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United States Economy

Still Getting Your Head Around Digital Currency? So Are Central Bankers.

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The question is whether the new technology is going to make the yuan an attractive alternative to other currencies. Chinese central bankers say it is not an effort to supplant the dollar, and Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics, said digitization won’t fix issues that make the yuan unattractive as a reserve currency in the first place — like capital controls, which mean you can’t exchange it easily at all times.

Others worry that private-sector innovations like Bitcoin or “stablecoins,” which are backed by a bundle of assets or currencies, could become an attractive alternative to government-created cash if central banks don’t keep up.

Mr. Powell has argued that Bitcoin is more like gold than the dollar. It has value because it’s rare and people want to hold it, so it can even at times be traded for other goods and services, but it is not government-guaranteed money.

But global regulators did slow down Facebook’s stablecoin project, originally known as Libra and now called Diem, because they worried about the potential for money laundering and financial system disruption.

Mr. Powell said in testimony last year that Libra was “a bit of wake up call that this is coming fast and could come in a way that is quite widespread and systemically important fairly quickly,” highlighting the “importance of making quick progress.”

If tech companies come to dominate the payment system, that could create privacy and stability issues. In fact, China’s digital yuan was pursued partly in reaction to the rise and dominance of private-sector digital payment platforms like Alipay and WeChat Pay.

A faster or instant payments system, like the FedNow instant payment technology that America’s central bank is now developing, could keep the Fed up-to-date without changing the system as much as a digital currency would. But digital dollar fans say the point is to prepare for the future — and the future might be central bank digital currency.

“Digital cash, if built in the right way, could be really groundbreaking,” said Neha Narula, who is the director of the Digital Currency Initiative at the Massachusetts Institute of Technology and is working with the Boston Fed on its project.

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Now That Everyone Is Bullish, Be Cautious

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As businesses shuttered and workers stayed home, the gross domestic product, a broad measure of goods and services, plummeted in the United States. G.D.P. dropped 5 percent in the first quarter of 2020 and more than 31 percent in the second, according to the federal Bureau of Economic Analysis. The unemployment rate surged more than 10 percentage points from March to April last year, nearly reaching 15 percent. That was the highest level and the biggest increase since the Bureau of Labor Statistics began collecting data in January 1948.

In March 2020, the Federal Reserve stepped in. On its own, it couldn’t do much to combat the coronavirus itself — the last presidential administration’s efforts were dilatory at best, historians say. But the Fed and the federal government were able to prop up the markets, provide emergency aid for millions of people, help keep at least some small businesses afloat and put most major corporations in a position to reap big profits as the economy rebounded.

By now, the federal government has committed more than $5 trillion in a variety of coronavirus-related aid packages, and the Fed has made trillions more available in loans, intervened in financial markets, purchased vast quantities of bonds and held short-term interest rates near zero.

All of this is contributing to what looks like a “Biden boom economy,” as the Princeton economist Alan S. Blinder called it in The Wall Street Journal. Economic growth may exceed 7 percent for the first quarter, and will almost certainly be spectacular for the year as a whole, when compared with 2020.

But there’s the rub. These annual economic and financial numbers are comparisons with the depths of the pandemic. The statistics are warped, inevitably, by “base effects,” which is to say, in economic jargon, that the coronavirus-induced recession of last year is making many current numbers look unnaturally high. They don’t provide much insight about where we are heading in 2022 and later.

As Neil Irwin explained in The New York Times, the current uptick in inflation may not be as worrisome as it would otherwise seem because its comparisons are based on the depressed prices of a year ago, when so many people were huddled indoors.

What’s more, Alberto Cavallo, a Harvard economist who has studied inflation deeply, told me that by altering consumption and supply patterns radically, the pandemic has had many subtle effects. Lower-income people, for example, who pay a higher proportion of their income for food, have experienced greater inflation than those for whom food is a relatively minor expense.

