Katie Porter - What Is Causing Inflation?

[Derec]

But yea, what about all the republican stimulus that was passed?? PPP, higher government spending, stimulus, massive tax cuts, tariffs and etc. all have contributed to inflation.

PPP was horribly mismanaged, but something like that had to be passed - and it was passed in a bipartisan fashion. Same goes for the rest of the COVID package - it had to be done, but it should have been administered better and it should have ended a lot sooner. By the way, PPP was renewed by Congress with an almost unanimous support in March 2021 and was signed by Biden. So I do not think it is fair to call it "republican[sic] stimulus".
Trump tax cuts had some good portions (e.g. higher standard deduction which makes filing easier for more people) but you are right about cuts for top brackets.

 

[Derec]

Personally, I'm disgusted with the vast number of dollars that the Biden administration spent in Australia and Europe.

Personally, I am disgusted by the flimsiness of your straw men, even by straw man standards. Shoddy work. Do better.

I mean, they must have done it, if we are to accept that spending by the Biden administration is the major cause of inflation, because inflation in those places has jumped up pretty much in line with inflation in the USA.

Spending by the Biden administration is a major cause of inflation in the US. Spending by those other governments is a cause of inflation in their respective countries. That said, given US role as world's number 1 economy, US has a larger effect on other governments than vice versa.

 

[Derec]

People who make that kind of claim never seem to complain about government spending that they like. They never complain that military and police spending is inflationary, for instance.

A major war (say a full US war against Russia) would indeed be inflationary unless US jacked up taxes to pay for it. As would a massive increase in spending on police. But nobody is proposing a $3.5T bill to increase police budgets.
The thing is, adequate police and defense spending are necessary for any government to function. Politically, "defund the police" movement was a huge loser for the Democrats.
And unlike child tax credits or taxpayer funded childcare, military is explicitly mentioned in the constitution.
In the Preamble ...

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

... and then in Article II, Section 2.

The President shall be Commander in Chief of the Army and Navy of the United States, and of the Militia of the several States, when called into the actual Service of the United States;

 

[Derec]

Essentially you are arguing which part of the scissor does the most cutting.

It's not even about what does most cutting. It's about acknowledging that this part does substantial cutting. People like Porter cannot admit that, because then why was she supporting additional wanton fiscal stimulus? So they must pretend that government spending is not a major cause of THIS inflation. Because their pet spending bills (like the $3,500,000,000,000.00 B³) depend on it.

Inflation is not some natural force - producers with some market power make deliberate choices about the prices they charge.

The economy is the sum of all the economic actors and the actions they take. As such, you can think of it as a natural force of sorts. It can be steered, as a raging stream can be, but it is not easy.
When US last had large inflation in the 70s, there was no easy fix for it. Even forcing companies to charge less would not have worked as price controls merely cause shortages (see Venezuela).

Almost all economists - distinguished or not - agree that firms with market power can exacerbate inflationary pressures.

[citation needed]

The notion that our current inflation is "due in large part to government largesse" is your opinion,

Not just mine. Take John Cochrane with the Hoover Institution and formerly of the University of Chicago.

and it is contradicted by the world wide inflation.

Other countries do not have governments that practiced fiscal stimulus?[/QUOTE]

 

[Derec]

The causes of the present inflation are not clear; even experts are in doubt.

They are more or less clear in their nature - what is more murky and in dispute is how much each of these factors contributed.

at least Democratic largesse tends to address that.

Not really. The largess is not really focused on income inequality as much as rewarding Dem Party constituencies. Take college graduates, They make significantly more, as a group, than non-graduates, but were promised (and Biden delivered, or at least is trying to deliver) largess on their behalf. A big part of B³ was a massive tax cut for blue state rich (aka SALT deduction hike, which is highly regressive and mostly benefits those in high-tax blue states like California, NY and Taxachusetts). Most of the rest of B³ are giveaways to parents. I fail to see why somebody making $100k who has 3 kids should get $900/month in extra benefits funded by somebody making $30k but who has no kids.

A major sub-debate in this thread is the extent of monopoly and oligopoly power in the U.S. Some Infidels seem to argue that since Pepsi is under price pressure from Coke, and vice versa, that this market is competitive rather than oligopolic. But that ignores the way that American mega-corporations actually operate today: Oligopolies are the norm.

