Tangle - Good news about inflation?

Episode Date: August 16, 2022

Another update. Plus, a question about birthright citizenship.You can read today's podcast here.You can subscribe to Tangle by clicking here or drop something in our tip jar by clicking here.Our podcast is written by Isaac Saul and produced by Trevor Eichhorn. Music for the podcast was produced by Diet 75.Our newsletter is edited by Bailey Saul, Sean Brady, Ari Weitzman, and produced in conjunction with Tangle’s social media manager Magdalena Bokowa, who also created our logo.--- Send in a voice message: https://podcasters.spotify.com/pod/show/tanglenews/message Hosted on Acast. See acast.com/privacy for more information.

The flu remains a serious disease. Last season, over 102,000 influenza cases have been reported across Canada, which is nearly double the historic average of 52,000 cases. What can you do this flu season? Talk to your pharmacist or doctor about getting a flu shot. Consider FluCellVax Quad and help protect yourself from the flu. It's the first cell-based flu vaccine authorized in Canada for ages 6 months and older, and it may be available for free in your province. Side effects and allergic reactions can occur, and 100% protection is not guaranteed. Learn more at flucellvax.ca. From executive producer Isaac Saul, this is Tangle.

Good morning, good afternoon, and good evening, and welcome to the Tangle Podcast, a place where you get views from across the political spectrum, some independent thinking without all that hysterical nonsense you find everywhere else. I'm your host, Isaac Saul, and on today's episode, we're going to be talking about inflation and some of the latest inflation numbers we just received last month. Maybe some good news finally on this, but before we jump into that main topic, I do have to issue a correction today, which I never like doing. But yesterday in our quick hit section, we wrote that author Salman Rushdie will recover after being stabbed on stage at a speaking event in New York City. In fact, Rushdie was speaking in Chautauqua, New York, which is about as far away from New York City as you can while still being in New York State.

I was actually on a train to the Big Apple yesterday morning, so clearly my mind was driving on autopilot. Our apologies for the error. This is our 67th correction in Tangle's 159-week history and our first correction since July 25th. I track corrections and place them at the top of the podcast in order to maximize transparency with our readers. All right, that is it for our corrections, so we can jump into our quick hits. Number one, President Biden will sign the Inflation Reduction Act into law today. Number two, lawyers for Rudy Giuliani said he is a target of Georgia's criminal investigation into efforts to overturn the 2020 election. Number three, Alaska and Wyoming

will hold primary elections today. Representative Liz Cheney, the Republican from Wyoming, is expected to lose her seat in a closely watched race. Alaska will also begin using ranked choice voting rules as they decide whether to send Sarah Palin to Congress. Number four, the Justice Department said it objects to releasing the affidavit used to search Trump's home, arguing it could compromise their investigation. Number five, First Lady Jill Biden has tested positive for COVID-19. Her office informed America Today. Well, we will get another look at how inflation is impacting consumer spending when we get a number of earnings results from retailers this week with big names including Walmart, Target, Home Depot, Kohl's, TGX, among some of the big retailers that are The big thing that we're going to be looking for in the reports this week will be how well is a demand holding up and be how fast are these companies working through the excess inventory that they had coming out of the first quarter?

Is the market calming down because people think inflation has peaked? Well, it's calming down because it's summer. A few doors away at UBS, you could hear crickets in my hallway today. But it's also... Last week, we got the latest inflation numbers from the Labor Department. A reminder, inflation is measured by the Consumer Price Index, the CPI, which is designed by the Bureau of Labor Statistics to measure price fluctuations for urban buyers

who represent the vast majority of Americans. The CPI tracks 80,000 items in a fixed basket of goods and services, representing everything from gasoline to apples to the cost of a doctor's visit. Core CPI is a measurement of prices that does not include more volatile food and energy prices. Consumer prices rose 8.5% in July compared with a year earlier, and prices were unchanged from June to July, the first time that has happened in 25 months of rising prices. In June, prices rose 9.1% from a year earlier, the highest increase since November of 1981, meaning the July numbers represented a slight easing of inflation. November of 1981, meaning the July numbers represented a slight easing of inflation.

