“many Fed watchers say some of the root causes of inflation lie outside the central bank’s control, like the U.S. labor shortage, global supply chain snags and Russia’s war on Ukraine. They’re raising concern that higher rates could crimp growth without leading to much relief on prices — a point that Sen. Elizabeth Warren (D-Mass.) has hammered away at Powell for months.”
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“Markets are expecting rates to rise nearly 2 more percentage points by the end of the year. That would bring them to a level that is more normal by historical standards — the Fed’s main borrowing rate would sit above 4 percent — but is staggeringly high compared to the near-zero rates that have mostly prevailed for more than a decade.”
“Despite the bill’s name, independent analysts have found it will have virtually no impact on inflation. In reality, it is a pared-down version of what Biden originally pitched as the “Build Back Better” plan—it leaves aside much of the original bill’s spending, but it maintains a huge corporate tax increase, huge spending on green energy initiatives, and a plan to swell the ranks of IRS agents. What was originally a roughly $4 trillion proposal that would have relied heavily on borrowing ended up being something of a rarity in Washington: a bill that will raise more revenue than it spends.
And where will it get that revenue? Quite possibly from you. Households earning as little as $50,000 annually are more likely to see a tax increase than a tax break from the legislation.
In the final hours before the House vote, the Joint Committee on Taxation (JCT) completed a breakdown of how the bill’s corporate tax increases would affect households at various income levels. The JTC, a nonpartisan number-crunching agency within Congress, found that households earning between $50,000 and $75,000 are more likely to see a tax increase than a tax decrease next year.
Higher-earning households are more likely to see tax increases, but households earning more than $1 million next year are actually far more likely than lower-earning households to get a tax break.
That fits with what The Tax Foundation, a tax policy think tank, found when it analyzed the bill. The Inflation Reduction Act will “would also reduce average after-tax incomes for taxpayers across every income quintile over the long run,” the Tax Foundation reported on Wednesday. Those tax increases will reduce long-term economic output by about 0.2 percent and could eliminate 29,000 jobs, the group found.”
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” Tax increases on corporations get passed along from the board room table to the kitchen table in a variety of ways: lower pay for workers, higher prices for consumers, and smaller investment returns for shareholders.”
“Housing keeps getting more expensive — and even though new data shows that overall price increases are slowing down, surging rent prices underscore how difficult it could be to bring inflation under control.
Prices were 8.3 percent higher in August compared to a year before, according to the Consumer Price Index report released on Tuesday. That’s slower than it was the month before, when inflation climbed 8.5 percent, but it’s still uncomfortably high for consumers and policymakers. Prices picked up 0.1 percent from July to August.
One of the biggest drivers of inflation has been higher rent prices. According to data from Zillow, the typical US monthly rent was $2,090 in August, up 12.3 percent from a year before. That is much higher than it was before the pandemic — in February 2020, the nation’s average rent was $1,660.
According to the CPI report, shelter prices — which include rent, lodging away from home, and household insurance — rose 0.7 percent in August from the month before, the biggest monthly jump since 1991. The rent index by itself also increased 0.7 percent from July, and was up 6.7 percent from a year ago.”
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“Sarah House, a senior economist at Wells Fargo, said that rent prices could be decelerating as supply improves and landlords start to “get a little bit more realistic” about how much they can charge before they see more pushback from renters. But she said that rent prices in the CPI measure tend to move slowly, so it could take time for the government data to reflect the price deceleration that private-sector data may already be picking up.
That’s largely because the government data also takes into account existing rentals, while many private data sources only examine prices for new leases to capture current market conditions. Since rents typically change when leases expire, which tends to happen annually, this can lead to a lag in government data.
“I think we’re close to beginning to see a slowdown in the monthly rate of the price gain,” House said. “But it’s still likely to remain pretty strong in a historical sense for some time.”
Omair Sharif, the founder and president of research firm Inflation Insights, also said rent price gains could slow in the coming months as the CPI measure eventually catches up to private-sector data.
“Around the end of this year into the first quarter of next year, we should probably start to see the CPI data start to mimic more closely what we’re seeing in terms of that deceleration,” Sharif said.
A deceleration in rental price growth could help bring down overall inflation closer to the Fed’s goal of 2 percent annual inflation. Although prices for rent, food, and medical care climbed in August, prices for gasoline, used cars, and airline fares dropped.
Still, mortgage rates have skyrocketed to their highest levels since 2008 and home prices remain much higher than they were before the pandemic. That has made it harder for people to afford monthly payments, leading to some potential homebuyers being priced out of the market. If people continue renting rather than buying, that could drive up demand for rentals and keep prices high.”
“Tens of thousands of freight rail workers are prepared to go on strike on Friday at 12:01 am, which could have wide-ranging effects across the economy. It’s already causing some disruptions for rail passengers, freight companies, and others.
The cause is a dispute between the freight industry and the workers who make it run.
