The Biden Bucks Blowout

Link: https://www.city-journal.org/the-biden-bucks-blowout

Excerpt:

Not to worry: the Biden administration is coming to the rescue. The town of Palm Beach Gardens is using $2 million in federal money from President Biden’s $1.9 trillion American Rescue Plan Act (ARPA) to build a $16 million public course, with a two-story clubhouse and driving range that should help at least partially slake the new thirst for golf. The city’s project, one of several golf-course investments that the Biden legislation is funding, is entirely within the spirit of the “rescue” act, which devotes only about 9 percent of its money to public-health causes that fight the virus but allocates hundreds of billions of dollars to local governments and schools for the vague task of providing “support for a recovery” and funding “investments in infrastructure.” As one wag at a South Florida newspaper observed, “If this keeps up much longer, Palm Beach Gardens may get an equestrian center from it.”

Showering local governments with unprecedented federal dollars, ARPA is the last of several emergency packages, totaling more than $5 trillion, to come from Washington in response to the pandemic. Though termed a “rescue bill” to enhance its appeal, the Biden legislation was more of a stimulus, designed to stoke spending by the country’s tens of thousands of local governments to boost economic activity. Signed by the president in March 2021, even as the economy was recovering and tax revenues were rebounding far faster than most analysts had predicted, ARPA allows for wide discretion in how to spend “Biden Bucks.”

The federal money has turned pols into the proverbial kids in the candy shop. They’re using it to restart parades, fund street performers, upgrade high school weight rooms and sports fields, and build bike paths, golf courses, pickleball courts, and other “essential” infrastructure. Billions of dollars are going to illegal aliens. Cities are testing efforts to give low-income residents guaranteed money that supporters say will end poverty. Municipalities are moving to construct their own broadband networks, in competition with the private sector. It’s all part of a program whipped up so quickly that it included billions of dollars for municipal governments that don’t even exist.

To many local officials, ARPA’s allocations seem like free money. But it comes at a cost to the United States. The act’s funds haven’t been generated by taxes or other federal revenues. Instead, they’re financed by “printing” new money (something done mostly via electronic keystrokes these days)—massively expanding the dollars in circulation and thus intensifying our current inflation, the highest in decades. Aside from the pain that the upward spiral of costs is causing ordinary Americans, inflation is also raising the price that governments pay for essential services like police and fire protection, even as politicians rush to spend their one-time Biden Bucks on ephemeral projects and untested programs. With a Federal Reserve–induced recession, sparked by high interest rates to curb inflation, now a distinct possibility, Biden Bucks may soon be remembered as the spending blowout that preceded a local government budget bust-up.

Author(s): Steve Malanga

Publication Date: Autumn 2022

Publication Site: City Journal

Inflation Cools to 7.1 Percent, but Still Has a Long Way To Fall

Link: https://reason.com/2022/12/13/inflation-cools-to-7-1-percent-but-still-has-a-long-way-to-fall/

Excerpt:

Inflation finally slowed to a near halt in November, possibly signaling a winding down of the prices crisis that has gripped American households this year.

Prices rose just 0.1 percent on average during November, the Department of Labor reported on Tuesday morning. The year-over-year inflation rate fell as well, to 7.1 percent for the 12 months ending in November. That’s the lowest annualized rate since December 2021, and is significantly lower than the 7.8 percent annualized rate reported a month ago.

This also marks the fifth consecutive month in which the annualized inflation rate has held steady or fallen, after peaking in July at an astounding 9.0 percent.

That trend suggests that the Federal Reserve has finally gotten a collar on rising prices. The central bank’s board is expected to hike interest rates for the seventh time this year when it meets on Wednesday. That means it will continue getting more expensive to obtain a mortgage or a car loan, and credit card interest rates will continue to rise—but also that savings accounts and other interest-based investment vehicles are paying larger returns.

Author(s): Eric Boehm

Publication Date: 13 Dec 2022

Publication Site: Reason

Federal Reserve hikes rates again

Link: https://www.thecentersquare.com/national/federal-reserve-hikes-rates-again/article_da8ec844-7be2-11ed-9977-17d7d24d73fb.html

Excerpt:

The U.S. Federal Reserve announced a new rate increase of half a percentage point Wednesday in its ongoing effort to curb inflation.

The Fed raised the rate by 50 basis points, as expected, the seventh rate hike this year. This increase is smaller than the four previous 75 basis point increases but is still a notable increase, putting the range at 4.25%-4.5%.

“Recent indicators point to modest growth in spending and production. Job gains have been robust in recent months, and the unemployment rate has remained low,” the Fed said. “Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures.”

The Fed blamed the Russian war in Ukraine for the price hikes. That war delayed the supply chain and increased costs, but the price increases began long before that war, due in part to trillions of dollars in federal debt spending since the pandemic began.

