Saturday, June 19, 2021

What Is Normal Inflation?

 Popular Economics Weekly


The financial markets were shocked, yes shocked, when the May Consumer Price Index for retail prices jumped 4.9 percent year-over-year. Just kidding. No one was really surprised because one year ago it wasn’t rising at all (well, just 0.22 percent), and it was predicted to rise substantially with the $4 trillion plus in government aid already being injected into companies and individuals.

It has averaged around two percent since the 1990s, per the above St. Louis Fed graph that dates back to 1950. Every business economist would know this, and expect such fluctuations that rather quickly return to the longer-term average with today’s just-in-time, global supply chains that have tamed prices.

In fact, CPI inflation was rising as high as 5.5 percent annually in July 2008 during the Great Recession, before another jaw-dropping plunge to -0.32 percent in 2009. You get the drift. So who is worrying about these temporary ‘blips’ in inflation?

The financial markets, of course. They love to use other peoples’ (borrowed) money to finance their stock, bond and commodity market transactions, if possible. And interest rates have been at rock bottom over the past year; close to zero for short-term rates, and the 10-year benchmark treasury yield below one percent for much of the time. It is still in a daily trading range of 1.5-1.6 percent, per the below FRED graph.


This is one reason market indexes have been at record highs, and why they gyrate so wildly on almost a daily basis, as traders try to guess what the Fed will do next in its almost daily pronouncements on when they might allow short-term interest rates to rise.

Consumers don’t have to worry so much, because it has been extremely difficult for the Federal Reserve, or anyone else, to keep CPI inflation above two percent, especially during this once in a 100-year coronavirus pandemic. Inflation below that range has invariably meant there is too little aggregate demand—consumers aren’t buying, investors aren’t investing, and banks aren’t lending.

CEPR’s Dean Baker just remarked on what has boosted inflation of late. It’s gasoline prices and insurance rates spiking because of the sudden surge in travel, as consumer bust out of their prolonged at home hibernation.

“Overall, the story this month is overwhelmingly that bounce back inflation was 100 percent predictable, coupled with soaring car prices (both new and used) due to temporary shortages. There’s not much here to get excited about,” he said.

“The overall CPI was up 0.6 percent (monthly), the core rose 0.7 percent. New and used cars were major factors, rising 1.6 percent and 7.3 percent, respectively. The jump in used and new car prices added 0.3 percentage points to the inflation rate for the month.”

And, he continues:

  • · Even though it’s hard to get good help, restaurant prices outpaced food prices by just 0.1 percentage points over the last three months, 1.0 percent to 0.9 percent.
  • · The medical care index fell 0.1 percent in May, up just 0.9 percent over last year. Drug prices were flat, down 1.9 percent over last year.
  • · Rent indexes: rent proper increase just 0.2 percent; owner equivalent rent rose 0.3 percent in May.
  • · Apparel prices jumped 1.2 percent in May, car insurance 0.7 percent, and air fares 7.0 percent. The indexes are respectively 2.2 percent, 0.2 percent, and 6.3 percent below the February 2020 level.

It is also why the housing market is booming. Interest rates are this low because bond traders see very little danger of longer-term inflation, and the Fed promising to hold short-term rates close to zero for at least one more year.

Harlan Green © 2021

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Thursday, June 17, 2021

When the Return to Normal?

 Financial FAQs

Calculated Risk

When will most American workers return to work, and the U.S. economy return to normal? The Calculated Risk-FRED graph since 1992 tells us that retail sales have historically never varied substantially from a 5 percent annual increase, except during the blue bar recession periods indicated in the graph, and consumers and businesses have spent most of their pandemic aid. It could take another year.

The U.S. Census Bureau reportedAdvance estimates of U.S. retail and food services sales for May 2021, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $620.2 billion, a decrease of 1.3% from the previous month, but 28.1% above May 2020.”

Altogether, the number of people reportedly still receiving jobless benefits from eight separate state and federal programs totaled 14.8 million as of May 29, reports MarketWatch’s Greg Robb. It is down about 560,000 from the prior week. Last year, 30 million Americans were receiving these extra benefits, while the historical range receiving claims is in the mid-200,000s, so one can see why it might take another year for economic activity to return to normal.

Retail sales began to rebound last April with the first aid checks, and really took off this January with the additional recovery dollars going to individuals. Clothing and accessory sales are up 200 percent from May 2020, while food service and drinking places surged 71 percent and electronic and appliance stores gained 91 percent.

This sudden prosperity is creating many bottlenecks, raising all prices and shrinking the housing supply, with builders struggling to meet the increased demand.

Privately‐owned housing starts in May were at a seasonally adjusted annual rate of 1,572,000. This is 50.3 percent above the May 2020 rate of 1,046,000, but is not enough construction to satisfy the soaring demand for more housing—new or used.

NAR chief economist Lawrence Yun commented on the May starts: “Despite the month-to-month trend, or even year-to-year changes, America is facing a massive housing shortage due to multiple years of underproduction in relation to population growth. We estimate around 5.5 to 6.8 million additional housing units need to be built. America is on track for only 1.6 million and 1.7 million new housing units this year and next, respectively. That would represent the best two-year performance in 15 years, yet it would still be inadequate. Therefore, expect both rents and home prices to outpace overall consumer price inflation in the upcoming years."

Calculated Risk

Where is this housing supply to come from? Estimates of population growth, demographic change, and demolitions suggest about 1.3 million households will form annually for the next few years, Goldman Sachs analysts said in a May note cited by Business Insider.

“Millennials are just reaching peak homebuying age and set to keep demand strong for the foreseeable future. Elevated lumber prices and lot shortages will continue to drag on construction even as starts accelerate. And while mortgage rates have risen from their pandemic-era floor, they still sit at historically low levels and should keep demand robust, the bank said.”

In 2021, the Mortgage Bankers Association (MBA) forecasts single-family housing starts to be around 1.134 million. And that could just be the beginning, as projections going forward are even rosier: 1.165 million single-family homes in 2022 and 1.210 million in 2023.

And we should see more entry-level homes under construction in 2021, says Joel Kan, associate vice president economic and industry forecasting at the MBA. That could help a potential pinch point, as too many entry-level buyers are helping to push up prices, making those homes unaffordable for that very group.

“We’ll see more affordable homes come onto the market as builders try to meet demand for these homes,” Kan says.

“Some 5.16 million people who have exhausted state compensation were also getting extra $300 a week in federal benefits as of May 29, down about 75,000 from the prior week,” says Robb. “The federal program ends in September and more than two dozen states are going to end the program early starting in the middle of this month.”

We know that will slow down the return to normal growth in those 25 states that are coercing their lower-paid workers to return to jobs they might not like. And that is on top of the need to find adequate housing.

Harlan Green © 2021

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Wednesday, June 9, 2021

There Are More Jobs Than Ever!

 Financial FAQs

Calculated Risk

The number of job openings reached a series high of 9.3 million on the last business day of April, the U.S. Bureau of Labor Statistics reported last Tuesday. Hires were little changed at 6.1 million. Total separations increased to 5.8 million. Within separations, the quits rate reached a series high of 2.7 percent while the layoffs and discharges rate decreased to a series low of 1.0 percent.