There are other players, including store brands and including other types of beverages. Is there any evidence of excessive pricing in the soft drink space I wonder? And what would be the solution in your mind? Break up Big Bubble?

(This would be a topic for another thread, but for starters note that the shareholders of Pepsi are essentially the same set of institutions as those who own Coke.)

And a lot of those shareholders also drink Coke. Or Pepsi.

Even noisy data has central tendencies.

Especially if you apply motivated reasoning.

For truly laughable "research" try the American Enterprise Institute.

I'd take it over this dreck.

Lusiani has a Masters degree, with emphasis on Economics, International Law and Human Rights. His credentials are not to be sneered at, with several awards from his undergraduate studies at UCLA in International Development, etc.

In other words he has an unfocused master's degree and is not an economist. By the way, where did you get this description? His bio at Roosevelt merely states that he has a "Master’s degree from Columbia University’s School of International and Public Affairs.". Which is even more vague than what you wrote, so I wonder where you got it from.
In any case, he is all about things like "exploring the mechanisms by and extent to which firms, executives, and shareholders have gained, retained, and wield outsized power in our economy and politics, while also teeing up policies to promote shared prosperity and reclaim power for workers and the public by curbing corporate power." Hardly unbiased economic analysis.

To make sure we're on the same page, we're discussing the supply and demand of, say, widgets, in the context of a shortage of a prerequisite for widgets, e.g. steel.

For example. You give people who like widgets more money. Say $2,400/month for not looking for work. Or $300/month for not having used a condom that one time. At the same time, there is fewer widgets in the store. What happens? Prices rise.

Konczal and Lusiani argue that oligopolic power can lead to the higher widget prices, but you assume competition.

Too little competition can definitely lead to market inefficiencies, yes. To argue that this is the driving force of THIS inflation rather than huge amounts of government spending is ludicrous. 2020/21 did not see significantly less competition from people making and selling widgets, but it did see significantly more government spending.

Can you agree that the supply of steel is NOT completely inelastic? That businessmen would pay a premium, outbidding other buyers of steel, with the proper profit motive?

Which raises prices. And note that any response requires time. If widgets are made in China, and China shuts down the factory, then you would need to build and expand factories elsewhere for example. And by that time China might reopen, so is it financially worth it?
And you have to bring widgets to the consumers. A big part of the supply chain issues were about container ships. So now you have fewer widgets, for a while, and at the same time people clamoring for widgets have more money to spend, thanks to Uncle Moneybags, uhm, I mean Uncle Joe.
Result:

And thus, higher prices, and thus inflation.

In your opinion there is a new equilibrium for widgets with lower volume but higher profit margins. But if the widget market were competitive, these high margins would lead an entrepreneur to bid up the price of steel, and bring down the price of widgets.

Eventually things settle down yes. Either prices come back down because there are more widgets being produced/shipped, or labor costs increase reducing profits. But in the meantime, more profits are pocketed.

 

[Swammerdami]

A major sub-debate in this thread is the extent of monopoly and oligopoly power in the U.S. Some Infidels seem to argue that since Pepsi is under price pressure from Coke, and vice versa, that this market is competitive rather than oligopolic. But that ignores the way that American mega-corporations actually operate today: Oligopolies are the norm.

There are other players, including store brands and including other types of beverages. Is there any evidence of excessive pricing in the soft drink space I wonder?

How does the price of Safeway's Select Cola compare with the price of Coca Cola? Can you even buy "store brand" cola at many restaurants?

And what would be the solution in your mind? Break up Big Bubble?

Hey. I score INTP on the MBTI questionaire. It's the rest of you guys who are INTJ. I identify problems. Do NOT come to me begging for solutions :— I'm afraid the problems of post-rational America are insoluble.

For truly laughable "research" try the American Enterprise Institute.

I'd take it over this dreck.

