Category: Economic Policy

Why Isn’t Good Economic News Covered?

The Daily Escape:

Crater Lake, OR – winter 2020 photo by Austin James Jackson photography.  

We need to talk about the economy. The underlying economic news is very good, but both the press and the Republicans say it’s bad, while Democrats say very little.

There are three things being discussed. First, inflation is terrible. This is a key Republican talking point about how Biden is failing the country. Second, jobs are going begging in what journalists have dubbed “The Great Resignation”. This is supposedly the fault of giving too much in unemployment benefits, allowing people to stay home rather than work. Third, if the economy is so great, why isn’t employment growing faster?

Starting with the last point, take a look at this graph showing jobs growth since 2008. The blue bars are when a Democrat was president, and the red bars are when a Republican was president:

That last blue bar is the strongest jobs growth in history. During 2021, the US created more than 6 million jobs, the most since records began in 1939.

That means Biden has just managed a year of stunning jobs growth, but consumers were constantly fed headlines about “disappointing” jobs reports, because the initial reports rarely align with skewed “expectations” by economists and pundits. Explaining this should be fairly easy, but the press can’t seem to get it across to the American people.

In addition, wages have been moving up across the board:

In December, average hourly earnings for Production and Non-supervisory Personnel rose $0.12 to $26.61, which is a 5.8% year over year gain. This shows that American workers are finally building some economic power. People have choices right now. After years of worker insecurity in the wake of the financial crisis followed by the pandemic, they have options. Jobs are going unfilled, while virtually no one is getting laid off.

The unemployment rate has now fallen close to a 50 year low, at a level exceeded only by one month in 2000, and during 2018-19. The economic result of this is visible on the graph above.

While employment is continuing to be strong, we’re still lagging in terms of filling job openings created by pandemic losses. America must gain an additional 3.6 million jobs in order to equal the number of employees in February 2020, just before the pandemic hit. At the current average jobs growth rate for the past 6 months, that should take about 7 more months to reach the pre-pandemic employment level.

Economists are tying themselves in knots trying to figure out why more Americans aren’t going back to work. Some of those reasons are understandable: Fears about health, caring for someone who’s sick, and lack of childcare. But there’s a big reason that isn’t talked about. Employment has declined in the last year among workers who were 55 or older at the start of the pandemic. A WaPo analysis found that over 1.5 million more people were retired in November 2021 than would have been expected based on pre-pandemic trends. That would help explain the employment story if the mainstream media would look at the big picture instead of dutifully following Right-wing propaganda.

Turning to inflation, the WaPo says:

“The US economic recovery from the Covid pandemic was the strongest of any of the big Western economies…The Biden stimulus pushed the bank accounts of even the lowest-income Americans to unexpected heights. On average, they had more than twice as much in their savings accounts as they did when the pandemic began.

The Federal Reserve…helped, too. It held rates near zero and pumped hundreds of billions of dollars into the economy. The twin fire hoses of cash — one from Congress, one from the Fed — sent Americans’ spending roaring back.”

Bloomberg reports that manufacturing companies are saying their supply chains are performing a little better. Their message seems to be that things aren’t worsening.

While oil prices get the most attention, the ISM surveys show manufacturers say the cost of more commodities are falling. In December, there were eight commodities that were identified as falling in price. In November, it was four. In October, just one (wood).

Finally, the NY Fed is out with its 2022 inflation expectations survey. It shows that In December, US consumers expected inflation to average 6.0% over the next 12 months and 4.0% over the next three years. Those expectations were unchanged from November 2021.

It also showed that Respondents were more optimistic about their future wage and income growth, as well as their ability to hold a job or find a new one.

One big question for Republicans is what will they pivot to if inflation actually slows down?

A larger question is why the Democrats and the press can’t explain good news when it happens?

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Manchin Hates Data and Poor Kids

The Daily Escape:

Early morning, -10°F, Pagosa Springs, CO – December 2021 photo by Ben Hazlett Photography

Evan Osnos reports in the New Yorker that it was Sen. Manchin who suggested to Biden that the physical infrastructure bill and the social infrastructure bills be split from each other:

“I’m saying we can get an infrastructure deal—a traditional infrastructure deal….Then we come back on human infrastructure and look at the needs.”

Osnos goes on to say that even after the bills were split, and after months of giving ground to Manchin on the social spending particulars, Manchin never budged from an unreconstructed conservative talking point: give Americans too much help, such as extended unemployment insurance, and they will become lazy and dependent. Manchin told reporters:

“I cannot accept our economy, or basically our society, moving towards an entitlement mentality.”

