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White House Opposes Expanded Virus Testing, Complicating Stimulus Talks

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WASHINGTON — In late September, a Nobel Prize-winning economist emailed Dr. Scott W. Atlas, a White House coronavirus adviser, in what he saw as a last-ditch effort to persuade the Trump administration to embrace a sharp increase in testing and isolating infected patients. The plan, meant to appeal to a president who has complained that positive tests make his administration look bad, would not “generate any new confirmed cases.”

Dr. Atlas, a radiologist, told the economist, Paul Romer of New York University, that there was no need to do the sort of testing he was proposing.

“That’s not appropriate health care policy,” Dr. Atlas wrote.

Dr. Atlas went on to mention a theory that the virus can be arrested once a small percentage of the United States population contracts it. He said there was a “likelihood that only 25 or 20 percent of people need the infection,” an apparent reference to a threshold for so-called herd immunity that epidemiologists have widely disputed.

The call for more widespread testing and isolation, Dr. Atlas wrote, “is grossly misguided.”

The exchange highlights the resistance in the White House toward adopting a significantly expanded federal testing program, including efforts to support infected patients in isolation and track the people they have been in contact with, even as cases and deaths continue to rise nationwide. That resistance has become a sticking point in negotiations over a new economic stimulus package, with the administration and top Democrats yet to agree on the scope and setup of an expanded testing plan.

Many public health experts, and some economists like Mr. Romer, say that a far more sweeping program would save lives and bolster the economy by helping as many Americans as possible learn quickly if they are infected — and then take steps to avoid spreading the virus.

Dr. Atlas and other administration officials playing influential roles in the government’s virus response effectively say the opposite: that more widespread testing would infringe on Americans’ privacy and hurt the economy, by keeping potentially infected workers who show no symptoms from reporting to their jobs.

Congressional Democrats have grown so frustrated with the administration’s testing efforts that as part of any agreement on a new aid package, they insisted on language that would force the government to carry out a far more prescriptive national program for administering and distributing tests.

While White House negotiators resisted those demands for months, Treasury Secretary Steven Mnuchin has said he will accept such wording with minor edits. Top Democratic staff, including the top health adviser to Speaker Nancy Pelosi of California, walked Mr. Mnuchin through the party’s proposal on Friday, according to a person familiar with the discussion, but they had yet to announce agreement on language by early evening.

In an interview on Thursday, Dr. Atlas, who is not involved in the stimulus talks, said that the United States had a “massive” testing program over all, but that it should be used strategically to protect vulnerable populations, like nursing home residents — not young, healthy individuals who he said were at low risk of contracting the disease. He said that large-scale government test and isolate programs infringed on civil liberties, and that new research had persuaded him that herd immunity might be achieved once 20 or 40 percent of Americans are infected.

“The overwhelming majority of people who get this infection are not at high risk,” Dr. Atlas said in the interview. “And when you start seeking out and testing asymptomatic people, you are destroying the workforce.”

Many congressional Republicans, who prefer to leave testing decisions to states, share Dr. Atlas’s concerns about federal testing programs, a complication if Mr. Mnuchin and Ms. Pelosi do agree on a nearly $2 trillion economic stimulus deal.

Mr. Mnuchin said on Thursday that the pair had settled on spending an additional $75 billion for testing and tracing. But the sides have not yet reached agreement on the language that Democrats have demanded for a national testing strategy, including timelines and benchmarks for allocating testing supplies and testing communities heavily affected by the virus. Democrats have been wary that the administration would actually spend the money as intended without specific legislative parameters.

Ms. Pelosi said she had not received proposed changes from Mr. Mnuchin as of early Friday evening, saying in an interview on MSNBC, “we’re making progress — we have to have clarification in language.” The pair are scheduled to speak Saturday evening.

“The devil and the angels are in the detail,” she said, adding that she was opposed to “giving the president a slush fund” instead of “a prescription for what we need, what scientists tell us to need to stop the spread of this virus.”

Experts from a wide range of fields have repeatedly denounced the lack of testing in the United States. Despite Mr. Trump’s repeated affirmations that the country has done more testing than any other nation, researchers have noted that 991,000 or so tests done each day were still not enough to keep in check a virus that has infected more than eight million people nationwide. Tests can individually diagnose people who might unknowingly carrying the virus. At the population level, they can also help health officials monitor any spread and pinpoint and quash outbreaks before they spin out of control.

Others have cautioned against an overreliance on testing as a preventive measure, noting that, in the absence of standards like physical distancing and mask wearing, testing alone cannot fully contain a virus that spreads wherever people tend to gather, regardless of whether those infected are exhibiting symptoms.

