“In March, researchers at Columbia led by Zachary Parolin estimated that as a result of President Joe Biden’s stimulus package, the American Rescue Plan, the US poverty rate would fall to 8.5 percent, the lowest figure on record and well below 2018’s figure of 12.8 percent. This past month, researchers at the Urban Institute, using a slightly different means of measuring poverty, found that 2021 poverty will be around 7.7 percent, almost a halving relative to 2018’s rate of 13.9 percent per their methodology. (Official US Census poverty statistics for 2020 have not yet been released.)
The Columbia authors find that if you compare 2021 to every year for which the census does have data, from 1967 to 2019, and use a consistent poverty line, 2021 is projected to have the lowest poverty rate on record.
Considering that the US endured a pandemic and economic shock in 2020, these numbers are remarkable.”
“If handing out cash led people to work dramatically fewer hours or to quit their jobs, then cash payments wouldn’t cut poverty by as much as they initially seem to.
Luckily, cash doesn’t seem to discourage work to that degree. In 2019, a group of economists and sociologists specializing in child poverty put together a major report for the National Academy of Sciences, and their estimate based on the research literature was that a cash benefit of $3,000 per year for all but the richest children would reduce work effort by about 1.15 hours a week on average — a fairly trivial amount that barely changes the antipoverty impact of such a program.
The effects of stimulus checks to adults, like those pursued in the past year, are surely different, but the evidence generally suggests that work disincentive effects of cash are small. University of Pennsylvania economist Ioana Marinescu, in a wide-ranging review of the effects of cash programs, concluded, “Our fear that people will quit their jobs en masse if provided with cash for free is false and misguided.””
“The US has been sending out a lot of cash during the pandemic. But that’s almost certainly coming to an end. The enhanced child tax credit is a policy many Democrats want to make permanent, or at least (as the Biden administration has proposed) extend for several more years. But the $1,200 and $600 and $1,400 stimulus checks were emergency measures, as were the $300/$600 weekly unemployment supplements.
All that implies that in 2022, when those measures are gone, poverty is likely to shoot back up again, even in a strong economy with robust job growth.”
“According to a recent congressional report, credit card balances actually declined sharply, by $76 billion, in the second quarter of 2020. You might also assume that, with the guillotine of joblessness hanging precipitously in the balance, Americans might defer large purchases, like homes or cars. Again, you’d be wrong: By the fourth quarter of 2020, mortgage debt grew to $10 trillion (compared to a fourth-quarter 2019 statistic of $9.56 trillion), and auto loan debt reached $1.4 trillion.”
“During the worst part of Covid, people were pretty cautious. Debt did rise, but not all debt rose. For example, the US experienced the largest recorded quarterly decline in credit card balances (about $76 billion, see the Congressional Research Service study of May 6, 2021). For one thing, people stopped spending; they really just cut back on expenditures. That’s one of the reasons that businesses were so hard-hit: Aside from the lockdowns and all the rest of it, people weren’t buying stuff.
But I would say that what really saved it from being a total disaster was the three stimulus checks. That first stimulus check was spent almost entirely on expenses, and it appeared that was the period of highest unemployment. When the second stimulus check came out, people were more likely to spend that on debt; that may be one reason that we began to see a decline in credit card debt. And then by the time we got to the third stimulus check, some people were spending it, some people were buying down debt, but a surprising number saved it. The personal savings rate actually reached a high in April of 2020. Who would have believed it?”
“The Census Bureau began doing a survey that was very helpful during the pandemic called the Pulse survey, which comes out every week and asks people about their economic difficulties. In the survey that covered May 12 through 24, there were still 26 percent of respondents who said they were having trouble paying their household expenses. That’s a red flag. And 9 percent of adults were in households where they said that at least some time in the past week, there had not been enough to eat. So it appears to me that the people who have been in dire straits are not going to get out of those dire straits any time soon.”
“The Biden administration in July issued a warning to US companies: Doing business in Hong Kong is increasingly risky. The advisory, released jointly by the departments of State, Treasury, Commerce, and Homeland Security, was basically a giant red flag cautioning companies and investors against the complications that are emerging under China’s national security law.
China imposed the sweeping legislation a little more than a year ago. It has since stifled Hong Kong’s pro-democracy movement and undermined its autonomy, rule of law, and free speech traditions.
This tenuous political climate has shaken Hong Kong, but it has not yet upended its status as a global financial capital. The United States’s advisory is recognition that this might change as China continues its crackdown in the territory. International businesses — and their employees — could soon find themselves entangled in national security law enforcement.”
“China, for its part, is banking that Hong Kong’s infrastructure and economic climate will still make it a destination for foreign businesses in Asia despite the crackdown. After all, trade wars, tense Washington-Beijing relations, Beijing’s atrocious human rights record, and US sanctions have yet to stop most US firms from doing business in mainland China. And that may keep Hong Kong’s economic might intact while doing little to stop its democracy from crumbling.”