Manchin’s opposition to the Build Back Better (BBB) bill has ended the expanded Child Tax Credit (CTC) program. According to the Treasury Department, in West Virginia, it delivered payments to 305,000 children. And statewide, 93% of children are eligible for the credit, equaling the highest rate in the country.

ABC reported that Manchin questioned whether parents would misuse CTC payments to buy drugs. In private conversations, Manchin also said he believed paid family leave would be exploited by West Virginians to go hunting during deer season. Bloomberg says he’s wrong:

Looking at the chart, people overwhelmingly have used it for food, rent, utilities and to buy clothing and education. The poorer the family, the greater chance the CTC will be spent on necessities: a report from the Center on Budget and Policy Priorities found 91% of households making less than $35,000 per year used the money to pay for food, shelter, clothing and other necessities. They also found that Black and Hispanic families were more likely to use their credits on education-related costs, such as school supplies.

An October survey by the Census Bureau found that 25% of parents with young children also use the credits to pay for child care. Manchin is worried that there will be people gaming the system, and since perfection is unattainable, we shouldn’t be giving these kids and their parents anything.

His attitude is one that many Americans agree with. They think that since they aren’t going hungry, there’s no reason for anyone else to be hungry, either. It’s a vestige of the Protestant work ethic. They think that people like CTC recipients shouldn’t get free stuff, because it is taking something from them.

It’s an ugly, selfish way of looking at life.

America has successfully stigmatized being poor. How many in the bottom quartile of income are conditioned to believe they don’t deserve help? While corporations and the top 1% always lobby for financial assistance, and welcome it when it comes.

There are persistent rumors that Manchin will switch Parties. That shouldn’t be the Democrats’ objective, but to the extent there is a purity test to be a Democrat, it probably includes helping poor children and their struggling parents.

OTOH, the Build Back Better bill isn’t fully dead, nor is the voting rights bill. There’s a whole year left of appointing and legislating before the Republicans (possibly) retake Congress. Maybe we’ll want 50 Senators until then?

Remember that the Senate confirmed President Biden’s 40th federal judicial nominee a week ago, the most judges confirmed in a president’s first year in the last 40 years.

Democrats know that few of those judges would have been confirmed without Manchin voting for cloture to end debate on their nominations. If Manchin were to change Parties and stop voting with the Democrats on procedural issues, almost none of the remaining White House appointments would be filled.

It seems clear that IF some version of BBB does pass the Senate, it won’t include all of the progressive goals. Wrongo assumes that both immigration reform and the CTC may need to be dealt with separately.

What Democrats will then need to decide is whether they’re willing to hold their noses and vote for a bill that includes $500 billion in climate change investments, plus a critical childcare provision, more for health care, and a few other goodies.

Here’s another seasonal tune, “Christmas Wrapping” by The Waitresses from 1981. This year marks 40 years since this holiday classic was released. In the song, the lead singer hints that there is a guy she met at a ski shop that she regrets not having the time to date. Later, she realizes that she must go back to the store, and meets the guy she had wanted to connect with:

Be kind, not just at Christmas, but all the time.

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Biden’s Economy is Booming

The Daily Escape:

Sunrise with moon, Utah Lake, UT – December 2021 photo by Karen Lund Larsen

Bloomberg reported on Monday that the US economy is outperforming the world by the biggest margin in the 21st century. Surprisingly, they say that there’s a good reason:

“America’s economy improved more in Joe Biden’s first 12 months than any president during the past 50 years…”

They say that the objective economic data are pretty convincing about the Biden Boom of 2021, notwithstanding the contrary media narrative that seems to be driving poor public opinion. Biden is either in first place compared to recent American presidents, or at number 2 on all the big economic indicators, says Bloomberg’s Matt Winkler:

“Exceptional returns…especially the S&P 500 Index in both absolute terms and relative to its global counterparts, can be attributed to record-low debt ratios enabling companies to reap the biggest profit margins since 1950. Corporate America is booming because the Biden administration’s Covid-19 vaccination programs and $1.9 trillion American Rescue Plan reduced the jobless rate to 4.2% in November from 6.2% in February, continuing an unprecedented rate of decline during the Covid-19 pandemic.”

Also, inflation-adjusted GDP surged at an average annual rate of 5.03% in each of the first three quarters of 2021 and is poised to hit 5.6% for the year based on the preliminary estimates of more than 80 economists surveyed by Bloomberg. If that forecast holds up, it would be more than 2.8 times the average performance between 2000 and 2019. And double the average since 1976.

