Category Archives: Economics

Miscellaneous economy stuff

Inflation is Coming Down—So What?

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So what, indeed.

Shelter cost inflation slowed, to 0.4% in February from the previous month compared with a 0.6% pace in January. This reinforced suspicions that January’s high reading in that category was an anomaly. But apparel prices, a category that had been in deflation, jumped 0.6%.

There’s concern that inflation isn’t “slowing” enough to encourage the Federal Reserve to start cutting its benchmark interest rates, and that’s a two-edged sword.

It’s nice that inflation may finally be abating, but that’s for the future. Most of us live in the here and now; we have to deal with the present reality of the much higher prices for our necessities, much less for our wants, that Progressive-Democrat Joe Biden’s hugely inflationary policies have created. Those prices won’t come down in nominal terms, and they can’t come down in real terms until wages catch up with, and surpass, prices—which means that wage increases must surpass those price increases over a period of time.

That isn’t occurring at a rate that would ease the loss us Americans are experiencing in the grocery stores and in the homes we want to buy. That last, driven in large part by high interest rates, also is inhibiting our heretofore geographical mobility, and that in turn hurts our ability to earn more by changing jobs. We’re functionally denied that avenue for wage increases that surpass price increases.

As things over the last three years or so, wage increases were much less than those inflation-driven price increases for a couple of years, until last summer. At that point, wages increased slightly—and only slightly—faster than price increases over each of the next several months. Over the last couple of months, though, that trend appears to have reversed, with wage increases again being smaller than price increases as inflation has begun, slowly so far, to rise again. Indeed, over the longer term into the past,

[a]ccording to ECI [the Bureau of Labor Statists’ Employment Cost Index], inflation-adjusted wages have shrunk by 3.7% since the end of 2020. While real wages rose in response to falling energy prices late last year, they have been roughly flat since. Worse, the drop in real wages erased all gains made in the late 2010s. Real wages today stand at 2015 levels, meaning Americans’ paychecks don’t go any further now than they did eight years ago.

That two-edged sword shows up in this way. Higher interest rates help the stereotypical widows and orphans—and today’s retirees—who are living with fixed income sources facilitating their Social Security payments. Those fixed income sources benefit from higher interest rates, since that interest is the source of income for the debt- and dividend-paying instruments they hold.

Higher interest rates, though, hurt the overall economy in a couple of ways. One is the higher cost of the Federal government’s borrowing, including its rolling over of its existing debt. That higher cost means less money to spend on things the Federal government should be spending on (setting aside, for this post, the definition of what the government should spend on). Those higher rates also increase the cost of money to businesses, which leads to lower investment rates, less R&D, slower pay raises, and reduced hiring.

This Time I Disagree with Bjorn Lomborg

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But only a little bit. Lomborg (among other things, Copenhagen Consensus President), in his Tuesday Wall Street Journal op-ed, writes absolutely correctly about the need for climatistas (my term, as is “doomsayers” below) to consider much more than their simple claim of climate change and the imminent destruction from their claimed change. Lomborg, though, concentrated on the economic destruction the doomsayers’ policies would inflict even as those worthies ignore technological advances that would mitigate their claims’ outcome, even were their claims in any way accurate.

Where I disagree is in the lack of discussion of the larger, and more important, context within which today’s alleged climate disaster is supposedly developing.

From the subheadline of Lomborg’s piece:

Climate policy needs to take into account the costs of draconian measures….

The doomsayers need to do more than that. They need to reconcile their claims of impending disaster with some facts that provide longer range context. Facts like Earth, 11k years after the last Ice Age, still is cooler than our planet’s geologic warming trend line (noisy as the data around the trend line are). Facts like there have been a number of epochs in our past where Earth was much warmer than it is now, and life was lush; there have been a number of epochs in our past where atmospheric CO2 was much higher than it is now, and life was lush; and those sets of epochs do not correlate with each other.

Some other facts: our climate changes do correlate, roughly, with orbital changes (small) and rotation axis precession (relatively dramatic). Beyond that, we’re about halfway through the current axial tilt from one direction to the opposite, and we tilt—our northern hemisphere, where most of the oceans are—toward the sun in winter and away from the sun in summer. How do the doomsayers plan to deal with the situation in a few thousand years (roughly equivalent to half the time that has passed since that last Ice Age, and a bit shorter than the time since we started our first civilizations) when our northern hemisphere tilts toward the sun in summer, away from the sun in winter, and the seasons get dramatically more extreme as a result?

