Bait the Nation

 

 

 

BROOKE GLADSTONE From WNYC in New York, this is On the Media, I'm Brooke Gladstone. If you're a person who buys things, then you've probably noticed things cost more these days...

 

[CLIP MONTAGE]

 

NEWS REPORT From the gas station to the grocery store. Americans are struggling with rising prices and historic inflation.

 

NEWS REPORT Prices on just about everything are soaring and consumer patience is waning.

 

NEWS REPORT Inflation is taking a bite out of people's paychecks, particularly for middle and lower income Americans.

 

BROOKE GLADSTONE The annual consumer price index rose more than six percent in the past year, the largest year to year increase since 1990. The cause of this inflationary jump and chatter about how long it will last. A red meat for the bloviating class. And if you're a Republican bloviator, you know where to direct your blast.

 

[CLIP]

 

REPUBLICAN BLOVIATOR And now we see Biden inflation. All the money you've worked for in your life is worth less.

 

REPUBLICAN BLOVIATOR Mr. President, the inflation we're seeing, Biden-flation, as I call it, is here to stay so long as those on the left continue to jam through reckless tax and spend bills [END CLIP]

 

BROOKE GLADSTONE seems blaming Biden's working. The Washington Post published a poll last week that found almost half of Americans believe Biden deserves quote a great deal or a good amount of the blame for rising prices.

 

[CLIP]

 

NEWS REPORT Those worries are at least in part responsible for President Biden's approval rating, dropping to the lowest point of his presidency. [END CLIP]

 

BROOKE GLADSTONE On Thursday, the Congressional Budget Office released a new report estimating that the bill could add 367 billion to the federal budget deficit over the next decade. But according to John Cassidy, staff writer at The New Yorker, the coverage often fails to tell us what those numbers really mean. John, welcome back to the show.

 

JOHN CASSIDY Thanks a lot for inviting me on.

 

BROOKE GLADSTONE Last week, the Labor Department said that prices rose by 6.2 over the last 12 months. That's the largest increase, they say, in decades. So what exactly contributes to that number?

 

JOHN CASSIDY The inflation rate is an average of all the prices in the economy that consumers face. The biggest factors in this 6.2 percent jump have been mostly goods and services affected by the pandemic. New cars and trucks and car rentals, especially cars, are basically like, you know, mobile computers these days. They can't build the cars without the computer chips. A lot of the semiconductor factories are in Asia. Some of them are being closed down by COVID. That's the main driver of what's happening. Plus the cost of gasoline and fuel oil. Now, obviously, when the pandemic started, demand collapsed around the world because it's difficult to drive your car if you're locked in your house. 2021, the whole world has been reopening. The demand for all sorts of fuel oil has skyrocketed. And at the same time, OPEC, the cartel of oil producers, has kept production pretty steady. So you've got pretty much a constant flow of oil, a massive increase in demand.

 

BROOKE GLADSTONE So is any of this Biden's fault? What is the GOP's argument simply that the government spending too much money?

 

JOHN CASSIDY First, presidents always get the blame when the economy goes south and credit when it does well, even if it's got little or nothing to do with them. But having said that, what are the merits of Republican arguments? And I think most are pretty weak. They say things like, well, should have anticipated the supply chain problems and acted earlier. It took him to the summer to get on to it, which isn't actually true. We set up a working group back in February to look into it. Right wing talk radio, they say, well, he just collapsed American oil production by stopping pipelines, et cetera. That's not true. American oil production hasn't gone down. It's just not going up enough to make up the shortage between supply and demand. Spending argument, of course, is their third one, and they say the rescue package, back in February. The American Rescue Act, which was part two of the big pandemic stimulus, was too big. But they don't really make that one too strenuously because they passed a big stimulus package the year before, you know, the Trump pandemic relief package. And the fact is, both of those packages were very necessary to basically prevent the wholesale economic collapse.

 

BROOKE GLADSTONE A lot of the analysis says that the Trump administration and the Biden administration were trying not to repeat the mistakes of the George W. Bush and Obama administrations to do too little in the face of the 2008 economic collapse.

