DMZ America Podcast #133: Biden’s Bad Good Economy & Death Cab for Print Media

Political Cartoonists Ted Rall (from the Left) and Scott Stantis (from the Right) discuss the week in politics, current events and culture. This time, the guys start out wondering about the state of the economy and the 2024 presidential campaign. Though Biden has pulled ahead of Trump in national polls, key swing states Biden needs to win continue to support Trump. One of the big reasons give is that they’re unhappy with the state of the economy. But unemployment is low, wages are high and inflation is easing. Why are Americans pissed? We have answers.

The month of January saw major layoffs at legacy media companies like the Wall Street Journal, Los Angeles Times, Sports Illustrated and Pitchfork. Is there a future for journalism, and if so what does it look like?

Watch the Video Version: here.

Abortion vs. Inflation

Democrats and Republicans are going to feud over abortion rights and inflation, respectively, in the coming presidential election. They might not be the most important issues we face, but they’re the ones the politicians will be talking about.

The Daunting Physics of Bidenomics

Unemployment is low—lower than at any time since the Vietnam War. Real wages are increasing. Inflation, voters’ top concern for the last several years, is slowing. Democrats are confident enough about how things are going that “Bidenomics” is at the center of their case for another four years in the White House.

Yet this is a rosy picture few voters can see. Americans consistently give President Biden low marks for his handling of the economy.

“I’ve never seen this big of a disconnect between how the economy is actually doing and key polling results about what people think is going on,” Heidi Shierholz, president of the Economic Policy Institute, a liberal think tank, tells the New York Times.

What gives?

Jason Furman, who served as chairman of the Council of Economic Advisers under Obama, points to a years-long trend that only ended recently: wages haven’t kept up with inflation, leaving the average worker $2,000 worse off than under Trump’s final year. “The way to think about that is people were in an incredibly deep hole because of inflation and we’re still not all the way out of that hole,” Furman says.

The problem for Biden is, what people would need to have happen in order to feel that inflation was truly behind them would be horrible for the economy, not to mention his prospects for reelection: deflation.

During our lifetimes, ideal economic conditions in a healthy economy feature an annual official inflation rate in the single digits, a policy economists call inflation targeting. Prices rise, but if wages go up even faster employees are happy. Low inflation incentivizes consumers to buy sooner rather than later, when prices will be higher. But, as Furman points out, that hasn’t been the case lately. Airfares went up 28.5% in 2022. Butter rose 31.4%. Eggs a whopping 59.9%. So we’re displeased.

What will it take to convince voters that inflation is no longer a problem? In the short term — i.e., between now and the presidential election—prices would need to fall back to pre-Biden levels. The average US gas price in January 2021 when Biden took office was $2.42 per gallon. Now it’s $3.95.

The Federal Reserve Bank’s efforts to reduce inflation appear to be working. Prices are rising at a slower rate. And that’s the problem for Democrats.

Mechanical physics provides a helpful parallel. Many economists and political analysts seem to think of inflation rate as analogous to velocity. In their view, reducing the inflation rate from 8% to 3% is a victory for inflation-targeting fiscal policy. Indeed, if a 3% inflation rate (coupled with wages that rise faster than 3%) remains in effect indefinitely, people will eventually feel good (or less bad) about the economy. As the economist John Maynard Keynes observed a century ago, however, “In the long run, we will all be dead.” And the Democrats’ calendar is much shorter than that, a mere 14 months.

Before inflation-affected consumers can be persuaded to tap their feet to “Happy Days Are Here Again,” they’ll have to pass through several stages of recovery. First, they’ll feel less bad. Then comes meh. Penultimately, they’ll see themselves paying off credit card and other debts they ran up during the inflationary period. Only after those lingering financial hangovers are past will they be able to achieve what feels like the final stage, prosperity: earning enough to pay one’s bills while setting a surplus aside in the form of savings.

With Americans’ credit card debt hitting the staggering benchmark of $1 trillion and rising, we are currently in the “less bad”/”meh” stage. But it’s hard to see what Biden or the Fed or anyone else can do in order to promote a sunnier view of the economy.

