America's Talking - Episode 1: Inflation spikes to highest levels since 2008 crisis

Episode Date: June 11, 2021

The latest federal report suggests more troubles for the U.S. economy, even as experts hoped for a post-COVID economic surge. The Bureau of Labor Statistics Thursday released new data showing a major spike in inflation, the largest since the financial crisis from over a decade ago. Some goods increased in price more than others. Household furnishings saw “its largest monthly increase since January 1976” and new vehicles increased 1.6% in May, its “largest 1-month increase since October 2009.” The inflation report comes one day after the U.S. Department of Labor showed disappointing job creation for the month of May. The U.S economy added only 559,000 nonfarm jobs last month, short of 650,000 predicted by economists. Unemployment for the month was 5.8%. Support this podcast: https://podcasters.spotify.com/pod/show/america-in-focus/support Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to America in Focus, powered by thecentersquare.com. I'm John Spittaro, and this is the 23rd week of 2021. Coming up, we'll take a look at one of the top stories from the center square.com. And later, executive editor of the center square, Dan McAulip, and DC reporter Casey Harper, will take a deeper dive into the top stories of the week, including a look at the rising inflation levels, the latest on a potential tax hike as part of President Biden, Biden's massive infrastructure plan and a study on which states benefited the most from the recent COVID-19 stimulus packages. All of that and more coming up right after this.

Hi, this is Chris Krug, publisher of the Center Square. Our team produces the nationally read and recognized news stories at thecenter.com, the country's fastest growing, non-profit, nonpartisan, state-focused news and information site. We deliver essential information with a taxpayer sensibility through reporting that's easy to understand and easy to share with your friends and family. We know that you need information that allows you to understand what the governor and your local legislators are doing. Get the news that you need to know at thecentersquare.com. That's the center square.com. Thecenter square.com. Welcome back. Here are the top stories of the past week on the center square.com. World leaders are gathered in the United Kingdom for the

G7 summit this weekend. Earlier this week, U.S. Treasury Secretary Janet Yellen announced a framework for a global minimum tax on corporations in advance of the International Summit. Yellen was joined by finance ministers from Canada, France, Germany, Italy, Japan, and the United Kingdom in support of the minimum 15% tax on corporations, regardless of where they are located. Proponents, including Yellen, believe the global minimum tax would prevent a race to the bottom for countries' lowering their tax rates, but opponents, including Republicans in the United States, say the G7 agreement would be anti-competitive and drive corporations to non-G7 countries. The 47th G7 summit concludes June 13th in the UK.

To read more about this story and many others, visit thecentersquare.com. And now for a closer look, over to Dan McAulb and Casey Harper. Hello and welcome to the America in Focus Podcast, presented by the Center Square and thecenter Square.com. I'm Dan McAaleb, executive editor of the Center Square Newswire Service. We're excited to launch this new weekly podcast about the news from the past week in Washington, D.C., where we'll dig a little deeper into the most relevant taxpayer-focused news from our nation's capital. We seek to add context to our reporting at thecentersquare.com, and the other reporting you may read or have seen in the past week. Join me this week,

and most every week on American Focus is Casey Harper. Washington, D.C. Bureau Chief for the Center Square. Casey, how are you? I'm great, Dan. How are you? I'm doing well. Since this is our first effort at the American and Focus podcast, Casey, why don't you tell our listeners a little about yourself and your experience covering the news that matters to taxpayers inside the Beltway? Sure, happy to. I've been a reporter for several years out of Washington, D.C. for a few different publications. I've covered Capitol Hill. I've been part of interviews with the president. Now I'm happy to cover taxpayer issues because for whatever reason, I came into covering taxpayer issues right when things got really interesting with particularly interesting with budget spending proposed tax cuts.

And I think we're going to be talking some about that. But, you know, I've spent several years a reporter, covered the Baltimore riots, was injured and hospitalized there. Hopefully that doesn't happen here at the center school. I don't think it will, but it's really up to you to end. Well, stay safe, Casey. That's first and foremost. And something tells me that, you know, this is our first effort at the podcast, as I said. Something tells me we're not going to be hard pressed to find things to talk about.

