Recovery Rebate Payments, Dow Jones Drop, and $40 Billion Ukraine Aid Package

Tax Policy/News:

May 23: IRS changes guidance on child tax credits

The Internal Revenue Service has revised and updated the answers it previously provided to frequently asked questions on the 2021 Child Tax Credit and Advance Child Tax Credit. The Advance Child Tax Credit was included as part of the Biden administration's American Rescue Plan, which provided monthly payments in the second half of the year on an expanded version of the Child Tax Credit.

The advance credits provided early payments from the IRS of 50% of the estimated amount of the Child Tax Credit that taxpayers could claim on their 2021 tax return. If the child's other parent claimed the Child Tax Credit on their 2020 tax return, then they would have received the advance Child Tax Credit payments.

"If you knew you would not be eligible to claim the Child Tax Credit on your 2021 return, then you should have unenrolled from receiving monthly payments," said the IRS. "Receiving monthly payments during 2021 could mean that you have to repay those payments when you file your 2021 tax return. If things change again and you are entitled to the Child Tax Credit for 2021, you can claim the full amount on your 2021 tax return when you file it." In some cases, parents may have agreed that, for federal income tax purposes, one will claim the child for each even-numbered year while the other parent will claim the child for each odd-numbered year.

One of the FAQ items concerns a parent who claimed the Child Tax Credit for the child on their 2020 tax return, but the IRS also disbursed the 2021 advance Child Tax Credit payments to them even though they weren't planning to claim the Child Tax Credit on their 2021 tax return.

"Because you claimed your child on your 2020 tax return, the IRS automatically disbursed advance Child Tax Credit payments to you even though you knew you wouldn't be claiming your child on your 2021 tax return," said the IRS. "When you file your 2021 tax return, you could have to pay back the advance payments that exceed the amount of the Child Tax Credit you're entitled to claim on that return." However, a parent may be excused from repaying some or all of the excess amount if they qualify for repayment protection.

May 23: IRS sent over $800M in potentially improper recovery rebate payments

The Consolidated Appropriations Act of December 2020 later added an RRC of up to $600 for each eligible individual and $600 for each eligible child and modified the eligibility requirements for the RRC. Taxpayers had to enter the amounts they received from the payments and credits on their tax returns, and the IRS would reconcile them with its records.

As of May 27, 2021, the IRS had processed 26.3 million tax returns with RRC claims totaling $39.2 billion. TIGTA's testing identified 181,743 returns for which either IRS programming problems, Error Resolution function tax examiner mistakes, or timing issues resulted in the wrong RRC being given to the taxpayer.

These actions include reviewing the tax returns TIGTA identified, taking the actions necessary to correct the taxpayers' tax accounts, and implementing processes to automate the error resolution process for RRC claims filed during the 2022 filing season.

TIGTA made 22 recommendations to the IRS. They included taking actions to correct erroneous RRC payments; ensuring eligible individuals receive their credit and notifying individuals who haven't filed a tax return or didn't claim the RRC of their potential eligibility. Finally, the IRS didn't agree to take any actions to ensure that the approximately 10 million potentially eligible individuals identified by TIGTA as of May 27, 2021, receive their RRC or to identify others who are eligible for the RRC but didn't claim the credit.

"We developed programming for the reconciliation of a single EIP during the 2021 filing season; however, the passage of the CRTRA on Dec. 27, 2020, required us to issue the second EIP and to quickly change the programming to permit reconciliation of both EIPs, which had slight differences in eligibility criteria, before the tax year 2020 returns claiming the RRC could be processed. The changes to our processing systems were programmed and implemented with only a two-week delay to the opening of the filing season." With the sudden changes, it's no surprise that so many taxpayers had incorrect amounts on their tax returns.

May 20: Corporate taxes plunged to a new low worldwide

With the COVID-19 pandemic leaving a gaping hole in the public finances of many countries UHY predicts the trend of declining corporate tax rates worldwide is likely to be over for the foreseeable future. For example, the U.K. government recently announced its intention to raise corporate tax rates to 25% starting in April 2023, more than two percentage points higher than the European average. Argentina has already increased its headline corporate tax rate from 30% to 35% in 2021. President Biden has also pledged to raise federal corporate income tax to 28% in the U.S. after it was cut to just 21% by former President Trump in 2017, although Biden's tax proposals have been facing resistance from Republicans and some Democrats in Congress and he was unable to pass the Build Back Better Act last year.

France, often seen as a higher tax European economy, has lowered its headline tax rate from 31% to 26.5% in the past three years.