“No testing scheme, no test is perfect. There will always be people who go undetected,” said Dr. David Dowdy, an infectious disease epidemiologist at Johns Hopkins University who has researched and written about herd immunity. “The best way to protect the most vulnerable is to reduce the amount of virus that’s in the population that can get through all of those testing schemes and cause destruction.”

Dr. Atlas’s position has been challenged by medical advisers around him who have backgrounds in infectious disease response, revealing a significant rift in the White House over the right approach. Dr. Deborah L. Birx, the White House’s coronavirus response coordinator, has pushed for aggressive, broad testing even among young and healthy people, often clashing with Dr. Atlas in meetings.

“I would always be happy if we had 100 percent of students tested weekly,” Dr. Birx said on Wednesday in an appearance at Penn State University, “because I think testing changes behavior.”

Dr. Atlas at one point influenced the administration’s efforts to install new Centers for Disease Control and Prevention guidance that said it was not necessary to test people without symptoms of Covid-19 even if they had been exposed to the virus, upsetting Dr. Birx and Dr. Robert R. Redfield, the C.D.C. director.

The administration’s efforts to fund federal and state testing have long been fraught. In July, as administration officials and top Senate Republicans clashed over the contours of their initial $1 trillion proposal, the White House initially balked at providing billions of dollars to fund coronavirus testing and help federal health agencies.

Since the early days of the pandemic, Mr. Romer has argued for a wide-scale testing program, costing as much as $100 billion. He had hoped to persuade Dr. Atlas that if officials could quickly identify and isolate people carrying the virus, they would slow its spread and allow normal economic activity to resume more quickly.

In his email, sent to Dr. Atlas’s personal account, Mr. Romer proposed additional testing and isolation efforts that could allow far more Americans to return to work and shopping, generating economic activity that would be 10 or 100 times larger than the cost of the testing program itself.

In an interview, he said he also “went out on a limb” to propose a version of an expanded testing plan that might appeal to Mr. Trump, who said this year that he had instructed federal officials to slow the rate of testing because “by having more tests, we have more cases.”

Mr. Romer wrote that an increase in positive test results could be “interpreted as a sign of a policy failure.” He said the administration could instead consider a plan to send Americans tests they could administer themselves at home, then allow people to voluntarily self-isolate if they tested positive, which would not officially generate new “confirmed” cases.

Dr. Atlas replied that the push for such testing was the result of “a fundamental error of the public health people perpetrated on the world.”

Mr. Romer said he was taken aback by the answer: “Atlas just responded in a way that just honestly made it seem like he was in over his head,” he said.

Katherine J. Wu contributed reporting from New York.

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The Trump campaign celebrated a growth record that Democrats downplayed.

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The White House celebrated economic growth numbers for the third quarter released on Thursday, even as Joseph R. Biden Jr.’s presidential campaign sought to throw cold water on the report — the last major data release leading up to the Nov. 3 election — and warned that the economic recovery was losing steam.

The economy grew at a record pace last quarter, but the upswing was a partial bounce-back after an enormous decline and left the economy smaller than it was before the pandemic. The White House took no notice of those glum caveats.

“This record economic growth is absolute validation of President Trump’s policies, which create jobs and opportunities for Americans in every corner of the country,” Mr. Trump’s re-election campaign said in a statement, highlighting a rebound of 33.1 percent at an annualized rate. Mr. Trump heralded the data on Twitter, posting that he was “so glad” that the number had come out before Election Day.

The annualized rate that the White House emphasized extrapolates growth numbers as if the current pace held up for a year, and risks overstating big swings. Because the economy’s growth has been so volatile amid the pandemic, economists have urged focusing on quarterly numbers.

Those showed a 7.4 percent gain in the third quarter. That rebound, by far the biggest since reliable statistics began after World War II, still leaves the economy short of its pre-pandemic levels. The pace of recovery has also slowed, and now coronavirus cases are rising again across much of the United States, raising the prospect of further pullback.

“The recovery is stalling out, thanks to Trump’s refusal to have a serious plan to deal with Covid or to pass a new economic relief plan for workers, small businesses and communities,” Mr. Biden’s campaign said in a release ahead of Thursday’s report. The rebound was widely expected, and the campaign characterized it as “a partial return from a catastrophic hit.”

Economists have warned that the recovery could face serious roadblocks ahead. Temporary measures meant to shore up households and businesses — including unemployment insurance supplements and forgivable loans — have run dry. Swaths of the service sector remain shut down as the virus continues to spread, and job losses that were temporary are increasingly turning permanent.

