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Shutdown from the New York Times: Congress Narrowly Averts Shutdown as House Democrats Help Pass Stopgap Bill-In a stunning reversal, Speaker Kevin McCarthy pushed through a bill with Democratic votes to temporarily keep the government open. 

President Biden signed it late Saturday.Congress narrowly averted a government shutdown on Saturday as the House, in a stunning turnabout, approved a stopgap plan to keep the federal government open until mid-November. After Senate passage, President Biden signed the bill shortly before midnight.

In a rapid-fire sequence of events on Capitol Hill, a coalition of House Democrats and Republicans voted to pass a plan that would keep money flowing to government agencies and provide billions of dollars for disaster recovery efforts. The bill did not include money for Ukraine despite a push for it by the White House and members of both parties in the Senate, but House Democrats embraced the plan anyway, seeing it as the most expedient way to avoid widespread government disruption.

Speaker Kevin McCarthy, who had for weeks brushed off demands to work with Democrats on a spending solution, outlined the proposal for Republicans in a closed-door meeting Saturday morning and then rushed to get it on the floor under a special procedure that meant it could only pass with substantial Democratic help.

Speaker Kevin McCarthy, who for weeks resisted partnering with Democrats, needed their support to pass a measure that would keep the federal government temporarily open.

Democrats initially complained that Mr. McCarthy had sprung the plan on them and was trying to push through a 71-page measure without sufficient scrutiny. But they also did not want to be accused of putting the U.S. aid to Ukraine ahead of keeping government agencies open and paying two million members of the military and 1.5 million federal employees.

Ultimately, it was scores of his own Republican colleagues who voted to shut down the government. The measure was approved on a vote of 335 to 91, with 209 Democrats and 126 Republicans voting in favor and 90 Republicans and one Democrat in opposition.

Inflation from the Financial Times: Eurozone inflation hits two-year low-Eurozone inflation has fallen to its lowest level for almost two years, bolstering hopes that the biggest surge in consumer prices for a generation is fading fast and paving the way for the European Central Bank to halt interest rate rises.

From the New York Times: Inflation Measure Favored by the Fed Cooled in August-The Personal Consumption Expenditures Index climbed more slowly, after cutting out food and fuel prices for a sense of the underlying trend.

Federal Reserve officials received more good news in their battle against rapid inflation on Friday, when a key inflation measure continued to slow, the latest evidence that a return to normal after the pandemic and higher interest rates are combining to wrestle rapid price increases back to a more normal pace.

The Personal Consumption Expenditures Index, which the central bank uses to define its 2 percent inflation goal, rose slightly more quickly last month as higher gas prices gave it a boost. It rose 3.5 percent in August from a year earlier, up from 3.4 percent in July.

But after stripping out food and fuel costs, both of which are volatile, a “core” inflation measure that Fed officials watch closely is beginning to cool notably. That measure picked up 3.9 percent from a year earlier, which was down from 4.3 percent in July. Compared with the previous month, it climbed 0.1 percent, a very muted pace.

It’s the latest encouraging sign for Fed policymakers, who have been raising interest rates since March 2022 in a campaign to slow the economy and cool price increases. While economic momentum has held up better than expected, a less ebullient housing market and a grinding return to normalcy in the car market have helped key prices — like automobile and rents — to fade.

At the same time, supply chain disruptions that led to shortages and starkly pushed up prices starting in 2021 have gradually cleared up, allowing costs for many goods to stop rising or even come down slightly.

The next moves in shutdown chess-Corporate leaders and money managers are among those relieved that Speaker Kevin McCarthy helped pull off a bipartisan deal to avert a U.S. government shutdown, with just hours to spare.

But the drama is set to be replayed in six weeks — and it’s not clear that McCarthy will survive a mutiny by hard-right Republicans over his working with Democrats. Meanwhile, the economy still faces risks from a shutdown.

Conservative backlash against McCarthy was immediate. Representative Matt Gaetz of Florida, one of the speaker’s biggest critics, threatened to push for a vote to oust McCarthy this week. “I think we need to rip off the Band-Aid,” Gaetz told CNN.

McCarthy sounded defiant — “Bring it on,” he replied — but the risks to his leadership still loom large.

House Democrats could save him, if they want to. Gaetz’s putsch will need Democratic votes to succeed. Democrats are no fan of the speaker, especially after he allowed an impeachment hearing against President Biden to begin.

Interest rates (From the New York Times): Are High Rates Going to Last? Fed Officials Increasingly Think So. Federal Reserve officials forecast higher interest rates through 2026 this week, a sign that borrowing costs are not heading back to the rock-bottom levels normal before the pandemic.

The era of ultralow interest rates may be over. At the very least, policymakers don’t expect the type of low borrowing costs that prevailed before the pandemic to return anytime soon.

The Federal Reserve decided this week to leave interest rates unchanged at their highest level in two decades, and left the door open to raising rates again before the end of the year. But an even more significant if subtle change lurked in its freshly released economic projections.