“Fracking has also accelerated life on the surface. Some landowners have made millions of dollars from selling the rights to oil beneath their land to major corporations. And struggling agricultural crossroads, including Watford City, the county seat 20 miles southeast of Novak’s farm, have found new life as boomtowns. During the past decade, a new high school and hospital, and housing developments sprawling from Main Street into the prairie, have arisen to serve the more than 10,000 people who have come from afar to work in the McKenzie County oil field.
But installing an industry atop an agricultural zone has brought less-heralded changes, too, including an elaborate system to deal with the saltwater, which is actually a polluted mix of naturally occurring brine, hydrocarbons, radioactive materials and more. Billions of gallons of it are produced by oil drilling and pumping each year.”
“Over the following weeks, industry clean-up specialists dug dirt, built berms and installed pumps to try to decontaminate the pasture and its springs. But nearly three months later, a water sample taken far down the gully, where it broadens into a wetland, contained 149,000 parts per million of chloride — 600 times the advised limit, and a clear indication that saltwater and its dangerous contaminants were still present.
The damage to Novak’s land, while dramatic, isn’t uncommon in the North Dakota oil fields. More than 50 saltwater spills happen each year in McKenzie County, when tanker trucks crash, pipelines leak, or well pads or disposal sites catch fire or otherwise malfunction. Many spills are contained on well pads and at disposal sites. But others drain into fields, farmyards and roadways. Novak worried about his pasture, a water source for cows, deer, pheasants and more. And he feared the cumulative impact of so many saltwater spills in a county that is home to hundreds of streams and springs, and where farmers and ranchers often rely on water wells for livestock and themselves.”
” Today, tax revenues from oil operations make up more than 50 percent of North Dakota’s annual budget. Republican leaders in the state, who hold all federal and statewide elected positions, have continued to push for a carbon-based economy, as North Dakota now depends on oil more than any other state. The North Dakota Legacy Fund, an investment account approved by North Dakota voters to guard some oil tax revenue for future expenses, is worth more than $8 billion. Oil tax revenue from that and other sources has buoyed schools and health care across the state, lowered income taxes for residents, and funded everything from flood containment systems in eastern North Dakota to major highway projects.”
““Sometimes you have a really good company that will clean it up. Sometimes you don’t. Sometimes you don’t ever find out about it,” Jappe said. “I wish saltwater had a little bit more regulation. There just needs to be more accountability.”
Jappe would like the state to require tanker trucks hauling saltwater to carry placards that indicate the toxic load. She would like to see more state health and environmental quality inspectors on site, including some who live and work in McKenzie County year-round, as many now travel from the eastern part of the state for shorter stays.
She is especially concerned about the damage that can come if pipes injecting saltwater a mile underground were to leak. She told me she is not confident underground aquifers, let alone fields and pastures impacted by surface spills, are safe. She worries that residents don’t have enough protection under current oil-field oversight by state agencies that can’t keep pace with development.
“We’re their lab rats,” Jappe said.”
“Ocasio-Cortez is wrong that Amazon—and by extension, Bezos—has profited primarily by abusing its market power or engaging in anti-competitive practices. Bezos is so wealthy because, over the better part of three decades, he built a company that could successfully deliver a wide array of consumer goods to customers in just a few days flat, serving 300 million people annually (with 150 million of those customers deciding Amazon’s services are so valuable that they choose to pay for an annual Prime membership). Bezos and other Amazon executives built a company that could survive the dot-com bubble, the subprime mortgage crisis, and a pandemic.”
“Amazon has about 40.4 percent e-commerce retail market share. That’s a healthy chunk, but consumers have other choices: Walmart’s sales comprise 7.1 percent of total U.S. e-commerce retail; Target, Wish, and other big-box retailers also ship directly to consumers. More people choose Amazon over competitors because it has more stuff and its click-to-ship speeds are half that of its competitors.”
“customers always have the option of seeking out brick-and-mortar retail equivalents—it’s just that many of them choose not to, prioritizing convenience (and, in a pandemic, safety) over the fluorescent glory of in-person big-box shopping.”
“”The idea that consumers choose to use products not because they’re useful but because Big Tech companies have somehow tricked or pressured them into it is deeply embedded…in the new antitrust crusade more generally,” she writes. “It’s a form of consumer false consciousness in which end users don’t know what they want (but members of Congress, of course, do).””
“Amazon warehouse working conditions are sometimes quite bad, with employees getting so little time for breaks that they cannot use the restroom or take time off-task. Amazon workers have been denied pregnancy accommodations and adequate sick leave, and warehouses have been hit hard by the pandemic. However, her claims that Amazon engages in union-busting are unfounded (warehouse workers in Alabama actually voted against unionization), and the criticisms she leveled at Bezos yesterday have been par for the course for someone who calls Amazon’s lower-skilled jobs “scams” while rabblerousing for the cause of wealth redistribution. What’s more, Bezos has acknowledged reports about warehouse working conditions and has pledged to make changes.
