Marketplace - Campaign promises and what happens later

Episode Date: August 17, 2024

The presidential campaign has been full of economic promises. Do you pick the contender vowing to reduce food costs and invest in housing? Or the one promising more tariffs and oil drilling? Promises can become targets for the opposition, even if they have little chance of being carried out in their original form. Which leaves some voters wondering: Do policy goals pitched on the campaign trail matter? Plus: The insurance boogeyman creeps up behind condos and a Pennsylvania town navigates life without a coal plant.

Cornucopia, perhaps? A plethora, maybe, or a multitude. Whatever, we've got a bunch of stuff to talk about on this Friday from American Public Media. This is Marketplace. In Los Angeles, I'm Scott Rizdall. It is Friday today. This one is the 16th of August.

It is always good to have you along, everybody. Believe me when I tell you, there is no shortage of things to talk about in trying to sum up the last five days in this economy. So in we shall dig. Jordan Holman is at the New York Times. David Gurra is at Bloomberg. Hey, you two. Hey, Kyle.

Hey, Kyle. David, let me start with you. We will start with the consumer price index, which came out the other day, 2.9%. The lowest reading we've had in better than three something years. Good and all, and there were many huzzahs, but as I said to Atlanta Fed President,

Rafael Bostic on the program yesterday, I guess, I said, pretty good, right? And he said, well, look, 2.9% is not 2%. Discuss. Yeah, Dr. Bostic, in that interview, repeating what we've heard from him and other Fed policymakers, that the target is 2%. It's not 2.9%. It's not 3.2%, I think he said.

So they're really adamant they're going to get to that point. And of course, the last mile in this fight against high inflation is known to be the hardest. They've acknowledged that it's going to be the case. So we should cheer this number that we got this week. It's a far cry from what we had back in twenty twenty two, that nine point one percent reading. So the Fed has made a lot of progress here, but they are still adamant. Dr. Postick and his colleagues still adamant that we have a long ways to go yet to get to that two percent target.

And they're not going to stop until they get there. Jordan, I want to get to retail with you in a minute because that's the other big chunk of this week's economic news, but I do want to pick up on something David said, the hard part. Bostic has said to me and Powell has said, and many of these Fed officials have said, the last little bit is going to be the hard part. Why is it hard? It's moving in the right direction.

Yes, unemployment's up a little bit. What makes this now hard for the Fed? You know, the Fed has this role of keeping mind of two things. So inflation is one, the jobs market is another, and there is this sense that now the jobs market is going to be what they have to focus on more. I think he said the same thing to you yesterday. He didn't sound worried as I listened to him about the labor market, but he did say that he's thinking about it more more and I think that's true of the entire Fed

It is a delicate dance pick your metaphor They have to do this very carefully and the thing that he said he's fearful of is moving too quickly Cutting rates before the work is done and then having to kind of backtrack and raise them again. So they're proceeding cautiously They're gonna get some more data before their next meeting. Of course the Fed They're proceeding cautiously. They're gonna get some more data before their next meeting. Of course the Fed Looks at the CPI, but they care a lot more about this personal consumption expenditures price index We're gonna get that on August 30th And then a new jobs report on the 6th of September and of course That's the thing that spooked everybody spooked them and spooked the markets as well was that reading in the last report?

That was much lower than than they thought we were gonna get a parenthetical and personal observation and then Jordan We're gonna come to you for retail sales. Nobody has yet explained to me why it would be the end of the world if the Fed cuts and then in three or four months has to raise, but that's a topic for another podcast. We'll get there eventually. Jordan Holman, two words for you, Walmart, go. I know it's only one word.

It's one word now, but Walmart. So people were looking at this as another possible data point just to see how the economy was faring. Largest retailer in the world, and that's kind of how people assume it's about weather. But Walmart's earnings were really strong. Walmart was saying, we're doing good. We don't see any weakness in our consumer. What was interesting was talking to some retail analysts saying, well, actually, maybe that's a bad thing that so many people are coming to Walmart, because maybe everyone's stressed and they don't have any money and they just have to spend at Walmart.