Well, so far, as long as D.C. doesn't shut down. But even if it did, then we have plenty to talk about there. So I think you're right about that. All right. Well, why don't we jump into our first headline of the week then? new data from the federal government came out that shows inflation continues to spike. What can you tell our listeners about that? Sure. This is actually a really important story.

I think sometimes when people hear the word inflation, their eyes kind of glaze over, and it just reminds them of maybe their high school economics class. But inflation is a really serious issue. And the Bureau of Labor Statistics, which is a federal, you know, group agency that tracks these kind of things, released data this week, which showed a major spike. in inflation. Now, this same spike in inflation was shown last month and the area they covers the previous 12 months. But that's continued and even gotten worse in some cases in just the last 30 days, which is really troubling to economists. Over the last 12 months, the average price of consumer

goods has risen, something like 5%, which is the largest increase since August of 2008. Dan, can you remember anything important happening in 2008 in the economy? It seems like there was some sort of a financial meltdown, a housing bill burst and whatnot. You're right. Yeah, that's right. I'm old enough to remember that. I got a few years on you. Yeah, right. Well, yeah, maybe our younger listeners won't remember. But 2008 was, you know, one of the worst financial years in American history, especially modern American history. And so to have any economic indicators alluding to that time period is not good.

And, you know, just give an example of some things, you know, even in just the month of May, saw huge increases like household furnishings, for example, which I know you care a lot about, Dan, your big passion of yours, but it saw its largest one month. I got my purchases in last year during the high-dict. Right. Thank you. Thank you. Yeah. Right. I know you're just like on online. shopping all day while I'm working. But household furnishing saw their largest one-month increase in May since January of 1976. Now, you may think that's not a big deal, 1.6%. But if everything gets 1.6% more expensive every month, the average American is going to be a big trouble because,

you know, I know for a fact that I don't get a 1.6% raise every month. And I don't think the average American does. And so your paycheck is going to be able to buy you less of the stuff. And that's just when you think about the average person, that's where it really hits home pretty quickly, especially for people who rent and don't own a home. Your prices, your rent, everything's going to be going up even as your wages remain stagnant. Right. And just a couple of other items that I've seen, the costs of which have gone up, like used cars and new cars, the prices of those have gone up. Wooden lumber, I, that's sort of, uh, it's gone up significantly to the point where I read one story this week,

where the price of a new home, the average price of a new home has gone up $36,000 just because the cost of lumber has gone up so much. So, yeah, you mentioned inflation, you know, a big word, but it's something that is impactful to all Americans, to everyone, the value of the dollar, what you can purchase with every dollar you earn is something smaller. So we're going to have to keep an eye on that. That'll probably be a monthly story at thecentersquare.com. Yes, I agree.

Why don't we move on to our second headline then? Casey, what can you? We've talked in the past that there's been plenty of news reports about this infrastructure package, this $2 trillion infrastructure package that President Biden has been pushing. Republicans came in with something much smaller, something much less expensive. Negotiations stalled this week? Where are we at? Sure. Negotiations have been all over the place, and I think this is moving a bit slower than many in the Biden administration would like. If you may remember Biden introduced much

earlier this year a $2 trillion infrastructure bill. Now, kind of setting aside the Republican criticism over that much of the bill isn't actually infrastructure. There's kind of some debate over how you define infrastructure. Is it just roads and bridges and hard infrastructure? Can it be expanded? But kind of setting that debate aside, two trillion dollars is a lot of money. And the way that Biden has proposed funding it has been tax increases. And most notably, probably a corporate tax increase from 21% to 28%.

