Category: Economic Policy

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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Monday Wake Up Call – July 11, 2022

The Daily Escape:

Penstemon and Paintbrush, with Mt. St. Helens in background – June 2022 photo by Edwin Buske Photography

There are two big economic issues that the media and pundits say will influence the 2022 mid-terms: inflation, and the possibility of a recession.

Let’s start with the scare of a looming recession. Most Americans have been told that a recession occurs when real GDP contracts for two consecutive quarters. Sounds easy to figure out, but this definition wasn’t met in two out of the last three recessions. Some facts: The 2020 downturn lasted just two months, not two quarters. And during the 2001 recession, real GDP didn’t contract for two quarters in a row either.

The difference is that recessions are determined not by pundits but by a group of economists at the National Bureau of Economics (NBER), and they use several measures beyond GDP to make it official. Here’s how they explain it:

“A recession is a significant decline in economic activity spread across the economy, normally visible in production, employment, and other indicators…”

They go on to say that:

“There is no fixed rule about what measures contribute information to the process or how they are weighted in our decisions.”

In recent decades, the two measures that have had the most weight are real personal income and non-farm payroll employment. So, despite what you’re hearing from pundits about GDP, it basically boils down to income and employment. If income and employment turn south, there’s a good chance economic output will be lower.

But after two quarters of 2022, while output is slowing, income and the labor market are both still solid. The WSJ quotes Robert Gordon a Northwestern University economics professor and member of the NBER’s committee that decides on recessions:

“We are going to have a very unusual conflict between the employment numbers and the output numbers for a while…”

The US economy added 1.6 million jobs in the first quarter, and another 1.1 million jobs in the second quarter. Those numbers certainly don’t look recessionary, despite what the media is trying to tell us. U6, which is a measure of underemployment declined -0.4% to 6.7%. This is a new all-time low for U6, which has been tracked since 1994.

It may seem like splitting hairs to talk about the definition of a recession. But we need to be prepared for the coming political scenario where some argue we’re in a recession while others will refute that idea vigorously.

In this mid-term season, things are going to get weird.

Let’s turn to the scourge of inflation. It is among the first stories on the local news every night, but you might not know that as Paul Krugman says:

“The wholesale price of gasoline has fallen about 80 cents a gallon since its peak a month ago. Only a little of this plunge has been passed on to consumers so far, but over the weeks ahead we’re likely to see a broad decline in prices at the pump….what are the odds that falling gas prices will get even a small fraction of the media coverage devoted to rising prices?”

That seems to point to profit taking by the petroleum corporate interests. Have you noticed how much profit they have made lately? ExxonMobil plans to buy back $30 billion of stock this year with the extra money that we all paid at the pump.

Last Friday, PBS talked about a looming wage-price spiral, a neoliberal concept that says rising wages drive prices. But the annualized rate of wage growth, comparing the last three months (April, May, June) with the prior three months (January, February, March), was 4.3%,down from a previous annualized rate of 6.1%.

This is big since the Fed’s plans for aggressive interest rate hikes is based on its concern about a 1970s-type wage-price spiral. It is impossible to have a wage-price spiral when wage growth is slowing. The current 4.3%  wage growth is less than one percent higher than the 3.4% rate in 2019 when inflation was comfortably below the Fed’s 2.0% target.

Retailers are now stuffed to the gills with merchandise. What happened was that all of the product that was stranded at sea has finally reached store shelves. They will hold massive sales this fall to get rid of it, and that will lower prices.

The lockdowns in China are mostly over, last year’s fiscal stimulus has worked its way through the economy, and the Fed has begun sharply raising interest rates.

Krugman feels that as the economy weakens, the prospect for sustained inflation is receding.