I just want to say a number, zero, President Biden told reporters. Today, we received news that our economy had 0% inflation in the month of July. The easing of inflation was driven primarily by falling prices for gas, airline tickets, and clothing. However, core CPI, which excludes volatile energy and food prices, was up 5.9% in July from the same month a year ago. The Core CPI rose 0.3% from the month before, but was less than June's 0.7% gain. In the wake of these latest inflation numbers, U.S. stocks rallied. The average price of a gallon of gasoline, which was $4.54 a month ago, is now $3.94. A year ago, the average price was $3.18. Grocery prices, however, rose 1.3% in July from the previous month and are 13.1% higher than July's prices a year ago, the fastest annual increase since 1979. It's kind of a mixed

blessing for individual households. They probably like what they see on gasoline prices coming down, but they're still seeing the pain on the food side, Brian Bethune, an economist at Boston College, told the Wall Street Journal. Many economists believe inflation has been fueled by a combination of rapid growth in the wake of the pandemic, historically low interest rates, and government stimulus. The Federal Reserve is tasked with navigating inflation by raising interest rates to and government stimulus. The Federal Reserve is tasked with navigating inflation by raising interest rates to cool the economy, but is attempting to bring rates down without setting off a recession, a so-called soft landing. The U.S. economy shrank

at an annual rate of 0.9% from April through June. However, it added 528,000 jobs in July, marking the first time the U.S. has recovered all the jobs lost since the start of the pandemic and driving the unemployment rate down to 3.5%. That's the lowest unemployment rate in over 50 years. We have covered inflation repeatedly in past podcasts and will continue to do so as polls consistently show it is the number one concern for American voters right now. In our eight editions on inflation that we've done so far, this is the first time that some of the Labor Department numbers have stoked optimism that inflation may have peaked.

In a moment, you're going to hear some responses from the left and the right, and then my take. First up, we'll start with what the left is saying. The left is optimistic about the numbers, but also cautions not to get too excited. Some insist the Fed needs to continue to raise interest rates. Others say Biden is right to celebrate inflation flattening month over month. In the New York Times, Paul Krugman said, finally, some good news on inflation. This is not the end of inflation. It is not even the beginning of the end. But it is, perhaps, the end of the beginning. On Wednesday, the Bureau of Labor Statistics reported something

we haven't seen since the depths of the pandemic recession, a month without inflation. That is, the average price of the goods and services consumers buy was no higher, actually slightly lower, in July than it was in June, he wrote. First, there is absolutely no reason to question the numbers. There were many advanced indications that this report, and probably the next few reports, would show a sharp drop in inflation. In fact, I wrote about that last week. It's not just falling gasoline prices, business surveys point to declining inflation and supply chain problems easing. Zero was a somewhat lower number than most observers expected, but not wildly so. When President Biden declared accurately that we had zero inflation in July,

many on the right accused him of lying because prices in July 2022 were 8.5% higher than they were in July 2021, Krugman said. Do they really not understand the difference? To be fair, sloppy business reporting may have contributed to their confusion. I saw many headlines to the effect that inflation was up 8.5% in July. But the more fundamental issue, surely, is that it's difficult to get people to understand something when their sloganeering depends on their not understanding it. Unfortunately, one month of zero inflation doesn't mean that the inflation problem is solved. Economists have long known that you get a much better read on underlying inflation if you strip out highly volatile prices,

normally food and energy. But there are a variety of measures of core inflation and all of them are still unacceptably high. In Bloomberg, Mohamed El-Irian said the Fed needs to resist a quick and easy interpretation of the latest data. The recent combination of a stronger-than-expected jobs report and better-than-expected inflation numbers has reset the dominant narrative in markets, again the quick and easy thing to do, he said. The decidedly much more constructive economic tone is based on the view that the Fed will be able to complete its tightening cycle in the next few months and even start easing as early as next year, thereby limiting the hit to growth, employment, and incomes. This puts the Fed in a difficult

position. Does it follow suit and validate through actions and words the easing in financial conditions being carried out by markets, or does it remain steadfast and risk unsettling markets that have regained their footing after a damaging first half of 2022? As tempting as it may be to again choose the easy course of action, the Fed should resist yet another approach that risks keeping the inflation threat alive for longer, he wrote. This would not only result in further erosion of purchasing power, but also further damage growth prospects and impose an even heavier burden on the most vulnerable segments of our society. The Fed needs to stay the course and do its utmost to put the inflation genie back in the bottle. This is not easy, and it is far from risk-free. Yet it dominates the other policy narratives