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Welcome to the YOLO Economy

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In addition to the job-hopping you’d expect during boom times, the pandemic has created many more remote jobs, and expanded the number of companies willing to hire outside of big, coastal cities. That has given workers in remote-friendly industries, such as tech and finance, more leverage to ask for what they want.

“Employees have a totally unprecedented ability to negotiate in the next 18 to 48 months,” said Johnathan Nightingale, an author and a co-founder of Raw Signal Group, a management training firm. “If I, as an individual, am dissatisfied with the current state of my employment, I have so many more options than I used to have.”

Individual YOLO decisions can be chalked up to many factors: cabin fever, low interest rates, the emergence of new get-rich-quick schemes like NFTs and meme stocks. But many seem related to a deeper, generational disillusionment, and a feeling that the economy is changing in ways that reward the crazy and punish the cautious.

Several people in their late 20s and early 30s — mostly those who went to good schools, work in high-prestige industries and would never be classified as “essential workers” — told me that the pandemic had destroyed their faith in the traditional white-collar career path. They had watched their independent-minded peers getting rich by joining start-ups or gambling on cryptocurrencies. Meanwhile, their bosses were drowning them in mundane work, or trying to automate their jobs, and were generally failing to support them during one of the hardest years of their lives.

“The past year has been telling for how companies really value their work forces,” said Latesha Byrd, a career coach in Charlotte, N.C. “It has become challenging to continue to work for companies who operate business as usual, without taking into account how our lives have changed overnight.”

Ms. Byrd, who primarily coaches women of color in fields like tech, finance and media, said that in addition to suffering from pandemic-related burnout, many minority employees felt disillusioned with their employers’ shallow commitments to racial justice.

“Diversity, equity and inclusion are extremely important now,” she said. “Employees want to know, ‘Is this company going to support me?’”

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The Fed Faces Criticism as It Wades Into Climate and Equity Issues

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And Michael Strain, an economist at the American Enterprise Institute in Washington, said he was concerned that the Fed’s focus on fostering equity — by driving down Black unemployment, for instance — could make it too hesitant to lift interest rates, allowing inflation to bubble up.

But Fed officials say the central bank is being pragmatic, not political. Ms. Daly regularly points out that understanding climate change risks to the financial system is important for bank regulators and supervisors. Mr. Powell said during a webcast Wednesday that the Fed sees such issues “through the lens of our existing mandates” — racial, gender and other disparities in economic outcomes “hold the economy back,” for example.

“Also I think we now realize that unemployment can go low for quite a long time without inflation being a problem — which will tend to help those groups,” he said.

Still, the Fed knows it’s in fraught territory. Mr. Powell avoids endorsing specific legislative packages. When Fed officials talk about inequality, they often discuss opportunity — a framing with more bipartisan backing.

There is a risk if the Fed is seen as a “quote unquote Democratic institution,” said Peter Conti-Brown, a Fed historian at the University of Pennsylvania. It might lose support across political cycles, as with the Consumer Financial Protection Bureau, which is largely seen as a liberal project.

“The Fed always needs political support to do its job well and to have the autonomy it wants,” said Sarah Binder, a political scientist at George Washington University who studies the Fed’s politics. Pushback that led to reform has generally come from Democrats — who have forced it to focus more on employment and reined in its ability to help Wall Street — rather than Republicans, she noted.

And even now, some Democrats say the central bank could go further. Representative Rashida Tlaib, a Michigan Democrat, has pushed the Fed to do more to get cheaper credit to states and localities, for instance.

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The Week in Business: Let’s Go Shopping

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Good morning. The economy is showing more signs of recovery — jobs are coming back, the stock market is up (again) and people are spending money. Here’s the latest in business and tech news for the week ahead. Stay safe out there. — Charlotte Cowles

Credit…Giacomo Bagnara

So, what did you buy with your stimulus check? Retail sales in March blew past expectations, soaring nearly 10 percent as the latest round of federal relief funds trickled into bank accounts. Restaurants and bars saw a 13 percent bump in business, and sales of clothing and accessories rose 18 percent — people are getting out and about and need new clothes after a year of sweatpants. Another sign of better times ahead: Last week’s jobless claims dropped to their lowest level since the pandemic began.