More from Bloomberg:

“All of which makes Biden’s first year in the White House the standout among the seven previous presidents, based on ten market and economic indicators given equal weight. According to data compiled by Bloomberg, no one comes close to matching Biden’s combination of No. 1 and No. 2 rankings for each of the measures:

Gross domestic product (1)

Profit growth (1)

S&P 500 performance (2)

Consumer credit (1)

Non-farm payrolls (2)

Manufacturing jobs (2)

Business productivity (2)

Dollar appreciation (2)

S&P 500 relative performance (2)

Per capita disposable income, which rose 1.08% this year, is the only comparable weakness for Biden, trailing Donald Trump’s 2.17%, George W. Bush’s 2.01%, Jimmy Carter’s 1.80% and Ronald Reagan’s 1.42%.”

GDP growth in year one of each new administration during the past four decades had never exceeded 2.74% until 2021. Bloomberg goes on to say that Biden might surpass Carter (5.01%) as the GDP growth champion of presidents since 1976.

Much of the credit goes to The American Rescue Plan, which poured $66 billion into 36 million households. The child tax credit reduced the child poverty rate by 50%, helping the US recover faster from the pandemic than most other nations.

That’s the same child tax credit that just expired, and that Sen. Joe Manchin is vociferously against.

The downside to those record corporate profits is that they are not being shared with workers. We know that in 2021 economic inequality got considerably worse, even with Biden’s recovery act putting $ billions in the pockets of American families.

Like Jimmy Carter, Biden now faces the political fallout of accelerating inflation. The NYT’s Neil Irwin wrote about how high inflation and  the never-ending pandemic are depressing Americans’ attitudes about the economy. He adds that it’s easy to recall Carter’s inability to deal with inflation in the 1970s, until the Fed’s Paul Volcker threw the economy into a deep recession. Back then, Carter took the political fall for the Volcker policy. Reagan got full credit for the recovery.

Once again, fear of inflation is everywhere in the press, but as Wrongo wrote:

“Back in 1980, when then-Chair of the Federal Reserve Paul Volcker raised interest rates high enough to throw the US into a recession and end inflation, inflation had averaged 6.9% for the previous 11 years.”

And while inflation’s averaging 6.81% for this year, it isn’t comparable, because of the amazing growth in US GDP and corporate profits, along with the chronic product shortages due to supply chain issues.

But contrast today to December 1981, when Reagan had been president for 11 months, just as Biden is now. Conditions were substantially worse: The unemployment rate was 8.5% and would keep rising throughout 1982. Inflation was 8.9%, and consumer sentiment was in the tank.

People believe what they’re told by the press and pundits. That in part explains Biden’s low approval ratings, along with the GOP’s master class of blaming Biden for a disastrous economy that was really caused by Trump’s inaction on Covid.

Keep all this in mind. Overall, Biden’s doing a very good job with the economy.

Time for another Christmas season tune. Here’s a group of UK theater performers called Welsh of the West End performing the Mariah Carey classic, “All I Want for Christmas is You” on a zoom call. Perfectly appropriate for Christmas with Omicron:

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Sunday Cartoon Blogging – December 19, 2021

The political class in DC is very concerned about inflation, including many Democrats. So much so that they are unwilling to pass Biden’s “Build Back Better” social infrastructure bill because it will add to our current inflation. Specifically, Sen. Manchin objects to the extension of the child tax credit that is expiring this month.

It’s time to remind these people of what real inflation looks like. Back in 1980, when then-Chair of the Federal Reserve Paul Volcker raised interest rates high enough to throw the US into a recession and end inflation, inflation had averaged 6.9% for the previous 11 years. Let’s also remind Sen. Manchin that this year’s annualized rate of inflation went above the long-term average of around 3% in April. We’ve averaged 6.81% for the year, not for 11 years.

The Senate wrapped up its work for the year, with Democrats punting the Build Back Better and the voting rights bills into 2022. The Senate adjourned early Saturday morning after a voting marathon including confirming 50 of Biden’s nominees. On to cartoons.

The answer is to elect more Democratic Senators:

Let’s see the Senate break at least one tooth on voting rights:

Only the social programs have to pay for themselves:

Omicron surges, is anybody surprised?

Why can Fox News get away with this?

