A Red Flag (ish)

Peter Zeihan is a smart guy.

Peter Zeihan doesn't always get it right.

Peter Zeihan is worth a listen because he's not all that wrong all that often.

Yay Elmo 🤨

Twixter has lost a shit load of value since Elmo bought it.

If you remember, he paid $44B for a company valued at about $20B, and since then, the valuation has dropped by as much as $15B according to some, while others are (IMO) a little over-anxious to boost the company, thinking (again, IMO) it might be ripe for a big comeback.

Elon Musk's X is gaining value, Fidelity says

NOTE: Fidelity helped put Elmo's financing together so he could buy the thing last fall.

Gee, I wonder if that has anything to do with their decision to pimp it up a little.

But the main problem being reported is that ad revenues continue to lag badly - because companies want to avoid the potential for brand damage due to their names appearing next to some seriously slimy posts on a platform becoming quite well-known for slime, and dis-infobots, and racism, and Nazis, and hosts of other monsters of the id.

Case in point:

We can't continue with an overarching policy of Profit Over Principle, and expect a nice happy ending. It's never worked out like that. Ever.

• People, then Policy
• Labor, then Capital
• Principle, then Profit

Call it a Business School version of Popper's Paradox: Allowing an anything-goes fully-laissez-faire management philosophy because "Profit Is King" can lead to the extinction of profit.

I think maybe Elmo is illustrating that for us now.

Bidness Is Lookin' Up

Inflation ticked up a little in July, and new unemployment claims were higher than forecast last week, but the economy is strong and on track to get better.

Growth in factory construction for Q2 contributed more to GDP than at any time in the last 40 years.

1. Unless you're in the business of fabricating outrage, don't expect the GOP to do one fuckin' thing for you.
2. Democrats are proving - again - that they're the ones who know how a healthy economy works, and they're the ones who know how good government can keep it healthy.

3 signs the US economy is set to zoom past growth expectations

• The US is on pace to grow beyond expectations, thanks to a strong labor market and new economic policies.
• On Thursday, new GDP data will show just how much the US economy grew between April and June.
• "Bidenomics" policies including the Infrastructure Investment and Jobs Act could heighten GDP more than expected.

The economy has been on a roll recently, and this trend may continue when GDP numbers come out on Thursday.

With the debate over a looming recession still going strong, all eyes will be on the gross domestic product numbers for the three months ending in June — and forecasts are sunny.

Last week, Morgan Stanley made a "sizable upward revision" in its GDP forecasts, projecting 1.9% growth, after crediting President Joe Biden's economic growth initiatives with driving a surge in manufacturing and infrastructure. Plus, consumer confidence is up and inflation is slowing, while a surge in new business creation remains strong.

Forecasts from the Federal Reserve Bank of Atlanta are also optimistic at 2.4% in the second quarter. However, panelists surveyed by the Federal Reserve Bank of Philadelphia predict second-quarter growth of 1.0%—which would signal a slowdown in growth from an annual rate of 2.0% in the first quarter. Congressional Budget Office estimates released Wednesday suggest GDP will rise at a 0.4% annual rate in the second half of 2023 and will steadily improve next year.

Some believe GDP won't rise too much since consumer spending has been modest, with many Americans becoming more cautious given high prices and rising credit card debt.

Thursday's data comes as President Biden continues to aggressively promote his economic growth initiatives, commonly deemed "Bidenomics," in an attempt to increase the country's industrial strength and bring back manufacturing jobs to the US.

"Together, we are transforming the country, not just through jobs, not just through manufacturing, but also by rebuilding our infrastructure," Biden said last week at a Philadelphia shipyard.

Investments in frastructure and manufacturing fuel growth

Ellen Zentner, chief U.S. economist for Morgan Stanley, said in a note that the Infrastructure Investment and Jobs Act is "driving a boom in large-scale infrastructure," adding that manufacturing construction has strengthened.

The US has also been experiencing a factory boom, with construction spending on US manufacturing nearly doubling from May 2022 to May 2023. Legislation such as the CHIPS Act, intended to boost semiconductor manufacturing, and the Inflation Reduction Act have provided tax incentives and funding to promote manufacturing construction. The boom has been led mainly by construction for computer, electronic, and electrical manufacturing.

Manufacturing employment recently hit its highest level since 2008, and since Biden took office, around 800,000 manufacturing jobs were added. However, manufacturing hiring still lags behind some other sectors due in part to the manufacturing skills gap, caused by the struggle to find workers with technical and manual expertise.

New business formation is still on the rise

The US has also seen a continued boom in new business creation, according to the Economic Innovation Group. In the first two quarters of this year, applications to start a business likely to hire employees grew 7% year-over-year. This puts the country on pace to nearly match 2021's highs, the highest level in US history.

So far this year, nearly 871,000 likely employer applications were filed, making this the second largest midyear total ever—and a 36% increase over the prepandemic half-year baseline. Individuals filed nearly 2.7 million applications to start a busy first half of this year, a 52% increase from the first two quarters of 2019.

Sectors leading likely employer business applications include accommodation and food services, construction, health care and social assistance, and retail trade. This data has been strongest in the South, with significant upticks in total business applications between Mississippi and North Carolina.

And existing businesses report favorable conditions as well. According to the National Association for Business Economics' July Business Conditions Survey, respondents on the whole saw improvement in sales and profit margins at their firms over the past three months.

"Results of the July 2023 NABE Business Conditions Survey reflect an economy of rising sales and profits, as materials costs decline and stabilizing wages prove less challenging," said NABE President Julia Coronado, founder and president, MacroPolicy Perspectives LLC in a statement.

Americans are feeling better about the economy — likely due to slowing inflation

After months of a so-called "vibecession," when many Americans felt poorly about the economy even though most metrics pointed away from a recession, consumer confidence has been rising. On Tuesday, consumer confidence levels jumped to the highest level since July 2021, according to the Conference Board's monthly Consumer Confidence Index.

