And What’s With the Fed?

Judging by Federal Reserve Chairman Jerome Powell’s recent remarks, reported here by NPR:

Federal Reserve Chairman Jerome Powell said on Friday the U.S. continues to recover from the pandemic recession, and that progress could allow the central bank to dial back its extraordinary efforts to prop up the economy later this year.

Powell cautioned, however, that the recovery remains uneven and unpredictable, and said the Fed will continue to monitor incoming data and adjust its policies as needed.

That reminds me of Augustine of Hippo’s ironic prayer, “Give me chastity and continence, but not right now.” There’s a problem but we won’t deal with until later.
Consider the report of inflation:


See that upswing at the end? That’s inflation now. We haven’t seen anything like this in more than 40 years. Inflation in the 70s was “transitory”, too, but it took heroic measures by the Fed to bring it under control.

I’m trying to figure out what the Fed is trying to accomplish. The Federal Reserve, famously, has a dual mandate: to maintain stable prices and keep employment high. But they actually have a third mandate: to regulate banks. The economic slumps of the last 30 years along with the sharp increase in income inequality all have the Fed’s fingerprints all over them. What’s going on?

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Don’t They Teach Anyone to Write?

What’s wrong with this headline?

Chicago Sues Grubhub and DoorDash for Allegedly Scamming Basically Everyone: Restaurants, Drivers, and Customers

I would be willing to bet that Chicago is suing Grubhub and DoorDash for scamming not for “allegedly scamming”. The use of the extra adjective is a strategy for avoiding libel suits but I don’t see the vulnerability here. Chicago is either suing them or not and if they are suing they’re are suing them for doing something.

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Ain’t No Sin

For the last week I have been in Cincinnati. It was my first business trip since March 2020 and I have been working all day and entertaining customers at night (which is also work). On Thursday one of our guests remarked with a combination of admiration and disdain on my ability to nurse a single beer (2 hours).

It has been nearly 50 years since I was last in Cincinnati; it has grown up a bit in the interim. Where I was reminded me of Oakbrook or Schaumburg 50 years ago which is a bit hard to explain if you’re not a Chicagoan. New hotels and office buildings, lots of open space, rather few people. Not completely built over.

The people in Cincinnati remind me of those in St. Louis in my youth in their looks, speech, and demeanor. Very unlike Chicago. Mostly people of Western European descent or black, rather few Hispanics or Asians.

I was also treated to what was possibly the best bourbon I had ever sampled: Weller 12 Year Old. Unlike most bourbons nowadays it actually tasted like bourbon.

It was also the first time I had physically met any of my colleagues at my present employer. We got along famously.

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Difficulty: 10

At Politico Jeff Greenfield remarks on the situation facing the House Democrats’ ambitious expansion of the “social safety net” following the bill having been “deemed” to pass, a legislative procedural veronica:

For Biden, Pelosi and Schumer, there remains one pesky problem in embracing a massive budget reconciliation package: they do not yet have the votes for anything like a $3.5 trillion bill. We don’t know what price tag Joe Manchin, Kyrsten Sinema, Josh Gottheimer and other centrist Democrats will find acceptable. We don’t know if House progressives will doom the infrastructure bill if the final Senate figure on the reconciliation package is unsatisfactory. We don’t know if a sliver of moderates will indeed tank the social safety net bill once infrastructure passes, in the belief that they cannot win in their districts if the cost is too high.

But give the Democrats credit on one front: if passing these bills was an Olympic event, it would come with the highest “degree of difficulty” rating in history.

As Mr. Greenfield notes earlier in his post, presently the Democratic margins in both houses of Congress are razor-thin. There is literally no “wiggle room”.

My own view is that the $3.5 trillion should have been paid for using actual revenue increases rather than accounting tricks or presumed growth. In the present state of the economy the additional spending is unlikely to stimulate it. Our problem is that aggregate product is too low not inadequate aggregate demand. We just don’t produce enough of what the additional spending will buy for it to increase aggregate product here although it could stimulate the Chinese, Japanese, South Korean, etc. economies.

I also wonder if resorting to procedural legerdemain doesn’t undercut the Congressional Democrats’ argument that they’re preserving democracy while the Republicans are undermining it. If you can’t get a majority to vote for something but have “deemed” it passed to save part of your caucus from having to commit themselves one way or another, it is de facto minority rule.

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The Red Shoes, Redux

I find it astonishing that the editors of the Washington Post can draft an editorial about the increasing number of homicides in the last year or so in the U. S. with elephant in the room. Here’s their prescription:

There has been too much finger-pointing focused on law enforcement — including, on the extremes, by activists who want to abolish police or those who fault progressive policies for reform — and not enough attention to other, evidence-based programs that can address the problem. Among efforts that show promise, as Vox has reported, are providing summer jobs; raising the age at which students can legally drop out of school; making physical improvements to neighborhoods such as installing more streetlights and greening vacant lots; and providing more drug addiction treatment.

That elephant, of course, is how gang-related so much of the violence is. I don’t see much in their prescriptions that would actually reach the source of the problem.