Fed officials do not expect rates to go much higher — the next quarter-point increase is likely to be the last, if they make even that. But they do expect borrowing costs to stay elevated for years to come. Policymakers expect their benchmark short-term interest rate to stay above 5 percent next year, and to end 2025 at nearly 4 percent, the estimates showed. That would be roughly double where they were at the end of 2019.

Even in 2026 — when, the Fed hopes, inflation will have been fully stamped out and economic growth will have settled back into its longer-run trend — policymakers expect rates to remain well above the levels that prevailed before the pandemic.

In other words, higher rates may be here to stay for years.

That conclusion stems in part from a simple observation: The Fed has raised interest rates aggressively over the past year and a half, yet the economy has barely blinked. That suggests that after years in which even the slightest increase in rates threatened to bring growth to a halt, the economy might at last be able to withstand higher borrowing costs.

State’s average gas price tops $6 a gallon, but relief is on the way-By Christian Martinez for the LA Times.

With fuel prices steadily climbing again nationwide, Southern Californians are experiencing some of the worst pain at the pump, thanks to a string of issues at local refineries.

A move by California Gov. Gavin Newsom to switch to winter-blend fuel earlier than usual, however, could bring relief within weeks.

From Wednesday to Thursday, the average price of a gallon of regular gasoline in California surged by nearly 14 cents to $6.03, according to AAA. By Friday, the average price had risen to nearly $6.08.

In the Los Angeles-Long Beach metro area, a gallon of regular was, on average, $6.31 as of Friday. That’s not too far off the record-high statewide average of $6.43 per gallon set in June 2022.

The main local issue driving up prices continues to be planned and unplanned outages at fuel refineries in Southern California, said Patrick De Haan, head of petroleum analysis for GasBuddy, the Boston tech company behind an app that helps people find gas stations offering cheaper fuel.

Childcare (from the LA Times):‘Child-care cliff’ nears as funding cuts loom By Jenny Gold.

Sirens are sounding for American families that on Saturday the nation will fall off a “child-care cliff.”

That’s when $37 billion in child-care pandemic relief from the federal government will expire. Across the nation, providers have used that money to pay their teachers more, buy cleaning supplies and food amid rising inflation, and keep their doors open despite low enrollment during the COVID-19 pandemic emergency. An additional $15 billion in federal child-care relief is set to expire in September 2024.

The emergency money was meant as a Band-Aid to sustain an industry hobbled by the pandemic shutdowns. But the loss of funds could have significant consequences for an industry already on the brink of a crisis.

How is the loss of federal funds predicted to affect the child-care industry nationally?

An oft-cited report from the Century Foundation , a progressive think tank, found that more than 70,000 child-care programs — one-third of those supported by the American Rescue Plan’s stabilization funding — could close when funds expire, leaving 3.2 million children without child care.

In California , which received $5 billion in federal funds, the report projected more than 13,000 programs would probably close, and 84,000 children would lose access to their care, a number that some in the state dispute.

The estimates were based on an October 2022 survey by the National Assn. for the Education of Young Children of 12,000 providers nationwide; one-third of directors and owners receiving pandemic relief funds reported that they would have closed permanently without the grants.

One in four said they would raise tuition for working families when the federal funds expire. More than a quarter said they would cut staff wages, down from an average hourly rate of $14.22 nationally.

But the actual effects of the losses will probably vary greatly by state, with California faring better than most.
How did it get this bad?

The child-care system was in bad shape even before the pandemic, with many working parents unable to find or afford care. More than half of parents spend more than 20% of their income on child care, yet many providers can barely afford to keep their doors open. The problem, at its core, is that child care simply costs more to provide than parents can afford to pay.

In 2021, Treasury Secretary Janet L. Yellen described the industry as “a textbook example of a broken market.” One possible solution, advocates say, is to have the federal government chip in for more of the cost. The pandemic relief funds were a stopgap measure to do just that. But many advocates hoped robust federal funding would become permanent through the Build Back Better Act . The proposal, however, failed in the Senate.

Legislation proposed in Congress this month would extend federal child-care payments with an additional $16 billion in funding for each of the next five years. But with new funding unlikely to pass a divided Congress and the federal government grappling with a possible shutdown, advocates say the child-care industry could enter a tailspin.

In states such as Minnesota that required providers to use the pandemic funds to increase wages, Dade said, the loss of funds could quickly lead to a pay cut for workers. In states that have already moved to offset the loss of federal funds, such as New Mexico and Massachusetts, the impact is expected to be minimal.

What is likely to happen in California?

Although California’s child-care industry still suffers from access and affordability problems, the state has recently moved to improve funding for low-income families and the programs that serve them.

California is likely to stave off the worst effects of the federal fund losses, in part because the money wasn’t used to directly increase worker wages, but also thanks to recent efforts to backfill and augment the funding and prop up the faltering child-care sector, experts across the industry said.