This uptick in consumer confidence comes as a recession seems less likely for 2023. According to the NABE survey, nearly 75% of forecasters believe there is a 50% or less chance the US would enter a recession in the next 12 months. This could signify a higher chance of a long-desired soft landing.

Additionally, many Americans have felt better about the economy due to slowing inflation. The Consumer Price Index rose by 3.0% year over year in June, down from 4.0% in May, a positive sign for Americans' wallets.

The CPI continues inching closer to the Federal Reserve's 2.0% inflation target, which it hopes to achieve partly through July's 25 basis point interest rate hike. More rate hikes are likely necessary to bring inflation numbers down further, though it's unclear how many additional hikes, if any, will occur this year.

To be sure, not every metric is pointing to blazing growth. Though still strong, the jobs market drastically slowed hiring in June, adding 209,000 nonfarm payroll jobs — almost 100,000 less than in May. Job openings also fell in June, suggesting the labor market still has a ways to go but is still growing at a sustainable rate.

Many economic indicators support strong GDP growth for the quarter and the rest of the year, which could be a good sign for big companies, new small business owners, and Americans at the grocery store.

Yes, we still have a problem with Deficit and Debt, and we can't expect to grow our way out of it. But if there's a better way to get a handle on our immediate national cash flow problem than to make the fat cats pull their weight, I'm listening.

Cutting taxes at the top of the earnings pyramid ends up a dead loser for the overall economy because it spurs self-indulgence on Wall Street, while actually taking money out of general circulation. Tax cuts always provide a nice boost for the top 0.01%, but they have a stifling effect on the economy for the overwhelming majority of the country.

Raising taxes on the top 1 or 2 percent (earnings north of $500K - $850K) will not slow things down, and will ensure solvency for Medicare and Social Security, as well as go a long way to fixing a host of problems the GOP has been deliberately causing in furtherance of their Plutocracy Project.

Returning to a progressive tax rate schedule would do wonders for everybody.

Manufactured Crises

Promises

There's plenty about Joe Biden that falls way short of anything anybody would consider perfect.

But I have to ask: When did we start thinking the leaders we elect would be - or could be - perfect? A government of, by, and for the people means we look around at all the normal everyday folks, we choose a few who we think can do a job for us, and we put them to work.

We give them 2 or 4 or 6 years, and if they're not up to snuff, we get to send 'em packin' and hire somebody else.

That's how it's supposed to work anyway.

BTW, this is not the tirade about what the fuck happened that we're stuck with a buncha fuckers in office who don't do what we need them to do, but we can't seem to fire them? That's a repeat rant for another time.

What I'm on about here is that Biden is trying to make some headway in the fight against plutocracy by going after predatory lending in "public" education, but he keeps getting stiffed by a Supreme Court that's bent so far to the right, they're coming up behind themselves, and just might disappear up their own asses pretty soon.

He stays in there though, hacking away at an entrenched faction of coin-operated congress critters who are hellbent on keeping us under Wall Street's thumb.

Millions of American households are paying the monthly bills with their credit cards, piling up trillions of dollars in debt, making payments that more or less keep them just solvent enough to stay afloat, but never getting a chance to break free. It's very reminiscent of Robber Barons and Company Stores - but more like we're on the verge of becoming a full-blown feudal system complete with Lords and Serfs.

I guess my point is: Biden keeps trying, and he's about all we've got. We need to work on getting him some help.

Education Department announces student loan forgiveness for 800,000 borrowers

The action is a result of what the department calls a “fix” to income-driven repayment plans. It’s expected to provide $39 billion in federal student loan forgiveness.

WASHINGTON — The Education Department announced Friday it would automatically forgive student loans for more than 800,000 borrowers.

The action is a result of what the department calls a “fix” to income-driven repayment plans. It's expected to total $39 billion in federal student loan forgiveness.

The department said the move will address administrative issues in the income-driven repayment system. Under the plans, federal student loan borrowers are eligible for forgiveness after 20 or 25 years of payments, depending on the plan. But for some, qualifying payments that “should have moved borrowers closer to forgiveness were not accounted for,” it said in a news release.

The Supreme Court struck down President Joe Biden’s plan to forgive up to $20,000 in debt for 43 million federal student loan borrowers in a 6-3 ruling last month, dealing a blow to one of his key campaign promises.

Immediately after the ruling, Biden said his administration would explore other avenues for relief. “Today’s decision has closed one path. Now we’re going to pursue another,” he said.

Biden also said he was directing the Education Department to formulate a new plan for loan forgiveness grounded in the Higher Education Act. He promised the proposal would be “legally sound” while warning that “it’s going to take longer.” The specifics of the new plan have yet to be announced.

Friday's announcement is a smaller step the Biden administration is taking to pursue federal student loan relief with existing authority.

“For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress towards forgiveness,” Education Secretary Miguel Cardona said in a statement. “By fixing past administrative failures, we are ensuring everyone gets the forgiveness they deserve.”

Better Is Better

It's still not enough, but whatever Biden's team is doing seems to be working OK so far. 

We've got the right guy in the White House, he's workin' hard, and he's got it headed in the right direction. Let's try not to fuck it up.

Inflation eased further in May but remains above normal levels

The latest inflation snapshot comes as the Federal Reserve is expected to leave rates untouched at this week’s policy meeting

Inflation eased further in May, but it’s still unclear whether the economy can slow just enough without causing pain to families and businesses already squeezed by high costs for groceries or rent.

A report out Tuesday from the Bureau of Labor Statistics showed inflation eased for the 11th straight month in May. Prices rose 4 percent in comparison with last year, the smallest 12-month increase since March 2021, and an improvement from the 4.9 percent annual rate noted in April. Prices also rose 0.1 percent in May compared with the previous month.

Those figures show significant progress since the summer, when prices soared to 40-year highs and the consumer price index peaked at 9.1 percent on a year-over-year basis. But inflation is still above normal levels, and a looming question is whether large price increases will become a permanent feature of the economy — or whether more economic pain is necessary for policymakers to root out persistent inflation.

