Biden Makes His Business Case in the State of the Union

Biden picks his battles

President Biden delivered a State of the Union address to Congress on Tuesday night that was filled with dramatic moments, meant in part to jump start his 2024 re-election campaign.

He also used the speech to press his economic priorities, from bolstering American manufacturing to extending his climate efforts. How far he advanced his causes, however, remains to be seen.

Mr. Biden defended his record on the economy. He took credit for falling inflation and strong job growth, and listed promised benefits from his sweeping legislative agenda, including infrastructure, clean energy (even if he did acknowledge, “we’re still going to need oil and gas for a while”) and manufacturing laws that will pour trillions into the economy.

He also urged Congress to back initiatives including raising a billionaires tax on the wealthy; expanding a measure in the Inflation Reduction Act that caps the cost of insulin at $35 a month; renewing the expanded child tax credit; and expanding Medicaid and affordable child care.

He baited Republicans over social welfare programs. Mr. Biden accused some Republicans of threatening Social Security and Medicare, implying they wanted cuts in exchange for a deal to raise the debt ceiling. (That claim requires a bit of context.) Several lawmakers shouted in response; one, Representative Marjorie Taylor Greene of Georgia, yelled “Liar!”

Mr. Biden responded that he had somehow gotten unanimity on the issue. “We all apparently agree, Social Security and Medicare is off the books now, right?” he said, leading a bipartisan round of applause for seniors.

He kept up pressure on ripe political targets. Though Mr. Biden didn’t directly address the Chinese spy balloon incident, he pledged to make America more competitive and less reliant on China. “I will make no apologies that we are investing to make America strong,” he said. “Investing in American innovation — in industries that will define the future, and that China’s government is intent on dominating.”

Mr. Biden also called out tech companies, demanding stricter limits on their collection of personal data, and oil giants, which he accused of raking in record profits from high energy prices instead of using their huge coffers to increase domestic production.

How much cooperation Mr. Biden will get from Republicans and business is unclear. In Republicans’ rebuttal, Gov. Sarah Huckabee Sanders of Arkansas accused him of perpetrating a culture war. Corporate America was more circumspect: Suzanne Clark, the head of the U.S. Chamber of Commerce, reiterated her group’s support for the infrastructure law, but urged Biden to focus on striking more trade agreements and pulling back from what she said was overregulation.

HERE’S WHAT’S HAPPENING

The U.S. trade deficit balloons to $948 billion. The export-import gap jumped 12 percent in 2022, to a record, as Americans continued to spend more on imported goods than travel and entertainment. Trade data also showed growing deficits in goods with the likes of Mexico and South Korea, as manufacturers seek bases outside China.

Microsoft announces A.I.-powered consumer internet tools. The tech giant promised versions of its Bing search engine and Edge browser that incorporate chatbots, drawing on a partnership with the ChatGPT creator OpenAI. Microsoft’s ambitions may be bigger: It’s reportedly planning to create software to let companies make their own ChatGPT-powered chatbots.

Zoom plans to lay off 15 percent of its staff. The videoconferencing company acknowledged it had hired too many people during its pandemic boom, and needed to retrench as growth has slowed. Its C.E.O., Eric Yuan, said he plans to cut his salary for the coming fiscal year by roughly 98 percent and forgo a bonus.

A former Coinbase employee pleads guilty to insider trading. Ishan Wahi, who was a product manager at the crypto exchange, had been accused of tipping his brother and a friend about tokens it planned to list, bringing about $1.5 million in illegal profit. He’s the first crypto insider to admit insider trading.

Chobani’s founder urges U.S. companies to fund recovery efforts for the earthquake in Turkey and Syria. Hamdi Ulukaya, a Turkish immigrant, has partnered with the Turkish Philanthropy Funds to aid in recovery from the quake, which has a death toll above 11,000. He told DealBook that he has personally donated $2 million to the cause.

Jay Powell sees a “bumpy” path ahead

America’s red-hot labor market suggests that the world’s biggest economy may yet avoid recession. But this same dynamic has also thrust the Fed into a policy conundrum, with pressure for higher interest rates to tamp down inflation.

In a question-and-answer session at the Economic Club of Washington on Tuesday, the Fed’s chair, Jay Powell, said he could see “the very early stages of disinflation,” but added that the easing in prices was likely to follow a “bumpy” path, particularly with hiring and wage growth proving strong.

January’s jobs data surpassed the Fed’s forecasts. Mr. Powell said last Friday’s knockout nonfarm payroll report, which announced that employers added 517,000 new jobs last month, was “certainly strong — stronger than anyone I know expected.”