Republican misfits can’t wait for the midterms:

This would be gerrymandering in the real world:

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The Great Resignation

The Daily Escape

Sunrise, Alpine AZ – November 2021 photo by Ed Kendall. Alpine is at 8,200’ elevation.

From Krugman:

“You’re probably aware that the US is experiencing what many call the Great Resignation — a significant fall in the number of people willing to accept jobs, at least at pre-Covid wages. Four million fewer Americans are employed than were on the eve of the pandemic, yet the rate at which workers are quitting their jobs — usually a good indicator of labor market tightness — has hit a record, and the scramble of employers to find workers has led to rapid wage increases.”

People see the “now hiring” signs everywhere. They assumed that generous unemployment benefits were discouraging workers from accepting jobs. But the enhanced benefits went away with no visible change in the US labor force participation. So, what’s going on?

Back to Krugman: (brackets by Wrongo)

“…[the] Great Resignation, it turns out, is largely an American phenomenon. European nations have been much more successful than we have at getting people back to work. In France, in particular, employment and labor force participation are now well above prepandemic levels.”

Barry Ritholtz says that there’s a massive transformation underway in America’s labor markets. When we look at the total Quits Rate for all Nonfarm payroll workers since the Great Financial Crisis (GFC) ended in 2009, the trend in the “quits rate” has steadily moved higher for all workers and really accelerated this year:

The red trend line shows that the rate that people are quitting has now returned to its level in 2016, and except during the pandemic, it has continued to rise.

If you look at only the Quits Rate for Professional & Business Services, those white-collar workers who did okay during the pandemic, their trend isn’t the same as the overall quits:

There’s been virtually no difference in the rate of professional quits since 2008. That’s telling us that the Great Resignation is taking place in the lower half of the employment wage scale, entry-level jobs, and the tiers just above them.

This has deep ramifications for the American economy.

Companies who rely on cheap labor are having hiring problems. Those companies that pay the minimum wage (or slightly higher) are having a hard time finding workers. Part of this is the failure of the Federal government to raise the minimum wage, which has been the same since 2009. That hasn’t kept up with inflation, or the growth in corporate profits.

Instead of gradually raising the minimum wage over time nationally, putting it on a path towards $15 or higher, we’ve allowed wage pressure to build for years. Then, during the pandemic, we experienced an 18 month period when low-wage workers reconsidered their careers. The dam broke, and we’re seeing both a sudden spike in wages and a shortage of workers.

Along the way, some labor has upskilled, gotten certified, degreed, and found new fields to work in. Now we have millions of people launching small businesses, striving to make it to the middle class, and towards self-determination. From the WSJ:

“The pandemic has unleashed a historic burst in entrepreneurship and self-employment. Hundreds of thousands of Americans are striking out on their own as consultants, retailers and small-business owners.”

The number of unincorporated self-employed workers has risen by 500,000 since the start of the pandemic, to 9.44 million. Except for a few months this summer, that’s the highest total since 2008. It amounts to an increase of 6% in the self-employed, while overall US employment total remains nearly 3% lower than before the pandemic.

So far this year, these entrepreneurs applied for federal tax-identification numbers to register 4.54 million new businesses, up 56% from the same period of 2019. That is the largest number on record since 2004. And two-thirds are for businesses that aren’t expected to hire employees.

More from the WSJ:

“This year, the share of US workers who work for a company with at least 1,000 employees has fallen for the first time since 2004….Meanwhile, the percentage of US workers who are self-employed has risen to the highest in 11 years. In October, they represented 5.9% of U.S. workers, versus 5.4% in February 2020.”

So, there’s a challenging future ahead for the small fraction of American workers who willingly struck out on their own. Couple that with the problem for those firms who pay near-minimum wages and who still treat employees like commodities.

Americans like to believe in “survival of the fittest” when it comes to business and the market. Well, if your company won’t look after its employees properly, its workers may desert it. The company may not survive.

There’s a huge difference between a spectator sport economy with a few winners and lots of losers, and an economy where everyone feels as if they belong and see a way to do better. In the US economy, where the same side always wins, it shouldn’t be a surprise when people decide to stop playing.

At least until they no longer have to work for a dick.

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Saturday Soother – November 20, 2021

The Daily Escape:

Floyd Lamb Park, Las Vegas NY- November 2021 photo by Marcia Steen

The biggest, baddest news of the week was that Kyle Rittenhouse was found innocent on all charges in the Kenosha murders.

As bad as that is, there’s some good news to start the weekend. First, the House succeeded on Friday in their months-long quest to pass Biden’s social spending bill. It still faces a serious challenge in the Senate before it can become law.

