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It’s been a week of revisions and recalculations. We’ve had to change our understanding of why people are quitting their jobs and how long this stretch of everything getting more expensive will last.
Throw in an uncertain delay for the Democrats’ massive, fix-it-all bill to improve the social safety net and a sudden spike of Covid-19-related shutdowns.
The week is ending a lot differently than it began.
The Great Retirement. One of the more interesting and unexplained questions of the pandemic economy has been why, exactly, millions of Americans are not returning to the workforce.
CNN’s Allison Morrow and Anneken Tappe have one answer in their story with the incredibly catchy headline, “How millions of jobless Americans can afford to ditch work.”
Everyone who might wish they could ditch work immediately clicked.
But this is a story that busts the myth that too much government aid led fat-and-happy youngsters to lives of leisure.
Morrow and Tappe write:
People have left the workforce for myriad reasons in the past two years — layoffs, health insecurity, child care needs, and any number of personal issues that arose from the disruption caused by the pandemic. But among those who have left and are not able to — or don’t want to — return, the vast majority are older Americans who accelerated their retirement.
OK, boomers. Morrow and Tappe quote an economist, Aaron Sojourner, who says there were 3.6 million more people who left the workforce and were not looking to return in November 2021 compared with November 2020 – and 90% were Americans in the 55 and older category.
Over the entire pandemic, nearly 70% of the people who have left the workforce are older than 55, according to Goldman Sachs.
Many of the Americans quitting their jobs are young people hopping from one job to another with better pay – which suggests it’s less an issue of a labor shortage and more that businesses haven’t come to terms with the need to pay their workers more.
Evidence of discontent. There’s a new CNN poll conducted by SSRS this week, and it suggests a feeling of American angst about the economy. CNN’s Jennifer Agiesta writes that three-quarters of Americans are worried about the state of the economy in their own communities.
It’s the price of things. When people were asked to rate the severity of seven issues affecting the economy recently, they chose the following as major problems. Rising prices are a theme.
- Rising cost of food and other everyday items (80%).
- Disruption in the nation’s supply chain (79%).
- Rising cost of housing (77%).
- Rising cost of gas (70%).
- Labor shortages (67%).
- Government spending (67%).
- Coronavirus pandemic (65%).
About-face from the Fed on inflation. The Federal Reserve switched gears completely. It had previously held that price hikes were “transitory” but changed its outlook this week and is now expecting to end its programs to address the pandemic earlier than expected – and also hinted at multiple interest rate hikes to combat inflation.
“I think part of the reason behind our move today is to put ourselves in a position” to deal with inflation, said Jerome Powell, chairman of the Federal Reserve Board of Governors, during a news conference in Washington on Wednesday.
The Fed had already evolved on inflation in November. Its further evolution this month is proof that inflation continues to surprise some economists.
Misreading inflation for months. CNN’s Matt Egan writes that the Fed must achieve balance between combating inflation and avoiding starting a recession.
“Powell’s task is complicated by how wrong the Fed and the consensus among economists has been. Very few people expected inflation at the end of 2021 to be this hot for this long,” Egan says in his story, which also has an interesting section on what, exactly, the Fed can do to fight inflation.
Spoiler alert: It’s interest rate hikes.
But we don’t know what the future holds with the economy or with the pandemic that has affected it so completely. College kids sent home from campus and outbreaks of Covid-19 in professional sports leagues are proof that prediction is a flawed line of work.
Meanwhile, there’s what’s happening – or not happening – on Capitol Hill.
The future for Build Back Better is uncertain. There’s a struggle among Democrats about what they should do to help Americans and the planet. What they can accomplish will have major implications for how Americans live their lives.
The plan had always been to pass the bill this year.
But, unable to get final signoff from Sens. Joe Manchin of West Virginia and Kyrsten Sinema of Arizona, the plans are likely now on ice until the new year.
One major complication is that there are now two cost estimates for the proposal. One assumes some programs in the bill will end in a few years. Another, which nearly doubles the cost to $3 trillion, assumes the programs will continue indefinitely.
While it’s true that most Democrats want to keep the plans in place, it’s also true that these kinds of budget games have been used previously to pass tax cuts by Republicans.
Parents will, for now, see less money next year. The bottom line is that Manchin has a price tag in his head – $1.75 trillion – and it will be very difficult for Democrats to fit their wish list in under that line.
That also means most parents, who have been getting monthly checks from the government, will see those cut next month since one temporary program Democrats had hoped to expand – enhanced tax credits for families with children, which were first enacted under the coronavirus relief bill – will expire until they can find a way to get them going again.
Ending the enhanced credit is fine by Manchin, who reportedly wants to “zero it out,” at least from this bill. But it’s the latest in a long list of his gripes that Democrats have dealt with. That enhanced credit – which pays up to $3,600 per child (many payments are less) – is the centerpiece of their efforts to cut down on child poverty.
Other issues over the Build Back Better bill remain between Manchin and the White House. That means Democrats’ efforts to combat climate change, ensure universal pre-K and tackle much more end the week in a much different place than intended.