 

JOHN CASSIDY That's exactly right. I think most economists on both sides of the political divide now agree that the stimulus program post 2008-2009, that financial crisis, was too small to bring about a rapid recovery. They prevented a wholesale financial collapse, but overall growth was very slow for a half a decade or so. So I think there is a consensus that we didn't know enough last time. This time we've got this terrible shock to the. Let's go big, make sure that we give people enough money to survive and to keep the factories running. And that worked. I remember at the start of this recovery when people talked about a V-shaped recovery, I was pretty skeptical. Sounded like sort of happy talk. But actually, we if you look at a chart of employment or output, there was a much more rapid rebound than most economists expected. And that plays into the whole inflation picture because basically what's happened is demand and the amount of money in the economy has come back a lot quicker than expected, whereas supply, the output of goods and services and especially imported goods, has come back a lot more slowly than we hoped. And that, together with slower than expected rebound in the labor force in the U.S., has put upward pressure on inflation. So you could make the argument that policies introduced were responsible. But the flip side of that is that they're responsible because they've been so successful.

 

BROOKE GLADSTONE Let's talk now specifically about the labor side of this. Unemployment seems way lower than many predicted it would be this early in the pandemic, but at the same time, we're in the middle of what some people are calling the great resignation. People quitting in droves.

 

JOHN CASSIDY I think there's two sides to this. The great resignation is basically taking place in the in the low wage economy, especially in restaurants, retailing warehouses. Because of a shortage of labor, people who work in those industries for the first time in decades have now got outside options. They can go somewhere else down the street, which is off, maybe offering a dollar or two higher, or other industries desperate to hire workers. And you know, you might get a 20, 30, 40 percent pay raise. So that's putting upward pressure on wages. And that explains why there's a lot of vacancies. The other side of it, which doesn't get covered as much, which I think is equally important in the overall picture, is that a lot of people are still, for various reasons, reluctant to return to the labor force because of how COVID has changed their lives. A lot of these people are older. I've seen some statistics which suggest that up to half of the people who left the labor force during COVID are aged 55 and over. And that doesn't seem to be rebounding. Now, the Republicans say it was because of higher unemployment benefits. You're paying people to stay at home. That's the reason why we haven't had a rebound in labor supply. On the face of it, you might think that's a plausible argument. But if you look at the actual data, what you find is both in the states that got rid of expanded unemployment benefits earlier, they didn't recover any faster in terms of employment than the states, which kept the higher benefits. And since August and September, when they expanded, benefits lapsed all over the country, the proponents of the benefits of the problem argument said we should see a big rebound in labor supply, and that just hasn't happened.

 

BROOKE GLADSTONE So we're talking about people who work in famously underpaid and without sufficient benefits.

 

JOHN CASSIDY Exactly. Low paid people casualised labor. For the first time in decades, the whip hand in the labor employer relationship is not all in the hands of the employer. That's the upside of the current situation, which doesn't get nearly enough coverage. But when wages go up, companies may take a slight cut in their profit margin. But the first thing they'll do is try to raise prices and see if there's any resistance, and that pushes up the inflation rate. The big question in all of this stuff is whether it's just a one off increase because of the pandemic related dysfunctions in the economy or whether it's going to just keep going up.

 

BROOKE GLADSTONE Obviously, there's more to the economic picture than just inflation. How does this story change when you factor in things like unemployment or wage growth or reducing child poverty?

 

JOHN CASSIDY Yeah, well, that's another very good question, obviously, inflation is just, you know, one economic statistic. And to the extent the wages keep up with inflation, it's not a particularly important one to say the average person. If the inflation rate is five percent and your wages are going up five percent and inflation is not really a problem to you. What we see in a moment is that wages are not going up as fast as prices. As a result, real wages have actually fallen over the last year. The average, I mean again, averages disguise a lot of variance. But the average hourly wage is down 1.2 percent of last year. Now, at the same time, lots of other statistics in the economy are positive. We've had a huge fall in the unemployment rate over the last 18 months. You also see, as you mentioned, a large fall in the child poverty rate. That's due to the program, which was introduced as part of the Rescue Act, families, particularly low income and middle income families, get checks every month of 250 or $300 now for each child they have. That's had a huge impact on child poverty. In any sort of reasonable assessment of how the economy's doing, you'd have to say that's a big success.

 

BROOKE GLADSTONE We keep hearing endlessly that the economy is a disaster, but most people are saying their financial situation is good.

 

JOHN CASSIDY Well, pollsters ask people, How do you think the economy's going to fare over the next year? And 60 or 70 percent of respondents said it's going to get worse? Now, in the same poll, they ask people, How are your own personal finances? And you had a majority saying that personally they were doing pretty well and that they expected their finances to be fine over the next year.