Most of the 12 unions representing the workers have already agreed to a proposal put together by a presidential emergency board established by the White House over the summer to try to help resolve the dispute. The proposal includes a 24 percent increase in wages for workers by 2024, but many workers have complained that it fails to address leave, on-call scheduling, and poor working conditions.
The holdout unions’ position is that pay increases aren’t enough to make up for some real downsides — and dangerous aspects — of the job.
The two most powerful unions involved in the negotiations, which represent engineers and conductors, are continuing to resist the proposal, putting both sides in a deadlock. If workers do go on the strike they appear to be hurtling toward, it would be the first such strike in 30 years.”
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“If a freight strike were to occur — and especially if it’s long-lasting — it could have disastrous effects across an already fragile economy still reeling from supply chain disruptions and inflation.
“Rail moves a lot of the foundational, basic goods that we don’t think about day-to-day,” said Rachel Premack, editorial director at FreightWaves, which covers supply chains. “They’ll move sand and gravel that would then be crushed into concrete for roads or for laying home foundations. Railroads move the chemicals used to purify water or to compromise fertilizer for crops, soybeans that could become food for humans or [animals] that are then food for humans. It’s a lot of early-chain-type goods.”
Many passenger trains also run on freight rails, and their service could be suspended. Amtrak has already warned of potential disruptions and canceled cross-country trains in anticipation of a strike, though so far its Northeast service will not be affected.”
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“Replacing freight with other forms of transportation is not easy if workers do walk out. Mike Steenhoek, executive director of the Soy Transportation Coalition, told Vox in an interview that one train has the freight capacity of 400 semi-trucks. “I don’t know of a shipper who just has 400 semis sitting in a garage ready to be accessed,” he said. He noted that for agriculture, the timing couldn’t be worse because of harvest season, adding more urgency for a deal.”
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“Under the Railway Labor Act, Congress has the ability to block or end a rail strike. Since 1963, it has passed legislation more than 10 times to intervene in rail disputes.
So far, though, Democratic leaders have been reluctant to commit to doing so, while Republicans have been eager to pressure workers into agreeing to the terms set by the presidential emergency board.
If Congress were to intervene, there are a few routes lawmakers could take. They could require the unions and carriers to accept the presidential emergency board’s conditions, which included a pay increase but no acknowledgment of other demands like sick leave. They could extend the existing cooling-off period so both sides have more time to negotiate. Or they could turn the talks over to independent arbitrators who would be tasked with finding a resolution.
For now, congressional Democrats are waiting to see what might come out of the talks the Labor Department is leading between unions and railroad carriers on Wednesday before they lay out a policy response.”
“On its face, the idea of increasing semiconductor manufacturing in the US seems like it would help address the global supply crunch for computer chips, which has made it harder to buy everything from cars and laptops to sex toys and medical devices during the pandemic. Senate Majority Leader Chuck Schumer (D-NY) has even suggested that the funding package could help fight inflation, presumably by making these goods cheaper.
But while it’s certainly fair to call the legislation a victory for bipartisanship, this plan is primarily focused on keeping up with China’s growing investment in its own domestic chip industry — not solving the present issues with the tech supply chain. The chip factories produced by this package won’t be complete for years, and the bulk of the funding won’t necessarily go toward basic chips, also known as legacy chips, which account for much of the ongoing shortage. And that shortage may be nearing its end anyway.”
“GDP measures the monetary value of goods and services produced in a country. It contemplates things like consumption, government spending, business investments, and net exports. But there’s also a lot it leaves out, such as unpaid work, sales of used goods, and, perhaps most important, general well-being. Generally, countries with stronger and growing economies have higher standards of living. But GDP is only a decent-ish indicator of how things are going for people.”
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“There’s a British economist, Kate Raworth, who once said in a book called Doughnut Economics that there’s one graph in economics that no economist ever wants you to talk to them about. And that is the graph of exponential GDP growth. A mainstream economist would probably consider a growth rate of about 3 percent GDP every year as a healthy, robust economy. At 3 percent, the economy would have to double in output roughly every 25, 26, 27 years or so. If I showed a 5-year-old this kind of graph, they would know that that’s patently insane. This is, however, precisely the reigning economic doctrine in every country in the world with the possible exception of Cuba and Bhutan.
It is destructive because it will plunder the world, it will destroy our ecosystem, because it works people to death, because it destroys economies, because it commodifies everything.
Let me give you an analogy. Say we’re passengers on a train racing toward a cliff, and the only metric that matters in that train is its increase in speed. Whether that train has an unfair distribution of income matters not at all, what we’re destroying on the journey does not matter, whether the train is comfortable does not matter. And, in fact, not even the destination of the train matters.”
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“The vast majority of people would agree we should care about the greatest well-being of the greatest number within the biophysical limits of the planet, for the most part. The problem is that we are currently operating in a system called capitalism, which requires growth. We are at this tragic moment in history in which we can say both that if we continue to grow, we will kill ourselves, and if we stop growing, we will suffer greatly within capitalism.
