Category: Economic Policy

Europe’s Vulnerability To Russian Gas

The Daily Escape:

Morning light – Norbeck Pass, Badlands NP, SD – July 2022 photo by Rick Berk Photography

After imposing sanctions on Russia for their invasion of Ukraine, Germany and all of Europe are now facing an energy crisis unlike ever in their history. Gas deliveries from Russia have been halted altogether, exposing the dependence of European energy consumers on pipelined gas from Russia.

Strategically, Germany’s dependence on Russia is a muddle. Germany has depended on Russian natural gas since the Cold War. And it steadily increased its reliance on Russian gas while reducing alternative sources of energy such as nuclear power, even after Russia invaded Ukraine in 2014.

On September 5th, Russia said it would close its Nord Stream I pipeline for as long as Western sanctions are in place. This initially sent gas prices higher by 30%. They currently stand at around $400 expressed as the equivalent of a barrel of oil.

The energy shock has morphed into a political and economic shock. In Germany, steelmaker ArcelorMittal is shutting down a plant in Bremen. Germany is spending €65 billion (1.8% of GDP) on measures including a price cap on electricity for households and firms.

France has enacted a retail price freeze for energy. French gas prices are frozen until at least the end of 2022, and the rise in electricity prices is capped at 4%.

Now, 14% of families in England are behind on their utility bills. The UK’s prime minister Liz Truss unveiled a plan to freeze prices for two years, which could cost more than £100 billion (4.3% of its GDP) and will be financed through government borrowing.

But the threatened loss of Russian gas also caused European governments to make big changes by lowering demand and lining up new gas supplies. That has lowered gas futures prices. From Wolf Richter:

“The front-month October TTF contract in the Netherlands – a benchmark for northwest Europe – plunged by 8% on Monday from Friday, and by 44% from the peak on August 26, to €191.02 per megawatt-hour (MWh) at the close today…”

On the supply side, the Netherlands has started operations of two floating liquefied natural gas (LNG) import and storage terminals in the port of Eemshaven. These floating storage and regasification units (FSRU) receive the LNG, store it, re-gasify it, and then send the natural gas via pipeline into the land-based distribution network in the Netherlands, from where it can be further distributed throughout Europe. Three more FSRUs are planned.

Germany had failed to build a single LNG import terminal as an alternative to Russian piped gas, but it has now chartered five FSRUs, three of which will start operating this winter. Germany has also been filling its gas storage facilities at record pace. They are currently 87.9% full, according to Gas Infrastructure Europe. For the EU overall, storage facilities are 83.6% full, well above the EU’s 80% target.

Strategically, Germany (and the EU) can’t simply return to the old normal once (IF) Ukraine hostilities end. Germany’s vulnerability to its natural gas dependence on Russia has irrevocably shaken up the economies and politics of Germany and most of Europe.

Germany seems to have finally figured this out. In the short run, (2-3 years) the consequence will be that Germany’s and EU’s consumers and industrial users will face natural gas prices that are much higher than they were two years ago. Higher-cost LNG will be a larger part of the energy mix, with low-cost pipeline natural gas from Russia a smaller part.

As Wrongo said recently, Russia cannot easily sell all of the natural gas that it’s not selling to Europe, because the pipelines can’t be moved overnight. And Russia has no LNG export facilities linked to its production sites. So Russia will have to cut some production at these sites and will lose the revenues associated with that lost production.

Also in the short run, Europe’s governments will struggle to balance relief for its citizens against letting energy prices rise high enough to discourage use. These governments are scrambling to find alternative sources while cutting consumption as deeply as they can. But winter is coming, and if they aren’t able to find successful workarounds, economic growth will slow, and European voters may demand that their governments drop sanctions on Russia.

That is a political problem that Russia hopes to exploit this winter.

Europe’s response to the Russian invasion of Ukraine has exposed both its vulnerability to Russian gas, and also the poor strategic decisions that it and Germany have made over several decades: to take the cheapest, simplest solution to Europe’s growing energy needs.

Russia is hoping that it will gain some leverage in the diplomacy regarding an endgame in Ukraine and the anti-Russia sanctions regime this winter.

And like always, regardless of the outcome, no politician will be harmed while playing this game.

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Monday Wake Up Call – September 12, 2022

The Daily Escape:

Harvest Moon, Cape Cod National Seashore, MA – September photo by Tom Baratz

With all of the media’s coverage of the comings and goings of the British monarchy, Wrongo’s certain that you missed the reviews of a new book, “Slouching Towards Utopia” by Brad DeLong, an economist from UC Berkeley. Dylan Matthews in Vox quotes DeLong from the book:

“The 140 years from 1870 to 2010 of the long twentieth century were, I strongly believe, the most consequential years of all humanity’s centuries.”

Matthews thinks it’s a bold claim. After all, homo sapiens has been around for at least 300,000 years; DeLong’s “long twentieth century” represents 0.05% of that history.

