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Biden budget expects hot – but not overheating – economy heading into 2022 midterm elections

WASHINGTON – The budget officially released Friday by the White House hinges on an optimistic projection that the economy will grow at a rapid pace for the next two years, with inflation under control and unemployment falling to near pre-pandemic levels.

In its first budget, the Biden administration said the economy will grow at just north of 5% this year as the nation rebounds from the coronavirus pandemic. The White House sees robust growth continuing through the following year as well, with the economy expanding by 4.3% in 2022. The economy has not grown at a rate faster than 4% rate in more than 20 years. White House officials told reporters on Friday that these projections predate the rollout of the Biden administration’s full economic spending proposals and may therefore prove to be conservative estimates.

The budget also projects that the unemployment rate will fall from 6.1% as of April 2021 to 4.1% in 2022. The jobless rate was 3.5% in February 2020 before the pandemic pushed it up to 14.8% in April 2020.

All of these forecasts would set the table for a vibrant economy just ahead of the 2022 midterm elections, possibly bolstering Democrats’ shot at maintaining control of Congress despite tough odds. But numerous economists believe that predicting the economy’s performance coming out of the pandemic is very difficult, as there is little precedent for what the country has endured since early last year.

One part of the newly released budget that will likely face the most scrutiny is the White House’s estimate that this hot economy will not lead to a dramatic and sustained spike in inflation, despite a sharp uptick over the past two months. The administration says the consumer price index – the main measure of inflation – would increase by a little more than 2% every year over the next decade. Republicans have said that the Biden administration’s economic agenda would flood the economy with too much cash and lead to a surge of inflation that hurts the economy.

Recent reports appear to be somewhat skewed because the economy is reopening quickly after many parts of it were sluggish during the pandemic. Prices jumped 3.6% in April compared to one year ago, although policymakers including central bankers have said that will likely be transitory rather than permanent change. The University of Michigan Surveys of Consumers said Friday that consumers are bracing for an uptick in inflation to persist throughout the year but largely expect a healthy economic recovery.

The projections may give congressional Democrats a glimmer of hope in what is otherwise expected to be a difficult battle to maintain control of the House and Senate in the 2022 midterm elections. The Senate is evenly divided between the parties and Democrats only have a narrow margin in the House, meaning even a minor electoral setback could cost them control of Congress. They are swimming against the historical tide: The president’s party has lost seats in the House in every midterm election since 1938 with only two exceptions – 1998 and 2002, according to David Hopkins, a political scientist at Boston College.

Upbeat economic projections are common in White House budget proposals, but economists believe forecasting the next few years is very difficult. The pandemic delivered an enormous shock to the U.S. and global economies, and it is still unclear which sectors will return to pre-pandemic levels and which sectors might never return to normal.

“We are seeing waves of the virus continue globally, and in that world forecasting becomes highly uncertain,” said Constance Hunter, chief economist at KPMG. Hunter added that the uncertain state of congressional negotiations over the administration’s priorities further cloud the projections. “There are still many negotiations between now and the point we have legislation, and those negotiations will contract this plan not expand it.”

Biden’s approval rating has hovered around the mid-50s, but many political scientists think it will have to be above 60% for Democrats to retain control of Congress. It is unclear if even relatively robust economic growth can pull him over that threshold given the country’s deep partisan divides.

“There will be a lot of twists and turns between now and the election, but to the extent you’re running on impressive economic growth this has to be encouraging for them,” said Jim Manley, a former aide to Sen. Harry Reid, D-Nev. “If you look at history, the House is destined to change. But this has to make Democratic strategists optimistic. These are pretty good numbers.”

The economic projections are included as part of the White House’s release of a $6 trillion budget on Friday for the fiscal year that begins in October. That budget includes no major new spending proposals but reflects what the administration has already said it wants to advance, including a $2.3 trillion jobs and infrastructure plan, a $1.8 trillion education and families plan, and a $1.5 trillion discretionary spending plan for agencies like the Department of Defense.

The proposal kicks off negotiations between the White House and Congress over the federal budget, which must be agreed to avert a shutdown of the U.S. government.

Republicans and even some Democrats dispute the administration’s projections of a rosy economic rebound. These critics have pointed to rising inflation, as well as weaker-than-expected hiring and the continued growth of the federal debt. The administration’s economic projections are based in part on assuming some of their infrastructure and other domestic spending priorities as written are signed into law, which is far from clear given Biden’s negotiations with congressional Republicans over those priorities and Democrats’ narrow congressional majorities.