Time to wake up America, don’t get demagogued by the scary economic terms that the politicians will throw at you. To help you wake up, let’s listen to Barenaked Ladies – “If I Had a Million Dollars” Live in Michigan in 2007:

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Lowering Gas Prices Isn’t Easy

The Daily Escape:

Sunset, tide pools, La Jolla, CA – June 2022 photo by Paul Folk

Fed Reserve Chair Powell appeared before the Senate Banking Committee on Wednesday and the House Financial Services Committee on Thursday to talk about inflation and the Fed’s role in bringing it under control. Both Democrats and Republicans agreed with Powell’s desire to bring inflation down as quickly as possible. But they had vastly different views on how the Fed and Congress should do the job.

When pressed by Sen. Elizabeth Warren (D-MA), Powell said higher interest rates could not boost the production of oil or end other supply shocks that are driving prices higher:

Basically, Powell agreed that the forces causing inflation were largely beyond the Fed’s control.

The Fed is raising interest rates to dampen demand, but consumers are in relatively decent shape and still have money in their bank accounts to spend. If spending declines, companies are often forced to keep prices stable or cut them, which throws some cold water on inflation. But that also can cause job losses and wages to stagnate.

Committee Republicans blamed the Fed for not listening to their calls to raise rates as inflation began to rise last year. Several GOP Senators questioned whether the Fed has the will to induce a recession if that becomes necessary.

Politically, it’s clear that a sharp recession that cost jobs would be ruinous for millions of Americans. But, it has the advantage of giving Republicans a clear path to winning back control of Congress in 2022 and possibly the White House in 2024.

That’s how politics works: The Party out of power blames the Party in power for whatever isn’t working.

However, inflation has multiple causes, most of which Powell admitted were outside the control of the Fed or the White House. Let’s focus on gas prices, an area where neither Biden nor Powell can do much to bring prices down.

The key to gas prices right now is the global lack of refinery capacity. Seeking Alpha reports that excess refining capacity doesn’t exist outside of India, China, and Russia. As a result, US and European refineries are making huge profit margins. From the Economist:

“In normal times, the refining business is a low-margin, low-drama adjunct to the…business of oil production….Refiners typically make profit margins of $5-10 a barrel….This time….Margins for many refiners have rocketed, and bottlenecks in the sector are propelling global petrol prices upwards.”

Here’s a chart:

A government report shows that US refining capacity has fallen in the last two years. In fact, it’s where it was in 2014, meaning that gas supplies would still be tight if refineries were running at 100%, and they’re running at close to that. Industry capacity utilization is at roughly 94%, the highest since 2018.

US oil refining capacity has decreased by more than one million barrels/day (5% of the total) since the start of the pandemic. Some old facilities were closed permanently after Covid stopped people from driving, which crushed fuel demand. Other refineries are being modified to produce renewable diesel instead of gas. Those conversions may be too far along to reverse course.

Since there’s little chance of bringing new US sources of gasoline refining online anytime soon, Biden’s best chance to lower prices will likely come from jawboning the refiners to accept smaller profit margins.

We shouldn’t count on America’s corporations to do the right thing.

Over the longer term, Mr. Market might help save the day. The price spikes will cool demand for gas, which should lower prices. A shift in trade flows could also help. The Economist says that India’s refiners see an opportunity to become, as RBC Capital Markets says, “the de facto refining hub for Europe”.

New refineries are scheduled to come online in Kuwait and Saudi Arabia, which should help ease the shortages too.

The hard reality is that there’s no easy solution for gas prices, or for food prices. If they existed, Biden would’ve flipped that switch months ago. Earlier this week, Wrongo said:

“Will people vote this Fall based on the price of gas? Or the threat of a recession? Or, will they understand that there’s a real possibility that democracy as we know it in the US could vanish?….Inflation comes and goes. Recessions come and go. If we lose our democracy, it won’t be returning any time soon.”

The GOP keeps slamming Biden over inflation, but it has zero solutions to offer, because this shit is complicated. Rep. Elise Stefanik, (R-NY), the third-ranking member of the House GOP, isn’t even pretending the GOP has a plan. She recently said of inflation:

“House Republicans will address these crises when we earn back control of the House this November.”

Sure. You can trust the Party of tax cuts for the wealthy to prevent a recession that will harm the rest of us.

