Brendan Case and Allison Nicole Smith have a rather chilling article at Bloomberg on the collapse of the stocks of major retailers. “Horror”, “meltdown”, “disastrous”, “bloodbath”, and “freefall” all figure prominently. Eventually they seem to run out of descriptors.

The short version of what has happened is that inflation and, frankly, panic are causing shoppers to change from name brands to cheaper private labels and from discretionary items like television sets and clothing to more basic items and services. Not only are their profit margins higher on what shoppers were buying than they are on what they are buying, inventories of what they aren’t selling are buying to pile up. Assuming they’re doing floorplanning, that means that either the retails will start paying interest on those unsold inventories or they’ll need to discount them to get rid of them. Here’s a snippet from the article:

The retailers now find themselves flush with clothes, televisions and other discretionary items that customers aren’t buying as they channel more spending into basic needs and services. As a result, the companies took markdowns that eroded profits.

It’s possible that Costco dodged some of that pressure since its narrower range of items gives it more flexibility, said Jennifer Bartashus, an analyst at Bloomberg Intelligence.

“We’re going to be thinking a lot more about inventory and the markdown risk that may be associated with inventory,” Bartashus said. “That will be an overhang for earnings next week, and it will be an overhang later into the year as well.”

Earnings reports from Dollar General, Dollar Tree, Gap Inc., Urban Outfitters Inc. and Abercrombie & Fitch Co. are expected next week. Those should give us a better notion on the contours of the situation.

In his column in the Washington Post Fareed Zakaria is frustrated that President Biden isn’t doing more to reduce inflation:

President Biden says that combating inflation is his “top domestic priority.” But he certainly isn’t acting that way. He has in plain sight several measures that would reduce inflation significantly, and yet appears hesitant to take them.

[…]

In March, the Peterson Institute for International Economics produced a study estimating that reversing most of the Trump tariffs would reduce inflation by 1.3 percentage points. Lawrence H. Summers, a Post contributing columnist who has been prescient on many things in this economic crisis, endorsed that study, concurring that trade barrier reduction was the single biggest microeconomic measure “by far” that could be taken to alleviate inflation in the near term.

He also wants the president to allow more immigration into the United States. On the other hand in her WaPo column Megan McArdle expresses gratitude that President Biden isn’t doing more:

Since the thing that actually works is politically foolish, Democrats such as Warren are resorting to conspiracy theories and quack cures. The conspiracy theory is “greedflation,” which blames rising prices on corporate greed. (They’re right, of course, that corporations are greedy, but they didn’t all of a sudden get massively more greedy in January 2021.) The quack cure is simply forbidding firms to raise prices under threat of legal sanction.

This is a stealth variation on the wage-and-price controls imposed by President Richard M. Nixon in 1971, early in the country’s last great bout of inflation. Even Nixon appears to have understood that they wouldn’t work, since they didn’t actually address the underlying problem. But he was facing reelection and wanted voters to see him doing something about one of their most pressing problems. Nixon won in 1972, but his series of “temporary” freezes caused shortages and other economic distortions, without fixing the problem. In 1974, with inflation at a two-decade high, the failed controls were allowed to expire.

Nixon resigned in disgrace not long afterward. Now, I don’t suggest that the cynical economic manipulation led directly to Watergate. (Though one wonders if the economy had been in better shape, would the Nixon campaign have been tempted to burglary?) But it does go to show that there are worse things than being a one-term president. So please, Mr. President, keep right on embracing the healing power of inaction. Be the do-nothing president America needs.

I found both columns endlessly baffling. Cutting 1.3 points from inflation when it is running at 8.3% is a spit in the ocean. The difference would barely be noticed. And I simply do not understand how increasing consumption in the U. S. will correct inflation. In the long term more immigrants might, indeed, produce more but they will begin eating, living, buying stuff, and using safety services immediately. Won’t increased immigration actually exacerbate inflation in the near term? And I’m afraid that Ms. McArdle is in denial. As the midterms near the pressure on President Biden to do something will be irresistible. Unfortunately, the direction in which his instincts, his own party, and the media are pulling him is almost entirely wrong.

I can’t see President Biden taking microeconomic steps that would reduce the problem. e.g. reduce government benefits, can you?

In an article at Atlantic Charles Kupchan remarks:

With both sides doubling down, NATO must engage in a forthright dialogue with the Ukrainian government about its goals and how best to bring the bloodshed to a close sooner rather than later. Russia has already been dealt a decisive strategic defeat. Ukrainian forces have rebuffed the advance on Kyiv and retain control of most of the country; the West has hit Russia with severe economic sanctions; and NATO has reinforced its eastern flank, while Finland and Sweden now seek to join the alliance. For NATO and Ukraine alike, strategic prudence argues in favor of pocketing these successes rather than pressing the fight and running the tantamount risks.