American workers are finally in a position to pick and choose from what is a record number of job openings. As proof, the number of quits jumped to a new all-time high of 4.0 million, versus 3.6 million last month.  These are voluntary exits from one job to a presumably better job.

This is panicking 25 red state governors into terminating the additional $300 per week in unemployment benefits early, believe it or not. They seem to be afraid that their workers might take the time to shop for a job with better pay and benefits, which anecdotal evidence already indicates.

The blue line in Calculated Risk’s graph tells us that hiring has actually returned to a more normal level, but sudden opening of the economy has orders pouring in for goods and services, which is more demand that can be satisfied at the moment, and this is boosting workers’ wages.

Reuters said “Higher worker mobility undoubtedly contributed to the surge in hourly earnings in the past two employment reports, as employers must not only pay higher wages to attract new workers but may feel more pressure to raise compensation to retain their existing employees.”

There are still too many unvaccinated employees that don’t feel safe returning to work, and most schools are still out or having only partial re-openings for many women to return to work.

Treasury Secretary Janet Yellen also claimed data does not support the argument that increased unemployment benefits are leading to a workforce shortage. She said when they looked at states and sectors where supplemental benefits were high, there weren't lower job finding rates as the argument would suggest, and in fact it was the "exact opposite."

The simple truth is that Republican governors en masse that suppress additional aid for their workers is in keeping with their small government principles. Why else give up $26 billion that will flow to them if they allow their workers to keep the additional benefits?

Sadly, research is showing that this hurts those states, report a number of researchers. A report cited by The Center For Equitable Growth concludes that workers salaries increased as much as five percent when their unemployment benefits were extended to 99 weeks in 2010-11 following the Great Recession.

And as of May’s jobs report released last Friday, the country is still down 7.6 million jobs from before the pandemic, reports The Hill. The May jobs report also indicated that there are 9.3 million people who are officially unemployed — meaning they are actively looking for work and unable to find it. In most industries, the number of jobseekers still exceeds the number of job openings.

We are in a different world with COVID-19 that is killing more than all the world wars, a time  much like the Great Depression and New Deal when a small government ideology makes no sense.

Harlan Green © 2021

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Friday, June 4, 2021

Who Lost Their Jobs?

 Popular Economics Weekly

This would be a good jobs report at any other time. Total nonfarm payroll employment rose by 559,000 in May, from a revised 278,000 jobs in May, and the unemployment rate declined by 0.3 percentage point to 5.8 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in leisure and hospitality, in public and private education, and in health care and social assistance.

Employers are crying labor shortage because they were surprised by the sudden 6.4 percent Q1 GDP growth pickup, so they were hoping for more new hires in the May report.

But maybe there is another reason for some workers not taking new jobs as quickly as employers would like—the businesses that employed them may be permanently closed, hence the large number still receiving unemployment benefits.

The WSJ reported that the pandemic resulted in the permanent closure of roughly 200,000 U.S. establishments above historical levels during the first year of the viral outbreak, according to a study released Thursday by economists at the Fed. In recent years, about 600,000 establishments have permanently closed per year, or about 8.5 percent, according to the study, so the total number could be upwards of 800,000 businesses permanently closed during the first pandemic year.

Then why would those losing permanent jobs, permanently, want to return to work quickly? Why shouldn’t they be given time to get over their loss? Have sociologists and psychologists even studied such traumas in detail?

We know something about the hurt from permanent job losses in the Rust Belt—soaring drug use and suicide rates in studies by Nobelist Angus Deaton and Anne Case.

The Federal Reserve gives a preliminary estimate of jobs permanently lost, and as of May it was 3.234 million from 3.529 million permanently lost in April. The calculated Risk graph shows the percentage losses over all recessions since WWII, and the time it took to return to normal levels; 5 years in 2001 (light blue line), 8 years in 2007 Great Recession (dark blue line) and is still below par just 15 months from the current pandemic (red line).

Calculated Risk

Individual companies account for about two-thirds—or roughly 130,000—of the extra business closures if historical patterns hold, according to the Fed economists who examined businesses with employees, cited by WSJ. Other closed establishments are units of major companies—say, a Gap or Pizza Hut—that closed some locations while remaining in businesses.

The service sector was hardest hit and is roaring back with 292,000 jobs in Leisure and hospital, followed by Education and health, and government. More women will return to the workforce, particularly mothers when schools are fully open in the fall. Other service-oriented businesses such as hotels, museums, parks and entertainment venues also added a flush of new jobs.

And many work sites are relaxing restrictions on masks or customer occupancy with coronavirus cases falling to the lowest levels since the first month of the crisis. 

MarketWatch’s Jeffry Bartash reports the global tally for the coronavirus-borne illness climbed above 172 million on Friday, while the death toll rose to 3.7 million, according to data aggregated by Johns Hopkins University. The U.S. remained in the lead globally in cases with 33.3 million and deaths with 596,434, JHUniv data show, but the seven-day average for cases has fallen 48 percent from two weeks ago, according to a New York Times tracker, for deaths has dropped 28 percent and for hospitalizations has declined 22 percent as vaccinations continue to increase.

This all points to labor participation rates continuing to rise in the fall, though it could depend in part on those workers that lost permanent jobs working through the debilitating effects of their losses.

Who is willing to help them, other than the Biden administration that is extending jobless benefits through September, and the 25 states that have not cut off their benefits too early?

Harlan Green © 2021

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Wednesday, June 2, 2021

President Biden’s New Deal Budget Helps All of US

 Financial FAQs

President Biden’s $6 trillion 2021-22 budget proposal would rebuild America’s infrastructure and social safety net, supporting those essential workers that need it the most.

“It also represents the most substantial expansion of the federal government’s spending powers since World War II and a direct rebuttal of the small-government principles of his Republican, and even many Democratic, predecessors,” reports VOX.

Then why are 24 states terminating the additional $300 per month payments early that Biden’s American Rescue Plan has extended until September, reports NY Times Binyamin Appelbaum?

The simple truth is that red states are suppressing any additional aid for their workers as much as possible in keeping with their small government principles. Why else give up $26 billion that will flow to them if they allow their workers to keep the additional benefits?

It is also a sign that Republicans will oppose President Biden’s new budget, which is really his ‘new’ New Deal that scares the daylights out of conservatives because it will show that government can work for all Americans, not just the wealthiest as it has over the past 40 years.

Biden’s budget proposal includes the $2 trillion American Jobs Plan — which would embrace an expansive definition of infrastructure, not only to modernize America’s road and bridges, but to invest in broadband and elder care — and a $1.8 trillion American Families Plan, which would establish free higher education and expand child care, health care, and tax benefits for needy families.

“As proposed, the budget would reinvest in infrastructure and education, raise taxes on the wealthy and corporations, and meet many — but not all — of Biden’s campaign promises,” says VOX.

This is happening while Federal Reserve and private banks are predicting and even bigger growth spurt ahead in coming quarters.