“We just got the most dramatic monthly inflation report in decades,” Senate Minority Leader Mitch McConnell, R-Ky., told CNBC on Friday.

Other parts of the administration’s economic projections could prove overly optimistic. The coronavirus continues to wreak havoc on global supply chains and dry up demand for U.S. exports. A new outbreak in Malaysia led to the announcement of a new lockdown this week, for instance, and coronavirus variants could pose further problems.

Conservatives also warn that the administration’s tax plans could slow growth. The administration has proposed increasing the corporate tax rate from 21% to 28%, while also imposing dramatically higher taxes on multinational corporations operating abroad. The White House has denied those plans will slow the growth rate, though Biden has said he’s willing to negotiate with Republicans on other alternatives.

Much of the next year in Washington could be defined by debates about government spending, but the economy’s performance could prove a major factor in the 2022 elections. And the White House is not alone in believing Biden could oversee a rapid economic rebound. The economic growth projections were squarely in line with the “blue chip” forecasters on Wall Street. The Wall Street forecaster Moody’s has said the economy will grow even faster than the White House suggested, projecting 7.4% growth in 2021. Moody’s and the White House have both forecast 4.3% growth for 2022, falling to a little above 2% in the year after that.

Published : May 29, 2021

By : The Washington Post · Jeff Stein

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DHS budget reflects a shift in U.S. immigration policy, border enforcement

WASHINGTON – President Joe Bidens immigration policy changes took shape Friday in a budget request that would eliminate border-wall funding, boost spending on care for unaccompanied migrant children to $3.3 billion and overhaul the way asylum seekers are handled at the Mexico border by dramatically increasing staffing to process their claims.

The budget would also increase internal oversight of U.S. Customs and Border Protection, set up a $30 million fund to assist migrant families separated during the Trump administration and more than double the resources available for a major increase in refugee admissions.

Lawmakers from both parties have expressed concern that Biden’s $52 billion request for the Department of Homeland Security leaves overall funding flat, despite a migration influx this spring that has sent border crossings to their highest levels in 20 years.

The administration also faced criticism from immigrant advocates Friday who expressed disappointment that Biden’s budget continues to fund tens of thousands of U.S. Immigration and Customs Enforcement detention beds, while maintaining a controversial program that deputizes state and local police to detain immigrants for deportation.

In a statement, Homeland Security Secretary Alejandro Mayorkas said the president’s budget “will invest in our broad mission set, including preventing terrorism; keeping our borders secure; repairing our broken immigration system; improving cybersecurity; safeguarding critical infrastructure; and strengthening national preparedness and resilience.”

“The Budget will provide DHS with the resources we need to keep our country safe, strong, and prosperous,” Mayorkas said.

Under Biden, immigration arrests and deportations have dropped to their lowest levels on record. But advocates for immigrants, who have praised Biden’s other moves on immigration, said they were concerned about the budget for ICE.

“President Biden’s proposed DHS budget today includes positive measures to increase accountability and oversight but fails to make a sharp enough break from the Trump administration’s wasteful and harmful spending on the detention and deportation machine,” said Naureen Shah, lawyer at the American Civil Liberties Union.

On the campaign trail, Biden said he would create a “fair and humane immigration system,” and he has revoked his predecessor’s controversial measures, such as the travel ban from countries with Muslim majorities, and limited immigration arrests to recent border crossers and people who pose a threat to national security and public safety.

But Mayorkas has said he is considering “significant changes” to the enforcement guidelines for ICE agents, and the proposed budget provides for robust enforcement: The budget projects that ICE would deport 167,420 immigrants in fiscal 2022, the same estimate as the prior year’s proposal, and would fund 32,500 detention beds, down from 34,000 the prior year.

A Biden administration official, speaking on the condition of anonymity to detail ongoing deliberations, said the president’s budget would reduce the total number of ICE beds and shift some of their use from detention to processing individuals for release into the community on “alternatives to detention,” such as case-management programs, so they can await a hearing in immigration court.

Mayorkas said at a budget hearing this week that he was “concerned about the overuse of detention” and was looking to expand alternatives.