But DeLong says an incredible thing happened during that sliver of time that had eluded our species for the other 99.95% of our history: Before 1870, technological progress was glacial, but after 1870 it accelerated dramatically. More from Vox:

“DeLong reports that in 1870, an average unskilled male worker living in London could afford 5,000 calories for himself and his family on his daily wages. That was more than the 3,000 calories he could’ve afforded in 1600, a 66% increase….But by 2010, the same worker could afford 2.4 million calories a day, a nearly five hundred fold increase.”

DeLong is speaking of the nations of the rich north, not about all nations. He’s saying that food surplus was the key driver of progress. What’s implied is that the greatest difference between the wealthy and everyone else was that the poor were living on the verge of starvation. Those basic economic facts shifted once having enough to eat ceased being society’s most critical status distinction.

Another interesting statistic from the book:

“…the average number of years of a woman’s life spent either pregnant or breastfeeding…has gone down dramatically, from 20 years of a typical woman’s life in 1870 to four years today.”

Most historians present modern history as a long 19th century (from the French revolution in 1789) to the crisis of 1914. Which is then followed by a shorter 20th century ending with the fall of communism. DeLong, by contrast, argues that the period from 1870 to 2010 is best seen as a coherent whole: the first era, he argues, in which historical developments were overwhelmingly driven by economics.

From the Economist:

“…despite the Industrial Revolution…for millennia, technological improvements never yielded enough new production to outrun population growth. Incomes had stuck close to subsistence levels. Yet from around 1870, growth found a new gear, and incomes in leading economies rose to unprecedented levels, then kept climbing.”

DeLong says that economic policy in this period was a duel between the ideas of Friedrich von Hayek, who extolled the power of the free market, and Karl Polanyi, who warned that the market should serve man, not man serving the market.

Before WWI, markets generated rapid growth along with soaring inequality. People pushed back, demanding greater political rights, which they used to pursue regulation of the economy and improved social insurance.

After WWII, a mix of a market economy and a generous safety-net made for a happy marriage of Hayek and Polanyi, improved by Keynes, who said that governments should act to prevent economic recessions. This led to a three-decade post-war period of growth unmatched before or since. DeLong calls them the Thirty Glorious Years; from 1945 to 1975, as the US and Europe recovered from World War II.

But when growth sagged and inflation rose in the 1970s, voters supported politicians promising market-friendly, or “neoliberal”, economic growth reforms, like lower taxes and reduced regulation. But those reforms didn’t keep economic growth high. And they also led to even worse inequality. Still, the US and other rich countries pressed on with them, right up to the 2008 global financial crisis, which marks the end of DeLong’s 20th century.

According to a paper by Carter C. Price and Kathryn Edwards of the RAND Corporation, had the more equitable income distribution that America experienced in those thirty glorious years stayed constant, the aggregate annual income of Americans earning below the 90th percentile would have been $2.5 trillion higher in just the year 2018. That’s an amount equal to nearly 12% of GDP.

Price and Edwards say that the cumulative inequality cost for our 40-year experiment in government-supported income inequality added up to $47 trillion from 1975 through 2018. And probably equaled $50 trillion by 2020.

That’s $50 trillion that would have made the vast majority of Americans far more healthy, resilient, and financially secure.

So, the big unanswered question is: Can we again return to a period where we see both economic growth and equitable growth? It’s highly doubtful. As DeLong says in Time:

“Our current situation: in the rich countries there is enough by any reasonable standard, and yet we are all unhappy, all earnestly seeking to discover who the enemies are who have somehow stolen our rich birthright and fed us unappetizing lentil stew instead.”

The problem here is that our entire culture, economy and even our civilization is predicated around growth and people haven’t known anything else. Hope you’ve enjoyed the ride.

Time to wake up America! We need to reimagine capitalism, our taxation policies and our welfare scheme if we are to survive. Expect a rough adjustment.  To help you wake up, listen, and watch Bruce Springsteen perform “Darlington County” live in London in 2013:

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Russia, Iran Form Energy Cartel

The Daily Escape:

Sunset, Lookout Point, Harpswell, ME – August 2022 photo by Rick Berk Photography

Good strategy is supposed to include a look at what the logical outcomes may be, once you’ve implemented your strategic plan. Was that done when the US and the EU decided to sanction Russia about its Ukraine invasion after having sanctioned Iran, well, for being Iran?

When you treat much of the world as your enemy, you should expect them to eventually find common cause and fight back. We’re speaking about the world’s supply of natural gas (NatGas). There is a new alliance between Russia and Iran on NatGas. At Oil Price, Simon Watkins says that a new energy cartel is forming: (brackets and emphasis by Wrongo)

“The US $40 billion memorandum of understanding (MoU) signed last month between [Russia’s] Gazprom and the National Iranian Oil Company (NIOC) is a steppingstone to enabling Russia and Iran to implement their long-held plan to be the core participants in a global cartel for gas suppliers in the same mold as the Organization of the Petroleum Exporting Countries (OPEC) for oil suppliers.”