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Saturday Soother, Inflation Edition – June 11, 2022

The Daily Escape:

Blackfish Creek, Wellfleet, MA – June 2022 photo by Jo LF

Wrongo and Ms. Right are on the road again, this time on Cape Cod visiting family. So this column will be brief. We saw on Friday that the Bureau of Labor Statistics gave us more bad news, that inflation jumped higher in May. That caused the Dow to decline by 880 points or about 2.7%.

From the Bondad blog: (parenthesis by Wrongo)

“People who were hoping inflation would abate did not get the news they wanted from the May CPI. Consumer prices rose 1.0% in that month alone. Inflation less energy rose 0.7%, and “core” inflation less food and energy rose 0.6%. On a YoY (year over year) basis, prices are up 8.5%, tied for a multi-decade high with a few months ago. Core prices are up 6.0%, down slightly from their February and March peak…”

Bondad says that this means that the Fed will continue stomping on the brakes. The big question is whether the Fed can engineer a relatively short and gentle recession, perhaps in 2023. Or whether instead, they engineer a good, old-fashioned “bust” that hurts all of us.

A recession happens when the economy contracts for two successive calendar quarters. In the first quarter of 2022, GDP declined 1.6%. If we see a similar result for the second quarter, this will meet the classic definition of recession.

Will that happen in 2022? Maybe. Will it happen in 2023? Probably. It is highly unlikely that the Fed’s actions alone will bring aggregate demand down to normal levels relative to supply.

Republicans are messaging that it’s the Biden administration’s fault that inflation got out of control. But if you remove politics from the equation, the reasons are the pandemic’s severe global economic impacts, and the efforts by both the Trump and Biden administrations, along with the Fed, to stimulate the US economy.

The stimuli led to a booming economy, even though it didn’t help everyone. The Fed’s inability to react quickly then left them behind the curve. Russia’s invasion of Ukraine created an oil shortage, that pushed gasoline prices even  higher.

The complex causes of our current inflation doesn’t lend itself to either Party presenting workable solutions in the short term. And they certainly can’t do that by using sound bites. And you shouldn’t expect the media to either provide both sides of the argument, or to detail what’s being offered to solve the problem.

After all, we’re in an election year.

Wrongo will wait a few more days before saying much about the J6 public hearing. We didn’t get to see much of it, but the WaPo says that about 19 million people watched the first public hearing. The preliminary data come from Nielsen and do not include the millions more who watched the hearing on streaming apps or social media, where a few clips of the testimony went viral.

The Post also provided some context, comparing the viewership of this hearing to Watergate and to Trump’s first impeachment:

“….some 71% of Americans told Gallup that they watched some of the Watergate hearings live back in 1973, the first televised hearing of Donald Trump’s first impeachment trial drew only about 13 million viewers in 2019…”

It’s time to let the millions of words about the hearing slip from your mind, and to get yourself into a place of calm reflection. That means it’s time for our Saturday Soother. We’re here on the Cape trying to do just that. The weather so far is fantastic. And we’re scheduled for dinners at two fabulous restaurants over the next two nights, in both cases, eating outdoors.

So, take a few minutes to center yourself by grabbing a chair outside, putting on your wireless headphones and listening to Lili Boulanger’s “D’un matin de Printemps” (On a spring morning). Lili wrote this piece in 1917 when she was 23. Boulanger was a child prodigy, but she battled bronchial pneumonia throughout her short life, dying a year later at age 24.

Here is the piece played in 2017 by the Chicago Youth Symphony Orchestra, conducted by Allen Tinkham at Orchestra Hall, in Chicago:

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Saturday Soother – May 7, 2022

The Daily Escape:

Griffith Observatory, LA, CA – April 2022 photo by Mike Holzel

You undoubtedly missed it, but on Wednesday, Biden gave a short speech on the budget deficit and the national debt. You can watch a video of his talk here. You didn’t see it because it received virtually no coverage in the media. From Robert Hubbell:

“….let’s engage in a thought experiment: Ask yourself, ‘By what amount has the deficit increased during Biden’s tenure—rounded to the nearest $1 trillion?’”

