Tangle - What the latest inflation numbers mean.

Episode Date: November 15, 2022

We're covering the latest inflation numbers and what they mean (some good news, maybe?)... plus, a question about what candidates do with leftover campaign funds and an under the radar story about Adderall.You can read today's podcast here, today’s “Under the Radar” story here, and today’s “Have a nice day” story here.Today’s clickables: Quick hits (2:30), Today’s story (3:17), Right’s take (7:34), Left’s take (12:40), Isaac’s take (17:35), Listener question (20:06), Under the Radar (22:22), Numbers (23:14), Have a nice day (23:50)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.

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, the place we 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, back on the mic today after Trevor tagged in yesterday. I want to start by thanking him. I thought he did a great job. I was in transit out in New Mexico and then Southern California, traveling the country a bit during election season, seeing some family, doing some weekend work at a conference. And so things got a little nuts for me,

but it was fun to listen to yesterday's podcast and not be the one on the mic. So thank you, Trevor, for doing a great job and tagging in. And good to know I can do that in the future whenever we need to. So obviously we have had a wild week of election coverage. I am personally still trying to catch up on sleep. So we've got a story today about inflation and the inflation numbers that came out last week, which we did not get a chance to get to because of the election. I also want to start off with a correction from yesterday. In yesterday's podcast, which I wrote,

and now I can maybe partly blame on Trevor because he was the one who had to read it, I wrote that Democrats also won several key swing state gubernatorial races assuring executive control in Pennsylvania, Michigan, Wisconsin, and Nevada. In fact, Democrats lost Nevada's gubernatorial race in which incumbent Governor Steve Sisolak was unseated by Republican Joe Lombardo. This error, like I said, I think brought to you by sleep-deprived election week in which I was kind of running back and forth. So yeah, I apologize.

A very dumb mistake. That is our 72nd correction in Tangle's 171-week history and our first correction since November 9th. We've had a few corrections in the last month. I'm not happy about it. I track corrections and place them at the top of the podcast in an effort to maximize my transparency with our listeners. All right, so with that nonsense out of the way and our silly dumb mistake, we'll start off, as always, with some quick hits. First up, former President Donald Trump is widely expected to announce a 2024 presidential run this evening. Number two, Democrat Katie Hobbs defeated Republican Carrie Lake in Arizona's race for governor. Number three, the suspect in a University of Virginia shooting who killed

three people and injured two others has been arrested and charged with second-degree murder. Number four, Amazon is expected to lay off more than 10,000 employees this week, according to several news reports. Number five, an Iranian court has reportedly issued its first death sentence for anti-government protests while sentencing five other defendants to up to 10 years in prison. Consumer prices slowed last month, suggesting inflation may be cooling down. Core inflation, excluding food and energy, remains stickier, but there are positive signs all around that the U.S. has turned the corner on inflation. The sticky part, as has been widely recognized, will be rent. Goldman Sachs' economic team, led by Jan Hatsis, who we know, says that inflation will drop significantly next year.

And of course, the Fed doesn't necessarily want to see the markets celebrate prematurely and get overexcited. So we have been covering inflation and the latest Labor Department reports every month since May, since this year's midterm voters continually pointed to it as their number one concern in the country. A quick reminder that inflation is measured by the Consumer Price Index, also known as 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. On Thursday, in the midst of a sea of news about the election results, the Labor Department released its latest inflation numbers. The CPI rose 7.7% annually in October, the first time annual inflation rates have fallen below 8% in eight months, giving the Federal Reserve its strongest signal yet that inflation may be slowing. Meanwhile, the CPI rose 0.4% in October after climbing by the same margin in September, which was below the 0.6% that economists had predicted. Over half of the increase in CPI was driven by soaring rent costs, while gasoline prices ticked back up after three months of decreases. Food prices at the grocery store continued to skyrocket, up 12.4% on the year, while the cost of food at restaurants is up 8.6%. Despite that, though, the encouraging signs spurred a major rally on Wall

