Job Growth, the International Monetary Fund, and OPEC

Tax Policy:

October 7: Why defunding IRS auditors won’t be easy GOP promise to keep

Republicans heading into November's midterm elections are talking a big game on the IRS, promising to take back the $80 billion in agency funding provided by Democrats and scuttle plans to hire what the GOP has characterized as an army of new auditors. House GOP Leader Kevin McCarthy says the first bill a new Republican majority will pass if it wins control of the House will be one repealing the new IRS agents.

“Republicans are openly vowing that their number one priority if they retake power is to delay Americans’ tax refund checks and make it even easier for millionaires to cheat on their taxes,” Rep. Bill Pascrell (D-N.J.) said in a statement to The Hill. "After years of deliberate Republican sabotage of the IRS, the Inflation Reduction Act will finally give IRS resources to process returns faster, answer the phone, and crack down on big business tax cheats."

The figure of 87,000 new IRS auditors comes from last year's Treasury Department compliance report, which found that $80 billion could pay for 86,852 new IRS hires. Due to an aging workforce, the IRS estimates it will need to hire 52,000 employees over the next six years to maintain current levels, which are more than 10 percent lower than they were a decade ago, according to IRS data.

The decline in tax enforcement has vastly increased the estimated revenue lost each year to underpayments - the IRS puts the figure as high as $1 trillion - increasing a reliance on deficit spending that Republicans have long decried. There are polls that suggest the IRS isn't the public demon suggested by the GOP rhetoric.

Economic News/Policy: 

October 11: I.M.F. Warns ‘Worst Is Yet to Come for World Economy

The International Monetary Fund said on Tuesday that the world economy was headed for "Stormy waters" as it downgraded its global growth projections for next year and warned of a harsh worldwide recession if policymakers mishandle the fight against inflation.

The dark assessment was detailed in the fund's closely watched World Economic Outlook report, which was published as the world's top economic officials traveled to Washington for the annual meetings of the World Bank and the I.M.F. The gathering comes at a fraught time, as persistent supply chain disruptions and Russia's war in Ukraine have led to surging food and energy prices over the last year, forcing central bankers to raise interest rates sharply to cool off their economies.

"In short, the worst is yet to come, and for many people, 2023 will feel like a recession," the I.M.F. report said.

The I.M.F. maintained its most recent forecast that the global economy would grow by 3.2 percent this year but now projects that it will slow to 2.7 percent in 2023, slightly lower than its previous estimate.

"The risks are accumulating," Pierre-Olivier Gourinchas, the I.M.F.'s chief economist, said in an interview where he described the global economy as weakening.

The I.M.F. defines a "Technical recession" as an economy contracting for two consecutive quarters. The I.M.F. report detailed how the economies of the United States, the euro area, and China are in various states of slowing, causing ripple effects around the world.

In the United States, inflation and rising interest rates are sapping consumer spending power, and activity in the housing sector is slowing as mortgage rates rise. Europe has been heavily reliant on Russia for energy and is facing sharp increases in oil and gas prices as additional sanctions go into effect later this year, just as the weather turns colder. Ongoing lockdowns in China to prevent the spread of the coronavirus continues to be a drag on its economy.

As the pain piles up in rich and poor countries alike, policymakers are under increasing pressure to blunt the fallout, with central bankers — including the Federal Reserve — facing calls to curtail interest rate increases. Still, the I.M.F. warned that doing too little to combat inflation would make the fight more costly later. It also said that governments should avoid enacting fiscal policies that will make inflation worse.

In its report, the I.M.F. acknowledged that its forecasts face considerable uncertainty. Halting Russian gas supplies to Europe could depress its economies, debt crises in developing countries could worsen and the pandemic could come roaring back. Global output may sink below 2 percent next year.

October 10: Jamie Dimon warns the US faces likely recession next year

The head of the largest U.S. bank said Monday he believes a combination of rising interest rates and geopolitical tensions will drive the U.S. and global economies into recession before the end of 2023. "These are very, very serious things which I think are likely to push the U.S. and the world - I mean, Europe is already in recession - and they're likely to put the U.S. in some kind of recession six to nine months from now," JPMorgan Chase CEO Jamie Dimon said at a Monday event hosted by CNBC. While Dimon said the U.S. economy remained strong at the moment, he expressed fears it would slide into a recession at some point next year as the Federal Reserve boosts interest rates to fight rising inflation.

