Tag: economy

Why Biden’s Policies Are A Nightmare For Housing Affordability

We’re enduring a stagflationary crisis – there’s no way around it.

It doesn’t matter how much oil Joe Biden dumps on the market from the Strategic Reserves.

It doesn’t matter how many jobs he is able to temporarily buy with $8 trillion-plus deficit spending.

It doesn’t matter how many times the mainstream media claims we are “in a recovery” or claim to see the “green shoots” of a “soft landing.”

In reality, most Americans are struggling to afford necessities – increasingly, they’re simply unable to participate in essential markets. The longer this goes on, the deeper the hole and the harder it will be for people to climb out.

For most people, it feels like they wake up one morning at the bottom of a pit, barely able to see the sun, wondering what happened. Everything was going just fine yesterday – how’d we end up here?

For those who pay attention, we can watch the pit get deeper, a shovelful at a time…
Granted, we have seen worse conditions in the U.S. in the past. Both the Great Depression and the stagflation crisis of the 1970s were truly severe.

The people who think conditions are bad now haven’t seen anything yet (interest rates eventually climbed to 20% in the early 1980s). That said, there is a growing potential for today’s crisis to become the biggest financial crisis in our nation’s history – given a little more time, and just a little more digging.

Part of this ongoing problem is the heavy inflation in housing prices, and make no mistake, this is one of the biggest threats facing middle-class America right now.

Let’s describe the problem, then solve it.

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Home Values Have Increased Significantly More In States That Legalized Marijuana Than Those That Kept Criminalization, Real Estate Study Finds

Home values have grown at a significantly higher rate in states that have legalized marijuana compared to non-legal states over the past decade—with the average price of a home in a legalization state now 41 percent higher than those that have continues to criminalize cannabis—according to a new report on real estate trends.

The study from Real Estate Witch and Leafly explored average home prices from 2014 to 2023, looking at the potential impact of regulated cannabis access for medical or recreational purposes on real estate value.

The analysis found that, during the time period reviewed, the average price of a home in states that had legalized for adult use appreciated by $185,075 since 2014, versus $136,092 in non-legal states. The average home value in a recreational state reached $417,625, while non-recreational state home prices averaged out at $295,338—a 41 percent difference.

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Why Is Halloween Candy So Expensive? Sugar Protectionism.

There ain’t no such thing as free candy, not even on Halloween—as anyone who has stocked up in advance of Tuesday’s holiday can attest.

Candy prices have jumped over 7 percent since last year and are up over 21 percent since October 2021, according to inflation data from the Bureau of Labor Statistics. Even in an environment where everything is getting more expensive, candy prices have climbed even faster than the overall rate of inflation for groceries and other home goods.

The main culprit is rising prices within the supply chains for America’s candy makers—and, specifically, rising sugar prices. Much of America’s supply of the sweet stuff comes from Mexico, where a dryer-than-normal summer meant a below-average sugar crop, Barron‘s reports. The New York Times spreads the blame a bit wider: Everything from high fertilizer prices (thanks to the Russian invasion of Ukraine) to hotter, dryer weather all around the world that affected sugar crops in Asia, Central America, and West Africa.

There is, however, one major factor that the Times ignores entirely: America’s sugar policies.

The series of subsidies and tariffs that the federal government uses to artificially inflate sugar prices in the United States cost consumers between $2.5 billion and $3.5 billion every year, according to a timely Government Accountability Office (GAO) report released today. Those protectionist policies aren’t the cause of the recent spike in sugar or candy prices, of course, but prices would absolutely be lower without them.

The so-called “sugar program” administrated by the federal Department of Agriculture “creates higher sugar prices, which cost consumers more than producers benefit, at an annual cost to the economy of around $1 billion per year,” the GAO concludes. No matter what happens to cause global sugar prices to fluctuate, Americans have consistently paid higher prices over the past 20 years:

Those higher prices get baked—quite literally—into the cost of everything from Milky Ways to Sour Patch Kids. And, as the GAO also points out, this is a classic case of concentrated benefits for a special interest that results in huge, but very diffused, costs for everyone else: “Because the program guarantees relatively high prices for domestic sugar, sugar farmers benefit significantly, and sugar farms are substantially more profitable per acre than other U.S. farms.”

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The White House is losing the messaging war on Ukraine. Now it’s changing the message.

The White House has been quietly urging lawmakers in both parties to sell the war efforts abroad as a potential economic boom at home.

Aides have been distributing talking points to Democrats and Republicans who have been supportive of continued efforts to fund Ukraine’s resistance to make the case that doing so is good for American jobs, according to five White House aides and lawmakers familiar with the effort and granted anonymity to speak freely.

The push, first previewed publicly in President Joe Biden’s Oval Office address last week, comes ahead of the election of a new House speaker, with the White House trying to invoke patriotism to help convince holdout Republicans not just to help Kyiv but to pass a major package that includes funds for Israel as well.