It’s a trick question. During Biden’s first year in office, the deficit decreased by $350 billion and is on track to decrease by an additional $1.5 trillion by the end of this fiscal year (9/30/22). It will be the largest single yearly decline in American history. Biden also said that this quarter, for the first time since 2016, the Treasury Department is planning to pay down a small portion of the national debt.

Biden pointed out that the deficit increased for each year of the Trump administration, both before and after the pandemic. Let’s remember that the main driver for deficits during Trump’s administration was the Republican 2017 tax cut for corporations and millionaires. The Trump tax cuts didn’t add any additional revenue, and without any offsetting savings, deficit spending went way up.

After Biden finished speaking, he took a few questions from the press. He was immediately asked about Russian sanctions and the leaked draft of the Supreme Court’s abortion opinion. Biden responded by saying:

“No one asked about deficits, huh?….You want to make sure this doesn’t get covered.”

Why isn’t good economic news covered by the media? Most members of the media seem to be uncomfortable with it. Biden shares responsibility for getting the good news out as well. He should speak to the American people directly, not just indirectly through the press in the middle of the day.

Maybe Ukraine’s Zelensky could be a role model. He speaks directly to his people every day. Had Biden announced paying down the debt and cutting the deficit while seated at the Resolute Desk in the Oval Office, people would know that it was a big deal.

He should also speak about the location and targeting information we gathered about Russia’s cruiser and then shared with Ukraine:

“Intelligence shared by the US helped Ukraine sink the Russian cruiser Moskva, US officials told NBC News, confirming an American role in perhaps the most embarrassing blow to Vladimir Putin’s troubled invasion of Ukraine….The US…was not involved in the decision to strike.”

Despite America’s chicken hawk pundits’ finger-wagging, releasing this information hurts Russia’s already badly-run war effort. It shows Putin’s bad decision-making, poor command structure, and with it a likely collapse of morale. Going public also helps other NATO members see the differences with Trump’s four years of doing everything he could to sow distrust in the alliance.

There is a big country outside of DC desperate for good news. And therein lies the central problem for Democrats. Biden delivered this speech just before a meeting with Olympic athletes. Wrongo bets that this is the last we will hear from Biden on this accomplishment.

Just like FDR used his “fireside chats” to brief Americans on what his administration was doing, Biden should speak directly to the American people when necessary on matters of significant importance to the nation. He needs to discuss his accomplishments at every opportunity—and not just from the East Room of the White House.

Better messaging has to come from the top. If it does, voter support will follow. Oh, and by the way, we had another very good jobs report on Friday. The unemployment rate is 3.6%, and 428,000 new jobs were created last month according to the BLS. But the media only report about inflation.

It’s a continuation of Biden’s record job creation. In his first year in office, there were 6.6 million jobs added to the economy, 60% more than the next highest total, which was 3.9 million under Jimmy Carter. Wait, you thought Trump was the biggest job creator in history just because he said so? Wrong!

You might say that Putin is losing his domestic disinformation war while Biden is losing his domestic information war.

Time to turn off the news for a few minutes, and center ourselves for another rock ‘em, sock ‘em week ahead. It’s time for our Saturday Soother!

Here on the fields of Wrong, our crab apple trees’ blossoms will open over the weekend. It appears that we may not have bluebirds in our nest boxes for the first time in 10 years. A juvenile Cooper’s Hawk is using a box as his perch to survey our mix of woods and open grassland. That has driven many birds away.

So, grab a seat by a south-facing window and listen to Beethoven’s “Triple Concerto in C Major, Op. 56 No. 2” Largo, and Attacca, performed in 2019 by Anne-Sophie Mutter, Daniel Barenboim, and Yo-Yo Ma, accompanied by the West-Eastern Divan Orchestra at Philharmonie Berlin:

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China’s Torpedoing the Supply Chain

The Daily Escape:

Spring snow, Mt. Princeton, CO – April 2022 photo by Haji Mahmood

For the past two years, Covid has thrown the global supply chain into a tailspin. Even though the cargo industry’s ships, trains, trucks, and planes worked full-time, we still have shortages. Now, China’s zero Covid policy is increasing both the uncertainty and costs of efficiently operating the still-choked global supply chain.