“The bigger question for inflation is: Where is it going? Where does it settle out?” said Peter Boockvar, the chief investment officer at the Bleakley Financial Group. “Are we just going to go back to this 1-to-2 percent inflation trend that we got so used to? Or is there something so structural that after the spike, after the comedown, are we going to settle at 3 [percent]?”

He added: “That plays into: How high do rates stay, and for how long?”

People are spending less on hotels, flights and restaurants

Major stock indexes flashed green Tuesday morning. Shortly after the open, the Dow Jones Industrial Average was up 109.7 points, or 0.32 percent. The S&P 500 index rose 0.49 percent, and the Nasdaq 0.69 percent.

Housing costs continue to be a major driver of overall inflation. Rent rose 0.5 percent in May over the month before, only a minor improvement from a 0.6 percent increase in April. Rental costs are still up 8.7 percent over last year.

Costs for used cars and trucks also increased 4.4 percent in May in comparison with April, as they did the month before. Wholesale costs for used cars have been rising, and those increases are showing up in retail prices.

A narrower measure of prices that strips out more-volatile categories including food and energy rose 0.4 percent in May, as it did in April and March. Normally, “core inflation” may rise by between 0.1 and 0.2 percent. Fed officials are especially focused on this particular measure since it helps them gauge the underlying sources of inflation that can become the most persistent.

Prices for a range of “core” goods rose yet again in May. Wendy Edelberg, director of the Hamilton Project and a former chief economist at the Congressional Budget Office, said the continued price increases show people are still spending — but that could force the Fed to slow the economy more, even if central bankers skip a rate hike this week.

“If we have any hope of getting inflation down, goods prices have to fall, just outright fall,” Edelberg said. “I expected that to happen many months ago. We had a couple of months of good news on that front, but then real consumer spending remained really strong to my surprise, and perhaps to retailers’ surprise.”

Encouraging signs were sprinkled throughout the report, too. The category for household furnishings fell 0.6 percent over the month, marking that index’s first decline since June 2021 and its largest one-month decline since August 2009. Airfares also decreased 3 percent over the month after a 2.6 percent decline in April.

To get inflation under control, the Federal Reserve has raised its benchmark interest rate at a breakneck pace since March 2022. Those moves have brought the central bank rate, the federal funds rate, to between 5 and 5.25 percent — the highest level in 16 years. The goal is for steep borrowing costs to curb demand for all kinds of lending and investments, including mortgages and auto loans, so that demand for new houses or cars can fall into better balance with supply.

In Charleston, S.C., managers at Neal Brothers aren’t expecting supply chains, prices or the overall economy to go back to the way they were. The export, packing and distribution services company instead is focused on adjusting to the “new normal” on anything from diesel to liquid propane to timber, said vice president Harry Griffin.

Griffin also worries that the Fed’s fight to rein prices in will hamper his business, too. Neal Brothers stores building materials and other goods that will eventually be used by contractors constructing new homes. If the home building industry seizes up entirely and people stop building, that could hit Griffin’s bottom line.

“As long as these interest rates stay really high, it could affect the home building industry long-term, and that may keep importers from importing as much lumber products in as they have been,” Griffin said. “It’s all connected.”

Much of the economy, though, has remained resilient throughout the Fed’s aggressive fight against inflation. Employers added 339,000 jobs in May, marking the 29th straight month of strong job growth. The country does not appear to be barreling toward a recession. And while there are signs that Americans are spending less on restaurants, hotels and airlines, that could help the Fed’s attempts to curb prices in service industries, which have been especially susceptible to labor shortages.

President Biden touted the report, pointing to steps his administration has taken to tackle the cost of gas, prescription drugs and health insurance premiums.

“At the same time, the unemployment rate has remained below 4 percent for the longest stretch in more than 50 years, helping to support wage gains over the last year, even after accounting for inflation,” Biden said in a statement. “More Americans are in the workforce than in decades.”

For much of the past 15 months, the Fed has rushed to catch up to inflation, often hiking the federal funds rate in big jumps. And it has always signaled that more work remains to be done. But when central bankers gather for their June policy meeting Tuesday and Wednesday, their agenda will be somewhat different.

The widely held expectation is that policymakers will leave rates unchanged this week to give themselves some time to see how the past year’s increases are filtering through the economy. Rate increases operate with a lag, and many economists argue that the drop in inflation over the past year has been driven largely by improvements in supply chains, gas prices returning to normal and the economic aftershocks of Russia’s invasion of Ukraine gradually fading away. That could mean the full toll of higher rates has yet to be felt.

Still, there are many sources of inflation that haven’t been tamed by the Fed’s moves. The housing market slowed as mortgage rates soared. But rent, which makes up a large share of the consumer price index, continues to be a major driver of overall inflation. Rent isn’t expected to simmer down until the volume of housing available significantly increases or until cooling in the rest of the housing market trickles down to leases. No one knows when that will happen.

Officials have not definitively said they have entirely finished raising rates, and incoming data on inflation, jobs and consumer spending will help them decide whether to make further increases in the coming months. Also significant will be information on banking lending, which has moderated since a recent shock to the financial system made lenders more skittish about issuing credit.

“A decision to hold our policy rate constant at a coming meeting should not be interpreted to mean that we have reached the peak rate for this cycle,” Fed governor Philip Jefferson said in a recent speech. “Indeed, skipping a rate hike at a coming meeting would allow the committee to see more data before making decisions about the extent of additional policy firming.” (Jefferson’s remarks carry added weight since he was nominated to the Fed’s No. 2 role last month.)

In Baltimore, Postman Plus Perry Hall is getting hits from all sides. The pack-and-ship store has seen costs of 250-foot rolls of bubble wrap nearly double. Transportation and shipping costs go up every few months, even since gas prices simmered down from the summer’s peaks. All of the store’s employees start at $15 already, but the hot labor market means they could earn higher pay elsewhere.

Owner Sharon Greenbeck has tried to absorb as much of the cost as possible. But looking at her small business, Greenbeck said it’s nearing time for her to pass higher prices on to her customers. She worries about how they will react. Already, customers raise an eyebrow if they want to send gifts to friends and the shipping ends up costing as much as the gifts. Greenbeck said she has even seen inflation encroach on the “little things.” For instance, the rubber ducks she would have in stock for children have doubled in price.