Now, Biden really does need some moderate, at the very least moderate, you know, support to get something like this through Congress. And so he's been negotiating with Shelley Moore Capito. She's the Republican Senator for West Virginia. She's kind of been representing a lot of the Republicans in the Senate. And they came up with a, you know, I think $568 billion plan. The White House came back with $1.7 trillion. And then the Republicans came up to almost $1 trillion, but have just refused to raise taxes. And The White House has said they're open to not raising taxes if it can get paid for, which is a big if they can somehow pay for it, two trillion dollars without the taxes. So this week, basically the White House was, I guess you could say fed up, pun intended, with Senator Capito.

And so those negotiations have really fallen apart. And now there's kind of been a realigning, a reshaping, a shifting, and how this is happening. And there's this, there's a group of senators, kind of more moderate senators who are taking over negotiations. And instead of, I think, broadly trying to get some Republicans to agree with this bill. And now the White House is just trying to get enough senators to squeeze something by. The big, the big news that we really covered this week was that the senators in that bipartisan group, the new bipartisan group that's negotiated the infrastructure bill, have indicated. that they're not going to raise taxes.

So even with the, you know, the negotiations falling apart, a new alignment coming, all this stuff, it looks like Biden getting any kind of corporate tax hike with this infrastructure bill could be off the table. So let's talk about one, you said bipartisan a couple of times. And that you don't hear that often when it comes to Congress and politicians in Washington, D.C. So maybe that should be a little bit encouraging. at least people both sides are talking to each other to some extent.

But let's let me just ask you about this corporate tax rate. Why should everyday Americans care if these big billion-dollar corporations, if their taxes are going to go up from 21% to 28%? Is there any real impact on, you know, working class America when that happens? Sure. You know, I mean, you're right. And you kind of alluded to an argument that these companies are so big, these corporations are so big, surely they can.

absorb a tax cut. But 21 to 28% is not a small increase, first off. And the second thing is, we've seen time and time again that those costs get passed on to consumers. So if you raise the corporate, just to give kind of a classroom example, if you raise significantly the corporate tax rate on an electric company, guess what? Your electric bill is going to go up. And when you spread those corporate tax rates across all industries, across all sectors, it's almost like another inflation where the... I was just going to say that. We just talked about inflation.

The cost of everything's going up anyway, regardless of any tax increases. So what you're saying is, you know, if these corporate tax rate, if Biden's plan, which is to increase the corporate tax rate from 21%, 28%, that corporations are going to pass those costs on a consumer. So not only are going to have inflation on one end, you're going to have inflation on one end, you're going to have these tax hike pass-ons that's going to raise the cost of consumer goods even more. That's right. Yeah.

And I think that's why this podcast can be really important because we're going to put things in a way, the average person, how it affects you. I mean, you hear a corporate tax rate, 28% inflation kind of sounds like, you know, this is just up in the air. Like, what is it really? But, you know, you can imagine a scenario where a year from now, say this passes. And because of inflation, the cost of everything you buy is up, you know. We'll just say like 5% a year from now. So everything is 5% more expensive, but you haven't gotten a 5% raise, very likely. And on top of that, because of the corporate tax rates, there's another maybe, I mean, you can only speculate how much the cost we bought, but your electric bill is more expensive.

Your car is more expensive. Your gas is more expensive. And so, you know, for some of it because, you know, 10% increasing costs, when many people are finding unemployment, it's, it is really significant. And that's just within 12 months, not even counting. the economic impact, economic loss over several years or even a decade that this could have. Right. And just before we move on to our next headline, too, I just want to also mention two, corporations also when they face these kinds of tax increases, yes, they absolutely pass some of those costs on the consumers. But they also look at other expenses, including payroll.

Right. Yeah. And look to cut expenses. So that affects jobs, that affects salaries, things like that. So just so our listeners, you know, are aware, when you're talking about corporate tax hikes, it's just not tax hikes on big businesses, right? Because there is an impact on the entire economy. There is. And, you know, like you said, millions of Americans work for a corporation. And I think people hear the word corporation or the rich, and they just think of like Jeff Bezos or Bill Gates.

