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Tag: inflation

Are Wage Increases Driving Inflation? Not This Time

A popular line on our recent surge of inflation is that an over-tight labor market has led to rapid wage growth, which in turn forces companies to raise prices. Higher prices in turn lead workers to demand higher wages, which will give us a wage-price spiral and soon lead to double-digit inflation.

While this was a story that plausibly fit the data in the 1970s, it is very hard to make the wage-price spiral fit the current situation for a simple reason: The wage share of income has fallen sharply since the pandemic. By wage share I mean total compensation to workers, including fringe benefits, not just cash wages and salaries.

Here’s the picture:

Worker Share of Net Income Decline chart Federal Bureau of Economic Analysis

As can be seen, the wage share of corporate income had been recovering gradually from the troughs it hit in 2014 following the Great Recession. However, we see a sharp reversal in 2021, with the wage share falling from 76.1 percent to 73.7 percent, a decline of 2.4 percentage points.

Perhaps some economists can tell a story where rapid wage growth is driving inflation even as the wage share of income is falling, but I’m not that good an economist. [Editor’s Note: “Good” as in dishonest.]

This still looks to me like a case where supply-side disruptions, associated with the economy reopening from the pandemic together with the war in Ukraine are driving inflation.

This view is consistent with the fact that year-over-year inflation in the European Union was 7.5 percent as of March. The EU countries did not have as big a stimulus as the United States and by most measures the EU labor market is not as tight as in the United States.

Published with permission from DC Reports. Dean Baker co-founded the Center for Economic and Policy Research in 1999. His areas of research include housing and macroeconomics, intellectual property, Social Security, Medicare and European labor markets. He is the author of several books, including "Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer."

'Slightly Better Than Expected': Experts Say Core Inflation Now Slowing

The monthly Consumer Price Index report from the Bureau of Labor Statistics was released Tuesday morning, and while inflation continues to rise some economists appear pleased, with one stating the report is “slightly better than anticipated.”

Overall, the annual rate of inflation is 8.5 percent, but removing food and energy, prices are up 6.5 percent annually.

Gas prices are a big part of the inflation rate. CNN’s cable reporting calls the current report a “rearview mirror” look, given that gas prices are coming down. They add some economists are hoping the peak of the inflation has been reached. They also note that the U.S. does not rely much on oil from Russia, so in other countries, inflation is worse.

“Food prices are up 8.8% over the past year. Energy prices are up 32%, including 11% in March alone — reflecting the spike in energy prices associated with Russia’s invasion of Ukraine,” The New York Times’ Ben Casselman notes.


Casselman points to Putin’s illegal war in Ukraine for food price increases:

And he sees some good news: “Headline inflation accelerated in March, but we all knew that would happen given gas prices. The bigger surprise is the slowdown in ‘core’ inflation.”

There’s still plenty to be concerned about. Casselman says this is “the fastest year-over-year inflation since 1981.”

Meanwhile, oil companies – not the President – set the price of gas at the pump and other energy products, and are under no obligation to price gouge, which is illegal in most states during a declared state of emergency, such as war, natural disasters, or COVID-19.

University of Michigan economist and public policy professor Justin Wolfers:

And Wolfers throws a challenge to the mainstream media, which is generally focused on only bad news:

Printed with permission from Alternet.

Why Are Americans Feeling So Bad About A Good Economy?

The U.S. economy is doing its best impression of a Formula One car, racing at high speed while negotiating a series of twists and turns. Last year, real gross domestic product grew faster than any year since 1984, when President Ronald Reagan was running for reelection on the theme, "It's morning in America."

One indicator after another suggests an economy enjoying robust health. Last week, economists were pleasantly surprised when the Bureau of Labor Statistics reported that in January, the economy added 467,000 jobs — despite omicron, which spread across the country with alarming rapidity.

Unemployment remained low at four percent, compared with 6.4% a year before. A record number of people quit their jobs in November, reflecting their confidence that in today's labor market, they can find better ones.