“I sell less because people say, ‘Oh, I’m not spending $2 on a duck,’” Greenbeck said. “So then my merchandise sits. It’s an ugly cycle.”

"Ground And A Lot Of Dead Russians"

With Bakhmut ‘only in our hearts,’ Zelensky makes impassioned G-7 plea

HIROSHIMA, Japan — Ukrainian President Volodymyr Zelensky, making a dramatic and impassioned plea for the richest global democracies here to continue supplying Ukraine with arms and money, mourned the destruction in Bakhmut, a city in ruins that Russia claims to have taken.

Asked during a Group of Seven summit meeting with President Biden whether Bakhmut was still in Ukraine’s hands, given that the Russians say they’ve taken control, Zelensky responded: “I think no. But you have to understand, there is nothing.”

His spokesman Sergii Nykyforov later clarified on Facebook that Zelensky’s “no” was referring to Russia’s assertion that it has taken the city, saying Zelensky denies those claims.

But buildings have been destroyed, Zelensky said, and all that remains is ground “and a lot of dead Russians.”

“For today, Bakhmut is only in our hearts, and there is nothing on this place,” Zelensky said, while praising Bakhmut’s defenders: “They did strong work, and of course we appreciate them for their great job.”

It was a somber note as Zelensky arrived in a city that was severely damaged nearly eight decades ago by a U.S. nuclear bomb. He came warning anew about the threats of nuclear weapons and the risks for his war-tattered country that is seeking to one day rebuild in the same way Hiroshima has become a vibrant industrial hub.

Biden, in remarks ahead of the meeting with Zelensky, said the United States would supply Ukraine with another phase of military assistance, a $375 million tranche that Biden described as “a package that includes more ammunition artillery, armored vehicles to bolster Ukraine’s battlefield abilities.”

“The United States continues to help Ukraine respond, recover and rebuild,” Biden said.

Zelensky spent much of the day in meetings but was expected in the afternoon to visit the Peace Memorial Park, the epicenter where the atomic bomb was dropped in 1945, and hold a news conference in the evening. Throughout the day, he received hugs, handshakes and pats on the back.

“Together with all of our allies and partners, we have achieved such a level of cooperation which ensures that democracy, international law, and freedom are respected,” he wrote on Twitter amid his meetings. “There have been attempts to ignore and disregard what we value. But now it is impossible. Now our power is growing.”

He called for keeping democracies united.

“The more we all work together, the less likely anyone else in the world will follow Russia’s insane path,” he added. “But is this enough? Democracy needs more. I think we need the clear global leadership of democracy. This is the main thing that we provide with our cooperation.”

Later in the day, he wrote an emboldened message stating that Ukraine won’t negotiate with Russian President Vladimir Putin until troops are withdrawn.

“As long as invaders remain on our land, no one will sit down at the negotiating table,” Zelensky wrote. “The colonizer must get out. And the world has enough power to force [Russia] to restore peace step by step.”

In the morning, Zelensky met with other leaders at a hotel. They posed for photos briefly, with Zelensky leaning over to Japanese Prime Minister Fumio Kishida and saying, “Thank you.” After about a minute of rearranging themselves and posing for photos, Biden came over to Zelensky, draping his arm around him and speaking into his ear as they left the room.

During a later meeting, Zelensky was notably seated next to Indian Prime Minister Narendra Modi, who has remained neutral about the war.

“The Ukrainian situation, and the international community, is faced with challenges over peace and stability,” Kishida said to start the meeting. “How can we respond to these challenges? I hope we can deepen our discussion on those themes.”

Before the discussion began, and before Zelensky spoke, reporters were ushered out of the room.

Zelensky met on Sunday afternoon with Biden, a discussion that came a few days after the Ukrainian president won a significant victory when White House officials said they would allow allied nations to send F-16s to Ukraine and that the United States would train Ukrainian pilots. That decision, a significant reversal after Biden had maintained that the fighter jets were unnecessary, came after Zelensky had for months requested the advanced aerial capabilities to bolster his country’s counteroffensive.

The shift was the result of extensive discussions among White House officials and diplomacy with allies around the world.

In the weeks leading up to the G-7 summit, national security adviser Jake Sullivan traveled to London, in part to iron out the details of the F-16 issue, according to U.S. officials who spoke on the condition of anonymity to describe private deliberations. While there, he met with European officials, including the British, French and Germans, to discuss the logistics of training the Ukrainians, and the Dutch and the Poles to discuss the potential delivery of the fighter jets. The trainings are likely to take place in Europe, U.S. officials said. The Netherlands and Poland have F-16s, making them central to the effort to provide Ukraine with them.

Upon returning to Washington, Sullivan briefed Biden on the discussions and the broad support among U.S. allies to give the planes to Ukraine. That paved the way for Biden to tell his G-7 counterparts at the summit that the United States would support training Ukrainian pilots, paving the way for countries to eventually send F-16s to Ukraine.

Zelensky’s trip, which had been kept under wraps until the day before he was to arrive, immediately has become the most dominant theme for a summit that was also designed to focus on climate change, combating China’s economic and military rise, and coming up with international standards for rapid advancements in artificial intelligence.

He landed late Saturday afternoon, dressed in his signature army green, and walked down the stairs of a French plane to board a waiting motorcade. Riding through the streets of Hiroshima, with police officers standing at nearly every corner, he arrived for several meetings with foreign leaders.

One of his first was with Modi, the first time the two have met since the war began.

In his remarks, Modi said he would do everything he could to find a solution to the conflict: “For me, this is an issue of humanity and humanitarian values. You would know the challenges and pain of war more than any of us”

He held meetings late into the evening with every top leader here, including French President Emmanuel Macron, German Chancellor Olaf Scholz and British Prime Minister Rishi Sunak.

Zelensky released an upbeat video late on Saturday to the citizens of his country, calling his meetings hopeful and productive.