With much fanfare, Coinbase — a marketplace where people buy and sell digital currencies like Bitcoin — went public on Wednesday, becoming the first major cryptocurrency company to do so. Its first day of trading made early investors, including the basketball star Kevin Durant, very rich (well, even more than they already were). It also encouraged the crypto-curious to dip a toe — or take a plunge — into what has become an increasingly hot market. Digital currencies have boomed this past year as investors pushed their prices to new highs, bringing related businesses (like Coinbase) along for the ride.

Planning to do business with the Kremlin anytime soon? Too bad. President Biden announced a flurry of sanctions against Russia last Thursday and barred American banks from purchasing any new Russian government debt. The measure targeted 32 individuals and entities involved in Moscow’s disinformation campaigns and interference in the 2020 presidential election. Mr. Biden also formally blamed Russia’s top intelligence agency for the sophisticated hacking operation that breached American government agencies and dozens of large companies last year. By squeezing access to international finance, the Biden administration aims to pressure Russia’s president, Vladimir Putin, into negotiating a more stable relationship with the United States.

Credit…Giacomo Bagnara

Apple’s first product unveiling of the year, titled “Spring Loaded,” will be streamed on the brand’s website this Tuesday. Anticipated gadgets include a new iPad Pro line (face it, your old iPad is out of storage space) and new iMac desktops (to improve your work-from-home setup, which you might need for the long haul). The company is also reportedly developing a small tracking device called an AirTag that can be stuck to items like keys and wallets, allowing you to find them with an app (now that you need them to go places again!). But it’s unclear if they will make their debut this week. Stay tuned.

For years, Instagram has been planning a special version of its app for users under age 13. The children’s version would supposedly include stronger measures to protect them from sexual predators and bullying. But it faces an uphill battle. Last week, an international coalition of 35 children’s and consumer groups called on Mark Zuckerberg, the chief executive of Instagram’s parent company, Facebook, to scrap plans for the app. Among their reasons: It “will likely increase the use of Instagram by young children who are particularly vulnerable to the platform’s manipulative and exploitative features.”

What does a global shortage of tiny semiconductors — also known as chips — have to do with you? Well, they’re used for everything from cars to computers to kitchen appliances. And the companies that make them are reeling from pandemic-fueled production snafus, causing trickledown problems in the auto industry and many other sectors. Mr. Biden wants to fund more domestic chip manufacturing with his infrastructure plan and signed an executive order to bolster supply chains in the meantime. But that may not be enough to fix what has already become a big problem.

Bernie Madoff, who masterminded the biggest Ponzi scheme in history, died in prison at age 82. Nearly four years after the infamous Fyre Festival left its attendees scrambling for shelter and water in the Bahamas, ticket holders — many of whom shelled out thousands for what was billed as an ultraluxury experience — will receive settlement payments of about $7,220 apiece. And China’s post-pandemic recovery is booming. Its economy grew by a whopping 18.3 percent in the first three months of the year to last year’s low.

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Treasury Puts Taiwan on Notice for Currency Practices

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The Treasury Department said on Friday that it was putting Taiwan, Vietnam and Switzerland on notice over their currency practices, but it struck a more conciliatory tone than the Trump administration by stopping short of labeling any of them a currency manipulator.

The announcement came in the Treasury Department’s first foreign exchange report under Treasury Secretary Janet L. Yellen. The report, which Treasury submits to Congress twice a year, aims to hold the United States’ top trading partners accountable if they try to gain an unfair advantage in commerce between nations through practices such as devaluing their currencies.

Being labeled a currency manipulator requires a trading partner to enter into negotiations with the United States and the International Monetary Fund to address the situation. The blemish is somewhat symbolic but can lead to tariffs or other forms of retaliation if talks collapse.