I have no idea how that can be reconciled with the maximalist goals being articulated by all sides—not just the Russians and Ukrainians but Americans and NATO members as well. It appears to me that too many people are staking their political futures on those goals to be able to back down.

In a recent piece Andrew Sullivan makes an interesting observation: critical race theory (CRT) and “great replacement theory” (GRT) which apparently motivated the perpetrator of the murders in Buffalo last week are mirror images of each other. Both depend on racial essentialism; neither are believed by a majority of Americans. He concludes:

And this is the trap we are in. CRT and GRT are in a deadly and poisonous dance in our culture. They foster ever-increasing levels of racial identity in each other; they demonize whole populations because of skin color; they both believe liberal democracy is rigged against them; and the logic of their mutual, absolutist racial politics is civil conflict, not democratic deliberation.

If we are to get past the kind of ugly violence and race essentialism in Great Replacement Theory, then we also need an antidote to the toxins of Critical Race Theory. The two illiberalisms are profoundly connected. They need each other. And, in their racialized heart, they are morally exactly the same.

I’ll just add one observation of my own. Is there any other country in the world in which you can become wealthy by complaining how badly you’re being treated?

Lately I have been following the assessments of the Russia-Ukraine War at Understanding War, the blog of the Institute for the Study of War (ISW). Here’s a snippet from their assessment for May 19:

Key Takeaways

• Russian forces are intensifying operations to advance north and west of Popasna in preparation for an offensive toward Severodonetsk.
• Russian and proxy authorities in Mariupol are struggling to establish coherent administrative control of the city.
• Russian forces reportedly attempted to regain control of the settlements they lost during the Ukrainian counteroffensive north of Kharkiv City.
• Russian forces are bolstering their naval presence around Snake Island to fortify their grouping on the island.

Some of the things I like best about it are that it is heavily annotated, they cite their sources, and they use both Ukrainian and Russian sources.

I don’t take everything they say as holy writ but it’s a lot better than the heavily propaganda-laden reports I’m seeing in so many places these days.

In his New York Times column today David Brooks muses on the differing world views, particularly different views of morality, that are contending in modern American society. Here’s a telling passage:

Many progressives have developed an inability to see how good and wise people could be on the other side, a lazy tendency to assume that anybody who’s not a social progressive must be a racist or a misogynist, a tendency to think the culture wars are merely a distraction Republican politicians kick up to divert attention from the real issues, like economics — as if the moral health of society was some trivial sideshow.

Even worse, many progressives have been blind to their own cultural power. Liberals dominate the elite cultural institutions — the universities, much of the mainstream news media, entertainment, many of the big nonprofits — and many do not seem to understand how infuriatingly condescending it looks when they describe their opponents as rubes and bigots.

One of my college professors lo! those many years ago, one of the most eminent in the university at the time, once said that he never paid much attention to an undergraduate paper until the first “however”. Here’s Mr. Brooks’s first however:

However, there are weaknesses. The moral freedom ethos puts tremendous emphasis on individual conscience and freedom of choice. Can a society thrive if there is no shared moral order? The tremendous emphasis on self-fulfillment means that all relationships are voluntary. Marriage is transformed from a permanent covenant to an institution in which two people support each other on their respective journeys to self-fulfillment. What happens when people are free to leave their commitments based on some momentary vision of their own needs?

If people find their moral beliefs by turning inward, the philosopher Charles Taylor warned, they may lose contact with what he called the “horizons of significance,” the standards of truth, beauty and moral excellence that are handed down by tradition, history or God.

This is a crucial passage:

A lot of people will revert to what the philosopher Alasdair MacIntyre calls “emotivism”: What is morally right is what feels right to me. Emotivism has a tendency to devolve into a bland mediocrity and self-indulgence. If we’re all creating our own moral criteria based on feelings, we’re probably going to grade ourselves on a forgiving curve.

Self-created identities are also fragile. We need to have our identities constantly affirmed by others if we are to feel secure. People who live within this moral ecology are going to be hypersensitive to sleights that they perceive as oppression. Politics devolves into identity wars, as different identities seek recognition over the others.

Does Mr. Brooks not see the inherent conflict between

It is wrong to try to impose your morality or your religious faith on others.

and

We need to have our identities constantly affirmed by others if we are to feel secure.

While it is possible for the highly permissive rubric of the Wiccan Rede, “An’ it harm none, do what ye will” to function in a liberal society, compelling others to affirm your convictions or choices is authoritarian.

Here’s his “however” in his outline of the conservative moral tradition:

The weaknesses of this tradition are pretty obvious, too. It can lead to rigid moral codes that people with power use to justify systems of oppression. This ethos leads to a lot of othering — people not in our moral order are inferior and can be conquered and oppressed.