"The cash-strapped governments of 2022 will likely now be considering increasing taxes on corporations. Public finances will have to be shored up somehow and corporations can be an easier target politically than individuals. Businesses worldwide should be prepared for their tax costs to begin to rise in the coming years." The Netherlands recently decreased its corporate tax rate to 16.5% for companies with taxable income under $450,000, while Croatia now offers a rate of just 10% for companies with a turnover of less than $1,125,000.

The Organization for Economic Cooperation and Development announced in October that 136 countries had signed a deal to enforce a minimum corporate tax rate of 15% starting in 2023.

Countries such as Ireland have come under fire for their low corporate tax rate of just 12.5%. Treasury Secretary Janet Yellen has been pushing for countries like Poland to agree to the OECD deal, although the minimum tax deal is facing skepticism in the U.S. from Republicans and some Democrats in Congress. India's tax rates increased to 34% for the largest corporations, with Nigeria implementing a headline rate of 32%, and Argentina charging its resident companies 35% on their profits.

May 20: IRS to pay 5 percent interest to individuals with delayed tax refunds

The IRS will start paying 5 percent in guaranteed interest to individuals with delayed tax returns beginning in July, up a percentage point from the last interest rate hike that took effect in April. The agency will also pay 4 percent interest on delayed corporate tax returns, 5 percent on underpayments on tax returns, and 7 percent for "Large corporate underpayments," the IRS said Friday.

"IRS does not identify, monitor, and mitigate issues contributing to refund interest payments. Accordingly, the IRS is missing an opportunity to reduce costs," the watchdog report said.

The number of delayed returns, still numbers in the tens of millions, skyrocketed during the pandemic as the IRS shut facilities and diverted resources to administer benefits like the child tax credit.

"The IRS is sitting on 13 million unprocessed tax returns and over 26 million tax returns that are waiting to need further IRS action," Rep. Tom Rice told a House Ways and Means subcommittee hearing on taxpayer fairness earlier this week. "At the same time, IRS phone service levels are near all-time lows, making it nearly impossible to reach an IRS agent for help with tax or audit matters."

"I'll cut right to the heart of the matter for those families whose refunds might be delayed due to IRS backlogs," Senate Finance Committee Chairman Ron Wyden said in an April statement.

May 18: Democrats pounce on latest tax perk for the rich: falling audit rates

A new report from the government's internal watchdog found that richer taxpayers are benefitting the most from a broader decline in audit rates by the IRS, adding impetus to criticism that the U.S. tax system favors the wealthy, and possibly bolstering a White House push to increase taxes on the wealthy. 

During the 2010s, audit rates of individual income tax returns have fallen an average of 72 percent across all income levels and tax brackets. Democrats seized upon the discrepancy to paint a picture of a bifurcated tax collection system that treats the rich one way and average Americans another. Republicans reacted to the report mostly with operational concerns related to the pandemic-induced backlog of unprocessed tax returns, showing a general lack of interest in the ethical debate put forward by Democrats on biases in the tax system.

"The IRS is sitting on 13 million unprocessed tax returns and over 26 million tax returns that are waiting, needing further IRS action. At the same time, IRS phone service levels are at near all-time lows, making it nearly impossible to reach an IRS agent for help with tax or audit matters."

IRS officials said audit rates declined because of staffing decreases and because it takes more time and expertise to deal with complex higher-income audits, according to the GAO. The overall trend toward looser tax enforcement on the rich is consistent with other longer-term tax policies benefiting the wealthy that have been pushed by both Democrats and Republicans. One of those lobbyists is former Democratic North Dakota Sen. Heidi Heitkamp, now with consulting firm Alliantgroup, who led a campaign last year against a Democratic proposal to tax capital gains at death, arguing against a very similar measure to the Biden administration's billionaire tax proposal.

May 17: IRS audit rates plummet, especially for wealthy

Audit rates have dropped for all income levels - with audit rates falling the most for taxpayers with incomes of $200,000 or more. IRS officials blamed the decline in audit rates on staffing decreases and the fact that it takes more staff time and expertise to handle complex higher-income audits.

Lower-income audits are typically more automated, allowing the IRS to continue performing such audits even with fewer staff.

On average, the audit rate for these returns decreased from 0.9% to 0.25%. Internal Revenue Service headquarters in Washington, D.C.Samuel Corum/Bloomberg While audit rates declined more for higher-income taxpayers, the IRS generally audited them at higher rates compared to lower-income taxpayers. Audits of the lowest-income taxpayers, particularly those claiming the EITC, resulted in higher amounts of recommended additional tax per audit hour compared to all income groups except for the highest-income taxpayers.