Both Switzerland and Vietnam had been on the list of currency manipulators after the Trump administration added them last year, and their removal on Friday means no country currently faces that designation. Still, Treasury said there were signs that Switzerland, Vietnam and Taiwan were improperly managing their currencies.

“Treasury is working tirelessly to address efforts by foreign economies to artificially manipulate their currency values that put American workers at an unfair disadvantage,” Ms. Yellen said in a statement.

The decision represents the latest example of the Biden administration attempting to de-escalate tension with American allies after four years of former President Donald J. Trump’s confrontational approach to international economic diplomacy. It also steers the United States away from Mr. Trump’s fixation on bilateral trade imbalances, taking a more holistic view of trade relationships.

Treasury officials noted the extraordinary economic conditions brought on by the pandemic in the last year and said they were not trying to send mixed messages by suggesting manipulation was taking place but not labeling it as such.

“This report adopts a more measured and analytical tone in evaluating U.S. trading partners’ currency practices relative to the Trump administration’s approach of wielding the report as a political tool,” said Eswar S. Prasad, the International Monetary Fund’s former China chief. He said the Biden administration’s report “comes to analytically balanced assessments of foreign exchange market intervention by U.S. trading partners.”

The Trump administration had labeled Vietnam and Switzerland as manipulators in its final report in 2020, but the Biden administration said there was insufficient evidence to support the designation. To receive the label, Treasury must conclude that a country manipulates the exchange rate between its currency and the dollar for “purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade.”

Treasury instead said it would continue “enhanced engagement” with Vietnam and Switzerland and begin such talks with Taiwan, which includes urging the trading partners to address undervaluation of their currencies. There is no fixed duration for how long such talks can go without a resolution.

Mark Sobel, the chairman of the Official Monetary and Financial Institutions Forum, said the Biden administration was wise to take a more nuanced approach to assessing how countries are managing foreign exchange.

He noted that Switzerland faces unusual monetary policy and safe haven challenges and that Vietnam’s foreign exchange reserves had been low when it received the manipulator label last year. A government can suppress the value of its currency by selling it in foreign exchange markets and stockpiling dollars.

Moreover, Taiwan, Thailand and South Korea have traditionally been even worse offenders than Switzerland and Vietnam, according to Mr. Sobel, even though the United States has avoided calling them out for it.

“I think the new Treasury team is more willing to recognize that the relative policy divergence between the US and others is a significant factor in that,” Mr. Sobel said. “I also think the Trump administration approach was much more belligerent as a general proposition.”

Taiwan is the United States’ 10th largest trading partner in 2019, according to the Office of the United States Trade Representative. Vietnam is the 13th largest, and Switzerland is 16th.

The warning to Taiwan comes as the United States has been deepening ties with the island as part of its effort to confront China. However, it has also comes as the Biden administration is calling for a major investment in the domestic semiconductor industry to reduce America’s reliance on imports from Taiwan and other countries.

The Treasury report said that Taiwan’s central bank “continues to actively intervene in the foreign exchange market” and that “less formal exchange rate management practices” have prevented the Taiwan dollar from fully reflecting macroeconomic fundamentals.

Currency analysts have been expecting the Biden administration to put more pressure on Taiwan to change its foreign exchange practices following the appointment of Brad Setser to to a senior role at the Office of the United States Trade Representative. As a fellow at the Council on Foreign Relations in 2019, Mr. Setser wrote a report concluding that Taiwan was hiding $130 billion in reserves to mask its currency interventions and that the case for naming it a manipulator was stronger than the case for naming China.

“Taiwan really has been intervening on a large scale to maintain an undervalued currency for competitive advantage,” Mr. Setser wrote on Twitter at the time.

The Treasury Department did not label China as a currency manipulator, instead urging it to improve transparency over its foreign exchange practices.

Treasury kept China, Japan, Korea, Germany, Italy, India, Malaysia, Singapore and Thailand on its currency monitoring list, and added Ireland and Mexico.

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The Fed’s newest governor sees America’s inflation pop as temporary.

