Im-Politic: Where Republicans Should Definitely Listen to Trump

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abortion, conservatives, Donald Trump, election 2024, entitlements, establishment Republicans, GOP, Im-Politic, Medicare, Populism, Republicans, Social Security

And now for a sentence I’m stunned to be writing (but maybe shouldn’t be stunned to be writing): Donald Trump has once again shown that he’s one of the most interesting politicians in America – and in a good way.

The reason: In just the last few weeks, the former President has just staked out moderate and commonsensical positions on two critical issues that are frontally challenging a hardening, politically foolish and substantively counterproductive Republican/conservative consensus.

I’m stunned to see this because last month, I wrote that his continuing, off-putting – and, I emphasized, apparently irremediable – personal behavior and poor judgment  meant that he no longer deserved even to lead the conservative populist movement, much less win the Republican 2024 presidential nomination.

But I shouldn’t be so stunned because Trump has been opposing decades of Republican and conservative dogma since he first threw his hat in the ring in 2015. Trade and immigration policies are the obvious examples – and due to his efforts, the GOP is no longer the mouthpiece of the Open Borders-friendly corporate cheap labor lobby and of the China-coddling corporate offshoring lobby.

At the same time, Trump’s achievement in this respect has been even broader. As I’ve written, the unusual combinations of policies he supported contained the promise of not only redefining American conservatism (by uniting its traditional focus on allegedly excessive taxation and regulation with those aforementioned populist approaches to trade and immigration) but of bringing some long Democratic-voting constituencies into a new national political coalition broad enough to govern effectively. These include both households with members of industrial unions and working class minorities.

So it’s been all the more dispiriting that, in particular, the former President hasn’t been able to overcome his tendency to embrace even the most odious or simply dodgy figures as long as they profess admiration for him, and to blurt out the first often ill-considered opinions that pop into his head.

Nonetheless, there was Trump the day after New Year’s, writing on his own social media platform that “It wasn’t my fault that the Republicans didn’t live up to expectations [in the last midterm elections]….It was the ‘abortion issue,’ poorly handled by many Republicans, especially those that firmly insisted on No Exceptions, even in the case of Rape, Incest, or Life of the Mother, that lost large numbers of Voters.”

And as known by RealityChek regulars, evidence indeed abounds that contributing mightily to the Democrats’ better-than-expected November showing was a sharp, widespread reaction against (a) the sweeping Supreme Court ruling striking down the previously cited Constitutional right to privacy that legalized abortion nationally in most cases (approved to be sure by several Trump-appointed Justices); and (b) to the consequent stated determination of many Republican abortion foes to lengthen the list of draconian state bans.

Then, last Friday, Trump warned in a video message, “Under no circumstances should Republicans vote to cut a single penny from Medicare or Social Security.” He added, “Cut waste, fraud and abuse everywhere that we can find it and there is plenty there’s plenty of it,” Trump says. “But do not cut the benefits our seniors worked for and paid for their entire lives. Save Social Security, don’t destroy it.”

The former President was referring both to statements by Republican members of Congress supporting the idea of winning changes in eligibility for these hugely expensive but politically popular entitlement programs before agreeing to lift the federal debt ceiling, and to similar criticisms of entitlement spending expressed during the last campaign.

And as noted in the above-linked Politico article, support for Social Security and Medicare versus establishment Republican calls for significant change has been a long-standing Trump position.

Once again, I don’t believe that Trump has the personal discipline to stay on these most recent constructive messages and to avoid committing damaging own-goals. But these new statements add another big question about the future of Republicanism and conservatism:  How genuinely Trump will leaders who have shown signs of championing “Trump-ism without Trump” actually be?       

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(What’s Left of) Our Economy: Yet Another 40-Year Worst for U.S. Inflation

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Biden administration, Congress, consumer price index, core CPI, core inflation, cost of living, CPI, energy prices, Federal Reserve, inflation, monetary policy, oil prices, OPEC, Social Security, {What's Left of) Our Economy

For a change, the real headline development in my opinion revealed by today’s official report on U.S. consumer inflation (for September) wasn’t in the headline number (the figure that measures prices increases throughout the entire economy).