But, you know, if the government, again, guess what? The government definition of those terms is much broader. You know, the IRS isn't saying, oh, you're not Jeff Bezos. You don't have to pay this tax. We'll let it go. You know, they have a broader definition and affects a lot more people. Absolutely. Moving on then, Congress earlier this year passed another COVID stimulus bill, $1.9 trillion, this one, that included a number of different things that similar to stimulus bills, from last year from 2020 under President Trump. This one, however, included a bailout of states and local governments.

A new study addressing the bailout was released this week. And what did that study show, Casey? Yeah, this is a really interesting study that. It was really just looked at actually the last several stimulus bills and saw how is that money distributed? I think that's kind of a question a lot of people ask. You know that people know they got their $1,000 stimulus check. or however much it was depending on your income. But people got their stimulus check, but there's a lot of other money in there.

And I think a lot of people don't know where it went. But you're right. It went to some state and local governments. And then the next question is, was it distributed fairly? So this study basically looked at the most recent stimulus bill, the $1.9 trillion dollar COVID stimulus bill passed when Biden took office. And it found something pretty interesting, which is that that money was disproportionately distributed to Democrat-led states.

or blue states. And so. So let me just, let me just make sure I'm understanding this. Democratic controlled states, states run by Democratic governors, Democratic legislatures essentially, essentially got a bigger slice of this stimulus pie. That's right. Yeah. And why is that? Well, the why?

Yeah, I mean, it's a good question. So just to put a little more finer point on it, though, you know, I'll read this quote from the studies. is a fully democratic delegation predicts a $300 per capita increase in federal funds under unified democratic control of the federal government relative to the previous years divided government. So that's kind of confusing. But basically, fully democratic state, $300 more per person was kind of the average. Now, that is like an average. It's not specific. But that's not nothing when you distribute that over an entire state's population. And there's a few reasons for it. part of it is the formulas that the federal government uses to distribute. We can talk more about those,

but a big reason for it is that they wrote this bill to help states that had higher unemployment rates. Now, you know, you can make a lot of arguments as to wine, but right now the blue states by far have higher unemployment. States like California, states like New York. Now, Republicans have really shot back and fired back about this, and they even warned about it, actually. McConnell, Mitch McConnell and others warned this what happened because they said this bill was really written to give the money more to blue states. And they say it's not fair because the blue states have been, stayed, you know, shut down for too long during COVID, according to them. And also that these blue states have passed, you know, poor economic policies, whether it's high tax rates or other things that have led to this unemployment right. Now they're being rewarded.

And, yeah, one thing to keep in mind, too, we're talking about $1.9 trillion in federal taxpayer money, this stimulus bill. So this is federal taxes. We, you, me, our listeners, you know, just about everybody, anyone who works contributes, pays federal taxes. And this is federal taxes that was, our tax dollars, that was sent back to the states or as being sent back in the states. I think it's going in waves to the states. Do you think in this latest package favors Democratic run states, do you think that was deliberate? I mean, is there any evidence that was deliberate?

Is it just happenstance that had happened this way? Any insight into that? Sure. I mean, it's some level, you know, it's a little bit of speculation to talk about the motives, but I think it was deliberate, mainly because that, you know, this is not a secret.

really people in Congress, Republicans in Congress, were saying this is going to happen. We've read the bill. This is what's going to happen. And now this data that we've reported on this week confirmed that it turns out those fears were correct. So I do think it's fair to say that, you know, the Democrat-led government this year knew what they were doing. And, you know, they have a pretty good, I don't know, I wouldn't call it an excuse. use, it's just kind of reasoning.

You say, well, hey, we're giving it to the States with the highest unemployment. You know, what are you going to do? So that's a pretty good line of reasoning. But this often happens with these stimulus bills where the legislators who write the bills use formulas that appear just purely mathematical, but they know the answer to those formulas. So, for example, you may have transportation funding and they'll say, okay, the transportation funding will be distributed proportionate to the number of bus miles in the municipalities. So that sounds kind of like a reasonable thing to do.

And you could say it is. Maybe you think it is. But when they choose to use that formula, they know for a fact which states have the most bus formulas already. It's no secret. It's not like, well, we'll just do it based on this and find out where the money goes later. You know, they know exactly.