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Christopher Waller, the newest governor on the Federal Reserve’s Washington-based board, said on Friday that he expects an unfolding acceleration in inflation — which is expected to intensify in the coming months — will prove short-lived.

“I do buy into the idea that this is going to be temporary,” Mr. Waller said on CNBC, during his first television interview since President Donald J. Trump nominated him to the role and the Senate confirmed him. “Whatever temporary surge in inflation we see right now is not going to last.”

Inflation data are being measured against very low readings from 12 months ago, causing a mechanical year-on-year jump, he noted. Spending tied to government stimulus and supply chain constraints will also have an effect.

“We know the stimulus is going to have some impact, but once the stimulus checks are spent, they’re gone,” Mr. Waller said. “We also know that the bottlenecks that are currently there are going to go away.”

The Consumer Price Index, a closely watched inflation measure, rose 2.6 percent in March from a year ago, the Labor Department said earlier this week. But it was skewed by the comparison to March 2020, when prices of some items fell as consumers pulled back spending in the face of the pandemic.

While the C.P.I. and other inflation gauges are expected to rise even higher in coming months, Fed officials and most economists project that they will settle back down before long. Many officials see key measures hovering near the central bank’s 2 percent average inflation target by the end of the year.

Mr. Waller said that investors themselves are not betting on “outrageous, runaway inflation” and that even if the data show a stronger pickup, the Fed stands ready to contain that and is not going to just let inflation “rip.”

“I don’t think anyone would be very comfortable if it got to three, three-plus and stayed there for a while,” Mr. Waller said, noting that the bigger concern would be if inflation expectations jumped.

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Looking Back at the First Roaring Twenties

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We are in a second Roaring Twenties, or so you might think, from the countless comments suggesting that we are entering an exuberant decade that echoes the one of a century ago.

The 1920s were marked by frenetic celebration, amazing stock market returns — and, ultimately, one of the worst crashes and most devastating depressions in modern history.

A century is a long time, and the original Roaring Twenties have become something of a lost world, glimpsed through legend, movies and pop fantasy.

It’s worth looking back more closely. History doesn’t provide a clear guide to the future — many economists avoid studying it, preferring instead to dwell on mathematical models, the latest changes in fiscal and monetary policy and statistically significant leading indicators.

These are all important, but understanding the pop culture of another time can give us an inkling of the possibilities for changes in the mass psychology of the current, highly speculative market.

We don’t know how the stock market will end up for the entire 2020s, but the decade ending in March 2021 was spectacular. By my calculations, the total return for the monthly inflation-corrected S&P 500, including dividends, averaged 12 percent annually in the 10 years through March. The real value of an investment tripled in that period.

Great as that was, the stock market in most of the Roaring Twenties was even better: It was the biggest bull stock market in U.S. history, when you factor in inflation. I calculate that the real total return for the Standard & Poor’s Composite Index (an S&P 500 predecessor), including dividends, from September 1919 to September 1929 averaged 20 percent a year. That implies a sixfold increase in real value over the decade.

It didn’t end well, however: Including inflation, the index crashed 77 percent from September 1929 to June 1932.

While there is evidence that many people sensed that the market’s steep rise was precarious, there was practically no anticipation of how bad the crash would be, or that it would lead to the prolonged, severe unemployment of the Great Depression.

In The New York Times on New Year’s Day 1929, 10 months before the crash, the financial editor Alexander Dana Noyes wrote both of “the most reckless stock speculation” and of a series of “exceedingly favorable” factors protecting the economy: a “sound banking system,” “expanding production and consumption,” “large profits,” “stability of prices,” “conservative methods of trade,” “labor’s high wages” and “increasing exports.”

As stocks rose, people who had little knowledge of the market blithely bought shares for the first time, as Eunice Fuller Barnard described in “Ladies of the Ticker,” a firsthand account in April 1929.

Recently, there has been a parallel rise in trades by inexperienced retail investors.

Early in the 1920s, people played the market as a grand game, abetted by technological innovation and new mass media.