The prevalence of high prices combined with rising interest rates and looming recession across much of the rest of the world, Dimon warned, make for a "Very serious" obstacle for the U.S. "It can go from very mild to quite hard," Dimon said of a potential recession, "And a lot will be reliant on what happens with this war" between Russia and Ukraine.

Dimon's warning comes days before the Labor Department is set to release new inflation data, which could play a significant role in how much further the Fed moves to slow the economy.

The Fed has been raising its baseline interest rate range at a rapid pace since March in a bid to reduce stubbornly high inflation. Financial markets have also faltered throughout the year as the Fed tamps down on investment and incentivizes saving. Fed officials were hopeful they could boost interest rates fast enough to bring inflation down without causing an economic downturn.

October 9: Economy Week Ahead: Inflation and Retail Sales in Focus

Wednesday: The Labor Department releases a report on the prices that suppliers charged businesses and other customers in September. The producer-price index fell in August and July from the prior months. In August, it rose 8.7% from the same month a year earlier, a slower pace than earlier in the summer.

The Federal Reserve releases minutes from its September monetary-policy meeting, at which officials approved the third consecutive 0.75-percentage-point increase in the benchmark federal-funds rate as it tries to bring down high inflation. The minutes could provide additional details about the discussions over the decision.

Thursday: The Labor Department releases its consumer-price index for September, a crucial reading of U.S. inflation trends that measure what consumers pay for goods and services. The consumer-price index rose 8.3% in August from the same month a year earlier, down from annual rates of 8.5% in July and 9.1% in June, which was the highest inflation rate in four decades.

The Labor Department also releases the number of applications for unemployment benefits in the week ended Oct. 8. Initial jobless claims, a proxy for layoffs, increased to a seasonally adjusted 219,000 in the week ended Oct. 1, a level that remained close to the prepandemic 2019 average of 218,000.

Friday: The Commerce Department releases September retail sales. Retail sales, which measure spending at stores, online, and in restaurants, rose 0.3% in August from the prior month. The gain outpaced inflation and was a reversal from a July decline.

The University of Michigan releases its preliminary reading of consumer sentiment for October. Consumer sentiment rose slightly in September to its highest level in five months as a decline in energy prices lowered inflation expectations. The Commerce Department releases manufacturers’ and trade inventories for August. In July, inventories were up 0.6% from the prior month and 18.4% from July 2021.

October 9: Yellen: OPEC production cuts will hurt the economy

Treasury Secretary Janet Yellen in a new interview expressed worry that OPEC+ countries' decision to cut oil production will hurt the global economy, especially in developing countries. The oil-exporting alliance, which includes the 13 OPEC nations and 11 non-members including Russia, made the production cut announcement last Wednesday.

Biden faced criticism from some over the trip given Saudi Arabia's human rights record, namely the death of journalist and Saudi dissident Jamal Khashoggi, and Riyadh announced a production increase following Biden's visit that was smaller than hoped for by his administration.

Yellen declined to outline to the Financial Times any steps U.S. officials would take to counter OPEC+'s production cut, which threatens to cause an increase in domestic gas prices.

The OPEC+ cut could boost price levels and improve Russia's oil exporting revenue, providing a new obstacle for the group of wealthy democracies' attempts to weaken Moscow's financial position.

"Holding down prices is something that's particularly helpful to developing countries that are suffering from high energy prices," Yellen said.

The Biden administration has repeatedly released weapons packages for the war-torn country under presidential drawdown authority, most recently unveiling a $625 million security package last Tuesday that includes more High Mobility Rocket Artillery Systems.

October 7:  Biden Warns Inflation Will Worsen if Republicans Retake Congress

President Biden laced into Republicans on Friday for trying to enact policies that would make "Every kitchen table cost" go up while lavishing tax cuts on big corporations, shedding his usual tone of bipartisanship a month ahead of the midterm elections.

In a speech before factory workers at a Volvo manufacturing facility, Mr. Biden defended his economic record and accused Republicans of political hypocrisy for seeking to reap the benefit of federal funds made available by legislation that they had opposed.

He also laid out the stakes of the upcoming elections, bluntly warning that Republicans will try to scale back Medicare and Social Security benefits if they win control of Congress.

He accused Republicans of rooting against America's economic success. Despite his sharper tone, Mr. Biden said that he remained hopeful that bipartisan cooperation could be possible after the election.