Over the course of the pandemic, Bezos’ net worth has increased by about $70 billion. But despite Ocasio-Cortez’s objections, his vast increase in wealth has been the result of making millions of people better off.”
“a review of the literature about the impact of government spending on growth reveals that, generally, such spending crowds out the private sector. This dispels the hope that more spending will produce economic wonders.
Deficit spending will eventually result in higher taxes for future generations. That’s a profoundly unfair burden. Debt is also expansive in and of itself, as interest payments on an enormous amount of debt—even when interest rates are low—will result in a larger and expanding deficit. According to Brian Riedl at the Manhattan Institute, Congressional Budget Office data reveal that by 2049, “Interest payments on the national debt would be the federal government’s largest annual expenditure, consuming 42% of all projected tax revenues.”
Eventually, growing debt will also slow economic growth. Lower growth means fewer innovations, lower wage growth, and higher unemployment. It’s all-around bad news. Finally, higher debt could result in a debt crisis. These are good enough reasons for me to want to restrict the size of government and impose fiscal prudence.”
“Interestingly, recent concerns over inflation have highlighted one additional reason why higher debt is problematic. You see, when it comes to inflation, people’s expectations about the price trajectory in the next few years are what really matters. So, it matters less than we think that the current inflationary forces are likely transitory. If people believe that inflation is here to stay, they will try to protect themselves from it today, and we will indeed have inflation today.
Under that scenario, to get inflation under control, the Federal Reserve will have to raise interest rates. And this is where your debt levels matter. Higher interest rates result in a large increase in overall interest payments fairly quickly, as so much of our debt needs to be rolled over on a short-term basis. A sudden increase in interest rates would slow down the recovery, too, which hurts lower-income Americans.
If the Fed were immune to political pressures, this reality might not matter. However, we can expect that political pressure to be enormous. No administration would be happy to see a large increase in interest payments suddenly show up on its balance sheet followed by a large increase in the size of the deficit, especially if that administration is already planning to spend a larger amount of money in the first place. This pressure only grows under an administration that will resist any rate change that could hurt growth. The Fed may also be slow to act because it has made addressing inequality one of its priorities.”
“Do I know what expectations are and how long inflation will stick around? I don’t. But in truth, no one really does. That’s part of the point. In that context, fiscal prudence now is the best course of action, because with so much political pressure in the worst-case scenario, there will be fewer opportunities when the Fed must actually raise interest rates.”
“It’s an imperfect science, indeed. Under the gambit, budget forecasters estimate how much a policy change might boost the economy and send more cash flowing to the federal government. This time, Democrats are pinning their revenue hopes on the idea that major investments in the social safety net, climate policy and tax reform will yield robust, long-term economic growth.
“I’m very concerned that the pay-fors aren’t real,” said Sen. Rand Paul (R-Ky.), a fiscal conservative. “Both parties bear some culpability. But I’m worried about adding so much debt in such a short period of time.”
Both Democrats and Republicans have previously relied on dynamic scoring and both have lampooned its use as a budget trick. Predictions about how much revenue a new government policy will generate are often exaggerated or inaccurate and are difficult to calculate, placing enormous pressure on independent budget analysts to come up with favorable numbers that might turn out to be a bust.”
“the biggest price increases affecting “core” non-gas or food inflation in recent months have come from new and used cars and air travel. The Biden Council of Economic Advisers estimates that at least 60 percent of inflation in June was due to car prices alone, and a big chunk of the rest came from services like air travel increasing in price as everyone rushes back to travel post-pandemic.
A huge part of the rise in car prices is a semiconductor shortage — implying that a better way to tackle inflation than the Fed raising interest rates might be an effort to improve supply of semiconductors, including boosting production in the US. Biden’s recent efforts to get Taiwan to boost production for US car companies is exactly the kind of intervention implied by this analysis.
The Fed itself seems to be thinking this way; Powell recently testified to Congress that “supply constraints have been restraining activity in some industries, most notably in the motor vehicle industry, where the worldwide shortage of semiconductors has sharply curtailed production so far this year.” Lael Brainard, an influential member of the Fed’s Board of Governors, has said the same.
“If you do think that this supply side story is convincing, then that does really change the way you want to think about this,” Steinsson told me. “Somebody’s going to build a new semiconductor factory at some point … that gives you a rationale for not using the blunt tool of raising interest rates for the whole economy.”
Yes, inflation is rising, there is a great deal of uncertainty, and the specter of the ’70s looms large. But given how much economic pain was visited on millions in the fight against inflation decades ago, it’s encouraging that today’s policymakers seem more willing to consider the path their predecessors did not take.”