But Walmart is just saying like, no, this is not a sign of that. And so I think we have to put Walmart to the side. The next few weeks, we're going to get a whole list of retail earnings. So we're going to get a whole list of retail earnings. So we're going to see Target, Macy's next week. And I think that will be a better measure of where we are when it comes to discretionary spending and how willing people are to spending. Not to jump into the, and pun very much intended here, not to jump into the political food fight of the moment about grocery prices.

But Walmart did say, right, that a lot of their growth, a lot of their revenue was from groceries, right? People are going there to buy food. Yes. And they're contending that that's because they're getting more people. For the past few quarters, Walmart has been saying that people making over $100,000 are coming to them more often for grocery, just because if that's a place, you know, that people are trying to save at, go to Walmart. But they are stepping within this. The context here is the conversation around price gouging. We're expected to hear that from Paris, that being part of her economic policy. But when I was speaking with Walmart CFO, he was really emphasizing that they are trying to do a better job of negotiating with their suppliers to get that price down because there are still some CPG companies that are trying to pass

price along to shoppers. CPG, for those of us who are not retail reporters? Consumer packaged goods, so the snack foods. Thank you very much. Super quick, Jordan, and then I got one more for you, David. Consumers, we are getting more choosy in where we're spending our money, right? We're still spending, that's what the data says,

but we're picking and choosing. Yes, so we're choosing on price and we're choosing on convenience. If we can go to one place to get all of our needs met, that's what we're gonna do. And that's why Walmart is really seeing a lift right now. You're always seeing that with Amazon, but when you're thinking about places that have food, That's what we're going to do. And that's why Walmart is really seeing a lift right now. You're always seeing that with Amazon, but when you're thinking about places that have

food, that have your clothes, that have your back to school, that's what's going to happen. And that's why a lot of analysts think some of these other earnings we're going to get from companies will be weaker because they're not a one-stop shop. Right. Okay, David, Austin Goolsbee, the president of the Chicago Fed, was on another public radio program today whose initials are morning edition, had a nice little chat with Steve Okay, David, Austin Goolsbee, the president of the Chicago Fed was on another public radio program today whose initials are morning edition, had a nice little chat with Steve Inskeep. And Inskeep put to him the question of the September meeting and basically whether it

was a question of a big cut or a small cut. And Goolsbee dodged, but it is possible that they go with a half percentage point cut? What do you think? It is. And you look at sort of what the data is telling you, what investors are thinking about that, and it's a pretty close, could be a quarter point, could be a half point. The big event, aside from all the data, is going to be the speech that Fed Chair Jay Powell is going to give next week at the Jackson Hole Economic Symposium that's convened by

the Kansas City Fed. It is an opportunity for him to telegraph a bit, throw some tea leaves out there for us to try to read, and we'll see if we get any more of a sense of sort of what he's thinking. But you're right, it could go either way here. Obviously, the Fed wasn't happy with that job support. I mentioned a few minutes ago, caught them off guard.

If they feel that they need to cut by a half, I think they could do that, and that meeting next week could be a time when he could kind of convey that to investors and folks like you and me as well. Right, super quick, David. I'm talking like 15 seconds. Fed's chair speeches are always big.

This one, it does not seem like there's been a lot of buzz about what Powell's gonna say, sort of in the Fed watcher universe. Yeah, I think that's true. And he's, as you know, he repeats a lot of what he's thinking say, sort of in the Fed Watcher universe. Yeah, I think that's true. And, you know, he's, as you know, he repeats a lot of what he's thinking over and over again. I think that we're likely to hear more of that as well. So there's a lot of boilerplate here, but you're right.

There hasn't been the kind of fervor or buzz around this one that we've seen with speeches passed, including ones at Jackson Hole. David Gurra at Bloomberg, Jordan Holman at the New York Times. Thanks, you two. Have a nice weekend, all right? Have a great weekend. You too. Bye. Wall Street today as we pass the halfway mark of August. Bloomberg Jordan Holman at the New York Times. Thanks, you two. Have a nice weekend, all right? Have a great weekend. You too, bye.

