Supply Chain Hurdles Will Outlast Covid Pandemic, White House Says – The New York Times
The coronavirus pandemic and its ripple effects have snarled supply chains around the world, contributing to shipping backlogs, product shortages and the fastest inflation in decades.
But in a report released Thursday, White House economists argue that while the pandemic exposed vulnerabilities in the supply chain, it didn’t create them — and they warned that the problems won’t go away when the pandemic ends.
“Though modern supply chains have driven down consumer prices for many goods, they can also easily break,” the Council of Economic Advisers wrote. Climate change, and the increasing frequency of natural disasters that comes with it, will make future disruptions inevitable, the group said.
White House economists analyzed the supply chain as part of the Economic Report of the President. The annual document, which this year runs more than 400 pages, typically offers few new policy proposals, but outlines the administration’s thinking on key economic issues facing the country, and on how the president hopes to address them.
This year’s report focuses on the role of government in the economy, and calls for the government to do more to combat slowing productivity growth, declining labor force participation, rising inequality and other trends that long predated the pandemic.
“The U.S. is among and remains one of the strongest economies in the world, but if we look at trends over the last several decades, some of those trends threaten to undermine that standing,” Cecilia Rouse, chair of the Council of Economic Advisers, said in an interview. The problem is in part that “the public sector has retreated from its role.”
The report dedicates one of its seven chapters to supply chains, noting that the once-esoteric subject “entered dinner-table conversations” in 2021. In recent decades, Ms. Rouse and the report’s other authors write, U.S. manufacturers have increasingly relied on parts produced in low-cost countries, especially China, a practice known as offshoring. At the same time, companies have adopted just-in-time production strategies that minimize the parts and materials they keep in inventory, in an attempt to maximize returns to shareholders.
The result, the authors argue, are supply chains that are efficient but brittle — vulnerable to breaking down in the face of a pandemic, a war or a natural disaster.
“Because of outsourcing, offshoring and insufficient investment in resilience, many supply chains have become complex and fragile,” they write, adding: “This evolution has also been driven by shortsighted assumptions about cost reduction that have ignored important costs that are hard to turn into financial measures, or that spilled over to affect others.”
In the report, the administration cited its efforts to identify weaknesses in supply chains for key products like semiconductors, electric-vehicle batteries, certain minerals and pharmaceutical products, and to bolster American manufacturing through expanded federal purchasing and other investment.
“The public sector can be a partner of the private sector, rather than a rival,” the report said.
And in a blog post Thursday, Sarah Bianchi, the deputy U.S. trade representative, said that trade negotiators had been working with officials in Canada, Mexico, the European Union, South Korea, Japan, Britain and elsewhere to identify and address bottlenecks in supply chains.
But some economists have noted that making supply chains more resilient could carry its own costs, making products more expensive when inflation is already a major concern.
Adam S. Posen, the president of the Peterson Institute for International Economics in Washington, said the pandemic and Russia’s invasion of Ukraine might lead companies to locate at least some of their supply chains in places that were more politically stable and less strategically vulnerable. But pushing companies to duplicate production could waste taxpayer dollars and introduce inefficiencies, raising prices for consumers and lowering growth.
“At best you’re paying an insurance premium,” he said. “At worst you’re doing something for completely political reasons that’s very economically inefficient.”
What is inflation? Inflation is a loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation and toys.
What causes inflation? It can be the result of rising consumer demand. But inflation can also rise and fall based on developments that have little to do with economic conditions, such as limited oil production and supply chain problems.
Where is inflation headed? Officials say they do not yet see evidence that rapid inflation is turning into a permanent feature of the economic landscape, even as prices rise very quickly. There are plenty of reasons to believe that the inflationary burst will fade, but some concerning signs suggest it may last.
Is inflation bad? It depends on the circumstances. Fast price increases spell trouble, but moderate price gains can lead to higher wages and job growth.
How does inflation affect the poor? Inflation can be especially hard to shoulder for poor households because they spend a bigger chunk of their budgets on necessities like food, housing and gas.
Can inflation affect the stock market? Rapid inflation typically spells trouble for stocks. Financial assets in general have historically fared badly during inflation booms, while tangible assets like houses have held their value better.
Other economists have emphasized that global supply chains are not always a source of fragility — sometimes they can be a source of resilience, too.
Ngozi Okonjo-Iweala, the director general of the World Trade Organization, said in an interview that the world had been seeing a trend toward the decentralization of manufacturing and production, in which supply chains were moving out of China into Vietnam, Laos, Cambodia, Bangladesh, Ethiopia and other countries. That is an opportunity to diversify supply chains and bring poorer countries into the global trading system, allowing them to reap the benefits of globalization, too, she said.
Rather than reeling in supply chains to concentrate them in developed countries, she said, businesses are doing more “nearshoring” — shifting to low-cost but less distant countries — as well as pursuing risk-mitigation strategies like building up inventory.
Ms. Rouse, the White House economic adviser, said that while it could make sense to promote increased domestic production of some critical components such as computer chips, the Biden administration was not pushing to reverse offshoring entirely.
“We don’t need to make everything here,” she said. “We understand that would be excessively costly and unnecessary.”
But despite their emphasis on the public sector’s role in the economy, the White House economists recommended only modest steps that the federal government could take to strengthen supply chains. They suggested that the government help aggregate and disseminate data that could make it easier for companies to understand their supply chains and identify weaknesses. And they said the government could encourage domestic production of products that were vital for national security or other core interests. Independent experts said those steps could be useful, but were unlikely to solve the problems outlined in the report.
