“The $1.2 trillion infrastructure law signed by President Joe Biden in November expanded requirements that federally funded infrastructure projects purchase American-made goods and materials. Now, new rules from the administration will make it harder to get waivers from those cost-increasing mandates.
For decades, Buy America laws required that grantees receiving federal funds to build roads, bridges, and rail lines purchase domestically produced steel, iron, and manufactured goods—including rolling stock like buses and trains. The Infrastructure Investment and Jobs Act (IIJA) expanded those Buy America requirements to cover copper wiring, plastics, polymers, drywall, and lumber.
These requirements are known to raise costs and can even make some projects totally infeasible. For that reason, grantees have been allowed to request waivers from Buy America laws when they prove unworkable or raise costs too much.
But on Monday, the White House’s Office of Management and Budget (OMB) issued guidance intended to narrow the use of those waivers for the Buy America provisions of the IIJA.
Typically, requests for those waivers are approved or denied by the federal agencies that provide a project’s funding. Monday’s guidance, in keeping with an earlier White House executive order, requires these agencies to consult with OMB’s Made in America Office when considering waivers for grant awards made with IIJA funds. It also gives OMB’s Made in America Office final say over whether these waivers are approved.
The explicit purpose of sending these waivers through OMB is to limit the number and extent of waivers granted.”
“Inflation is a general rise in the cost of goods and services. It can occur for two reasons: an increase in the supply of money relative to the supply of goods or an increase in demand for goods relative to supply. While not all price increases are evidence of inflation—prices also fluctuate based on supply and demand—a sustained increase in prices across the board is evidence that one of these phenomena is at play.”
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“Biden’s big spending bills weren’t enacted immediately. The ARP wasn’t signed until March 2021, and much of its spending occurred over several months. Likewise, the Infrastructure Investment and Jobs Act—another commonly cited source of inflationary pressure—didn’t pass until last November, and its spending won’t peak until 2026. Plus, a study by the Chicago Federal Reserve found that the ARP alone can only partly explain recent inflation.
Those findings shouldn’t be a surprise, because significant spending was underway before Biden ever made it to the Oval Office. Even before the Coronavirus Aid, Relief, and Economic Security (CARES) Act—the most expensive bill signed by Donald Trump—the federal government was spending unprecedented amounts due to COVID-19. This act included cash payments to most Americans, housing assistance, boosted unemployment checks, and a pause on student loan repayments, which was recently extended by Biden. These actions may have been necessary at the time, but such policies began under Trump and are contributing to inflationary pressures now.
Putting the pandemic aside, Trump spent extravagantly, spending more in four years than President Barack Obama did in eight. While Biden may be fanning the flames of inflation, Trump collected the kindling and lit the match.
Not that Democratic policies would have been better. They pushed for more generous “enhanced unemployment,” flooding states with cash, and near-permanent stimulus payments to parents. While only some of their ideas were enacted, the cash distributed didn’t disappear, and neither did additional spending by many blue-state governors.
And while the 2020 election happened alongside increasing prices, an expansion of the money supply occurred long beforehand. This is important because one cannot understand inflation without considering the Federal Reserve. No president controls interest rates or dollars in circulation: Jerome Powell and the Federal Open Market Committee do. And Powell admitted last year that they got inflation completely wrong.
The Federal Reserve isn’t the only central bank at fault. Just as worldwide governments spent generously on pandemic relief, the threat of recession made central banks across the world hesitant to raise interest rates in response to rising prices. The European Central Bank has kept rates consistent since early 2016. Meanwhile, the United Kingdom raised rates to where they were pre-pandemic, but like the Federal Reserve, the Brits lowered interest rates during the last two years.
Cheap credit might be appropriate when economies face unexpected shocks, but it becomes a problem once demand roars back. But even if central bankers and other policymakers weren’t following each other’s lead, there’s further reason to expect inflation to be spiking now.
Inflation in the Eurozone sits at 7.5 percent, and price levels in the United Kingdom look similar. To an extent, these phenomena occur independent of the U.S.—it’s ridiculous to suggest Biden’s inauguration sparked inflation nearly 3,600 miles away. But just as Russia’s war can impact the price of gas and wheat, the United States, too, can export inflation across the globe in an interconnected economy.
Breakeven inflation is now the highest it’s been in the 21st century, but blaming any one person or policy only captures part of the economic picture. In reality, many actions—some recent and some dating back five years—primed the pump and escalated a worldwide run-up in prices.
Just as no one person caused our current predicament, it’s unlikely any one person can solve it. Inflation will only abate when the pandemic ends, central banks roll back easy money policies, the private sector increases production, the supply chain stabilizes, and, yes, governments finally undertake more responsible levels of spending.”
