Is The Misery Index Back?

In the 1970’s Chicago Economist Robert Barro coined the phrase ‘misery index.’ The phrase was used to describe a number obtained by adding the unemployment rate to the inflation rate. During the Carter administration, that number ranged between 12 and 17 percent. During the Trump administration, that number ranged between 5 and 7 percent. I shudder to think where it is headed during the Biden administration.

Yesterday The New York Post posted an article about the current rate of inflation.

The article reports:

Inflation continued to surge in July, but appeared to settle close to the fastest pace in almost 13 years as the economy continues to emerge from the pandemic, the feds said Wednesday.

The Labor Department’s Consumer Price Index, which measures a basket of goods and services as well as energy and food costs, jumped 5.4 percent in July from a year earlier.

That’s the same as June’s 5.4 percent year-over-year rise in prices, which marked the biggest 12-month rise since August 2008, just before the financial crisis sent the US into the worst recession it had seen since the Great Depression.

Consumer prices rose 0.5 percent from the month prior, the Labor Department said.

Economists surveyed by Dow Jones expected a 5.3 percent year-over-year spike in July and monthly increase of 0.5 percent.

The core consumer price index, which excludes volatile food and energy costs, rose 4.3 percent from a year ago, lower than the 4.5 percent year-over-year jump that the index saw in June, which marked the fastest acceleration since 1991.

The article concludes:

Federal Reserve officials have so far maintained their position that inflation is mostly temporary and will likely subside this year. They’ve cited this as a reason why they haven’t yet pulled back on their economic support measures like the bond-buying program.

Last week’s July jobs report showed that the country added a whopping 943,000 jobs in the month, more than expected, in a sign that the labor market recovery could finally be gaining steam.

Fed officials have said they will look for more confirmation of that in the next few jobs reports before a tapering of their financial support measures will be considered.

“I think this keeps taper talk on the table because inflation is staying relatively high and transitory may mean a little longer,” Minopoli said.

“If the supply chain kinks and businesses raising prices remains sustained, ‘transitory inflation’ might be a little less transitory than Fed Chair Powell will like and the hawks at the Fed may push a little harder on timing and speed of taper,” he added.

I remember the 1970’s–gas lines and all– and I don’t want to go back there.

The Past Six Month In Charts

Issues & Insights posted an article today about President Biden’s first six months in office. The article included eight charts to illustrate what the first six months has brought us.

Here are the charts:

Please follow the link above to read the entire article.

The article concludes:

It is true that Biden has been in office for only six months. It’s also true things could turn around. But we don’t see that happening unless Biden changes course.

We have no doubt that Biden was very much hoping one day to tell the public how he killed COVID and saved the economy (just as he once bragged that “Osama bin Laden is dead and General Motors is alive” while he and President Barack Obama where in the White House).

The way things are going right now, Biden might one day have to admit that “the economy is dead, but COVID is alive.”

I Guess The Truth Is Relative

On Monday The Conservative Treehouse posted an article about a recent statement made by White House Press Secretary Jen Psaki.

The article reports:

On Friday the Bureau of Labor Statistics (BLS) said: “Median weekly earnings of the nation’s 113.6 million full-time wage and salary workers were $990 in the second quarter of 2021 (not seasonally adjusted), the U.S. Bureau of Labor Statistics reported today. This was 1.2 percent lower than a year earlier.” (Data)

On Monday the White House says: “Wages are up.”

The article includes a video of Jen Psaki making that statement.

The article notes:

The reality is when you combine 1.2% decrease in earned wages with a 5.4% inflation rate, real wages are down 7.6% from last year. {Go Deep}

Does the Biden administration really believe that Americans will not notice that their spending power is down considerably from last year? I know that politicians tend to exaggerate, but this is unbelievable. How many times was President Trump accused of lying with no examples given? Here you have a blatant lie, and I doubt that the media will report it. Hopefully American voters are paying attention to what the Biden administration is doing to their economic well being.

Why Economics Needs To Be Taught In School

Yesterday Newsbusters posted an article about some comments recently made on mainstream media about inflation. The comments indicated that economics is not universally taught in our colleges.

The article notes:

Did CNBC get its understanding of economics from the back of a cereal box? The outlet is arguing that the silver lining to skyrocketing inflation is — “rising wages.”

The liberal outlet noted how “[a]s the economy picks up in the wake of the Covid pandemic, concerns about inflation are also gaining steam.” After conceding that prices of goods are rising, CNBC took a nosedive into ineptitude: “Companies facing a labor shortage are also paying more to get workers to walk in the door.” Did CNBC even consider that rising prices of goods are eating into American pay? Bloomberg News just reported that American pay boosts “are failing to keep pace with surging prices for everyday goods.” CNBC seemed to only figure that out after the story was originally published. Its original headline was “The upside to inflation: rising wages.” The headline has since been changed to alter the entire context of the story: “It’s not certain rising wages will be enough to outpace inflation.”