The article describes how Russia and Iran are creating a NatGas OPEC. The two countries are first and second respectively in holding the world’s largest NatGas reserves. Russia has just under 48 trillion cubic meters (tcm) and Iran has nearly 34 tcm, so the two countries are in an ideal position to form a cartel.

NatGas is a vital commodity. It is widely seen as the optimal product in the transition from fossil fuels to renewable energy. And controlling the global flow of it will be the key to energy-based power over the next 10 to 20 years. This has already been demonstrated in Russia’s hold over the EU through its NatGas supplies.

From a top-down perspective, this Russia-Iran alliance might also draw other Middle East gas producers, who have tried to be neutral between the Russia-Iran-China axis or the US-EU-Japan axis.

Qatar has long been seen by Russia and Iran as a prime candidate for this kind of gas cartel because it shares its gas field with Iran. Iran has exclusive rights over 3,700 sq.km of the well-known South Pars field (containing around 14 tcm of gas), with Qatar’s North Field comprising the remaining 6,000 sq.km (and 37 tcm of gas).

If they can enlist Qatar, this new cartel would control 60% of world gas reserves, allowing them to control NatGas prices globally. It would be logical for prices to rise, given the growing demand for NatGas in the coming decades.

America can dodge this bullet for a few years because proven gas reserves in the US amount to about 13.5 tcm. So, at the current level of production we can produce sufficient NatGas for another 13-15 years.

But this means that in a decade or so, the US, Europe, and Asia will all be more dependent on imports from Russia, Iran, and Qatar, while competing with the rest of the world for our share in order to maintain our economy and lifestyle.

So, strategy can be a bitch. By creating a global political and economic environment that pushes Russia, Iran, and Qatar into a cartel, we’ve created a significant future economic vulnerability.

There are immediate NatGas cost implications in the US today. Bloomberg’s article, A ‘Tsunami of Shutoffs’: 20 Million US Homes Are Behind on Energy Bills, paints a picture:

“…about 1 in 6 American homes…have fallen behind on their utility bills. It is, according to the National Energy Assistance Directors Association (NEADA), the worst crisis the group has ever documented. Underpinning those numbers is a…surge in electricity prices, propelled by the soaring cost of natural gas.”

That’s 16% of American homes for the math challenged. Winter in the US may not be as big a disaster as in the UK and Europe, (better insulation). But plenty of people here will have to choose between food and heat.

The world is sorting itself out into blocks of countries aligned with each other. Russia, China, Iran and perhaps India, want their own commodity-based financial system to reduce their exposure to the political impacts from the West’s corporate/state “free” market system, which has used trade as a weapon for the past few decades.

There are two ways of looking at this. We could just build this energy vulnerability into our economic planning and prepare to devote a growing share of our GDP to paying the cartel for more NatGas.

Or, we could immediately start seriously building out our renewable energy capacity. There’s a model. Europe is attempting to pivot away as quickly as possible from its dependence on Russia.

We could do the same thing.

That could reduce our exposure to imported NatGas because it’s largely a bridge from coal to renewables. Massive investing in renewables would give Russia and Iran a shorter bridge than they think they’re getting.

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Saturday Soother – August 20, 2022

The Daily Escape:

Stormy view from House Mountain, Sedona, AZ – August 2022 photo by Ed Mitchell

Tens of thousands of teacher openings are unfilled as students head back to American classrooms. That’s prompting states and school districts to try everything they can to address the teacher shortage.

Except increase their pay. The Economic Policy Institute (EPI) has tracked teacher compensation for 18 years. Here’s the headline:

“…teachers are paid less (in weekly wages and total compensation) than their nonteacher college-educated counterparts, and the situation has worsened considerably over time.”

EPI tracks what they call the relative teacher wage penalty, the relative wages and total compensation of teachers compared to other college graduates. Here are the EPI’s findings:

  • Inflation-adjusted average weekly wages of teachers have been relatively flat since 1996. The average weekly wages of public school teachers (adjusted for inflation) increased just $29 from 1996 to 2021, while inflation-adjusted weekly wages of other college graduates rose from $1,564 to $2,009 —a $445 increase.
  • The relative teacher wage penalty reached a record high in 2021. It was 23.5% in 2021, up from 6.1% in 1996. The penalty was worse for men than for women. The penalty for men rose from 18.6% to 35.2%.
  • The great portfolio of teachers’ benefits used to be a selling point, but it hasn’t been enough to offset the growing wage penalty. The teacher total compensation penalty was 14.2% in 2021 (a 23.5% wage penalty offset by a 9.3% benefits advantage).
  • The relative teacher wage penalty exceeds 20% in 28 states. Teacher weekly wage penalties estimated for each state range from 3.4% in Rhode Island to 35.9% in Colorado. In 28 states, teachers are paid less than 80 cents on the dollar earned by similar college-educated workers.