“Dating back to its founding in 1934, the Export-Import Bank of the United States has had a pretty specific mission: subsidize the export of American-made products by extending cheap credit to foreign companies looking to buy our stuff.
Whether the bank serves any legitimate purpose is another matter entirely. These days, the Export-Import Bank mostly acts as a slush fund for politically connected American corporations like Boeing and General Electric that would have no trouble doing business abroad but are more than happy to benefit from its largesse, doled out in the form of low-interest loans to potential buyers. Sometimes it also blows American taxpayer money on propping up government-run monopolies in foreign countries.
Still, the mission has always been clear. It’s right there in Executive Order 6581, which President Franklin Delano Roosevelt signed in 1934 to authorize “a banking corporation…with power to aid in financing and to facilitate exports and imports and the exchange of commodities between the United States and other Nations.” The bank’s current mission statement, too, clearly spells out a goal of “supporting American jobs by facilitating the export of U.S. goods and services.”
Now, quietly, the Ex-Im Bank is taking on a new—and entirely domestic—project.
At a meeting last week, the Ex-Im Bank’s board of directors voted unanimously to approve a so-called “Make More in America” initiative. The press release announcing the new program is a gobbledygook of crony capitalist doublespeak virtually devoid of specifics about how the program will operate or what it will cost. The new program “will create new financing opportunities that spur manufacturing in the United States, support American jobs and boost America’s ability to compete with countries like China,” Reta Jo Reyes, the bank’s president and board chair, says in the statement.
This latest development at the Ex-Im Bank is another aspect of the sprawling federal effort that began under President Donald Trump and continues under President Joe Biden to subsidize American manufacturing. The creation of a “domestic financing program” at the Ex-Im Bank was part of a series of supply chain recommendations made by the White House in June. A few days before Christmas, the Ex-Im Bank filed a vague notice in the Federal Register outlining plans to implement the program.
But there has been little clarity about what the program will aim to do, which businesses might stand to benefit from it, or how its results will be judged. In the announcement last week, the Ex-Im Bank only said that the new program will “immediately make available the agency’s existing medium- and long-term loans and loan guarantees for export-oriented domestic manufacturing projects.””
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“the government will throw taxpayer dollars at investments that private capital markets have deemed too risky.
But how will the government decide which projects to fund? Toomey also asked the bank to explain what steps will be taken to “ensure that domestic transactions will not be influenced by political pressures.”
The Ex-Im Bank’s response to that query is even more worrying. There don’t appear to be any safeguards in place. “Financing is available to all qualifying applicants based on criteria established by law and agency practice,” Lewis wrote in reply.
Translation: Any company with the resources to hire the attorneys, accountants, and lawyers necessary to decipher the bank’s policies and sufficiently schmooze decision-makers can get paid.
“There is no reason that taxpayers should have to back domestic financing when we live in a highly developed market economy in which promising businesses have access to capital on competitive terms,” says Toomey.”
“The point of sanctioning is that, if we don’t, the norm against territorial incursions will collapse. Preserving this norm — and working to prevent similar abuses in the future — is worth the cost of sanctioning. But why is norm collapse an inexorable consequence of failing to sanction? Fortunately, a bit of game theory can help us answer this question.
Let’s call this the Repeated Sanctions Game, which has two players. In each round of the game, Player 1 (i.e., an adversary such as Putin) chooses whether to transgress, then Player 2 (i.e., NATO) chooses whether to sanction. Transgressing benefits Player 1 (Putin would like to annex Ukraine) but costs Player 2 (NATO would prefer that Ukraine be free). As in real life, sanctioning is costly not just to Player 1 but also to Player 2, who might prefer not to, for example, suffer higher prices or lose revenue from Player 1’s products and businesses as a result. Then Player 2 plays the game again and again — perhaps with the same Player 1, perhaps with another (Putin now, maybe Xi next time).
For Player 2 to deter future transgressions in this game, she would have to threaten to sanction Player 1 whenever he transgresses. This threat has to be credible, otherwise Player 1 will simply call Player 2’s bluff. Player 2 must, if called upon, reliably follow through on her threat.
How can this be worth it for Player 2, given that, as already acknowledged, sanctioning is costly? To see, we must factor future expectations into the cost-benefit calculation. When a transgression isn’t met with sanctions, everyone would reasonably expect that future transgressions may also go unpunished. This is the norm collapsing. So long as Player 2 cares enough about the costs of all those future transgressions, she’ll prefer the collateral costs of punishing the transgressor today to increasing the likelihood of future transgressions. It’s not preventing or stopping the current transgression that’s motivating Player 2 to sanction, it’s the fact that without sanctions as a response, there will inevitably be more transgressions.”