IRS officials explained to the GAO that EITC audits are mainly pre-refund audits and are conducted through correspondence and therefore require less time. "Over the last decade, accountability for the wealthiest tax cheats has plummeted so far it almost hits the floor. Looking at the numbers, a tax filer making less than $25,000 a year is more than twice as likely to be audited as someone with between $200,000 and $500,000 in income. I worry well-off taxpayers are not going to be pursued at the rate things are going." His office noted that except for those with over $5 million in income, audits of the lowest-income taxpayers resulted in higher amounts of recommended tax per audit hour.

Reconciliation Bill: 

May 24: Democrats set to blow through key date for moving Biden’s agenda

Democrats are set to blow through the soft Memorial Day deadline for reaching a deal with Sen. Joe Manchin on a slimmed-down budget reconciliation bill to raise taxes, fight climate change and lower the cost of prescription drugs. Instead, Democrats are once again pushing back the target date for getting a deal with Manchin.

Manchin told reporters last week that all 50 Senate Democrats should be able to agree on a reconciliation package that lowers the price of prescription drugs. Rank-and-file Democratic senators say they've been kept largely in the dark about Schumer's negotiations with Manchin.

"You're not going to hear anything, I don't think, out of anyone but Schumer and Manchin, just the two of them," said Sen. Ben Cardin.

Some Democrats think the lack of details from the talks between Schumer and Manchin is a reason to be hopeful.

"I think it's a good sign that there are some talks and it's very quiet. I think public negotiations have been very damaging to this process. If something's going to get done, Schumer, Manchin, and Biden are going to figure it out. And I wouldn't even put a timeline on it," said Jim Kessler, a former Schumer aide who now serves as executive vice president for policy at Third Way, a centrist Democratic think tank.

Economic News/Policy: 

May 23: Biden: US economy has ‘problems,’ but recession not inevitable

President Biden on Monday acknowledged the United States is facing economic headwinds with high gasoline and food prices, but he rejected the idea that a recession is inevitable. At a press conference in Tokyo, Biden rattled off a series of investments that have spurred job growth, including a new Samsung factory in Texas, a new Hyundai operation in Georgia, and Toyota's commitment in North Carolina.

Biden pointed to the Russian invasion of Ukraine upending global oil markets and the strain it has put on European nations more reliant on Russian energy. When asked if a recession for the U.S. economy is inevitable, Biden responded, "No.".

Biden further argued that passing his domestic agenda to lower child care and family care costs would lower inflation, but that legislation has stalled in the Senate, where moderate Democrats are reluctant to approve more spending. Biden has faced tremendous pressure from voters to tamp down inflation, even as the president and White House aides point to low unemployment, strong gross domestic product growth, and other underlying factors that show the economy is strong. Brian Deese, the head of the National Economic Council and Biden's top economic adviser, wouldn't rule out the possibility of a recession entirely during an interview on Sunday morning.

May 23: Americans keep spending despite record inflation squeeze

Despite high inflation, rising gas prices, deepening concern about the economy, and rising recession risks, Americans keep spending money. Retail spending rose 0.9 percent in April, according to Census Bureau data released Tuesday, with an uptick in spending at restaurants, bars, and automobile dealers leading the increase. While spending dropped off at hobby, sporting goods, book and home supply stores, e-commerce and department store spending rose.

"There has been a shift in the kind of spending in the consumer basket away from 'stay at home' spending towards 'let's go out' spending," Bovino said in a Friday interview. She pointed to an increase in spending on clothes, restaurants, and bars and a decline in spending at grocery stores.

If consumer spending keeps increasing but shifts more toward services over goods, it could help the economy stay strong as the Fed fights inflation through higher interest rates. If inflation continues to spiral higher, the Fed may need to hike rates fast and far enough to drastically reduce how much money consumers have to spend.

May 22: Economy Week Ahead: The Fed, Inflation, and Consumers in Focus

Tuesday: Surveys of purchasing managers from the U.S., Europe, and Japan are expected to point to a slowing global economy in May, with disrupted supply chains and surging prices taking their toll on economic growth. The new-orders measures will be closely scrutinized for hints of a slide into recession over the coming months.

U.S. new-home sales are expected to fall for the fourth consecutive month in April as rising mortgage rates and climbing prices intersect with a market already constrained by low inventories. Separate data released Thursday showed that existing-home sales slipped 2.4% in April from the prior month.

Wednesday: U.S. new orders for durable goods—products designed to last at least three years—are forecast to rise in April. Demand for factory goods, from both businesses and consumers, has proven resilient amid supply-chain snarls, rising prices, and depleted inventories.

