President Trump’s plan to have businesses defer the employee’s share of payroll taxes is not going smoothly. The logistical difficulties are significant, and businesses have been expressing their frustration to the Treasury Department, reports The Wall Street Journal (subscription).
The problem: Employers are worried about the administrative burden. Plus, they’re concerned they may be liable for the taxes of employees who have changed jobs. And lastly, if Congress refuses to forgive the taxes, companies will be on the hook for a huge tax bill next year.
While companies await guidance on how to implement the President’s executive order, Treasury Secretary Steve Mnuchin said in an interview on Wednesday that he can’t force firms to stop withholding those taxes. Some tax experts say that companies will be disinclined to take the chance.
NAM involvement: In remarks yesterday to NAM members, IRS Commissioner Chuck Rettig urged companies to continue weighing in with policymakers.
Chinese President Xi Jinping has been outlining an economic plan that will focus more on domestic consumption and markets, easing back from China’s reliance on trade and foreign investment, the Wall Street Journal (subscription) reports.
Xi has been speaking publicly about this “domestic circulation” (as it’s translated) since May, according to Chinese officials. The details haven’t emerged yet, but more news should come out of the October “plenum,” the meeting of the Communist Party’s top leaders.
The chips are down: U.S. sanctions are already having an effect, with telecom company Huawei reporting a shortage of processor chips that will stall production. The Chinese government recently announced it would provide tax cuts and other forms of financial help to its domestic chip industry.
What’s the prognosis? Some experts think these measures won’t make much of a difference, however. As Paul Triolo, head of the geo-technology practice at Eurasia Group, told CNBC, “The preferential treatment outlined in the new policies will help in some areas, but in the short-term will have only marginal impact [on] the ability of Chinese semiconductor firms to move up the value chain and become more competitive globally.”
Interpreting China: The Financial Times (subscription) gives another read on U.S.–China relations: that China has taken a much more cautious attitude toward confrontation in the past month or two. For example, top Chinese officials have seemed to suggest that China is willing to talk and unwilling to let the relationship degrade further.
Meanwhile, in Taiwan . . . U.S. Health Secretary Alex Azar discussed a trade deal with Taiwan on a high-profile visit to the country (though he didn’t spell out the details). While he was there, Chinese fighter jets flew across the median line in the Taiwan Strait.
The prices of consumer goods increased this past month, The Wall Street Journal (subscription) reports. According to the Labor Department, the consumer price index increased in July by 0.6%—the second month in a row of upward momentum.
Still, economists think that the increase is primarily a return to form, after the COVID-19 pandemic initially drove prices to artificially low levels. A rise in gas prices fueled about a quarter of the increase, along with the cost of clothes and used vehicles. On the other hand, grocery costs went down as millions of Americans ventured more confidently outside of their homes.
Economists also don’t see a risk of either sharp inflation or sustained deflation. Instead, they’re banking on some fairly gentle inflation that doesn’t cause any real alarm.
And speaking of alarm . . . The U.K. is feeling less than chuffed as its economy recorded the worst recession of any of its fellow world powers, according to U.S. News and World Report. The British economy fell behind countries like Germany, France and the United States, contracting by more than 20%, its largest drop on record.
Producer prices in the United States surged 0.6% in July, the largest jump in almost two years, according to MarketWatch. Meanwhile, core prices—what you get when you take out food, energy and trade margins—rose 0.3%. That was the third month of an upward trajectory.
What’s going on: Congress’s frantic spending to help us weather the pandemic isn’t increasing inflation. But that’s because there’s so little demand nowadays—businesses can’t raise prices because they need more customers to start buying again.
The NAM breaks it down: “Even with sharp increases in raw material costs in July, overall costs remain in check for now, especially on a year-over-year basis,” said NAM Chief Economist Chad Moutray. “Given the deflationary pressures seen in the economy in the spring months, it should not be a surprise that prices would bounce back strongly at some point.
