Big Warning Signs for the Biden Economic Agenda
Glenn Youngkin, center, won the Virginia governor’s race.Credit…Anna Moneymaker/Getty Images
The day after
Republicans scored big in yesterday’s elections. Most notably, the former private equity mogul Glenn Youngkin won the race for Virginia’s governorship. It is a major warning sign for President Biden and Democrats that their legislative plans are under threat.
A rundown of some prominent races:
In Virginia, Youngkin, who was previously a C.E.O. of the Carlyle Group, beat the Democratic veteran Terry McAuliffe in a state that Biden easily carried last year.
In New Jersey, where the race is still too close to call, the little-known Republican Jack Ciattarelli is running narrowly ahead of Gov. Phil Murphy, a former Goldman Sachs executive with close ties to Biden.
In New York City, the Democrat Eric Adams cruised to victory over the Republican Curtis Sliwa, while Alvin Bragg, also a Democrat, became Manhattan’s first Black district attorney.
Many pundits put the blame on Democratic squabbles in Washington, namely lawmakers’ inability to pass major parts of the Biden agenda, including a $1.85 trillion social spending bill and a $1 trillion infrastructure proposal. If yesterday’s results foreshadow a Republican takeover of Congress next year, Biden’s ability to get anything else done in the latter half of his term will be a lot harder — if not impossible.
More election news and analysis:
Youngkin offers a viable playbook for Republicans to follow, The Times’s Shane Goldmacher writes.
Crucial to Republican victories were gains in suburban and rural areas and a focus on taxes and education, according to Politico.
What do Democrats do now? The Morning newsletter considers their options.
Democrats are moving too far to the left, Axios contends.
Follow the latest results and reactions in The Times’s live briefing.
HERE’S WHAT’S HAPPENING
Democrats make (some) movement on the big spending bill. House lawmakers agreed on a measure to curb prescription drug costs by allowing Medicare to negotiate some prices. Yet some progressives balked at a potential deal to repeal a cap on state and local tax deductions, which they derided as a tax cut for the wealthy.
Meet the new meme stocks. Shares in Avis and Bed Bath & Beyond soared unexpectedly yesterday, drawing comparisons to the likes of GameStop and AMC. There are several possible reasons, including good news, a surge in interest from retail investors and a squeezing of short sellers.
Zillow gets out of the house-flipping business. The real estate site known for estimating home values said it would shut its Zillow Offers division and lay off nearly a quarter of its 8,000 employees. The home-flipping business lost more than $420 million in the third quarter, and, Zillow said, made its bottom line too unpredictable.
Pfizer predicts continued blockbuster sales of its coronavirus vaccine. The drugmaker said that it expected the shot to collect $36 billion in revenue this year — and has already signed up $29 billion worth of deals to sell to governments in 2022, with more to come. Speaking of which, the C.D.C. has approved its vaccine for children 5 to 11, and shots could be given as soon as this week.
Postings for high-paying jobs increasingly mention vaccine mandates. Nearly 5 percent of such notices — on jobs sites like Ladders and on individual company sites — now say being vaccinated is a requirement, double the month before, according to data compiled by Ladders.
The feds sue for writers and readers
The Justice Department yesterday sued to block the $2.2 billion merger of two publishing giants. Penguin Random House’s acquisition of Simon & Schuster, announced a year ago, would hurt American authors and their readers, senior department officials told DealBook. The lawsuit also challenged claims that the merger would help the publishers stand up to the e-commerce behemoth Amazon.
The acquisition would give Penguin “unprecedented control” over publishing, which already has a “history of collusion,” the department argued. (Apple paid $400 million in 2016 to settle a case that it conspired with the top publishers to raise e-book prices.) The government argues that the deal would eliminate competition in acquiring books, leading to less pay for authors and, ultimately, fewer titles for readers.
The “goal” of the merger was to become an “exceptional partner” to Amazon, Penguin executives privately discussed, per the complaint. Publicly, the publisher suggested that merging would create a counterweight to the tech giant, an argument that Penguin’s chief “never bought into” in talks behind closed doors.
“Antitrust laws protect both buyers and sellers,” a Justice Department spokeswoman said. The focus on harm to authors is part of a wider push by the Biden administration to emphasize labor as a competition issue, she added. Amid a push by the White House to limit corporate power, the federal government has gone to court to block other deals this year, including a merger between Aon and Willis Towers Watson (which was called off) and a partnership between American Airlines and JetBlue in the Northeast.
Penguin plans to fight. The publisher enlisted Daniel Petrocelli, who successfully defended AT&T and Time Warner against the Trump administration when it tried to block their $85 billion merger. He told The Times that the government’s argument was “completely speculative through a chain of strained logic.”
“We’re scarce, we have higher standards and that gives us more power than we’ve had before.”