Wall Street today as we pass the halfway mark of August up, but not enthusiastically. We'll have the details thick and fast this week. Vice President Harris today in North Carolina promising to cut food costs, as we mentioned, making housing more affordable. Former President Trump yesterday afternoon at his club in New Jersey rambling, it has to be said, about energy costs and immigration restrictions and tariffs and many, many, many other things.

But what exactly is the relationship between economic promises on the campaign trail and economic policy in the Oval Office? Marketplace's Kimberly Adams made some calls. When making promises about the economy, presidential candidates have to strike a balance between making their general case for why they'd be a good president and not giving their opponents too much to work with. John Berlaw is director of finance policy at the Competitive Enterprise Institute. It's sometimes a conflict because we would want people to be flexible as the facts goes, but I think voters want specifics. And there's only so much control a president even has over economic policy, points out

Caitlin Legacchi, who worked for the Commerce Department under Biden. A lot of this depends on the makeup of Congress. And so as much as presidents lay out their agenda and their visions, it's not entirely up to them. But campaign promises do give a voters a sense of what a candidate will attempt and creates a framework for voters to judge them if they run for reelection. Lanhee Chen is a fellow at the Hoover Institution at Stanford University. Presidents always try to do what they can to follow through on those promises because

politically there's a price to be paid for those who don't. Whether a candidate's promises about the economy even land with voters kind of depends on how the economy is doing ahead of the election, says Tabitha Bonilla, who teaches social policy at Northwestern. If the party in power is presiding over a weaker economy, that tends to make voters more skeptical of the promises that that campaign can actually be effective on the economy. But if the economy is in good shape and or improving, voters may be a bit more inclined to give them another shot at running the government.

In Washington, I'm Kimberly Adams for Marketplace. Lost sometimes in the conversation about home prices in this economy, high, is the price of home insurance in this economy, also high. S&P Global Market Intelligence says it jumped more than 11% just last year, insurance did. It's up nearly 20% since 2022. Texas, Utah, and Arizona have seen the worst increases, and tens of thousands of policyholders here in California in the high-fire risk areas have lost their coverage altogether. But here's the thing, it's not just people living in those high wildfire or flood areas

who are facing higher bills. Marketplace's Kaylee Wells has this next story from a condo complex smack in the middle of LA. Diane Dumas moved into Village Green in 1990. She'd just gotten divorced and wanted a one-bedroom condo. Village Green is smack in the middle of the busy concrete neighborhoods of South LA. The 1940s townhomes and bungalows encircle a giant manicured green space. It wasn't until I went inside and saw the center and I thought,

oh my God, it's a park in here. By LA standards, it's kind of affordable. At least, it was. I had no idea what the cost would be. Dumas and her neighbors pay an HOA fee that covers maintenance, landscaping and insurance. Dumas's fee went from $523 per month to $628 per month. With my income frozen with Social Security and a pension, I have to be really careful. The 20% increase is the maximum allowed by state law.

The insurance on the property actually went up 475%. There are several possible causes, but wildfire risk isn't one of them. So Dumas has been cutting costs wherever she can. I got the lowest price package for TV. It kept going up. I cut out the LA Times except for weekend. I thought I would never do that. Lylea Hickman This story doesn't surprise Melanie Barker. She's the president of the

California Association of Realtors. Melanie Barker You've got owners that are saying, hey, I can't afford my insurance. Lylea Hickman One reason, insurance companies seem to be more cautious about insuring condo complexes. Remember the Surfside condo complex in Miami, Florida, that collapsed and killed 98 people three years ago? The building had a bunch of steel that corroded and it turned into a huge claim

that demonstrated the risk of insuring massive buildings. And so that is now a risk that insurance companies are like, oh no, if you can't prove you've done all of these things, either retrofit or built a certain standard, then it's, yeah then it's pretty expensive. The second problem for condos, insurance companies are more worried about the risks that come with a bunch of people living really close to each other.

