Tuesday, November 16, 2021

Corporate Inflation Scare- and news coverage- is dumb.

The New Inflation Scare Is the Dumbest Thing Since Voodoo Economics

Elites are sounding the alarm over threats of inflation in order to block Biden’s social spending plan. We shouldn’t fall for it.



After years of hypocrisy and bungled forecasts of doom, the budget deficit no longer provokes panic. The elites need a new bogeyman, otherwise Congress might actually spend us into happiness. Now, the new monster in the closet is Inflation. The great prognosticators Sen. Joe Manchin (D‑W.V.) and CNN’s Wolf Blitzer have weighed in, and we are officially advised to be afwaid, vewy afwaid.

Since 2010, median housing rents have gone up by 36 percent. The cost of family health insurance has risen 47 percent. From the academic year 2009 – 2010 to 2018 – 2019, average costs of college went up 39 percent. And the median hourly wage rose by just 11 percent, so rent, healthcare and college — among other things — are all less affordable now than they were ten years ago. 

To varying degrees, each of these problems is addressed in the Democrats’ budget reconciliation bill, dubbed the Build Back Better (BBB) plan. That legislation includes added support for housing, increased premium subsidies under the Affordable Care Act, and expanded Pell Grants for college students. There is compensation for the inadequate growth of wages, including tax credits for families with children, subsidized childcare, pre‑K for three- and four-year olds, and an expanded Earned Income Tax Credit for workers without children. Of course, each of these items is scaled down from what was originally proposed by Joe Biden and Bernie Sanders. More should be done.

Now comes Manchin, leading the charge by calling the budget bill ​inflationary.” It’s like criticizing a fire company for using water instead of gasoline. The bad faith here is stunning. There wasn’t a peep about inflation in the case of the bipartisan infrastructure bill, supported by Manchin and signed by Biden on Monday, much less about former President Trump’s tax cuts or defense spending increases.

The spur for this new campaign is a handful of cherry-picked, transitory changes in particular prices. On the most basic level, there is a widespread misunderstanding of what ​inflation” really is. Inflation is a continuous increase in prices, more or less across the board. As my reactionary graduate macro economics professor taught me, a spike in the price of, say, oil is not ​inflation” unless it ends up feeding into a sustained increase in other prices. 

As Ryan Grim notes, according to the Bureau of Labor Statistics, that’s what we are looking at right now. The change in prices is overwhelmingly due to energy. Now, if that spike persisted, it would not be surprising to see it propagate through the wider economy. But there is no reason to expect that. As Dean Baker points out, an isolated bottleneck in the supply of anything is likely to clear in short order, one of the limited blessings of on-demand capitalism. For example, just this year, television prices rose in the summer and subsequently fell by almost three percent.

There has been reporting that oil prices are being propped up by Saudi leader and part-time butcher Crown Prince Mohammed bin Salman, in concert with the Russians. There are two reasons to doubt this. One is that there are other countries not beholden to Saudi Arabia who can offset any manufactured shortfall by ramping up their own production. Members of the OPEC cartel have been known to cheat on mutual agreements to limit supply. Two is that price spikes encourage the adoption of alternative energy sources. It is true that this adoption takes time, but once it is established, it is non-reversible. A temporary price increase can generate a permanent loss of customers.

This narrowness of the price increases is well illustrated in the latest figures for the Consumer Price Index. Including the latest, allegedly alarming, one-month change of 0.9 percent in the total CPI yields a year-over-year (‘YOY’) change (from October of 2020 to last month) of 6.2 percent. It should be noted that this 6.2 figure does not itself provide support to any claim that the increase is either spreading through the economy or is being sustained. On the first count, what is called the ​core” CPI, excluding the volatile numbers for food and energy, shows a YOY increase of a more modest 4.6. And the 0.9 percent jump in October constitutes just one month of data, so it is too soon to say it is sustained.

The politics of all this, meanwhile, is a different matter. We are being driven deep into the silly season. The up-to-date price of gasoline, which people buy on a regular basis, is displayed on huge signs all over the country (and on Twitter by pundits like Blitzer). The price of milk is listed in the advertisements we get with the local newspaper. As Kevin Drum demonstrates, the news media thrives on publicizing outliers in prices, not boring averages.

On the other hand, the prices of healthcare or college don’t receive so much public attention. We could be forgiven for suspecting that underlying this disparity is the presumption that the working class doesn’t need healthcare or higher education. Moreover, anyone who follows the news knows that no Republican ever gives a Democrat credit if the price of gas goes down, which it often does. The GOP only cares when prices go up during Democratic presidencies. 

Purely for the sake of argument, let’s concede that the recent increase in energy prices is a problem. Even so, contracting or eliminating the BBB bill to reduce the price level, as some ​centrists” have advocated, is as absurd as invading Iraq to avenge 9/11. (Do you see a pattern here?) A serious response to an undesirable increase in energy prices would do something about…energy. A broad-brush response, such as a move by the Federal Reserve to raise interest rates, would contract a much wider swath of the economy than the energy sector. And, under that scenario, we might not even see a pale imitation of Biden’s agenda come to fruition.

In the latter regard, inferring an inflation risk from BBB fails the most elementary economics, since, according to the Congressional Budget Office, the current version of BBB is mostly offset with tax increases. It would only be the net of spending over revenues that would potentially be inflationary, if and only if the economy did not still have a shortfall of five million jobs. In reality, the BBB legislation is likely to lessen the inflation risk, not increase it. 

