Marketplace - America’s got a power grid problem

Episode Date: July 12, 2024

Nearly a million Texans are without power after Hurricane Beryl damaged an already fragile energy grid. As they wait for the lights come back on, we’ll explain why pretty much the whole country needs costly energy grid updates, especially as climate change makes weather more extreme. Also in this episode: Students who attended for-profit colleges are drowning in debt, and legal experts break down what might happen to federal regulatory agencies without the Chevron deference.

Hey everybody, it's Kai. Listen, is it time to upgrade your car? Give it new life by donating it to Marketplace. We'll use the proceeds to bring you more news about finance and the economy and how they affect you. Let us turn your old car into a donation to power the journalism you rely on. Go to Marketplace.org slash vehicle to donate your car today.

Some mixed signals on inflation, keeping the lights on in the age of climate change. And it wouldn't be Friday without the weekly wrap. From American Public Media, this is Marketplace. In Baltimore, I'm Amy Scott in for Kai Rizdal. It's Friday, July 12th. Good to have you with us. It has been a week, eh? I'm talking about the macro economy, of course. We got some new inflation data to sort through, two days of testimony by Fed Chair Jay Powell

before Congress, so much to talk about with our guests, Rachel Siegel at the Washington Post and David Gura at Bloomberg. They're here to recap the week that was. Hi, you two. Hey, Amy. All right. So, Rachel, a big week for Fed watchers like yourself. We had Chairman Powell testifying on the Hill and he repeated a theme we've been hearing a lot, which is that the Fed wants to see more good data before it starts cutting interest rates, and then we got some good data on inflation yesterday. So what was your takeaway on how close the Fed might be to having that confidence?

Yeah, the week really turned out to hand Chair Powell the exact kind of report he's looking for more of. And I think by the end of the week, there's been this real rally around a September cut. We haven't heard that officially from Fed officials themselves, but the sense is that they probably won't have time to get their ducks in a row to cut by the July meeting. And the one after that is September. And with the inflation picture looking the way it is, as well as the job market, they don't really seem to have a reason not to go ahead and cut. All right. But as I said, the inflation picture looking the way it is, as well as the job market, they don't really seem to have a reason not to go ahead and cut.

All right. But as I said, the inflation data we've had this week was mixed. Today we got a little bit of a hotter measure of wholesale inflation, David. The PPI for June was up 2.6% from a year ago, higher than in May. Does that muddy the picture a little bit for the Fed? I think only a little bit. I mean, you saw markets react really favorably to those consumer prices that we got the day before the PPI. Yes, services costs were up. It was slightly more than expected. But I think the Fed can get a lot of confidence from what it saw in

those consumer price index numbers. Just indicates that this fight that they've been waging for so long now against high prices is back on track. There was some concern at the beginning of the year, maybe it was going a little off track. Now it seems like things are working. And you mentioned that Jay Powell was on Capitol Hill this week. He was up there two days in a row. And something he said he wants to see is more good data. This is like certainly an example of that.

And I think it's going to give them more confidence, as Rachel was saying, to get closer to cutting those rates. And I think the only complicating factor here moving forward is we're getting very close to the presidential election in November. There are just a handful of meetings before then. So that's bound. If anything's muddying the waters, I think it's the fact that there's the sense that maybe the Fed would be seen as acting politically, even if we've seen the Fed chair over and

over again be adamant that that would not be the case. Right. And that came up in those hearings, just the idea that a September rate cut could be politically timed. But of course, he's been signaling all along that we might start seeing it around then. So, Rachel, I'm curious what other data the Fed is going to be looking at or wanting to see in that positive category. Obviously, the job market has been weakening a little bit. Where does that position the Fed as it thinks about cutting rates? Yeah, you know what's interesting is for so long there has been this laser focus on the

inflation fight, right? That even though the Fed has a dual responsibility to keep an eye on inflation and help the labor market grow as long as possible, the last couple years just made it an inflation story and that was where their focus was. Now you're hearing more and more officials say that the risks are actually pretty balanced on both sides and we haven't seen major cracks in the job market. We're not seeing massive layoffs. We aren't worried about a near term recession,

but you don't wanna push it. You don't wanna keep rates so high when the inflation picture is looking better. And that means that their dashboard is a little bit wider. They have to be more mindful of the job market when making decisions. And that's the reason they're inching closer to finally cutting. David, I want to ask you about a topic you covered on your show recently, the big take. And that was the idea that the Fed's 2% inflation target might not actually be the right target

anymore, especially if it requires doing real harm in the job market to get there. What's the argument there? Yes, I talked to Mohammed Al-Aryan, who's a big investor and he's really been at the forefront of making this argument and as Rachel said, the Fed has this dual mandate, focuses on jobs and focuses on inflation. And the argument that Mohammed Al-Aryan is making is that that 2% target is, as he sees it, kind of arbitrary. It hasn't been around that long. Yes, a lot of central banks have adopted it, but it really is kind of a number that the