“With coronavirus infections hitting a record high in recent days and any additional fiscal stimulus unlikely to arrive until, at the earliest, the start of next year, further progress will be much slower,” Paul Ashworth, chief United States economist at Capital Economics, wrote in a note following the report.

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Black and Hispanic workers, especially women, lag in the U.S. economic recovery.

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The surge in economic output in the third quarter set a record, but the recovery isn’t reaching everyone.

Economists have long warned that aggregate statistics like gross domestic product can obscure important differences beneath the surface. In the aftermath of the last recession, for example, G.D.P. returned to its previous level in early 2011, even as poverty rates remained high and the unemployment rate for Black Americans was above 15 percent.

Aggregate statistics could be even more misleading during the current crisis. The job losses in the initial months of the pandemic disproportionately struck low-wage service workers, many of them Black and Hispanic women. Service-sector jobs have been slow to return, while school closings are keeping many parents, especially mothers, from returning to work. Nearly half a million Hispanic women have left the labor force over the last three months.

“If we’re thinking that the economy is recovering completely and uniformly, that is simply not the case,” said Michelle Holder, an economist at John Jay College in New York. “This rebound is unevenly distributed along racial and gender lines.”

The G.D.P. report released Thursday doesn’t break down the data by race, sex or income. But other sources make the disparities clear. A pair of studies by researchers at the Urban Institute released this week found that Black and Hispanic adults were more likely to have lost jobs or income since March, and were twice as likely as white adults to experience food insecurity in September.

The financial impact of the pandemic hit many of the families that were least able to afford it, even as white-collar workers were largely spared, said Michael Karpman, an Urban Institute researcher and one of the studies’ authors.

“A lot of people who were already in a precarious position before the pandemic are now in worse shape, whereas people who were better off have generally been faring better financially,” he said.

Federal relief programs, such as expanded unemployment benefits, helped offset the damage for many families in the first months of the pandemic. But those programs have mostly ended, and talks to revive them have stalled in Washington. With virus cases surging in much of the country, Mr. Karpman warned, the economic toll could increase.

“There could be a lot more hardship coming up this winter if there’s not more relief from Congress, with the impact falling disproportionately on Black and Hispanic workers and their families,” he said.

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Ant Challenged Beijing and Prospered. Now It Toes the Line.

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As Jack Ma of Alibaba helped turn China into the world’s biggest e-commerce market over the past two decades, he was also vowing to pull off a more audacious transformation.

“If the banks don’t change, we’ll change the banks,” he said in 2008, decrying how hard it was for small businesses in China to borrow from government-run lenders.

“The financial industry needs disrupters,” he told People’s Daily, the official Communist Party newspaper, a few years later. His goal, he said, was to make banks and other state-owned enterprises “feel unwell.”

The scope of Mr. Ma’s success is becoming clearer. The vehicle for his financial-technology ambitions, an Alibaba spinoff called Ant Group, is preparing for the largest initial public offering on record. Ant is set to raise $34 billion by selling its shares to the public in Hong Kong and Shanghai, according to stock exchange documents released on Monday. After the listing, Ant would be worth around $310 billion, much more than many global banks.

The company is going public not as a scrappy upstart, but as a leviathan deeply dependent on the good will of the government Mr. Ma once relished prodding.

More than 730 million people use Ant’s Alipay app every month to pay for lunch, invest their savings and shop on credit. Yet Alipay’s size and importance have made it an inevitable target for China’s regulators, which have already brought its business to heel in certain areas.

These days, Ant talks mostly about creating partnerships with big banks, not disrupting or supplanting them. Several government-owned funds and institutions are Ant shareholders and stand to profit handsomely from the public offering.

The question now is how much higher Ant can fly without provoking the Chinese authorities into clipping its wings further.

Excitable investors see Ant as a buzzy internet innovator. The risk is that it becomes more like a heavily regulated “financial digital utility,” said Fraser Howie, the co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.”

“Utility stocks, as far as I remember, were not the ones to be seen as the most exciting,” Mr. Howie said.

Ant declined to comment, citing the quiet period demanded by regulators before its share sale.

The company has played give-and-take with Beijing for years. As smartphone payments became ubiquitous in China, Ant found itself managing huge piles of money in Alipay users’ virtual wallets. The central bank made it park those funds in special accounts where they would earn minimal interest.

After people piled into an easy-to-use investment fund inside Alipay, the government forced the fund to shed risk and lower returns. Regulators curbed a plan to use Alipay data as the basis for a credit-scoring system akin to Americans’ FICO scores.

China’s Supreme Court this summer capped interest rates for consumer loans, though it was unclear how the ceiling would apply to Ant. The central bank is preparing a new virtual currency that could compete against Alipay and another digital wallet, the messaging app WeChat, as an everyday payment tool.