You don’t have to be a socialist to discount the inflation danger. In late September, a group of eminent, Nobel Laureate economists announced support for BBB, writing: ​Because this agenda invests in long-term economic capacity and will enhance the ability of more Americans to participate productively in the economy, it will ease longer-term inflationary pressures.”

The Federal Reserve itself is saying the recent increase is annoying but transitory, reducing the likelihood (thankfully) that it will take any action to choke off the current growth in employment. 

Another group that is paid — handsomely — to anticipate inflationary trends consists of those who trade in the bond market. Since most bonds’ returns are in nominal dollars, a change in the price level changes the value of any such bond. The ​coupon’ of a bond is a fixed dollar amount. The market will reprice bonds so that they hit the market interest rate. It’s amusing to note that, before and after the latest panic about the October price change, the interest rates on Treasury bonds with durations of seven years or longer all went down, not up.

All things considered, this new inflation scare is one of dumbest turns in what passes for economic thinking since voodoo economics.


MAX B. SAWICKY is a senior research fellow at the Center for Economic and Policy Research. He has worked at the Economic Policy Institute and the Government Accountability Office, and has written for numerous progressive outlets.  

Thursday, November 11, 2021

The phantom recall:

 The phantom recall: Who’s behind the push for removing Sacramento Councilmember Katie Valenzuela from office?




It’s been 17 months since Katie Valenzuela shocked Sacramento’s political establishment by ousting an influential, well-financed incumbent on the City Council.

Evidently, some in Sacramento’s political establishment aren’t over it.

Despite having less than a year on the actual job, Valenzuela could soon be facing a recall effort. For now, the players behind this political phantom menace remain a mystery, though fans of the Central City representative worry that it’s a cynical attempt to ride a broader wave of recalls targeting progressives across California.

“Given what’s happening around the state, we’ve decided we need to take this seriously,” Valenzuela told SN&R. “There’s a lot we still don’t know, but it’s better to be ready.”

News that Valenzuela, who unseated District 4 Councilman Steve Hansen, might already have a shadow recall campaign working against her emerged only recently. It took many supporters off-guard, as Valenzuela has not had the same kind of political dust-ups and embarrassments that have plagued some leaders who have faced – or currently face – recall. There have been no headlines about Valenzuela caught ignoring the very COVID mitigation measures she urged other people to follow, unlike Gov. Gavin Newsom and at least nine other Democratic leaders from San Francisco to Santa Monica. She has also not had any alleged racist tweets resurface after building her platform on social equity, like San Francisco School Board member Alison Collins, who is now facing recall.

So, if the kind of perceptions of hypocrisy fueling some California recalls aren’t inspiring the possible one against Valenzuela, what is? Based on the secretly operated push-poll that was aimed at her, the motivation might be the exact opposite – that she’s too genuine about her beliefs. The poll, which was conducted through phone calls and mailers, brought up local news stories and Sacramento Bee editorials about two staffers who Valenzuela hired for her City Hall team. One, long-time housing advocate Michelle Pariset, was criticized by The Bee’s management in 2019 for what she described as a personal conviction that she couldn’t legally withdraw Sacramento’s proposed charter amendment for strong rent control simply because the Council passed lesser policies,

Read more.



Wednesday, November 10, 2021

Congressman Ami Bera and Build Back Better

According to Huff post,   local Congressman Bera is part of the so called Moderate Caucus. this is the group opposing the Build Back Better bill and insisting upon passing the Infrastrurce bill.  It would be more accurate to call it the Corporate Caucus.

Here is my e mail to him. I encourage all to contact his office this week.

 Congressman Bera


I am greatly offended that you are listed as one of the Congresspeople holding back Build Back Better as reported in the Huff Post.

Rep. Ami Bera (D-Calif.), who is part of the more moderate New Democrat Coalition in the House, said he doesn’t think Democrats are messaging effectively around the “real problem” of inflation.

“I think that we’re bogged down in the process of trying to get really important legislation done,” Bera said. “I think we’ve got to acknowledge the people where they are right now and I don’t think we did a great job of that in Virginia,” Bera said, attributing Republican Glenn Youngkin’s win in the governor’s race to his acknowledgment of kitchen table issues like kids’ schooling and the rise in everyday expenses.”


So, the corporations got their bail out with the needed bi partisan Infrastructure bill. But, apparently you are not helping with Build Back Better.  The people of the district need and expect your support.  I am teaching an economics course and we are examining these bills.  We need a big  6.1 Trillion Build back better. It is already too small.  I will be bringing your position up for discussion tomorrow in my seminar.  I strongly urge you to support the bill.  The headlines about inflation are poorly informed.  Major economists agree. We need a big bill. Please represent your voters….


From Bera's office. 
If you have additional thoughts that you would like to share with me, please visit my contact page at 
www.bera.house.gov/contact. You're also always welcome to call my local office at (916) 635 0505 or my Washington, D.C. office at (202) 225 5716.


Saturday, November 6, 2021

House Passes Infrastructure Bill


'Foolishness': House Passes Infrastructure Bill But Postpones Build Back Better Act

"Passing the infrastructure bill without passing the Build Back Better Act first," said Rep. Ilhan Omar, "risks leaving behind child care, paid leave, healthcare, climate action, housing, education, and a roadmap to citizenship."


November 6, 2021