From Bloomberg:

“We expect a bigger mess than last year,” said Jacques Vandermeiren, the chief executive officer of the Port of Antwerp, Europe’s second-busiest for container volume, in an interview. “It will have a negative impact, and a big negative impact, for the whole of 2022.”

Bloomberg says that China accounts for about 12% of global trade. It’s recent Covid lockdowns have idled factories and warehouses, slowed truck deliveries and exacerbated container logjams. And since US and European ports are already swamped, this new outage will leave them vulnerable to additional shocks.

China is home to six of the world’s 10 largest container ports. It’s the global economy’s most important manufacturing hub. While most countries have decided to learn to live with the Covid, Beijing has maintained its Zero Covid policy, where even small outbreaks can shut down large population centers and slow economic activity.

It’s taking an average of 111 days for goods to reach a warehouse in the US from the moment they’re ready to leave an Asian factory. That’s similar to the record of 113 set in January 2022 and more than double the time that the same trip took in 2019, according to Flexport Inc., a freight forwarder.

Julie Gerdeman, CEO of supply-chain risk analytics firm Everstream Analytics says:

“Once product export activities resume and a large volume of vessels make their way to the US West Coast ports, we expect waiting times to increase significantly…”

You’d think that after more than two years into this pandemic, America would have realized that single-sourcing much of our industrial production to a dictatorship is a bad idea. One with enormous consequences when something goes wrong.

But we haven’t. US Treasury Secretary Janet Yellen has advocated for what she calls “friend-shoring” meaning reducing our dependence on China and Russia. Brian Ehrig, a partner at the consulting firm Kearney is co-author of a report that found 78% of CEOs are either considering reshoring or have done it already. He says that relocating supply chains:

“…might cost more, but if you can make smaller quantities that you can then sell at closer to full price, you can actually completely change the game…”

Le Monde reminds us that capitalism has created hidden dependencies in Ukraine. It is the main producer of the wiring harnesses that hold together the many electrical cables in a car. They quote Christine Lagarde, president of the European Central Bank (ECB) in a speech in Washington, DC: (brackets by Wrongo)

“Ukraine produces one fifth of Europe’s [harness] output,”

These parts are low value added, but essential in the construction of cars, a perfect outsourcing target for capitalism. Globalization isn’t going to die; but maybe it can evolve. Much of that possible shift hinges on convincing consumers to accept higher prices for the certainty of supply.

For example, once the CDC finally gave us unambiguous advice about wearing masks, there was a huge rush to open mask production facilities in the US. But now they’ve all closed, because it’s cheaper to make masks in China.

Dictatorships can ensure that labor remains cheap. That’s great for capitalists, not so good for people who needed masks in 2020 when China decided to keep most of them for their population. Or, now, when China is still willing to shut down its economy to stop a Covid outbreak.

And, despite all the good will in the world, nobody will make masks in the US if it means their five-dollar boxes of masks go unsold because everyone is buying the one-dollar boxes. Instead, they will complain about how the company asking five dollars is a bloodsucker.

We’re told that capitalism works. That it just does. That just-in-time supply cuts costs for consumers. But does it?

Art installation by Steve Lambert – 2013, Times Square, NYC

It’s proven not to work during an emergency. But what are the chances of re-shoring ever happening? Business school really only teaches one thing: Short-term profits rule and everything else is irrelevant.

After all, America is a business, not a country.

What should be readily apparent is that despite the CEO poll above, our corporate masters are certainly not thinking about systemic change to supply chains. Nor will they, as long as the focus is reducing costs as low as possible for maximum shareholder gain.

The point is that unless business is incentivized otherwise, don’t expect the supply chain to get any better. That incentive must come from the government in the form of tax policy or subsidy.

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