Fed picked, yes, after a lot of research. But the world has changed since they put that figure in, put that target in. It's not a world of deregulation and liberalization and fiscal prudence. We're kind of seeing a more inherently inflationary world that's more fragmented. And you're hitting on exactly what his argument is, is if you look at the Fed trying to get to 2% and if to get to 2%, it means a lot of people are going to lose their jobs. Is it inherently worth it? And I should say he's definitely loudly making this argument and he claims that other people are kind of getting on board with it but it is still very much out of line with what a lot of economists are saying and

certainly what the Fed is saying as well he is adamant he was adamant on Capitol Hill this week and is at press conferences and other testimony that you know 2% is the Fed's target that's their goal here that's what they're marching toward and they're gonna do all that they need to do to get it there. All right David Gura is at Bloomberg Rachel Siegel is with the Washington Post. Thank you both so much and have a great weekend You too, Amy. Thanks It was a buoyant day on Wall Street we'll have the details when we do the numbers So Five days after Hurricane Barrel hit Texas, nearly a million people in the state are still without power, many in and around Houston.

The power company, Centerpoint Energy, says it expects to be able to restore 80 percent of the outages by Sunday, but that still means hundreds of thousands of people could be without power into next week. Texas has been in the news a lot in the last few years for major power outages, but as climate change makes all kinds of extreme weather more common, power grids around the country are becoming increasingly vulnerable. Marketplace's Samantha Fields reports. Most of the power grid we use today was built more than 50 years ago. So we have lots of old power lines often on wooden poles, lots of old transformers, lots of old equipment. Daniel Cohen at Rice University in Houston says many of those old poles and lines are also near

trees. All that is at big risk when we have winds that gust it up over 80 miles an hour like they did in this storm. As climate change makes storms more extreme, Kohan says much of our existing power infrastructure needs to be replaced. Really it comes down to building out stronger poles, stronger switches, having systems that can better sense where the outages are so crews can respond more quickly. Utilities also need to invest in shoring up the grid so that it can handle increased demand when temperatures soar or when they plummet. But Joshua Rhodes at the University of Texas at Austin says for now, at least, power outages

from storm damage are more common. The vast majority of times when people lose power, it's because of failure on the transmission or in the distribution system, the small wires and poles that take the electricity the last mile to your home or business. So he says if the goal is to keep the power on, we really need to focus on hardening the distribution network. Starting in neighborhoods where power goes down the most often, Rhodes says, because utilities aren't going to be able to overhaul the whole system at once.

This is not something that happens in an order of weeks or months. This is something that's going to take years to develop and potentially, you know, decades to fully roll out. For one thing, getting regulatory approval for these kinds of projects can take a long time. And they're also expensive, says Ramtin Siasani at Carnegie Mellon University. At the end of the day, someone has to pay for these types of investments to make electricity supply more reliable. And so there's always this trade-off.

Between wanting to make electricity more reliable, he says, and wanting to keep it as affordable as possible. I'm Samantha Fields for Marketplace. We've been talking a lot in the last few weeks about what a recent Supreme Court ruling means for what's known as the administrative state, that is, the federal agencies that issue and enforce regulations. Quick recap, the ruling in Loper Bright Enterprises versus Raymundo killed a decades-old legal doctrine known as Chevron deference, which basically said that when federal laws aren't clear, courts should defer to the interpretation of regulatory agencies. The Supreme Court ruled instead that federal judges should rely on their own interpretations. To get a sense of what the regulatory future might hold, we

asked Marketplace's Kimberly Adams to look back to the past and what things were like before the giant federal bureaucracy we have now came into being. Here's Kimberly. To trace the origins of the administrative state, you need to go back more than a century. John Vecchione, a senior litigation counsel for the new Civil Liberties Alliance, and was one of the lawyers who helped overturn Chevron. Before the 1920s, I'd say, there was not that many administrative agencies. They didn't touch American life that much. Around the turn of the century, a new wave of lawmakers, the progressives, argued that the existing structures of government didn't do enough to protect workers, the food supply,

the environment. Mark Tushnet is a professor emeritus at Harvard Law School. The progressives thought that the legislatures were not adequate, partly because they thought that they were under the control of interest groups. Often, in their view, they were corrupt. Doesn't sound familiar at all, right? In addition to thinking that Congress was in the pocket of the so-called robber barons of the era, Tushnet says progressives believed the courts

couldn't be proactive, only reactive. They had to wait for people to bring problems to them, but things like accidents to workers, the courts couldn't do a good job of addressing why it was that so many workers were getting injured. Then in the 1930s, as America struggled through the Depression,

