“The thing about excuseflation is it’s sort of grounded in truth. It’s the idea that companies are using these once-in-a-lifetime disruptions. Think about the supply chain hiccups that we’ve had. Think about the Ukraine-Russia war. And they’re using those one-off disruptions as an excuse to raise prices. And that sounds fair enough. You know, companies, they have expenses. If their input costs go up, maybe it makes sense for them to pass some of those on to customers. But where it starts to become insidious is when they’re raising prices so much that they’re seeing their profits go up quite substantially as well.”
…
“Sure. So one of my favorite examples, because, you know, I love these personally, but chicken wings. Let’s talk about chicken wings and Wingstop. Wingstop is a very large purveyor of very delicious chicken wings. And what they’ve been saying on their earnings calls is that they have been raising their prices for their delicious chicken wings. And the reason they’ve been doing that is because the wholesale cost of your basic chicken wing went up quite a lot during the pandemic. We had a lot of disruptions at various farms, chicken farms with labor shortages and things like that. So it made sense that chicken wing prices went up and the company started passing those on to consumers.
The issue now, though, is that we have seen a substantial drop in chicken wing prices. And yet the company isn’t saying that it’s going to start dropping its prices. What it’s discovered, much like a lot of other businesses at the moment, is that actually this strategy of making up what you lose in sales volume with higher prices, so you’re selling fewer products, but you’re selling them at higher prices, [is] a viable strategy in the current environment, and it’s working for a lot of companies because profit margins are up.”
…
“baker in Chicago kind of laid it out for us. He said: “Whether it’s rye flour or bird flu, that impacts eggs when it makes national news just running a business, it’s an opportunity to increase the prices without getting a whole bunch of complaining from the customers. It’s not that we’re out there price gouging, but, you know, timing can be everything.””
…
“think about the reason that we tend not to like monopolies as consumers. We want, you know, a vibrant landscape of lots of smaller businesses that are all competing with each other so that we get a better value for our money. What happens when you have an industry-wide event that gives a group of businesses an excuse to raise prices: They are all effectively, not officially, but effectively acting as a monopoly. They can all say, well, you know, it’s bird flu, so we’re all going to raise the prices of our eggs.”
“JPMorgan Chase bought most of the assets of First Republic Bank in a deal announced early Monday, just after the federal government seized control of the troubled regional bank.
First Republic is the second-largest bank failure in US history, following Washington Mutual which collapsed in 2008 and was also acquired by JPMorgan. It comes after the failure of Silicon Valley Bank (SVB) and Signature Bank in March, which were the third and fourth largest US banks to fail, respectively.
Like Signature Bank and Silicon Valley Bank before it, First Republic saw a mass exodus of depositors to larger institutions, who feared that the bank would not have the capital to cover huge unrealized losses on its books due to rising interest rates. If it’s a signal of a larger banking crisis, it seems to be one that’s unfolding slowly, but it’s certainly possible that more banks could fail.”
“President Joe Biden and his staff have said repeatedly he is willing to sit down with House Speaker Kevin McCarthy to negotiate a compromise on government taxes and spending.
Biden has also said, repeatedly, that he is unwilling to negotiate over raising the debt ceiling.
These things may seem contradictory. They are not, and the somewhat subtle distinction between the two is important for understanding what is happening in Washington, DC, this summer.
Congress has two important deadlines coming up.
One is the day that the US officially hits the debt ceiling, and cannot borrow more money from bond markets without further congressional authorization.
We don’t know when that day will be, exactly — but we have a guess. In a Monday letter to McCarthy and other lawmakers, Treasury Secretary Janet Yellen said that “our best estimate is that we will be unable to continue to satisfy all of the government’s obligations by early June, and potentially as early as June 1” without a debt ceiling increase.
Once we reach that date, the federal government will not be able to pay its bills, or for things like Social Security checks, payroll for service members and other federal employees, and Medicare reimbursements. Interest payments on past debt could go unpaid, which would mean the US government would default on its debts.