The EPI has a chart showing the relative erosion of teacher wages vs. other college graduates since 1980:

The EPI focuses on “weekly wages” to avoid the comparisons of length of the work year (i.e., the “summers off” issue for teachers).

Add to this the general decline in working conditions for teachers, and many who are eligible for retirement are leaving. Republicans in particular are politicizing education. Some are pushing the idea of “parental rights.” That is happening in Florida, Texas and in other states. It’s clear that in some school districts parents want the right to censor what’s being taught. Some Conservatives are pushing for a camera in every classroom across America. Tucker Carlson called for cameras in classrooms to “oversee the people teaching your children, forming their minds.”

This comes under the guise of “transparency in the classroom”, parents keeping an eye on teachers, so they won’t teach the dreaded Critical Race Theory (or groom kids to become trans, or gay). Teachers naturally bristle at the idea of video auditing.

Forcing teacher compliance with imposed politicized curricula won’t make these jobs any more desirable.

Some states are relaxing licensing requirements to make it easier for people to fill some of those unfilled jobs. Florida, which has about 8,000 open teaching positions, is allowing military veterans without a bachelor’s degree and no prior teaching experience to apply for a temporary five-year teaching certificate while they finish their bachelor’s degrees.

The biggest issues to solve are better public school funding, which can help end the teacher wage penalty. That requires towns to raise taxes. Second, the politicization of education is changing the amount of parental control in the day-to-day operations in some school districts. That’s making teaching an even lower-status job than it is now.

According to the BLS, there are currently 300,000 fewer teachers nationwide compared to before the pandemic. Part of this is job satisfaction. A survey from the American Federation of Teachers found that 74% of teachers were dissatisfied with their job, up from 41% two years ago.

If teachers and staff are underpaid, under-resourced and are now being second-guessed in the classroom, they’re not going to stay. So replacing them will become an even bigger problem.

Enough of this week’s problems, it’s time for our Saturday Soother! Let’s put Trump’s secrets and Liz Cheney’s political prospects on pause. We’re facing moderate drought conditions here in CT, so lawn mowing has ceased, and our grass is brown and crunchy.

But, it’s time to empty our minds, so that we can begin filling them up again on Monday. Start by grabbing a cold glass of lemonade and a seat in the shade.

Now, watch and listen to Antonin Dvorak’s “4 miniatures”, for 2 Violins and Viola, played here by the Musicians of Lenox Hill at Temple Israel of the City of New York in  April 2019:

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Companies Are Making Inflation Worse

The Daily Escape:

Grand Park, Mt. Rainier, WA – August 2022 photo by Edwin Buske Photography

As discussed yesterday, polls are showing that voters are still concerned about inflation. The good news over the past two days is that producer prices (prices at the wholesale level) and consumer prices both fell from June to July.

But these inflation concerns won’t be going away, and the Republicans hope to make the November midterms a  “gas and groceries” election, saying Biden is the cause of rising prices. In July’s Consumer Price Index, the price of groceries was a particular pain point, rising 1.3% for the month. Wolfstreet reports that the year-over-year rise in the “food at home” part of the CPI (food bought in stores and at markets) is now at 13.1%, the worst spike since 1979.

Food is a category where inflation hits consumers right in the face on a daily basis. And it hits people on the lower end of the income spectrum much harder because they spend a relatively larger portion of their income on food.

But the fall in gasoline prices over the last couple of months is also meaningful. After peaking in June at $5.03 per gallon, the average national price of gas fell below $4 this week, according to GasBuddy.

The Hill reports that Biden will go on offense against the Republicans’ drumbeat about inflation by traveling the country to tout job creation and the Inflation Reduction Act, once it is passed by the House on Friday. Biden plans to make the point that Congressional Republicans sided with the special interests every step of the way on delivering lower costs for working people.

That won’t hurt Dems chances in November, but will it be enough to offset what’s happening with retail prices? Here’s another striking set of facts from Bloomberg:

“The first sign that this wasn’t going to be a typical corporate earnings season came early on the morning of July 12, when PepsiCo Inc. unveiled an odd set of results. Growth in unit sales, it said, was essentially zero in North America. Revenue rose though, driven by the double-digit price increases Pepsi slapped on its snacks.”

They weren’t the only consumer product company to raise prices as sales fell: The purple dots show how unit sales fell (as much as 10% for Clorox) while prices (green dots) rose in most cases, more than 10%. And revenue (yellow dots) rose for all firms:

This is bad for the economy on many levels: Price-driven sales growth isn’t healthy; and it isn’t good for consumers who have lost purchasing power (and are angry about it). It isn’t good for our overall economy, or for the Federal Reserve that’s trying to bring down inflation.