Instead, it was in the core consumer inflation number – the one that strips out food and energy prices supposedly because they’re volatile for reasons having nothing do with the economy’s fundamental inflation prone-ness.

Last month, the core Consumer Price Index (CPI) rose by 6.66 percent year-to-year. That wasn’t only the second month of speed up in these annual data. It was the worst such result since August, 1982’s 7.06 percent.

But even had this near-forty-year high not been recorded, the new CPI report would have been full of bad news. Contrary to recent claims that America’s cost-of-living crisis has peaked, headline inflation on a monthly basis acclerated for a second straight time, and the 0.39 percent number was the highest since June’s 1.32 percent.

On that same sequential basis, core CPI quickened for the second consecutive month, too, and the 0.58 percent result was also the worst since June (0.71 percent).

There was one bright spot on the consumer price front: Annual headline inflation declerated in September – to 8.22 percent. The slowdown was the third straight, and the best such number since June’s nine percent, but it’s tough to see this trend continuing much longer.

After all, as mentioned in yesterday’s post about the latest official wholesale inflation figures (which in and of themselves signaled renewed price increases that businesses could easily pass on to consumers), there’s no shortage of reasons for thinking that the consumer purchasing power to support such continued business pricing power will remain strong.

Moreover, on top of the aforementioned expansion of food stamp, Obamacare, and veterans’ benefits, and some possible version of student loan relief (pending legal challenges), we just learned today that Social Security recipients will get their biggest (8.7 percent) annual cost of living increase since 1981. All these actions arguably are worthy, but they all add to consumer demand without increasing the nation’s supply of goods and services – a proven recipe for stoking inflation.

And don’t forget that the global oil cartel decided last week to cut production substantially, which can only boost upward pressure on energy prices.

This lastest lousy inflation report underscores what a stunning change has taken place on the cost-of-living front – and how miserably both the monetary policy makers at the Federal Reserve and the fiscal policy makers in the Biden administration and Congress have failed. Not so long ago, Americans were debating how quickly raging inflation would end. Now the big question is how deeply it’s been embedded in the economy.

(What’s Left of) Our Economy: U.S. Inflation Just Rebounded on the Wholesale Level, Too

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Biden administration, consumer price index, core inflation, CPI, Federal Reserve, food stamps, inflation, interest rates, monetary policy, Obamacare, PPI, Producer Price Index, Social Security, student loans, veterans, wholesale inflation, {What's Left of) Our Economy

After today’s official report on producer price inflation in the United States, it’s hard to see how anyone could still genuinely believe that the worst of the recent, decades-high price increases afflicting Americans is past.

In the first place, both versions of the Producer Price Index (PPI) worsened sequentially in September) for the second straight month. And in the second place, these results are likely to generate acceleration in consumer prices (those September figures come out tomorrow) because these “final demand” producer price (also called wholesale price) numbers tell us what businesses charge for the goods and services they buy to create what they sell to consumers.

It’s true that, at some point, U.S. businesses will lose this pricing power because their customers simply can’t afford to keep buying as much. But continuing strong inflation at all levels by definition makes clear that this development isn’t imminent. (Otherwise, price increases would have cooled much faster.)

Moreover, the Federal Reserve’s tighter monetary policy, which makes credit more expensive, isn’t likely for at least several months to slow economic activity enough to moderate inflation. And the Biden administration keeps putting more money in people’s pockets (e.g., in the form of a – scaled back – student loan forgiveness program, a major expansion of food stamp eligibility and Obamacare benefits, and higher spending on veterans benefits). Further, tomorrow Washington could announce the biggest increase in Social Security payments (which are indexed to inflation) in decades.

Overall producer prices rose sequentially by 0.38 percent in September. The monthly increase was the first since June, but keep in mind that it followed a July drop of 0.41 percent and a smaller August decline of 0.18 percent (hence my claim above of two consecutive months of discouraging results).