The stock market is up more than 12 percent over the past 12 months. Corporate profits reached a 70-year high in 2021. Federal tax revenues soared by 18 percent in the 2021 fiscal year, as more people made more money.

But ... there's always a "but." As the columnist George Will postulated years ago, all news is economic news, and economic news is always bad. The dominant news in recent months has been inflation, once thought to be permanently vanquished but now making a comeback.

Prices climbed by seven percent last year, the biggest increase since 1982. A recent CNN poll found that 80 percent of Americans regard rising prices as a major problem, and 63 percent think the national economy is in poor shape.

That notion is at odds with reality. In April 2020, when the economy was suffering a pandemic-induced collapse, CNN found, 60% of Americans thought the economy was in bad shape. That the number is higher now than it was then is a testament to the power of negative thinking.

Where does the negative thinking come from? Maybe from the psychological phenomenon known as loss aversion. As Investopedia explains, some research suggests that "the pain of losing is psychologically about twice as powerful as the joy we experience when winning."

Since the pandemic crushed the economy, we have regained nearly 24 million jobs, and growth has rebounded strongly. But those gains get discounted because of what we have lost: stable prices. The joy of a boom doesn't compare to the misery of inflation.

Politics plays a role. Most of the people who voted for Donald Trump in 2020 are not inclined to cheer the state of the economy, because they don't want to think that Joe Biden has done well at managing it. They feel vindicated by every unfavorable development. They bring to mind country artist Patty Loveless, who sang, "You can feel bad if it makes you feel better."

Biden hardly deserves all or even most of the credit for our improving fortunes. The economy is an unpredictable beast over which Washington has only limited control. But he did push through a $1.9 trillion COVID-19 relief package last spring, despite warnings that it could overheat the economy and spark inflation.

Those warnings turned out to be valid. But if you're going to blame Biden's spending for the rise in inflation, you have to give credit to Biden's spending for the surge in economic growth. The outlays served to boost overall demand, which produced both results. Without the relief package, we'd have lower prices but slower growth and higher unemployment.

Much of the gloom about the economy stems from the disruptions caused by the pandemic. Some are economic: snarled supply chains, shortages of some goods, canceled airline flights and other events resulting from workers being infected. But the fear of COVID-19, the obligation to wear a mask and get any number of vaccine shots, and endless uncertainty may do more damage to the national psyche.

We all yearn for a normal life that we fear will never return. And whether we are in the pro-mask, pro-vaccine group or the opposing camp, we are confronted with reminders every time we go out that the other side is an obstacle to what we want. Bitter feelings fester.

In our yearning, we forget that in what we recall as the happy times, we were grumpy. In December 2019, before the first case of COVID-19 in the U.S., Gallup found that 62 percent of Americans were "dissatisfied with the way things are going in the United States at this time."

When you're smiling, the song says, the whole world smiles with you. These days, though, you'll get more company with a scowl.

Follow Steve Chapman on Twitter @SteveChapman13 or at https://www.facebook.com/stevechapman13. To find out more about Steve Chapman and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

Biden Says What Most Sane Americans Think About Peter Doocy (VIDEO)

It was not a good day for Fox News White House correspondent Peter Doocy. First, Press Secretary Jen Psaki was clearly irked by his line of questioning as he tried to make news by framing a rise in crime as something the Biden administration has ignored, despite Fox News promoting Second Amendment “activists” and doing its best to oppose efforts to reduce poverty and efforts to counter societal ills.

Later, after the close of President Biden’s Competitiveness Council meeting, reporters continued to shout questions at the President. Among them Peter Doocy, who carelessly asked the President if rising inflation was a “liability” for the midterm elections.

“It’s a great asset – more inflation. What a stupid son of a bitch,” President Biden appeared to say sarcastically.

Watch The Entire Exchange Below:

Reprinted with permission from Alternet

How Much Blame Does Biden Deserve For Inflation Woes?

President Joe Biden's standing with voters has taken a beating on multiple fronts. He is perceived as not focusing on issues they care about, particularly inflation.