President Franklin Delano Roosevelt expanded the federal government with a bunch of new agencies with some success. Here he is speaking in one of his fireside chats from 1934. We have through various federal agencies, paid debtors and creditors alike in many other fields of enterprise. The Supreme Court pushed back, so FDR tried to pack the court. Eventually, says Craig Green, a professor of law and government at Temple University. FDR didn't get to pack the court, but he did get to pack the government.

And the Supreme Court, since the 1930s, has been relatively hands-off in managing the administrative state. He says that has meant letting experts at federal agencies respond to new developments as they come up, rather than waiting for Congress. The emergence of the federal administrative state made it a national economy, and they wouldn't have to wait for new statutes passed every year or every new crisis, because there's just not time for that. Fast forward to the 1970s and 80s, when a new generation of federal judges had different

ideas about the balance of power among Congress, the agencies, and the courts. Ironically, the original Chevron decision was to keep the judges in their swim lane. Susan Dudley is founder of the George Washington University Regulatory Studies Center. She says after Chevron, agencies took that deference from the courts and used it to take on additional powers. And now the concern is that it's gone too far the other way

and is not allowing judges to do what they should do, which is say what the law is, and is also giving Congress a free pass when they don't do what they're supposed to be doing. The recent Supreme Court decision swings the pendulum back the other way. But John Vecchione at the New Civil Liberties Alliance says it's alarmist to assume we're going back to the excesses of the Gilded Age. We have a lot more laws and administrative agencies than the 19th century, and those laws don't go away. The regulatory power is still there, but they don't get congressional power to define the law.

And while the decision marks a major shift, experts are divided on just how much will actually change. Here's Mark Tushnet from Harvard again. The agencies that existed before Chevron were doing decent, not great, but decent jobs handling the problems that they were supposed to handle. In a world without the Chevron deference, Tushnet expects that agencies will do decent, not great jobs with the new challenges that come along. In Washington, I'm Kimberly Adams for Marketplace. Coming up... I used up eight of my nine lives on that job. That sounds dangerous, but first let's do the numbers.

The Dow Jones Industrial Average rose 247.6% to finish at a record 40,000 even. The NASDAQ added 115.6% to close at 18,398 and the S&P 500 increased 30 points, 6 tenths percent, to end at 56.15. For the week, the Dow was up 1 and 6 tenths percent, the NASDAQ expanded 2 tenths percent, the S&P 500 gained 9 tenths percent. AT&T was hit with a massive data breach that affects nearly all customers of its cell and landline networks. The telecommunications company says the data did not contain call or text content or personal information, but it does include the phone numbers and duration of calls or text conversations. AT&T has more than 90 million direct subscribers, but also has a number of customers through brands that resell service on its network. AT&T dipped 0.3%. A number of banks reported earnings today. JP Morgan Chase beat analysts'

expectations, reporting revenue of $50.99 billion. JP Morgan Chase fell 0.1% and 0.2%. Also reporting was Citigroup, whose revenue came in above expectations at $20.14 billion. Citigroup descended 1.8%. And let's look at some of their competitors. Bank of America, which reports on Tuesday dropped 0.5%. U.S. Bank Corp, which comes out with earnings next week also was up 0.4%. Bonds rose. The yield on the 10-year T-note fell to 4.18%.

You're listening to Marketplace. This is Marketplace. I'm Amy Scott. In the world of higher education, there are public colleges and universities, private nonprofits and for-profit chains like DeVry and the University of Phoenix. For-profit schools often promise a fast track to a degree and a better job, one you can work toward while doing the job you already have, raising your kids or both.

But an investigation by WBEZ Chicago found that many students who attend these colleges in Illinois end up worse off than typical high school graduates. From Chicago, Lisa Curian-Philip has more. After her kids get on the bus to school, Nyka Ewing gets into her car and eventually starts it up. I do this quite a few times. She has just a few hours to make some money picking up and delivering food orders.