As with the consumer price index (CPI), the government also releases “core” producer price figures that strip out food and energy prices supposedly because their volatility has nothing to with the economy’s fundamental vulnerability to inflation. And quickening inflation was apparent here, too, with September’s monthly increase of 0.36 percent following an August rise of 0.25 percent and a July bump up of 0.13 percent.

The headline year-on-year PPI increase looked a little better – but only if you forget the baseline effect, which can produce misleadingly high or low results if the preceding year’s readings (in this case) were abnormal in either direction.

The September annual rise of 8.55 percent represented the third straight month of deceleration, and the lowest such number since July, 2021’s 7.83 percent.

But it’s coming off an annual increase the previous September of 8.82 percent. By contrast, this year’s highest annual PPI increase (March’s 11.67 percent number) came off a yearly rise of only 4.06 percent the previous March. That’s less than half as high. Therefore, it’s entirely reasonable to see plenty of still worrisome producer price momentum in that most recent annual data.

As for core PPI, September actually saw an acceleration in the annual pace – from August’s 5.60 percent to 5.66 percent. And although the latest figure is still the year’s second lowest, it’s coming off a September, 2020-21 increase of 6.17 percent. The highest annual PPI result for this year (March’s 7.11 percent), that increase followed one between the previous March’s of a mere 3.15 percent – roughly only half as high.

Between these new wholesale price results and the rapid consumer prices increases revealed in last month’s official report on the consumer inflation measure preferred by the Fed, the case for peak inflation looks weaker than it has for months. And here’s one more reason for doubting that the cost of living crisis will abate much any time soon:  the unlikelihood, at least as I see it, that the Fed will keep tightening monetary policy much longer and risk being charged with throwing the economy into a recession with a presidential election coming up.

Of course, the central bank is supposed to be immune from political pressures (including public opinion). But of course, nothing in Washington is. I’ve actually been surprised that the Fed has persisted in its hawkish stance this long. But the real test of its convictions is still months away.       

(What’s Left of) Our Economy: How Not to Rate the States’ Economies – & Their Prospects

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California, demographics, domestic migrants, entitlement programs, Florida, Forbes, government workers, immigrants, inflation-adjusted growth, innovation, Medicare, Missouri, New York, New York City, Pennsylvania, population, private sector, productivity, retirees, seniors, Social Security, taxes, William Baldwin, {What's Left of) Our Economy

Thanks to Forbes magazine, it’s possible today to teach a useful lesson about the limits of statistics and the studies they’re based on – especially if those studies seem to be intended to prove a point rather than seek the truth.

The post in question, by former Forbes editor William Baldwin, looks like it makes a claim that’s not only important but irrefutable: U.S. states whose numbers of “takers” (government workers plus recipients of government transfer – welfare – and entitlements payments) greatly exceed the “makers” (private sector workers) are in “death spirals.” But states in the opposite situation have promising economic futures. In particular, employers are much likelier to create the private sector jobs crucial to continued healthy growth in the “maker” states.

It’s easy to understand Baldwin’s reasoning. The private sector undeniably is more innovative and productive than the public sector – two of the main ingredients of that healthy growth. And states with big populations of entitlements recipients (e.g., Medicare and Social Security) are almost by definition states with older populations – raising the question of who’s going to pay for all those benefits for non-working or even only semi-retired seniors. Case closed? Not exactly.

Interestingly, doubts start arising as soon as you eyeball the author’s chart. For example, he places California in the “death spiral” category. Since the Golden State represented 13.40 percent of the entire national economy as of 2014, it’s clearly a crucial example. But U.S. government figures also make clear that California enjoyed inflation-adjusted growth last year (2.80 percent) that was considerably faster than the national average (2.20 percent). That doesn’t sound like much of a death spiral to me. And in case you’re wondering whether 2014 was an outlier, California also out-grew the nation as a whole from 2011 to 2014 – by 7.81 percent to 6.26 percent.