California used its $5-billion share of the pandemic funds to give cash stipends to child-care programs, increase the number of kids who receive state-subsidized care and pay providers even when children were absent during the pandemic. The “family fees” paid toward subsidized child care were also waived.

Although the final stipend payment will be distributed in November, providers will be cushioned from a funding free fall that may be felt in some other states.

This year’s California budget made permanent the pandemic-era waiver for most of the fees low-income families pay toward subsidized child care and dedicated $1.6 billion to child care over the next two years. Also, the state finalized an agreement with the Child Care Providers United union in June, extending several other pandemic-era protections, boosting caregiver wages and creating the nation’s first retirement fund for child-care workers.

“California has done a very good job delaying the impact of a cliff,” said Donna Sneeringer, chief strategy officer for the Child Care Resource Center, a nonprofit that helps connect families in northern Los Angeles County and San Bernardino County with child care and subsidies. “Is California good to go in perpetuity? Absolutely not. Are we holding things together with a Band-Aid and state revenue? Yes.”

The end of the federal stipends for providers is unlikely to lead to mass program closures in California, said Nina Buthee, executive director of EveryChild California, a membership association for child-care centers.

What pain points still persist?

The industry still faces myriad pain points — teacher shortages, the high cost of materials and utilities eating into narrow profit margins, parents who still haven’t brought their children back after the pandemic, and students leaving centers for transitional kindergarten classrooms, Buthee said.

Others in the industry expressed frustration that the federal government had not moved to continue the payments.

“We take two steps forward and then we go right back,” said Mary Ignatius, executive director of Parent Voices California, which represents parents receiving state subsidies to help pay for child care. “It doesn’t always feel like progress because as soon we get something, something gets taken away instead of it moving us to the next goal post.

What does this mean for parents who do not qualify for subsidies?

Most of the federal pandemic child-care funding, as well as California’s recent actions, primarily affect programs that accept subsidies from the state to care for children from low-income families.

Day-care programs that care for families that pay privately were not eligible for most of the federal stipends, and their rates are not affected by the recent state increases that were part of the union negotiation.

The private market continues to suffer from teacher shortages, rising tuition, a scarcity of slots for infants and toddlers as well as losses to the state’s transitional kindergarten program. But middle-class families that pay out of pocket for care are unlikely to feel much of a change from the expiration of federal funds, nor will they be helped significantly by the state’s recent moves to bolster the child-care industry.
 

This article is part of The Times’ early childhood education initiative, focusing on the learning and development of California children from birth to age 5. For more information about the initiative and its philanthropic funders, go to latimes.com/earlyed .

 

Tourism (from the LA Times): A push to win back foreign tourism-Visits by overseas travelers — a lucrative clientele — still lag behind pre-COVID levels. The industry is planning ads in Canada, Mexico and major domestic cities.

By Terry Castleman

After several down years, tourism in Los Angeles County is on the rebound.

But the recovery from the COVID-19 lull has been uneven to this point, officials say — with far fewer international visitors making their way to L.A. than during the last pre-pandemic year.

“Domestic leisure travel has really led the recovery process” and has fully recovered after tourism was upended by the pandemic , said Adam Burke, president and chief executive of the Los Angeles Tourism and Convention Board.

However, international tourism is still down nearly a third from 2019.

That slower recovery comes at a cost.

He blamed a slow process that often makes prospective international travelers wait more than a year for a visa — a delay he characterized as a “significant deterrent.”

Domestically, widespread issues in the air travel industry have “wreaked havoc on travel schedules” and could be damping domestic tourism to Los Angeles, Burke said.

Meetings and conventions — which in 2019 brought in $24 billion, compared with the $31 billion racked up from leisure visitation — have also struggled to rebound. So far this year, they’re tracking at only 81% of their 2019 level.

The tourism industry employs nearly 560,000 people, making it one of the county’s top five employers, according to Burke.

From 2020 through 2022, nearly 200,000 Angelenos employed in tourism were out of work and businesses catering to tourists lost almost $43 billion in sales as pandemic precautions restricted travel, he said.

Now, his organization wants to remind people “just how indispensable tourism is to our local community.”

To that end, the tourism and convention board is purchasing advertisements on traditional broadcast channels in Canada and Mexico for the first time, hoping to attract additional visitors from those countries.

The organization plans to spend some $6.5 million on ads in other major American cities as well.

But not everyone may be fully on board with the push to bring more visitors to L.A. Residents may worry that a crush of tourists could exacerbate the city’s already chronic traffic and pollution problems.

And amid a prolonged hotel workers’ strike , drawing more people to the city would probably involve more guests having to choose whether to cross picket lines.

Burke countered that his organization is committed to “making sure that tourism is done sustainably.” He touted investments in sustainable fuels for airlines and encouraged visitors to “travel car-free in L.A.”

Roughly two-thirds of the 1,300 hotels in L.A. County have fewer than 300 rooms, he said, so there are plenty of options for visitors to choose from.