Tangle - Inflation rises (again).

Episode Date: November 15, 2021

On Wednesday, the government said its consumer price index rose in October 6.2% from a year ago — the largest 12 month jump in 31 years, since 1990. Because of the unique economic recovery we've been living in, economists have been debating whether inflation is "transitory" or not — fundamentally unsure  if it will pass on or settle in. Many on the left have argued that the inflation we're seeing is due primarily to things like supply chain snarls, and will resolve itself on its own as the economic disruptions shake out. Others have argued that inflation is the result of government spending, comparing our relatively higher numbers to many European countries experiencing supply chain issues, and saying we need policy changes as well.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 Bokowa, who also created our logo.The podcast is edited by Trevor Eichhorn, and music for the podcast was produced by Diet 75.You can support our podcast by clicking here--- Send in a voice message: https://podcasters.spotify.com/pod/show/tanglenews/message Hosted on Acast. See acast.com/privacy for more information.

Based on Charles Yu's award-winning book, Interior Chinatown follows the story of Willis Wu, a background character trapped in a police procedural who dreams about a world beyond Chinatown. When he inadvertently becomes a witness to a crime, Willis begins to unravel a criminal web, his family's buried history, and what it feels like to be in the spotlight. Interior Chinatown is streaming November 19th, only on Disney+. The flu remains a serious disease. Last season, over 102,000 influenza cases have been reported across Canada, which is Chinatown is streaming November 19th, only on Disney+. 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.

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 I hope you had a great weekend. It's getting cold. It feels like winter in New York City today. So I'm excited to be bundled up in the booth recording. Today, we're going to be covering some less than exciting news. It's some of the information and statistics and stories around inflation in the U.S. and what it means for President Biden, the economy, Americans at large. But as always, before we jump in,

we'll start with some quick hits from the news. First up, Democrat Beto O'Rourke announced he is going to run for governor of Texas. This was expected in some Democratic circles, but O'Rourke made it official today with an announcement. Number two, longtime advocates of paid family leave are trying to re-insert language to include it in President Biden's Build Back Better plan. Number three, attorneys will make closing arguments on Monday in the trial of Kyle Rittenhouse, who was accused of homicide after shooting three people during the Kenosha, Wisconsin riots last year. Number four, Steve Bannon, the longtime ally of President Trump,

surrendered to federal authorities on contempt charges Monday after defying a subpoena to testify before Congress. Number five, a group of Republicans will join President Biden at the White House this afternoon when he signs his Infrastructure Investment and Jobs Act into law. All right, that is it for our quick hits today. Before we jump into our main story, actually, I have a couple of corrections to issue. We have some wrongs to right. It has been a little bit since we did this, but first, a week ago in my coverage of the Virginia and New Jersey governor's races, I said that Virginia hadn't re-elected a Democratic governor since 1977. A fact I accurately delivered a few times throughout the week, and only one reader noticed the mistake, so shame on the rest of you, I guess, for not catching it.

Second, on Thursday, we publish a widely read breakdown of the Kyle Rittenhouse trial. There were two errors in it, both of which, similar to the Virginia and New Jersey mistake, contradicted accurate information elsewhere in the newsletter. The first was a sentence that said Kyle Rittenhouse crossed state lines with a rifle he illegally obtained. This isn't true. He crossed state lines and picked up the rifle in Wisconsin, then went to Kenosha.

Rittenhouse's hometown is just a short drive from Kenosha on the other side in Illinois. I made this clear in another place in the newsletter, but I also muddied it with this mistake. Finally, I referred twice to Jacob Blake, in one instance referring to his shooting and in another instance referring to his death. Jacob Blake is not dead, which for whatever it's worth, I knew. It was just a dumb brain fart, I guess. He is paralyzed, though. Neither of these mistakes really changed the thrust of my story, but they're errors nonetheless. I am going to model being kind to myself and give me a half

point error for each of the ones in the Rittenhouse case and a full error for the New Jersey, Virginia mistake. So together, these are the 44th and 45th Tangle Corrections in our 118-week history, the first corrections since October 14th. I track corrections and place them at the top of the podcast and newsletter in an effort to maximize my transparency with readers. I hope you appreciate it. All right, that's it for the corrections and self-loathing. We are on to today's topic,

which is inflation. On Wednesday last week, the government said its consumer price index rose 6.2% from a year ago, the largest 12-month jump in 31 years since 1990. A quick reminder, inflation is measured using the Consumer Price Index, or CPI, which is designed by the Bureau of Labor Statistics to measure price fluctuations mostly 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. The Core Price Index, which excludes volatile goods like food and energy, representing everything from gasoline to apples to the cost of a doctor's visit.

