On the Radio: Inflation

Posted on December 10, 2021 | Comments Off on On the Radio: Inflation

Today at 5:30 ET, I will appear on the Lars Larson Show to talk about inflation.

I’ll post a link to audio afterwards if it’s available.

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Posted in Economics, Media Appearances, Monetary Theory

In the News: Supply Chains

Posted on December 10, 2021 | Comments Off on In the News: Supply Chains

I can’t access the article due to a paywall, but on December 3 I was quoted in the Washington Times about tariffs and supply chains networks.

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Posted in Economics, Media Appearances, Trade

Inflation Increases to 6.8 percent, Misery Index Reaches 11

Posted on December 10, 2021 | Comments Off on Inflation Increases to 6.8 percent, Misery Index Reaches 11

October’s inflation reading was the highest since the recession of 1991. November’s is the highest since the 1982 recession, at an annualized 6.8 percent. The reason inflation is usually highest during recessions is because governments attempt to restart growth through a combination of monetary and fiscal policy. It is troubling that today’s inflation is happening while the economy is growing and unemployment is low.

In fact, the misery index is now in double digits, which rarely happens outside of recessions. The misery index is the inflation rate plus the unemployment rate—economist Arthur Okun came up with it as an easy-to-use statistic for President Lyndon Johnson’s benefit, and it remained a key statistic throughout the stagflationary 1970s. It may be time to dust it off again.

While unemployment is a very low 4.2 percent, when combined with 6.8 percent inflation, the misery index currently stands at 11. For context, its all-time high was 21.9 in June 1980. It was below 5 for a good chunk of the 1950s, and was at 5.3 in April 2015. See a historical chart from the St. Louis Federal Reserve’s FRED database here.

Inflation happens when the money supply grows faster than the supply of goods and services, as I explained earlier. In today’s case, the COVID-19 pandemic shut down large swathes of the economy for an extended period. Even if the money supply had remained stable, the supply of goods and services temporarily went down. The effects are still being felt in today’s supply chain problems.

But economic fundamentals remained healthy. There was no financial crisis or popped housing bubble. People hunkered down for a while, and are in the process of coming back. This is why COVID-era growth has bounced back in close tandem with increased vaccination rates and decreased caseloads. When people feel safe to open back up, they do—and nothing is stopping them except for bad public policy.

Both Congress and President Biden responded to a different type of recession with the same tools. The result is high inflation during a period of growth. The solution is to spend less and get money supply growth back in sync with growth in goods and services. Instead, Congress continues to spend at a record rate, with more likely on the way. The Fed has indicated that it will taper back monetary growth, but not until next year.

Policy makers are unlikely to do the right thing on the money side. But they can help the goods and services side by removing trade barriers, getting rid of unneeded occupational licenses, speeding up years-long permit processes, repealing the shipping cost-raising Jones Act, liberalizing trucking regulations, and other deregulatory measures. These would spark growth while helping to tame inflation—and without adding to the deficit.

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Posted in Economics, Monetary Theory

Can Regional Trade Agreements Replace the WTO?

Posted on December 9, 2021 | Comments Off on Can Regional Trade Agreements Replace the WTO?

Trade policy is in a bad place right now, with two consecutive protectionist administrations in the U.S. and the World Trade Organization (WTO) possibly damaged beyond repair. The Hudson Institute’s Thomas J. Duesterberg recently argued in The Wall Street Journal that one solution would be a pivot to regional trade agreements. While that’s not the worst idea on paper, I sent the following letter to the editor pointing out that it wouldn’t work in practice:

Thomas J. Duesterberg rightfully worries that the World Trade Organization may be damaged beyond repair (“The WTO’s Fast Track to Irrelevance,” op-ed, Nov. 29). A trade organization has enough on its plate without having to deal with trade-unrelated issues such as labor, human rights, and climate. But Duesterberg’s solution of expanded regional trade agreements would likely have the same problems.

Trade-unrelated provisions are part and parcel of trade agreements these days, as the United States-Mexico-Canada Agreement’s 2,000-page length shows. The solution is to confine trade agreements to trade and treat separate issues separately. Until that root problem is addressed, trade policy will remain ugly, whether negotiations happen at the WTO or regionally.

Ryan Young

Senior Fellow, Competitive Enterprise Institute

Washington

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Posted in Correspondence, Economics, Trade

This Week in Ridiculous Regulations

Posted on December 6, 2021 | Comments Off on This Week in Ridiculous Regulations

The number of new final regulations this year will pass 3,000 this week, with more than three weeks still to go. The Omicron variant gave the country an education in the Greek alphabet, though it is too early to tell if it will be particularly harmful. New job numbers provided further evidence that the big spending bills are unnecessary, and that it is well past time for policy makers to begin tamping down inflation. Meanwhile, agencies issued new rules ranging from Egyptian artifacts to imported goats.