To my eye it appears that he understands what moves progressives better than he does what moves conservatives.

What pains me in discussions of this sort is that Mr. Brooks writes as though considering the moral universe were virgin territory while in actuality it has been considered, discussed, and written about voluminously for millennia. Moral systems are essentially of two sorts: deontological and consequentialist. Deontology refers to the ethical theory that the morality of an action is based on whether that action itself is right or wrong. Consequentialists believe that the consequences of an action determine whether it is right or wrong. Utilitarianism (the greatest good for the greatest number) is consequentialist.

What do you notice about that? The “moral freedom” rubric that Mr. Brooks clearly likes does not appear to be either deontological or consequentialist. I think it is quietly consequentialist but makes some extremely strong, unstated, unproven, and possibly unprovable assumptions, i.e. that “moral freedom” will make more people happier. Quite to the contrary I think it will make some people happy and most people very miserable, indeed.

To relate the title of this post to the subject of Mr. Brooks’s column, how do we square the circle? How can people who demand “moral freedom” and those who believe in deontology live peacefully in a society together? I think the only path to that is through the Enlightenment values of tolerance of contrary views and commitment to a limited government of defined powers but that flies directly in the face of emotivism.

I found the editors’ of the New York Times’s remarks on Ukraine extremely confusing today. I may actually agree with them but I’m honestly not sure. For example, how do they reconcile these two statements:

In March, this board argued that the message from the United States and its allies to Ukrainians and Russians alike must be: No matter how long it takes, Ukraine will be free. Ukraine deserves support against Russia’s unprovoked aggression, and the United States must lead its NATO allies in demonstrating to Vladimir Putin that the Atlantic alliance is willing and able to resist his revanchist ambitions.

That goal cannot shift, but in the end, it is still not in America’s best interest to plunge into an all-out war with Russia, even if a negotiated peace may require Ukraine to make some hard decisions. And the U.S. aims and strategy in this war have become harder to discern, as the parameters of the mission appear to have changed.

and

A decisive military victory for Ukraine over Russia, in which Ukraine regains all the territory Russia has seized since 2014, is not a realistic goal. Though Russia’s planning and fighting have been surprisingly sloppy, Russia remains too strong, and Mr. Putin has invested too much personal prestige in the invasion to back down.

I guess it hinges on their operative definition of “free”. If by free they mean that the Ukrainian territory seized by Russia will remain either Russian or “autonomous”, then it’s not so confusing. That seems like a counter-intuitive definition of free to me. I agree that there is no reasonable prospect for a decisive military victory for Ukraine over Russia.

And this:

The United States and NATO have demonstrated that they will support the Ukrainian fight with ample firepower and other means. And however the fighting ends, the U.S. and its allies must be prepared to help Ukraine rebuild.

But as the war continues, Mr. Biden should also make clear to President Volodymyr Zelensky and his people that there is a limit to how far the United States and NATO will confront Russia, and limits to the arms, money and political support they can muster. It is imperative that the Ukrainian government’s decisions be based on a realistic assessment of its means and how much more destruction Ukraine can sustain.

I agree that’s a necessity. Actually, I would go farther. I think that the U. S. needs a clear, verifiable audit trail of its support. Be that as it may, I find it difficult to reconcile the previously stated objective with that proviso. Are the editors saying that the president should set a monetary value on the objectives we’ve set out? I don’t believe that’s how wars are won. Not in any sense.

I do agree with their conclusion:

Confronting this reality may be painful, but it is not appeasement. This is what governments are duty bound to do, not chase after an illusory “win.” Russia will be feeling the pain of isolation and debilitating economic sanctions for years to come, and Mr. Putin will go down in history as a butcher. The challenge now is to shake off the euphoria, stop the taunting and focus on defining and completing the mission. America’s support for Ukraine is a test of its place in the world in the 21st century, and Mr. Biden has an opportunity and an obligation to help define what that will be.

The editors of the Washington Post have a plan for fixing the infant formula shortage:

The simple solution, from the outset, would have been to import more formula from abroad, from places such as the European Union, Britain, Canada, Australia and Japan. The U.S. Food and Drug Administration announced Monday that it was streamlining its review process so that foreign manufacturers could begin shipping more formula into the United States. That should have happened weeks ago. The FDA also reached a deal with Abbott on how to reopen the shuttered factory in Michigan.

The situation is still dire. Supplies of formula have been 40 percent out of stock, and it could take two months before it is widely available again. On Wednesday, the White House took the much-needed steps of announcing “Operation Fly Formula” to speed up foreign formula imports by using Defense Department air cargo contacts and invoking the Defense Production Act to speed delivery of ingredients to domestic formula producers.