The Federal Reserve at its May 3-4 meeting approved a half-percentage-point interest rate increase—the largest since 2000—and prepare markets for more as officials try to slow inflation that is running near a 40-year high. Minutes from the meeting, published with their usual lag, could add more context around discussions on the size and pace of future increases.

Thursday: U.S. jobless claims rose for three weeks in a row as of mid-May. While the overall level is still historically low, economists will watch to see if the trend continues higher, a possible signal that the Fed’s effort to cool the economy is reaching into the labor market.

Friday: The U.S. Commerce Department releases a monthly report with three key pieces of data from April: consumer spending, personal income, and the Fed’s preferred inflation gauge. Economists forecast another month of gains for spending as households contend with both rising prices and strong demand for services such as travel and dining out. Inflation, as measured by the personal consumption expenditures price index, is expected to show price pressures eased but remained well above the Fed’s 2% target. In March it accelerated to its fastest pace since 1982.

May 22: Higher Rates Raise Risk of Future Fed Losses

The Federal Reserve's plans to raise interest rates aggressively to combat high inflation could have an overlooked and uncomfortable side effect for the central bank: capital losses. The potential for losses hinges on obscure monetary plumbing.

The Fed's $9 trillion portfolio, sometimes called a balance sheet, is full of mostly interest-bearing assets-Treasury and mortgage-backed securities-with an average yield of 2.3%. On the other side of the ledger-the liability side of the Fed's balance sheet-are bank deposits held at the Fed known as reserves, which are also interest-bearing, as well as currency in circulation.

May 20: S&P 500 Drops for Seventh Straight Week but Evades Bear Market

After a 3 percent drop this week, the index is down 14 percent since early April. Friday afternoon, the S&P 500 crossed the bear market threshold of a 20 percent decline from its peak on Jan. 3. With less than 30 minutes left before trading ended, after hours of churn and a drop of as much as 2.3 percent, the market rallied and ended a hair above where it had started the day.

Recessions have often followed bear markets, though one does not necessarily cause the other. A bear market occurred in the early days of the coronavirus pandemic, but it was the shortest on record, lasting just 33 days before stocks began to rally. Less than six months later, the S&P 500 began hitting new highs again, climbing 42 percent above its pre-pandemic level before starting to slide in January. Now the index is down more than 18 percent from its high point.

Unemployment is approaching the lowest rate in decades, and the economy has regained nearly 95 percent of the 22 million jobs lost at the height of coronavirus lockdowns. Average hourly earnings in the U.S. rose 5.5 percent in the year through April, but many of those gains are being eroded by inflation. The company's 25 percent decline in profit from the previous year was a big surprise to analysts.

May 19: U.S. Economy Could Be Heading To Recession In Next Year, Banks And Economists Say

The U.S. economy could be heading for a recession in the next year, according to growing warnings from banks and economists, as a sudden bout of pessimism hammers financial markets, which on Thursday spiraled further from recent highs. This week alone, former Goldman Sachs chief executive Lloyd Blankfein warned of a "Very, very high risk" of recession; Wells Fargo CEO Charlie Scharf said there was "no question" that the U.S. economy is heading toward a downturn, and former Fed chair Ben Bernanke cautioned that the country could be poised for "Stagflation" - a slowing economy combined with high inflation.

International turmoil, including the risk of recession in Europe and China, is dimming the outlook for the U.S. economy. A strengthening U.S. dollar - as rate increases make dollar investments more attractive - could dampen exports, raising the chances of a technical recession in which the economy contracts for two quarters in a row. Inflation, which remains near 40-year highs, has become a central challenge for both the economy and the Biden administration.

Higher prices for basics like food, energy, and housing are straining Americans' budgets and clouding their view of the economy. "Near term, the U.S. economy is holding up rather well despite the trouble abroad and the high prices at the checkout stand," said Beth Ann Bovino, chief U.S. economist for S&P Global, who says there's a 35 percent risk of recession in the next year.

May 18: Dow plunges nearly 1,200 points in worst day since March 2020

Stocks plunged Wednesday as deepening concern about the economic impact of high inflation and rising interest rates drove the Dow Jones Industrial Average to its worst day since March 2020. The Dow closed with a loss of 1,161 points, dropping 3.6 percent Wednesday for its steepest one-day drop since the onset of the coronavirus pandemic. The S&P 500 closed 4 percent lower and the Nasdaq closed 4.7 percent lower Wednesday.