Evidently you missed the dreck from "Senior Fellow Emeritus" Mark Perry at AEI, which I summarized here.. Basically Perry employed a little trick to shift a statistic slightly — turning a median (50-percentile) number into a 49-percentile number — to accuse the Biden White House of a hypocrisy. The deviation would have been too trivial to note in any event, but Perry demonstrated extreme intellectual dishonesty:

Did his cutesy trick have merit or not? Debatable, BUT since that trick was the ONLY thing that led to his hypocrisy claim, an honest researcher would have highlighted it (and any justification) in the Introduction and Body of his longish diatribe. Instead the trick is HIDDEN away. Not even a single complete sentence admits to the trick: it's buried as a single adjective in one single sentence. I discovered it only because my peculiar strain of autism enjoys playing with numbers.

I'd be happy to use Perry's dreck as a test. Twelve brownie points to anyone who can find a "scholarly" paper with intellectual dishonesty more blatant than Perry's.

 

[Harry Bosch]

But yea, what about all the republican stimulus that was passed?? PPP, higher government spending, stimulus, massive tax cuts, tariffs and etc. all have contributed to inflation.

PPP was horribly mismanaged, but something like that had to be passed - and it was passed in a bipartisan fashion. Same goes for the rest of the COVID package - it had to be done, but it should have been administered better and it should have ended a lot sooner. By the way, PPP was renewed by Congress with an almost unanimous support in March 2021 and was signed by Biden. So I do not think it is fair to call it "republican[sic] stimulus".
Trump tax cuts had some good portions (e.g. higher standard deduction which makes filing easier for more people) but you are right about cuts for top brackets.

Okay. My point is that both sides are to blame for too much stimulus. I agree that PPP needed to happen. We were in a crisis. It was a lot like TARP in that it rebuilt confidence. But the republican plans (tax cuts and investigations) aren't going to lower inflation.

 

[RVonse]

What I'm saying is just because the baseline since 1979 has been 11.4% doesn't mean that it is the only healthy number. 0% could be just as good or better if that means that employees are getting a bigger slice of the pie.

Let's consider what happens in a world where it's 0%:

Companies have no reason to expand because that brings no value. Companies have no reason to be created because there's no value in doing so.

Thus there is nothing to grow the economy. It's stuck at 1979 levels. Note, furthermore, that as companies fail there would be no replacements because there's no incentive to do so. Look around--anything founded after 1979 would not exist.

It's amazing how delicious seed corn is.

Companies do not expand or retract due to inflation or interest rate, they do so because of demand for their products and demographics. How did inflation have anything to do with the development or sale of the iPad or iphone?

 

[RVonse]

What is the republican plan?

There is monetary inflation and there is also the fiscal inflation.

In the case of monetary inflation, Republicans like Ron Paul would tell you it is the fault of the fed. And that the constitution has no requirements for a private fed in the first place. Just who was it who slammed interest rates at or below zero for far too long.

Indeed, there is nothing in the constitution about needing a fed, or a global cabal of central banks and there are many other Republicans who feel the fed does far more harm than good.

 

[Elixir]

there are many other Republicans who feel the fed does far more harm than good.

So what? There are many “other Republicans“ who want to install a halfwit conman as dictator. They “feel” it’s a good idea.
To quote yet some “other Republicans”, fuck their feelings.

 

[laughing dog]

Essentially you are arguing which part of the scissor does the most cutting.

It's not even about what does most cutting. It's about acknowledging that this part does substantial cutting. People like Porter cannot admit that, because then why was she supporting additional wanton fiscal stimulus? So they must pretend that government spending is not a major cause of THIS inflation. Because their pet spending bills (like the $3,500,000,000,000.00 B³) depend on it.

[/quote] There is no evidence to support the notion that fiscal and monetary policy provided most of the inflationary pressure. None.

Inflation is not some natural force - producers with some market power make deliberate choices about the prices they charge.

The economy is the sum of all the economic actors and the actions they take. As such, you can think of it as a natural force of sorts. It can be steered, as a raging stream can be, but it is not easy.
When US last had large inflation in the 70s, there was no easy fix for it. Even forcing companies to charge less would not have worked as price controls merely cause shortages (see Venezuela).

Almost all economists - distinguished or not - agree that firms with market power can exacerbate inflationary pressures.