Street and sent U.S. Treasury yields tumbling. Treasury yields, a reminder, are effectively the yearly interest rate that the U.S. government pays on money it borrows to raise capital through selling Treasury bonds. So when yields go up, banks usually have to respond by raising interest rates on the people they lend to. That means the yields going down is good news for anybody borrowing money. Core CPI, which is the measure of inflation with more volatile food and energy prices removed, went up 6.3% annually, down from 6.6% in September. At a monthly rate, the core CPI climbed just 0.3%, which is down from the 0.6% it had risen between August and September. It's pretty clear that inflation has definitely peaked and is rolling over, Mark Zandi, the chief economist at Moody's

Analytics said. All the trend lines suggest that it will continue to moderate going forward, assuming that nothing goes off the rails. Others express more caution, noting that the rate is still well above the Fed's 2% target, while prices for rent and food continue to rise. One month of data does not a victory make, and I think it's really important to be thoughtful that this is just one piece of positive information, but we're looking at a whole set of information, San Francisco Fed President Mary Daly said. Today, we're going to look at some reactions from the left and the right, and then my take. You can find all our previous inflation coverage with a link in today's episode description. All right, first up, we'll start with what the right is saying.

Many on the right are skeptical this is the end, but share some optimism about finally seeing reliably good numbers. Some warn that we've seen this before and the dawn never came. Others say a Republican-controlled House could be a great piece of news for inflation and President Biden. First up, we'll start with the Wall Street Journal editorial board, who called it a modest reprieve and warned that it might be temporary. An increase of 7.7% in the overall consumer price index compared to a year ago remains unusually high, although it marks the fourth monthly decline in the inflation rate from a peak of 9.1% in June. Core inflation, excluding food and energy, was 6.3%, which is down from 6.6% in September, but has yet to show a lasting downward trend, the board said. Investors desperately want to believe this means inflation is coming under control.

Some caveats are in order. Prices are still rising at an abnormally fast pace, and households will notice that a falling inflation rate is not a stable price level. Much of the disinflation comes via prices for goods, which declined 0.4% from September to October, notably for durables such as appliances. This is a result of a cooling housing market and is the kind of demand destruction the Fed says it wants to achieve. Prices for services, in contrast, rose 0.5% month to month, and food and energy prices rose by 0.6% and 1.8% respectively on a monthly basis. Inflation remains widespread across the economy and thus hard to tamp down.

One consequence of leaning on the Fed to fight inflation on its own by suppressing demand is that households are left with few ways to boost their standard of living. Inflation-adjusted weekly earnings fell in October and are now down 3.7% in the last 12 months, the board said. At this rate, it would take a long time for households to recover the purchasing power they've lost during this inflationary bout, even if the inflation rate moderates. Congress and the Biden administration could help with policies to stimulate productive investment to fuel new supply and real wage growth. But on Wednesday, President Biden was still deploring trickle-down policies. There's only been falling real incomes on his economic watch.

In the New York Post, Brian Riedel said a GOP-led House will help address inflation by stopping Biden's enormous spending. Yes, much of the inflation reflects an economic hangover from the pandemic, yet President Biden and Democrats have actively driven prices higher through energy regulations, tariffs, Buy America rules, tightened ethanol mandates, Davis-Bacon rules, raising construction costs, and restrictions on new building. Most destructive of all has been the president's historic spending spree, which has added $4.8 trillion to the 10-year budget deficit. The Federal Reserve calculates that President Biden's $1.9 trillion American Rescue Plan was a major inflation contributor. The student loan bailout, if it survives legal challenges, will push inflation even higher. That will force the Federal Reserve to further rate hike the economy into a likely

recession with significant job losses. And that is why it was so important for Tuesday's voters to stage an intervention and take away President Biden's credit card. While the results were less than expected, the current vote counts show that the majority of voters chose a Republican House, with inflation and the economy their top concerns, Riedel said. Republicans may not have produced a comprehensive anti-inflation agenda, but their most valuable weapon will be gridlock. While Biden has already enacted $4.8 trillion in new spending, he had proposed a staggering $11 trillion during his 2020 campaign. Any chance of enacting the final $6.2 trillion in remaining promises, digging the inflation and deficit ditch even deeper, is almost surely dead