The Atlanta Fed has just updated their second quarter growth prediction, for starters:

“The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2021 is 10.3 percent on June 1, up from 9.3 percent on May 28. After this morning's Manufacturing ISM Report On Business from the Institute for Supply Management and the construction spending report from the U.S. Census Bureau, the nowcasts of second-quarter real personal consumption expenditures growth and second-quarter real gross private domestic investment growth increased from 8.6 percent and 20.7 percent, respectively, to 9.5 percent and 22.0 percent, respectively,” said the Atlanta Fed.

Goldman Sachs estimates 9.5 percent Q2 GDP growth while the New York Fed posts a much more conservative 4.5 percent spurt.

In fact, manufacturing activity is surging with the Institute for Supply Management reporting that The May Manufacturing PMI® registered 61.2 percent, an increase of 0.5 percentage point from the April reading of 60.7 percent. This figure indicates expansion in the overall economy for the 12th month in a row after contraction in April 2020.

President Biden’s budget, if enacted, would give a boost to GDP growth for the rest of this year because it targets working people that generate most economic activity, including essential workers that provide health care, police and fire protection, because they spend the largest percentage of their incomes.

And that is just a few of its elements, says VOX. “It also proposes universal pre-K, affordable childcare, and paid leave. It also puts the climate crisis front and center, with proposals dedicated to reducing US emissions, creating jobs in the clean energy sector, and funding climate research.”

Focusing on those folks that most need the support, this budget will give a huge boost to economic growth. The Federal Budget has supported the wrong segments of society for too long by cutting taxes and social services, when just the opposite is needed to end this coronavirus pandemic and be ready for whatever comes next that could damage economic growth—maybe our changing climate, or another pandemic?

Harlan Green © 2021

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Wednesday, May 26, 2021

Some Workers Reluctant to Return to Jobs

 Financial FAQs

“In the week ending May 15, the advance figure for seasonally adjusted initial (jobless) claims was 444,000, a decrease of 34,000 from the previous week's revised level. This is the lowest level for initial claims since March 14, 2020 when it was 256,000,” says the US Bureau of Economic Analysis.

Most of the decline came from a decrease in those getting benefits through pandemic-related emergency programs. States showing the largest declines included Georgia (-8,216), Kentucky (-7,175) and Texas (-4,828), according to unadjusted data. New Jersey showed the biggest gain, with 4,384.

Along with the steady slide in the headline number, the total of those receiving various government benefits tumbled by nearly 900,000 to just shy of 16 million, according to BEA data through May 1.

The high number still receiving benefits has caused 23 states to back out of the $300 weekly federal bonus checks as soon as June, with Florida being the latest state to announce it is canceling extended federal unemployment benefits. That'll cut off more than 3.6 million people from getting enhanced benefits related to the pandemic that Congress has authorized to expire in September..

State governors claim that this unemployment coverage discourages workers from taking jobs, citing labor shortages. Some economists and analysts disagree, noting that several factors are preventing people from finding suitable work, including lack of child care and fear of contracting COVID-19.

The 2 million person gap between Job Openings and actual Hires in the government’s latest JOLTS report is growing evidence that there is a red-hot demand for workers after what I call the pandemic recession, even with the high number out of work and still receiving benefits.

Why the record number of job openings at the same time so many are still receiving benefits? It will take time for workers to find suitable jobs, while employers need to raise their minimum wages for essential workers in the service sector (that are the lowest paid) to attract them back to work.

Service sector employers such as Amazon say they are raising their minimum wage to $15 per hour, while Bank of America is raising the minimum wage from $20 to $25 per hour for its clerical workers.

It is perhaps why a record number of small businesses said they could not fill open jobs in April, adding to a growing national controversy over whether extra unemployment benefits are keeping scores of people from re-entering the labor force.

Some 44 percent of small businesses reported job openings went unfilled, according to the National Federation of Independent Business. The NFIB is the nation’s largest small-business lobbying group.

It is less understandable why the red states are the first to terminate extra aid to their own lowest-paid workers before September, maintaining that it is keeping them from working in jobs that probably pay less than the weekly benefits (aid that is also free $$ to the states), as I said.

It not such a good idea because cutting off the additional benefits is exacerbating the income inequality that has been a major cause of record drug use and suicide rate among high school-educated white males that have lost formerly high-paying jobs in the rust belt.

It also tells us that red states governors, (such as Arkansas Governor Asa Hutchinson in a recent NPR interview), think little of the plight of Arkansas’ own essential workers that fill most of the lower-paying jobs after having weathered one year of pandemic hell.

The good news is that workers are now getting to pick and choose what jobs they would prefer. That is just one of the changes we are seeing as the 2020’s economy begins to roar.

Harlan Green © 2021

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Monday, May 17, 2021

Why So Much Inequality?

Answering Kennedy’s Call

There aren’t many economists that still debate the origins of our record income inequality, the worse in the developed world, and even in some of the developing world.

A loss of $10/hour in the typical worker’s compensation is the result of employers’ successful efforts to keep wage growth down over the past 40 years, according to a new paper by EPI distinguished fellow Larry Mishel and EPI director of research Josh Bivens.

Mishel and Bivens maintain that while productivity increased 69.6 percent from 1979-2018, employees’ compensation increased just 11.6 percent, per the EPI graph.

How did this happen? The obvious reasons are the growing strength of corporations and loss of labor union bargaining power that has allowed states to pass anti-labor laws and American corporations to ship many high-paying jobs overseas with little government regulation that would mitigate the job losses of domestic workers.

But it goes deeper. It goes back to the origins of the so-called economic sciences and the economic theories that politicians utilize to rationalize their policies.

They really derive from political economics, the original pseudo-science that attempted to understand human’s financial behavior, which is not that difficult to understand when we are talking about dollars and sense.

The owners of companies and the capital that controlled them wanted few regulations and lower taxes. So from 1980 onward Republican administrations and Big Business began to deregulation whole industries, and the labor lows and practices that guaranteed employees their fair share of the profits under what have been called Laissez Faire or free market economic theories.

Less government oversight and lower taxation, for instance, was based on the supposition that it encouraged greater growth, since corporations would create more jobs to produce more goods and services.

Industries have become more productive, but the increased profits were kept by the owners and chief executives of those companies rather than passed on to their employees; so much so that the gap has widened between employee’s hourly compensation and productivity that doesn’t guarantee the majority of service workers a livable wage.

That justified lower trade barriers in turn, so that consumers with their reduced incomes could afford the cheaper goods now made made overseas.

Even the Supreme Court got into the act by allowing public employees to avoid paying any fees if they so choose, even though receiving all the benefits of union membership—higher wages, pensions, worker safety, the list goes on and on.

The Supreme Court issued a sweeping ruling in 2018 that dramatically undermined unions for teachers, firefighters, police officers, and other public employees throughout the United States.

The case, Janus v. AFSCME, involved a challenge to the practice of public sector unions charging “agency fees” to employees who decline to join the union but who still benefit from the deals it bargains.

And twenty-eight states have ridden the free market banner that have “right to work” laws banning agency fees. Such laws create a free-rider problem: People don’t have to join unions or pay agency fees to get the unions’ benefits, so the unions lose members and political influence.

There is an ongoing dispute over how much of the economic pie should be going to workers vs. the owners of capital, but not the fact that it has happened. Our badly degraded infrastructure and a warming planet tell us that public works have been badly neglected that would prepare US for future catastrophes as well.