Author(s): Casey Harper

Publication Date: 14 Dec 2022

Publication Site: The Center Square

CPI Report Shows U.S. Inflation Eased in November

Link: https://www.wsj.com/articles/us-inflation-november-2022-consumer-price-index-11670883405

Graphic:

Excerpt:

The Labor Department on Tuesday said that its consumer-price index climbed 7.1% in November from a year ago, down sharply from 7.7% in October—building on a trend of moderating price increases since June’s 9.1% peak.

Core CPI, which excludes volatile energy and food prices, rose 6% in November from a year ago, easing from a 6.3% gain in October. September’s 6.6% increase was the biggest jump since August 1982.

Author(s): Gwynn Guilford

Publication Date: 13 Dec 2022

Publication Site: WSJ

Inflation Around the World: How Does the US Compare to Canada and the EU?

Link: https://mishtalk.com/economics/inflation-around-the-world-how-does-the-us-compare-to-canada-and-the-eu

Graphic:

Excerpt:

  • Inflation in the US was the first to peak.
  • US inflation peaked in June at 9.06 percent and is currently (through September) at  8.20 percent.
  • Inflation in France peaked at the lowest rate, 6.08 percent.
  • France also has the lowest current rate of 5.55 percent.  
  • Inflation in Germany is 9.99 percent and still rising
  • Inflation in Italy is 8.87 percent and still rising
  • Inflation in Spain was the highest peak so far at 10.77 percent
  • Inflation in the UK is 8.80 percent matching the July high.
  • Inflation in Canada peaked at 8.13 percent and is now 6.86 percent

Author(s): Mike Shedlock

Publication Date: 3 Dec 2022

Publication Site: Mish Talk

2023 Tax Brackets

Link: https://taxfoundation.org/2023-tax-brackets/

Graphic:

Excerpt:

On a yearly basis the Internal Revenue Service (IRS) adjusts more than 60 tax provisions for inflation to prevent what is called “bracket creep.” Bracket creep occurs when people are pushed into higher income tax brackets or have reduced value from credits and deductions due to inflation, instead of any increase in real income.

The IRS used to use the Consumer Price Index (CPI) as a measure of inflation prior to 2018. However, with the Tax Cuts and Jobs Act of 2017 (TCJA), the IRS now uses the Chained Consumer Price Index (C-CPI) to adjust income thresholds, deduction amounts, and credit values accordingly.

The new inflation adjustments are for tax year 2023, for which taxpayers will file tax returns in early 2024. Note that the Tax Foundation is a 501(c)(3) educational nonprofit and cannot answer specific questions about your tax situation or assist in the tax filing process.

Author(s): Alex Durante

Publication Date: 18 Oct 2022

Publication Site: Tax Foundation

Social Security Politics

Link: https://marypatcampbell.substack.com/p/social-security-politics#details

Graphic:

Excerpt:

2022 OASDI Trustees Report, plus spreadsheets, etc. https://www.ssa.gov/OACT/TR/2022/

I am graphing the net change in the OASI (that’s the old age benefit part) Trust Fund, year-over-year.

I think you can easily see all those glorious years the Boomer payroll taxes were being stuffed into the Trust Fund… but really flowing right out into current spending for other goodies.

And you can see when that reversed and is now negative, and will continue to be negative until the Trust Fund is exhausted, in the early 2030s.

Author(s): Mary Pat Campbell

Publication Date: 7 Nov 2022

Publication Site: STUMP at substack

Interest Rate Hikes Will Make Climate Change Worse

Link: https://jacobin.com/2022/10/interest-rates-climate-change-liz-truss-tories

Excerpt:

Raising interest rates won’t just push Britain into a recession and make the cost-of-living crisis worse for working-class people — it will discourage badly needed investments in green energy, undermining the UK’s efforts to address climate change.

….

The theory goes that higher interest rates help bring inflation down by making credit more expensive across the economy and reducing the amount of money firms and families have to spend on goods and services, thereby slowing price increases. But our inflation is predominantly driven by external factors, most notably high gas prices resulting from COVID-19 supply issues and the war in Ukraine. Instead, the bank’s policy is likely to push the UK economy into a recession, without addressing the main underlying causes of rising prices. That also means higher costs of borrowing for the very investments we need to reduce our reliance on costly fossil gas, like wind farms and home insulation.

To compound the problem, higher interest rates discourage investment in clean projects more than dirty ones. Running renewables doesn’t cost much: they rely on free wind and solar energy instead of expensive fossil fuels. But building them in the first place does come with high initial costs, meaning they are particularly impacted by the higher costs of credit. Similarly, insulation and heat pumps need to be paid for up front, before they begin to lower energy bills for households. Demand for improvements like heat pumps is significantly influenced by the availability of cheap loans to cover the initial installation costs.