Demographics don’t support Baldwin’s portrait of California, either. According to the U.S. Census Bureau (click here for the various relevant spreadsheets), between mid-2010 and mid-2015, the United States population as a whole as a whole grew by 12.661 million. Nearly 58 percent of the increase came from more babies being born than legal residents passing away, and the rest came from net migration from abroad.

California was responsible for nearly 15 percent of this increase – which means that the state punched above its weight demographically. In 2010, its share of the national population was only 12.07 percent. So it looks like there will be plenty of new Californians to pay for public services and retirement costs. And although many of the nearly 835,000 immigrants to come to the state during this period were illegals, many obviously were not.

The situation in another one of Baldwin’s death spiral states – New York – doesn’t look nearly so dire, either, on closer inspection. New York’s after-inflation economic growth between 2011 and 2014 wasn’t as fast as California’s. But at 6.79 percent, it still beat the national average.

New York also lost a little population from 2010 to 2015 (22,308 residents moved away). But births outnumbered deaths by 1.59 to 1, which is a bit better than the national average. And although just over 653,000 New Yorkers moved out of the state during that period, nearly 631,000 immigrants arrived. Of course, many have been illegal and low-wage. But many others have been foreign oligarchs who have rocketed the New York City real estate market into the stratosphere. In fact, the city’s property and income tax receipts for the fiscal year ending June 30 are so immense that its budget surplus is likely to approach $1 billion. So there’s no revenue shortage there.

Now let’s move to one of Baldwin’s more promising states: Florida. The Sunshine State has handily beaten the national average on 2011-2014 growth (7.07 percent) – although its performance has been affected by the depth of its housing-bust-fueled recession. On the surface, its population trends look good, too – as has historically been the case. In 2010, Floridians represented 6.09 percent of all Americans, but over the next give years, the state’s increase came to 11.58 percent of the national total.

Less good, however, were the internals – especially for Baldwin’s “death spiral” thesis. Florida’s population growth has been powered by immigrants and Americans from other states to a roughly equal extent. Surely wealthy foreigners have been well represented in immigrant ranks along with poorly paid illegals. But anyone who knows Florida knows that many of the domestic migrants have been retirees. That can’t bode well for the tax base.

Florida’s neighbor, Georgia, is another odd Baldwin success story. Its 2011-2014 growth trailed the U.S. average (at 5.32 percent). Yet its population growth (4.16 percent of the nation’s total) was greater than its 2010 share of the overall population (3.14 percent). It’s true that Georgia’s subpar population increase may eventually translate into stronger-than-average growth. But should that be considered a solid bet? Stranger still is the author’s positive assessments of Missouri and Pennsylvania, which have been under-performing both in terms of economic and population growth.

Of course, Baldwin has pegged many states right. But misses that are this big, especially for places like New York and California, make clear that the sources of healthy growth and bright economic futures are much more varied than entitlement spending, government workforce sizes, and even generational demographics. Lifestyle clearly plays a major role – what else explains California consistently defying predictions of economic doom triggered by alarm over high taxes, burdensome regulations, and the like? Along with New York and Washington state (another one of Baldwin’s losers, despite the attractions of Seattle), it’s long likely to remain a magnet for talent, as well as wealth (whether ill-gotten or not).

Although I’ve never met Baldwin, I do know that Forbes has long been one of the media world’s strongest champions of Darwinian free market thinking – and of course an equally ardent opponent to Big Government. So it looks reasonable to me that this ideology overwhelmed a more holistic view of economics and business – which his successors at Forbes might have realized just by looking out the windows of their Manhattan offices.

(What’s Left of) Our Economy: Gallup Survey Shows No Public Consensus on Boosting Recovery

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2016 elections, balanced budget, budget deficits, economy, education, executive pay, Immigration, infrastructure, minimum wage, recovery, regulation, Social Security, spending, taxes, Trade, training, {What's Left of) Our Economy

I’m a strong believer the American people’s ability to understand policy clearly enough to govern themselves wisely, and an equally strong believer in viewing opinion polls skeptically. But some new Gallup findings on economic issues are so contradictory and confusing that it’s enough to make the most dedicated populist think twice.

