the midterm elections. Then we can all turn our attention to the hordes of would-be successors waving their hands.That’ll still give Democrats a year to check out the options. Don’t you think that’s enough?Bret: If you’re the billionaire governor of Illinois, Jay Pritzker, it doesn’t make that much of a difference, since fund-raising isn’t an issue. Pete Buttigieg can’t be feeling as lucky. But either way I think it would be better for Biden to announce before the midterms. Maybe he will even find it liberating to be a president who can really govern for the rest of his term without the burden of a presumptive campaign and all the nagging questions about it. And it will send the message that he has the grace and wisdom to know it’s time to step aside, which is more than can be said for the Chuck Grassleys and Dianne Feinsteins of politics.Gail: Biden’s political clout, wobbly as it is right now, will vanish completely if he embraces lame-duck-hood. Announcing he’s not running by the end of the year seems a good timetable. But of course actually trying to stay in for another race would be a disaster.Bret: Gail, before we go we should probably mention that we’ll be taking the next two weeks off for travel and family. Any parting suggestions or recommendations for our readers till we reconvene?Gail: Stay cool, read something good — I’ve really been enjoying “A Gentleman in Moscow,” by Amor Towles, a novel about a count who’s trapped in his hotel after the Russian Revolution. That’s one for now, but when we get back, Bret, we’ve got to have that favorite-books conversation we’re always threatening to have.And what’s your tip?Bret: Same. Devote a few weekend mornings to some of the terrific longer pieces in The Times. Start with Alex Vadukul’s devastating, breathtaking portrait of Daniel Auster, Paul Auster’s son. It’s a modern-day “American Tragedy,” worthy of Dreiser. Then get out in the sun and count your life’s blessings. I hope there are many.The Times is committed to publishing a diversity of letters to the editor. We’d like to hear what you think about this or any of our articles. Here are some tips. And here’s our email: letters@nytimes.com.Follow The New York Times Opinion section on Facebook, Twitter (@NYTopinion) and Instagram. More

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      The First Post-Reagan Presidency

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      Credit…Timo LenzenSkip to contentSkip to site indexOpinionThe First Post-Reagan PresidencySo far, Joe Biden has been surprisingly progressive.Credit…Timo LenzenSupported byContinue reading the main storyOpinion ColumnistJan. 28, 2021, 8:50 p.m. ETDuring Donald Trump’s presidency, I sometimes took comfort in the Yale political scientist Stephen Skowronek’s concept of “political time.”In Skowronek’s formulation, presidential history moves in 40- to 60-year cycles, or “regimes.” Each is inaugurated by transformative, “reconstructive” leaders who define the boundaries of political possibility for their successors.Franklin Delano Roosevelt was such a figure. For decades following his presidency, Republicans and Democrats alike accepted many of the basic assumptions of the New Deal. Ronald Reagan was another. After him, even Democrats like Bill Clinton and Barack Obama feared deficit spending, inflation and anything that smacked of “big government.”I found Skowronek’s schema reassuring because of where Trump seemed to fit into it. Skowronek thought Trump was a “late regime affiliate” — a category that includes Jimmy Carter and Herbert Hoover. Such figures, he’s written, are outsiders from the party of a dominant but decrepit regime.They use the “internal disarray and festering weakness of the establishment” to “seize the initiative.” Promising to save a faltering political order, they end up imploding and bringing the old regime down with them. No such leader, he wrote, has ever been re-elected.During Trump’s reign, Skowronek’s ideas gained some popular currency, offering a way to make sense of a presidency that seemed anomalous and bizarre. “We are still in the middle of Trump’s rendition of the type,” he wrote in an updated edition of his book “Presidential Leadership in Political Time,” “but we have seen this movie before, and it has always ended the same way.”Skowronek doesn’t present his theory as a skeleton key to history. It’s a way of understanding historical dynamics, not predicting the future. Still, if Trump represented the last gasps of Reaganism instead of the birth of something new, then after him, Skowronek suggests, a fresh regime could begin.When Joe Biden became the Democratic nominee, it seemed that the coming of a new era had been delayed. Reconstructive leaders, in Skowronek’s formulation, repudiate the doctrines of an establishment that no longer has answers for the existential challenges the country faces. Biden, Skowronek told me, is “a guy who’s made his way up through establishment Democratic politics.” Nothing about him seemed trailblazing.Yet as Biden’s administration begins, there are signs that a new politics is coalescing. When, in his inauguration speech, Biden touted “unity,” he framed it as a national rejection of the dark forces unleashed by his discredited predecessor, not stale Gang of Eight bipartisanship. He takes power at a time when what was once conventional wisdom about deficits, inflation and the proper size of government has fallen apart. That means Biden, who has been in national office since before Reagan’s presidency, has the potential to be our first truly post-Reagan president.“Biden has a huge opportunity to finally get our nation past the Reagan narrative that has still lingered,” said Representative Ro Khanna, who was a national co-chair of Bernie Sanders’s presidential campaign. “And the opportunity is to show that government, by getting the shots in every person’s arm of the vaccines, and building infrastructure, and helping working families, is going to be a force for good.” More