In 1923 the Trans-Lux company came out with the “movie ticker” — a large illuminated screen showing rapidly changing stock prices. For the first time, a crowd at a retail brokerage could watch together as a facsimile of the stock ticker tape whizzed by in bright light.

And they heard about the stock market on the radio, the hot new technology of that era. Westinghouse, in Pittsburgh, created one of the world’s first commercial radio stations, KDKA, which broadcast Warren G. Harding’s victory in the presidential election on Nov. 2, 1920. Sports events, comedy shows and stock market reports soon followed, and radio stations spread throughout the United States and the world.

The world entered homes electronically, giving people an immediate sense of the possibility of new technologies and access to a global narrative about financial success.

What is startling, in retrospect, is that while there was plenty of discussion of the brave new horizons for investing in the 1920s, there was very little skeptical scrutiny of the underpinnings of the markets available in mass media, at least at first.

The term “price-earnings ratio,” for example, was used by investment professionals as a tool for analyzing stock valuations long before the 1920s. In the most basic sense, that simple ratio provides a means for comparing stock prices and corporate earnings. I’ve developed a more sophisticated, inflation-adjusted version of the ratio, known as the CAPE, which enables us to say stock prices today are quite high on a historical basis.

But my research suggests that in the early 1920s, scarcely anyone, outside of investment professionals, knew what a price-earnings ratio was. There was not a single use of the phrase in the ProQuest News & Newspapers database before 1928.

This inattention shifted in the months before the October 1929 crash. In May 1929, for example, The New York Herald Tribune published “Price-Earnings Ratio Ignored by Traders in Present Market.”

It was a sign of worry. Suddenly, many people became aware that this important measure was at record highs, indicating that prices were difficult to justify. The article helped to spread a pessimistic narrative about the stock market that began to dominate discourse.

“The purchaser of securities on tips, who gives no thought or study to intrinsic values, must suffer the consequences of his own lack of reasonable care in conserving his resources,” the article said.

As the crash approached, newspapers reported that many people had taken excessive loans from brokers, noting that the severity of a market decline could be amplified when brokers made “margin calls,” requiring repayment of those loans.

As early as March 1928, an article in The Times said there was a widespread “uncomfortable feeling” about the “unpleasant possibilities” for the still roaring stock market. Such a feeling exists today, though perhaps not in as severe a form.

In early 1929, the Federal Reserve issued a sequence of warnings about the risk of excessive speculation. Yet the Standard & Poor’s Composite Index rose 29 percent from Jan. 1 to Sept. 8 that year. (The increase in the S&P 500 from March 23, 2020, to Thursday, at 86 percent, is even larger.)

In 1929, the warnings only heightened public attention to the market.

In February 1929, the singer Eddie Cantor had a hit pop song about the dangers of living. Its title was a form of baby talk: “I Faw Down an’ Go Boom!” The lyrics included this: “I got a tip to buy some stocks, lost my shirt, lost my socks. The minute that I buy some stocks, they faw down an’ go boom.”

An article by Joseph Dineen in The Boston Globe on Feb. 10, 1929, said the song had gone viral: “‘I faw down and go boom.’ Did you ever hear anything sillier, more ridiculous and inane in your life? This wisecrack is positively cuckoo, a snatch of baby talk which has swept the country, used every day in every way by broad-shouldered huskies and lithesome lounge lizards as the last word in high-powered repartee. Every broadcasting station tossed it off into the air at least once a night.”

The song, and others like it, helped to prime people into thinking about the possibility of a crash.

Are there similarities today? Certainly. The current widespread fascination with the rising market accompanied by recent concern about a possible downward spiral and strained stock market valuations echo those of 100 years ago.

That said, there is no particular reason to expect a market collapse that would be as bad as the 1929 crash, and the government and the Fed have shown themselves to be far more adept in staving off prolonged recessions than their predecessors. But we shouldn’t be surprised if uncomfortable feelings about the market grow to unmanageable proportions, leading eventually to a major stock market decline.