The ongoing political and economic debate is how to right the fact that most of the rewards of higher productivity have not increased the public good, but diminished it. Mishel and Bivens are helping us to see that labor must have a greater voice in that debate.

Harlan Green © 2021

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Wednesday, May 12, 2021

Job Openings Soar

 Financial FAQs


“The number of job openings reached a series high of 8.1 million (yellow line in graph) on the last business day of March, the U.S. Bureau of Labor Statistics reported today. Hires were little changed at 6.0 million (blue line). Total separations were little changed at 5.3 million (red bar). Within separations, the quits rate was unchanged at 2.4 percent while the layoffs and discharges rate decreased to a series low of 1.0 percent.”

In the arts, entertainment and recreation industry, vacancies increased by 81,000 jobs, said Reuters. Vacancies also increased in manufacturing, trade, transportation, and utilities industries as well as in finance. Job openings rose in the Northeast and Midwest regions. But vacancies dropped in the healthcare and social assistance industry.

There is a red-hot demand for workers after what I call the pandemic recession. So we are essentially at the starting gate of the next growth cycle with first quarter GDP already showing 6.4 percent growth.

So economic indicators will have crazy numbers until we reach herd immunity and everyone—including teachers, day-care workers and government workers—are able to return to work. There are still 2 million fewer women and 1.5 million fewer men in the labor force than pre-pandemic levels.

This Calculated Risk graph shows that companies are holding on to more of their employees with lower separations and quits, while last Friday’s unemployment report actually showed some 1 million new jobs were created, but just 266,000 above the normal seasonal rate of hiring.

The 2 million gap between Hires and Job Openings in the graph means companies are looking for workers. But it will take time for workers to find suitable jobs, and employers perhaps to begin to raise their minimum wages for essential workers in the service sector (that are the lowest paid).

A record number of small businesses said they could not fill open jobs in April, as well, adding to a growing national controversy over whether extra unemployment benefits are keeping scores of people from re-entering the labor force. The extra $300 in jobless benefits was extended to September in Biden’s $1.9 trillion American Recovery Act.

Some 44 percent of small businesses said job openings went unfilled in April, according to the National Federation of Independent Business. The NFIB is the nation’s largest small-business lobbying group.

And we have yet to see the enactment of an American Jobs Plan for massive infrastructure spending that will create even more jobs. Does that mean we have a labor shortage with more then 8 million still out of work who say they are looking for work?

There are supply bottlenecks while companies ramp up production again, and the inflation rate hitting new highs since the Great Recession. Will wages begin to rise as well from their lows of the last 40 years?

The consumer price index soared 0.8 percent to match the biggest monthly increase since 2009, the government said Wednesday. Economists had forecast a smaller rise. The rate of inflation over the past year jumped to 4.2 percent from 2.6 percent in the prior month — the highest level since 2008.

Wages have been held down for most workers by the rising power of corporations and weakening of labor unions since 1980. However, the trend is about to reverse as the demand for workers increases.

Will it cause the Fed to boost their short term interest rates? Fed Chair Powell doesn’t want to, but Treasury Secretary Yellen believes rates will have to rise if higher inflation continues.

Who is right? It is too early to tell. This also means the US economy is in for a wild ride this decade.

Harlan Green © 2021

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Friday, May 7, 2021

A Disappointing Jobs Report?

 Popular Economics Weekly

Not everyone is eager to go back to work, according to this morning’s unemployment report. The US economy added just 266,000 new nonfarm payroll jobs in April. Leisure and hospitality led the way with 331,000 jobs and governments added 48,000 new jobs.

“Both the unemployment rate, at 6.1 percent, and the number of unemployed persons, at 9.8 million, were little changed in April,” said the US Bureau of Labor Statistics. “These measures are down considerably from their recent highs in April 2020 but remain well above their levels prior to the coronavirus (COVID-19) pandemic (3.5 percent and 5.7 million, respectively, in February 2020).”

Transportation/warehousing and Professional/business sectors had 153,000 fewer jobs that would be normal for this time of year, since the jobs numbers are adjusted for seasonal factors. There was a pause in hiring in those sectors probably because they couldn’t find enough workers, since there has been no slowdown in business activity in both the manufacturing and service sectors of the economy.

This is in part because the government’s various aid programs are enabling more women to stay at home until their children go back to the slowly opening schools, and many of the 8 million that were laid off are still receiving good unemployment benefits.

The good news is that the size of the labor force grew by 430,000 in April to 161 million, close to the 164.5 million working before the pandemic when the unemployment rate was 3.6 percent.

“The shortfall in new jobs in April is likely just temporary,” said MarketWatch’s Jeffry Bartash in his comments on this morning’s disappointing nonfarm payroll report. “Falling coronavirus cases and massive federal stimulus have turbocharged the economy and job openings have surged. The U.S. is still set up for a summer of strong economic growth, especially if the coronavirus is mostly squelched.”

Employment by local governments also rose 31,000 in April as more schools reopened. Some very essential workers neglected until now—bus drivers, cafeteria workers and other personnel had been unable to work with schools closed, while employment declined in retail, health care, transportation and manufacturing, as I said.

Reuters’ ICAP says “The deceleration in payroll growth this month is not an argument for easier monetary policy.  As Chair Powell keeps reminding everyone, virus-related constraints are the key variable in the outlook.  For much of the past year, the major effect of those constraints was to restrict demand. Given the large number of employers who say they cannot find enough new workers, it is clear that the deceleration in hiring in April was not due to insufficient demand.”

This is only the beginning of what will be a decade-long recovery, with much of it to come from the just-passed American Recovery Act, and upcoming American Jobs Plan, a requested total of more than $4 trillion in additional government spending that will create even more good jobs.

The real question with all this stimulus spending is what will full employment look like in the years to come? Will there continue to be a labor shortage, for instance, with the current declining US birth rate and lower immigration numbers?

It must be one reason the financial markets are boosting tech companies’ stock values (i.e., NASDAQ). They are betting on a big 5G future need for more robots and Artificial Intelligence that will be needed to supplement what could be a looming labor shortage.

Harlan Green © 2021

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Thursday, May 6, 2021

The Age of Narcissism Is Ending

 Answering the Kennedys’ Call


The election of President Biden is bringing an end to the age of narcissism, or as Tom Wolfe titled it in 1976, “The ‘Me’ Decade”? Only 30 percent of adult Americans say they still approve of our former Narcissist-in-Chief in the latest polls since Donald Trump’s defeat in November.

Donald Trump epitomized what psychologists have described as a Narcissistic Personality Disorder (NPR). Psychologists Jean Twenge and W. Keith Campbell described in their 2009 book, “The Narcissism Epidemic”, the destructive effects of narcissistic behavior: the breakdown of institutions that bind families and communities, thus encouraging divisive and antisocial, short-term behaviors over long-term, collective decision-making.

There is much more to the definition, of course, but psychologists are in general agreement a person with NPR, such as former President Trump, has sociopathic behavior with an almost complete lack of empathy, or regard for others.