Other data offered more encouraging signs for the U.S. economy. The Atlanta Fed’s GDPNow tracker forecasts that the U.S. will grow by 2.1 percent in the first quarter; it was predicting 0.7 percent a week ago. And even bearish economists are dialing down their gloomy expectations: “A potential recession in 2023 will likely be short and shallow,” Jeffrey Roach, the chief economist for LPL Financial, wrote to investors on Tuesday, while Goldman Sachs economists this week lowered their estimate of the likelihood of a U.S. recession to 25 percent.

Investors were relieved that Mr. Powell gave no hint of a sudden shift in the Fed’s strategy. He reiterated that the central bank planned to keep raising borrowing costs to rein in consumer spending. That was enough to reassure investors that no big policy changes were coming soon: The S&P 500 rallied after his comments, snapping a two-day losing streak.

A hedge fund catches meme fever

Hudson Bay Capital Management has emerged as the mystery backer of Bed Bath & Beyond’s bold plan to cash in on its meme-stock cachet to raise $1 billion in emergency funds and avert bankruptcy.

The hedge fund’s involvement in the deal highlights the meme-stock frenzy’s pull on big institutions. Shares in the struggling retailer, which has closed 400 stores in the past year as revenues slide, are up nearly 86 percent in the past month in extremely volatile trading that’s been largely influenced by day-traders betting on its survival. But the stock nearly halved on Tuesday,after the company announced it would sell a flood of new shares, which will dilute existing shareholders.

Hudson Bay has underwritten the initial $225 millionworth of shares that Bed Bath & Beyond is selling. It plans to underwrite another $800 million over time, if certain unspecified “conditions are met.” Hudson Bay also receives warrants to buy further stock at an advantageous price, which could prove lucrative if the retailer were to turn its business around.

The deal with Hudson Bay came together within the past several weeks, two people familiar with the negotiations told DealBook. Late last month, JPMorgan Chase, which gave Bed Bath & Beyond a lifeline last summer by expanding its credit line, froze the retailer’s credit accounts after deeming the company in breach of the terms of its debt. As Bed Bath & Beyond raced to find cash to pay its debts, it had also been preparing for a bankruptcy — and possible liquidation — if the needed funds didn’t arrive.

Whether this only buys Bed Bath & Beyond a temporary reprieve remains to be seen. “The fundamental story for Bed Bath & Beyond is so broken at this point,” said David Silverman, a retail analyst at Fitch Ratings. “I don’t know that a short-term cash infusion that could buy them a few months, a couple of quarters, is going to change their fate.” The Wedbush Securities analyst Seth Basham seconded that opinion, cutting the stock price target to zero.

“U.S. hog farmers look at the pictures of those farms in China, and they just scratch their heads and say, ‘We would never dare do that.’”

— Brett Stuart, founder of the research firm Global AgriTrends, is worried about disease risks from China’s high-density pig farms, which in some cases pack the animals into tower blocks.

Adam Neumann opens up about his next act

Since leaving WeWork, Adam Neumann has (largely) kept quiet about his future plans, including Flow, a venture that Andreessen Horowitz invested $350 million in last year. But he is finally revealing more about the start-up, via a talk he gave to an Andreessen Horowitz-organized conference in November.

The main — if still vague — takeaway is that Flow owns and operates apartment buildings that aim to persuade tenants to stay longer by making them “feel” as if they’re owners rather than renters. (How is left unsaid.) Mr. Neumann used plumbing to illustrate the business advantages of this approach, according to Bloomberg:

THE SPEED READ

Deals

• Apollo is reportedly in talks to buy a stake in CS First Boston, the investment bank that will be spun out of Credit Suisse. (WSJ)

• Carlyle is said to be in negotiations to buy Cotiviti, a health care tech company, from Veritas Capital for nearly $15 billion. (Bloomberg)

• Oaktree Capital and other hedge funds have snapped up Adani Group bonds in recent days, restoring investor confidence in the beleaguered Indian conglomerate. (Bloomberg)

Policy

• Marty Walsh, the U.S. labor secretary, reportedly will step down to lead the N.H.L. players’ union. (Daily Faceoff)

• Senator Josh Hawley, Republican of Missouri, said he wants to make 16 the minimum age to be allowed on social media in the U.S. (NBC News)

• Russia’s government is said to be pressuring the central bank to loosen fiscal policy as it enters the second year of its invasion of Ukraine. (Bloomberg)

Best of the rest

• American start-ups laid off over 3,000 workers last month, up 1,700 percent from a year ago. Relatedly, Washington now has more tech vacancies than Silicon Valley. (Insider, WSJ)

• “The Secret Saudi Plan to Buy the World Cup.” (Politico)

• Voice actors say they’re increasingly being asked to sign away the rights to their voices — so they can be duplicated by A.I. (Vice)

• How Nestlé’s bet on a breakthrough treatment for peanut allergies went south. (Bloomberg Businessweek)

• LeBron James now owns the N.B.A.’s scoring record. (NYT)

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