Rising wages are a good thing when they are part of a strong economy.

On November 2, 2020, The Federalist reported:

Many on the left refuse to admit President Trump’s populist policies have provided massive benefits to working-class Americans. Matthew Yglesias argued at Vox that Trump’s refusal to endorse a federal $15 per hour minimum wage proves Trump has abandoned populist ideals. Progressives claim the Trump economy helps billionaires, not workers, and snidely dismiss his outreach to minorities.

Yet, during the first three years of the Trump presidency, wage growth was off the charts, especially for low-income workers and African Americans. The third-quarter economic data released Thursday confirm once again that Trump is on the job for U.S. workers.

The Biden campaign has tried to tie COVID-linked economic devastation to Trump’s leadership. The new third-quarter economic data once again shows that’s wrong. The total number of U.S. wage earners increased more than 5 percent in that period, and the third-quarter rebound for African Americans occurred at a 17 percent faster rate than for wage earners as a whole.

During the Trump administration, inflation remained at about 2 percent.

On May 18, 2021, The Post Millennial reported:

It’s not just anecdotal evidence, the Consumer Price Index released last week shows that prices are up across the board by .8 percent for April. That’s after a .3 increase for January, .4 increase for February, and a .6 increase for March. In contrast, the last few months of the Trump administration had increases as well, albeit much lower. October showed a .1 percent increase, while November and December both showed increases of .2 percent.

Newsbusters also notes:

CNBC’s “Key Points” section also contradicted itself by admitting that prices of goods were increasing while lauding how pay was increasing at the same time. Newsflash, CNBC: rising costs of living takes away from the benefit of a pay increase.

    • “Although consumers may be paying more for everyday items, it’s not all bad news.”
    • “As inflation takes hold, wages may increase, too.”

CNBC must have realized this contradiction and changed its “Key Points” section to reflect new points entirely:

    • “As inflation takes hold, wages may increase, too.”
    • “The question is, will it be enough to outpace the rise in prices.”

CNBC couldn’t stop contradicting its points. It even warned that economists were saying rapid increase in wages could in fact cause inflation, further undercutting the entire story:

And still, some economists fear a too-rapid increase in wages could prompt companies to raise prices and create the very phenomenon of inflation, causing more harm than good.

No kidding. Elections have consequences, but at least President Biden doesn’t do mean tweets.

Inflation Rears Its Ugly Head

Just the News is reporting today that the U.S. consumer price index rose 5% in May compared to the same time a year earlier.

The article reports:

The index represents the average change in prices of goods and services such as food, energy, housing costs, and others. It rose 5% in May compared to the same time year earlier. The increase was higher than expected, with the Dow Jones forecasting a slightly lower of 4.7% rise, according to CNBC.

The increase is the largest since 5.3% rise In 2008, just before the financial crisis causing the worst recession since the Great Depression.

The goods with the highest price increases were used cars and trucks, with prices surging 7.3%. Airline tickets were a close second, with prices climbing 7% from a year earlier as the pandemic cut air travel substantially. Food prices have stayed similar to those a year ago, up only 2.2%.

The article concludes:

People are also concerned over the rise of inflation that could be caused by President Joe Biden’s nearly $2 trillion COVID relief package and similarly priced proposed infrastructure package.

The Federal Reserve has not expressed alarm about the increases. Reserve Chairman Jerome Powell has said he expects the pressure on prices to be temporary as the economy reopens after the pandemic, according to Fox News.

Increased government spending will cause inflation. At some point the interest on our national debt is going to cripple our economy. At that point the dollar will be devalued to pay off the debt and the average American will be left with worthless money. The solution to this is to elect people to Congress who will be fiscally responsible. Currently there are actually a few Congressmen who are fiscally responsible, but not enough to make a difference.

Something We Need To Pay Attention To

On Monday CNBC posted an article about a recent statement put out by Deutsche Bank economists.

The article reports:

In a forecast that is well outside the consensus from policymakers and Wall Street, Deutsche issued a dire warning that focusing on stimulus while dismissing inflation fears will prove to be a mistake if not in the near term then in 2023 and beyond.

The analysis especially points the finger at the Federal Reserve and its new framework in which it will tolerate higher inflation for the sake of a full and inclusive recovery. The firm contends that the Fed’s intention not to tighten policy until inflation shows a sustained rise will have dire impacts.