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“what the international community is really trying to avoid is other, more rational actors, such as Putin’s eventual successor or Xi, inferring that future invasions will not be punished.”
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“So, yes, it’s true that sanctions will hurt our economy, and it’s true that they may even push Putin to further escalate Russia’s aggression against Ukraine. That’s all really bad, but it’s not as bad as a future where national sovereignty is not respected. For the norm against territorial incursion to survive, everyone must forever know that we are willing to pay the cost to sanction.”
“Despite Western powers’ broad condemnation of and efforts to isolate Russia, the country has managed to maintain ties and partnerships elsewhere around the world. In April, the UN General Assembly voted on a resolution to suspend Russia from the Human Rights Council over its invasion of Ukraine. The resolution succeeded after it received a two-thirds majority of votes from member states with 93 nations voting in favor of Russia’s suspension from the body. But 24 of the body’s members voted against the action while 58 members abstained from the vote altogether.
Results of the UN vote signify the complexities of real-world diplomacy even in the face of war. Countries in Africa, South America, and Asia have increasingly sought to resist taking sides as the Russia-Ukraine war threatens to shape the world into political factions. But the West’s waning influence in other parts of the globe, combined with economic and political interests at stake, has resulted in many nations opting to maintain their independence when it comes to relations with Russia.
In Asia, where growing vigilance over China’s increasing influence is shared across borders, nations in the southeast and the south of the continent have expressed their intentions to remain on good terms with Russia in spite of the situation with Ukraine. Among Russia’s most loyal partners is India, with whom it has maintained a strong relationship since the Soviet Union’s backing of India during the 1971 war with Pakistan, even as India remained officially non-aligned during the Cold War.
Another factor behind their continued friendship is India’s reliance on Russia as a military arms supplier — from the 1950s to now the country has received an estimated 65 percent of firearms exports from the Soviet Union or Russia, according to the Stockholm International Peace Research Institute. India’s border disputes in the Himalayas with China, which triggered a bloody clash in 2020, is another motivating factor for India as Russia has functioned as an important mediator in the conflict with China.
China, another key Russian partner, has refrained from condemning Russia outright, instead asking for the warring countries to reach a peaceful resolution. In a March virtual meeting with France and Germany, President Xi Jinping called for “maximum restraint” on the issue and expressed concerns over the broader impact of sanctions on Russia. But some, like Herrera, doubt how far China will continue to toe the line if the situation worsens.
“China has not said they would not abide by the sanctions and they are so far going along with the sanctions against Russia,” Herrera said. A potential turning point, she said, could be Europe’s next sanctions, particularly any secondary sanctions it puts out, which will be “a big crossroads for China to decide whether to participate with those.”
But its ties with Russia could still end up serving China economically. President Vladimir Putin has stated Russia will “redirect” its energy exports to “rapidly growing markets” elsewhere to help buttress against sanctions, perhaps an effort to maintain support from its key ally.”
“mergers don’t just affect consumers: “The world has changed for those workers,” Warren said.”
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“Studies have shown that as markets become more concentrated, wages stagnate.”
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“Under Warren’s new bill, mergers over a certain size or that consolidate the market too much are forbidden. And consummated mergers that have harmed competition, workers, consumers, or competitors can be broken up.”
“The United States and its allies imposed unprecedented economic sanctions on Russia in the wake of its full-scale invasion of Ukraine. The swiftness and intensity of the penalties crashed the ruble, forced the Russian stock market to close, and sent Russians to line up at ATMs to withdraw dollars from their bank accounts.
The Russian economy was in free fall. Until it wasn’t, exactly.
The country’s central bank responded by sharply hiking interest rates to 20 percent and imposing strict capital controls. Those interventions, along with Russia’s still-intact ability to sell its oil and gas abroad, helped create a buffer against the economic chaos after the initial sanctions shock. The measures were “straight out of the country’s economic crisis playbook,” said Adam Smith, a partner at Gibson, Dunn & Crutcher, who worked on sanctions during the Obama administration.
The economic crisis playbook did its job, and calmed the immediate crisis. The ruble stabilized. That allowed Russia to declare victory over the sanctions onslaught. “The strategy of the economic blitz has failed,” Russian President Vladimir Putin said in April.
At least, that is what Russia would like to claim. Russia’s efforts to shore up its currency mask the profound economic disruptions and transformations that sanctions are unleashing within Russia right now. The West’s sanctions are isolating Russia, cutting it off from key imports that it needs for commercial goods and its own manufacturing to make its economy work. That means high-tech imports like microchips, to develop advanced weaponry. But it also means buttons for shirts.