“That’s my hope, that after this election, there will be a little return to sanity,” Mr. Biden said. “That we’ll stop this bitterness that exists between the parties and have people working together.”

October 7: Economy adds 263K jobs in September, unemployment ticks down

The U.S. added 263,000 jobs in September and the unemployment rate fell to 3.5 percent, according to data released Friday by the Labor Department. The September employment report showed job growth continuing to slow from a torrid pace earlier in the year, but remaining strong as the economy powers through high inflation and rising interest rates. Economists expected the U.S. to have added roughly 250,000 jobs last month and the unemployment rate to remain at 3.7 percent, according to consensus estimates.

The construction and manufacturing sectors also added 19,000 jobs and 22,000 jobs respectively last month even amid rising interest intended to crater activity in those sectors. The U.S. had added an average of 420,000 jobs each month in 2022 after gaining roughly 561,000 jobs each month last year, all while wage growth remained above 5 percent annually.

Average hourly earnings rose 0.3 percent in September when adjusted for inflation and rose 5 percent over the past 12 months, down from an annual rate of 5.2 percent last month. The Fed's rate hikes have pushed mortgage rates to the highest level since before the 2007-08 recession, slowing the housing market and weighing on other interest-rate-sensitive sectors of the economy.

October 6: IMF predicts darkening outlook for global economy, $4 trillion loss

The International Monetary Fund is predicting an increasingly gloomy global economic outlook for the coming years, projecting a $4 trillion loss in global output from now to 2026. Kristalina Georgieva, the managing director of the IMF, said in remarks at Georgetown University on Thursday that the world is seeing a "Fundamental shift" in the global economy from relative predictability to greater uncertainty.  She said the IMF predicted a strong economic recovery from the COVID-19 pandemic as global growth reached 6.1 percent in 2021. 

She said the IMF will downgrade its global growth projection in its World Economic Outlook next week. Georgieva's comments come as Treasury Secretary Janet Yellen is set to speak at the Center for Global Development on Thursday about the challenges facing the global economy and the role of multilateral development banks.

Georgieva said the $4 trillion loss expected through 2026 is equivalent to the size of the German economy, which she said is a "Massive setback."

The risks of recession are rising, and countries accounting for one-third of the global economy will experience at least two consecutive quarters of contraction this year or next year, the technical definition of a recession, she said.

October 6: The Fed Wants to Quash Inflation. But Can It Do It More Gently?

Central bankers have been raising rates rapidly to temper demand and bring prices under control. Federal Reserve officials have raised rates five times this year as they try to beat back the worst inflation in 40 years, and the past three moves have been especially rapid. That has prompted Wall Street and policymakers to contemplate when the Fed might start to slow down.

Jerome H. Powell, the Fed chair, has signaled that moving less rapidly will be appropriate at some point in the future, though he has declined to put a date on when that might begin. On Thursday, Lisa D. Cook, one of the Fed's newest governors, echoed that stance, saying that "At some point" the central bank will decide to "Slow the pace of increases while we assess the effects of our cumulative tightening on the economy and inflation."

Based on the Fed’s latest projections, “participants expected an additional 100 to 125 basis points of tightening by the end of the year, which means either a couple of 50-basis-point hikes at our remaining two meetings or 75 basis points in November and 50 basis points in December,” Mr. Waller said. “I imagine we will have a very thoughtful discussion about the pace of tightening at our next meeting.”

Markets are still betting heavily on a three-quarter point move in November, based on pricing. They then expect the Fed to slow its increases to half a point in December, roughly matching the rate path implied in the central bank’s latest Summary of Economic Projections.

October 6: Yellen warns of acute ‘spillover’ effects of interest rate hikes on developing countries

Treasury Secretary Janet Yellen on Thursday acknowledged the negative effects that continued interest rate hikes by the U.S. Federal Reserve and other central banks are having outside U.S. borders. "For major economies facing high inflation, the immediate task is to return to an environment of stable prices. Central banks bear the prime responsibility. But it is important to recognize that macroeconomic tightening in advanced countries can have international spillovers," Yellen said at an event Thursday at the Center for Global Development. Her remarks come after a highly critical report from a United Nations economic body earlier in the week that urged against continued rate hikes that spelled trouble for the global economy.