Many CEOs are willing to raise prices because it’s no longer the taboo it has been for the past two decades, when annual inflation averaged a little more than 2%. Their thinking is that if volumes slip a little as a result of the price hikes, their share prices won’t take a beating. So no worries, just raise prices.

The bet that these consumer products CEOs are making is that once things settle down in the economy, people will come back. Bloomberg quotes  Neil Saunders, an analyst at GlobalData Plc, a consulting company:

“If they keep losing share next year, they’ll take more notice. It’s very hard at the moment to tell what’s temporary and what’s permanent.”

Starbucks, Coca-Cola, Kimberly-Clark, and Church & Dwight, the maker of Arm & Hammer baking soda and OxiClean, all reported quarterly numbers that fall into the weak-volumes-and-big-price-hikes category. More from Bloomberg: (emphasis by Wrongo)

“One of the best examples is Conagra Brands Inc., the…Chicago-based food conglomerate, which reported results on July 14. A core measure of its revenue jumped 6.8%, in the three months that ended on May 29, thanks to an increase of 13% in the average price it charged….The amount of goods it sold, though, fell 6.4%.”

We know that inflation is very high, among the highest rates in the past 40 years. It now seems clear that consumer products companies are a prime contributor to these price increases.

We know that unemployment is as low as it’s been in 50 years. The labor market is strong. We know that the growth rate of GDP was really high in 2021, and that it’s slowing in 2022.

What we don’t know is how voters are going to act in November.

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Should Legislative Wins Have Dems Feeling Optimistic?

The Daily Escape:

Sunset, Colorado, NM, near Grand Junction, CO – July 2022 photo by David Shield

Robert Hubbell made a list of landmark legislation passed thus far during the Biden presidency so that we’d have it handy over the next few months leading to the mid-terms in November:

  • 03/11/2021 American Rescue Plan Act of 2021, a $1.9 trillion relief bill to address the continued impact of COVID-19 on the economy, public health, state and local governments, individuals, and businesses.
  • 11/15/2021 Infrastructure Investment and Jobs Act, a $1.2 trillion investment in “hard infrastructure” including roads and bridges.
  • 03/29/2022, Emmett Till Anti Lynching Act, 120 years after an anti-lynching bill was first introduced and which failed on nearly 200 prior occasions, Congress passed a bill designating lynching as a hate crime. Only three representatives—one each from Texas, Kentucky, and Georgia—voted against the bill.
  • 06/25/22 Bipartisan Safer Communities Act, extended background checks for gun purchasers under 21, funding for state red flag laws and other crisis intervention programs, and partial closure of the “boyfriend” loophole.
  • 07/29/2022 CHIPS and Science Act, the most significant research bill passed in a generation, including a $56 billion investment in American semiconductor production to incentivize companies to move chip production back into the US.
  • 08/02/2022, Honoring our PACT Act of 2022, expanded healthcare and other services for veterans who were exposed to toxic substances during military service.
  • 08/07/2022, Inflation Reduction Act of 2022, the largest climate investment in US history, also lowers prescription drug prices by giving Medicare the power to negotiate the prices of certain prescription drugs and extends expiring Obamacare health care subsidies for three years.

The scope of the issues addressed is significant: the pandemic and its economic fallout, highways, bridges, broadband, rail, manufacturing, science, semiconductors, prescription drug prices, health insurance, veterans’ health, climate change, deficit reduction and tax equity.

And they were passed within the constraints of a 50/50 Senate. Five of these laws, and all but the two biggies: the American Rescue Plan, and the IRA received Republican support. It’s pretty amazing that the Dems got this much.

So, whenever someone asserts that “Biden or the Democrats haven’t achieved anything” or that “Biden’s presidency has been a failure,” ask them to name as many significant pieces of legislation passed by Trump. Or, by Obama, Bush II, Clinton, Bush I, Reagan, Carter, Ford, or Nixon.

Only LBJ stacks up to the progress Biden has made so far.

But, it’s unclear how much this will help the Democrats in November. The Dems went into the 2010 midterms having passed Obamacare, a landmark piece of legislation, but they lost 60 seats and the leadership of the House. That was the biggest swing since 1948. Republicans also reduced the Democrats’ Senate majority.

So, as Wrongo stated yesterday, the political challenge for Democrats turns in large part to messaging —and targeting their message to the cohorts that make up the Democratic Party. Ruy Teixeira, a Democratic strategist affiliated with the American Enterprise Institute, wrote in the WSJ that Hispanics are no longer a sure cohort for the Democrats:

“It seems clear that Democrats seriously erred in 2020 by lumping Hispanics in with other “people of color,” assuming that they sympathized with the racial activism that dominated so much of the political scene that year. In reality, Hispanic voters are not a liberal voting bloc, especially on social issues.”

More:

“In a Pew postelection survey, just 20% described themselves as liberal, while 45% were moderate and 35% conservative. Surveys show that Hispanics are overwhelmingly an upwardly mobile and patriotic population whose main concerns are jobs, the economy, healthcare, effective schools, and public safety.”