available to a Fed that, because of its previous mistakes, no longer has a first-best policy approach at its disposal. In CNN, Alison Morrow said yes, Biden politicized inflation, but that doesn't mean he's wrong. From June to July, the CPI, which measures price movements for a basket of everyday goods and services, was, in fact, flat. Not exactly a break out the champagne kind of result, but a step in the right direction, she wrote. But Republicans pounced on what some saw as a gaffe and others saw as a fiction. Ted Cruz tweeted that it was cruel gaslighting from the president, noting that the headline figure on CPI was actually 8.5%. Just to be perfectly clear, the year-over-year rate of inflation was 8.5%, as widely reported by news outlets including CNN. That means we're comparing July 2022 to July 2021,

and that is how media typically choose to frame their reporting. But Biden didn't lie. Did he perhaps cherry-pick the more optimistic figure on shorter-term improvements in spending power? Sure, he's a politician after all, she wrote. As we wrote here yesterday, the CPI was flat for one reason and one reason alone. Energy prices came down. Almost everything else was up, including groceries and housing. Both Biden and the GOP are correct about the data and both are missing the point. Biden's optimism looks Pollyannish when people are still working paycheck to paycheck even after he acknowledged that people were still hurting. And the GOP's knee-jerk dismissal of the 0% month-to-month reading is unnecessarily gloomy, feeding an unhelpful narrative that anything good that

happens under Biden's watch either isn't real or shouldn't be celebrated. All right, that is it for what the left is saying, which brings us to what the right is saying. While the numbers are better than last month's, many on the right say they still contain very worrisome signs. Some accuse Biden of misleading Americans about zero inflation. Others say the numbers are still bad despite waning energy demand. In the Washington Post, Henry Olson said the inflation problem is far from over. July's rate was so encouraging largely because of energy prices, which dropped by 4.6 percent. But this masked the underlying problem. The average gas price has declined by almost a dollar a gallon since its high point in mid-June, but it is now only

at March's level, Olson said. Even more important is that prices continued to rise in virtually every other important economic sector. Food prices are an especially problematic area for Biden. They rose by 1.1% last month, making them 11% higher than they were a year ago. Inflation was even higher for dairy products, rising 1.7% last month, and grain products, rising 1.8% last month. In other words, food items are getting more expensive every time Americans visit the grocery store. That omnipresent fact drives home the importance of inflation to every consumer. Housing prices are the most ominous indicator of future stubbornly high inflation numbers. They increased by 0.5% in July, almost no change from the prior month.

That puts housing prices at 5.7% higher than last year and shows that demand continues to outstrip supply for this essential sector, he said. Our current inflation is a direct consequence of our response to the pandemic. We flooded the economy with money through the multiple aid packages and reduced the supply of services that constitute the bulk of our economic activity. That created the savings buildup, and when supply constraints were lifted as the pandemic eased, the money had to go somewhere. We won't return to pre-pandemic rates of inflation and growth until the balance between the supply of money and the supply of goods and services is restored. The flu remains a serious disease. goods and services is restored. In the Washington Examiner, Tiana Lowe said even a stark drop in fuel demand did not help

inflation. White House allies and the monetary doves who browbeat the Fed into keeping interest rates at zero last year will attempt to spin the BLS's report as a success, a sign that President Joe Biden releasing oil from our strategic reserves worked and that our central bank need not end our era of easy money to stave off further inflation. Nothing could be further from the truth, Lowe wrote. First, consider just the oil question. According to the Energy Information Administration, the national demand for oil plummeted from 9.25 million barrels daily to just 8.54 million barrels going from the oil price peak of mid-June until now. Spurred by those

soaring prices, our anemic oil demand matched the peak pandemic lows of July 2020, just months after oil futures actually went negative due to an unprecedented lack of demand. And even so, the rest of the report is a total mess, she said. Food price hikes continued to accelerate, with the price spike of food at home nearly double that of food away from home. Even worse are shelter costs that, despite them comprising a third of the CPI basket, are a gross underestimate. Although the BLS reports that shelter costs increased by 5.7% over the past year, both monthly mortgage costs and rents have risen far higher than that. Thanks to the increase in

mortgage rates, the average monthly payment on a median price home has increased from $1,289 to $1,877 in the past year, a staggering 45%. The average monthly rent aggregated by Redfin is up by 15%. In the Hill, Joe Concha called out Biden's lie of the year. I just want to say a number, zero. Today, we've received news that our economy had zero inflation in the month of July, zero percent. Here's what that means. While the price of some things go up, went up last month, the price of other things went down by the same amount. The result, zero inflation last month.