“As always, I’m thankful to our warriors,” he said. “To everyone who protects the Ukrainian land, the Ukrainian sea and the Ukrainian sky. We are sure we will return from this visit with even greater opportunities for you, our defenders.”

It was Zelensky’s first visit to Asia to mobilize for the war, but he has traveled extensively this month to try to keep the international community behind Ukraine’s fight, including visits in recent weeks to capitals in Germany, France and Britain.

Zelensky’s appearance at the informal grouping of the world’s largest economies — which included Russia just a decade ago — showed how much the geopolitical landscape has shifted in the aftermath of Putin’s invasion. Russia was kicked out of the group, known previously as the G-8, in 2014 after Moscow’s illegal annexation of Crimea.

Now, the leaders of the remaining seven countries have banded against Russian aggression once more, and this weekend, leaders sought to consistently reinforce that message.

Despite a leaky lead-up, Zelensky’s meeting with Scholz in Berlin culminated with a promise to provide Ukraine with air defense systems and more tanks. Then came a surprise trip to Paris, where Macron announced that armored vehicles and light tanks would be headed to Ukraine. During Zelensky’s U.K. visit, Sunak said Ukrainian forces will get “hundreds” of missiles and drones; London also offered to help other countries send fighter jets to Ukraine.

Ukraine will also continue shipping grain around the world after a NATO- and Turkey-brokered deal to extend a Black Sea initiative between Kyiv and Moscow, an agreement that gives Zelensky’s nation an economic lifeline.

The Mideast diplomacy continued Friday, when Zelensky stopped in Saudi Arabia to request more support from Arab League leaders. That meeting included Syrian President Bashar al-Assad, who was attending for the first time since being suspended from the group 12 years ago after his crackdown on pro-democracy demonstrators triggered a deadly civil war.

Not every development has gone Zelensky’s way this month.

Although damage from a midweek missile strike on the U.S.-provided Patriot air-defense system was repaired, attacks on Kyiv were some of the heaviest in months, prompting overnight sirens and unnerving capital residents while their president was traveling to shore up support.

Amid his efforts to secure more assistance from Asian allies, Zelensky also met Sunday with South Korean President Yoon Suk Yeol, whose country sits on a huge supply of artillery shells that Ukraine says it desperately needs and has faced sustained pressure from Western countries to send lethal weapons directly to Kyiv.

Zelensky announced on Twitter that he thanked Yoon for South Korea’s humanitarian and nonlethal assistance and that he looked forward to “continued cooperation.”

South Korea has so far declined to supply lethal weapons to the war effort, citing its concerns over its relationship with warring countries. Seoul has been wary of driving Moscow closer to Pyongyang, out of fears that Russia would retaliate by helping North Korea advance its nuclear and weapons programs. U.S. officials have said that Russia is already providing food and other commodities to North Korea in return for weapons.

Zelensky and Kishida are set to meet Sunday evening for the first time since Kishida’s March trip to Ukraine as the final G-7 leader to make the trek to Kyiv to show support.

At the time, Zelensky called the Japanese leader “a truly powerful defender of the international order and a longtime friend of Ukraine.”

In a news conference concluding the summit Sunday, Kishida said that it was “truly worthwhile for the G-7 to have invited President Zelensky to Japan to show the G-7’s unwavering solidarity with Ukraine.”

Kishida said by inviting Zelensky, the leaders were able to send a “strong message to the world” about their support for Ukraine and their condemnation of Russia’s invasion.

“Wherever in the world, attempting to unilaterally change the status quo by force can never be accepted,” he said.

Today I Learned

... about Jude Wanniski.

The Two Santa Claus Theory is a political theory and strategy published by Wanniski in 1976, which he promoted within the United States Republican Party. The theory states that in democratic elections, if members of the rival Democratic Party appeal to voters by proposing programs to help people, then the Republicans cannot gain broader appeal by proposing less spending. The first "Santa Claus" of the theory title refers to the Democrats who promise programs to help the disadvantaged. The "Two Santa Claus Theory" recommends that the Republicans must assume the role of a second Santa Claus by not arguing to cut spending but offering the option of cutting taxes.

According to Wanniski, the theory is simple. In 1976, he wrote that the Two-Santa Claus Theory suggests that "the Republicans should concentrate on tax-rate reduction. As they succeed in expanding incentives to produce, they will move the economy back to full employment and thereby reduce social pressures for public spending. Just as an increase in Government spending inevitably means taxes must be raised, a cut in tax rates—by expanding the private sector—will diminish the relative size of the public sector." Wanniski suggested this position, as left-liberal observer Thom Hartmann has clarified, so that the Democrats would "have to be anti-Santas by raising taxes, or anti-Santas by cutting spending. Either one would lose them elections."

Note: This is classic SunTzu.

(paraphrasing) Instead of giving your adversary a problem (which he can solve and overcome), present him with a dilemma, which will translate as a loss for him no matter which alternative he chooses.

The theme of the Two Santa Claus Theory fits with my Plutocracy Project suspicions. The point of the exercise is to tear down the institutions of democratic self-government in order to replace it with a corporate plutocracy.

There's no better way to do that than to "starve the beast" - a phrase almost gleefully uttered by notable defenders of that Supply Side bullshit like Grover Norquist.

Note: 5 years ago - Hartmann rails about how "the media" doesn't report on this stuff, but in recent years, I think the Press Poodles have begun to catch on.

I didn't even know it had a name, but there it is: The Two Santa Claus Strategy.

Background reminder:

Trickle-Down Economics Has Always Been a Scam

Despite being proven wrong time and again, trickle-down economics keeps limping forward, resurrected by governments to justify tax cuts for the rich with false promises of prosperity for all.

On September 13, 1974, in the aftermath of Watergate, four men met at a restaurant in Washington, DC to discuss a new strategy for the Republican Party. One of them was Donald Rumsfeld. Another was Arthur Laffer.

Laffer had made a name for himself as chief economist in the Office of Management and Budget and was now working as a consultant to the secretary of the treasury. His ideas had been on the fringe of economic orthodoxy for most of his career. Unfortunately for the rest of us, that was about to change.