Inflation is a president slayer. Richard Nixon imposed wage and price controls. When they were lifted, prices soared even higher. Would Nixon have been removed over Watergate if the economy had been better?

Gerald Ford issued red and white lapel pins proclaiming "WIN," which stood for "Whip Inflation Now." Inflation was unimpressed. Ford got whipped by Jimmy Carter in the 1976 election.

Inflation dogged the Carter presidency as well. Carter did eventually appoint a determined inflation hawk, Paul Volcker, to lead the Federal Reserve. He threw the nation into a recession by hiking interest rates. Ronald Reagan defeated Carter in 1980.

Does Biden deserve the blame for inflation? Not to the degree people are saying.

Senate Republicans held a press conference in July blaming the "insane tax and spending spree of President Biden and the Democrats for six straight months of raging inflation." In December, Sen. Mitch McConnell tweeted: "It is unthinkable that Senate Democrats would try to respond to this inflation report by ramming through another massive socialist spending package in a matter of days."

Whoa. Biden did pass a large COVID-19 bill early in his term, but the rest of the "socialism" Republicans are fulminating about did not pass.

Republicans are suddenly crying "socialism!" but let's be fair. While the government has been pumping money into the economy at a record clip over the past 14 years, most of that has been the work of the Federal Reserve, and former President Donald Trump was the most vociferous proponent of easy money we've ever seen.

Since the financial crisis of 2008, the Federal Reserve has been shoveling money out the door with pitchforks, and in the wake of COVID-19, both the central bank and the federal government have been "dropping money from helicopters," to use the image coined by Milton Friedman.

Many economists believe the Fed was right to do this as a response to the financial crisis of 2008. The controversy arises about when it was time to stop. Arguably, the Trump years were the right time. But that's not what the Trump-led GOP favored.

Trump's money gusher began in 2017 with the $1.9 trillion tax cut that wasn't matched with any spending cuts.

Trump appointed Jerome Powell to the Fed but quickly soured on him when he didn't increase the money supply quickly enough for Trump's taste. Powell was soon on the receiving end of Trump tweets. He argued that "we need rate cuts and easing" (exactly the opposite of what we needed).

If Republicans were worried about inflation, they might have spoken up about Trump's attempt to flood the economy with easy cash (to say nothing of eroding the norm about political influence on the Fed).

Then came COVID-19. Most people think the big federal cash infusion, the $2.2 trillion Coronavirus Aid, Relief and Economic Security Act, was a necessary response to the emergency. It saved many from destitution. But that money, combined with the trillions of dollars of quantitative easing and near-zero interest rates over the past decade and a half, certainly set the stage for inflation. Congress passed an additional $900 billion in December of 2020 — which Trump signed — for a grand total of over $3 trillion in COVID-19 relief.

Again, all of this money sloshed into the economy before Biden took the oath of office.

Was it wise for Biden to pass yet another COVID-19 relief package, the $1.9 trillion American Rescue Plan, in 2021? I don't think so. But did it cause the inflation we're experiencing now?

The annual inflation rate for most things Americans buy was already at the highest level in a decade before Biden entered the White House. And inflation is global. According to the Organization for Economic Cooperation and Development, inflation among its 38 member states is running higher than at any point since 2008.

So, even if Biden is only partially responsible for the inflation we've got, there are steps he can take. One would be to remove the Trump-imposed tariffs, which are taxes that raise the price of goods to Americans. Another would be to promote more legal immigration. We are suffering a severe labor shortage in all areas. More labor would ease bottlenecks at ports and in transportation. Make keeping schools open a priority. Remote learning has been terrible for kids, and many parents cannot work if their kids are not in school.

Biden should forthrightly address what's on voters' minds. He's gotten tangled up in internecine fights with other Democrats over matters voters don't know or care about and that he can't even win. If they sense he's not really engaged in controlling the inflation menace, it could well do to him what it has done to other presidents.

Reprinted with permission from Creators.com

Eat It, Fox News: New Data Shows Inflation Eased In December

Washington (AFP) - Wholesale prices for US goods and services surged to a record last year amid the supply snarls that have battered the global economy, but data released Thursday showed that inflation pressures eased in December.