“As we replenish our stocks of weapons, we are partnering with the U.S. defense industry to increase our capacity and meet the needs of the U.S. and our allies both now and in the future,” according to a copy of the talking points obtained by POLITICO.

“This supplemental request invests over $50 billion in the American defense industrial base — ensuring our military continues to be the most ready, capable, and best equipped fighting force the world has ever seen — and expanding production lines, strengthening the American economy and creating new American jobs,” the document states.

The talking points are an implicit recognition that the administration has work to do in selling its $106 billion foreign aid supplemental request — and that talking about it squarely under the umbrella of national security interests hasn’t done the trick.

The White House’s pitch is an echo of one made by an influential figure on the other side of the aisle: Senate Minority Leader Mitch McConnell.

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Yellen Says the US Can Afford to Fund Wars in Gaza and Ukraine

Treasury Secretary Janet Yellen insisted on Monday that the US could “certainly” afford to fund the war in Ukraine and Israel’s onslaught on Gaza as the White House is looking for more military aid for both conflicts.

Yellen’s comments came a day after President Biden said the US could fund both wars. “We’re the United States of America for God’s sake, the most powerful nation in the history — not in the world, in the history of the world. The history of the world. We can take care of both of these and still maintain our overall international defense,” he said on 60 Minutes.

Yellen said the House needs to elect a new speaker so the new funding could be authorized. “We do need to come up with funds, both for Israel and for Ukraine. This is a priority,” she said. “It’s really up to the House to find, seat a speaker and to put us in a position where legislation can be passed.”

The White House has also discussed the possibility of rolling funding to arm Taiwan into the potential spending package. But Yellen did not mention Taiwan, and other Biden administration officials have made clear this week that Ukraine and Israel are the priority.

“America can certainly afford to stand with Israel and to support Israel’s military needs and we also can and must support Ukraine in its struggle against Russia,” Yellen said.

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Ticking Time-Bomb: Food Inflation Is Crushing Millions Of Low Income Americans

In 1906, Alfred Henry Lewis stated, “There are only nine meals between mankind and anarchy.”  The sentiment was expressed right on the heals of a banking crisis which led to the Panic of 1907.  The event was widely blamed on a liquidity crunch, and this same crisis was used as a rationale for the creation of the Federal Reserve Bank in 1913-1916.  Of course, it is the central bank and its ability to generate fiat money from thin air (unbacked liquidity) that has led the US to the stagflationary disaster we face today.  The “solutions” offered by establishment elites are often worse than the problems they are supposed to solve.  

The total inflationary damage done to Americans consumers since 2020 varies according to who you ask.  Stats from the Federal Reserve and government are muddled in a series of creative mathematics in order to make the situation look much better than it is.  CPI is not a valid indicator of true inflation given it is watered down with over 80,000 items and services, and many of them are not necessities for the common US household.  If we look only at necessities like housing, food and energy, the economic picture looks increasingly bleak.

Food, as Alfred Lewis noted, is particularly vital to civil cohesion.  The human body can in fact survive up to three weeks without a meal, but the vast majority of people in the first world are not acclimated to such conditions and might just panic after one or two days without sustenance.  

The potential for this scenario might sound exaggerated to those in a higher income bracket, but it’s important for these people to understand that a 25%-50% increase in food costs for them is not the same as a similar increase for people on a low or fixed income.  For example, food price increases for the average middle-class to upper-middle-class households amount to around 11% of their annual income in 2023.  However, for people in the low income bracket, food costs now amount to 31% of their annual income.  That’s a pile driver to the wallet.

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NY Times’ Paul Krugman says ‘inflation is over’ — if you exclude food, gas and rent

Paul Krugman’s assertion that “the war on inflation is over” if you exclude food, energy, shelter, and used cars is being mocked online.

The Nobel Prize-winning economist and New York Times columnist posted the comment on his X social media account on Thursday.

“The war on inflation is over,” Krugman wrote in the caption, adding: “We won, at very little cost.”

Krugman attached a graph titled “CPI ex food, energy, shelter and used cars” that showed a declining rate stretching from 7% in January of last year to slightly below 2% in September.

The reaction on X to Krugman’s post was scathing, with critics noting that the Labor Department’s consumer price index (CPI) — the most widely used by economists to gauge prices faced by consumers — factors in those day-to-day living expenses.

“This is fantastic news for all Americans who don’t need food, a place to live, or fuel & electricity,” wrote Tim Murtaugh.

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Mexican cartels are fifth-largest employers in the country, study finds

Organised crime groups in Mexico have about 175,000 members – making them the fifth-biggest employer in the country, according to new research published in the journal Science.

Using a decade of data on homicides, missing persons and incarcerations, as well as information about interactions between rival factions, the paper published on Thursday mathematically modeled overall cartel membership, and how levels of violence would respond to a range of policies.