Dennis Shen, in a London School of Economics article maintains narcissistic behavior became prevalent in baby boomers and millennials, the Gen X and Y’ers born approximately between 1946 to 1980, as they focused on their own needs rather than the needs of others.

It was a sharp divergence from the post-Depression and World War II generations, when a rare consensus within America emerged, the result of existential crises in the form of the World War and looming Cold War.

“This post-war era of togetherness saw unprecedented economic stability and trust in the state as the steward of the people,” said Shen., “The nation backed global reciprocity, exemplified during the founding of the United Nations, Bretton Woods institutions and Marshall Plan.”

We now have a president who is explicitly restarting global reciprocity by rejoining alliances such as the Paris Accord on climate change, and restoring economic stability with a ‘new’ New Deal of Rooseveltian proportions—more than $6 trillion in government spending to ‘build back’ American institutions and programs designed to heal communities and families.

We also have a younger generation facing serious existential crises—diminished economic and educational opportunities, a deteriorating physical environment and polarized political environment that has endangered our constitutional-based democratic system.

And they don’t like what America has become.  Gen Zer’s (born after 1996) are more progressive and pro-government, most see the country’s growing racial and ethnic diversity as a good thing, and they’re less likely than older generations to see the United States as superior to other nations, said a recent PEW survey.

A look at how Gen Z voters view the Trump presidency provides further insight into their political beliefs. A Pew Research Center survey conducted in January of last year (2020) found that about a quarter of registered voters ages 18 to 23 (22%) approved of how Donald Trump is handling his job as president, while about three-quarters disapproved (77%).

"Millennial voters were only slightly more likely to approve of Trump (32%) while 42% of Gen X voters, 48% of Baby Boomers and 57% of those in the Silent Generation approved of the job he is doing as president."

So Americans are coming together again with the election of President Biden, who has asked “that we all do our part”—the younger generations in particular, who are reacting as did those of the Great Depression and World II when faced with existential threats.

Harlan Green © 2021

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Thursday, April 29, 2021

Americans Get a New Deal

 Popular Economics Weekly

President Biden announced in his first ‘non-State of the Union’ address that “America is on the move again,” saying in effect that government isn’t the problem but the solution to today’s problems, including the horrific events of the past year.

We are seeing the effects of those solutions in today’s first estimate of Q1 Gross Domestic Product growth: Real gross domestic product (GDP) increased at an annual rate of 6.4 percent in the first quarter of 2021, said the BEA, reflecting the continued economic recovery, reopening of establishments, and continued government response related to the COVID-19 pandemic.

All sectors expanded, with consumer spending surging 10.7 percent, the economy adding`1.5 million new jobs. business investment jumped up 10 percent and housing investments up 11 percent in the ongoing housing boom.

Much of this is possible because of the still record low interest rates that the Fed has promised to maintain al least through next year. But consumers have benefited the most with the assistance payments, of course, so much so that disposable personal income increased $2.36 trillion, or 67.0 percent, in the first quarter, compared with a decrease of $402.1 billion, or 8.8 percent, in the fourth quarter.

And personal saving was $4.12 trillion in the first quarter, compared with $2.25 trillion in the fourth quarter, which has boosted the personal saving rate—personal saving as a percentage of disposable personal income—to a huge 21.0 percent in the first quarter, compared with 13.0 percent in the fourth quarter, and 3-5 percent historically.

Consumers with more money in their pockets means the economic recovery has just begun and businesses will be playing catchup to the increased demand for the rest of this year, further boosting economic growth.

The American public seems to like governmental solutions to our problems, says Gallup’s Frank Newport:

“The latest update (of polling data) shows that 54% of Americans say the government should do more to solve our country's problems, while 41% say the government is trying to do too many things that should be left to individuals and businesses. This is the highest percentage choosing the "government should do more" option since Gallup began asking the question in 1992.”

But will the rising sentiment for big government continue as President Biden asks for more spending?

President Biden outlined his American Families Plan at last night’s address that is summarized by the White House:

“The American Families Plan is an investment in our children and our families—helping families cover the basic expenses that so many struggle with now, lowering health insurance premiums, and continuing the American Rescue Plan’s historic reductions in child poverty. Together, these plans reinvest in the future of the American economy and American workers and will help us out-compete China and other countries around the world.”

It is a ‘new’ New Deal that brings us out of this pandemic and the deterioration of American education, infrastructure, research & development, and environmental protection that is despoiling the planet and our ability to survive as a democracy.

“History shows that Americans tend to adopt big government initiatives when there are big problems facing the nation,” Gallup’s Newport continued. “including COVID-19, the Great Recession, 9/11, World War II and the Great Depression.”

But there has been too little agreement on how we should be paying for future generations since World War II, I said in my last column.

Let us hope we are willing to pay enough forward to win this world war against COVID-19 that is also a battle to save the liberal democracy our constitution has envisioned.

Harlan Green © 2021

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Tuesday, April 27, 2021

A Better Use of Economic Growth

 Popular Economics Weekly


The Atlanta Federal Reserve Bank puts out a GDP now forecast of upcoming monthly GDP growth, and its latest estimate puts growth at the highest level since the 1980s, as we recover from the COVID-19 pandemic.

“The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2021 is 8.3 percent on April 16, unchanged from April 15 after rounding,” said the Atlanta Fed. “After this morning's housing starts report (last week) from the U.S. Census Bureau, the nowcast of first-quarter real residential investment growth decreased from 10.6 percent to 10.2 percent."

However, new-home sales’ figures Friday showed even faster residential investment growth ahead, reports the US Census Bureau

Sales of new single-family houses in March 2021 were at a seasonally adjusted annual rate of 1,021,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 20.7 percent (±23.7 percent) above the revised February rate of 846,000 and is 66.8 percent (±36.7 percent) above the March 2020 estimate of 612,000.

The problem is not finding more ways to boost GDP growth, per se, but how it will be utilized. Since the 1980s, a growing percentage of the Gross National Income derived from GDP growth has gone to ‘rentiers’, i.e., people that receive  income from their assets rather than wages.

That is in part due to the huge decline in personal and corporate taxation of said wealth that has allowed rentiers to accumulate more private wealth, rather than investing in productive enterprises.

What creates GDP? The aggregate, or effective demand of all goods and services produced domestically. Economists have broken it into four components, of which consumer spending is the largest portion. The rest is made up of net exports, government expenditures, and investments.

Consumers spend on private consumer goods, so it is up to investment and government spending to build for future growth. That has not happened because corporations haven’t been maintaining a decent level of capital expenditures and government investments in infrastructure, education, R&D, and our social safety net that would keep workers healthy enough to be more productive has been cut sharply since the 1970s.

GDP growth has been paying too little for future generations since then, in other words, so taxing some of the wealth accumulated since 1980 is needed to pay it forward.

President Biden’s $2.3 trillion American Jobs Plan is meant to correct the underinvestment in the public good. He is calling for more than $1 trillion to be invested just in the various components of infrastructure, including better roads, bridges, public transportation, expanding broadband and electric grids, as well as electric vehicle use.

He is also calling for more spending on health care and the national housing shortage—some $213 billion to “build, preserve and retrofit more than 2 million homes and commercial buildings to address the affordable housing crisis,” $100 billion to modernize public schools and early learning facilities, and $180 billion in research and development of future technologies, and more.