A lower inflation rate—even an ideal one in the low single digits—still means higher prices. We will probably not see $2.42 per gallon gas, the price in early 2021, any time soon, if ever. Gas prices will likely continue to increase, to $4.00 and $4.05 and $4.10 and on and on and on, adding minor injury to gaping wound.

Inflation is really like acceleration—the rate at which speed increases. If you fall off the roof of a tall building, your speed at the beginning of your plunge will be exponentially lower than when you hit the ground. The ground approaches, not at a steady rate, but faster and faster. As your body rushes toward doom, you’d likely welcome a physical intervention to reduce the rate of acceleration. You’d live a smidge longer but it wouldn’t save you. Reducing the acceleration rate to zero might help, assuming your initial rate of descent was low. But what you need in this dire situation is negative acceleration—a force that neutralizes gravity and then some, returning you back up to the roof of the building.

Negative inflation would, in many people’s minds, set things straight. If Biden could return prices to pre-2021 levels, that would look and feel like a return to a period of normalcy.

But negative inflation is deflation, the disaster last experienced in this country to a significant extent during the Great Depression, when prices dropped 7% each year between 1930 and 1933. Knowing that goods and services were becoming cheaper, Americans were incentivized to horde cash. Consumer spending declined, triggering a doom loop in which manufacturers laid off workers and cut salaries, further reducing spending and prices. Given a choice, economists choose inflation over deflation.

From an economics standpoint, Biden’s only option is to hope for a quicker trip through the psychological stages of economic recovery than Americans have seen in their lifetimes.

(Ted Rall (Twitter: @tedrall), the political cartoonist, columnist and graphic novelist, co-hosts the left-vs-right DMZ America podcast with fellow cartoonist Scott Stantis. You can support Ted’s hard-hitting political cartoons and columns and see his work first by sponsoring his work on Patreon.)

 

First They Came for Bigger Cubicles

Unemployment fell to the 3.4%, the lowest on record since the early days of the Richard Nixon administration. Jobs have never been easier to find and workers are able to get raises. The American economy, however, relies on cheap compliant labor, so economists are worried.

Two Bad Options, One Obvious Choice

Historically, unemployment tends to go up under Republicans and down under Democrats. Meanwhile, Democrats like Jimmy Carter and of course the current president have suffered from inflation. But what would you rather have? A paycheck shrinking from inflation? Or no paycheck at all?

DMZ America Podcast #68: Neofascism in Italy. Is the Fed destroying the economy for the rich? Snowden granted Russian citizenship

Ted Rall, coming at things from the Left and Scott Stantis, coming from the Right, tackle the major issues of the day. First off, Italy elects Giorgia Meloni, head of the Brothers of Italy, a political party founded by neo-fascists which begs the question: is the whole world going totalitarian or what? Next, Scott and Ted discuss the Fed and its passion for bringing back the ’70’s and all the economic pain that comes with it. Lastly, breaking news as Edward Snowden, ( Ted wrote his biography), is granted Russian citizenship by Vladimir Putin. Is this just the Russian system working or is it Putin thumbing his nose at America? All of this and more on the best podcast in the world!

 

 

Why Business Wants a Recession

           Give Jerome Powell credit for candor: the Fed chairman admits that his policy of increasing interest rates to fight inflation might push the economy into a recession. “No one knows whether this process will lead to a recession or, if so, how significant that recession would be,” he recently told reporters.

            If it does, one sector won’t be entirely displeased: employers.

            According to the Deloitte accounting firm, a typical Fortune 500 company spends $1 to $2 billion a year on payroll, averaging between 50% and 60% of total spending. Controlling labor costs, unsurprisingly, is a top priority for employers.

            In the boom-bust cycle of labor-management negotiations, the post-pandemic Great Resignation has triggered a labor shortage, a phenomenon we rarely witness and tends to fizzle out fast. Workers are quitting and retiring early, tanking the labor force participation rate. Those who remain enjoy the upper hand at interviews that feel like the job prospect is sizing up the company rather than the other way around. Labor shortages are driving up salaries, shortening hours, prompting signing bonuses and forcing bosses to accommodate people who prefer to work at home. Just 8% of office workers in Manhattan are back in the office a full five days a week.