"US stocks are crumbling after Wall Street worries about economic growth after hearing a chorus of concerns of higher prices that won't be easing anytime soon. The strength of the consumer will be tested as both Walmart and Target signal rising pricing pressures are not easing," wrote Edward Moya, senior market analyst at OANDA. Wednesday marked a new low for a stock market in steady decline since the start of the year.

The Dow is now down 14 percent from the start of 2022, well below the 10 percent loss from a 52-week high that traders consider being a correction. The S&P is down 18.3 percent on the year and the Nasdaq is deep into a bear market with a 28 percent decline on the year after both indexes took heavy hits from an earlier nosedive in technology stocks. Stocks rallied Tuesday after the Census Bureau reported a 0.9 percent increase in retail sales last month, showing how resilient consumer spending has been in the face of high inflation.

Global Trade:

May 23: Biden to Begin New Asia-Pacific Economic Bloc With a Dozen Allies

President Biden has enlisted a dozen Asia-Pacific nations to join a new loosely defined economic bloc meant to counter China's dominance and reassert American influence in the region five years after his predecessor withdrew the United States from a sweeping trade accord that it had negotiated itself.

Wary of liberal opposition at home, Mr. Biden's new partnership will avoid the market access provisions of traditional trade deals, raising questions about how meaningful it will be. "We're writing the new rules for the 21st-century economy," Mr. Biden said on Monday in Tokyo during the launch of what he has termed the Indo-Pacific Economic Framework.

The new Biden initiative comes less than five months after the China-led Regional Comprehensive Economic Partnership officially went into force, linking 15 Asia-Pacific economies in the world's largest trade bloc.

As officials prepared for the new venture, it was clear that the scars of T.P.P. run deep in the Biden administration.

Before flying to Tokyo on Sunday, Mr. Biden joined Euisun Chung, executive chairman of Hyundai Motor Group, to celebrate the company's plan to build a new $5.5 billion electric vehicle and battery manufacturing plant in Savannah, Ga. Before that, he touted Samsung's decision to build a new manufacturing plant in the United States during a tour of a similar semiconductor plant. During a separate news briefing with Mr. Kishida on Monday, Mr. Biden said he did not believe a recession was inevitable.

May 20: Export bans abroad threaten to push sky-high food prices even higher

Soaring food prices both in the U.S. and abroad have prompted countries to ban exports of core agricultural commodities, pushing up domestic food prices and leading agronomists to wonder what additional crops could face supply constraints on their way to grocery stores.

Food inflation in the U.S. is already at a 40-year high, with the annual index for consumer food prices up 9.4 percent in April - the largest 12-month increase since 1981 - according to the Department of Labor.

“There was some general thinking that India was going to be able to fill a lot of that supply gap that Ukraine historically filled, but it’s less likely to fill it this year,” Mark Jekanowski, a research economist with the Agriculture Department and chairman of its World Agricultural Outlook Board, said in an interview. "The news that India banned their exports - that drove prices even higher and suggests global supplies are tightening even more," he said.

Economists are quick to caution that since food prices are set on global commodity markets with many different countries and suppliers, there isn't a one-to-one correlation between an export ban and a price hike.

"The impact of a ban on exports of wheat from India, in the aggregate, will be positive, will tend to push prices up, but other than short-run panic responses, in effect, the impact will be very, very small," Vincent H. Smith, a professor of agricultural economics at Montana State University, said in an interview.

“Of far greater concern” to the price of bread “would be the price of gas and transportation costs — getting the wheat to the mill, the flour to the baker, the bread to the supermarket, and then stacking the shelves,” Smith said. "A lot of what we call 'food price inflation' is inflation affecting labor costs and the particular issue of higher energy prices."

According to a list compiled by the International Food Policy Research Institute, a Washington-based nonprofit, 20 countries now maintain export bans on various foodstuffs, contributing to a 30 percent rise in global food prices as measured by the United Nations Food and Agriculture Organization.

May 18: Retailers press Biden to lift China tariffs to fight inflation

The National Retail Federation on Wednesday urged President Biden to reduce or eliminate tariffs on Chinese goods as a way to help combat red-hot inflation. The lobbying group claimed that lifting tariffs that were first imposed by the Trump administration could reduce consumer prices by as much as 1.3 percent. The letter comes as Biden administration officials debate whether to provide tariff relief to consumers who are feeling the effects of 40-year high inflation.

Treasury Secretary Janet Yellen told reporters on Wednesday that the Section 301 tariffs "Impose more harm on consumers and businesses" and "Aren't very strategic in the sense of addressing real issues" with China.

U.S. Trade Representative Katherine Tai, who has defended tariffs on China as a way to combat what the U.S. sees as unfair trade practices, said earlier this month that reducing tariffs is a potential option to lower consumer prices.