That was President Biden speaking to the country on Wednesday, Concha said. His administration has attempted to redefine what infrastructure means. It's not only about improving roads, bridges, and power grids, but also about paid family leave and child care, and what a recession means. It's not two straight quarters of negative gross domestic product growth anymore. But it just moved into the lead to win Lie of the Year award for the claim that the U.S. economy is experiencing zero inflation. The facts. Inflation still stands near a 40-year high and came in at 8.5% in July. In other words, the money coming from the average household still isn't keeping

up with the cost of everyday items, Concha wrote. But the president and this administration decided to turn the most basic economic norms on their head for cheap political gain by arguing that since the inflation rate fell by six-tenths of a percentage point to 8.5% in July compared to the same month last year, that somehow means 0%. As a fun game to play on a summer weekend, imagine what would have happened if the previous president attempted to spin numbers with alternative facts in this fashion. The U.S. media would have screamed about the need for transparency and truth, and the fact-checkers and scathing editorials would commence. Yet, that didn't happen here with his successor. Alright, that is it for the left and the right's take, which brings us to my take.

I think the least important part of all this is Biden's comment about zero inflation, so I figure we can get that out of the way first. So, yes, it's classic politicking, and yes, I'd consider it a fib or a stretch. I think if former President Trump had made the same claim, there would have been a million fact-checks exploring the question. As Joe Concha noted, some of the typical fact-checking websites didn't even cover it, a nice sign of their bias. However, Peter Coy's take that Biden is both right and wrong is pretty much on point. We had zero inflation month over month, but yearly inflation is still near record

highs. Given that monthly numbers are very volatile, while yearly numbers are the standard measure and every other month and year number for the last two years has shown inflation, standard measure and every other month and year number for the last two years has shown inflation, saying we had zero inflation is a little bit misleading. But Biden can hang his hat on technically being right about the total month-over-month inflation being flat, which was driven almost entirely by falling energy prices. With all that out of the way, I do think it's worth entertaining a little semblance of hope. We've covered this issue eight times now. Every single post made before this one has had something between consternation and doomsday fear in my take.

This is the first time I think there is hope that things may finally be improving. Obviously, for now, that's mostly because of energy prices. Lowe is probably right that those prices seem to be driven down by recession-spooked consumer demand contraction, but that's precisely the point of the Fed increasing interest rates to contract demand. The hope is that we don't spin off into a serious recession, but a little bit of tightening seems to be in order and what economists are hoping for. And if you want to be really optimistic, you can think of energy prices as the tip of the spear. There are some positive signs from businesses reporting supply chain problems easing, and when fuel prices go down, the price of shipping goes down, which can reduce the cost for just about everything that moves in the global economy. On top of that,

consumer expectations on inflation are declining, which is a good thing since consumer expectations can themselves drive rising inflation. All of this is very good news. The less good news is, well, everything else. Core prices are still running way too hot. The less good news is, well, everything else. Core prices are still running way too hot, which means the Fed is, or should, continue to bump interest rates and stay aggressive. There seems to be a strong consensus on this from economists across the political spectrum. Perhaps the most important thing for Biden and the economy is that real hourly wages are still down 3% over the last year. Food prices, grocery prices, and housing are all rising quickly and we'll need a few more good months of those prices falling

and wages continuing to grow or staying steady for real wages to catch up. So the numbers aren't all good. Most, frankly, are still bad, but inflation was never going to dissipate in one month. The hope from every American should be that this report is the start of a trend and not just a blip on the radar as things worsen. It's the first remotely encouraging sign we've had in a long time on inflation. We'll find out soon in the coming months if it is the beginning of a trend. All right, that is it for my take, which brings us to your questions answered. All right, that is it for my take, which brings us to your questions answered. This one is from Jennifer in Seattle, Washington. Jennifer said,

Why does the U.S. continue to provide automatic citizenship to babies born on our soil? And should we do this? Why? So, birthright citizenship comes from the concept of eus soli, the right of the soil, or eus sanguinis, the right of blood. The former is about being born on U.S. soil, while the latter is about being born to U.S. citizens. Europe tends to favor automatic citizenship for children of citizens, while the U.S. is one of about 30 countries that has birthright citizenship.