Second, the Organization for Economic Co-operation and Development (OECD) reported that the US is the only G7 country to surpass its pre-pandemic economic growth. Employment is up. Wages are up. Goldman Sachs predicts by the end of next year the US unemployment rate will drop to a 50-year low, thanks to continuing red-hot demand for workers. Retail sales surged 1.7% in the month of October. American consumers spent $638 billion in October, a 16% increase from last year.

Meanwhile, slowly but surely, the supply chain bottlenecks that have plagued our economy for over a year appear to be easing. Imports through the ports of Los Angeles and Long Beach are up 16% from 2018, and in the first two weeks of November, those two ports cleared about a third of the containers sitting on their docks.

The Baltic Dry Index (BDI), a measure of global shipping rates and an inflation indicator, has plummeted 50% since peaking Oct. 7, another good sign for consumers. And the global chip shortage that was crippling the auto industry? GM said that the week of Nov. 1 was the first time since February that none of its North American assembly plants were offline due to a lack of chips.

All of this good news is going to waste because of the media’s hot takes on how bad Biden is doing. From Eric Boehlert:

“For weeks this fall, the Beltway press joined forces with the GOP to tell a hysterical tale about the state of the US economy. It was an alternate version of reality, where the stagnant, faltering economy was being driven to the precipice by runaway inflation, which stood poised to demolish middle-class savings across the board. All while an ineffective president stood by and watched cash-strapped households suffer.”

Boehlert says that recent press coverage suggests the economy is an albatross around Biden’s political neck, while in reality, it’s booming.

Biden got elected to bring a return to normalcy. Since there’s no normalcy in sight, his poll numbers (along with Democrats generally) have plummeted. David Brooks in the NYT addresses Joe Biden’s efforts at meeting the needs of people in “left behind” places of the country that did not vote for him: (parenthesis by Wrongo)

“If (noted economist) Larry Summers thinks lifting wages at the bottom will cause inflation…so be it. The trade-off is worth it to prevent a national rupture.”

Democrats have to get beyond the victory laps when they pass a bill, and let America know what the bills are for. Propaganda is a tool that shouldn’t be used to yammer on about defunding the police. Here’s Wrongo’s list of what Dems should say they’re for:

  • The Bill of Rights
  • One person, one vote
  • A world-class ideology-free education for all American kids
  • Jobs for more Americans
  • Universal health insurance
  • No more foreign interventions
  • More police funding and more police accountability
  • Reduce carbon emissions
  • Zero potholes

That last one is facetious, but it’s political gold in Wrongo’s town, and is funded in the recent infrastructure bill.

The Democrats’ gamble is whether their efforts and their successes will be rewarded politically less than a year from now, in November 2022. Remember that despite what the pundits say, passing the items on Biden’s platform shouldn’t be primarily to woo swing voters. They’re to shore up enthusiasm among your base, something that Dems didn’t have in the recent elections in Virginia and New Jersey.

Right now, things look grim. If you let your mind wander to what might happen if there’s a Republican House and Senate in January 2023, you should be happy not sad, that the Dems aren’t repealing the filibuster.

Let’s take a break and try for some normalcy in our weekend. Wrongo recommends that you start by not watching the Sunday pundit shows. Here on the fields of Wrong, we’re still engaging in our fall clean-up, trying to take advantage of the few warmer days to work outside. Also, there’s some menu planning for Thanksgiving underway.

So, settle into your Saturday Soother, where we leave the chaos behind for a few moments. Let’s start by grabbing a chair near a large window, and listening to the Prague Cello Quartet play an atmospheric version of the theme from “The Phantom of the Opera”:

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Increased Demand is Causing Price Inflation

The Daily Escape:

Pueblo Bonito, Chaco Canyon, NM – November 2021 photo by James C. Wilson. It’s difficult to hire stone masons this good today.

 “If Americans are feeling glum, they sure are engaging in some retail therapy.”— WSJ’s “Heard on the Street” columnist Justin Lahart

We’re in a period of unclear signals. Every poll says that Americans believe inflation is high and the economy is bad. But unemployment is low, GDP growth is high, and people are buying things like crazy:

“The Commerce Department…reported that sales at stores, restaurants and online rose 1.7% in October from a month earlier, better than the 1.5% economists expected. Additionally, estimates of August and September retail sales were revised upwards. Sales were broadly higher across most categories, with gains at department stores, electronics and appliance stores and online retailers in particular…”

This led economists to revise their fourth-quarter GDP estimates higher. JPMorgan Chase now forecasts GDP will grow at a 5% annual rate in the fourth quarter, versus its previous 4% estimate. The news wasn’t all terrific, as restaurant and bar sales were flat in October versus a month earlier. That might be an indication of cooler weather keeping diners at home as outdoor seating arrangements became less comfortable.