[citation needed]

Read with comprehension any principles of economics textbook on monopoly, oligopoly and monopolistic competition. It is a well-known outcome that firms that are "price-makers" can pass on increases in costs and increase profits.

The notion that our current inflation is "due in large part to government largesse" is your opinion,

Not just mine. Take John Cochrane with the Hoover Institution and formerly of the University of Chicago.

Taking the opinion of someone from the Hoover Institution on economics is akin to believing Trump on election results.

and it is contradicted by the world wide inflation.

Other countries do not have governments that practiced fiscal stimulus?

Irrelevant. Policy stimulus in different countries at different levels would not cause inflation in each of those countries to jump so quickly at the same time. Discounting supply "shocks" as a major influence on this inflation is either incredibly ignorant or ideological madness.

 

[Loren Pechtel]

What is the republican plan?

There is monetary inflation and there is also the fiscal inflation.

In the case of monetary inflation, Republicans like Ron Paul would tell you it is the fault of the fed. And that the constitution has no requirements for a private fed in the first place. Just who was it who slammed interest rates at or below zero for far too long.

Indeed, there is nothing in the constitution about needing a fed, or a global cabal of central banks and there are many other Republicans who feel the fed does far more harm than good.

No, they don't like it because they want to manipulate the economy for political gain--which is exactly why the Fed was set up with only limited government control: to prevent such manipulation.

The reality is that the economy has been much smoother sailing with the Fed than with specie currency.

 

[laughing dog]

What is the republican plan?

There is monetary inflation and there is also the fiscal inflation.

In the case of monetary inflation, Republicans like Ron Paul would tell you it is the fault of the fed. And that the constitution has no requirements for a private fed in the first place. Just who was it who slammed interest rates at or below zero for far too long.

Indeed, there is nothing in the constitution about needing a fed, or a global cabal of central banks and there are many other Republicans who feel the fed does far more harm than good.

All true. There are many Republicans who think Biden did not win the 2020 election. The GOP has had control of both chambers and the Presidency before, and done nothing to abolish the Federal Reserve. Probably because they believe that the benefits it creates outweigh its costs.

Ever since there has been a central bank, there has been a debate about its place in a democracy. The debate is not new. Basically it boils down to does one prefer some unelected people to manage our supply of money or Congress or the private sector?

 

[Swammerdami]

Serious question: What do the Abolish-the-Fed crowd want to use for money? Congress just prints money to suit its whims?

I suppose Google would answer this, but why waste a click when we have Abolitionists here. There were three major types of money used in the 20th century:
(a) gold
(b) central-bank money modeled after Bank of England or U.S. FedRes
(c) Zimbabwe-style paper money
I won't overlook the 21st century invention
(d) crypto-currency, presumably anonymously created a la Satoshi

Is one of these the Paul-QAnon-Libertarian model?
(e) none of the above.

 

[Harry Bosch]

What is the republican plan?

There is monetary inflation and there is also the fiscal inflation.

In the case of monetary inflation, Republicans like Ron Paul would tell you it is the fault of the fed. And that the constitution has no requirements for a private fed in the first place. Just who was it who slammed interest rates at or below zero for far too long.

Indeed, there is nothing in the constitution about needing a fed, or a global cabal of central banks and there are many other Republicans who feel the fed does far more harm than good.

All true. There are many Republicans who think Biden did not win the 2020 election. The GOP has had control of both chambers and the Presidency before, and done nothing to abolish the Federal Reserve. Probably because they believe that the benefits it creates outweigh its costs.

Ever since there has been a central bank, there has been a debate about its place in a democracy. The debate is not new. Basically it boils down to does one prefer some unelected people to manage our supply of money or Congress or the private sector?

Well, you know more about the economy than I do. As an aside, I've never understood why the right hates the fed so much. But please correct me if I'm wrong, but if the fed were eliminated, wouldn't we have quicker recoveries, but much deeper recessions? The fed helps smooth out cycles. Less volatility.

 

[laughing dog]

What is the republican plan?

There is monetary inflation and there is also the fiscal inflation.

In the case of monetary inflation, Republicans like Ron Paul would tell you it is the fault of the fed. And that the constitution has no requirements for a private fed in the first place. Just who was it who slammed interest rates at or below zero for far too long.