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      After Biden Win, Nation’s Republicans Fear the Economy Ahead

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      #masthead-section-label, #masthead-bar-one { display: none }The Coronavirus OutbreakliveLatest UpdatesMaps and CasesWho Gets the Vaccine First?Vaccine TrackerFAQAdvertisementContinue reading the main storySupported byContinue reading the main storyAfter Biden Win, Nation’s Republicans Fear the Economy AheadPolling shows that Republicans have turned bearish on the outlook for their family finances since the election, while Democratic optimism is rising.By More

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      In Praise of Janet Yellen the Economist

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      It’s hard to overstate the enthusiasm among economists over Joe Biden’s selection of Janet Yellen as the next secretary of the Treasury. Some of this enthusiasm reflects the groundbreaking nature of her appointment. She won’t just be the first woman to hold the job, she’ll be the first person to have held all three of the traditional top U.S. policy positions in economics — chair of the Council of Economic Advisers, chair of the Federal Reserve and now Treasury secretary.And yes, there’s a bit of payback for Donald Trump, who denied her a well-earned second term as Fed chair, reportedly in part because he thought she was too short.But the good news about Yellen goes beyond her ridiculously distinguished career in public service. Before she held office, she was a serious researcher. And she was, in particular, one of the leading figures in an intellectual movement that helped save macroeconomics as a useful discipline when that usefulness was under both external and internal assault.Before I get there, a word about Yellen’s time at the Federal Reserve, especially her time on the Fed’s board in the early 2010s, before she became chair.At the time, the U.S. economy was slowly clawing its way back from the Great Recession — a recovery impeded, not incidentally, by Republicans in Congress who pretended to care about national debt and imposed spending cuts that significantly hurt economic growth. But spending wasn’t the only issue of debate; there were also fierce arguments about monetary policy.Specifically, there were many people on the right condemning the Fed’s efforts to rescue the economy from the effects of the 2008 financial crisis. Among them, by the way, was Judy Shelton, the totally unqualified hack Trump is still trying to install on the Fed board, who warned in 2009 that the Fed’s actions would produce “ruinous inflation.” (Hint: They didn’t.)Even within the Fed, there was a division between “hawks” worried about inflation and “doves” who insisted that inflation wasn’t a threat in a depressed economy, and that fighting the depression should take priority. Yellen was one of the leading doves — and a 2013 analysis by The Wall Street Journal found that she had been the most accurate forecaster among Fed policymakers.Why did she get it right? Part of the answer, I’d argue, goes back to academic work she did in the 1980s.At the time, as I’ve suggested, useful macroeconomics was under attack. What I mean by “useful macroeconomics” was the understanding, shared by economists from John Maynard Keynes to Milton Friedman, that monetary and fiscal policy could be used to fight recessions and reduce their economic and human toll.This understanding didn’t fail the test of reality — on the contrary, the experience of the early 1980s strongly confirmed the predictions of basic macroeconomics.But useful economics was under threat.On one side, right-wing politicians turned away from reality-based economics in favor of crank doctrines, especially the claim that governments can conjure up miraculous growth by cutting taxes on the rich. On the other side, a significant number of economists themselves rejected any role for policy in fighting recessions, claiming that there would be no need for such a role if people were acting rationally in their own interests, and that economic analysis should always assume that people are rational.Which is where Yellen came in; she was a prominent figure in the rise of “new Keynesian” economics, which rested on one key insight: People aren’t stupid, but they aren’t perfectly rational and self-interested. And even a bit of realism about human behavior restores the case for aggressive policies to fight recessions. In later work Yellen would show that labor market outcomes depend a lot not just on pure dollars-and-cents calculations, but also on perceptions of fairness.All this may sound abstruse, but I can vouch from my own experience that this work had a huge impact on many young economists — basically giving them a license to be sensible.And it seems to me that there’s a direct line from the disciplined realism of Yellen’s academic research to her success as a policymaker. She was always someone who understood the value of data and models. Indeed, rigorous thinking becomes more, not less important in crazy times like these, when past experience offers little guidance about what we should be doing. But she also never forgot that economics is about people, who aren’t the emotionless, hyperrational calculating machines economists sometimes wish they were.Now, none of this means that things will necessarily go well. The race is not to the swift, neither yet bread to the wise, nor yet success to policymakers of understanding, but time and chance happen to them all. Trump’s cabinet was a clown show — possibly the worst cabinet in America’s history — but it wasn’t until 2020 that the consequences of the administration’s incompetence became fully apparent.Still, it’s immensely reassuring to know that economic policy will be made by someone who knows what she is doing.The Times is committed to publishing a diversity of letters to the editor. We’d like to hear what you think about this or any of our articles. Here are some tips. And here’s our email: letters@nytimes.com.Follow The New York Times Opinion section on Facebook, Twitter (@NYTopinion) and Instagram. More