Overall, this dynamic growth in retail sales stands in contrast to the University of Michigan’s consumer sentiment survey that fell in early November to its lowest level in a decade.

How to explain what’s going on? People have some savings. Some people have higher wages, and both seem to be having a greater influence on how much people are willing to spend than price increases are having on how they feel about Biden’s job performance.

Claudia Sahm argues that some of the savings are due to government checks, and it was worth it:

“2021 began with economists arguing about $1,400 stimulus checks. Americans got them, but they got higher inflation too. Even so, the checks were very good policy.”

She compares the government’s reaction in the Covid crisis to their reaction during the Great Recession. This time, Congress went big:

“In 2008, Congress enacted one round of stimulus checks, totaling about $110 billion. During the first year of Covid, it sent out three rounds at close to $1 trillion dollars. A family of four got $11,400, which is about 20% of median family income.”

Here’s a chart showing the difference between the two policy approaches. Sahm plotted the value of the payments against the trend of personal income during both recessions:

The three rounds of stimulus checks provided relief to the families whose lives Covid disrupted and it helped bolster the economic recovery by creating jobs. The Covid relief paid the bills. Stimulus helped bring back paychecks.

Most people spend most of the money they make. With smaller take-home money during the crisis, many Americans made a dramatic cut in their spending. And big cutbacks in spending in an economy driven by consumers, led to big layoffs. So, the policy decision to put money in people’s bank accounts was key to keeping the Covid recession as short-lived as possible.

Clearly, the fast recovery came with a cost. Inflation is higher today than it has been in 31 years. But don’t let the inflation doom-sayers fool you: consumer spending, even after taking inflation into account, has been increasing even as millions are out of work.

New Deal Democrat shows us that total activity through the big Southern California ports is breaking records, and yet as we know, they still can’t keep up with the increased import demand:

Despite increased container handling capacity, this explains a great part of the current supply chain bottleneck since the global supply chain is incapable of handling a sudden jump in consumer demand. It partially explains why goods shortages and price pressures have mounted. That, in turn, is pushing up prices. The NYT quoted Aneta Markowska, chief financial economist for Jefferies, an investment bank:

“It’s the demand in the first place that’s causing prices to move higher…There is a supply shortage, but it’s not because of bottlenecks. It’s because we’ve had this big shock to aggregate demand and supply can’t respond quickly enough.”

There are still plenty of logistics bottlenecks. Yes, we’re buying much more stuff, and paying more for it. But households were sitting on a collective $2.5 trillion in savings built up during the pandemic. And millions of jobs have come back, so spend they will.

The Covid recession was a sharp and steep one, the deepest since the Great Depression. But the speed of recovery has been very fast, due in large part to the policy decision to put checks in people’s pockets.

This time, government worked for us.

Let’s have a Thursday tune. Everyone has heard 1981’s “Under Pressure” a masterpiece by Queen and David Bowie. It was covered by Fall Out Boy as part of ABC’s Queen Family Singalong on Nov 4. Lead vocalist Patrick Stump tries to sound like both Freddie Mercury and Bowie. Read the words and you’ll understand why Wrongo offers it today:

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Can Biden Whip Inflation?

The Daily Escape:

Lone Rock, Lake Powell – November 11, 2021 photo by Ron Broad. This shows how dramatic the loss of water has been in the lake. One commenter said it was possible to boat completely around the Rock in July 2021!

The country is facing a series of problems that, if unresolved, point towards a bloodbath for Democrats in the 2022 mid-term election. An ABC poll, released this weekend should be a wake-up call. Here’s a chart showing early mid-term voting preferences by Party:

On a generic ballot, it shows that the Democrats and Republicans have swapped places since 2017. Today the Dems are supported by just 41% of those surveyed, down from 51% in 2017.

It’s true that relying on polls conducted of just 882 registered voters via landlines, as this poll was, isn’t the only thing Democrats should build their political strategy on. But ABC’s result is similar to others.

People are frustrated with the economy, because they see how everything is getting much more expensive, and they’re blaming the government and politicians. They’re not blaming the Federal Reserve’s expansive policies, because the polls never ask about the Fed, and because most people don’t understand how it works.