The producer price index (PPI) jumped 9.7 percent in 2021, the largest calendar-year increase since the data was first calculated in 2010, the Labor Department reported.

But PPI in the final month of the year gained just 0.2 percent compared to November, its slowest increase in over a year, and half the increase economists were expecting, due to a 0.4 percent decrease in the cost of goods.

The data follows the government report on consumer prices released Wednesday showing the biggest annual increase in nearly four decades, fueled by jumps in prices for cars, housing and food.

However, at the producer level, energy prices dropped 3.3 percent and food prices also declined, the data showed.

"Producer prices ended the year on an encouraging note, rising less than expectations as both the headline and core PPI moderated in December," said Mahir Rasheed of Oxford Economics.

The Covid-19 pandemic has created shortages of critical goods like computer chips for cars while transportation snags have further fanned the inflation flames as new strains of the virus cause additional business disruptions.

"Persistent supply disruptions will pin producer prices near record levels in the near term, especially given a rapidly spreading Omicron variant that will fan inflation pressures," Rasheed said.

Federal Reserve officials have made clear that fighting the wave of price increases will be a priority, and many economists now expect the central bank to raise the benchmark interest rate as soon as March.

The price surge has battered President Joe Biden's reputation even as the economy recovers from the damage inflicted by the pandemic, and his White House welcomed the sign the pressures might be abating.

"Monthly inflation results are always volatile, and this report was driven in large part by a reduction in highly volatile energy and food prices, but also reflects potential improvement in prices for supply-chain related goods and services," said Cecilia Rouse, head of the White House Council of Economic Advisors.

But she said the data underscore the need to continue to work to resolve the supply chain issues.

"Even as the economy has had a historic recovery, we continue to face challenges with prices driven by supply chain disruptions around the world."

The Five Biggest Events To Go Down In 2021

If you turn on the news or visit your social media apps, the world looks a lot like 2020 still. Of course, the one massively sobering difference is Americans are no longer forced to live under a washed-up game show host turned cosplay fascist, treating democracy and the norms of governance like they were occurring in his tawdry casinos. It could be argued that we've been living in a simulation since the onset of the pandemic in 2020 and have yet to find the exit. In any case, 2021 brought some glimmers of hope amid bouts of destructive political partisanship and getting our fractured nation to come to grips with reality amid a never-ending pandemic.

1. January 6th Attack On the Capitol

Capitol Jan 6 | Blink O'fanaye | Flickr

Image via Flickr|Blink O' Fanaye

Saying this year began with chaos would be the understatement of the century. The biggest and most shocking event of our democracy happened less than a week into 2021. Hordes of irate MAGA cultists invaded the Capitol like the barbarians invaded Rome, right as Congress was at work certifying President Biden's unequivocally legitimate election victory in the Electoral College over now-former President Trump, forcing their evacuation. We watched images pour across our screens of defenseless Capitol Police officers trying to thwart this angry mob of Trumpist fanatics, with many of them facing injuries and one officer, Brian Sicknick, suffering a deadly stroke as a result of the chaos. You've got to hand it to the "bLuE LiVeS MaTtEr" crowd for striking an officer with a pole bearing a U.S. flag and dragging an officer down the stairs under the Capitol Dome. The unfolding drama and horror have resulted in lawmakers forming a select committee to investigate what led to the violence of that day, as well as what direct role former President Trump played. Not to mention the hundreds of arrests and prosecutions of the mob participants.

2. A Never-ending Pandemic

Fauci remains optimistic about near-end to pandemic in 2021 - Medill  Reports Chicago

Image via Northwestern University

While most of us thought the world would be welcoming the new year with celebratory events and massive crowds of jovial party goers, the highly contagious Omicron variant of Covid-19 all but killed those plans. Americans thought they'd be back to the daily grind of their lives and, most importantly, be able to be with their friends and families without having to don a biohazard suit. The fallout from Omicron complicates the promise of a president who vowed to get the pandemic under control. While President Biden acted valiantly and did much to mitigate the pandemic, plague fatigue and a large chunk of the citizenry stupidly devoted to refusing the vaccine and embracing baseless conspiracies will challenge the president and Democrats in the upcoming midterms.