The US would almost certainly enter a recession, probably a quite severe one, and the whole world could face a massive financial crisis. Beth Ann Bovino, chief US economist at Standard and Poor’s, was hardly alone in 2017 when she predicted that “the impact of a default by the U.S. government on its debts would be worse than the collapse of Lehman Brothers in 2008.”
The second deadline is September 30, 2023, the date that funding for the federal government runs out. If Congress does not pass funding bills lasting beyond that date, then on October 1, the federal government will “shut down” as it has done many times before, with many federal employees going without pay and “non-essential” services shutting down, but ordinary operations like Social Security, Medicare, and the military continuing.
Biden is willing to negotiate over the latter. He is not willing to negotiate over the former, as he reminded everyone anew in his invitation to congressional leaders for a May 9 debt ceiling discussion at the White House.
Whether he and McCarthy can navigate those distinctions and negotiate in good faith will likely determine whether the US tips into crisis in the next few months.”
…
“Biden’s principled case against bargaining over the debt ceiling is that doing so is effectively bargaining over policies Congress has already passed.
When Congress passed an omnibus spending bill in December 2022, it authorized specific amounts of funding for the rest of the fiscal year, which ends on September 30.
Congress has also, through literally hundreds of bills over the years, dictated the levels of tax on personal income, corporations, payroll, tobacco, etc. The revenue from these taxes do not come close to paying for the spending Congress has also authorized — meaning it has to borrow to pay for its obligations.
So the White House sees a debt ceiling bill as simply Congress agreeing to pay for spending it’s already approved, and obeying the 14th Amendment’s dictate that the federal government must always pay its debts.
“Like the President has said many times, raising the debt ceiling is not a negotiation; it is an obligation of this country and its leaders to avoid economic chaos,” press secretary Karine Jean-Pierre explained in January. “Congress has always done it, and the President expects them to do their duty once again. That is not negotiable.”
By contrast, arguing over the budget is arguing over future spending, which is a proper thing for the White House and Congress to debate with each other.”
“On Wednesday, the Federal Reserve raised interest rates another quarter point in regulators’ ongoing bid to reduce inflation. It’s a move that marks the Fed’s 10th straight rate hike and it’s one that’s proven contentious given fears that it could slow the economy too much.
The rate hike — which puts the Fed’s benchmark rate between 5 to 5.25 percent — comes as another mid-size bank, First Republic Bank, failed and was later acquired by JPMorgan Chase, becoming the second-largest bank failure in US history. The Fed favors the hike because it’s continuing to fight inflation, which has dipped substantially in the last year. At 5 percent, inflation is still higher than the Fed’s target rate of 2 percent.
Economists and experts who oppose raising rates, however, say inflation is already showing signs of slowing, and that additional rate increases could add even more challenges for small businesses and lead to a harmful uptick in unemployment.”
“Negotiators from Brussels and Washington are scrambling to solve a five-year dispute over steel and aluminum dating back to former U.S. President Donald Trump’s decision to slap tariffs on European imports. They have until October to get a deal but are still so far apart that European officials now fear the chances of an agreement are slim.
Without a deal, both sides could reimpose billions of dollars worth of trade tariffs on each other’s goods — potentially spreading well beyond steel to hit products including French wines, U.S. rum, vodka and denim jeans.”
…
“Officials in Brussels see the ongoing negotiations as just another push from the U.S. to force them into taking a harder line against China. “The language just seems written to tackle one country specifically,” said one of the European officials.
Discussions only recently picked up pace through the exchange of a U.S. concept paper and then an EU response. Those texts showed how far apart the two sides are on key issues, the officials said.
Washington wants to impose tariffs on imported steel or aluminum products, which would increase progressively based on how carbon-intensive the manufacturing process is, according to the proposal seen by POLITICO. Countries that join the agreement, which would be open to nations outside the EU, would face lower tariffs, or none at all, compared to those that do not.
The EU’s response — also seen by POLITICO — does not include any form of tariffs, according to the officials. Brussels fears the American plan for tariffs goes against the rules of the World Trade Organization, which is a no-go for the EU.