Consider this: 62% said the Democrats were out of touch with the concerns of most Americans. One dimly positive note was that Americans didn’t rate Republicans much better, with 58% considering them out of touch. The economy was among the key factors: 70% said the economy is in bad shape, up from 58% in the spring. About half blamed Biden for inflation. And his approval rating of handling the economy plunged to 39%, with 55% disapproving.

Biden doesn’t control prices, but try telling that to consumers. People who make a living by selling their labor have seen recent wage increases get eaten up by higher rents, home prices, food prices, gasoline prices and higher new and used-vehicle prices.

But you can always find an economist or a political writer who minimizes an impending political problem. That’s the kind of thing that Wrongo said yesterday was a bad strategy for Democrats. Here’s Dean Baker: (emphasis by Wrongo)

“The October Consumer Price Index data has gotten the inflation hawks into a frenzy. And, there is no doubt it is bad news. The overall index was up 0.9% in the month, while the core index, which excludes food and energy, rose by 0.6%. Over the last year, they are up 6.2% and 4.6%, respectively. This eats into purchasing power, leaving people able to buy less with their paychecks or Social Security benefits….While the stretch of high inflation has gone on much longer than many of us anticipated, there are still good reasons for thinking that inflation will slow sharply in the months ahead.”

Needless to say, if inflation continues at rates not seen since the 1970s until the 2022 election, no voter will see it as transitory and that won’t be good for Democrats.

Biden has signed his $1 trillion infrastructure bill, hoping that the legislation will help jump-start a Democratic political recovery. His infrastructure plan may not add to inflation, but inflation in the most important things that consumers either notice and care about – food, gasoline,  cars, and houses – doesn’t seem transient.

Biden has a few tools at his disposal. He’s doing what he should to address the microeconomic aspects of inflation: trying to increase capacity at ports, expanding microchip production and he’s considering a release of raw materials from the National Defense Stockpile. The biggest lever he hasn’t pulled is a tariff reduction, especially on goods from China.

Richard Nixon instituted price controls in 1971, They were the first and only peacetime wage and price controls in US history. After a 90-day freeze, increases would have to be approved by a “Pay Board” and a “Price Commission,” with an eye towards lifting controls, conveniently for Tricky Dick, after the 1972 election. His action led to greater inflation, not something any of us should want to see.

From Jason Furman in the WSJ:

“Ultimately inflation is a macroeconomic problem. It’s the Fed’s job to keep it under control….Policy makers at the Fed need to recognize that tools like asset purchases can’t solve the supply-side problems constraining US labor markets and output. They have a dual mandate. They have to take inflation into account even if the economy isn’t yet at maximum employment.”

Biden can pick a different Fed Chair, and there’s an additional vacant seat on the Fed’s board.

Biden can also be jawboning America’s CEOs about gas and food prices. Otherwise, he has no cards to play. All he can do is wait for supply and demand to turn back toward equilibrium, and hope that it happens in the next six months. If inflation turns around, Biden will get some credit.

If it doesn’t, you could see President Trump waddle back into the White House in 2024.

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The Climate Summit

The Daily Escape:

Fall colors near Smugglers Notch, VT – October photo by Montanus Photography

Representatives from 200 countries will meet in Glasgow, Scotland later this week to try once again to iron out an approach to heading off the disaster that will occur as global warming continues.

While this is a political gathering, the real focus should and must be on businesses. They are the primary sources of carbon emissions. And they are very concerned about their future should governments agree to serious efforts to limit global warming to 1.5°-2.0°C.

A real commitment would send shock waves through the business models of all corporations.

Corporations don’t like being forced by governments to do much of anything. With climate change, they prefer to make voluntary gestures, just enough to keep governments off their backs. One problem is that many have become more sophisticated in their soft climate denialism, as opposed to the 87-year old Oklahoma Senator who brought a snowball to the floor of the Senate.

If we’re serious about global warming, governments need to force corporations to pay for the damage they do to the planet. That should take at least two forms.

First, a global carbon tax. For big emitters, this would be an immediate threat to profitability. They will fight carbon taxes with all the weapons at their disposal. Reporters have exposed well-funded misinformation campaigns sponsored by them. More about carbon taxes below.