The Forgotten Man

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A recent Wall Street Journal editorial correctly pointed out the costs to us ordinary Americans of a variety of Progressive-Democrat President Joe Biden administration plans. The editors were particularly concerned with the administration’s plans for bank and credit card fees that these institutions charge individuals who overdraw their account or make late payments on their credit cards and that these institutions charge businesses for using the various ATM and credit card payment networks.

The Consumer Financial Protection Bureau, the agency proximately responsible for the latest round of regulations capping those fees at markedly lower levels,

acknowledges[] the lower penalty may cause more borrowers to pay late, and as a result incur higher “interest charges, penalty rates, credit reporting, and the loss of a grace period.” This would make it harder to qualify for an auto loan or mortgage.
The agency concedes that credit-card issuers may also raise interest rates, reduce rewards, “increase minimum payment amounts or adjust credit limits to reduce credit risk associated with consumers who make late payments.” Because some states cap credit-card interest rates, “some consumers’ access to credit could fall.”

The editors closed their piece with this bit of naivete, though:

The forgotten man always pays.

Who says they’re forgotten? These are the ones the Progressive-Democratic Party wants to trap into welfare, so Party can trade welfare payments for votes. Imperial Rome did bread and circuses; Party does welfare dolings.

Boeing Production Problems and Unions

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Yes, the two are related. This is from a Wall Street Journal article on Boeing’s production sloppiness (my term) in its airline assembly operations. “Traveled work” is work done on the production line at a later station on the line than it should have been done, and generally by the personnel at that later step rather than by those who should have done it moving to the next station to complete it. For instance,

…the plane [whose door had blown out on an Alaska Airlines flight] spent nearly three weeks shuffling down an assembly line with faulty rivets in need of repair.
Workers had spotted the bad parts almost immediately after the plane’s fuselage arrived at the factory. But they didn’t make the fix right away, and the 737 continued on to the next workstation. When crews completed the repair 19 days later….

Boeing’s fix [emphasis added]?

Boeing told staff it was changing how it determines pay for tens of thousands of nonunion employees—from mechanics in South Carolina to its top brass. Quality measures, such as reducing traveled work, will now determine 60% of the annual bonuses for those working on its commercial aircraft.

Boeing’s union employees apparently get to continue to skate. The move appears to single out Boeing’s right-to-work state employees for punishment while not addressing the problem itself.

Government Making Crime Pay

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Now the Progressive-Democratic Party reigning in the New York State government wants to reward felons for their crimes. After those felons have paid their debt to New York society through their jail time (and apparently before they’ve served out the rest of their penalty in the form of parole), the State wants to give them $2,600 for their trouble.

The legislation, introduced by State Senator Kevin Parker [D] and Assemblyman Eddie Gibbs [D], would allow inmates to collect around $400 each month over six months once they leave prison.
As the bill currently stands, there are no limitations on how or where the money can be spent, according to Fox 5 New York.

They’re looking at setting aside $25 million for this reward fund.

Instead of paying criminals for their crime, maybe this taxpayer money (the original $40 the felons routinely get on release came from their garnished wages from the jobs they held while in jail) would be better spent going to a victim rehab/make whole fund instead. Alternatively, maybe this taxpayer money would be better spent countering, if only a little, the State’s Defund the Police movement.

Alternatively alternatively, maybe this taxpayer money—evidently excess collections since it’s aimed at such foolishness—could be returned to the State’s citizens. After all, as Progressive-Democrat Gibbs complains,

In this economy that [the original $40] amount is barely enough to get groceries or purchase clothes for a job interview[.]

That’s also the case for the honest citizens of New York, both jobless and working poor.

It’s highly useful to help released felons readjust to life on the outside and start to recover (or begin) an honest life. Paying them for their crimes doesn’t accomplish that. Thus, and additional alternative: commit the $25 million to programs—not State-run!—jail house training in the trades, half-way house rehab and job prep, and the like. Gibbs and Parker like the idea of no strings attached for the felons’ spending their $2,600 each; they should have no trouble committing, unrestricted, their aggregated $25 mil to private enterprises to run these programs. Or—the horror—paying the $2,600 per to the employer who hires a newly released felon.

It’s instructive that of all the plethora of alternatives available, these Progressive-Democrats picked the absolute worst of the lot, the one that directly rewards the felon with free cash.