With respect to their proposal to raise the age at which students may legally drop out of school, what good will raising the truancy rate do? Also the editors should be prepared for the charges of racism that such an approach would provoke. The most truant students are either black or Native American; the least truant are Asian.

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Vast Carelessness

There’s one thing on which Walter Russell Mead and William A. Galston agree in their pieces on the situation in Afghanistan: Biden has screwed up in his handling of withdrawing from Afghanistan. Mr. Galston proposes three steps to remediate the situation:

  • Step one: Honor our commitments to our friends in Afghanistan.

  • Step two: Do everything possible to repair relations with our allies.

  • Step three: Do what is necessary to restore the credibility of American security guarantees.

while Dr. Mead see the situation as emblematic of something deeper:

The Afghan debacle doesn’t create a crisis of belief in American military credibility. Informed global observers don’t doubt our willingness to strike back if attacked. The debacle feeds something much more serious and harder to fix: the belief that the U.S. cannot develop—and stick to—policies that work.

He provides an explanation of the source of the problem:

Americans tend to look at foreign policy in partisan terms. Democrats think Republicans are the problem and vice versa. This isn’t how it looks from abroad. To many overseas observers, the 21st century has seen mostly unsuccessful U.S. responses to challenges from China, Russia and Iran even as global issues like climate change, refugee and migrant flows, and the pandemic intensify. From this perspective, George W. Bush, Barack Obama, Donald Trump and Joe Biden all seem to have failed; and from the invasion of Iraq to the withdrawal from Afghanistan, the story of American foreign policy since 9/11 looks even to friendly eyes like one of continuing and perhaps now accelerating drift and decline.

I don’t believe that it’s possible to effect Mr. Galston’s three step program while maintaining President Biden’s deadline for removing our forces from Afghanistan, something I can’t imagine happening. It would mean he would have screwed up twice with one policy which I doubt would bolster his popular support.

And I find it surprising that Dr. Mead doesn’t recognize the source of the problem with our foreign policy. After all he wrote a book about it. Our foreign policy is an emergent phenomenon which the professionals in the State Department, DoD, and intelligence agencies mistakenly believe they control. They don’t control it but they can be pretty successful in impeding the president’s ability to implement his own policies.

I don’t believe that our foreign policy will improve until the voters start considering foreign policy more important in their selection of a president which on a first approximation will be never.

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Why Work?

Here are some rather eye-opening statistics relating to Illinois from a post by Bryce Hill at RealClearPolicy:

According to the Illinois Department of Employment Security, the average Illinoisan earns approximately $55,770 per year at work. Meanwhile, the Illinois Policy Institute found if that person stayed home with their kids and collected unemployment, they could earn $51,627.

So go to work, average $55,770 and pay for child care, transportation and taxes. Or stay home, skip the expenses and get up to $51,627. It appears Illinois’ unemployment benefits are incentivizing workers to stay home.

I found those reported numbers a bit hard to believe since they’re not in agreement with the Census Bureau. But let’s just take them at face value. There are presently 120,000 jobs posted on the state’s jobs site. Why would a person earning a median income or below take one of them? That’s a question. I don’t know. I also find it hard to justify the governor’s support for continuing the enhanced unemployment benefits. I’m open to explanations.

I do find the mismatch between those facts and figures and the claim that the way to reduce the number of homicides is through jobs programs grimly amusing. What good are jobs programs if people won’t take the jobs? Other than for the people administering the jobs program, I mean.

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Facts Were Never Like This

At The Hill Will Marshall rises to the defense of the Biden Administration’s handling of the situation in Afghanistan. He makes three points:

First, the U.S. intervention in 2001 was inevitable and unavoidable. Afghanistan was the base from which al Qaeda mounted the spectacular Sept. 11 terrorist attacks that demolished the twin towers, damaged the Pentagon and wantonly killed nearly 2,000 people while wounding about 6,000 others.

I disagree with that. He completely fails to make a case that invading and occupying Afghanistan was either a political or strategic necessity, preferring to rely on several fallacious arguments, e.g. tertium non datur, appeal to emotion, appeal to popularity.

Second, President Biden has made the hard but correct strategic call. The U.S. public has lost confidence in our Afghanistan mission. We long ago passed the point at which the costs of staying there outweigh the risks of leaving.

I agree with that but it is not a fact. It is an opinion. Given my preference (a sharp, severe, punitive raid in 2001), we would never have gotten into the fix in which the Obama, Trump, and the Biden Administrations have found themselves.

Third, how we disengage from military interventions matters. The longer we stay, the greater the debt we incur to the people who risked their lives helping our soldiers, diplomats, aid workers, administrators and contractors do their jobs.

Here the president’s policy is harder to defend. “The likelihood that there’s going to be the Taliban overrunning everything and own the whole country is highly unlikely,” Biden declared confidently at a July news conference.

Again that’s not a fact but an opinion. And it’s not “harder” to defend. It’s impossible to defend. I fully acknowledge that, too, is an opinion but I don’t claim that it is a fact.

Do people no longer understand the difference between facts and opinions?

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Humane to Whom?