 

BROOKE GLADSTONE So I think there's a political messaging issue then.

 

JOHN CASSIDY Some people blame the media and say it's all your fault for focusing on inflation. You should be focusing on the drop in child poverty. Inflation is the real issue, et cetera. I think that goes too far. When you get a headline inflation rate, which is 6.2 percent the highest in 30 years. That's a news story, you can't expect the media not to cover that. But you do have to place it in the context of this extraordinary pandemic we've had, which has upended all sorts of different economic relationships.

 

BROOKE GLADSTONE One thing that's heartbreaking for me and I think terrible for the economy, is that in making the cuts to the Build Back Better plan to bring in Joe Manchin and Kyrsten Cinema, the quote moderate Democrats, they're going to be cutting the plans for affordable housing. Evictions are still happening. Rents are soaring. The knock on effects to the economy of homelessness, even beyond the incalculable issue of individual misery. I just think it's so shortsighted.

 

JOHN CASSIDY What we are forgoing is programs which would improve people's lives, and that's not going to happen. The question is, is it not going to happen for good reasons or is it not going to happen for bad reasons? The economic argument is pretty one sided here. We can afford to spend a little bit more on these programs, even at three point five trillion. The figure itself is misleading because it's over 10 years. Divide by 10, you're talking about $350 billion a year. You know, we got a 22- 23 trillion dollar economy here now. So you're talking between 1- 2 percent of GDP here. You're not talking 5-10 percent of GDP in the United States can afford to spend that much if it wants.

 

BROOKE GLADSTONE You referenced one of my bete noirs, which is the emphasis on this trillion dollar number, which you put into clear perspective. You have to divide it by 10 over the 10 years, and then you have to look at the 350 billion annual number against the annual economy and you find it's no more than 2 percent. The number 3.5 trillion we hear all the time, what it means, we almost never do.

 

JOHN CASSIDY Yeah, I mean, that's I mean, as you can probably tell from my accent, I come from the U.K. and that's always struck me. I don't know where it comes from. When did American economics coverage start to get cast in terms of 10 year budget windows? Because it is very misleading. If you're cast in terms of a 10 year budget window, you should cast it in terms of a 10 year window too. So instead of looking at a 22.2 trillion dollar economy, we should look at a 220 trillion dollar economy, which is what it would be over 10 years, and that's without any growth. Factoring growth. You're probably talking about a 300 trillion dollar economy in other countries. You don't get it, but for whatever reason, here, all spending plans are reported and argued about in terms of 10 year windows, because that's how the Congressional Budget Office and the Joint Congressional Committee score things. But in terms of how it impacts people's lives and how it relates to the sustainability of these programs and the ability of the government to afford them, it's actually very misleading because as you say, people see these huge figures of three point five trillion and it just plays in to this sort of argument that all these politicians, you just tax and spending and they don't know what they're doing and they're going to bankrupt the country, et cetera.

 

BROOKE GLADSTONE So to conclude, what do you think that people need to hold in their head about all the economic coverage they're seeing?

 

JOHN CASSIDY One of the problems is that most people get their news from TV and TV news generally doesn't cover economics at all. Being an old timer these days, I guess I'd call myself. I still watch the evening news.

 

BROOKE GLADSTONE Wow, are you 107?

 

JOHN CASSIDY Well, the reason I do it is just to try and see what the median voter or whatever is seeing every evening. And what you find if you watch the evening news is that economics only ever really is reported when it's bad news. It basically has to be a terrible jobs figure, or the inflation spike we've seen. That will lead the coverage. Stories about rising disposable income as a result of the stimulus packages, how it's kept businesses open or how the child tax credit is reducing child poverty don't appear on TV. So the problem and economic coverage is similar to in all sorts of other areas. Mass market coverage is very different to the elite coverage. How you break through all that, I'm afraid, is above my pay grade.

 

BROOKE GLADSTONE John, thank you very much.

 

JOHN CASSIDY Thank you.

 

BROOKE GLADSTONE John Cassidy has been a staff writer at The New Yorker since 1995, where he writes regularly about politics and economics.

 

So that's our first segment in an episode that turned out to be about persuasion. What works, what doesn't and why. Up next, sorting through the arguments that are supposedly about, but really aren't, what's called, but really isn't, critical race theory in schools. This is On the Media.