Teixeira cites the polling firm Civiqs’ survey in late July that showed that just 12% of Hispanic working-class voters said their family’s financial situation had gotten better in the last year, while 50% said it had gotten worse.

In general, Hispanic voters cite inflation and the economy as by far their top issues for 2022. They could be a tough get for Dems who want to focus voter attention on abortion rights, their legislative achievements, and the Jan. 6 hearings.

How should Democrats message Hispanic voters?

We’re at an inflection point. All of the above happened because there were 50 Democratic Senators. It wouldn’t have happened with 49. It might have been bigger with 52 or more. Lose control of the House in November, and see Biden impeached.

These are things all Democrats should be reckoning with. Let’s leave the last words to Hubbell: (brackets by Wrongo)

“We have the policies, the positions, the values, and the candidates necessary to win. We need to….engage without fear or hesitation…..Let’s capitalize on the string of mistakes and “pulling back the curtain” moments that have revealed…[Republican] depravity as never before. We have every reason to be confident but no reason to be complacent!”

 

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Monday Wake Up Call, Inflation Reduction Act Edition – August 8, 2022

The Daily Escape:

Summer storm passes, Grand Teton NP, WY – August 2022 photo by Hilary Bralove

The Senate came into session at 12 pm Saturday, and after a full 24 hours, it paused the vote-a-rama on Sunday for a new prayer. Those are the Senate rules. Then the Senate promptly resumed its vote-a-rama, which ended about 3:15 pm on Sunday. From the WaPo:

“The Senate on Sunday approved a sweeping package to combat climate change, lower health-care costs, raise taxes on some billion-dollar corporations and reduce the federal deficit, as Democrats overcame months of political infighting to deliver the centerpiece to President Biden’s long-stalled economic agenda.”

While most of the Democrat’s reconciliation process proceeded according to plan, Senate Republicans successfully stripped a provision capping the price of insulin in the private marketplace from the Inflation Reduction Act (IRA) by a 57-43 vote, with seven Republicans (Cassidy, Collins, Hawley, Hyde Smith, Kennedy, Murkowski and Sullivan) voting to keep it in. But the seven GOP votes, plus all Democrats, weren’t enough to reach the 60-vote threshold necessary to pass.

The cap on insulin prices for only those on Medicare remained in the bill since it complied with the rules on reconciliation. Apparently, the Republicans think that if we give people handouts for having diabetes America’s just incentivizing people to get diabetes. Who wants that?

Democrats included a new tax on large companies that currently pay nothing to the US government and added about $80 billion for the Internal Revenue Service to pursue tax cheats. They also approved a 1% tax on companies that buy back their own stock, a practice that many see as detrimental to the economy, that benefits only wealthy shareholders and executives.

After the bill passed, Republicans were predictably outraged. The appropriately-named Sen. Mike Crapo (R-ID) said:

“It does nothing to bring the economy out of stagnation and recession. But rather, the Inflation Reduction Act of 2022 gives us higher taxes, more spending, higher prices — and an army of IRS agents…”

And it’s important to note that while Democrats don’t think that Sens. Manchin and Sinema are all that great, don’t forget that this watered down bill was opposed by EVERY SINGLE REPUBLICAN.

There is plenty to crow about in the IRA. Does it contain everything on the progressive wish list? No, but Dems should take the win and stop pissing and moaning about what couldn’t get by Manchin, Sinema and/or the Senate Parliamentarian, and sell the bill hard to the American people.

If Democrats want to deliver even more, they’ll need to improve their margin in the Senate, and hold the House in the November mid-terms.

It’s not enough for Democrats to wait for Republicans to shoot themselves in the foot this fall, even though some candidates can be counted upon to try hard to do just that. Democrats need to be shouting about their successes. Just yesterday, Trump said at CPAC: “You have not good job numbers now”, even though the just-published job numbers were awesome! That has to be countered at every opportunity.

This means a wall-to-wall, multi-pronged messaging campaign, reminding Americans every minute that Republicans can’t be trusted on the economy. And despite where inflation is today, we need to be saying that gas prices are down nearly $1.00/gallon in the last seven weeks.

Maybe John Stewart should become the Dem’s Minister of Information?

We need to say that most GOP candidates support the Big Lie and the impeached coup plotter, Trump. That they’re willing to eliminate the right to an abortion in America. On Friday, Indiana’s Republicans passed and Republican Governor Eric Holcomb immediately signed, a bill that prohibits nearly all abortions from the moment of gestation. Several Republican-controlled states will shortly pass similar laws.

People must, as Tom Sullivan says, “campaign like crazy“, while reminding all Americans that the Party of Lincoln no longer will deliver anything that ordinary people want.