The authors argue that the best way to reduce the bloodshed would be to cut cartel recruitment – whereas locking up more members would actually increase the murder rate.

“More than 1.7 million people in Latin America are incarcerated, and adding more people to saturated jails will not solve the insecurity problem,” wrote the authors.

The number of homicides in Mexico more than tripled between 2007 and 2021 – when the government reported 34,000 victims, or nearly 27 victims for every 100,000 inhabitants – making it one of the deadliest countries in Latin America.

At a national level, two organised crime groups – the Sinaloa cartel and the Jalisco New Generation cartel – battle for domination. But analysts have identified 198 armed groups in Mexico, many of which are subcontractors to bigger players but also undertake local turf disputes.

The paper, titled Reducing cartel recruitment is the only way to lower violence in Mexico, was cautiously welcomed by security analysts in the field. “It is a first of its kind,” said Victoria Dittmar, a researcher for the Insight Crime thinktank, who did not take part in the study. “I haven’t seen any other estimates of how many people we believe are somehow related to criminal groups.”

But Dittmar said the figure would depend on the definition of a cartel and what constitutes membership, since working for a crime faction is very different to being formally employed.

“It can be very difficult to say who is a member of a criminal organisation, and who isn’t,” said Dittmar. “What about a politician that receives money? Or someone who cooperates with the group just once?”

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How the Federal Budget Deficit Doubled in a Single Year

It’s not totally unprecedented to see the federal budget deficit double from one year to the next, as it seems to have done this year.

But those occasions, at least in the past 50 years, have always corresponded with bad stuff happening to the national economy. Deficits surged in the late 1970s and early 1980s thanks to high inflation and a series of recessions. The budget deficit doubled between 2002 and 2003 thanks to a recession and as the War on Terror kicked off. And it skyrocketed again during the crises that bookended the 2010s: the mortgage crisis and the COVID-19 pandemic.

This year will likely be added to that list. The Congressional Budget Office last week projected that the federal government will post a deficit of $2 trillion when the current fiscal year ends on September 30.

At first blush, that might not appear to double last year’s budget deficit of about $1.4 trillion, but keep in mind that last year’s total included roughly $400 billion for President Joe Biden’s student loan forgiveness plan—funds that were never spent because the Supreme Court struck down the proposal, as the CBO notes.

Compared to those other historical examples, however, this year seems like an outlier. Unemployment is low, the economy has been growing steadily, and inflation has significantly abated. America does not seem to be in a crisis at the moment, but the government’s balance sheet certainly is.

And it is that way, in large part, because of the government’s own programs—as opposed to, say, an external event like a pandemic or a mortgage crisis. The drivers of this year’s rising deficit are four-fold, and three of them are the result of decades of poor policymaking: rising interest costs on the $33 trillion national debt, higher Social Security outlays, and more Medicare spending. As Axios points out, those three categories added more than $390 billion to the deficit relative to last year—a tremendous jump in a single year.

The fourth category is falling federal income tax revenue, which is responsible for about $171 billion of the added deficit this year versus last. That’s likely a blip and not a long-term problem—federal tax revenue was unexpectedly high a year ago, and bigger swings in annual revenue tallies seem to be becoming more common, as The Wall Street Journal explained in May.

That’s not the case for the other three categories driving this year’s deficit, all of which are going to keep getting worse for the foreseeable future.

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Is the Gig Economy on the Verge of Destruction?

The gig economy as we know it is on the verge of destruction. Gig work, otherwise known as freelance work, was once held up as an entry into the entrepreneurial economy for many people seeking to dip their toes in, but that economy is currently threatened by people who do not understand its vitality for freelance entrepreneurs. There is now a push, from policy makers and a few gig contractors who think it is in the best interest of gig workers and gig employers, to professionalize the gig economy.

A recent article in the Wall Street Journal interviewed gig contractors and policy makers, who explained what professionalizing the gig economy would look like if demands are met. The article describes the policies they seek to enact, which eliminate the incentives that make the gig economy attractive for those who enjoy its flexibility and freelance work options. The new mandates will undoubtedly raise business costs for employers and inadvertently shut out the people the gig economy should help: unskilled college students with little to no real work experience, retirees, stay-at-home parents, and, of course, budding entrepreneurs. Professionalizing the gig sector will bog it down with unnecessary new requirements that will destroy it.

One gig worker the Wall Street Journal interviewed said, “It is possible to transform the gig economy into a profession that is dignified for workers.” Really? Another gig delivery driver with the right idea about the gig economy told the reporter that “the flexibility and income allow him the time and funds for other pursuits, and he does not want to mess that up.” The gig economy in its current state is an oasis for regular folks who seek entrepreneurial channels to earn extra money or supplement their nine-to-five careers. The push to turn this economy into something vastly different will disemploy food delivery drivers, artists, tutors, musicians, coders, fitness coaches, construction contractors, and other gig workers.

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