Author(s): LUKASZ KREBEL

Publication Date: 23 Oct 2022

Publication Site: Jacobin

What Social Security Should Really Be Paying to Survive in This Economy

Link: https://www.nakedcapitalism.com/2022/10/what-social-security-should-really-be-paying-to-survive-in-this-economy.html

Excerpt:

Inflation continues to rise in the United States. Although gas prices have recently fallen since their record high over the summer, the cost of groceries rose by 11.4 percent over the last year, and there is no expectation that they will fall back to reasonable levels. Prices overall have risen by 8.2 percent, according to the U.S. Bureau of Labor Statistics’ Consumer Price Index report covering September 2022 as compared to the same month last year. While most working Americans are not getting hefty wage raises to compensate for inflation, seniors will see their Social Security benefits—which are pegged to inflation—rise next year. Starting in January 2023, beneficiaries will see an 8.7 percent cost-of-living adjustment (COLA) bump in their Social Security checks.

Conservatives are scoffing at this automated increase, as if it were a special treat that the Biden administration has cooked up to bribe older voters. Fox News reported that there was a “social media backlash” against White House Chief of Staff Ron Klain’s tweet lauding the upcoming increased COLA benefits for seniors. The outlet elevated comments by the conservative America First Policy Institute’s Marc Lotter, who retorted to Klain, “Nice try Ron. Raising benefits next year does not help seniors with the higher prices they are paying today or the higher prices they’ve been paying since you took office.”

But Social Security benefits have risen automatically with inflation since 1975 by design, precisely so that the livelihoods of seniors are not beholden to partisanship. This is an imminently sensible way to ensure that retired Americans, who spent their working lives paying Social Security taxes, can have a basic income.

If conservatives are complaining that an 8.7 percent bump is not enough to counter inflation, one might expect them to demand an even greater increase to Social Security benefits.

Author(s): Sonali Kolhatkar

Publication Date: 15 Oct 2022

Publication Site: naked capitalism

Bank of England Bought Only Small Amounts of Bonds even Today, Warns Pension Funds They Have “Only Three Days Left” to Unwind Derivatives with BOE Support

Link: https://wolfstreet.com/2022/10/11/bank-of-england-bought-only-small-amounts-of-bonds-even-today-warns-pension-funds-they-have-only-three-days-left-to-unwind-derivatives-with-boe-support/

Graphic:

Excerpt:

The relatively puny amounts of actual purchases show that the BOE is trying to calm the waters around the gilts market enough to give the pension funds some time to unwind in a more or less orderly manner whatever portion of the £1 trillion in “liability driven investment” (LDI) funds they cannot maintain.

The small scale of the intervention also shows that the BOE is not too upset with the gilts yields that rose sharply in the run-up to the crisis, triggering the pension crisis, and have roughly remained at those levels. The 10-year gilt yield today at 4.44% was roughly unchanged from yesterday and just below the September 27 spike peak.

And it makes sense to have these kinds of yields in the UK, and it would make sense for these yields to be much higher, given that inflation has spiked to 10%, and yields have not kept up with it, nor have they caught up with it. And to fight this raging inflation, the BOE will need to maneuver those yields far higher still:

So today, BOE Governor Andrew Bailey, speaking at the Institute of International Finance annual meeting in Washington D.C., warned these pension fund managers that the BOE will only provide this level of support, however little it may be, through the end of the week, to smoothen the gilt market and give the pension funds a chance to unwind in a more or less orderly manner the portions of their LDI funds that they cannot maintain.

Author(s): Wolf Richter

Publication Date: 11 Oct 2022

Publication Site: Wolf Street

What the 1970s Can Teach Us About Today’s Inflationary Politics

Link: https://reason.com/2022/10/13/inflation-remixed/

Graphic:

Excerpt:

American politicians had tried to control inflation before. The presidents and power brokers of the 1970s had tried price controls, public campaigns, pressure programs, blame games, and attempts to redefine basic economic terminology. The parties differed on the specifics, but both seemed to agree that the voting public and the private sector were to blame, not the bureaucrats and politicians in charge.

Inflation, in short, was a political problem, in the sense that it caused problems for politicians. But it wasn’t one America’s politicians knew how to solve.

On the contrary, America’s political class had spent the ’70s failing to fix inflation, or actively making it worse, often with policies designed to address other political and economic problems. That decade’s price hikes were prolonged and exacerbated by political decisions born of short-term thinking, outright cowardice, and technocratic hubris about policy makers’ ability to enact sweeping changes and manage the macroeconomy.

Author(s): Peter Suderman

Publication Date: November 2022

Publication Site: Reason