Time to wake up America! We’re at war politically and ideologically with Republicans. The only way to win is to keep defeating them at local, state, and federal levels until they stop trying to force their radical ways on the rest of us. To help you wake up, watch, and listen to the interesting but short-lived group, 4 Non Blondes play their big hit from 1992, “What’s Up”:

Sample Lyric:

25 years and my life is still
Tryin’ to get up that great big hill of hope
For a destination

I realized quickly when I knew I should
That the world was made up of this brotherhood of man
For whatever that means

And so I cry sometimes when I’m lying in bed
Just to get it all out what’s in my head
And I, I am feeling a little peculiar

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Monday Wake Up Call, Recession Edition – August 1, 2022

The Daily Escape:

Monopoly, Revere Beach, MA – From the 2022 Revere Beach International Sand Sculpting Festival. July 24, 2022 photo by Jack Daryl Photography.

From Paul Krugman:

“The US economy is not currently in a recession. No, two quarters of negative growth aren’t, whatever you may have heard, the “official” or “technical” definition of a recession; that determination is made by a committee that has always relied on several indicators, especially job growth.”

Nonetheless, Wrongo predicts that over the next few months, the Big Brain News Pundits will spend mucho time arguing among themselves while we watch, about the meaning of the word “recession“. They will ensure that the word “recession” is said at least once every 30 seconds.

Wrongo brought this up a few weeks ago. Recessions are determined not by pundits but by a committee of economists at the National Bureau of Economics (NBER). The two measures that have had the most weight are real personal income and non-farm payroll employment. So, despite what you’re hearing, it boils down to income and employment. If income and employment turn south, there’s a good chance economic output will be lower. From Robert J. Shapiro:

“Start with employment, which normally contracts in the first two quarters of recessions. Over the first six months of the 1990–91 recession, employment fell by 690,000, or 0.6%. Similarly, over the first two quarters of the recessions of 2001 and 2007–09, employment fell respectively by 761,000 and 426,000 positions, or 0.6% and 0.3%.”

But in the first two quarters of 2022, employment actually grew, increasing by 2,740,000, or 1.8%.

The main factor behind the lower GDP in the second quarter was business inventories. Businesses generally finance increases in their inventories. So as interest rates rose in the second quarter, inventory purchases fell sharply, subtracting 2% from GDP. GDP growth in the second quarter was -0.9%, so inventories accounted for all of the loss of GDP.

Inventories grew. but at a slower pace, bringing about the negative GDP performance. But this change in the rate of growth in inventories is not tied to either employment or to income, so we’re not in a recession, even though GDP fell.

But our bigger economic problem is inflation. Back to Krugman:

“Obviously gasoline prices are down — almost 80 cents a gallon from their mid-June peak. (Remember those scare stories about $6 a gallon by August?)”

We all know that the Big Brain Pundits only really care about how much it costs to fill their gas tanks compared to what it may have cost when some other guy was president. Expect that they will ignore our record low unemployment, and the growth in median wages.

Despite growing slower than inflation, wages are growing at about 5.4% annually. That’s good, although it could be better. Yet, the Big Brains want us all to be worried about the possibility of recession and inflation occurring at the same time. They’re worrying about that old 1970’s bugaboo, stagflation, which is highly unlikely to occur, despite how much Republicans are rooting for it to happen.

If America really wants to stop inflation in its tracks, we know how to nudge prices in the right direction: Implement a windfall profits tax on oil and food companies, whose profits are off the charts, along with their prices. Also, we could pass the corporate minimum income tax that is a part of the proposed Inflation Reduction Act.

How well the Federal Reserve addresses inflation will decide how soon the current economic expansion ends, and a recession begins. Although the economy’s fundamentals are sound, there’s a danger that the Fed’s interest rate hikes may dampen demand and employment too much. That’s a 50/50 call right now.

Time to wake up America! We’re not in a recession, although we may see one in 2023. We don’t have inflation under control yet, although that’s likely to happen within the next year.

To help you wake up, watch and listen to Sir Elton John from his “Farewell Yellow Brick Road” tour. Wrongo and Ms. Right got to see him in Foxborough, MA last Wednesday, courtesy of daughter Kelly and her partner Bob.

It was Wrongo’s second time seeing Sir Elton, the first was at the Budokan in Tokyo in 1974.

Last Wednesday was a great night with an adoring audience for what seems to be near the end of his touring career. Here’s his final encore from last week’s performance, “Goodbye Yellow Brick Road” performed on the night we were there:

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Sunday Cartoon Blogging – July 31, 2022

Q: Why do people take an instant dislike to Justice Samuel A. Alito?  A: It saves time.

Alito spoke in Rome dismissing criticism from foreign officials who he said “lambasted” his opinion that overturned Roe v. Wade. Alito spoke at a conference promoting religious liberty, saying:

“I had the honor this term of writing I think the only Supreme Court decision in the history of that institution that has been lambasted by a whole string of foreign leaders who felt perfectly fine commenting on American law…”

Alito called out Prince Harry as making a particularly hurtful comment. What Harry said at the UN:

“This has been a painful year in a painful decade….Climate change wreaking havoc on our planet, with the most vulnerable suffering most of all. The few weaponizing lies and disinformation at the expense of the many. And from a horrific war in Ukraine, to the rolling back of constitutional rights here in the United States, we are witnessing a global assault on democracy and freedom, the cause of Mandela’s life.”

