The Wall Street Journal has a long piece tonight that goes on and on and on about how Joe Biden blew it by passing the $1.9 trillion ARP bill and firing up inflation. About halfway through the story, Nick Timiraos buries this single sentence:
A separate analysis by the [San Francisco Fed's] economists estimated the ARP boosted inflation, excluding food and energy items, by 0.3 percentage point a year in 2021 and 2022.
This saves me the trouble of writing yet another post about the fact that ARP barely had any effect on inflation. The Journal's own story does it for me. Hell, it more than does it. Even I'd be willing to acknowledge that ARP might have contributed one percentage point to inflation, but they've already underbid me at 0.6 points. Great! I'll take it.
But if that's the case, why bother writing the story?
The article says the SF Fed found the stimulus responsible for a 3% rise in inflation through 2021. Since the 0.3% figure is without food and energy items, I'm not sure why that figure is terribly significant. Food price rises alone were a major flash point, and of course make a big difference in people's daily lives.
Food and energy prices can vary wildly, so they are not included in the core value. You're right, they're the ones people notice the most. Over the inflationary period, we had the bird flu and the drought in the western US causing shortages in chickens, eggs and beef--driving up those prices. The war in Ukraine drove up grain and, for a short while, oil, prices. There has also been some consolidation in the fracking business. When it was mainly a bunch of smaller producers, they had to pump like crazy once the prices got high enough to make a profit, something like $80+/barrel, which would temper run up in prices. With fracking sites bought up by larger companies with regular wells, they'd make more money by keeping the fracking levels low and pumping to the max with the cheaper to produce wells and letting demand drive prices even higher before cranking up on the fracking,
The issue, however, is whether ARP contributed to the food and energy price increases that underlie the higher, headline number. That would presumably be the result of increased demand. Can you cite any evidence that demand for food or fuels increased? I’m inclined to be skeptical: large food price increases occurred in relatively few items — https://jabberwocking.com/yet-another-tedious-gripe-about-food-inflation-reporting/ — and demand for fuels is mostly a function of weather.
“But if that's the case, why bother writing the story?”
For the same reason that corporations issue “apologies” after fucking something up. They don’t actually change how they’re doing anything to prevent it from happening again. But by issuing the “apology” - which is usually written in passive tense (“mistakes were made”) - they redeem themselves in far too many people’s eyes and we resume our consumption from them and/or stop pestering them to change their ways until the next fuck up.
Seriously Kevin, how did you make it to senior citizen status being this naive? You yourself are doing it below with the next post about “perhaps the brouhaha over trans athletes is overblown” post, after months of “trans people should be thrown under the bus” posts.
"which is usually written in passive tense (“mistakes were made”)"
And passive voice.
The passive voice should never be used.
Inflation had nothing to do with the election. Two words did: Race and Misogyny.
This is almost definitely not true. Democracies all around the world have seen their governing parties lose power because of inflation since 2020, even countries that are demographically practically all white and even countries that already have elected women to run them. It would be weird if the US was the only democracy to not succumb to this global trend.
Inflation doesn't explain why Trump won in 2016 or came very close in 2020. The only explanation for Trump being even considered as eligible to be President is general bigotry. MAGAs accept Trump's lies about how inflation is still high (it isn't) and those lies are amplified by the right-wing media and the bothsider MSM. Inflation is an acceptable substitute for racism in particular as a reason for voting for Trump.
Is the US weird as compared to the rest of the advanced world? A lot of people from other countries think so. Other countries have their problems, but few have anything like the general problem of racism in the US, which it has because of its history of slavery. Racism is what Trump has relied on from the beginning.
The importance of inflation can be tested. As I have said before, let's see if the evaluation of Republican voters of inflation and the supposedly terrible economy persists into the Trump administration.
Secondly, what have polls in all those other countries said about which issues are important? Have their polls all shown inaccurate perceptions ("vibes") about inflation or the economy? Were inflation "vibes" the number one issue there, or do those countries have other problems - such as their actual economies, most of which have not done nearly as well as the US?
"but few have anything like general problem of racism in the US"
Yes and no. Yes, our history of enslaving black people is not similar
to most of the other countries that fit under the heading "the advanced world" (Does Brazil count ?) But needless to say there are lots of other forms of bigotry that look a lot like racism that have infected those countries. The rise of right wing groups in Europe would seem to be a direct result of this. And have you ever spent much time in France where prejudice against people of Algerian descent (along with other Arab and Muslim populations) is every bit as intense as American racism.
I agree that racism and bigotry and fear of the other helped create the MAGA base, but I think the evidence shows that it was the perception of inflation that hurt Harris with the persuadables and cost her the election. And other factors, like a general distrust of "elites" contributed as well.
‘Because of inflation’? Or a continuation of anti-immigrant animus?