The core price index, which excludes volatile goods like food and energy, also rose by 4.6% year over year, higher than the 4% rise between September 2020 and September 2021. Because of the unique economic recovery we've been living in, economists have been debating whether inflationary is quote-unquote transitory or not, fundamentally unsure about whether it will pass on or settle in. Many on the left have argued that inflation we're seeing is due primarily to things like the supply chain snarls, which we've covered and will resolve itself on its own as the economic disruptions shake out. Others have argued that inflation is the result of government spending, comparing our relatively higher numbers to many European

countries experiencing supply chain issues, and saying we need policy changes as well. Whether it is the result of persistent supply chain issues, government spending, consumer demand, or a combination of all three, we'll see some arguments for them in a moment, we have now had a fifth straight month of inflation above 5%. Inflation has risen high enough that hourly wages, which are seeing historic gains, cannot even keep up. Last month, average hourly wages in the United States actually fell 1.2% compared to October 2020 when taking inflation into account. Some of the more startling numbers on specific goods, gasoline prices are up 50% from the same month a year ago and may soon break their all-time high price ever. Used car prices are up 26%, groceries are up 5.4%, new vehicle prices are up 9.8%,

and the costs of things like tires and sports equipments are rising the most since they have since the 1980s. The Federal Reserve, our central banking system, is responsible for addressing inflation. Headed by Jerome Powell, the Fed can take actions like moving interest rates, which can be used to mitigate inflation. If inflation is high, for example, the Fed could increase interest rates, which would dissuade certain spending and contract the monetary supply, thus slowing inflation. This is like some basic 101 economics, but if you want an explanation about how this works in more intricate terms, there is a link in today's newsletter explaining that. You can listen to our previous coverage of inflation from mid-October if you just scroll back a few weeks in our podcast. And that brings us to some of the arguments about what is happening. We'll start

with the left stake, then the right stake, and then my take. First up, the left is conceding that inflation is happening, but arguing that it's the Federal Reserve, not President Joe Biden's legislative agenda, who needs to address it. In the Washington Post, Catherine Rample argued that Democrats need to take inflation woes seriously. Inflation, visible in higher costs of gas, groceries, housing, and other common purchases, is the main reason views of the economy are so dour, even as the job market looks relatively strong, she said. And wages are rising, but they're not rising quickly enough to keep pace with consumer prices. Adjusting for the inflation figures, average hourly wages fell 1.2%

from October 2020 to October 2021. Not good. Republicans will take political advantage of this frustration, she said. Some already have. Presidents don't control prices, though. President Biden has limited tools available for dealing with inflation, and it seems unwise to promise his agenda will do more to reduce prices than it actually can. In any case, price stability is supposed to be the purview of the Federal Reserve. Unfortunately, the Fed's most obvious tool for tamping down inflation, raising interest rates, risks throwing the economy back into recession. When Democrats tell voters they should stop whining about inflation, that such worries are imagined, they do themselves

no favors either. They must head into the midterms with a clear-eyed view of the economy as it is, not as they wish it to be. In his newsletter, Bloomberg's Noah Smith said inflation is real, but the Federal Reserve needs to act, not the Biden administration. There's a second, more reasonable team transitory, which makes a slightly different prediction. Inflation will fall, but only because the Fed takes action to bring it down, Smith said. Tyler Cohen is on this second team, and for right now, I am too. In fact, it's very important that the country as a whole agree with Tyler, because as long as people expect the Fed to tame inflation eventually, it won't spiral out of control.