Indeed, there is nothing in the constitution about needing a fed, or a global cabal of central banks and there are many other Republicans who feel the fed does far more harm than good.

All true. There are many Republicans who think Biden did not win the 2020 election. The GOP has had control of both chambers and the Presidency before, and done nothing to abolish the Federal Reserve. Probably because they believe that the benefits it creates outweigh its costs.

Ever since there has been a central bank, there has been a debate about its place in a democracy. The debate is not new. Basically it boils down to does one prefer some unelected people to manage our supply of money or Congress or the private sector?

Well, you know more about the economy than I do. As an aside, I've never understood why the right hates the fed so much. But please correct me if I'm wrong, but if the fed were eliminated, wouldn't we have quicker recoveries, but much deeper recessions? The fed helps smooth out cycles. Less volatility.

I don't know whether we would have quicker recoveries. The general idea of a central bank is to ameliorate the effects of the ups and downs of economic activity (we used to say "business cycle" but that implied or presupposed some idea of regularity to the frequency of ups and downs). The central bank is also supposed to maintain financial stability (i.e. stem meltdowns in the financial sector), regulate banks and act as banker to banks.

There is a long history in the US of antipathy to the idea of a central bank, going back to before the time of Andrew Jackson (who eliminated the first central bank of the US). Some of it is due to rural vs urban world view. Some of it is suspiscion of centralized power. Some of it is due to the lack of democratic oversight. Some of it is due to financial naivete/ignorance. I suspect that some of it is also due to latent anti-semitism (the Jews are banker crapola). I am not sure that these sentiments (in whatever mixture) are found exclusively on the right.

 

[Cheerful Charlie]

In the late 1800's the U.S. had a series of roller coaster boom and bust cycles. There were bank failures, runs on banks, and lost savings and it was obvious something had to be done by the government, and thus the Fed was born in 1913. The right hates the Fed for the same reason criminals hate the police. It regulates the American banking system. They hate regulation.

 

[senor boogie woogie]

Maybe it is because Katie Porter's party has printed money to death to devalue the currency even more, plus the extremely high taxes in her state, plus the fact that her President decided to shut down the pipelines and drilling in America to jack up fuel prices even more which in turn makes shipping that much more expensive making everything we buy in the stores and supermarkets that much more expensive. Plus that her state has made creating and maintaining a business in her state so much more difficult and again, taxing them to death. Prices go up to cover the costs and someone has to pay for them.

Democrats hate job creators and businesses, and have no problem shipping jobs and industry overseas.

 

[Harry Bosch]

Maybe it is because Katie Porter's party has printed money to death to devalue the currency even more, plus the extremely high taxes in her state, plus the fact that her President decided to shut down the pipelines and drilling in America to jack up fuel prices even more which in turn makes shipping that much more expensive making everything we buy in the stores and supermarkets that much more expensive. Plus that her state has made creating and maintaining a business in her state so much more difficult and again, taxing them to death. Prices go up to cover the costs and someone has to pay for them.

Democrats hate job creators and businesses, and have no problem shipping jobs and industry overseas.

Good heavens! Those democratic meanies shut down the pipelines and drilling? Those monsters. And yet, I heard that there is more US oil production now than ever. I downloaded the below from Hunter's laptop:

U.S. Field Production of Crude Oil (Thousand Barrels per Day)

It shows very high oil production during the Biden days. What the hell is going on?????

 

[Cheerful Charlie]

Maybe it is because Katie Porter's party has printed money to death to devalue the currency even more, plus the extremely high taxes in her state, plus the fact that her President decided to shut down the pipelines and drilling in America to jack up fuel prices even more which in turn makes shipping that much more expensive making everything we buy in the stores and supermarkets that much more expensive. Plus that her state has made creating and maintaining a business in her state so much more difficult and again, taxing them to death. Prices go up to cover the costs and someone has to pay for them.

Democrats hate job creators and businesses, and have no problem shipping jobs and industry overseas.

Trumpo the clown gave us $7.8 trillion in deficits. Massive deficits usually are followed by inflation. Meanwhile, big corporations are jacking up prices giving them record profits while gouging us all. The GOP cares more about Hunter Biden's laptop than that.