            The most recent data published, for June, finds that wages and salaries soared 16.8% on an annualized basis as benefit costs went up 14.4%.

            Workers, angry and resentful after decades of frozen real wages and merciless downsizing, are becoming demanding. This reversal of a power dynamic in which workers were supplicants and bosses called the shots has also strengthened labor unions that had been losing membership for years.

            This, some CFOs may be thinking, calls for a recession.

            Company profit margins are at a 70-year record high, up 25% each of the last two years as the result of raising prices during the pandemic. Which means that, even allowing for an 8% inflation rate, a generic S&P 500 corporation should easily be able to ride out the average 26% earnings decline suffered in the most recent typical recessions that took place in 1990, 2000 and 2020. (A bigger crisis like the 2008-09 Great Recession, which reduced earnings by 57%, is another matter.)

            No corporate officer would voluntarily reduce earnings. Or would they, in order to get something more valuable: regaining leverage over labor?

            Traditional conservative allies of big business are openly arguing in favor of higher unemployment. “The recent drop in work and labor force participation—particularly among young workers—is troubling [my emphasis],” writes Sarah Greszler in a white paper for the Heritage Foundation, the right-wing think tank. “Job openings, at 11.3 million, remain near record highs, and record percentages of employers report unfilled positions and compensation increases.”

            Greszler summarizes: “Continued low levels of employment [sic] will reduce the rate of economic growth, reduce real incomes and output, result in greater dependence on government social programs, require higher levels of taxation, and exacerbate the U.S.’s already precarious fiscal situation.”

            Workers, of course, feel like they can finally breathe. High demand for labor means that they can quit positions where they feel unappreciated and/or undercompensated, pack up and move to another state and create a healthier balance between their family and work lives. The current situation is anything but “troubling.”

            Executives at employers like Apple, Tesla and Uber have had enough of workers calling the shots. They’re demanding that people get back to work — at the office — or find another job. “A quickly shifting employer-employee dynamic could give companies the ammunition to take a harder line against the full-time work-at-home arrangements that many employees have pushed for, according to corporate policies experts. In fact, they say more companies are likely to start pressing staffers to come back to the office — at least a few days a week,” reports CNBC. “The hybrid workforce is not going to go away, but the situation where employees refuse to come to the workplace at all is not likely to hold,” Johnny C. Taylor Jr. of the Society for Human Resource Management tells the network.

            Perhaps no one has told CEOs that at-home work empowers them too. Rather than hiring security goons to escort laid-off workers past their terrorized colleagues, companies can memory-hole the condemned by deactivating their remote-access passwords. Who’ll notice one less square on the Zoom screen?

I’m not subscribing to a dark Marxist suspicion that CEOs, the Fed and other powers-that-be are conspiring to slam the brakes on an economy that would otherwise be coming in for a soft landing as pent-up consumer demand from the pandemic naturally ebbs, in order to return their recently empowered employees to their rightful status as wage slaves. Powell and his fellow governors are doing what comes naturally to government, treating a disease based on a diagnosis that is close to a year out of date and, reasonably, including wage increases as part of their calculus of what constitutes a major driver of the inflation rate.

Business, however, does see what’s coming. If the captains of industry aren’t worried enough to be calling their pet politicians to demand an end to interest-rate hikes, one reason might be that they see a silver lining to the next recession.

(Ted Rall (Twitter: @tedrall), the political cartoonist, columnist and graphic novelist, co-hosts the left-vs-right DMZ America podcast with fellow cartoonist Scott Stantis. You can support Ted’s hard-hitting political cartoons and columns and see his work first by sponsoring his work on Patreon.)

The U.S. Played Gorbachev for a Fool

            Mikhail Gorbachev, the last leader of the Soviet Union who died this week, was a member of that tribe of politicians who can diagnose a problem but doesn’t know how to treat it. As he grew up, he couldn’t understand why a nation blessed with extraordinary natural resources and an enviable geographically strategic position had so much trouble delivering economic prosperity to its people. “Mr. Gorbachev has said he finally realized, as regional party boss, that something much more serious was wrong with the Soviet system than just inefficiency, theft and poor planning. The deeper flaw was that no one could break out with new ideas,” The Washington Post wrote in his obituary.