“For its part, the Federal Reserve has pursued extraordinary monetary policy measures to help prop up the economy—providing a financial ‘bridge’ for consumers and businesses during the slowdown in activity, and it remains committed to its stimulative stance for the foreseeable future.”
Worldwide cases of COVID-19 have reached 20 million, according to the World Health Organization, with nearly 750,000 deaths. WHO Director-General Tedros Adhanom Ghebreyesus said at a press conference that there were still “green shoots of hope,” citing successful control measures in South Asia, New Zealand and more recently Europe.
Here are some other data points as we move through yet another month of the pandemic:
The U.S.: New COVID-19 cases in America totaled less than 50,000 for the second day in a row yesterday. Meanwhile, the country has 5.1 million confirmed cases overall. Some good numbers, courtesy of Johns Hopkins University:
- The seven-day average of new cases was well below the two-week average, at 54,409 compared to 57,433. That’s a sign that new cases are declining across the nation.
- The one-week average was below the two-week average in a clear majority of states (37).
- Deaths, meanwhile, are pretty similar for the one-week and two-week averages (1,051 and 1,049, respectively). Unfortunately, a handful of states are showing a rising death rate.
Children: COVID-19 cases among American kids are rising markedly, according to a new study.
- The number of cases in the last two weeks of July make up a full quarter of all children’s cases since March.
- While kids make up only 8.8% of cases nationwide now, they were only 2% back in April.
A caveat: researchers aren’t sure whether this rise is a product of increased infections or improved testing capacity. And fortunately, children make up only a small proportion of hospitalizations. But this data is at least concerning, as many of the nation’s children prepare to head back to school.
Along with the many other things not happening this year are a wide variety of infrastructure projects. A report released by the American Road & Transportation Builders Association lays out the extent of the delays and even cancellations, reports ConstructionDive. A few of the numbers:
- About $9.6 billion in projects have been delayed or cancelled.
- 16 states have nixed or postponed projects worth about $5 billion.
- 20 local governments are responsible for the rest, at $4.54 billion.
- 44 states, transportation authorities and local governments expect to see a drop in revenues . . . which could translate into less funding for infrastructure down the road (so to speak).
Why infrastructure matters: One industry that relies on infrastructure is, of course, transportation. And very soon, transportation will help save our economy and public health: once the COVID-19 vaccine is ready, it must be distributed nationwide.
Right now, delivery companies like UPS, FedEx and DHL are bolstering their networks and capacity to ship medical goods in anticipation of the vaccine, Transport Topics reports. Here are some of the details:
- Preparations include building “freezer farms” capable of storing millions of doses of the vaccine at low temperatures. UPS has started work on two such facilities, while FedEx is adding at least 10 freezer facilities.
- The companies will also need a lot of dry ice, which keeps medical supplies cold during transport.
This will be the largest vaccine distribution effort in history. Preserving and improving our infrastructure means that future generations, when faced with other health challenges, will be able to distribute medicines easily. And meanwhile, it will enable manufacturers to keep the economy thriving as only they can.
NAM involvement: Last month, the NAM and 118 manufacturing organizations sent a letter to Congress urging it to pass a long-term surface transportation bill, in part because of the challenges surrounding COVID-19.
The big picture: The NAM has been an advocate for infrastructure reform long before the pandemic and will continue long after. NAM Vice President of Infrastructure, Innovation and Human Resources Policy Robyn Boerstling recently made the comprehensive case for infrastructure investment in a blog for Trade Vista.
And for the full slate of NAM recommendations, check out its “Building to Win” plan for candidates and elected officials, which the NAM will keep promoting throughout the campaign season and during the next administration.
Most of us are extremely grateful to have the internet nowadays—it keeps manufacturers’ high-tech operations running and provides entertainment for our socially distanced evenings. But the U.S. needs continued, substantial investment in broadband access and will do so long after the pandemic is over. One reason, of course, is that manufacturing is increasingly high-tech and high-skilled, which means demand will keep rising for fast, reliable and universal connectivity.