The report found that Fed rate hikes could be altogether ineffective against the specific type of inflation that global markets are now experiencing. The comments from Yellen also come after the International Monetary Fund on Thursday warned of a "Darkening global outlook," and other voices in the global economy have also expressed displeasure with the Fed's rate hikes.

Washington insider and former Democratic Treasury Secretary Larry Summers said in a Washington Post editorial on Wednesday that large creditor countries in the Group of 20 should suspend debt service for the poorest countries while making sure many countries "Restructure their debt." While Summers has consistently argued for rate hikes by the Fed, some commentators have criticized his advocacy, saying it's too domestically focused.

Energy and Environmental Policy/News:

October 6: OPEC+ cuts prompt calls to reevaluate US-Saudi ties

When Biden met with Saudi Crown Prince Mohammed bin Salman in July, it was viewed by many as a necessary evil that could potentially lead to increased OPEC output and lower gas prices.

"From unanswered questions about 9/11 & the murder of Jamal Khashoggi to conspiring w/ Putin to punish the US w/ higher oil prices, the royal Saudi family has never been a trustworthy ally of our nation. It's time for our foreign policy to imagine a world without their alliance," Sen. Dick Durbin, the number two Democrat in the Senate, tweeted Thursday.

"The Saudis need us more for weapons than we need them. President Biden should make it clear that we will cut off weapons if OPEC+ doesn't reverse the decision to make drastic cuts in production," Rep. Ro Khanna (D-Calif.) said in a statement to The Hill.

Sen. Bill Cassidy, a vocal critic of Biden's energy policies, told The Hill that critics of the Saudi government are "Upset because having consciously made ourselves dependent upon them, they're not bending to our will" despite Biden taking office "Promising an adversarial relationship."

Ahead of Biden's Saudi trip over the summer, the White House was careful to portray the president as not meeting directly with bin Salman, who the intelligence community determined approved Khashoggi's killing in Istanbul in 2018. American military support for Saudi Arabia dates back to World War II when President Franklin Roosevelt and King Abdul Aziz reached an agreement under which the U.S. would provide security backing in exchange for access to Saudi oil.

In the meantime, Sarah Leah Whitson, executive director of the nonprofit Democracy for the Arab World Now said, despite the calls to sever the business relationship with the Saudis, the American defense industry is likely to stiffly resist any attempts to unwind it. In the meantime, she said, the Saudis would likely find alternate sellers to replace much of the lost arms sales to the U.S. An end to arms sales "Is not just a punishment for Saudi Arabia. It's a punishment for a very powerful defense industry that has extremely close ties to the Biden administration," she said.

October 5: OPEC Moves Toward Cut In Oil, Threatening To Send Gas Prices Higher

A coalition of oil-producing nations led by Russia and Saudi Arabia announced Wednesday it will slash oil production by 2 million barrels per day, in a rebuke to President Biden that could push up gas prices worldwide, worsen the risk of a global recession and bolster Russia in its war in Ukraine. American consumers could also be strained by higher gas prices, potentially imperiling the Biden administration's determination to lower gas costs ahead of the 2022 midterm elections.

"The intention of the OPEC Plus cut was to break the fall in crude prices since the summer," said Bob McNally, an energy analyst at the Rapidan Energy Group.

Russia relies on gas and oil sales for a large portion of its budget and had pushed for the production cut, which will enable Moscow to sell oil for higher prices on the global market, generating more revenue for its war and troop mobilization.

"A large supply cut would delight Moscow, which would benefit from both stabilized if not higher crude prices and an implicit sign of solidarity from its OPEC Plus colleagues as it braces for looming E.U. oil sanctions‚," McNally said before the cut was announced.

Before the OPEC Plus meeting, gas prices were already up sharply in some areas of the United States where there are several hotly contested congressional races, as well as close races for governor. The potential production cuts by OPEC Plus suggest the United States may not be able to restock at the lower prices administration officials had hoped.

October 5: OPEC+ announces 2 million-barrel production cut

The Organization of the Petroleum Exporting Countries and its oil-exporting allies announced a 2 million barrel per day cut in oil production Wednesday, bucking months of pressure from Washington to increase production and potentially spiking gas prices again. The announced cut is roughly equivalent to 2 percent of global supplies. The cut announced by OPEC+ is about twice the amount the U.S. has been releasing daily from the strategic petroleum reserve.