In his letter, Shay also warned that the Federal Reserve's decision to raise interest rates and reduce its balance sheet to fight inflation could "Further hurt businesses, workers and consumers."

“Overly broad action by the Fed alone could inflict significant and lasting damage to consumers,” he wrote. “Providing tariff relief now can alleviate inflation pressures in the economy and provide targeted relief to consumers until the Fed’s job is done.”

May 18: High Inflation, Slowing Growth Raise Risk of Global Downturn

The global economy is in danger of entering a period of so-called stagflation, or high inflation and weak growth, policymakers and corporate leaders say, which could erode living standards around the world.

Treasury Secretary Janet Yellen on Wednesday became the latest leader to warn of turbulence in the global economy.

"Certainly the economic outlook globally is challenging and uncertain," Ms. Yellen said in Bonn, Germany, ahead of a meeting of leaders of seven wealthy nations.

"Higher food and energy prices are having stagflationary effects, namely, depressing output and spending and rising inflation all around the world."

Ukraine Crisis/Russia’s Economic Impact: 

May 21: Biden signs $40B Ukraine aid package into law

President Biden has signed into law a far-reaching aid package for Ukraine that will provide $40 billion in security, humanitarian and economic assistance for the country as it battles the Russian war over the coming months. The package brings the total U.S. assistance Congress has approved for Ukraine this year to nearly $54 billion to help the country battle a Russian onslaught that began on Feb. 24.

The president had asked Congress at the end of April to authorize an additional $33 billion for Ukraine as he exhausted the drawdown authority from the last bill passed in March. While the White House initially hoped lawmakers would link the package to billions more in COVID-19 pandemic funding, Biden ultimately asked leaders to separate the two to allow the Ukraine aid to move as quickly as possible.

The legislation allows Biden to transfer $11 billion in weapons to Ukraine and provides $9 billion to replenish depleted U.S. weapons stockpiles. Biden administration officials believe that the $40 billion will be enough to sustain Ukraine through the current fiscal year, which ends in September. The U.S. has sent heavy weapons to Ukraine and shared intelligence with the Ukrainians, but Biden has drawn the line at sending U.S. forces on the ground in Ukraine to fight the Russians.

May 18: Economic Headwinds Mount as Leaders Weigh Costs of Confronting Russia

The world economy is heading into a potentially grim period as rising costs, shortages of food and other commodities, and Russia's continuing invasion of Ukraine threaten to slow economic growth and bring about a painful global slump. At a news conference on Wednesday, Treasury Secretary Janet L. Yellen said that elevated food and energy prices were depressing both spending and economic output, creating what she called "Stagflationary effects" all around the world.

The economic challenges that governments around the globe are facing could begin to chip away at the united front that Western nations have maintained in confronting Russia's aggression, including sweeping sanctions aimed at crippling its economy and efforts to reduce reliance on Russian energy. Central banks around the world are beginning to raise interest rates to help tame rapid inflation, moves that will temper economic growth by raising borrowing costs and could lead to higher unemployment. Still, the United States is expected to press its allies to continue isolating Russia and to deliver more economic aid to Ukraine despite their economic troubles.

The European Commission, in its economic report, said the E.U. "Is first in line among advanced economies to take a hit," because of its proximity to Ukraine and its dependence on Russian energy.

Vicky Redwood, a senior economic adviser at Capital Economics, warned that more aggressive interest rate increases by central banks could lead to a global contraction.

Environmental Policy/News:

May 24: Climate worries galvanize a new pro-nuclear movement in the U.S

The movement to keep plants open comes despite persistent worries about toxic waste and just a decade after the nuclear disaster at Japan's Fukushima plant. It has been boosted by growing public acceptance of nuclear power and has nurtured an unlikely coalition of industry players, erstwhile anti-nukers, and legions of young grass-roots environmental activists more worried about climate change than nuclear accidents.

"I am part of a whole generation of people who became frightened of nuclear power, but I am also more willing to entertain nuclear than I once was because there is a climate crisis," said John Parsons, an energy scholar at MIT and co-author of a report that urges California to postpone the closure of Diablo Canyon.

Four states racing to meet their climate goals - New York, New Jersey, Connecticut, and Illinois - have recently shifted course on nuclear power, using clean energy subsidies once set aside for only wind and solar to keep plants open.

The state is reconsidering as it faces the risk of renewed blackouts and now stands out as a key test case for the new nuclear movement.

The new reactors at Plant Vogtle Nuclear Power Plant near Waynesboro were supposed to cost $14 billion and start generating power in 2016. Some of the most effective evangelists in the new nuclear movement are those who came to it from unexpected places.