At that time, President Gerald Ford had just inherited an economy in the throes of a stagflationary crisis, unleashed by the 1973 OPEC oil embargo and a crashing dollar following the collapse of the Bretton Woods system. Rumsfeld had called upon Laffer to scrutinize Ford’s plan: reducing inflation and raising revenue by introducing a temporary 5 percent tax surcharge on corporations and high income individuals. Laffer ridiculed the idea.

Instead, he argued that the “real” cause of stagflation was that the United States had been overtaxing work while over-subsidizing unemployment, decreasing the number of people willing to work and lowering the total possible amount of income-tax revenue collected. To illustrate his point, he whipped out a marker and started scribbling on a napkin. “If you tax a product: less results,” he wrote. “If you subsidize a product: more results.”

He then drew a parabolic curve on a graph, with axes for the tax rate and tax revenue. At 0 percent tax, there would be no revenue generated, with revenue steadily increasing in line with the tax rate up to a midpoint, where it fell, until reaching zero again as the tax rate reached 100 percent. Lowering the higher income-tax rate, rather than raising it, he suggested, was the answer.

Ford didn’t go on to enact Laffer’s policies, perhaps because Rumsfeld forgot to take the napkin with him when he left the restaurant. But Jude Wanniski, a financial journalist also present at the restaurant, kept it, and over the next few years wrote a series of articles to propagate Laffer’s ideas. By the 1980s, Laffer had caught the attention of Ronald Reagan’s campaign in the lead-up to the Republican primaries. He was brought on as an economic advisor alongside Chicago School professor Milton Friedman.

Friedman was a former president of the Mont Pelerin Society (MPS) — an organization formed by a group of economists dedicated to discrediting the postwar consensus of welfare states by appealing to a small but influential group of wealthy global elites. Through think tanks like the Cato Institute, it advocated for business and markets to have free rein over the economy, rolling back state support and any other form of government interference like financial regulation, protective legislation for workers, or progressive taxes on the wealthy and corporations.

Unlike Laffer, who ostensibly believed tax cuts would increase government revenue, Friedman saw tax cuts as a way to shrink the state by depriving the government of revenue. But Laffer’s concept, deridingly referred to as “voodoo economics” by Reagan’s Republican primary opponent George Bush Sr, provided the perfect cover to surreptitiously implement the MPS’s long-term plan. Shortly after coming to power, as part of 1981’s Economic Recovery Tax Act, Reagan slashed the top rate of income tax from 70 percent to 50 percent, while reducing the bottom rate by just 3 percent from 14 percent to 11 percent. He cut taxes again in 1986, reducing the top marginal rate from 50 percent to just 28 percent.

At a cursory glance, it appeared Laffer had been right: cutting taxes coincided with an increase in federal receipts from $599 billion to $991 billion between 1981 and 1989. But the tax cuts had also been accompanied by a huge increase in government spending. By 1990 the budget deficit had nearly tripled, and government debt as a proportion of GDP increased from 31 percent to 50 percent by the time Reagan left office.

During the same period, median real wages dropped by 0.6 percent and income inequality in the United States, measured by the Gini coefficient (where is 0 is complete equality and 1 complete inequality), increased from 0.37 to 0.43 — a trend that has continued ever since.

From Washington to London

On the other side of the Atlantic, a couple of years before Reagan’s victory, Margaret Thatcher had come to power and embarked on her own mission against the welfare state. She was assisted by the MPS-affiliated Institute for Economic Affairs (IEA), whose contemporary alumni include Priti Patel, Dominic Raab, and Sajid Javid. The IEA had been biding its time, waiting for a crisis to hit so it could pounce on an unsuspecting electorate. The 1970s provided that crisis.

The postwar economic consensus was caught off guard by the hyperinflation of the ’70s. The combination of rising oil prices and a weakening pound caused by the end of fixed exchange rates led the price of imports to rocket up. Keynesian economists were stuck trying to figure out how inflation and unemployment were rising simultaneously, in contradiction to the prevalent macroeconomic paradigm of the postwar years, the Phillips Curve. An embattled Labour government was forced into accepting a $3.9 billion loan from the International Monetary Fund (IMF) in the face of a loss of confidence in the pound.

Into this space stepped Thatcher and the IEA — pinning the blame for inflation on excessively high taxation for the rich and corporations, which had supposedly stifled investment, contributing to the UK’s lagging productivity and currency crisis. Part of the remedy, therefore, was to slash taxes for the very richest in order to boost productivity, encourage investment, stimulate growth to correct the trade deficit, and shore up the pound.

In 1979, the top rate of income tax was 83 percent. By 1988 it had been more than halved to 40 percent. By comparison, the basic rate of income tax was only decreased from 33 percent to 25 percent. What was given to lower-income earners with one hand was taken away with the other, as the rate of VAT increased from 8 percent to 15 percent. The rate of corporation tax was cut too, from 52 percent to 35 percent.

As we now know, these policies didn’t deliver. Tax cuts did not abate unemployment. Concurrent mass privatizations meant unemployment hit 12 percent during the ’80s, with record numbers of people having to sign on for unemployment benefits. The Gini coefficient in the UK rose sharply, from 0.25 to 0.34.

The cut to corporation tax did coincide with a marked increase in corporate tax revenue as a proportion of GDP, but it had more to do with the increase in newly privatized monopolistic companies, as well as the deregulation of banks, which led to significant growth in financial services. The UK’s financial services as a proportion of GDP are now the third highest in Europe; only notorious tax havens Luxembourg and Switzerland place higher. London and the South of England benefited from this mass influx of foreign capital at the expense of the deindustrializing North, creating stark regional inequalities that only worsened lagging productivity.

Today, the consequences are obvious. Wealth inequality in the UK has reached record levels. The top 1 percent have 230 times more wealth than the bottom 10 percent, the increase in corporate profits since the 1980s has outpaced the growth in nominal median wages by nearly 15 percent, and the average remuneration of a CEO has increased from twenty to sixty-three times that of the average employee. And rather than the rich investing the extra money productively, it has been channeled toward assets like housing, pushing up prices and creating an even more unequal society. The median earner now spends between a quarter and a third of their income on rent alone.