Capitalism requires growth. The economy doesn’t require growth, development doesn’t require growth, and welfare doesn’t require wealth. Since we are living in a global capitalist economy, when capitalism doesn’t grow, you and I know exactly what to call that: a depression, a recession, a crisis.
But the opposite is also true. If we continue to grow exponentially, that is a massive crisis. It is the reason why we are unable to address climate change successfully, why we don’t know how to address rampant inequality.”
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“If you are starving, and you’re on 200 calories a day, and I as a doctor set you on 400 calories, and then on 800, and then on 1,600, you will get well. But if I say I have the key to your health and well-being, I will continue to double your calorie intake, what will you look like pretty soon? You will get very sick, and you will die. Absolutely no question. The exact same thing is true for the economy at large.
Was it good and necessary at some point? Probably yes. Although there are lots of caveats there, too. Is that still necessary? Absolutely not. Certainly not in developed countries like the US or Germany or France or Denmark.”
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“I have done interviews with corporate CEOs who very frankly admit that the business model they’re currently operating under is not sustainable, that it will hurt the world and the planet in ways that are irreversible. But they don’t know how to change it. They say, “If I stop giving return on investment to my stockholders, they will fire me, that’s the end of that.””
“In our federalized system, it may make more sense to blame your state and local government or even your neighbors, not President Biden, for out-of-control costs in housing and energy or supply chain pain in our logistics infrastructure. That’s because most of the time, the US tasks lower levels of government with responsibility for infrastructure and land use — and the decisions made at those levels in the past are contributing to rising prices today.
State and local jurisdictions, not the Fed or the feds, determine how much housing is built and where, when to permit cheap clean energy sources and vital energy transmission lines, and whether to expand ports and logistics infrastructure. Across the country, local legislators, executives, and public authorities have declined to spend more to improve economic capacity, or placed additional hurdles in the way of badly needed new development.”
“Tariffs aren’t merely making summer fun more expensive—they are also making it potentially more dangerous too.
“Life Saver is not a misnomer,” writes Neil Mooney, an attorney representing Life Saver Pool Fence Systems, Inc., in testimony submitted earlier this month to the U.S. International Trade Commission (USITC), which later this week will hold a hearing on the economic impact of the multitude of tariffs imposed by the Trump administration in 2018.
For a company like Life Saver, which manufactures fencing meant to keep children away from unsupervised pools where they might accidentally drown, the tariffs have hiked the cost of raw materials imported from China. In his written testimony, Mooney estimates that the company has paid about $1.2 million in tariffs over the past four years—and has twice had to raise prices “specifically because of the tariffs.”
“The imposition of the Section 301 tariffs has forced Life Saver to raise its prices which inevitably has led to lower sales volume and therefore fewer protected pools,” writes Mooney. “The economic impact of the Section 301 tariffs is not only felt by Life Saver and other similar businesses and their employees, but also by the end consumers—American families.”
Are higher taxes on Chinese-made imports worth leaving American children marginally less safe?
Apparently so, at least for the past two presidential administrations. Former President Donald Trump used Section 301 of the Trade Expansion Act of 1974 to impose tariffs on a wide range of goods imported from China in several phases during 2018 and 2019. As a result, the average tariff rate applied to goods from China effectively doubled. Cumulatively, Americans have paid about $136 billion in higher costs as a result of those import taxes—that’s about $1,000 per household, according to research by the National Taxpayers Union, a nonprofit that opposes the tariffs.
Tariffs are adding to inflation, too. A study by the Peterson Institute for International Economics, a trade-focused think tank, found that repealing tariffs could reduce overall inflation by about 1 percentage point. Despite that, the Biden administration has so far been unwilling to do more than talk about repealing the tariffs imposed by Trump.”
“Tariffs on seafood have hit Alaska in particular, Alaska’s fishing industry generates over $5 billion dollars in economic activity and creates nearly 70,000 jobs in the state, making it a vital lifeline for the state. Over 40 percent of U.S.-caught Alaskan salmon and one-third of all seafood from Alaska is exported to China each year. Much of it is processed in China and then re-imported to the United States for sale in grocery stores.
As the National Fisheries Institute points out, this split processing stream has contributed to rising seafood costs for U.S. consumers, as China’s retaliatory tariffs hit seafood when imported for processing and the original U.S. tariffs hit products upon their return to American shores.”
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“For consumers, meanwhile, these costs are discouraging consumption of fish, according to a February study published by data analytics firms IRI and 210 Analytics. That month alone, sales of frozen seafood products decreased by 9.4 percent, while fresh seafood sales decreased by 12 percent.”
“Known as the Farm Workforce Modernization Act, the measure was sponsored by Reps. Zoe Lofgren (D–Calif.) and Dan Newhouse (R–Wash.) and passed the House twice last year. It aims to improve the immigration mechanics behind the U.S. agricultural workforce, expanding legal pathways available to foreign workers and the domestic farmers who hope to hire them.
The ability to hire more agricultural workers translates into more helping hands for farmers and increased production of goods, which then means fewer food shortages and lower prices at the grocery store.”