“The short answer is there’s no easy answers,” said Chad P. Bown, a trade economist and senior fellow at the Peterson Institute.
Former Trump AG Bill Barr joins new business lobbying group that aims to target Biden regulations
Former Attorney General Bill Barr will help to lead a new group formed by a business lobbying organization that aims to be an alternative to the U.S. Chamber of Commerce, the massive advocacy group that has fallen out of favor with some Republicans.
Barr will be chair of an advisory board for a project called the Center for Legal Action, he told CNBC in an interview. The group is part of the American Free Enterprise Chamber of Commerce, the business lobbying group that launched last year as a possible rival to the chamber.
The American Free Enterprise Chamber of Commerce boasts of being a business lobbying group that fights “against outdated regulations, future-killing tax policies, and the corporate cronyism and backroom DC deal making that close down our economic future,” according to a memo pitch to potential members.
Barr’s decision to join with the new group comes as some Republicans on Capitol Hill have turned their backs on the Chamber of Commerce after it started to favor endorsing Democrats running for House seats. The business lobbying behemoth moved away from predominantly supporting Republicans in recent years after former president Donald Trump embraced trade protectionism, bashed certain companies for their social stances and tried to overturn the 2020 election.
Barr, for his part, drew the ire of the former president and many of his GOP allies when he said evidence did not back Trump’s claims that fraud cost him the presidential election.
House Speaker Kevin McCarthy, R-Calif., and House Majority Leader Steve Scalise, R-La., are among the powerful GOP members who have distanced themselves from the original chamber.
In a statement to CNBC provided by the new group, McCarthy said it “is an important tool to ensure regulators operate fairly, efficiently, and without burdening America’s entrepreneurs and small businesses.”
Scalise in a separate statement to CNBC provided by the business lobbying organization said, “The American Free Enterprise Chamber of Commerce creating the Center for Legal Action is welcome news to House Republicans.”
The new group aims aims to challenge — at times in court — regulations put in place by the Biden administration. Barr will chair the project’s advisory board, in support of the chairman Terry Branstad and CEO Gentry Collins.
Branstad was a longtime Iowa governor and Trump’s U.S. ambassador to China. Collins was once a political director for the Republican National Committee.
In his role, Barr will advise the Center for Legal Action on the best litigators to hire, he explained to CNBC. He will also help to develop the organization’s overall legal strategy.
The “CLA will provide congressional testimony, initiate litigation, file amicus briefs, and support lawsuits brought by other parties in important regulatory and constitutional cases,” the American Free Enterprise Chamber of Commerce said in a statement.
Barr would not say who he aims to recruit from the legal community.
He noted that the newly formed project would engage on the Securities and Exchange Commission’s proposed climate-risk disclosure rule. If the rule is enacted, public companies would have to disclose the carbon emissions that are part of their operations, as well as the climate risks their businesses face.
Collins would not say how much the organization is investing into the new project. But he told CNBC that the group has been recruiting business members “at a rate of more than 1,000 a month for almost a year now.”
“As we’ve done that, one of the principal challenges that we hear from businesses of all sizes around the country is regulatory overreach threatening our business, threatening our industries and threatening our overall economy,” Collins said.
Trump faces deposition in New York AG Letitia James’ fraud lawsuit
Donald Trump said he is being deposed Thursday in New York City as part of the state attorney general’s $250 million civil lawsuit alleging widespread fraud by the former president and his company.
Trump announced on social media overnight that he had “just arrived in Manhattan for a deposition in front of” New York Attorney General Letitia James as part of the sweeping lawsuit.
In another post Thursday morning, Trump said he was “heading downtown” to be deposed. He accused James of leaking that the appointment was scheduled at 9:30 a.m. ET.
His trip marks the second time in less than two weeks that he has traveled to the Empire State to respond to court actions against him. The ex-president faces multiple criminal and civil proceedings as he makes a third bid for the Republican presidential nomination.
Trump previously flew from his home state of Florida to New York to surrender to authorities following his indictment in a separate criminal case centered on hush money payments made before the 2016 presidential election. The former president pleaded not guilty to 34 counts of falsifying business records in that case, which is being prosecuted by Manhattan District Attorney Alvin Bragg.
Trump is “not only willing but also eager to testify before the Attorney General today,” his attorney, Alina Habba, told CNBC in a statement. “He remains resolute in his stance that he has nothing to conceal, and he looks forward to educating the Attorney General about the immense success of his multi-billion dollar company.”
James’ office did not immediately respond to a request for comment.
James filed the civil fraud lawsuit last September against Trump, three of his adult children, the Trump Organization and others. The suit accuses Trump of repeatedly overstating the values of his assets in statements to banks, insurance companies and the IRS in order to obtain better loan and tax terms.
No shield for Trump in rape accuser’s case as court declines to rule
A Washington, D.C., appeals court on Thursday declined to shield Donald Trump from the first of two civil defamation lawsuits by E. Jean Carroll, a writer who said the former U.S. president raped her nearly three decades ago.
The district’s highest local court, the Court of Appeals, said it did not have enough facts to decide whether Trump deserved immunity, after he accused the former Elle magazine columnist in June 2019 of lying about the alleged encounter.
A ruling that Trump was acting as president, and not in his personal capacity, would have immunized him and doomed Carroll’s first lawsuit because the government could substitute itself as the defendant, and the government cannot be sued for defamation.
The court sent the case back to the 2nd U.S. Circuit Court of Appeals in Manhattan, which had last September asked the Washington court for guidance on local law.
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