This supports much more than infrastructure, as it fulfills every person’s basic need of food, shelter, and security.

The initial first quarter GDP estimate comes out Thursday, and consensus predictions are for 7 percent growth. Whatever it will be, it is important that it be used in productive ways, and the just-passed American Recovery Act and upcoming American Jobs Plan begin that process of utilizing America’s economic growth to support a better future for all Americans.

Harlan Green © 2021

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Sunday, April 18, 2021

Debt-Fueled Recovery Needed

 Popular Economics Weekly

To: Barron’s Letters

Published: April 19, 2021

Barron’s Lisa Beilfuss cites David Rosenberg’s worries about hyperinflation (because of the Federal Reserve’s inability to keep inflation within acceptable rates), as the reason to worry about a sustainable “debt-fueled” recovery.

But rather than compare the current economic recovery from the COVID-19 pandemic to the ‘roaring 20’s’ recovery from the Spanish flu pandemic, why not compare it to our recovery from World War Two?  Fighting that war required record debt-to-GDP levels that were brought down by record growth and consumer prosperity after the war, because there was agreement that high government and private spending geared to future growth was necessary with the building of American modern infrastructure and higher education system.

Our capitalist system has always required debt to leverage higher growth and the result has been accelerated growth to reduce said debt to the historical level.  Even the CBO in a recent report stated that “Between 1946 and 2019, the deficit as a share of GDP has been larger than that (3.0 %) only twice.”

A major goal of the Biden spending bills is to reverse the record income inequality that has reduced consumers’ ability to spend without higher debt levels since 1980.  The COVID-19 pandemic has cost more lives than World War Two and devastated economic growth worldwide.  So President Biden’s focus on not only rebuilding infrastructure, but improving our social safety net and reducing the record income inequality of working families will create a more sustainable recovery. 

Harlan Green © 2021

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Friday, April 16, 2021

Strong Retail Sales Continue 2020's Recovery

 Financial FAQs


Sales at U.S. retailers rose 9.8 percent in March, the government said Thursday, in part because of the additional $1,400 stimulus checks for consumers from the federal government that is accelerating economic growth.

This confirms the 2020’s economic recovery has begun, as more businesses open and consumers grow confident that the worst of the pandemic is over. The sales gain was the second largest on record, exceeded only by an 18 percent spike last May when the U.S. lockdown was first lifted.

Stock market indexes also reached new highs, which does bring back hints of the original roaring 1920’s—excessive exuberance in the financial markets and eight years of prosperity—but then came the 1930s when outmoded economic verities (and few regulations) turned it into the Great Depression.

However, I would compare this recovery to that after World War Two, which necessitated programs enabling government to invest heavily in the future—in infrastructure, education, and housing, as is being proposed today.

We achieved much higher annual GDP growth rates post-WWII, as high as 14 percent (see below graph dating from 1948), which can happen again with the right public and private investments.


Retail sales revved up 15 percent in March at car dealers even as automakers struggled to procure enough computer chips to maintain production, per MarketWatch’s Jeffry Bartash. Auto sales account for about 20 percent of all retail sales.

Sales at gas stations also rose nearly 11 percent, reflecting rising oil prices and more Americans taking to the road as government coronavirus restrictions are lifted. If autos and gas are set aside, retail sales still jumped 8.2 percent.

Almost every major retail group shared in the benefits of the federal aid payments. Receipts leaped 13.4 percent for bars and restaurants, 18 percent for clothing stores, 23.5 percent for sporting goods and other recreational items.

What about COVID-19 and future viruses that must be vanquished to continue this recovery? Better public health care spending is also needed and is contained in the just passed American Jobs Act. Hospitalization rates have plateaued at too high a level. The current 7-day average is 36,941, up from 36,257 reported yesterday, and well above the post-summer surge low of 23,000.

So we do need post-WWII-size investments in the future to create a real recovery.

Harlan Green © 2021

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Wednesday, April 14, 2021

Equitable Wealth = Equitable Growth

 Answering the Kennedys’ Call

We must cure the record income inequality if we are to re-unite the United States into a country that serves Americans in both red and blue states.

The current disunity is a result of whole swaths of the country losing out on economic opportunity. Our modern, tech-based capitalism has raced ahead, rewarding those that can keep up.

The wealth is distributed in a highly unequal fashion, says the Center for Equitable Growth, a progressive think tank, with the wealthiest 1 percent of families in the United States holding about 40 percent of all wealth and the bottom 90 percent of families holding less than one-quarter of all wealth.

The result has been that the top 20 percent of America’s educated class are winning the race with educational opportunities that have enabled them to take advantage of modern technologies.

And what happens to people who feel left behind—in education, good jobs, and adequate housing? They find a way to protest, and Donald Trump became their voice of protest.

They protest against immigrants because they believe their jobs have been stolen. They protest against open borders because they see those jobs fleeing to other countries with cheaper wages.

They are so angry they will believe any theory confirming their suspicions that the educated elites with the best jobs are abridging their freedoms.

That is why President Biden’s plan to return US to full employment by the end of 2022 is so important.

The just passed $1.9 trillion American Rescue Plan will boost benefits of lower and middle income consumers, raising incomes for the poorest 20 percent of families by an average of 20 percent, according to the Tax Policy Center's analysis, and create 7 million jobs by the end of 2021 while top earners would see their income rise less than 1 percent, according to the CBO.

The proposed $2 trillion plus infrastructure bill will create more good jobs by requiring the development of universal broadband, such as 5G networks that China is already building on a grand scale, a major issue in rural communities.

Documents suggest it will also include nearly $1 trillion in spending on the construction of roads, bridges, rail lines, ports, electric vehicle charging stations, and improvements to the electric grid and other parts of the power sector, all requiring higher paying jobs.

“I think a package that consists of investments in people, investments in infrastructure, will help to create good jobs in the American economy,” testified Treasury Secretary Janet Yellen in congressional hearings recently, “and changes in the tax structure will help to pay for those programs (and also reduce income inequality).”

The investments in people is even more important to lift the spirits of the 13 million that still have no jobs or would like full time jobs, including greater access to Obamacare and Medicaid, aid that the Trump administration had been drastically reducing.

Bringing back trust in government will do the most to boost public spirits. And that means spending on programs that make life easier for most Americans.

There is no easy path to a greater equality of opportunity in the richest country in the world, because we must first restore our faith in each other with programs that benefit all Americans.

Harlan Green © 2021

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Saturday, April 3, 2021

March Employment Augers Roaring 2020's

Popular Economics Weekly

It may be difficult for the naysayers that believe too much aid is going into social programs to find fault with the March unemployment report that added 916,000 new nonfarm payroll jobs. It looks like March economic data augers a recovery that may lead to a decade of robust growth in the overall economy.

Companies are already hiring en masse, in spite of a winter that froze Texas and the record floods and tornadoes that have devastated much of the south.

Almost all business sectors are hiring, including a huge jump in the U.S. ISM’s Manufacturing Index to a 38-year high of 64.7, which means some 65 percent of manufacturing businesses surveyed were expanding.