May 20: Congressional progressives warn Biden, EU natural gas reliance may hurt climate goals

Twenty-two congressional Democrats on Thursday urged caution over the European Union's plan to replace fossil fuel imports from Russia with liquefied natural gas infrastructure. In a letter to President Biden and European Commission President Ursula von der Leyen, the members warned that the transition must incorporate the goals of the Paris Climate Agreement.

The letter came shortly after the EU announced a plan to replace the energy that it would normally import from Russia, including with 50 billion cubic meters of LNG from suppliers including the U.S. "While the Joint Statement included specific details for natural gas, it did not contain such specificity for developing clean, renewable energy. The Task Force must develop a plan to swiftly move the European Union and the United States off fossil fuels and onto clean, renewable energy by 2035," the members wrote.

"It is critically important that our countries not lock ourselves into decades of further reliance on fossil fuels when climate science, environmental justice, and public health concerns necessitate a rapid transition towards full renewable energy."

In the meantime, the letter cited analysis indicating the EU could replace two-thirds of Russian gas imports with renewables in less time. Von der Leyen earlier this month announced the EU would end fuel imports from Russia in the latest round of sanctions against the country over the invasion of Ukraine. Russia exported 40 percent of European natural gas supplies in 2021, and the U.S. increased its exports even before von der Leyen's announcement.

May 18: Colorado, and Arizona local governments partner on carbon removal technology

The local governments of Boulder County, Colo., and Flagstaff, Ariz., are recruiting other "Climate-forward" jurisdictions in the Four Corners region of the West to scale up carbon removal technologies. The initial request will be seeking proposals "That realize durable, verifiable carbon removal" solutions that integrate the carbon they remove from greenhouse gas emissions into local concrete production, according to the partners.

At the Tuesday webinar, OpenAir co-founder Chris Neidl defined carbon dioxide removal as "a range of different activities that remove carbon dioxide from the atmosphere and durably store it in geological terrestrial ocean reservoirs or products." Essentially, carbon dioxide removal means sucking carbon dioxide out of the atmosphere - either through natural methods like trees or through technological approaches that are still emerging.

Flagstaff's city council last year also declared its support for carbon removal as part of its carbon neutrality plan, Neidl added.

The Four Corners Carbon Removal Coalition aims to bring local governments together to devise "Ways to directly support carbon removal innovation and to do it now," Neidl said.

Nicole Antonopoulos, sustainability director for the City of Flagstaff, said that carbon dioxide removal dominates her city's "Toolset" for achieving carbon neutrality over the next eight years.

ICYMI: 

May 21: Biden signs bill to protect access to baby formula amid a shortage

President Biden on Saturday passed a bill intended to expand access to baby formula for certain families amid a shortage in the United States after Congress passed the legislation earlier this week. Biden signed the Access to Baby Formula Act of 2022 while in Seoul during a four-day trip to Asia.

WIC participants buy about half the baby formula in the U.S., making the program the nation's largest purchaser of formula.

The formula shortage occurred after an Abbott Nutrition plant was shuttered back in February over reports of babies falling ill after ingesting formula from the facility. The White House has been under intense pressure to do more to address the baby formula shortage over the past week.

Officials have announced a series of actions, including new FDA guidance aimed at boosting imports of formula from abroad not typically sold in the U.S. Biden on Wednesday invoked the Defense Production Act to require suppliers to "Direct needed resources to infant formula manufacturers before any other customer who may have ordered that good."

The White House also announced the first flights would take place this weekend under its "Operation Fly Formula" to deliver roughly 1.5 million bottles worth of formula from Switzerland to Indiana for distribution.

May 19: Senate blocks $48 billion aid package for restaurants, other small businesses

The Senate on Thursday blocked a bipartisan bill to provide $48 billion to restaurants, gyms and other small businesses hit particularly hard by the pandemic. The vote likely spells doom for the bill, which was crafted by Sens. Roger Wicker and Ben Cardin and backed by Senate Majority Leader Charles Schumer as a way to help struggling small businesses get out of debt accrued during the pandemic.

Advocates had argued that the additional funds were needed to prevent scores of debt-ridden small businesses from closing down. The bill would have provided $40 billion to a relief fund for struggling restaurants. Democrats provided $28.6 billion to the fund in their COVID-19 relief package, but the federal dollars quickly ran out, with only one out of three applicants receiving aid.

"Local restaurants across the country expected help but the Senate couldn't finish the job," Erika Polmar, executive director of the Independent Restaurant Coalition, said in a statement.