As with most crises, the families that are the hardest hit are low-income households that can’t afford to pay high prices or drive around to multiple stores and families that have children with special medical conditions. At a minimum, states should work with manufacturers to suspend requirements forcing moms on the Women, Infants and Children (WIC) program to buy only specified formulas with government vouchers.

Disappointingly — albeit predictably — demagogues have been feasting on the fears of babies going hungry. Republican lawmakers and their backup choir on right-wing media have been stoking outrage with false claims blaming the shortage on stocks being set aside for the babies of undocumented immigrants. And there are some who are trying to shame mothers who don’t breastfeed.

The nation needs a full and rational accounting of this mess and the troubling questions about why it took so long for the FDA to look into the Abbott plant after a whistleblower came forward in October. Longer-term, we should open the U.S. market up to more imports from abroad. The trade deal the Trump administration struck with Canada and Mexico that made it even harder to import formula from Canada has had unintended consequences. In the 21st century, the United States should be capable of feeding the smallest and most helpless among us.

I don’t think they’ve actually thought it through very well. As has been pointed out around here, importing infant formula from small countries that produce formula almost exclusively for domestic consumption, e.g. Canada, is at best a very short term solution and at worst is just moving the problem from a U. S. one to a Canadian one. The United States is a very big country. I’m not convinced that Canada or Ireland is in any position to compensate for a 40% shortfall here in the U. S. which is what is being reported.

They also might want to consider why the FDA has the regulations it does on infant formula. If they don’t preserve the lives or health of American babies, they shouldn’t exist. If they do preserve the lives or health of American babies, they should not be lifted even temporarily. I don’t see any middle ground.

In addition you might want to consider this analysis at BIG by Matt Stoller. Mr. Stoller sees the problems as unforeseen consequences of FDA regulations conjoined with Department of Agriculture policies. Consider the bar chart at the top of this page. It represents the market share of the companies that dominate the infant formula market in the U. S. In case you’re wondering about Nestle, while it doesn’t have much market share here, it does have an enormous slice of global marketshare.

That’s not the working of the market you see in operation there. It’s a consequence of the way the Food Supplemental Program for Women, Infants, and Children (WIC) works. Winners of bids in each state are guaranteed a statewide monopoly on infant formula sales under the program in that state. WIC accounts for about half of all infant formula sold. Contract winners have an enormous competitive advantage.

At Roll Call Republican pollster David Winston notes that Biden’s net disapproval is dimming the electoral prospects of Democrats all over the country. After a lengthy digression on President Biden’s lack of understanding of how increasing willingness to pay in the context of constraints on supply should be expected to increase prices,

On top of that, confidence in the federal government to manage the nation’s challenges has also taken a beating. It started with a lack of COVID-19 tests, followed by shortages of everything from paper towels to cars to chicken and now baby formula, an embarrassing exit from Afghanistan, the negative effects of an open border, and inflation. The list is a long one.

In a survey done by The Winston Group for the S Corporation Association, we found the brand image of the federal government at an unbelievable low, with almost 2-to-1 negatives — 33 percent favorable to 59 percent unfavorable. It is even worse among independents, at 24 percent favorable to 68 percent unfavorable.

This puts the feds at the bottom behind Pelosi, Biden, Trump and both parties in Congress. Still, in the end, it is the president tasked with running the federal government, and if it is failing in its mission, so is the manager in chief.

It is hard to see a way out of the hole this president and his party find themselves in without a significant change in policy direction. But to listen to Biden over the past week, staying the course seems to be the operative strategy.

There has been a lot of bad news lately—inflation, the shortage of infant formula, Russia’s war against Ukraine, the murders in Buffalo, decreases in various stock market indices. A lot of things seem to going wrong all at once. Joe Biden is the president and the Democrats hold narrow majorities in both houses of Congress. It’s the party in power that tends to get blamed when things go wrong.

I had to guffaw at this paragraph:

But Team Biden seems intent on ignoring well-founded criticism even from the Democratic fold. In February, Democratic economist Steven Rattner warned in The New York Times, “The bulk of our supply problems are the product of an overstimulated economy, not the cause of it. … It’s a classic economic case of ‘too much money chasing too few goods,’ resulting in both higher prices and, given the extreme surge in demand, shortages.”

Steve Rattner is no economist. He’s a Democratic fundraiser, apparatchik, and private equity Rolodex hire (i.e. he didn’t get the job for his business acumen but for his contacts). Nonetheless his advice should be heeded since it probably reflects what his big money contacts are saying.

IMO President Biden’s problem is that any “change in policy direction” is likely to be the opposite of what needs to be done. That’s the direction in which the progressive wing of his party is pulling and he’s sunk without their support.