3. The US Exit From Afghanistan

Soldiers assigned to the Combined Joint Task Force 76 are shown exiting a CH-47 Chinook

Image via US National Archives

An amazing thing happened over the summer: Millions of average Americans suddenly went from being infectious disease experts to foreign policy experts. Indeed, President Biden's smart decision to finally end our involvement in a 20-year war was met with a flurry of unfounded criticism from would-be experts, especially given the rather chaotic execution of the departure. The majority of Americans wanted out of Afghanistan and former President Trump had laid plans to exit the war-torn country even earlier than Biden did. However, the planning and timing of the exit didn't exactly proceed with flying colors.

The Biden administration had thought the U.S.-backed Afghan government would hold on to power for at least six months. However, the Taliban had taken over the country before the final U.S. troops were out of the airport. It represented a major blow for Biden, who had promised weeks earlier that withdrawing from Afghanistan would not lead to a Saigon-like fall. Instead, Biden was forced to watch videos of desperate people fleeing to the airport, with a few plunging to their deaths as they clung to U.S. planes.

4. The Vaccination Fight

File:Anti Vax or mask IMG 3966 (51380804053).jpg - Wikimedia Commons

Image via Wikimedia Commons

Nothing has shown how unbelievably selfish and despicably partisan our nation has become than the fight to get our population vaccinated. In what can best be described as one part Idiocracy and one part Simpsons episode, we've watched far-right Republicans and deranged conspiracy theorists spout utter nonsense about the vaccine, the CDC, Dr Anthony Fauci, and members of the medical community just trying to do their damn jobs. A year after the miraculous development of effective COVID-19 vaccines, only 61 percent of the nation’s population is vaccinated, which clearly represents the danger of misinformation (Horse dewormer, anyone?) that infects social media like Covid itself.

Not surprisingly, the majority of the anti-vaxx noise is coming from far-right and GOP circles, thus proving the Republican party has become a death cult. Things have gotten so utterly insane that many of Trump's loudest cult members are raging against their own cult leader for his embrace of the vaccine, booing him at events and going after him on social media. At this point, it almost seems fitting to build a wall around the anti-vax crowd and make Fox News pay for it. But seriously, the CDC points out that vaccinated people are 14 times more likely to die from COVID-19 complications. Biden has done all he could to convince these selfishly stupid (and they are stupid) Americans to get vaccinated, but it's up to Darwin now.

5. Inflation

Forecasts Archives - PIDE Blog

Image via Pakistan Institute for the Development of Economics

Shutting down the world economy for nearly a year has had devastating impacts on the price of goods, especially as everything opened up all at once. Prices in 2021 rose at the fastest rate in 40 years, creating enormous problems for President Biden and his agenda. Government stimulus checks and other measures were desperately needed during a raging pandemic, but the rapid printing of money has spaned hyperinflation. It was a catch 22, but one that could not be avoided.

A shortage of workers contributed to wage gains, but more price hikes at restaurants and hotels. Notwithstanding these setbacks to the economy, the stats show the recovery is going well and Biden's economy has seen huge gains.

Obviously so much more happened in 2021, but those events got the most national attention and news time. Let's hope 2022 is far less chaotic.

Michael Hayne is a comedian, writer, voice artist, podcaster, and impressionist. Follow his work on Facebook and TikTok


How Biden’s ‘Christmas Nightmare’ Turned Into A Gift-Giving Miracle

Reprinted with permission from PressRun

So much for the empty shelves and delayed packages this shopping season.

After months of the media insisting consumers were terrified about the rising inflation rate, and that stores would be barren this season thanks to supply chain woes, shoppers snatched up everything in sight, sending holiday sales soaring to a 17-year high. Clothing sales jumped 47 percent compared to 2019 (pre-Covid), jewelry 32 percent, electronics 16 perc.