Smith also pondered whether COVID-19 relief has aided inflation. The theory here is pretty simple too, he said. COVID relief put money in people's pockets and they spent that money so prices went up. Inflation is global, of course, but most countries did quite a bit of COVID relief spending. Of course, we know another factor pushing up inflation, which is supply chain snarls. That's a major negative shock to aggregate supply, which also tends to be inflationary. It's hard to know which of these factors is contributing more to the inflation we're seeing, so the real answer here is that we don't know much how COVID relief spending

has contributed to the rise in inflation. In the New York Times, Paul Krugman said, history says don't panic about inflation. The closest parallel to 2021's inflation is the first of these surges, the price spike from 1946 to 1948, Krugman wrote. And here's what you need to know about that 1946-48 inflation spike. It was a one-time event, not the start of a protracted wage price spiral. And the biggest mistake policymakers made in response to that inflation surge was failing to appreciate its transitory nature. They were still fighting inflation even as inflation was ceasing to be a problem, and in so doing helped bring on the recession of 1948-1949. About Wednesday's price report,

it looked very much like the classic story of inflation resulting from an overheated economy in which too much money is chasing too few goods. Earlier this year, the rise in prices had a narrow base being driven largely by food, energy, used cars and services like air travel that were rebounding from the pandemic. That's less true now. It looks as if demand is outstripping supply across much of the economy. On the plus side, jobs have rarely been this plentiful for those who want them. And contrary to the cliche, current inflation isn't falling most heavily on the poor. Wage increases have been especially rapid for the lowest paid workers. All right, that's it for what the left is saying, which brings us to the right state. The right says Biden's legislative agenda is driving up inflation and he needs to pump the brakes before things get worse. In Bloomberg, Ramesh Pannura said Americans think the economy

is bad because it actually is. Americans have, in fact, been pessimistic about the economy for most of the last two decades, he said. Gallup's Economic Confidence Index went negative after the dot-com boom went bust in 2000 and did not register sustained positive readings until the pre-pandemic part of President Donald Trump's administration. It might then be more instructive to examine what our last two periods of widespread happiness about the economy throughout 1998 to 2000 and from mid-2018 to early 2020 had in common. Both were times when the standard of living for most people was rising and had been rising for a while. The public's unhappiness is not irrational now either, Ponamru added. Income fell in 2020 as the pandemic hit. Even if living standards were rising again,

positive trends would have to continue before people began to register satisfaction. But living standards aren't yet rising anyway. As the economics researchers Jason Furman and Wilson Powell III pointed out in an analysis for Peterson Institute, total compensation is 0.6% below its December 2019 level after adjusting for inflation. Irwin wrote that economists see rising wages and rising prices as two sides of the same coin. For most people, though, the net effect in today's economy is that the coins they are getting don't go as far. Based on Charles Yu's award-winning book, Interior Chinatown follows the story of Willis Wu, a background character trapped in a police procedural who dreams about a world beyond

Chinatown. When he inadvertently becomes a witness to a crime, Willis begins to unravel a criminal web, his family's buried history, and what it feels like to be in the spotlight. Interior Chinatown is streaming November 19th, only on Disney+. 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.

The Wall Street Journal editorial board said one irony of inflation is that while it's bad for working Americans, it's great for the government. Tax revenues soar as nominal profits and incomes rise, and for evidence, simply look at the boom in state and local government coffers, the board said. Overall state and local government receipts, including federal aid, were 23% above pre-pandemic levels in the third quarter through September, thanks to Congress's gusher of spending and the strong economic recovery. That's according to the Committee for a Responsible Federal Budget. Property, corporate sales, and individual tax revenue from the third quarter of 2020 through the second quarter of this year is running 18.3 percent above the same period two years ago. That's according to the Census Bureau. How many Americans have seen their incomes rise that

much over the last two years, the board asked. Progressive states with higher tax rates are especially flush. State and local tax revenues in New York, which raised taxes on high earners this spring, is running $13.3 billion, or 21.3% higher, for the current fiscal year than that began in April over the same period in 2019. Mind you, 2019 was a very good year for state coffers. These rich states have also received plenty of welfare from Washington. Congress has given states and local governments $885 billion in direct aid through the various COVID bills for schools, public transit, Medicaid, and more. If the Democrats' $4 trillion spending bill passes, they'll get even more. By our count, about $700 billion in the Democrats' new spending bill would

go to states for programs such as child care, universal pre-K, home health care, and housing. The New York Post editorial board said the Build Back Better plan would be utter poison for a struggling economy. Washington has already okayed nearly $6 trillion for COVID-19 relief since March 2020, plus another $1.2 trillion just passed for infrastructure, all of it juicing demand. Jenner's handouts pushed by Democrats, like unemployment bonuses, have made it easier for people to stay home from work, fueling a supply chain crisis. And Biden's anti-fossil fuel policies have driven up energy costs. The result, the worst inflation in more than a generation, rapidly eroding Americans'