But a senior Biden administration official, who spoke on the condition of anonymity to discuss ongoing negotiations, told POLITICO that tariffs should not be off the table.
“That’s a pretty powerful tool for driving the market both to reduce carbon intensity as well as to reset the playing field to counteract non-market practices and excess capacity,” the U.S. official said. “What we’ve been trying to understand and respond to, in part, is what are those reasons that the EU has to have concerns about a tariff-type structure.””
…
“Several officials said Washington is also seeking an exemption from the EU’s carbon border tax, which imposes a tax on some imported goods to make sure European businesses are not undercut by cheaper products made in countries with weaker environmental rules.
Such an exemption for the U.S. is another no-go for Brussels. A European Commission spokesperson said giving the U.S. a pass on the carbon border tax would constitute a breach of WTO rules and “cannot be compared with” the U.S. steel and aluminum measures.”
“whether SVB’s situation would have been different had these regulations remained in place is highly questionable. “You knew just by looking at this bank that it was growing at exceptionally rapid rate, which should have been a red flag to look at,” Thomas Hoenig with the Mercatus Center at George Mason University told Marketplace. “So I don’t blame it on so much on the rollback of Dodd-Frank. I blame it on the fact that the bank management didn’t understand the fact that interest rates change and they need to be managing their portfolio accordingly.”
Besides, even without the stricter rules, bank regulators still could have acted but did not. So, the idea that new regulations are needed to stop the next midsize bank collapse is suspect, to say the least.”
…
“”It appears that the leading causes of the failure of Silicon Valley Bank were managers who maintained a woefully under-diversified asset sheet, and a small group of investors who sparked a panic that led depositors to withdraw money at a rate that would be unsustainable for any bank,” said Sen. Chris Coons (D–Del.) in a statement. “SVB was subject to federal and state supervision, and it’s not clear what additional regulatory requirements might have yielded a different outcome.””
“Biden’s industrial policy is, not surprisingly, far more expansive than Trump’s. And unlike the Foxconn facility, which was subsidized by the state of Wisconsin, it has been bolstered by major legislation from Congress. Biden’s industrial policy rests primarily on three pieces of legislation: the bipartisan infrastructure law signed in 2021, and the Inflation Reduction Act and the CHIPS Act signed last year. Together, this trio of bills provided hundreds of billions in subsidies, tax breaks, and inducements for domestic manufacturing, with a particular emphasis on semiconductor production and clean energy and transportation.
But these subsidies are already being used as vehicles to pursue unrelated goals: The Commerce Department, for example, recently announced that companies receiving subsidies from the CHIPS Act would have to provide child care for their workers.
In addition, the rules say beneficiaries should try to use union labor and pay union wages to construction workers. Biden, of course, is a self-described “union man,” but these provisions will inevitably drive up costs and make it more difficult to find suitable workers, since, as Cato Institute scholar Scott Lincicome has noted, only about 12 percent of U.S. construction workers are unionized.
Similarly, Biden’s infrastructure plans have been stymied by a requirement to “buy American,” since many of the products needed to build domestic infrastructure are no longer made in the United States.
Domestic production requirements have proven more than a headache for builders. When a Michigan baby formula plant stopped production last year following a bacterial infection, Americans struggled to find a replacement because federal rules make it nearly impossible to import baby formula from Europe. At best, “buy American” requirements raise costs. At worst, they put American lives at risk by making vital goods more difficult to procure in emergencies.”
…
“As a bevy of experts from the Cato Institute point out in the recent book Empowering the New American Worker, policy makers should pursue policies that make employment more flexible—like remote work and gig employment, rather than make it more rigidly defined. And they should recognize that factory jobs are not the best or only path for non-college graduates: Retail managers increasingly command six-figure salaries. Occupational licensing laws that require dozens or hundreds of hours of training before certification to work in a profession have mostly served as barriers to entry for aspiring professionals. Eliminating state licensing boards and licensing types can go a long way to making the work force more accessible. Ending the Jones Act, meanwhile, would not only lower prices for American households: It would also mean the end of regulation-driven shipping emergencies like the one in Puerto Rico.”