The Biden administration also would add 100 new immigration judges, provide funding to reduce the backlog of 1.2 million cases in the immigration courts, and increase access to legal aid for children and families.

Immigration and Customs Enforcement’s proposed budget also would increase programs that deputize state and local law enforcement to assist ICE in enforcing immigration laws.

Biden had promised to “end the Trump administration’s historic use of 287(g) agreements,” named after the section of federal immigration law that authorizes them. Biden said on his campaign website that the programs “undermine trust and cooperation between local law enforcement and the communities they are charged to protect.” He promised to terminate all agreements the Trump administration signed and “aggressively limit” the use of these types of programs.

But ICE’s budget proposal said it expected the 287(g) program to “continue to increase in future years.”

“It’s a betrayal of the promises made on the campaign trail,” said Heidi Altman, director of policy for the National Immigrant Justice Center, an advocacy organization. “It’s a real lack of political courage.”

DHS signaled later Friday that part of the 287(g) language in the proposed budget is inaccurate and would change.

“This language does not reflect Administration policy and we are working to correct it,” DHS spokeswoman Marsha Espinosa said in a statement. “ICE still maintains authority over 287g, and we continue to exercise strict oversight and evaluate each of these agreements.”

The biggest change in Biden’s DHS budget is the elimination of $1.5 billion in border-wall funding. Biden has pledged not to add “another foot” to the former president’s signature project, and his administration’s decision to suspend construction activity has left a significant portion of last year’s appropriation unused.

Biden’s CBP budget would invest $660 million in new facilities for CBP’s Office of Field Operation, part of a plan that the administration says will modernize U.S. ports of entry and improve processing for legal trade and travel. Another new program would spend $2.1 million “to fund on-site clinicians to support employee resiliency and suicide prevention” at CBP.

Biden’s proposed budget would fortify U.S. Citizenship and Immigration Services, the agency that processes immigrants’ applications for citizenship, green cards and other legal benefits. His budget request would add more than 1,300 positions and $345 million to reduce backlogs, and process up to 125,000 refugee admissions next year.

The 2022 request also boosts DHS’s cybersecurity defense funding to $2.1 billion, a 5% increase, and provides $131 million to counter domestic terrorism and violent extremism, which the administration has identified as the most urgent lethal threat to the American public.

Published : May 29, 2021

By : The Washington Post · Nick Miroff, Maria Sacchetti

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Putin shows his support for Lukashenko as West moves to isolate Belarus

MOSCOW – Russian President Vladimir Putin offered a sweeping display of support Friday for his embattled ally in Belarus, as the West looked to further isolate Alexander Lukashenkos regime over its interception of a jetliner to arrest an opposition journalist.

Ameeting in the Black Sea resort city of Sochi served as a reminder of Russia’s role as a political and economic lifeline for Lukashenko, who has held power since 1994 but faced a wave of protests last year after an election that opposition groups and Western officials decried as rigged.

His pariah status deepened after Belarus claimed it had received a bomb threat for a Ryanair plane and scrambled a fighter jet to divert the flight – bound from Athens to Vilnius, Lithuania – to the airport in Minsk. Prominent dissident Roman Protasevich, who had been living in exile, was arrested upon landing and now faces a 15-year prison sentence in Belarus.

In Sochi, Putin made no immediate comments on possible steps to strengthen Russia’s commitments to Belarus. But the cozy body language and banter – even joking about swimming in the Black Sea – conveyed a message that Russia was fully behind Lukashenko.

“Thank you for coming to this meeting. We agreed on this even before the next round of . . . ” Putin said as he turned to Lukashenko, who jumped in to finish the sentence: “A surge of emotions.”

“Yes, a surge of emotions,” Putin agreed.

“We have things to talk about even without these events,” added Putin, who also made note of the forced landing in Austria of a plane carrying Bolivia’s President Evo Morales in 2013 – part of the hunt for fugitive U.S. secret-spiller Edward Snowden.

“There was nothing, just silence,” Putin said of the response.

Lukashenko, making a dig at his Western critics, said he had brought “documents” to brief Putin.

“I will show you so that you understand what is happening, so that you understand what kind of people these are,” Lukashenko said.

Belarus said there was an in-flight bomb threat against the Ryanair flight, but an email cited by Belarusian authorities containing the alleged threat was sent after the plane was diverted, Swiss email provider ProtonMail said Thursday, further challenging the Belarusian regime’s version of events.