            It is, however, possible to be too open to new ideas. Arms reduction negotiations with the United States led to increasingly close ties between the Soviet leadership under Gorbachev and the Reagan and first Bush administrations. He took meetings with advisers and officials of the World Bank and IMF, capitalist institutions for which the socialist utopian vision represented by the existence of the USSR presented an existential threat, and listened to their countless entreaties to reform the socialist economy, privatize state enterprises and replace the social safety net with brutal austerity. Do these things, he was told, and we will help you.

Of the many mistakes he made, Gorbachev’s biggest was to trust his biggest enemy, the United States.

            Socialism didn’t kill the Soviet Union; capitalism did. Privatization of small businesses and other of Gorby’s perestroika reforms tanked the Soviet economy toward the end of the 1980s. By late 1990 suppressed inflation, global recession and supply problems had sent the country into a tailspin. A desperate Gorbachev reached out to the Bush administration for assistance.

            At first, Bush almost behaved like a human being, promising the USSR up to $1 billion in loan guarantees to buy American agricultural products. “Instability in the Soviet Union is very definitely not, in my view, in the interests of the United States,” said Secretary of State James A. Baker III. “I want perestroika to succeed,” Bush said. “The Soviet Union is facing tough times, difficult times, but I believe that this is a good reason to act now in order to help the Soviet Union stay the course of democratization and to undertake market reforms.”

            Six months later, however, the tiny credits had expired and Bush refused to renew them. Bush also cooled to the suggestion that the U.S. should help bring the USSR in for a soft capitalist landing. “My only reservations are, will it help? Will it encourage reform?” Bush commented to Soviet requests for direct cash grants. “I think President Gorbachev knows we have understandable concerns about his creditworthiness and I hope he understands that I, and the other allied leaders, want to move forward.” Gorbachev was offered pennies on the dollar of the Marshall Plan-scale aid he needed to keep his country afloat.

            As the Soviet Union dissolved, the United States dithered. “A shortage of foreign capital is not what plunged your economy into crisis, nor can your economic ills be cured by a simple infusion of cash,” Bush lectured Gorbachev in August 1991. Neither statement, of course, was true. Gorbachev glumly noted the “increasingly obvious discrepancy” between America’s supportive rhetoric and “and the nature of our economic relations.”

            “Until Gorbachev’s resignation in December 1991, no American grants or loans would help the Soviet leaders in their struggle to turn 70 years of communist totalitarian rule into a Western-styled socialist democracy,” Diana Villiers Negroponte wrote in Wilson Quarterly.

            Disintegration of the former Soviet Union and the decision of the Western policymakers to sit on the sidelines chewing popcorn rather than offering a helping hand led to dire economic and social consequences in the 15 former Soviet republics, including Russia. Life expectancy plunged, with up to five million excess adult deaths in Russia during the 1990s. Birth rates collapsed. There was out-of-control crime and human trafficking. Boris Yeltsin, Gorbachev’s U.S.-backed replacement as president of Russia, was a fall-down-drunk alcoholic who once wandered out of the White House in his underwear to Pennsylvania Avenue where he tried to hail a taxi to get some pizza.

            Russia, a superpower that defeated Nazi Germany and terrified the United States with nightmare scenarios of communist dominoes falling all around the world, was looted, impoverished and humiliated. At bare minimum, the U.S. let it happen. At worst, they held the knife that plunged into Russia’s back—a scenario that seems more likely considering the zillions of times Republicans have given Reagan and Bush credit for defeating the Soviet Union in the Cold War.

            It is not hard to see why the Russian people wanted something different and better, or why they blamed Gorbachev for trusting the Americans. In 1996, when Gorbachev ran for president of Russia, he received less than 1% of the vote.

            He’d been played for a fool by his American friends.

(Ted Rall (Twitter: @tedrall), the political cartoonist, columnist and graphic novelist, co-hosts the left-vs-right DMZ America podcast with fellow cartoonist Scott Stantis. You can support Ted’s hard-hitting political cartoons and columns and see his work first by sponsoring his work on Patreon.)

 

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