Kimberly Lilly chairs a state legislative task force on insurance. If you insure the entire thing, that's a lot of risk just in one small location. So if there is a fire, that fire is going to possibly hurt or destroy a large proportion of what you're insuring. But the really big problem, and this one affects condo owners and single-family homeowners alike, is climate change. California's Department of Insurance says wildfires have contributed to insurance companies requesting more than $8.5 billion in rate increases since 2015. The definition of insurance is that we're all in a pool together, and there's some

high risk and there's some low risk, and that's how the carriers can manage it. Just like health insurance, she says, those of us who are healthy pay to subsidize those of us who have chronic conditions or got unlucky and broke a collarbone. Diane Dumas And when we have the benefit of that, we're very happy. But when someone else has the benefit, we might turn around and say, but wait a minute, why should I pay for them? And the answer is because they would pay for you.

Lauren Henry Diane Dumas from Village Green gets the idea in theory. In practice, the insurance spike is forcing her into a bleak reality. Diane Dumas It's the first time I started thinking, in theory. In practice, the insurance spike is forcing her into a bleak reality. It's the first time I started thinking, well, I might not be able to afford to live here. I'd have to move, I mean, really move, somewhere that I don't want to. My family's here. So. Dumas says when she retired early, she knew she'd spend the rest of her life counting pennies.

If another insurance increase comes, she's worried that for the first time, that won't be enough. In Los Angeles, I'm Kaylee Wells for Marketplace. Coming up... We're just always excited to meet new people from all over the world. Making new friends and running a business all at the same time. First though, let's do the numbers. Dow Industrial has gained 96 points today, about a quarter percent. $40,659. The Nasdaq picked up 37 points, two tenths percent, $17,631.

S&P 500 elevated itself 11 points, also two tenths percent, 55 and 54. For the week, the Dow added two and nine tenths percent. The Nasdaq bounced up 5.3 percent. The S&P 500 increased about three-and-nine-tenths percent. Kelly Wells was telling us about the spike in home insurance prices. Progressive insurance slumped four-tenths percent today. All-State Corporation rose nine-tenths percent. Marsh and McLennan companies climbed about three-tenths of one percent. The National Bureau of Economic Research has a new working paper analyzing the effects

of providing cash to people in low or moderate income countries. It turns out direct payments have a long list of positives. Better food security, school enrollment, labor supply. You're listening to Marketplace. This is Marketplace. I'm Kai Rizdal. I think I mentioned earlier this week that this spring, for the first time, we had back-to-back months where wind turbines produced more electricity in this economy than coal-fired power plants did. Part of that's because of both public

and private investment in green energy. Part of it's just market forces, green is getting cheaper. But all of it is not great for the people who live and work in those coal-powered economies. It's been a year since Pennsylvania's biggest coal-fired plant shut down. The Homer City Generating Station, like hundreds of its peers around the country, had faced stiff competition from natural gas and renewables. The federal government has, of course, been looking for ways to help places like Homer City rebound. But it's tough. Reed Frazier from the Allegheny front went for a visit.

Jeremiah Balzer liked his job as a union carpenter at the Homer City power plant, though it wasn't always easy. You're on call pretty much 24 hours a day. You know, you may not be told that, but that's kind of how you have to do it in order to kind of stick around. But over the years, baltzer saw the once mighty coal industry start to decline. There was competition from cheap natural gas and new regulations on toxic air and water pollution.

Homer city filed for bankruptcy in 2017. In the last few years, the plant operated at only around 20% capacity and its workforce dwindled. It went from like, you know, you're seeing 1500 people a day on a job during an outage and then all of a sudden, boom, you don't see anybody all day. The plant closed for good last year. Its owners cited cheaper fuels like natural gas, warmer winters and heightened regulations as reasons for closing. Though it was somewhat expected, it was still tough news for many in the area. We never really thought it would like completely shut down and

unfortunately it did. Connie Chamino has owned a salon in Homer City for 29 years. I have friends that work there, I have clients that work there. A lot of my friends are retired from there now. Now whenever she drives into town, Chimino passes by the plant's iconic smoke stacks sitting idle. And it's sad to not see them working, you know, because you go by and you don't see the stacks working at all and that's sad.