The bill earmarked $2 billion for gyms and fitness facilities, $2 billion for live event operators, $2 billion for bus and ferry operators, $1.4 billion for small businesses located near border crossings that were closed during the pandemic and $500 million for minor league sports teams that took a significant financial hit due to COVID-19.

May 19: Tech industry and advocacy groups join forces to oppose Texas social media law

An unlikely group of allies - made up of tech industry groups and advocacy organizations that are usually on opposing battle lines - is forming a joint front to push back on a newly instated Texas law that hinders social media companies' ability to remove content and users that violate platform rules. Tech industry groups, civil society organizations, and even a conservative think tank are asking the Supreme Court to intervene and block the Republican-backed law after an appeals court last week reinstated it even as litigation remains pending on its ultimate fate. The request comes after the appeals court reversed a block on the law last week while an ultimate judgment of the law's merits remains under consideration.

The law is going into effect at a precarious time - with critics slamming tech companies' handling of dangerous misinformation and hate speech following the deadly mass shooting in Buffalo, N.Y. Companies have come under scrutiny over clips of the shooting spreading online and faced accusations that they are not taking a hard enough stance against extremist content.

Despite a lack of evidence to back the claims of biased censorship, the law opens the floodgates for users to sue companies over bans even if they violated the platforms' rules. Even the Real Facebook Oversight Board, an activist group that was formed to hold Facebook accountable and is nearly always in opposition of the tech giant and the industry groups that back it, is against the law.

"Tech companies may have their reasons for opposing the law - they want as little interference as possible. But in this case, they're right - the Texas law stands in the way of critical safeguards against hate speech and incitement to violence. We need policy oversight, but it has to be good policy and this is not," a spokesperson for the group said in a statement.

May 18: Top Biden Health Officials Sound Warning On Rising Coronavirus Infections

Top Biden administration officials warned Wednesday that one-third of Americans live in communities experiencing rising levels of coronavirus cases and hospitalizations and urged them to resume taking personal protection measures, including wearing masks. That case count is almost certainly an undercount, officials said, given the widespread use of at-home tests for which results are often not reported to health officials.

Rochelle Walensky, director of the Centers for Disease Control and Prevention, strongly encouraged those living in communities designated yellow or orange, indicating they have large numbers of new infections and hospitalizations, to consider wearing masks in indoor public spaces and taking other steps to protect themselves.

Wednesday's warnings from Walensky and two other officials - Ashish Jha, White House coronavirus coordinator, and Anthony S. Fauci, President Biden's chief medical adviser - came on the same day the United States surpassed the grim milestone of 1 million covid-19 deaths, a toll that even the starkest predictions at the start of the pandemic in 2020 did not anticipate.

While officials stressed that the current situation is far less dire than the winter omicron-variant surge, they cautioned that the country will be ill-prepared to respond effectively in the coming months if Congress does not soon appropriate billions of dollars in coronavirus aid to buy a new tranche of antiviral treatments, vaccines, and tests. Walensky said the seven-day average of new infections has climbed to about 94,000 per day, an increase of 26 percent over the previous week and a threefold increase over the past month. Officials said the administration will struggle to buy enough doses of the new vaccines without money from Congress.

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May 23: 'Skydiving' Salamanders That Parachute Out Of California Redwood Trees

The wandering salamander, or Aneides vagrans, has evolved in its ability to glide, parachute and move through the air from tree to tree, in a manner similar to flying squirrels and gliding geckos and frogs, according to the paper published Monday in the journal Current Biology. 

Christian Brown, a University of South Florida doctoral candidate who is the first author of the joint paper with UC Berkeley researchers, said in a press release that the salamanders can turn, flip themselves over and "Pump their tail up and down to make horizontal maneuvers." Brown said Sunday that the wandering salamander is well known to scientists, but unless you live among the coastal redwood forests upstate, you're never likely to encounter one "Due to its limited range and canopy niche."

UC Berkeley graduate students Erik Sathe and Brown compared the behavior of the wandering salamander to that of three other species that are native to Northern California. Brown said there are hundreds of salamander species across the globe that can climb trees and cave walls and live in high-up places, so it's possible there could be others that can control their bodies when falling.

They found the "Skydiving" movement would lower the free-fall speed by about 10%. Brown encountered these salamanders while working in Humboldt and Del Norte counties with nonprofit and university conservation groups that mark and track the animals that live in the redwood canopy, primarily in the old-growth forest some 150 feet off the ground. The fact that a "Charismatic salamander" that can glide, parachute, and move through the air lives up in redwood trees is fascinating in itself, Brown said.