So in light of our renewed appreciation of all things digital, here’s a quick reminder of the policies that the NAM is promoting, courtesy of NAM Director of Innovation Policy Stephanie Hall. As she puts it, the federal government needs to take the following steps:
- Modernize federal partnership programs and appropriate funds to increase broadband deployment in hard-to-serve areas and to close the digital divide.
- Fund broadband mapping efforts to help us understand where broadband is needed and who needs it most.
- Create a smart regulatory environment that allows the private sector to design, build, finance, operate and maintain our digital infrastructure.
Recent actions: The NAM—and manufacturers across the country—are calling on Congress to include broadband funding in its COVID-19 response. In a May letter to the Senate Committee on Commerce, Science and Transportation, the NAM asked Congress to “support investment in our broadband infrastructure system, maximize consumer choice in how they connect and reduce regulatory barriers that can slow manufacturers’ ability to deploy current and next-generation broadband infrastructure.”
As Congress continues to work on COVID-19 response funding, the NAM will keep pushing for broadband access.
As American companies race to create an effective COVID-19 vaccine, they’re facing skepticism from minority communities, according to The Wall Street Journal (subscription).
The problem: This reluctance makes it especially difficult to create diverse clinical trials that gauge whether the vaccines work safely. Public health officials say that vaccines need to be shown to work safely and effectively across all ages, races and backgrounds, and especially among the high-risk. Black and Brown Americans have been impacted disproportionately by the virus—and without their participation, an effective vaccine may face longer odds.
The solution: Companies and researchers are working with churches, minority physicians, radio programs and other media sources for communities—not to mention recruiting in places with high minority populations.
The bigger picture: Clinical trials in general suffer from a shortage of minority participants. Only 9% of participants in clinical trials for new drugs last year were Black, while whites made up around three quarters of participants, according to the FDA.
With vaccines being developed as fast as possible, we can barely keep up or keep you up to date. Here are some major stories this week:
- New experimental vaccine studies from the pharmaceutical company Novavax are promising, reports The New York Times (subscription). One study saw the vaccine produce a high level of antibodies against the virus with no harmful side effects, while the other found that the vaccine strongly protected monkeys from COVID-19 infections.
- Moderna is setting prices for its vaccine candidate, reports Reuters.
- Johnson & Johnson announced a deal with the United States to create 100 million doses of its COVID-19 vaccine—with a price tag of $1 billion, reports CNBC. Its late-stage human trials are slated to begin in September.
- AstraZeneca will make its potential COVID-19 vaccine in mainland China, reports Reuters.
Meanwhile, distribution challenges loom large, according to The Washington Post (subscription). We’re heading toward “what is expected to be the largest single vaccination campaign ever undertaken,” but health experts and state officials have gotten little information from the Trump administration about how that will unfold—and the information they have gotten is often confusing.
As if that weren’t enough: COVID-19 vaccines aren’t the only shots we’re expecting. We’ll also be fighting the seasonal flu—and as CNBC reports, companies are making record numbers of that vaccine, too.
President Trump threatened to use executive actions if Republicans and Democrats can’t reach a deal on the next round of stimulus, reports The Washington Post (subscription). How much he can accomplish unilaterally is unclear, however.
What he said: “We’re negotiating right now as we speak, and we’ll see how that works out,” Trump said. “In the meantime, my administration is exploring executive actions to provide protections against eviction . . . . As well as additional relief to those who are unemployed as a result of the virus. Very importantly, I’m also looking at a term-limited suspension of the payroll tax.”
Meanwhile, on Capitol Hill: Democrats and Republicans intended to come to a deal by the end of this week. The latest word is that it will happen “in the near future,” according to Senate Majority Leader Mitch McConnell.
NAM connection: The NAM has been urging Congress to include liability protections in the next stimulus package. To that end, it organized a “Day of Action” yesterday on social media, calling for “commonsense protection from opportunistic lawsuits in order to fuel our recovery and help creators respond to this crisis.” A range of groups and organizations participated in the Day of Action, including the Minnesota Chamber of Commerce, the Michigan Manufacturers Association and the Illinois Manufacturers’ Association.