Recent Resurrection

A2020 paper published by researchers at the London School of Economics entitled “The Economic Consequences of Major Tax Cuts for the Rich” looked at UK and US data from the 1980s and found that tax cuts for the rich had no statistical effect on economic growth. Another report, from the IMF of all places, found that “a rising income share of the top 20 percent results in lower growth,” and that a more effective strategy was to increase the income share of the bottom 20 percent (a “trickle-up” approach). The impact of tax cuts for the rich is clear.

But that is precisely what short-lived chancellor of the exchequer Kwasi Kwarteng called for in his catastrophic September “mini-budget”: scrapping the 45 percent rate on earnings over £150,000, which would have seen the incomes of the richest 5 percent increase by 5.5 percent, with over half the total tax savings going to those with incomes of over £1 million; and scrapping the increase in corporation tax from 19 percent to 25 percent, which would have handed more than half of the tax cut to companies with profits over £1 million.

Gilt markets weren’t convinced that the tax cuts would encourage the rich to work harder, increase productivity, stimulate growth, or encourage investment. Instead, the budget sent those markets into a death spiral and crashed the pound, forcing a slate of U-turns and a new chancellorship. Could that be a sign that “trickle down” has finally been called on its bluff? Don’t count on it.

Today, Laffer’s napkin is displayed at the National Museum of American History. Exactly what the “optimum” tax rate it indicates for the rich and corporations has never been made clear — the ideological power of the curve is in its conceptual ambiguity. Nonetheless, the scribblings it contains have gone on to shape the content of global economic discourse for decades. Its failures have been repeatedly and roundly documented. But trickle-down economics keeps limping forward, resurrected time and again by successive governments hoping to justify tax cuts for the rich with false promises of prosperity for all.

Groceries

Next time some joker blames Biden for inflation, feel free to spit in their eye.

I'm not actually advocating for you to do that, but go ahead and feel that way - maybe just tell them that's what they're making you think.

How Food Companies' Massive Profits Are Making Your Groceries More Expensive

It’s been more than a year since the U.S. launched its battle against high inflation. Yet, nearly every grocery item still costs more than it did in the past.

A bag of potato chips that could have been purchased for $5.36 last year will cost you $6.17 today. A dozen eggs that used to cost $2.01 now sets you back $4.21. A pound of butter went from $3.77 to $4.87.

Across the country, the high grocery prices have crunched budgets for essential food items. But at the same time, some of the largest food corporations are raking in profits. Experts say those profits are helping to make your groceries even more expensive.

“Follow the money, and the story is clear,” Robert Reich, the former US. Labor Secretary, tweeted last week. “Food corporations are using inflation as cover to jack up prices.”

On Tuesday, Conagra Brands—one of the largest consumer packaged goods companies in the U.S.—announced that it had posted a nearly 60% year-over-year profit increase between December 2022 and February 2023. The Chicago-based company, which makes a long list of grocery staples including Chef Boyardee, Hunt’s, Slim Jim, Reddi-wip, and Marie Callender’s frozen meals, reported a net income of $342 million, up from $219 million in the same quarter a year prior.

Conagra attributed the rise in quarterly profits to inflationary price increases, despite facing more impactful supply chain disruptions than anticipated. Sean Connolly, Conagra chief executive, said on the earnings call with shareholders that the company’s sales growth was “primarily driven by inflation justified price increases” and a willingness by consumers to pay the higher prices. Conagra did not respond to a request for comment.

Connolly added that “while these inflation cycles are painful for manufacturers to go through to a degree, sometimes they’re actually quite good for you because they become a catalyst for getting your pricing right.”

Conagra isn’t the only food company making profits off of inflation-driven price increases. At Kraft-Heinz, the multinational food company that makes Oscar Mayer, Jell-O, and Kool Aid, profits for the quarter ending at the end of 2022 were up nearly 450%, compared to the prior year, at $887 million. Tyson Foods, the largest meat company in the U.S., more than doubled its profits between the first quarters of 2021 and 2022. And General Mills, which owns Kix, Trix, and Chex among other recognizable cereal labels, saw its fourth quarter profits last year rise 97% compared to the previous quarter. General Mills has raised prices five times since 2021 and indicated last month that another price hike could be coming soon. (Profits fell for both Tyson and General Mills in the most recent quarter, however.)

Over the last year, the price of food eaten at home has soared more than 10%, according to the Bureau of Labor Statistics, with some items spiking even higher. Cereals and bakery goods are up 14.6% from a year ago, closely followed by dairy and nonalcoholic beverages, which have both risen 12.3%. The other major grocery store food groups—meats and fresh produce—are up 6.8% and 5.4%, respectively. Prices increases have slowed in recent months, but show no signs of going back to pre-pandemic levels.

The trend shows that the packaged food industry is benefitting from passing the price increases along to American consumers. And as more food companies are reaping the rewards of higher profit, it could result in your grocery prices staying at these inflation-driven levels for longer, says Chris Becker, a senior economist at Groundwork Collaborative, which promotes left-leaning economic policies.

“When shareholders see that other corporations are getting away with high pricing, they start wanting to get in on it,” he says. “So other corporations then raise prices to deliver profit margins.”

In other industries, like electronics and home furnishing, consumers are likely to cut back on spending if prices are too high. But that hasn’t been as big a concern among food industry executives, Becker says, since people will always need to spend on groceries in order to live.

“Food companies are taking advantage of this very precarious moment,” says Irit Tamir, Director of Oxfam America’s private sector department, which seeks to fight inequality to end poverty and injustice. “They are hiding behind a very good story of the pandemic, inflation, and the Ukraine war to say that they need to raise prices, but they are actually just creating a smash and grab for profit, exploiting and exacerbating inflation.”