purchasing power, more unfilled jobs than people seeking work, bare shelves and consumers unable to get goods they need, heating costs that may prove crippling this winter, slowing economic growth pegged at an anemic 2% annual pace last quarter, and, of course, soaring national debt. Americans now have the grim prospect of 70 stagflation, a lagging GDP coupled with runaway prices. Yet somehow Democrats think this would be a swell time for more inflationary spending, more handouts, more growth-strangling taxes, regulations, and green news deal style boondoggles.

It's sheer lunacy. All right, that's it for the right and left's take. This brings me to my take. So the bad news for Joe Biden is getting worse. In the last few weeks, the president has passed a huge chunk of his legislative agenda, a popular chunk at that. He got China to issue a joint climate change pledge. He saw another month of unemployment below 5%. He watched his vaccine testing mandate push vaccination rates up, and he got something of a written commitment from moderates to push forward his $2 trillion social spending plan before the year is out. Six months ago, one would have thought that nothing could have stopped that from being a great week for

the president. But gains in realizing his vision have been overshadowed by these inflation numbers, the supply chain crisis, a crushing electoral loss in Virginia and a near loss in New Jersey, and increasingly dire approval ratings that have now hit their lowest levels of his presidency. As I said a month ago, I'm really not qualified to opine on whether inflation is transitory or not, or what the biggest cause for it is. Economists seem to disagree and have a maddeningly muddied way of debating this stuff. But a month later, we're still talking about it, and it's still getting worse. Whether it's transitory or not is something that will have a much greater impact on how history describes this period of time than what

it means for us right now. Transitory is a definition describing whether inflation will exist for a year or multiple years or a decade. Inflation appears to be here for the near term, at least for the next six to 12 months, and there is currently no reason to believe it is going to go anywhere anytime soon. There's been a lot of derision aimed at the left of center corporate media for dismissing inflation concerns, and rightly so. Rising costs of fuel and eggs are a much bigger deal when you are living paycheck to paycheck or have no more than $500 in your savings account, which is probably true for anywhere from one in four to one half of all Americans.

It's possible those Americans are still coming out ahead depending on the circumstances. As Rample explained in her op-ed, inflation may have wiped out, say, $1,000 to $2,000 of a worker's wages in the last year, but that same worker could have gotten thousands of dollars through the child tax credit and got $1,400 last spring from the latest stimulus check alone. The catch, of course, is that government money could be propping up demand, or as some have argued, keeping people from working, though the data on that is not yet convincing, while those same workers struggle to make ends meet as prices keep rising, effectively taking away any positive perceptions of a humming economy while it's harder to cover their rent each month. What is clear to me is that

Biden's Build Back Better plan is going to get a lot harder to pass with these numbers where they are. Some economists have argued convincingly that such a package wouldn't impact inflation nearly as much as monetary policy from the Fed. But it doesn't really matter if Biden can't convince moderates in the Senate and the House that it's a safe play economically and politically to push through another $2 trillion of spending. Honestly, that prospect looks less and less likely by the day. by the day. All right, that's it for my take. That brings us to your questions answered. Today's question comes from an anonymous reader in San Ramon, California. You mentioned in this Durham article that the Trump campaign had issues as identified by the Mueller investigation. What were those issues, the reader asked. I would also be

resistant to an investigation if I was being investigated for something I was not guilty of. Okay, so at some point soon, maybe when Durham is done with his inquiry into the investigation, I'd really like to revisit the entire Trump-Russia story with all the information we have now and do a much more fleshed out look at this than what I'm about to say. But to just answer this question in kind of a top level way, the issues I was referring to are just kind of around a few familiar storylines from the news. I mean, first, the Trump campaign basically held a senior staff meeting at Trump Tower to meet a Russian lawyer who was promising to hand over dirt on Hillary Clinton. That meeting turned into nothing, of course, except proof they

were willing participants to engage with a foreign adversary for dirt if the opportunity arose. Trump publicly asked Russia to find Hillary's 30,000 emails, and the same day, if the Senate Intelligence Committee is to be believed, Russian hackers went after her server. The Trump campaign hired Paul Manafort, one of the dirtiest political players in the book, and he eventually handed over internal polling data to a Russian intelligence officer, again, if you believe our own intelligence community. There is a full 1,000-page Senate report drafted by the Republican-controlled Senate Intelligence Committee, which detailed Russia's interference in the election, including its belief that members of the Trump campaign were easily manipulated, that many on Trump's campaign were eager for help from people with ties to the