Russia’s backing for Belarus also became clear when two European airlines, Air France and Austrian Airlines, said they had to cancel flights to Moscow on Thursday because Russian aviation authorities did not approve new flight paths that avoided Belarus’s airspace. EU leaders on Monday had barred the bloc’s airlines from flying over Belarus.

Dmitri Trenin, director of the Carnegie Moscow Center, wrote on Twitter that the Kremlin’s tolerance of Lukashenko “hurts Russian interests.”

“The longer it lasts, the more bad surprises it breeds,” he said.

Moscow and Minsk have drawn closer to each other as both countries’ relations with the West have grown increasingly adversarial. Putin is a known opponent of regime change and prefers the stability of a long-serving ruler in a country that has so far served as an allied buffer between Russia and the West. Belarus geographically separates Russia from the NATO states of Poland and Lithuania.

“The message to Putin is that there will be no more anti-Western Belarusian leader, which means that we must hold on to this,” Artyom Shraibman, a Minsk-based analyst, wrote in a commentary. “Any change of power in Minsk in such a situation is a drift towards the Belarusian rapprochement with Europe.”

Yet Lukashenko has occasionally irritated the Kremlin by resisting plans to implement a more than two-decade-old unification plan for the two countries and by cozying up to Europe when he saw it benefiting his rule.

When the two countries were unable to agree on a new price for the oil Russia sells to Belarus in December 2019, Moscow cut the supply. A few months later, Belarus ordered its first shipment of U.S. oil in an attempt to show Russia that it would be willing to turn to its rivals, if necessary.

But Lukashenko no longer has the leverage to play the East against the West. Much of the international community considers his regime illegitimate after last August’s election – in which he claimed a resounding victory – was widely denounced as rigged.

As mass anti-government protests broke out in the aftermath, Lukashenko turned to Putin for help. Putin backed him then, too, promising to dispatch a military contingent to aid Belarusian authorities, if necessary.

All 27 EU leaders agreed Monday to toughen sanctions on Lukashenko’s government. On Friday, the White House announced that Washington will reimpose full sanctions against nine Belrusian state-owned enterprises. Biden administration officials are also coordinating with allies in the European Union and elsewhere to develop “a list of targeted sanctions against key members” of Lukashenko’s regime, Press secretary Jen Psaki said.

E.U. foreign ministers suggested during informal talks Thursday in Lisbon that coming sanctions could target Belarus’s exports of oil products and potash, a primary cash-earner for the Lukashenko government. State-owned giant Belaruskali says it produces about 20 percent of the world’s supply of the potassium-rich salt used in fertilizers.

If Lukashenko does not make concessions, “one must assume that this will be just the beginning of a large and long spiral of sanctions,” German Foreign Minister Heiko Maas told reporters.

The Kremlin has said that could also harm the Russian economy.

“Clearly, considering the direct and indirect assistance we have been providing to our Belarusian partners on a permanent basis, of course, the certain unfavorable atmosphere around Belarus is complicating things,” Kremlin spokesman Dmitry Peskov said Thursday.

Published : May 29, 2021

By : The Washington Post · Mary Ilyushina, Isabelle Khurshudyan

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New Covid-19 cases and death toll continue to surge in Asean

Southeast Asia on Friday reported its highest number of new Covid-19 cases and deaths in over two weeks.

There were 27,656 new cases, higher than Thursday’s 24,952, while 479 people died, higher than the previous day’s 457.

The number of Covid-19 cases in Asean crossed 3.94 million, while total deaths rose to 77,669.

Malaysia reported a new high of infections for the fourth consecutive day with 8,290 new cases and 61 deaths on Friday, taking cumulative cases in the country to 549,514 and the death toll to 2,552.

The Malaysian government decided to announce a total lockdown countrywide from June 1-14 after new cases per day crossed 8,000. Over 72,000 patients are still hospitalised.

Cambodia reported 599 new cases and two nore deaths on Friday, taking cumulative cases in the country to 28,237 and the death toll to 196. So far, 20,900 people have been cured and discharged. Cambodia’s Ministry of Tourism on Friday announced the country’s readiness to welcome foreign tourists who have been vaccinated against Covid-19 to travel within the country.

Published : May 29, 2021

By : THE NATION