with the GOP house. In National Review, Andrew Studdiford said there was some progress. Much of the easing of pressure was seen on the good side, a function and part of retailers that overordered during the supply chain mess and are now dumping inventories, but also a sign that might suggest that squeezed consumers are spending less, Studdiford wrote. It is also worth noting that used car prices, which have been in sharp focus since we began emerging from the pandemic, also eased on a month-to-month basis and, in the view of the Wall Street Journal's Justin LaHart, ought to fall further. That seems reasonable. Shelter, LaHart notes, is still pushing the headline number up, but that's a lagging indicator. There are clear signs that rents have peaked, and house prices, which are

reflected within this part of the index in a rather convoluted way, are clearly looking shaky. Shelter accounts for about a third of the index, Studdiford said. With the labor market still tight, I'd keep an eye on wage pressure, which feeds, of course, into higher services prices. We've seen a false dawn before in this election cycle, but there may be more reason this time to think that absent an additional external shock, this may be the moment we have been waiting for. But even if this is the peak, we remain a long, long way from the 2% target. All right, that is it for what the right is saying, which brings us to what the left is saying. Some on the left are very optimistic about the numbers and say Biden and the Fed are executing a good plan. Many argue that we have

seen the peak in inflation. Others say the Fed cannot stop raising interest rates and we need to be sure this is a consistent trend. In Bloomberg, John Authors said reasons for optimism are adding up. 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+. 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 October consumer price inflation report proved to be better than the month before and much better than expected. Subsidary statistical measures suggest that this peak in inflation, unlike several previous false dawns, may not prove to be illusory. An emphatically strong market reaction with prices on both bonds and stocks rallying impressively was justified, authors said. The headline year-on-year inflation rate dipped again and so, crucially, did the core measure that includes the highly variable prices of food and fuel. The alarming and almost constant increases that started early last year have ended. The last

time core inflation came in this far under the consensus expectation compiled by Bloomberg was in early 2020, just as the pandemic took hold. More important still, underlying metrics confirm that this time might really be the peak, in a way they conspicuously failed to do earlier this year when Core's CPI last seemed to have started a descent. The chart shows the trimmed mean inflation produced by the Cleveland Fed that excludes the biggest outliers in either direction from the index's components and takes the average of the rest, and the sticky inflation measure produced by the Atlanta Fed,

which looks only at the goods and services whose prices are hardest to change, authors said. In practice, when these measures rise, it's taken as a sign that inflationary pressure is gaining strength, and so it's good to see that while both remain very elevated, the trimmed mean has dipped slightly while sticky price inflation is unchanged. This is consistent with the notion that the overall peak is in, although it doesn't prove it. In the Washington Post, Jennifer Rubin celebrated the possibility of the so-called soft landing. If the markets rallied because they were expecting Federal Reserve Chair Jerome H. Powell to curtail rate hikes, they may have misjudged him. When announcing the last rate hike earlier

this month, he warned, it is very premature to be thinking about pausing. People, when they hear lags, they think about a pause, he added. Caution is warranted. An early inflation hawk, Lawrence H. Summers, echoed that view on Thursday after the CPI number came out. He tweeted, encouraging CPI number, this is comparable on the low side to some of the earlier surprises on the high side. Cannot make judgments on a single monthly number, but this is not one that can be dismissed. The administration, meanwhile, will be constrained in new spending because of a closely divided Congress. If so, Biden's deficit reduction total, $1.7 trillion so far, may increase, Rubin said. While politically frustrating for the administration, focusing on protecting and implementing its agenda rather than adding new spending items