Estimating the source/s of US inflation is tricky. As a proud alumnus, I must admit I find this analysis interesting. The MIT study attributes more than 40% of inflation to Federal spending.
https://mitsloan.mit.edu/ideas-made-to-matter/federal-spending-was-responsible-2022-spike-inflation-research-shows
Both can be true. The initial stimulus bill passed under Trump, the CARES act, was larger then the Biden bill(s), and both are gov't spending. The initial bill was probably too large, but much better to err on the larger side to avoid a recession. When Biden pushed through the ARP, etc., there were already issues in the housing/rental markets causing problems, if I recall correctly--not to mention finding child care with schools closed for those who had to go into work.
golack - if you examine the study, the Biden Covid stimulus policy is shown to be a material contributor to inflation. Note, this is just one perspective...
I only read the description of the study, which contains a chart that identified ‘Federal Spending’ as a factor, not any specific program. As ARP was a one-off, no amount of statistical analysis could validly draw a conclusion about it.
KenSchulz - if you look at the actual study, you can see a chart with dates. Thus, one can distinguish from Trump and Biden stimulus spending....
I stand by my statement.
A statistical analysis of aggregate data with no out-of-sample validation.
The second-largest factor, according to Kritzman et. al., was inflation expectations. As I have noted before, expectations are supposed to affect demand by causing consumers to purchase sooner. This obviously works only for durable goods; you can’t stockpile eggs and bacon. I want to see evidence from disaggregated data.
There’s an old joke about economists predicting nine of the last five recessions. I think the track record of analytical statistics finding actual facts about the world is considerably worse. And I was a statistics user for fifty years.
KenSchulz - Several Democratic economists, for example Jason Furman and Larry Summers, also believe that the Biden stimulus was a major contributing factor in US inflation. Thus, the MIT conclusion is far from unique.
Certainty, in the halls of universities there will be debate over the origins and multiple causes of US inflation.
Ben Bernanke and Olivier Blanchard are not on board:
https://www.brookings.edu/articles/what-caused-the-u-s-pandemic-era-inflation/#:~:text=In%20fact%2C%20most%20of%20the,shift%20in%20demand%20during%20the
And did you mean this Larry Summers:
“We need five years of unemployment above 5% to contain inflation—in other words, we need two years of 7.5% unemployment or five years of 6% unemployment or one year of 10% unemployment”
Economists’ ‘beliefs’ and a MetroCard will get you a ride on the subway
OK, seriously, if excess demand was the predominant cause of inflation, then we should have seen a drop-off in demand leading the decline in inflation. Please show the data. Kevin showed us this: https://jabberwocking.com/americans-are-spending-more-money-than-ever/
Or maybe business investment slacked off? Nope: https://home.treasury.gov/news/featured-stories/us-business-investment-in-the-post-covid-expansion#:~:text=Post%2DCOVID%20Business%20Investment%20Growth,the%20pre%2DCOVID%20business%20cycle.
KenSchulz - I think debating the methodology, data sets etc of this, or most any, academic study is a wonderful university activity.
Rather, my point, there are multiple creditable studies that attribute a meaningful portion of the post Covid US inflation, to Federal stimulus. Now, perhaps these economists are wrong. However, the sources I reference are non bias, or left leaning, creditable academics.
I like being a part of the party that supports science. This means, giving serious weight to studies that may not conclude, what you might desire.
Jason Furman
https://www.riaintel.com/article/2aucrzsa72lr93ypli4g0/the-big-question/economist-jason-furman-explains-how-inflation-snuck-up-on-us-and-whats-ahead-in-2022
A lot of credible people have been saying for a long time that you're a POS, you POS. What you're trying to pull here is obvious, pathetically so since you thought you were being clever. It is not amusing.
ScentOfViolets - it is interesting. I offer up MIT analysis of the topic and you contribute name calling/personal attacks. And somehow, I am in the wrong???
I notice that Furman mentions the dollar amount of stimulus but says nothing at all about the amount of business and personal income lost due to pandemic closures, reductions in hours and layoffs; as though there was no offset. This is not a serious analysis. I used to think Jason Furman was more insightful than this.
I never suggested that any of the economists working in this area are letting bias influence their research. My critiques include that 1) many measurements used in economics are flawed, but economists continue to use them so that they can make comparisons over time; 2) the sparse data set and difficulty of conducting controlled experiments leads to over-reliance on modeling, though we know that economic systems evolve, which compounds the data and measurement problems.
It's not even an analysis but just his off the cuff estimates from 2022. Calling it a study like MotRer does is typical disingenuous BS. And that MIT study manages to conclude that supply chain issues had NO effect on prices. Okay buddy.
So why didn't Biden and the Dems make communicating about all of their achievements (and inflation not being their fault) a daily thing? They basically let the disinformation machine run wild for years while they quietly focused on good government, so sure that obviously the voters would reward them for that.
The decorum-obsessed technocrats are killing us. Bernie and AOC didn't catch fire because they were progressives, they caught fire because they were brawlers.
This is worse than the buyer's remorse we're hearing from people who finally learned a few things and realized they had been lied to by Trump. It's much worse because the press KNEW what Trump is, and they helped him. It makes them only slightly less horrible than Putin.