I have said it before but it bears repeating. I think that our immigration policy should be changed in the following ways:

  • We should greatly increase the number of work permits available to people from Mexico and Central America. Most of those who come here are migrant workers and would return home if it were easier.
  • We should have very rigorous employer-based enforcement of eligibility to work.
  • We should allow people brought here illegally as children and who have been in the U. S. all of their lives to remain here legally and whatever standards are established for that should be rigorously enforced.
  • We should abolish the immigration lottery and “family reunification” as criteria for admission.
  • We should have immigration laws that more closely resemble those of Canada, Australia, and New Zealand than our present laws do.
  • We should pick some number of legal immigrants, stick to it, and rigorously enforce our laws. What should that number be? Fewer than one million per year.

When you add it up it means I disagree vehemently with Mary Anastasia O’Grady’s position as expressed in her Wall Street Journal column:

A humane U.S. immigration policy would recognize the need for workers from outside the country and give migrants a legal path to those jobs by allowing them to apply for visas at local consulates. Coupled with an unmistakable message that asylum claims—even with children in tow—aren’t a free pass, access to worker visas would go a long way toward normalizing migration flows.

The estimates of how many people would come to the U. S. if they could vary but 150 million is a pretty good number. Of those 150 million how many could actually support themselves? I mean when you consider the cost of workers who do not read, write, or speak English and have few skills which warrant pay over minimum wage? As Joschka Fischer put it, “We wanted workers; we got people”. They have health care, educational, safety, sanitary, transportation, etc. needs and those do not pay for themselves.

The first thing you learn in economics class, the very first lesson on the very first day is that as when supply exceeds demand the price goes down. The evidence that there is increasing demand for unskilled labor in this country is very, very weak. If it were salaries for unskilled workers would be rising (they aren’t). There’s an additional factor: you can design and build machines to do many kinds of work or it can be done by hand. Which of those happens depends on the supply and demand for unskilled labor. Designing, building, operating, and maintaining those machines generally pays better than the labor they replace does.

Ms. O’Grady’s “humane” policy is humane to people who don’t live in the United States and inhumane to native born Americans and to foreign-born workers who are already here. I don’t think that’s humane at all. I think it’s cruel, exploitive, and opportunistic.

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More Speed Less Haste

If you read between the lines of the editors’ of the Washington Post’s latest offering you may detect a concern that the House Democrats may scuttle the “infrastructure bill”. They rather clearly blame the moderate Democrats:

Lawmakers are supposed to vote on a budget resolution that would clear the way for the Democrats to advance a big “reconciliation” bill, which would enable them to pass a range of taxing and spending policy through the Senate with only Democratic votes. But nine centrist House Democrats, enough to deny a House majority, insist that they will not vote for the budget resolution until the House passes a different bill, the $1 trillion infrastructure package the Senate approved earlier this month.

Doesn’t equal if not more blame belong to the progressives who insist on an additional $3.5 trillion (or $4.5 trillion or $5.5 trillion depending on whom you read) to gain their votes for the already bloated $1.5 trillion “infrastructure bill”?

They conclude:

The reconciliation bill promises to slash drastically child poverty through an enhanced child tax credit, cut the ranks of the working poor with a boosted earned-income tax credit, enshrine in law an ambitious federal climate policy and promote many other worthy reforms. But is pumping up Medicare, including for many wealthy seniors, more important than shoring up Obamacare or ensuring that low-income people caught in Medicaid’s coverage gap have basic health-care access? Does the nation need free community college when it can instead enhance Pell Grants for the neediest? The reconciliation bill’s answer to these questions is: Do it all. And to pay for it, the reconciliation bill’s architects suggest some significant new revenue sources, such as higher corporate taxes, and some squishy pay-fors, such as projected economic growth.

Democratic infighting must not ruin what is a rare opportunity in Washington, a moment when substantial reform is possible. Instead of issuing ultimatums, the party that narrowly controls the House should get to work.

The reason I use quotation marks around “infrastructure bill” is that so little of it is devoted to infrastructure. Again, that depends on whom you read. Here’s one assessment from Fortune/i>:

Infrastructure as many people think of it—construction or improvement of bridges, highways, roads, ports, waterways, and airports—accounts for only $157 billion, or 7%, of the plan’s estimated cost. That’s apparently what Vought was referring to. The definition of infrastructure can reasonably be expanded to include upgrading wastewater and drinking water systems, expanding high-speed broadband Internet service to 100% of the nation, modernizing the electric grid, and improving infrastructure resilience. That brings the total to $518 billion, or 24% of the plan’s total cost.

No matter whose assessment you read the majority of the $5.5 trillion in spending is not infrastructure unless you define everything that makes life possible infrastructure which is to remove any meaning from it. If everything is infrastructure nothing is infrastructure.

There’s something else I would remind you of: when your willingness to pay (what you’ll spend) exceeds the cost of what’s on offer, the price of what’s on offer will rise. In some sense that’s the point of all the spending. The administration clearly wants the wages of home healthcare workers to rise. Make more money available for it and that’s what will happen.

I should also mention that even Modern Monetary Theorists believe that if government spending increases faster than aggregate product, it will produce inflation. Again, in some ways that’s probably the point of all the spending. The debt is less burdensome when the dollar is worth less.

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