They know where the money's going. Right. Right. And so that's kind of how these formulas, and I've talked to some experts this week about that, how those can be kind of twisted in these kind of situations. But I think the real thing here, though, is that there are, you know, families in red states that are paying taxes that wanted the government to open up and not stay shut down for so long. And they sent their money to Washington. And then that money was then sent to a blue state that has high unemployment because they stay shut down

for so much longer. that's kind of like an anecdotal example of why people are upset about this, right? And that's a very important point, particularly as we're coming out of the pandemic, things have opened up. I'm in Illinois. You're, of course, in the Beltway in D.C. I'm in Illinois. We just opened up today. We're recording this on Friday, June 11th. So the economies are opening up. So it'll be interesting going forward. because there's talk about even another stimulus package. It's not gaining any momentum at this point, but who knows.

So those are just things we're going to have to pay attention to and probably talk about in the future. Time for one brief, a little bit of time for one last story. Casey, a big national story since President Biden took office. Illegal immigration has soared since January. This week, new data from May came out. What's in that data? I'm sure. So basically the data from May showed that 180,000, roughly 180,000 people were encountered by border protection agents trying to illegally enter the country.

Now, 180,000 in one month may sound high to you, and you'd be right. The numbers are high since Biden took office. You can speculate. And there's a lot of people arguing about the reason for this. Some people attribute to COVID, others say it's Biden's policy. but, and it may be a combination of both, but there's been a huge spike even this year. So in February of this year, the, there was about 100,000 people trying to caught illegally trying to enter the country. And even since February, the number has risen to 180,000. So it's a big increase. It's been about that level since March. So it stayed consistent.

So we're having, getting upwards of 200,000 people trying to enter the country illegally. If you want to think about a taxpayer angle on this, you know, there's, depending on your state, there can be different levels of benefits that immigrants of this kind can perceive, not to mention infrastructure things. But I think this is an issue that clearly defined the 2016 election is something we're going to keep watching. And another interesting fact is that 38% of the people who were encountered in May, trying to illegally cross were people who had been caught trying to go before. And so I do think it shows kind of a flaw in the system where it's like, you know, you get caught.

There's not really any fear. You just get caught and you'll get out and you'll just try to come back again. And the other backdrop of that is that the Biden administration has really plummeted the arrests from ICE, immigration and customs enforcement. So less and more people coming over, less enforcement of it. I know border states, particularly in Texas, Texas Governor Greg Abbott has, is up in arms over this and how this illegal immigration, the surge in illegal immigration has affected his state, particularly border communities.

Texas and other states have filed suit against Biden's illegal immigration policies saying they violate federal law. So there is, and the cost of housing, putting these illegal immigrants up in temporary facilities, you know, and feeding them and transporting them when they get full, when these facilities get full, So there is a huge cost on taxpayers, not to mention the increasing in crime. Now, certainly many of these people you feel for them they're fleeing horrible situations

in their home countries. That does not mean that we should be responsible for what's going on in their home countries, but not all of them are criminals, but some portion of them are. human trafficking has soared the federal government has said since the surge in illegal immigration has occurred. So there are dramatic impacts, particularly on these border communities, but essentially federal taxpayers end up footing the bill. Right. I think, you know, just looking at it for purely just the economic impact, you imagine that you're a small border town with maybe 40,000 people and there's almost 200,000 more people coming in every month. I mean, the impact that could

have on so many different factors from, you know, housing prices, you know, where do people live? The system is set up to like to integrate people over time in a systemized way, but having almost 200,000 coming in illegally at, you know, spots where the, I guess you said the border is more soft is not a good system for long-term success, especially for those border communities that are struggling just from an infrastructure, logistical, financially to handle so many people. Thank you, Casey. We've run out of time. We covered a lot of issues this week that will be ongoing and recurring that we're reporting on at thecenter square.com. Thank you for joining me this week on American Focus. We'll see you next week. Thanks, Stan.