may prove economically advantageous. Biden correctly claims the United States is in an enviable position internationally. Russia's economy is collapsing. China has been stymied by the pandemic. Britain and the European Union face rocky economic times. The United States remains the most attractive venue to spend your money, the country most likely to come out of the post-pandemic turbulence in the best condition. In the New Republic, Timothy Noah said inflation is dwindling and there's even a growing possibility we can avoid a recession. Inflation peaked five months ago. October was the fourth consecutive month during which the overall inflation rate fell, Noah said. Between June and September, core inflation rose from 5.9% to the aforementioned 6.6%,

and that was bad. Now it's going down, and that's good. The Fed's preferred measure, the Personal Consumption Expenditures, or PCE, price index, showed a much milder core inflation increase between June and September than the CPI, 0.1 percentage point, which perhaps deserved more attention than it got. We don't know yet what happened to the PCE index in October, but probably, like the CPI, it went down. A few weeks ago, I wrote that ordinary Americans were worrying more about inflation than the Federal Reserve was, and that this struck me as excessive, Noah said. But did they listen? Enough, perhaps, to avoid the predicted red wave. 54% of voters said they trusted Republicans

more than Democrats to tackle inflation, even though the Republican answer to inflation, like the Republican answer to everything else, is to cut taxes, which would increase rather than reduce inflation. Of that 54%, a shocking 9% were people who voted Democratic. This might be a good moment to remind everyone that Paul Volcker, the Fed chairman, widely celebrated for ending the Great Inflation of the 1970s by bringing on what was, at that time, the worst recession since the Great Depression, was a Democratic appointee. As I've written before, the economy consistently runs better under Democratic presidents, and that includes lower inflation. lower inflation. All right, that is it for what the left is saying, which brings us to my take.

So look, I'm hopeful. I mean, it's a good report, but we've also seen this before. As I've previously noted, over the course of the last year, the commentators considered quote-unquote on the right have been the ones who've mostly gotten their calls about inflation right. Whether that's due to their own negative bias toward Biden or not, every time we've had some light at the end of the tunnel, it has instead been an oncoming train. I was encouraged to see some conservative economists and pundits this time saying yes, this really might be a good sign. But my optimism is cautious and tempered given what we've seen. The last time we were truly optimistic about inflation was in September, when Biden was heralding zero inflation, but there were major caveats that the core CPI was still rising. Back then, the optimism was

very one-sided, and many economists and pundits with center or right-wing views warned that the report wasn't as good as the White House was selling it. The biggest caveat that I found to these numbers came from Jonathan Levin in Bloomberg, who wrote a very informative piece about how the pricing of health care is being skewed by a methodology quirk. The short version is that health insurance inflation rate data is updated once a year and spread out over 12 months, and the latest batch of data is being pulled down by a misleading drop in costs. Similar to how housing inflation is a lagging indicator because leases are often signed for a year, healthcare costs may be showing inflationary numbers even though we haven't gotten there yet. Is this a small asterisk or a big one?

I'm comfortable saying I truly don't know. Economists can't even seem to agree. Either way, Thursday's report is just one data point, and we'll need a few more before we can call deflation a trend. When it comes to practical implications, there is no reason the Fed should let up yet on raising interest rates. If it's working, keep doing it. If it isn't working, or if this does prove to be only a blip, they'll be much happier in a month if they don't let up now. The cost of food, gas, and shelter were all up last month, and those are the costs that the broadest swath of Americans will feel most acutely. Of course, politically, Biden can celebrate a strong week, unexpected success in the midterms, a report on inflation that even his critics are welcoming,

and a highly anticipated meeting with China's President Xi that points to the potential for bilateral relations between China and the U.S. improving. More than anything else, the last seven days are another reminder of just how quickly political fortunes can change. All right, that is it for my take, which brings us to your questions answered. This one is from Ellis in Blythewood, South Carolina. Ellis said, how do candidates use excess campaign funds? What limitations are applied to these funds and who polices the use of these funds? Ellis, this is a great question. So the vague and sort of unsatisfying answer is that it depends a lot on what type of election