But sometimes she's not even making enough to cover gas. That's why I'm like, uh-huh, DeVry, something gotta come because I can't keep living like this. Ewing says she was pregnant with her first daughter when she saw a commercial on her local news channel for DeVry University that's a chain of for-profit colleges with campuses across the country. She says the ad promised a bachelor's degree in three years and job placement within six months afterwards. Five years and more than $60,000 in student loans later, Ewing still doesn't have a degree or a job other than dropping off other people's takeout.

I'm like, so where I'm going? Like, you know, you feel kind of bamboozled a little bit. WBEZ analyzed federal data and found low-income students and Black students like Ewing attend for-profit colleges in Illinois at much higher rates than other groups do. As of 2022, more than 50,000 students were enrolled at for-profit colleges across the state.

This spring, the station surveyed 250 current and former students about their experiences and heard that many of them were stuck in low-wage jobs and, like Ewing, struggling with thousands in student debt. Aysa Controla-Bañas is policy director for the Student Borrower Protection Center. The for-profit kind of playbook is to meet these communities where they are, capitalize on those lack of infrastructure, lack of funding, lack of opportunities, and then dangle that promise of economic security, economic stability, economic mobility to these same folks. DeVry specifically has paid for some of these promises. In 2016, it and its parent company

settled with the Federal Trade Commission for one hundred million dollars over its allegedly deceptive ads. A bachelor's degree from DeVry University could change your tomorrow if you do something today. For-profit schools are able to keep attracting students because they give the perfect pitch, says Dominique Baker. She's a higher education researcher at the University of Delaware. She says they are pointed at

a key demographic. People in those ads have children, they are more often older, and those ads frequently have black women more often than other institutions' ads do. So in every sort of way, these for-profit institutions are creating an image of being incredibly welcoming to black women in particular. WBEZ's survey also found that once students come through the door, the bottom often drops out. Some students we spoke to said the instruction did not live up to their expectations and in some cases was nonexistent. Ewing says in many classes for her software engineering degree,

she's had to use class materials to teach herself. On one hand, you know, it makes you feel good when you can teach yourself something. But then on the other hand, it's like, this is what you're paid to do. You're paid to help me. So help me. DeVry says in a statement that Ewing's account of her experiences is inconsistent with the information they have. And some students who filled out the WBEZ survey reported positive experiences with their schools and say they were able to get lucrative jobs. This month, the Department of Education has introduced new rules governing for-profit

training programs, those that leave students with a certain amount of debt and not enough income to pay it back could lose access to federal funding. I'm Lisa Corian-Philip for Marketplace. Earlier in the program, Kimberly talked about the economy before the administrative state. Now we're going to look at another historical era before email. Here's the next installment of our series, My Analog Life. My name is Ray Charlton and I live in Corvallis, Oregon. Back in 1983, I was working as a motorcycle messenger in Los Angeles, picking up and delivering papers basically.

At this point in time, a signature on a piece of paper that had been faxed was not considered legal. You had to have ink on paper and that ink had to have come out from a pen. For people who needed things done in a hurry, I'd pick up the paperwork, take it to your house, you'd sign it, I'd wait, Few minutes later, they handed back, zoom off I went. In 10 months time, which is the amount of time I had the job, I rode 40,000 miles. Riding a motorcycle, I could split traffic. So I was never held up.

I was actually pretty good at finding my way around and remembering where I was going and how I got there. But if not, then I just whipped out the Thomas Guide and stopped by the side of the road and figured out where I was going. I got paid half of the fee that we charge the customer. I like to tell people when I'm talking about this part of my life, I've used up eight of my nine lives on that job. That was Ray Charlton in Corvallis, Oregon. You can ride down memory lane by writing to us electronically at marketplace.org slash my analog life this final note on the way out today we've talked a lot about inflation this

week so how about we end the show with some deflation CNBC has a rundown of some of the items that cost less now than they did a year ago, from the latest Consumer Price Index for June. Apples were 12 percent cheaper than a year ago. Ham and potatoes, each down about 4 percent. Cheese fell 2 percent. Dishes and flatware down about 10 percent. Same with used cars and trucks.

And good news for summer travelers, airline fares, hotel and rental car rates and gas all down. Our theme music was composed by BJ Liederman, Marketplace's executive producer is Nancy Fergalli, Donna Tam is the executive editor, Neil Scarborough is the vice president and general manager, and I'm Amy Scott. Have a great weekend. We will be back on Monday. This is APM.