You can see the full results here. (And Gallup says it will expand upon this exercise throughout the rest of this presidential cycle.) But here are some that are especially head-scratching:

> Of the 47 policy ideas presented to voters, only nine were judged likely to be “very effective” at improving the economy by half or more of respondents, and of these, four were so rated by 50 percent even. That’s no doubt in part a function of the large number of proposals (which would tend to fragment preferences – as we seem to be seeing for the Republican presidential field). But the diversity of popular responses strongly points to less comforting explanations.

> The only two proposals cracking the 60 percent “very effective” mark were “Ensuring that women receive equal pay for equal work” and “Improving job training for veterans.” Trailing close behind, at 58 percent, was “Giving small businesses easier access to loans to start or expand their businesses.” Nothing else exceeded 55 percent.

> The 50 percent neighborhood is where the fun really starts. Principally, budget deficit hawks will be heartened by roughly this level of enthusiasm for “Reducing federal government spending”; “Requiring a balanced budget”; and, arguably, “Reforming Social Security to ensure it remains solvent.”

> But spending doves will be just as pleased to see that roughly half of respondents saw great potential in “Spending more government money to improve U.S. schools and education”; “Providing free community college education for all Americans who want it”; and “Providing new federal government programs designed to increase manufacturing jobs.” Perhaps tipping the balance in the doves’ favor is the near-majority backing for increased public sector funding for pre-school education, more government loans for small businesses, and tax incentives to encourage business to train workers. These results also seem to signal fairly high public confidence that more educational opportunity is needed for spurring and spreading prosperity.  

> Some of the measures most prominently touted by politicians in both major parties haven’t lit raging fires under American voters, according to Gallup. “Increasing the minimum wage” was described as a “very effective” way to strengthen the economy by a solid but not spectacular 44 percent of respondents. Generating even less excitement were “Reducing income tax rates for all Americans” and “Reducing government regulations on small businesses,” which both came in at the 40 percent mark.

> However much Americans complain about the quality and quantity of their infrastructure, only 39 percent regard “Developing federal, state, and private partnerships to invest” in such systems as a great way to spur better economic performance. And for all the animus against Wall Street and the rest of Big Business, only 38 percent registered great confidence in “Setting a limit or ceiling on corporate executives’ salaries.”

> Immigration and trade issues were gauged by Gallup, too, but here the results look less reliable, thanks to some dubious wording choices. One possible reason: The polling firm received input on the entire survey from, among others, “economists, academics and economic and political observers” – groups where orthodox, establishmentarian views (of both liberal and conservative varieties) reign supreme.

> The immigration questions seemed unexceptional, and showed the public saw relatively little economic payoff from encouraging more immigration either by “high-skill” foreign nationals who graduate from American universities, by skilled workers generally, or by their low-skill counterparts. But respondents were never asked about the potential of limiting or reducing legal immigration flows, much less about cutting off illegal immigrants’ access to jobs and public benefits.

> Much more problematic were the trade questions, which gave respondents two choices: “Negotiating trade and economic agreements designed to enhance trade with other nations” and “Increasing tariffs and taxes in order to make it more expensive to import goods into the U.S. from overseas.” The former was seen as a very promising growth engine by 29 percent of respondents, the latter by 24 percent. But if you think about it, why should anyone intrinsically doubt the benefits of “enhancing trade,” especially if no drawbacks are listed? Conversely, including the word “tax” in the question suggesting trade barriers was bound to reduce this option’s popularity. What kinds of results would Gallup have gotten, for example, if its question mentioned something on the order of “Increasing tariffs to replace goods in our stores made by foreign workers with goods made by American workers”?

I’ll keep monitoring Gallup’s efforts on this score – and hope that the company does a better job framing the debate on the globalization-related hot button issues that seem to be generating an unusual number of political headlines.

By the way, it’s important to recognize that this survey doesn’t measure public backing for or opposition to these economic ideas. Instead, it measures how well the public believes these measures will or won’t improve the economy.  These questions are similar, but not identical.