Alito said in response:

“But what really wounded me…was when the Duke of Sussex addressed the United Nations and seemed to compare the decision…with the Russian attack on Ukraine…”

To quote Charlie Pierce:

“The conservatives on the Supreme Court are now not simply ruling like political animals, they’re behaving like political animals as well.”

This guarantees that Alito will be forever known internationally as a dickhead. On to cartoons.

Manchin had a surprise:

The GOP’s burning its mid-term chances by walking away from the PACT act:

And this incarnation of GOP plumbers need tech support:

The stuff of nightmares:

Change brings things to light:

DHS scrapped the effort to collect agency phones in order to try to recover deleted Secret Service texts:

Putin’s staff misunderstands:

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Tuesday Wake Up Call, Unhappiness Edition – July 26, 2022

The Daily Escape:

Smoke in Yosemite Valley from the nearby Oak fire – July 25, 2022 photo via Today’s California

At a family party this weekend, my daughter who owns an upscale restaurant, mentioned that while post-Covid, the restaurant is full again, the patrons are much more mean and nasty. That made Wrongo revisit the answers to the latest data on the happiness of Americans from the General Social Survey (GSS), produced by NORC, a nonpartisan research organization at the University of Chicago.

The GSS has been monitoring societal change since 1972. The last GSS survey came out in January 2022. Here’s a significant chart:

Since 1972, the GSS has asked the question: “Taken all together, how would you say things are these days–would you say that you are very happy, pretty happy, or not too happy?” As you can see above, historically the “very happy” people have outnumbered the “not too happy” group by about 3:1 for about 45 years.

But in 2021, the very-happies plummeted from 31% of the population in 2018 down to 19%, while the not-too-happies surged to 24% (the “pretty happys” remained constant at about 57%). For the first time in polling history, Americans are more likely to say they’re not happy than to say they’re very happy.

The Institute for Family Studies (IFS) has taken a look at the GSS data to see what’s driving this precipitous change. Here’s their chart of unhappiness by age:

Until 2018, fewer than 18% of Americans ages 35 and over claimed to be “not too happy”, while fewer than 16% of Americans under 35 had done so. But in 2021, unhappiness rocketed upwards for both groups, to 22% for those 35 and over, and to 30% for those under age 35.

The sharp increase for those under 35 indicates young adults are carrying a unique burden. They’re taking an extraordinarily dim view of the world and their own lives.

Among young adults, different groups had different levels of unhappiness even before Covid. For example, only 6% of married people said they were “not too happy,” versus 16% of the unmarried. The question is whether all groups saw the same spike in unhappiness. Here’s another chart from the IFS:

Unhappiness rose for every group: In each case, the red bars are higher than the blue bars.

In the GSS, social class didn’t protect people very much: Unhappiness rose about 16% for people with prestigious jobs vs. 15% for other people. People who attended college saw their unhappiness rise by 16% vs. 15% for people who didn’t attend college.

Some demographic traits did matter: Men saw their unhappiness rise 18%, vs. 12% for women. Unhappiness rose about 17% for non-Hispanic whites, vs. 12% for racial and ethnic minorities.

Religion seems to have buffered unhappiness. Among people who attended religious services at least two times per month, unhappiness rose only 4%, the smallest increase of any group.

Liberal Americans saw the largest increase in unhappiness of any group, by 19%. For moderates, it was 15%, and for conservatives, 13%. Despite what Tucker Carlson might try to make of this, the IFS says that given the sample sizes involved, those differences aren’t statistically significant.

We can blame the Covid pandemic for much of the increase in unhappiness, but we’ve also seen huge social disruption. Here’s a chart showing the percentage of 25-34 year-olds living with parents or relatives in the US:

In 1970, 11% lived with their parents, while in 2020, it was 29%. Note the decline in living with a spouse. From 80% to 38%. While people are getting married later, living alone is relatively unchanged since 1980.

This has occurred during a period when there was very little upside in real wages, and a huge increase in financial assets, which few young adults have, and in the cost of housing. This may also partially explain why young people are unhappy.

We’re about to head into a global recession and most of our politicians have zero idea how bad it will be, or how to fix it. When it comes to the midterm elections, nearly a third of voters say it doesn’t matter who wins.

Time to wake up America! We’re hoping that demography will save us before climate change slays us, or fascism overtakes us.

To help you wake up, listen to 9 year-old musical prodigy Ellen Alaverdyan perform a cover of Geddy Lee‘s iconic bassline on the classic Rush song “Tom Sawyer”:

Scroll away from the video, and she sounds like a pro. Very nice!

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