Russian spy services, whether they knew it or not. At the same time, Michael Flynn was having back-channel meetings with Russia before Trump was in office, which, depending on who you ask, was incredibly sketchy or boringly normal. In Mueller's report, he raised 10 instances where Trump may have obstructed justice during the investigation. About a half dozen of Trump's staff and aides lied to the FBI, to Congress, or to the Department of Justice during the investigations. None of this looks particularly good for them. So yeah, I mean, there's tons of stuff about the Russia investigation that was overblown. The Steele dossier was predictably complete garbage. And as I wrote last week, it's falling apart more and more every day. Of course, Hillary Clinton's campaign also should get some heat for what it was up to. I mean, clearly who were purportedly from Russia. So this is like a big, confusing, complex story. It wasn't all that

clean and above board either on Trump's side, though. And I thought the dispatchers, Jonah Goldberg, who wrote a piece titled In Defense of Both Sides and Neither, explained this beautifully. If you want to check it out, there's a link to it in today's newsletter. explain this beautifully. If you want to check it out, there's a link to it in today's newsletter. All right, that brings us to our story that matters today. This one is not a great story. Nearly 40% of patients reported new or continuing symptoms of depression in the first year of the COVID-19 pandemic, according to a new study by Intermountain Healthcare. The study looked at 4,633 patients who completed standard primary care depression screening and found that 4 in 10 reported symptoms of depression with worse feelings than before the pandemic. The data was presented at the American Heart Association's virtual 2020 scientific session,

which warned that increased depression could lead to heart issues. The odds of visiting the emergency room were 2.8 times greater for people with depression than those without, and the odds were 1.8 times greater for people to arrive at the ER with anxiety with chest pains when they had depression. Axios has a very important story about this today. All right, and that brings us to our numbers section. This is from that Washington Post poll on Biden. It's not good for Democrats. 46% is the percentage of Americans who said they would back a generic Republican candidate for Congress if elections were held today. 43% is the percentage of Americans who said they would back a generic Democratic candidate for Congress if elections were held today. candidate for Congress if elections were held today. 51% is the percentage of registered voters who said they would back a generic Republican candidate for Congress if elections were held today. 41% is the percentage of registered voters who said they would pick a generic Democratic candidate for Congress if elections were held today. $3.38 is the average price per gallon of

gasoline in the U.S. in October. $2.97 is the average price per gallon of gasoline in the U.S. in October. $2.97 is the average price per gallon of gasoline in the U.S. in May, which was the last time it was below $3. All right, that brings us to our Have a Nice Day story. This is about the largest study ever of psilocybin, the psychedelic compound in magic mushrooms, which was completed on Tuesday. The results of the study say the drug is highly effective as a therapy for treatment-resistant depression. Overall, 29.1% of patients in the highest dose group were in remission three weeks after treatment, compared to 7.6% of those in the

control group and more than a quarter of the patients in the 25 milligram arm were still in remission three months after treatment. That's according to a new story from Stat News on the study. And it comes as MDMA, the principal ingredient in ecstasy, is now in phase three trials and showing, quote, astounding results, eliminating PTSD in as many as two-thirds of trial participants. The treatments are helping build momentum for drugs that were once shunned in the medical community as now potentially effective treatments for ailments that millions of Americans are facing. All right, that is it for today's podcast. As always, if you enjoyed this, please go to the episode description. There's a link there. You can start supporting us. Also, if you want,

just give us a five-star rating, spread the word to friends, go to readtangle.com, subscribe to our newsletter. There's so much you can do. Just pick one thing to help us out. And thank you guys so much for listening. We'll see you tomorrow. 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. We'll see you next time. dreams about a world beyond Chinatown. When he inadvertently becomes a witness to a crime,

Willis begins to unravel a criminal web, his family's buried history, and what it feels like to be in the spotlight. Interior Chinatown is streaming November 19th, only on Disney+. 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.