“The consequence of delay will be greater disruption of economic and financial activity than would be otherwise be the case when the Fed does finally act,” Deutsche’s chief economist, David Folkerts-Landau, and others wrote. “In turn, this could create a significant recession and set off a chain of financial distress around the world, particularly in emerging markets.”

As part of its approach to inflation, the Fed won’t raise interest rates or curtail its asset purchase program until it sees “substantial further progress” toward its inclusive goals. Multiple central bank officials have said they are not near those objectives.

In the meantime, indicators such as the consumer price and personal consumption expenditures price indices are well above the Fed’s 2% inflation goal. Policymakers say the current rise in inflation is temporary and will abate once supply disruptions and base effects from the early months of the coronavirus pandemic crisis wear off.

The Deutsche team disagrees, saying that aggressive stimulus and fundamental economic changes will present inflation ahead that the Fed will be ill-prepared to address.

“It may take a year longer until 2023 but inflation will re-emerge. And while it is admirable that this patience is due to the fact that the Fed’s priorities are shifting towards social goals, neglecting inflation leaves global economies sitting on a time bomb,” Folkerts-Landau said. “The effects could be devastating, particularly for the most vulnerable in society.”

I realize that the Deutsche team’s conclusions may not be the majority opinion, but based on what I am currently seeing, I tend to think they are correct. Endless deficit spending has never led a nation into continued prosperity.

Stating The Obvious

Breitbart is reporting today that Council of Economic Advisers chair Cecilia Rouse appeared on Fox News Sunday and stated that they expect to see some “transitory inflation” as America comes out of the coronavirus pandemic. Just for the record, the pandemic won’t be the cause of any “transitory inflation”–the runaway spending will be.

The article reports:

Rouse said, “These are very serious concerns, and we know that coming out of an extremely deep recession that there are going to be bumps along the way. We expect that there is going to be supply chain disruptions. That will cause some transitory increases in prices. ”

She continued, “We know that there are some places where employers are struggling to workers because, let’s face it — we’re still in the middle of the pandemic. Some workers would like to go back to work but have font child care because schools are not open and the pandemic is still out of control in certain parts of our country. When we get to the other side of this pandemic, I fully expect that our labor market will come back and be flourishing. That said, we do expect some transitory price increases. The Feds expects that as well. We do not see evidence at the moment that those have become what we call de-anchored so that we expect runaway inflation. That said, we know we have to be vigilant, and we are watching the data. We expect, at the most, transitory inflation. That is what we expect coming out of a big recession.”

First of all, the ‘big recession’ peaked in April of last year. The unemployment rate hit 14.8 in April and the Workforce Participation Rate hit 60.2. Both have been steadily improving for the last year. If you want to avoid inflation, stop flooding the economy with free money and encourage people to open up the schools and go back to work.

The Impact Of President Biden’s Executive Orders Is Already Being Felt

Yesterday The Conservative Treehouse posted an article about the rapid increase in inflation in the past month.

The article reports:

The Bureau of Labor Statistics highlights some alarming inflation numbers today [Link Here] that are unfortunately, not unexpected…. unless you are a liberally trained economist (most of them) and so the results are surprisingly “unexpected”.    But the actual JoeBama-nomic policy is even worse because wages increased less than inflation increased, so real wages (actual purchasing power) decreased.  That spells trouble, Trouble.

First, it is important to know that BLS price survey data lags actual prices as felt today.  The prices you are seeing today/tommorrow at the store and gas pump will not show up in the rolled-up data for over a month….  So the data released today is unfortunately far behind what you are witnessing in real time.

Gas prices rose last month by 9.1%.  The year-over-year inflation number is an alarming 2.6 percent last month.  Keep in mind that retail grocery prices are not in the inflation number, and they generally follow the same price index as fuel; so it is safe to say monthly grocery store price increases are in the 8 to 10 percent range.

Part of the reason gas and food track together is fuel and energy prices are the #2 cost within the food sector.  With packaging prices increasing; with fuel prices and distribution costs increasing; with energy prices increasing; all costs associated with food production, processing, delivery, warehousing and distribution, all end up in the final price at the grocery store.

This problem with inflation is only going to get worse as the FED gets more involved (that’s coming), because interest rates are already disconnected from the economic costs associated with business investment. [Note: the Fed said last year that it would hold its benchmark interest rate near zero, for some time, even if inflation were to rise above its preferred rate.]  JoeBama is returning us to a “service driven economy”, and that is a problem for inflation.

