Friday, September 25, 2020

The American Economy, As It Stands and May Soon Be

This month, we have seen a lot of updates on how business and personal prosperity are doing, along with their immediate prospects.  How does it look?

“A Top Fed Official Warns That Economic Risks Aren’t Over,” by Jeanna Smialek in the September 1st New York Times, related that Federal Reserve governor Lael Brainard claimed “a lot of uncertainty” and that “downside risks continue to be important,” disagreeing that we have already seen the worst from the pandemic.  It also included the information that the Fed, sensibly, “will now aim for 2 percent inflation over time, instead of as a more or less absolute goal,” and expects to keep interest rates as is even if it slightly surpasses that mark.  Although money supplies have shot up since March, it is still not circulating enough to cause that problem.  Per a New York Times article by Justin Wolfers the next day, though, “Inflation Is Higher Than the Numbers Say,” as “people are buying more of those goods whose prices are rising the fastest,” online grocery shopping is more expensive, and “the quality of many services has gotten worse,” the latter including, as examples, restaurant meals, college courses, and therapy sessions.  How we measure inflation will, indeed, either need to change or be accepted as being less accurate. 

Yes, “Americans still spending money despite expiration of $600-a-week unemployment aid” (Fox Business, also September 1st), though more than expected.  A J.P. Morgan economist saw little worsening, let alone a disaster.  I think the difference has been in the general attitude toward Covid-19, that more Americans have accepted that our situation will not be changing soon, and so are not waiting to spend until it does.  There are, of course, exceptions galore, but this is encouraging.

On September 7th, also in the Times, Richard V. Reeves and Christopher Pulliam surprised by telling us about “The Tax Cut for the Rich That Democrats Love.”  Three very prominent members of that party want to end the $10,000 deductions cap, which can cost those in the highest income brackets a great deal.  The authors ended by saying that “it is a shame to see Democrats urging a big tax break for the richest, whitest families, which is arguably the very last thing the country needs right now” – except, perhaps, that bigoted attitude.

Two indications that the economy was stronger than we may have thought were the subject of “Median U.S. household income rises 6.8% to $68,700 in 2019, poverty rate falls for fifth year,” by Paul Davidson in the September 15th USA Today.  I like to see medians, which on such numbers these days are especially valuable, but assessing poverty has long been muddled and controversial, as products fall as well as rise in price and some become newly available.  The data’s keeper, the Census Bureau, however found real respondent bias in that those losing their jobs were less likely to participate, which, if such numbers were compiled today, would be much worse.

The clearest statistic yet I have seen showing such charges are unsustainable was that “9 of Every 10 Restaurants and Bars in N. Y. C. Can’t Pay Full Rent” (Mihir Zaveri and Daniel E. Slotnik, The New York Times, September 22nd).  Allowing indoor dining at 25% of capacity, scheduled for next week, won’t help that much, and sky-high Manhattan payments will need to come down.  Property values will also dive, and the city will come under pressure to reduce taxes.  The free market, which caused these amounts of money to be so large, works both ways, and now it has begun to speak loudly. 

An obvious need and an obvious source of revenue became clear in “Gas tax hikes pile up:  States become desperate for road repair revenue as COVID-19 reduces driving,” (Nathan Bomey, USA Today, September 23rd).  Gasoline averaged $2.18 per gallon, or 49 cents lower than a year before, this week, which means higher levies on it will be less painful – some planned or recently implemented are 9.3 cents per gallon more in New Jersey, 5 cents a gallon higher in Virginia, and smaller hikes in Nebraska, California, South Carolina, and Alabama.  An oil analyst claimed that we are now using about 15% less than “normal,” which, if anything, seems high.

In general, “200,000 dead:  COVID-19 is creating ruinous economic damage that will take years to repair” (Paul Brandus, USA Today, September 22nd) is both an accurate headline and a suitable summary.  Among other concerns, we have lower Social Security intake moving its projected trust fund exhaustion date up to 2031, a loss of many workers from the labor force becoming permanent as they will no longer have the skills to be rehired, and mental health problems becoming more common.  These results, “intertwined and destructive,” will end at various times, most long after vaccine distribution.  But our overall charge is clear – to roll with the punches and be as healthy and ready as we can when the economy, and life, moves on.

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