Much of the hiring has come because happy consumers with an additional $1400 checks in their pockets are dining out and traveling more, but also because the housing market is booming—prompting 110,000 new construction hires in March.

The 916,000 new payroll jobs are just the beginning of this hiring boom that must bring back 10 million jobs to return to pre-pandemic levels. That is why Biden’s $3 trillion infrastructure spending will be needed as well.

So thank goodness for the $5 trillion in recovery aid already raised by congress that is encouraging even restaurants and other leisure servicers to hire 280,000 new workers, Education and Health 101,000, and Government 136,000 workers that is just the beginning of what is needed to make this decade this into a roaring 2020's decade.

The official unemployment rate, meanwhile, slipped to 6 percent from 6.2 percent, the Labor Department said Friday. Yet the official rate doesn’t capture nearly 4 million people who lost their jobs last year and weren’t counted in the numbers because they left the labor force.

It is also why Consumer confidence surged in March to a one-year high as more Americans were vaccinated and states began to open up for business. The index of consumer confidence shot up to 109.7 this month from a revised 90.4 in February, the Conference Board said Tuesday.

Confidence may be rising because some 3 million vaccines now administered per day may have 70 percent of American adults vaccinated by July, say the experts.

But new variants of COVID-19 are beginning to pop up, which has epidemiologists worried because it’s causing a plateauing of the infection rates at an unacceptably high level, according to the CDC.

According to the CDC, 153.6 million doses have been administered. 21.7 percent of the population over 18 is fully vaccinated, and 38.4 percent of the population over 18 has had at least one dose (99.6 million people have had at least one dose).

Infection rates have plateaued because too many variants Of COVID-19 are popping up in some states. Winning the race between the spreading variants and administering enough vaccinations to stop their spread is the key to a robust recovery.

“I think a package that consists of investments in people, investments in infrastructure, will help to create good jobs in the American economy,” testified Treasury Secretary Janet Yellen in congressional hearings last week, “and changes in the tax structure will help to pay for those programs.”

Yellen and Fed Chair Jerome Powell said there was no problem with any inflationary bulges that might occur with so much spending because it was spending that would boost productivity as well as employment, generating even more growth.

Harlan Green © 2021

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Wednesday, March 31, 2021

Why the Inflation Worries?

Financial FAQs

There has been too much talk of inflation, as so-called ‘bond vigilantes’ seek to take advantage of the fear that too much pandemic recovery aid will saturate the financial markets with dollars, creating runaway inflation and boosting interest rates.

That makes sense when so many dollars are in play, right? Not really.

Who are the so-called bond vigilantes that worry about inflation and bond prices? They are usually the most highly leveraged funds that have been buying assets with borrowed money at the record low interest rates that have prevailed since the pandemic and have pushed up some stock prices to stratospheric levels.

A great example is what happened on Monday to a highly leveraged hedge fund investor, reports MarketWatch:

“U.S. stocks pared losses Monday afternoon despite jitters tied to reports that a large investment fund recently was forced to sell massive holdings ($30B) in stocks, causing prices to tumble. Investors were monitoring news reports that former Tiger Asia manager Bill Hwang’s Archegos Capital Management had unwound big bets late last week after facing margin calls.”

We know that margin calls are because banks require investors to sell the underlying assets that were bought on margin when said asset prices have fallen significantly.

So where is the runaway inflation they speak of? The Fed says they want moderate inflation but have the tools to prevent runaway inflation, and will keep a close-to-zero percent short term rate policy through at least 2002.

There is lots of precedence for the Fed holding real interest rates below inflation rates. It helped to finance World War Two, and GW Bush’s invasions of Iraq and Afghanistan. This is when the real cost of money is close to zero and borrowing needs high during such exigencies.

And we are fighting a world war against COVID-19 that is disrupting economies and killing more people than all the other wars.

Another problem with bond vigilantes’ thesis is the root cause of most inflation—higher demand than existing supply. But the demand for products and services has not exceeded supply for decades—since globalization and lower trade tariffs have made goods in particular cheaper to produce and more plentiful.

There has been little problem with the supply-side of the equation in recent decades, in other words, unless we have major disruptions such as this pandemic that creates temporary bottlenecks in the delivery of said products.

There hasn't been a problem with inflation since the 1980s, either.

“Even before the coronavirus crisis, central banks globally were struggling with sluggish inflation, and the pandemic-induced downturn has only made the challenge worse,” said Reuter’s Ann Saphir.

“Too-low inflation is typically a sign of a weak economy. It also tends to drag on interest rates and makes it difficult for central banks to fight recessions with their usual tools that focus on the cost of money.”

That is why several European countries are struggling with what amounts to negative interest rates, such as Denmark where even mortgage interest rates are less than zero.

The above Reuters graph shows that inflation has barely budged (light blue and red lines), even as average hourly earnings are rising at a 5.3 percent clip. One can call this another goldilocks economy with neither too hot nor too cold growth at the moment.

So those most fearful of soaring inflation and borrowing costs are those that are highly leveraged. And we will see that leveraging disappear soon enough as business activity returns to a new normal the Fed is wanting—holding interest rates at or below inflation; thus stimulating a higher demand for goods and services that stimulates a robust recovery.

Harlan Green © 2021

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Thursday, March 25, 2021

We Need A Green Infrastructure Plan

 Popular Economics Weekly

Washington Post

The Biden administration’s $3 trillion infrastructure plan is next on their agenda to boost economic growth. And it will need a tax raise to pay for it.

“I think a package that consists of investments in people, investments in infrastructure, will help to create good jobs in the American economy,” testified Treasury Secretary Janet Yellen in congressional hearings this week, “and changes in the tax structure will help to pay for those programs.”

Yellen and Fed Chair Jerome Powell said there was no problem with any inflationary bulges that might occur with so much spending because it was spending that would boost productivity as well as employment, generating even more growth.

“Our best view is that the effect on inflations will be neither particularly large nor persistent,” said Powell during the same hearings.

The circa $3 trillion infrastructure bill President Biden is proposing should really be treated as if we are fighting another world war, as we treated spending during world War Two. This war to overcome the coronavirus pandemic has killed more people than all prior world wars.

So why even worry about inflation or budget deficits? In fact, rising inflation during WWII created negative real interest rates at the time because the Fed kept rates low to finance the war, just as it is doing now, which really means it is interest-free money (That is, real interest rates less than zero as it was during WWII).

And the infrastructure bill must be a green, environmentally friendly bill because much of it has to mitigate the damage to infrastructure from global warming. Need we be reminded of the recent breakdowns in power grids that can leave millions without water and electricity for days, as demonstrated by the Texas power crisis this year?

The National Resources Defense Council (NRDC) in a 2008 report said, “New research shows that if present trends continue, the total cost of global warming will be as high as 3.6 percent of gross domestic product (GDP). Four global warming impacts alone—hurricane damage, real estate losses, energy costs, and water costs—will come with a price tag of 1.8 percent of U.S. GDP, or almost $1.9 trillion annually (in today’s dollars) by 2100.”

This means an 80 percent reduction in U.S. greenhouse gases alone to meet Paris Accord goals, phasing out most uses of fossil fuels and replacing them with electric energy sources such as wind and solar power.