President Trump’s MAGAnomic (USA First) increased wages and lowered prices (deflation) {Go Deep} but hurt Wall Street.  JoeBama’s globalist policies lower U.S. wages and increase prices (inflation) but increase Wall Street (via multinationals).

Economic policies have consequences. Shutting down pipelines has consequences. Runaway spending has consequences. Unfortunately we are stuck with those actions and their consequences for the next three years. We had four reasonably good years economically because we had a President who understood business and free markets. We currently have President who is moving us toward tough economic times, government overreach, and eventually socialism. Hang on to your wallet.

 

The Biggest Lie Told In Last Night’s Debate

Breitbart posted an article last night which detailed the biggest lie told in the Democratic debate in Iowa.

The article reports:

Blue-collar and white-collar Americans “are being clobbered, they’re being killed,” former Vice President Joe Biden claimed at the January 14 Democrat debate in Iowa.

However, unemployment is at record lows, many sidelined Americans are getting jobs, and blue-collar wages are rising at rates not seen for many years amid President Donald Trump’s new curbs on legal and illegal immigration.

The article quotes Joe Biden’s remarks:

Working-class people — where I come from in Pennsylvania, the places I come from in Delaware — I have great support. I have support across the board, and I’m not worried about taking on Donald Trump at all. And with regard to the economy I can hardly wait to have a debate with him.

Where I come from — the neighborhoods I come from — they’re in real trouble: working-class people and middle-class people. When the middle class does well, [the] working class has a way up and the wealthy do well. But what’s happening now: they’re being clobbered, they’re being killed. They now have a situation where they [believe] — the vast majority believe — their children will never reach the stage that they reached in economic security.

I love that [economic] debate because the American public is getting clobbered. The wealthy are the only ones doing well. Period. I’m looking forward to the economic debate.

The article reports the facts:

Wages for blue-collar Americans rose by 4.3 percent in 2019 — or 2.7 percent after inflation — in President Donald Trump’s tightening labor market, according to a December report by Goldman Sachs.

The wage gains come amid very low inflation of just 2.1 percent in December.

…Blue-collar wages are rising faster than white-collar salaries because of different demands from employers, said Tom Donohue, the CEO of the U.S. Chamber of Commerce. “White-collar wages have been moving up over time, a bit, and the demand there, because of technology and other things, is not as high as the demand [for blue-collar skills]. … It’s a reality of the market,” he said January 9.

But Biden wants to increase the flow of foreign workers who will reduce wages for Americans.

“Biden will work with Congress to first reform temporary visas to establish a wage-based allocation process and establish enforcement mechanisms to ensure they are aligned with the labor market and not used to undermine wages,” said Biden’s plan for legal immigration. “Then, Biden will support expanding the number of high-skilled visas and eliminating the limits on employment-based visas by country, which create unacceptably long backlogs,” the plan says.

Hopefully enough Americans are familiar with the actual facts to believe this garbage.

The Economy Continues To Move In A Positive Direction

Ed Morrissey posted an article at Hot Air today about the latest economic numbers. As usual when a Republican is President, the ‘experts’ were surprised that the numbers were better than expected.

The article reports:

It’s not great news for the White House, but it could have been a lot worse. The US economy’s growth slowed to 2.1% in the second quarter, down a full point from Q1. However, with economists predicting a recession right around the corner, the growth is still substantial enough to look positive:

Real gross domestic product (GDP) increased at an annual rate of 2.1 percent in the second quarter of 2019 (table 1), according to the “advance” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 3.1 percent.

The Bureau’s second-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see “Source Data for the Advance Estimate” on page 2). The “second” estimate for the second quarter, based on more complete data, will be released on August 29, 2019.

The increase in real GDP in the second quarter reflected positive contributions from personal consumption expenditures (PCE), federal government spending, and state and local government spending that were partly offset by negative contributions from private inventory investment, exports, nonresidential fixed investment and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased (table 2).

The deceleration in real GDP in the second quarter reflected downturns in inventory investment, exports, and nonresidential fixed investment. These downturns were partly offset by accelerations in PCE and federal government spending.

President Trump weighed in on Twitter:

The article at Hot Air concludes:

“Not bad” is a little bit of an understatement, actually. It’s pretty good, especially in the context of the global economy. That’s the bigger anchor, especially the trade disputes that at least for one quarter hit our exports hard.

The steady growth with low inflation should result in the Federal Reserve lowering interest rates in the near future.

When Congress Fails To Do Its Job, The Executive Branch Has To Do It

The Washington Times posted an article today about the Farm Bill that was recently passed. The House of Representatives added a more stringent work requirement to the Food Stamps Program, but the Senate eliminated the requirement. Thus the Farm Bill as it currently stands puts a 20-hour-per-week work requirement only on people between the ages of 18 and 49 who receive food stamps.