It’s unclear what direct impact the cut will have on domestic gas prices, but it could prompt an increase weeks before the midterms after the Biden administration has touted lower prices recently. Initial reports increased the price of oil by about $3 a barrel Wednesday morning. Prices have fallen from about $120 a barrel in June to around $80 a barrel amid concerns about a potential global recession. 

Meanwhile, an OPEC+ production cut could also benefit Russia by propping up the Kremlin's own petroleum revenues before European Union sanctions are set to take effect in December.

"President Biden should make it clear that we will stop supplying the Saudis with weapons and air parts if they fleece the American people and strengthen Putin by making drastic production cuts," Rep. Ro Khanna (D-Calif.) said in a statement.

ICYMI: 

October 7: What Biden’s marijuana order does and doesn’t do

President Biden on Thursday announced mass pardons for federal marijuana possession, a step long sought by advocates and the most significant action on marijuana his administration has taken to date. Possession of marijuana is a misdemeanor punishable by up to one year in jail and a minimum fine of $1,000 for a first conviction.

"There are thousands of people who have prior federal convictions for marijuana possession, who may be denied employment, housing, or educational opportunities as a result. My action will help relieve the collateral consequences arising from these convictions," Biden said in a statement.

Currently, 37 states and the District of Columbia have legalized medical marijuana, and 19 states have legal adult-use marijuana. Even as states moved toward greater acceptance, the federal government has continued to focus on prohibition, treating marijuana as a dangerous illegal drug with no potential benefits.

Andrew Freedman, executive director of the Coalition for Cannabis Policy, Education and Regulation said Biden's apparent evolution on marijuana could be the catalyst for Congress to act. Biden ordered the Departments of Justice and Health and Human Services to conduct a review of whether to reschedule marijuana.

October 6: Biden to pardon all federal offenses of simple marijuana possession

President Biden will pardon everyone who has been convicted of simple possession of marijuana under federal law, the White House announced Thursday. "There are thousands of people who have prior federal convictions for marijuana possession, who may be denied employment, housing, or educational opportunities as a result. My action will help relieve the collateral consequences arising from these convictions," Biden said in a statement.

The announcement represents the most significant action on marijuana the Biden administration has taken to date - and a major step towards decriminalization. Marijuana is illegal under federal law, even as states have moved toward legal use for recreational and medical purposes.

Administration officials told reporters the pardons could benefit about 6,500 people, though officials said there is nobody in federal prison for simple marijuana possession. Biden is asking the secretary of Health and Human Services and the attorney general to "Expeditiously" review how marijuana is scheduled under federal law. Marijuana is a Schedule I drug, meaning it is in the same category as drugs like heroin and LSD. According to the federal government, it has a high potential for abuse and no accepted medical value.

For Fun: 

October 11: Ancient Mars May Have Been Teeming With Life, Until It Drove Climate Change That Caused Its Demise

If there ever was life on Mars - and that's a huge "If" - conditions during the planet's infancy most likely would have supported it, according to a new research study led by scientists from the University of Arizona. Today Mars is dry and extremely cold, with a tenuous atmosphere. 

Most Mars experts agree that the planet started with an atmosphere that was much denser than it is today. Rich in carbon dioxide and hydrogen, it would have likely created a temperate climate that allowed water to flow and, possibly, microbial life to thrive, according to Regis Ferrière, a professor in the University of Arizona Department of Ecology and Evolutionary Biology and one of two senior authors on the paper.

The authors are not asserting that life existed on early Mars, but if it did, Ferrière said, "Our study shows that underground, early Mars would very likely have been habitable to methanogenic microbes."

Early Mars would have been very different from what it is today, Ferrière said, trending toward warm and wet rather than cold and dry, thanks to large concentrations of hydrogen and carbon dioxide - both strong greenhouse gases that trap heat in the atmosphere.

“We think Mars may have been a little cooler than Earth at the time, but not nearly as cold as it is now, with average temperatures hovering most likely above the freezing point of water,” Ferrière said. "While current Mars has been described as an ice cube covered in dust, we imagine early Mars as a rocky planet with a porous crust, soaked in liquid water that likely formed lakes and rivers, perhaps even seas or oceans."

NASA's Curiosity rover and the European Space Agency's Mars Express satellite have detected elevated levels of methane in the atmosphere, and while such spikes could result from processes other than microbial activity, they do allow for the intriguing possibility that life forms such as methanogens may have survived in isolated pockets on Mars, deep underground - oases of alien life in an otherwise hostile world.