“Mr. Biden’s infrastructure plan will deal with the meat-and-potato issues that Republicans and Democrats agree are an urgent need,” say NYTimes reporters Jim Tankersley and Anni Karney. “It seeks to rebuild roads, bridges, transit, rail and ports, while also improving power grids and increasing the number of electric vehicle charging stations.”

The plan also requires the development of universal broadband, such as 5G networks that China is already building on a grand scale, a major issue in rural communities. Documents suggest it will include nearly $1 trillion in spending on the construction of roads, bridges, rail lines, ports, electric vehicle charging stations, and improvements to the electric grid and other parts of the power sector, according to Tankersley

There is much more to Biden’s infrastructure plan that will be detailed as we get more particulars. Any delays in passing it will only increase the costs from damage caused by the increasing frequency of hurricanes, tornadoes, wildfires, power failures; so much so that even the U.S. Pentagon says climate change has become a national security threat.

Over the past decade, the Pentagon has consistently, repeatedly cited climate change as a serious threat to America’s national security in official public documents.

“Climate change is a threat in their eyes because it’s going to degrade their ability to deal with conventional military problems, said Michael Klare in an Vox interview about his new book about the Pentagon’s role in combatting global warming, titled All Hell Breaking Loose: The Pentagon’s Perspective on Climate Change. “It’s going to create chaos, violence, mass migrations, pandemics, and state collapse around the world, particularly in vulnerable areas like Africa and the Middle East.”

“It is difficult to put a price tag on many of the costs of climate change: loss of human lives and health, species extinction, loss of unique ecosystems, increased social conflict, and other impacts extend far beyond any monetary measure, says the NRDC report. “But by measuring the economic damage of global warming in the United States, we can begin to understand the magnitude of the challenges we will face if we continue to do nothing to push back against climate change.”

If we can protect ourselves from COVID-19, then we surely can protect ourselves from a warming planet.

Harlan Green © 2021

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Monday, March 15, 2021

We Can Pay For American Rescue Plan

 Popular Economics Weekly

“Consumer sentiment rose in early March to its highest level in a year due to the growing number of vaccinations as well as the widely anticipated passage of Biden's relief measures,” said the University of Michigan sentiment survey. “The gains were widespread across all socioeconomic subgroups and all regions, although the largest monthly gains were concentrated among households in the bottom third of the income distribution as well as those aged 55 or older (dark blue and gray lines in graph).”

Sentiments are soaring because the just passed American Rescue Plan (AMR) will boost benefits of lower and middle income consumers, raising incomes for the poorest 20 percent of families by an average of 20 percent, according to the Tax Policy Center's analysis, while top earners would see their income rise less than 1 percent in an NPR interview.


America can pay for the $1.9 trillion tab because it does not substantially raise the cost of the public debt over the long term if we look at the average annual budget deficit to GDP ratio that hasn’t varied substantially since WWII—the major exceptions being the need to finance recoveries from the Great Recession, and now the coronavirus pandemic.


The cost of financing public debt has averaged little more than 3 percent, historically because economic growth that followed that spending brought the public debt back down to manageable levels, whatever interest rates prevailed at the time.

Financing the $5 trillion in debt that congress has passed since the onset of the coronavirus pandemic should follow the same trajectory. For example, the new $1.9 trillion from the American Rescue will create 7 million new jobs by December, according to the Congressional Budget Office.

“Between 1946 and 2019,” says the CBO, “the deficit as a share of GDP has been larger than that only twice. In CBO’s projections, annual deficits relative to the size of the economy generally continue to decline through 2027 before increasing again in the last few years of the projection period, reaching 5.3 percent of GDP in 2030. They exceed their 50-year average of 3.0 percent in each year through 2030.”

Predictions of real GDP growth are soaring since the AMR’s passage. The Organization for Economic Cooperation and Development projects the U.S. economy will grow by 6.5 percent this year, according to NPR. That's more than twice the growth rate it was projecting in December — thanks in large part to more robust federal aid.

And employment is already surging, thanks to the prior pandemic aid packages. The February employment report added 465,000 private payroll jobs, with 355,000 of those jobs in leisure and hospitality — restaurants, hotels, casinos, theaters—all in the service sector.

All signs point to a robust recovery, in other words, which is why I don’t see any problem with managing a ‘new’ New Deal spending bill when it benefits so many Americans at a time of greatest need, the need to recover from a pandemic that has cost more American lives than our combined wars.

Harlan Green © 2021

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Tuesday, March 9, 2021

Why the American Rescue Plan Is So Important

 Financial FAQs

There are several good reasons for passing the American Rescue Plan (ARP). Firstly, it abolishes once-and-for-all the Reagan-era myth that ‘government is the problem’.

With the thinnest of Democratic majorities, the Biden administration is getting things done; from speeding up of vaccine deliveries, to expanding Obamacare coverage, to requiring masks on interstate and international travel and re-joining the Paris Accord on climate change—all this enabling a speedier economic recovery.

And it benefits so many Americans—more than 60 percent, according to economist Steven Ratner on Morning Joe, in comparing the American Rescue Plan to Trump’s Tax Cuts and Jobs Act that transferred $1.9 trillion in tax cuts to the wealthiest 10 percent of income earners with none of it supporting public spending, whereas the $1.75 trillion in spending from the ARP will benefit programs for more than 60 percent of Americans.


This will include the poorest among US, including minorities and immigrants, according to the PEW Research Center’s latest survey:

“About six-in-ten White (60%) and Asian adults (58%) currently say their personal financial situation is in excellent or good shape. In contrast, a majority of Black (66%) and Hispanic (59%) Americans say their finances are in only fair or poor shape.

The Congressional Budget Office has said that it could take five years for employment to reach levels prior to the pandemic without the American Rescue Plan.

The ARP’s main objective is to put people back to work as soon as possible, according to Fed Chairperson Janet Yellen.

““I think we should want a rapid recovery,” she said in a recent PBS Newshour interview. “We have a large number of workers who are long-term unemployed, and we have to make sure they’re not scarred to the point where this pandemic has a permanent impact on their lives.”

And speaking of the latest strong unemployment report that created 379,000 more payroll jobs, “at that pace it would take us more than two years to get to full employment,” Yellen said in the same interview. The “real” unemployment rate, after factoring in 4 million who dropped out of the labor force after losing their jobs, was more like 10 percent.

The PEW report said that income differences are particularly pronounced, with a gap of 60 percentage points between the shares of upper-income (86%) and lower-income (26%) adults who rate their financial situation as excellent or good. “About six-in-ten adults with middle incomes (58%) say their finances are in excellent or good shape.”

The ARP should also boost consumer sentiment now at a six-month low in the U. of Michigan February sentiment survey, with the entire loss concentrated in the Expectation Index and among households with incomes below $75,000 (the income brackets targeted by the government cash payouts), as I said last week.

“Households with incomes in the bottom third reported significant setbacks in their current finances, with fewer of these households mentioning recent income gains than anytime since 2014,” said the U. Michigan survey.

Need we say more? This is why the American Rescue Plan is so popular with a 76 percent approval rating per the latest Politico survey.

Harlan Green © 2021

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