— Zella Roberts, a waitress at a Sonic drive-in in Asheville, N.C., who successfully petitioned the company to make it easier for customers to tip their carhops. Flush with options and frustrated after laboring through lockdowns, employers are noting a shift in power that could be long-lasting.
Facebook shuts down facial recognition
Facebook said yesterday that it would shut down its facial recognition system, eliminating a decade-old feature that has fueled privacy concerns, government investigations, a class-action lawsuit and regulatory woes. The software allowed Facebook to build one of the largest repositories of digital photos in the world: It plans to delete more than one billion digital scans of facial features by December.
Facebook had “many concerns about the place of facial recognition technology in society,” Jerome Pesenti, a vice president of artificial intelligence at Meta, Facebook’s parent company, wrote in a blog post. “Facebook getting out of the face recognition business is a pivotal moment in the growing national discomfort with this technology,” said Adam Schwartz, a senior lawyer with the Electronic Frontier Foundation.
“We still see facial recognition technology as a powerful tool,” Pesenti wrote, suggesting that Meta was not abandoning the technology altogether. But in September, the company introduced a pair of glasses with a camera, speakers and a computer chip in partnership with Ray-Ban; it did not include facial recognition abilities.
Axios is now worth $430 million
Axios, the newsletter publisher, has raised at least $15 million in primary funding, sources told The Times’s Ed Lee. The lead investor was the cable company Cox Enterprises, valuing the site at $430 million.
The deal caps an odd chapter in the consolidation of upstart media companies. The valuation matches an offer Axios got this summer from the KKR-backed publisher Axel Springer. The German publisher, which also owns Insider and this summer bought Politico, had hoped to merge those properties with Axios, creating a competitor to rival the biggest media groups. But Axios called off the talks once it learned Axel Springer was interested in buying Politico.
Executives from Axel Springer, which is dealing with the fallout from a workplace scandal, approached Axios to restart talks after the Politico deal became public, but that appeared to go nowhere. Now, an independent Axios has more money and plans to launch more local sites.
The Fed gets a green light from the market
Today, the Federal Reserve is expected to announce plans to wind down the $120 billion in asset purchases it has been carrying out each month to support the economy during the pandemic. That’s led many on Wall Street to speculate when the U.S. central bank would begin to raise interest rates from their current rock-bottom levels, The Times’s Jeanna Smialek reports.
Support to raise rates sooner is coming from an unexpected source: stock market investors. Typically, share prices and interest rates move in opposite directions. Yet recent predictions that the Fed would raise interest rates as soon as next summer, instead of 2023, as many previously predicted, haven’t roiled markets. The Dow, S&P 500 and Nasdaq have all closed at records for the past three trading sessions. What’s going on?
The power of a signal: Coming out of the 2008 financial crisis, the Fed kept interest rates lower for much longer than expected. At the time, some said this hurt investor confidence because it suggested that policymakers thought the economy was still weak. The opposite could be happening now, with investors seeing the Fed’s intent to raise interest rates, at a time of economic uncertainty, as a vote of confidence that the economy will remain strong.
Inflation versus growth: Price increases are driven by supply and demand, and right now, there is a lack of supply for things consumers are demanding. What’s more, supply-chain problems could persist for a while, threatening companies’ bottom lines. Investors may be thinking that if higher rates reduce demand, removing some pressure on the supply chain, companies could get the goods they need without hurting the general trajectory of economic growth.
In other Fed news, President Biden said yesterday that he would announce several board nominees “fairly quickly.” If he is not renominated, Jay Powell’s term as chair expires in February.
THE SPEED READ
The drugmaker Teva sold $5 billion worth of “sustainability linked” bonds, but some investors questioned how green the debt actually is. (FT)
Black Rifle Coffee, which aspires to become a right-wing Starbucks, will go public via a SPAC. (Reuters)
The trendy shoe company Allbirds raised $303 million at a $2.4 billion valuation in its I.P.O. (Bloomberg)
“Why It’s So Hard to Tax the Rich” (Politico)
Global financial giants with $130 trillion in assets made a big pledge to cut carbon emissions at the COP26 climate summit. (WSJ)
The crypto exchange FTX hired Mark Wetjen, a former C.F.T.C. commissioner, to run its policy and lobbying operations. (The Block)
The vast majority of U.S. troops have gotten a mandatory coronavirus vaccine, in part because none received a religious exemption. (NYT)
Best of the rest
Deere workers again rejected a contract proposal by their union, extending a weekslong strike. (NYT)
How Ron Perelman’s private foundation is linked to mysterious loans. (Bloomberg)
Nike wants to sell sneakers in the metaverse. (CNBC)
Inside the race to build private space stations. (Axios)
“Toxic Positivity Is Very Real, and Very Annoying” (WSJ)
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