Ant has learned ways of keeping the authorities on its side. Mr. Ma once boasted at the World Economic Forum in Davos, Switzerland, about never taking money from the Chinese government. Today, funds associated with China’s social security system, its sovereign wealth fund, a state-owned life insurance company and the national postal carrier hold stakes in Ant. The I.P.O. is likely to increase the value of their holdings considerably.

“That’s how the state gets its payoff,” Mr. Howie said. With Ant, he said, “the line between state-owned enterprise and private enterprise is highly, highly blurred.”

China, in less than two generations, went from having a state-planned financial system to being at the global vanguard of internet finance, with trillions of dollars in transactions being made on mobile devices each year. Alipay had a lot to do with it.

Alibaba created the service in the early 2000s to hold payments for online purchases in escrow. Its broader usefulness quickly became clear in a country that mostly missed out on the credit card era. Features were added and users piled in. It became impossible for regulators and banks not to see the app as a threat.

ImageAnt Group’s headquarters in Hangzhou, China.
Credit…Alex Plavevski/EPA, via Shutterstock

A big test came when Ant began making an offer to Alipay users: Park your money in a section of the app called Yu’ebao, which means “leftover treasure,” and we will pay you more than the low rates fixed by the government at banks.

People could invest as much or as little as they wanted, making them feel like they were putting their pocket change to use. Yu’ebao was a hit, becoming one of the world’s largest money market funds.

The banks were terrified. One commentator for a state broadcaster called the fund a “vampire” and a “parasite.”

Still, “all the main regulators remained unanimous in saying that this was a positive thing for the Chinese financial system,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics in Washington.

“If you can’t actually reform the banks,” Mr. Chorzempa said, “you can inject more competition.”

But then came worries about shadowy, unregulated corners of finance and the dangers they posed to the wider economy. Today, Chinese regulators are tightening supervision of financial holding companies, Ant included. Beijing has kept close watch on the financial instruments that small lenders create out of their consumer loans and sell to investors. Such securities help Ant fund some of its lending. But they also amplify the blowup if too many of those loans aren’t repaid.

“Those kinds of derivative products are something the government is really concerned about,” said Tian X. Hou, founder of the research firm TH Data Capital. Given Ant’s size, she said, “the government should be concerned.”

The broader worry for China is about growing levels of household debt. Beijing wants to cultivate a consumer economy, but excessive borrowing could eventually weigh on people’s spending power. The names of two of Alipay’s popular credit functions, Huabei and Jiebei, are jaunty invitations to spend and borrow.

Huang Ling, 22, started using Huabei when she was in high school. At the time, she didn’t qualify for a credit card. With Huabei’s help, she bought a drone, a scooter, a laptop and more.

The credit line made her feel rich. It also made her realize that if she actually wanted to be rich, she had to get busy.

“Living beyond my means forced me to work harder,” Ms. Huang said.

First, she opened a clothing shop in her hometown, Nanchang, in southeastern China. Then she started an advertising company in the inland metropolis of Chongqing. When the business needed cash, she borrowed from Jiebei.

Online shopping became a way to soothe daily anxieties, and Ms. Huang sometimes racked up thousands of dollars in Huabei bills, which only made her even more anxious. When the pandemic slammed her business, she started falling behind on her payments. That cast her into a deep depression.

Finally, early this month, with her parents’ help, she paid off her debts and closed her Huabei and Jiebei accounts. She felt “elated,” she said.

China’s recent troubles with freewheeling online loan platforms have put the government under pressure to protect ordinary borrowers.

Ant is helped by the fact that its business lines up with many of the Chinese leadership’s priorities: encouraging entrepreneurship and financial inclusion, and expanding the middle class. This year, the company helped the eastern city of Hangzhou, where it is based, set up an early version of the government’s app-based system for dictating coronavirus quarantines.

Such coziness is bound to raise hackles overseas. In Washington, Chinese tech companies that are seen as close to the government are radioactive.

In January 2017, Eric Jing, then Ant’s chief executive, said the company aimed to be serving two billion users worldwide within a decade. Shortly after, Ant announced that it was acquiring the money transfer company MoneyGram to increase its U.S. footprint. By the following January, the deal was dead, thwarted by data security concerns.

More recently, top officials in the Trump administration have discussed whether to place Ant Group on the so-called entity list, which prohibits foreign companies from purchasing American products. Officials from the State Department have suggested that an interagency committee, which also includes officials from the departments of defense, commerce and energy, review Ant for the potential entity listing, according to three people familiar with the matter.

Ant does not talk much anymore about expanding in the United States.

Ana Swanson contributed reporting.

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