Right now, there is “this false sense of stability,” said Maria Shagina, a visiting fellow at the Finnish Institute of International Affairs.
Russia is facing a deep recession, one the Bank of Russia says will be “of a transformational, structural nature.” The Finance Ministry has predicted the Russian GDP will shrink by about 8.8 percent in 2022. Inflation is expected to clock in as high as 23 percent this year. Russia is looking at a looming debt default. All of this will mean hardship for ordinary Russians, who are already seeing their real incomes shrink. Some tens of thousands have tried to flee, especially those in tech, prompting a potential “brain drain.” And these are the things we know; Russia will cease publishing a lot of economic data, a tactic, experts said, Moscow has used before to obscure the effects of sanctions.
These sanctions, said Yakov Feygin, a political economy expert at the Berggruen Institute, are pushing Russia — a modern economy, integrated around the globe — back decades and decades.
“They’ve stabilized it, they’ve taken emergency measures. That was to be expected. But that’s not going to help them in the long run,” Feygin said of Russia. “You’re not going to see people queuing for food for quite a bit. But with the current course of things, it’s still very possible.”
The US and European allies have continued to pile on more penalties, refining and sharpening the sanctions, all in an effort to ratchet up the pressure on Moscow. The EU has proposed a phase-out of Russian oil products, and depending on the final details, that might further erode the Kremlin’s lifeline. And the US could take additional steps, like threatening secondary sanctions that go after countries like China or India, to deter them from buying cheap Russian energy. That comes at a cost, and not just for Russia.
Even without more escalation, the sanctions regime against Russia is one of the most aggressive in history, untested on an economy of Russia’s size and as entangled in the global financial system.
Whether the sanctions are “working,” then, depends on what they are intended to achieve. One thing is clear: Over time, these sanctions will likely make it harder for Russia to rebuild its tanks, manufacture cruise missiles, and finance a war. It will also make it harder to produce food and make cars. And it still may not stop Russia from pursuing its campaign against Ukraine, all with unpredictable consequences for the rest of the world.”
“Over the course of the pandemic, the Treasury Department issued roughly $6 trillion, $2.7 trillion of which was monetized by the Federal Reserve. Americans were sent $5.1 trillion through various programs, including individual checks and unemployment bonuses. Overall federal debt has since risen by about $6 trillion.
This response assumes the 2020 recession was sparked by a demand shock leading to a fall in aggregate demand, rather than the strangling of aggregate supply caused by the pandemic and lockdowns. Under these circumstances, sending people and companies money was never likely to impact output. Instead, it greatly inflated demand for the durable goods still being produced.
Even by the Keynesian economic standards that prompt this sort of fiscal response, COVID-19 relief was larger than any “output gap”—the difference between what the economy is producing and the most it could produce. In March 2020, the gap was $2.3 trillion, and that year alone, the government spent $3 trillion through several relief bills.
In March 2021, Democrats passed the over-the-top $1.9 trillion American Rescue Plan. At the time, the projected output gap was $700 billion through 2023—the period when most of the spending would take place. As such, the bill was two or three times too big, especially considering the economy was mostly reopened and growing, with unemployment dropping fast from 14.8 percent the year before to 6 percent.”
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“Today, several new studies confirm that this bout of inflation is rooted in demand, not supply. That’s not to say supply-chain chokepoints, originally resulting from the global shutdown imposed by governments and a sudden shift away from services toward goods, played no role.
However, we wouldn’t have such large-scale supply-chain problems without the shutdowns followed by the aforementioned government-fueled increase in demand for durable goods. According to Robert Koopman at the World Trade Organization, artificially inflated demand accounted for as much as two-thirds of supply shortages.
Second, global supply chains are, obviously, global. If inflation were truly the product of supply-chain issues, we would witness roughly the same rates of inflation throughout the industrialized world. But we don’t. Most industrialized countries have lower levels of inflation than the United States. These other countries also implemented significantly lower amounts of COVID-19 spending.”
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“Today, all prices are rising, including wages (though for now at a lower rate), and the inflation is persistent. This is because of overblown fiscal and monetary policies. Tackling the problem requires strong Fed actions and significant fiscal restraint by Congress. Short of both, inflation will persist for much longer, inflicting disproportionate harm on the most economically vulnerable.
This also means that the recent calls to offset inflation with subsidies for gas, housing, child care, and more will require borrowed money. Since fiscal largesse is the source of the problem, and since these efforts make the affected markets more inefficient, the approach raises the risk of a great stagnation spiral.”