Those stacks meant jobs but also pollution. Coal is still the country's biggest source of climate warming greenhouse gases from the power sector, even though it only provides 16% of electricity nationwide. Now the area around Homer City, once home to dozens of coal mines, has to plot a new future. That's what Rob Nymec is doing. He's Homer City's borough manager. My thought process is, okay,

what do we need to do to move forward? He sees one potential answer running through the middle of town. Nymec takes his work truck to a spot near a stream. The watercolor is unusual. Just look at the orange. There isn't a thing alive in that stream. The orange is drainage from mines that were abandoned decades ago before modern regulations. The acidity in the water kills aquatic life. Nymak wants to clean it up. He envisions tourists

one day flocking to the stream to fish, hunt and bite. Wouldn't this be a wonderful place someday if this stream is clean and we have the largest kids fishing tournament and we have all the room in the world to do this here. But in the meantime, Nymak and others are eager to see something replace the plant. The Biden administration is working to hook local officials up with federal incentives for former coal communities. Those include tax incentives for clean energy. As for former coal plant worker Jeremiah Balzer, he and his wife thought about moving even before the plant closed. Because I saw the writing on the wall even well before some of the people there did.

But Balzer didn't move his family. Since the closure, he's been working other union carpentry jobs. He and his family started going to a local church and have found a stronger sense of community. And we found a good core group of people that are really caring. So we're probably going to stick around. If a new industry replaces the coal plant, he'd consider applying, but any offer would have to be pretty good for him to take it seriously.

In Homer City, Pennsylvania, I'm retail, big picture up the top of the program. But as we say from time to time around here, headlines are all well and good, but what really matters is what people and businesses are feeling in their day to day. So we thought we'd zoom in a little bit to see how retail has been going for the moms and pops for today's installment of our series, My Economy. This is Joanna Reese, co-owner of The Maine Book House in Oxford, Maine, USA, and also Food for Thought Books and Records in Norway, Maine, USA.

We are a family business. My dad and I work together. We are doing the impossible of running two brick and mortar bookstores within the same basically communities, neighboring towns. And my dad is full time at the one store in Oxford, and I'm full time at the other store in Norway. Summer for us has traditionally been our busiest season, and we always look forward to it as far as helping with capital to sustain us through the rest of the year.

So this summer, I guess with every summer, we've seen an increase in foot traffic through the door and also an increase in return customers, new customers every year. We're just always excited to meet new people from all over the world. This area is a very beautiful area, so we're very fortunate to be here. It's sort of a dream to have a bigger workforce. We would love to be able to increase our workforce, especially for the busy summer months.

But for right now, we're sort of on a shoestring. Like we always have been as far as doing as much as we can ourselves to save on costs, overhead, taxes, etc. I enjoy working with my family immensely. They're the best people to know. I know I'm biased, but no, I definitely feel blessed to be able to work with my family. I've always worked alongside my dad since I was a little kid and in various industries and creative endeavors, so it's sort of a natural for me, especially being a creative person myself, to I stick close to my roots and it certainly is freeing to be able to work as an independent business person.

Joanna Reese, running the family business alongside her dad. Two locations in Maine, USA. Write to us about your economy, what you're doing, how it's going. There's a place you can do that at Marketplace.org slash My Economy. Music This final note on the way out today, two housing related items that are actually related. We learned this morning from the Commerce Department that housing starts, which is just like it sounds, new homes starting to be built.

They fell last month, 7% from June. They are 16% lower than the same time last year. So there's that. Item two, data from Redfin that they gave to the Wall Street Journal. The percentage of million dollar homes in this country is the highest it's ever been. 8.5% of all homes.

Obviously, that is very individual market dependent, but supply and demand is the economic rule of thumb you are looking for here. Our theme music was composed by BJ Liederman. Marketplace's executive producer is Nancy Pargali. Donna Tam is the executive editor, Neil Scarborough, vice president and general manager. And I'm Kai Rizdal.

We will be back on Monday. Everybody have yourselves a great weekend, all right? This is APM.