Second, corporations can’t be allowed to walk away from the pollution they create. Bloomberg reports that old oil and gas sites are a climate menace:

“There are hundreds of thousands of…decrepit oil and gas wells across the US, and for a long time few people paid them much mind. That changed over the past decade as scientists discovered the surprisingly large role they play in the climate crisis. Old wells tend to leak, and raw natural gas consists mostly of methane, which has far more planet-warming power than carbon dioxide.”

Bloomberg focuses on one company, Diversified Energy Co., owner of 69,000 wells throughout the US, making them America’s largest well owner. Diversified has alarmed some regulators and environmental advocates:

“State laws require that every well be plugged with cement after it runs dry, an expensive and complicated chore. At the rate Diversified is paying dividends to shareholders, some worry there will be nothing left when those bills come due. If a company can’t meet its plugging obligations, that burden falls to the state…”

Diversified’s business model is partially built on abandoning its played-out wells. If Diversified is allowed to walk, states are likely to be stuck with a $ billions mess. The only way to deal with this and similar problems is to change our bankruptcy laws so that liability for environmental damage isn’t expunged in bankruptcy. That change will require substantial political courage.

Back to a potential carbon tax: The Economist reports: (brackets and parenthesis by Wrongo)

“Even business[es]…realize that the best way to apply pressure is by imposing a global system of carbon taxes, with some form of redistribution to ease the pain on the poorest….The trouble is that only about one-fifth of global emissions is covered by a price on carbon. As a result, the global average price is just $3 per ton of carbon dioxide.

[But] To meet the ambitions of the Paris agreement, the IMF says the global carbon price needs to rise to $75/ton….For some heavy emitters covered by the European Union’s emissions-trading system, it is already above €60 ($69). In China’s new (limited) scheme, by contrast, it is a pittance. America has no federal (carbon tax) scheme of any kind.”

The first thing governments must do is to go after the big emitters like utilities, oil and gas firms, steel, and cement makers. A high carbon tax will cause price increases and thus force changes in consumer behavior. Tourist locations would see fewer tourists because flights would be more costly. Supermarkets would provide more local foods. Amazon might need to rethink their distribution strategy. Life as we know it for consumers would change, while for big emitters, this would be an “adapt or perish” moment. All the more reason why it won’t happen.

The largest problem will be trying to energize collective governmental action.

Self-interest leads every country to do as little as possible to solve this giant global problem. The only way to move these governments is for their citizens to care enough about the world 50 to 75 years from now. They must be willing to make significant sacrifices today for the sake of the future.

There are 30 US Senators who refuse to acknowledge human-caused climate change. That’s 30% of the Senate. As Greta Thunberg says to those not going to Scotland:

“Hope comes from people, from democracy, from you…It’s up to you and me…No one else will do it for us.”

Thunberg is saying that saving the planet will take better politicians. She’s correct. The necessary changes require a global political movement. That means there’s zero reason to be optimistic about the trajectory of global warming.

And like in our domestic politics, it’s another reason why we shouldn’t have 80-year olds in charge of our future.

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Sunday Cartoon Blogging – October 24, 2021

Last Friday, Wrongo and Ms. Right got their Covid booster shots. It’s a sample of one, but at our local drugstore here in a very conservative part of Connecticut, there was a line to get shots. Some were there for their first vaccinations, but most were waiting for a booster. There’s never a line around here for anything, except when the lobster food truck rolls into town.

But sadly, this isn’t the story for the rest of the country, particularly for cops and heath care workers. Some are saying that the vaccine mandates do little. But health workers who don’t really believe in science are leaving the job. And cops who don’t really care about public safety are leaving policing. Sounds like mandates are working just fine. On to cartoons.

Mandates are nothing new:

Most Republicans want boosters:

Texas got two new districts. Then the GOP redrew urban districts so that incumbent minority congresspeople are now running against each other:

One of our two political parties thinks that elections shouldn’t be the basis for choosing our representatives. That means democracy doesn’t matter to them anymore. They say it’s because there’s too much voter fraud, and no one can trust the result of any election now, anywhere.

So, the Dems think the next step is to change the Senate rules, modifying the filibuster. That would pave the way to pass the Protect the Vote Act. But there’s real danger that when the Republicans inevitably regain the majority, they will change that law to whatever the next Trump-like Republican leader wants voting rights to be. Could it be that Republicans are blocking the bill, not just to deny voting rights to minorities, but to lure the Democrats into changing the filibuster?

The economic ship sails on, and 40 years later, there’s zero thought to changing the message:

Biden compromises on the social spending bill. Still, it’s not certain to pass:

If only there was a solution to our supply chain problems:

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