you're talking about, who the money came from and who it's going to, or that it depends a lot on what type of election you're talking about, who the money came from and who it's going to, or whether it's a super PAC or an individual, what state you're in, et cetera. It changes a little bit. Is it a federal election, state election? But that being said, generally speaking, the leftover money basically cannot be used for any personal purposes or just simply stowed away. The funds have to be used on donations to charities, other candidates running transfers to political parties, or future races for the same candidate. So for instance, Blake Masters, who just lost an Arizona Senate race, he could hypothetically keep any leftover money that was donated and then use it to run again in a few

years. Or he could donate it to the RNC. Or you could donate it to other candidates. Some candidates will create slush funds where they start quote-unquote leadership packs and then use the money to advance a certain political agenda or other candidates. The big no-no with political donations is basically anything that is personal. For instance, you are violating the law if you take that leftover money and go buy a home. You also can't just hire a bunch of friends and family members to some bogus position and pay them. They need to prove that they are doing actual political work for an actual campaign. Otherwise, you are violating campaign finance rules. And for whatever it's worth, the FEC is the one who polices all of these campaign finance rules. Typically, the most unspent money you'll see is sitting in a super PAC, which by the letter

of the law isn't allowed to be coordinating with campaigns. So when they have money left over, what they used to do is support the same candidate at a future date or other candidates of the same party. Sometimes, though, super PACs will even reimburse donors for money spent on a losing campaign. We saw Jeb Bush do that, actually. So Investopedia has a great little simple article about this that I included in the newsletter, and you can also find in today's episode description. All right, next up is our under the radar section. In the United States last year, 41.4 million Adderall prescriptions were dispensed, up 10% from 2020. The drug, which is commonly used to treat ADHD or hyperactivity disorder, is in such high

demand that there is now a shortage in the U.S. Some regular users are experiencing stimulant withdrawal, while others are turning to unregulated dealers or illegal drugs as substitutes. Earlier this month, the U.S. Food and Drug Administration, the FDA, announced a nationwide shortage. Whether Adderall is overprescribed in the U.S. is a question worth asking, but in the immediate term, the issue at hand is what will happen and is already happening to Americans cut off from a stimulant they have been prescribed and regularly taken for years. Wired has the story and there's a link to it in today's episode description. and there's a link to it in today's episode description.

All right, next up is our numbers section. The estimated population of Earth as of today, according to projections from the United Nations, is 8 billion. The global population size today compared to 1950 is now tripled. The drop in medical care services costs over the last month, according to the latest BLS report, is 0.6%. The drop in used vehicle prices over the last month is 2.4%. The rise in shelter costs over the last month is 0.8%. And the rise in food costs over the last month is 0.6%. All right, and last but not least, our have a nice day section. Salt Lake City's city council

is going to give an innovative idea to address homelessness a shot. The council voted last week to build a community of tiny homes for people experiencing chronic homelessness in a project they hope can become a model for other cities. The Other Side Village is the organization behind the project, which plans to provide permanent housing to the homeless and specifically target those with mental illness or addiction issues. Along with 60 fully equipped homes, the neighborhood will have stores and employment opportunities for residents to encourage them to spend time in the village. NPR has the story along with advice from the organizers about how the broader issue of

homelessness might be better addressed. There is a link to that story in today's episode description. All right, everybody, that is it for the podcast. As always, if you want to support our work, especially right now in the wake of an election, it's a great time to get your friends keyed into politics. Please send them the podcast or give us a five-star rating or send them to reedtangle.com to check out our website, subscribe to the newsletter, follow the podcast, et cetera.

We'll be right back here same time tomorrow. Have a good one. Peace. Our podcast is written by me, Isaac Saul, and edited and produced by Trevor Eichhorn. Our script is edited by me, Isaac Saul, and edited and produced by Trevor Eichhorn. Our script is edited by Ari Weitzman, Sean Brady, and Bailey Saul. Shout out to our interns, Audrey Moorhead and Watkins Kelly,

and our social media manager, Magdalena Bokova, who designed our logo. Music for the podcast was produced by Diet75. For more from Tangle, subscribe to our newsletter or check out our website at www.readtangle.com. Thanks for watching! 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.