The article reports:

President Trump moved Thursday to tighten work requirements for people who receive food stamps, after Congress failed to include the proposal in a $400 billion farm bill that’s headed to the president’s desk.

The Agriculture Department said it is proposing a rule on Mr. Trump’s orders that would move “more able-bodied recipients” of food stamps back into working at least 20 hours per week.

“Long-term reliance on government assistance has never been part of the American dream,” said Agriculture Secretary Sonny Perdue. “As we make benefits available to those who truly need them, we must also encourage participants to take proactive steps toward self-sufficiency. Moving people to work is common-sense policy, particularly at a time when the unemployment rate is at a generational low.”

…Currently, able-bodied adults ages 18-49 without children are required to work 20 hours a week to keep their food-stamp benefits. The House measure would have raised the age of recipients subject to work requirements from 49 to 59 and required parents with children older than 6 to work or participate in job training.

The Labor Force Participation Rate currently stands at 52.9 percent. The Unemployment Rate currently stands at 3.7 percent. Wages at all levels have risen under President Trump. Inflation for 2018 is slightly over 2 percent. There is no reason anyone collecting food stamps cannot find a place to work for 20 hours a week or enter a job-training program that will help them find a job that pays enough for them to get off of food stamps. The Agriculture Department is doing the right thing in looking into strengthening the work requirements to collect food stamps.

One Major Cause Of Inflation

On Friday, Investor’s Business Daily posted an editorial about inflation. The editorial shows the contrast between inflation in areas of our economy heavily regulated by the government and inflation in areas less regulated.

Here is the chart:

The chart was put together by economist Mark Perry, who tracked the changes in prices over the past 20 years for various goods and services. (Perry’s blog, Carpe Diem, is a must read for anyone looking for clarity on economic matters.)

Note the impact free market capitalism has on inflation–it keeps it under control.

The article concludes:

The ones below the inflation line — many of which actually saw prices decline over the past two decades — are all in highly competitive industries: autos, cellphones, clothing, software, TVs, toys. Two that track inflation, not surprisingly since they account for much of the nation’s spending, are food and housing.

But look at the areas where inflation has been surging: they fall into two broad categories: health care and college education. What do these have in common? Both are subject to massive amounts of government subsidies.

In the case of health care, the federal government now accounts for more than 40% of all health spending. It subsidizes care for the elderly, the poor, and now thanks to ObamaCare, the middle class. Given that health care spending makes up almost one-fifth of GDP, this is a big deal.

As to colleges, federal aid has exploded over the past 20 years, climbing 51% since 1997 — after adjusting for inflation — according to the College Board, which tracks these numbers. Last year, loan subsidies, grants and special tax brakes added up to $113.8 billion.

All that subsidy money was premised on the goal of making these things more affordable. The result is, for many, the exact opposite. By paying most of the tab, the government has insulated consumers from the true cost of these things — a recipe for runaway prices.

Yet instead of dealing with the cause, policymakers keep talking about either adding still more subsidy fuel to the fire, or imposing price controls.

If policymakers want to tackle inflation, the first step would be to review those federal policies that are driving it.

Removing the overabundance of government regulations on businesses is good for everyone. We need to elect leaders who will do that.

Move Along, Nothing To See Here

Yesterday the Washington Examiner posted an article with the headline, “Fun with the Fed: Inflation is low, but the cost of living is up.” Meanwhile, CNS News posted the following graph yesterday:

Price of Ground Beef Hits All-Time High in November

It is hard for anyone who has been in a grocery store in the past year to believe that inflation is low.

The Washington Examiner reports:

From July to August, the “Core Consumer Price Index” did not move. That means zero inflation, if you use the measure of inflation the Federal Reserve uses when setting monetary policy. But core CPI omits volatile prices like food and energy. If you have a family, you’re probably pretty aware that food and utility bills are a big factor.

The result: The inflation measure that guides Fed decisionmaking has little resemblance to the inflation measure that guides family budgetmaking.

This is another example of the government manipulating numbers to get the desired result. Any resemblance to what is actually taking place and what the government is reporting is purely coincidental.

The Washington Examiner lists some of the price increases in the last year that impact families trying to live within their budget:

Food at home is up 2.9 percent.

Electricity is up 4.1 percent and gas bills are up 5.8 percent.

Coffee is up more than 50 percent from last year.

The article reports:

The net result is that life has gotten considerably more expensive for me since this time last year. I’m not saying this ought to guide our monetary policy. I’m just saying that core CPI doesn’t track the cost of living.