And it’s not just packaged food manufacturers that are experiencing a recent profit boom thanks to rising prices, says Joe Maxwell, the president of Farm Action, a nonprofit that campaigns against corporate influence in the farm industry. Some food producers and suppliers are also reaping the same rewards.

Cal-Maine Foods, the largest egg producer in the U.S., reported that its revenue doubled and profit surged 718% last quarter because of higher egg prices. The company, which controls about 20% of the U.S. egg market, said its average selling price for a dozen eggs in the quarter ending Feb. 25 was $3.30, more than double the average of $1.61 a year earlier.

READ MORE: Your Egg Prices Could Be So High Because of Price Gouging, Farm Group Says

The company has pointed to decreased egg supply nationwide due to avian flu as the reason for higher prices and record sales. The avian flu, which is tearing through poultry farms across the U.S., wiped out some 58 million birds in the last year. But Farm Action believes that there’s another culprit: price gouging. In a January letter to the Federal Trade Commission (FTC), the organization alleged that Cal-Maine Foods is engaging in “a collusive scheme among industry leaders to turn inflationary conditions and an avian flu outbreak into an opportunity to extract egregious profits.”

Maxwell, who was the last Democratic Lt. Governor of Missouri, says that the food and agriculture industries have become so concentrated into a few large companies that there’s no longer an incentive to gain market share by competing on price. “The market dynamics do not work,” he says. “Today a primary cause of food inflation in this country is the market concentration that allows for price gouging.”

Democratic lawmakers Sen. Elizabeth Warren and Rep. Katie Porter called out Cal-Maine and other major egg producers for more transparency into their profitability. “American families working to put food on the table deserve to know whether the increased prices they are paying for eggs represent a legitimate response to reduced supply or out-of-control corporate greed,” they wrote in a letter in February.

“Companies have admitted that they are raising prices not because of costs, but because they can,” Tamir says. “They are essentially hiding behind a lot of these excuses as a way to gouge consumers.”

Bad Reason For Good News

Shitty-Attitude Mike wants to say thanks to a whole big bunch of dumbass rubes who gave up the ghost because they were convinced to put more stock in their political fantasies than they did in what real-world clinicians with real-world expertise told them.

Not-Such-An-Asshole Mike regrets being unable to convince people not to fuck around.

Understanding the Red State Death Trip - Paul Krugman

Last Friday the Medicare trustees released their latest report on the system’s finances, and it contained some unexpected good news: Expenditures are running below projections, and the Hospital Insurance Trust Fund won’t be exhausted as soon as previously predicted.

But one important reason for this financial improvement was grisly: Covid killed a substantial number of Medicare beneficiaries. And the victims were disproportionately seniors already suffering from severe — and expensive — health problems. “As a result, the surviving population had spending that was lower than average.”

Now, Covid killed a lot of people around the world, so wasn’t this just an act of God? Not exactly. You see, America experienced a bigger decline in life expectancy when Covid struck than any other wealthy country. Furthermore, while life expectancy recovered in many countries in 2021, here it continued to fall.

And America’s dismal Covid performance was part of a larger story. I don’t know how many Americans are aware that over the past four decades, our life expectancy has been lagging ever further that of other advanced nations — even nations whose economic performance has been poor by conventional measures. Italy, for example, has experienced a generation of economic stagnation, with basically no growth in real G.D.P. per capita since 2000, compared with a 29 percent rise here. Yet Italians can expect to live about five years longer than Americans, a gap that has widened even as the Italian economy flounders.

What explains the American way of death? A large part of the answer seems to be political.

One important clue is that the problem of premature death isn’t evenly distributed across the country. Life expectancy is hugely unequal across U.S. regions, with major coastal cities not looking much worse than Europe but the South and the eastern heartland doing far worse.

But wasn’t it always thus? No. Geographic health disparities have surged in recent decades. According to the U.S. mortality database, as recently as 1990, Ohio had slightly higher life expectancy than New York. Since then, New York’s life expectancy has risen rapidly, nearly converging with that of other rich countries, while Ohio’s has hardly risen at all and is now four years less than New York’s.

There has been considerable research into the causes of these growing disparities. A 2021 paper published in The Journal of Economic Perspectives examined various possible causes, like the increasing concentration of highly educated Americans (who tend to be healthier than those with less education) in states that are already highly educated and the widening per capita income gaps among states. The authors found that these factors can’t explain more than a small fraction of the growing mortality gap.

Instead, they argued, the best explanation lay in policy: “The most promising explanation for our findings involve efforts by high-income states to adopt specific health-improving policies and behaviors since at least the early 1990s. Over time, these efforts reduced mortality in high-income states more rapidly than in low-income states, leading to widening spatial disparities in health.”

That sounds right. But did high-income states adopt health-improving policies because they were rich and could afford to? Or was it because in 21st-century America, high-income states tend to be politically progressive and politics, rather than money per se, account for the difference?

There is, in fact, a strong correlation between how much a state’s life expectancy rose from 1990 to 2019 and its political lean, as measured by Joe Biden’s margin over Donald Trump in the 2020 election — a correlation slightly stronger, by my estimates, than the correlation with income.

There are several reasons to believe that America’s death trip is largely political rather than economic. One is the comparison with European nations, which have had much better health trends even when, as in Italy, their economies have performed badly.

Another is the fact that some of the poorest states in America, with the lowest life expectancy, are still refusing to expand Medicaid, even though the federal government would cover the bulk of the cost (and the failure to expand Medicaid is killing many hospitals). This suggests that they’re failing to improve health because they don’t want to, not because they can’t afford to.

Finally, since Covid struck, residents of Republican-leaning counties have been far less likely to get vaccinated and far more likely to die of it than residents of Democratic-leaning counties — even though vaccines are free.

All of this seems relevant to our current era of culture war, with many Republican politicians praising rural and red-state values while denigrating those of coastal elites. Gov. Ron DeSantis of Florida, for example, claims that although he grew up around Tampa Bay, he’s culturally a product of western Pennsylvania and northeastern Ohio. It’s worth noting, then, that the culture these politicians want all of America to emulate seems to have a problem with one of society’s most important functions: keeping people from dying early.