Birthright citizenship has not always been the law of the land in the U.S. It became law in 1790 and at the time applied only to free white people who could become citizens after living in the U.S. for two years. Then their children under the age of 21 could also become citizens. In 1857, the Supreme Court's famous Dred Scott v. Sanford case found that an escaped slave was not a citizen nor was any other person of African descent born in the U.S. But in 1864, Congress passed a civil rights law that extended citizenship to all people born in the U.S. not subject to a foreign power. And the 14th Amendment furthered that idea, defining citizenship as all persons born or naturalized in the United States and subject to the jurisdiction thereof. In 1898, the son of a Chinese immigrant fought

for his citizenship because he was born in the U.S. but prohibited from being naturalized thanks to the Chinese Exclusion Act. He won, and his case has defined birthright citizenship ever since. History.com has a very simple and clean write-up on this history, and there's a link to it in today's newsletter. So, I think we could do a whole newsletter on whether we should have this as it's a very fascinating topic to me. So maybe we'll have to do that. There are about 4.1 million US citizen children living with undocumented parents. They're sometimes derided as anchor babies. So it's definitely an issue impacting a significant number of people. On the surface, I think I'm preferential to the dominant European system of gaining citizenship from parents, but I'd be a lot more supportive of that system if gaining

legal citizenship here were a little bit more straightforward or simple. So that's kind of a non-fleshed out answer from me, but you know, I think maybe we'll have to revisit this one. It's a great question. All right, that is it for your questions answered, which brings us to a story that matters. California Governor Gavin Newsom has proposed keeping California's last nuclear plant open for another 10 years. Plans to close Diablo Canyon Power Plant over the next three years were supported by Newsom in 2016, but now he is introducing, at a cost of $1.4 billion, a plan to keep it operating. Newsom's office said the governor is focused on maintaining

reliable energy for California households while also attempting to reduce carbon emissions. The plant provides about 9% of the state's electricity, and in 2020, California faced a series of rolling blackouts when a heat wave caused a large surge in power use. President Biden has embraced nuclear energy as part of his plan to help reduce U.S. emissions, but it's a divisive topic among environmentalists. AP News has the story, and there's a link to it in today's newsletter. Next up is our numbers section. The number of retirees and disabled people who receive Social Security benefits is 70 million. The estimated forthcoming increase in their monthly

checks in 2023 to keep up with inflation is 9.6%. The drop in gasoline prices last month was 8%. The increase in gasoline prices over the last year has been 44.6%. The increase in the price of a dozen eggs in the last year was 38%, and the increase in rent over the last year was 6.3%. All right, that is it for our numbers section. Last but not least, our have a nice day story. Researchers at the University of California, Irvine say they have discovered a new signaling molecule for hair growth called SCOOB3. The research was published in the journal Developmental Cell and claims to have uncovered the precise mechanism that encourages new development for the cells at the bottom of each hair follicle. The team behind the research hopes the discovery could lead to potential cures for androgenetic alopecia, a type of hair loss that impacts 50

million men and 30 million women in the United States alone. SciTechDaily has this story and there's a link to it in today's newsletter. All right, everybody, that is it for today's podcast. As always, if you want to support our work, go to readtangle.com slash membership. It's the best way to keep this podcast running. We'll be right back here tomorrow. Have a good one. Peace. Our newsletter is written by Isaac Saul, edited by Bailey Saul, Sean Brady, Ari Weitzman, and produced in conjunction with Tangle's social media manager, Magdalena Bokova, who also helped create our logo. The podcast is edited by Trevor Eichhorn, and music for the podcast was produced by Diet75.

For more from Tangle, subscribe to our newsletter or check out our content archives at www.readtangle.com. The flu remains a serious disease. Last season, over 102,000 influenza cases have been reported across Canada, which is nearly double the historic average of 52,000 cases. What can you do this flu season? Talk to your pharmacist or doctor about getting a flu shot. Consider FluCellVax Quad and help protect yourself from the flu. It's the first cell-based flu vaccine authorized in Canada for ages six months and older, and it may be available for free in your province. Side effects and allergic reactions can occur, and 100% protection is not guaranteed.

Learn more at flucellvax.ca.