Robert J. Shiller is Sterling professor of economics at Yale.

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Unemployment Is High. Why Are Businesses Struggling to Hire?

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By contrast, “right now what seems to be happening is that job creation is outpacing the search effort that workers are putting forth,” said Professor Marinescu, an economist at the University of Pennsylvania. “Compared to how people reacted last spring, it’s not that long ago, but the situation has changed a bit.”

That is to say, a similar decline in workers’ desire to pursue jobs matters more when there are plenty of jobs to go around, which is increasingly the case as the economy reopens.

In other research on the expanded jobless benefits, Peter Ganong of the University of Chicago Harris School and five co-authors found a smaller decrease in the inclination to search for jobs than earlier research would have predicted. In other words, those $600 weekly supplements didn’t decrease employment very much.

But those were circumstances that may no longer apply.

“The goal of government should be to get everyone back to work as soon as possible while continuing to provide economic support to workers who have not gone back to work yet,” Mr. Ganong said. “Those two things were not in tension in 2020, and they are in tension in 2021. All of those things that made 2020 special are receding, so we now face a more traditional set of trade-offs.”

Arindrajit Dube, an economist at the University of Massachusetts Amherst who has also studied the impact of last year’s expanded benefits, is skeptical that the lure of jobless benefits is the primary explanation. He notes that even with the reported shortages, businesses appear to be successfully hiring at a breakneck pace.

Companies added 916,000 employees to payrolls in March alone, a number matched only by the initial rebound from pandemic shutdowns last summer and in the immediate aftermath of World War II. Moreover, the expanded benefits are scheduled to expire in September.

“Maybe an unemployed person spends several additional days unemployed because of the $300,” Professor Dube said. “But if it’s a problem, it takes care of itself. It’s nothing compared to the broader trajectory of the reopening, which swamps anything on the unemployment insurance front.”

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Voters Like Biden’s Infrastructure Plan; Taxes Are an Issue

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Some Republicans are floating the possibility of putting forward a counterproposal that addresses more traditional infrastructure needs and removes the corporate tax increases. Senator Shelley Moore Capito of West Virginia suggested that such a proposal could be between $600 billion and $800 billion.

“I think the best way for us to do this is hit the sweet spot of where we agree, and I think we can agree on a lot of the measures moving forward,” Ms. Capito said on CNBC on Wednesday. She suggested that Democrats save proposals with less bipartisan support for the fast-track budget reconciliation process, which would allow the legislation to pass with a simple majority.

“If there are other things they want to do — they being the Democrats or the president — want to do in a more dramatic fashion that can’t attract at least 10 Republicans, that’s, I think, their reconciliation vehicle,” Ms. Capito added.

But several liberals have signaled a reluctance to whittle down Mr. Biden’s plan, with Senator Bernie Sanders of Vermont, the chairman of the Senate Budget Committee, telling reporters that the tentative price range “is nowhere near what we need.”

The Biden administration is rolling out its infrastructure plans from a position of relative strength. Voters generally give Mr. Biden high marks for his performance in office, at least in comparison with Mr. Trump’s consistently low approval ratings, and Americans are becoming more optimistic about the economy in particular. Measures of consumer sentiment have been rising in recent months; SurveyMonkey’s consumer confidence index, which is based on five questions about people’s personal finances and economic outlook, rose in April to its highest level in six months.

But views of the economy remain starkly divided along partisan lines. Confidence among Democrats jumped when Mr. Biden was elected and has continued to rise since. Republicans, who had a rosier view of the economy than Democrats throughout Mr. Trump’s time in office, have turned pessimistic since the election.

About the survey: The data in this article came from an online survey of 2,640 adults conducted by the polling firm SurveyMonkey from April 5 to 11. The company selected respondents at random from the nearly three million people who take surveys on its platform each day. Responses were weighted to match the demographic profile of the population of the United States. The survey has a modeled error estimate (similar to a margin of error in a standard telephone poll) of plus or minus three percentage points, so differences of less than that amount are statistically insignificant.

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