That runaway spending meant consumers had no problem finding products, despite months of dire media warnings and claims that it all meant terrible news for the White House.

Alternately hyped as a “problem,’ a “Christmas crisis,” and even a looming “nightmare” for President Joe Biden, the holiday season supply chain issue took on Herculean importance for the political press corps, which until this year had never cared about the global trade issue.

At an October White House press briefing, CBS’s Ed O’Keefe actually demanded to know if the White House would guarantee that every holiday package would arrive on time this year.

Itching to maintain the Dems in Disarray narrative, egged on by Fox News, and stretching common sense to the breaking point, the press claimed the president faced a debacle over something he does not control. When none of the doomsday predictions came to pass though, most of the press moved on, instantly losing interest in supply chain chatter.

The issue highlights what happens when the press joins forces with the GOP to hype a made-up Biden “crisis,” and how news outlets look away when the allegation proves to be a total bust.

“The holidays are just around the corner and shoppers are seeing something that they don't like, ‘Out Of Stock.’ You see it everywhere,” CNN announced on November 10. “Better start your shopping now. The shortages that could ruin your holiday plans,” the network warned on November 16.

Between November 1 and November 30, CNN mentioned “supply chain” 330 times, according to TVeyes.com. For the month of December, when supply chain news improved, that number fell to 130 mentions, a decrease of nearly 70 percent. (Fox News referenced “supply chain” a staggering 700 times in November; 400 times in December.)

The premise of the hand-wringing coverage never made any sense — why would the president of the United States be held responsible for the shipping and handling of private companies? Biden didn’t run for office on some kind of Kris Kringle platform, promising to deliver all Christmas gifts on time.

The press spent the last five months of the year so obsessed with touting an endless list of supposed Biden calamities (remember the White House’s Colonial Pipeline “crisis”?), that news outlets seamlessly added the supply chain to Biden’s To Do list.

Recently, the New York Times was among the few news outlets to double back and to report unequivocally that Christmas gifts were delivered on time, despite the media hype to the contrary. “The UPS and the Postal Service delivered about 99 percent of their packages on time by that measure between Nov. 14 and Dec. 11, and FedEx was close behind at 97 percent,” the newspaper reported.

But note how the Times suggested “people” had been expressing concern this season about gifts not arriving on time. (“A few months ago, people worried that a disrupted supply chain would ensnare Christmas gifts. It didn’t happen.”) In truth, it was the press and Republicans — not everyday consumers — who were ceaselessly beating that anxious drum.

There was also no mention of Biden in the Times’s good-news write-up about shipping. Back in the fall, the media constantly tied the president to the supply chain issue. “The [shipping] disruptions have also become a problem for President Biden, who has been vilified on Fox News as “the Grinch who stole Christmas,” the Times reported in November. In December, when the picture had improved dramatically, the Times made no reference to Biden, or suggested the update represented welcome political news for the White House.

That stems from the media’s fierce commitment to the Doomed Biden Economy narrative, even though it’s becoming increasingly difficult to sustain.

America’s economy improved more in Joe Biden's first 12 months than any president during the past 50 years notwithstanding the contrary media narrative contributing to dour public opinion,” wrote Matthew Winkler at Bloomberg, breaking from the media pack to tout positive news. “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 percent in November from 6.2 percent in February, continuing an unprecedented rate of decline during the Covid-19 pandemic.”

Today, Biden gets little credit. He currently nets the lowest economic rating from voters of any president at this point through their first term since Jimmy Carter in 1977, according to CNN.

Why the disconnect? A recent YouGov poll found that by an amazing 6-to-1 ratio, Americans had heard “mostly negative news stories about the economy,” including endless doomsday predictions about the supply chain, no doubt. Those polling results came in the wake of a new media study that showed Biden getting worse coverage from the Beltway press than Trump did one year ago, when the vaccine-less U.S. economy was being strangled by the pandemic.

It was strange watching the media root for a supply chain Christmas debacle this year. It was even stranger when they ignored the fact it never happened.