On to the data:

  • Agencies issued 67 final regulations last week, after 59 the previous week.
  • That’s the equivalent of a new regulation every two hours and 31 minutes.
  • With 2,991 final regulations so far in 2021, agencies are on pace to issue 3,251 final regulations this year. 2020’s total was 3,218 final regulations.
  • Agencies issued 29 proposed regulations in the Federal Register last week, after 47 the previous week.
  • With 1,927 proposed regulations so far in 2021, agencies are on pace to issue 2,095 proposed regulations this year. 2020’s total was 2,222 proposed regulations.
  • Agencies published 357 notices last week, after 399 notices the previous week.
  • With 20,481 notices so far in 2021, agencies are on pace to issue 22,262 notices this year. 2020’s total was 22,480.
  • Last week, 1,224 new pages were added to the Federal Register, after 1,496 pages the previous week.
  • The average Federal Register issue this year contains 299 pages.
  • With 68,874 pages so far, the 2021 Federal Register is on pace for 74,863 pages in 2021. The 2020 total was 87,352 pages. The all-time record adjusted page count (subtracting skips, jumps, and blank pages) is 96,994, set in 2016.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. There are 24 such rules so far in 2021, none from the last week. Agencies published five economically significant rules in 2020, and four in 2019.
  • The running cost tally for 2021’s economically significant rules ranges from $8.83 billion to $13.72 billion. The 2020 figure ranges from net savings of between $2.04 billion and $5.69 billion, mostly from estimated savings on federal spending. The exact numbers depend on discount rates and other assumptions.
  • Agencies have published 340 final rules meeting the broader definition of “significant” in 2021, with five in the last week. This is on pace for 370 significant rules in 2021. 2020’s total was 79 significant final rules.
  • In 2021, 823 new rules affect small businesses; 87 are classified as significant. 2020’s totals were 668 rules affecting small businesses, 26 of them significant.

Highlights from last week’s new regulations:

For more data, see Ten Thousand Commandments and follow @10KC and @RegoftheDay on Twitter.

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Posted in regulation

On the TV: Supply Chains

Posted on December 4, 2021 | Comments Off on On the TV: Supply Chains

This morning I appeared on C-SPAN’s Washington Journal to talk about supply chains, opposite the Economic Policy Institute’s Robert Scott.

Video and a transcript are here.

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Posted in Economics, Media Appearances, Trade

Speaking at CEI Supply Chains Event on 11/30

Posted on November 29, 2021 | Comments Off on Speaking at CEI Supply Chains Event on 11/30

CEI is hosting an online Zoom event on November 30 on supply chains, featuring my colleagues Sean Higgins, Marlo Lewis, Iain Murray, and me. It will begin at 12:00 ET. You can register here. The full event will be posted on YouTube afterwards.

Here is the invitation text:

Just in time for the holiday season, the global supply network is fraying in ways that affect our everyday lives. While Washington policy makers debate short-term fixes, the only real solutions are long-term reforms. Please join CEI for a discussion of the root causes of our current crisis that have been percolating for years pre-COVID. CEI Vice President Iain Murray will moderate a discussion with our respective experts in trade, labor, and energy policy, Ryan Young, Sean Higgins, and Marlo Lewis. 

Sean Higgins, Research Fellow, Competitive Enterprise Institute

Marlo Lewis, Senior Fellow, Competitive Enterprise Institute

Iain Murray, Vice President, Competitive Enterprise Institute

Ryan Young, Senior Fellow, Competitive Enterprise Institute

Tuesday, November 30, 2021

12:00 – 1:00 pm EST

Register: https://cei-org.zoom.us/webinar/register/WN_B4kvgNobRcKCjbpfqOTxhg

Sign up to join the conversation live and receive a link to the video archive following the event.

Registration confirmation and event reminder emails will be sent from CEI Events at no-reply@zoom.us 

Questions? Email events@cei.org 

Sean Higgins is a research fellow at the Competitive Enterprise Institute specializing in labor and employment issues. Prior to joining CEI, he covered the intersection of politics and economics as a journalist for two decades, as senior writer for the Washington Examiner, Washington correspondent for Investor’s Business Daily, and a contributor to publications like The Wall Street Journal, Fortune, Reason and National Review Online.​

Marlo Lewis is a senior fellow at the Competitive Enterprise Institute. He writes on global warming, energy policy, environmentalism, and the precautionary principle. Prior to joining CEI in 2002, he was director of external relations at the Reason Foundation, staff director of the House Government Reform Subcommittee on National Economic Growth, Natural Resources, and Regulatory Affairs during the 106th Congress.

Iain Murray is vice president for strategy, senior fellow, and director of the Center for Economic Freedom at the Competitive Enterprise Institute. He is author of the best-selling books The Socialist Temptation, The Really Inconvenient Truths, and Stealing You Blind: How Government Fat Cats Are Getting Rich Off of You. He has written extensively on the role free markets play in improving our lives.

Ryan Young is a senior fellow at the Competitive Enterprise Institute. His research focuses on regulatory reform, trade policy, and antitrust regulation. He writes the popular “This Week in Ridiculous Regulations” series for CEI’s OpenMarket blog.

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Posted in Economics, Trade

This Week in Ridiculous Regulations

Posted on November 29, 2021 | Comments Off on This Week in Ridiculous Regulations

It was a short work week because of Thanksgiving. Meanwhile, agencies issued new rules ranging from blood lancets to crash test dummies.

On to the data:

  • Agencies issued 59 final regulations last week, after 63 the previous week.
  • That’s the equivalent of a new regulation every two hours and 51 minutes.
  • With 2,924 final regulations so far in 2021, agencies are on pace to issue 3,138 final regulations this year. 2020’s total was 3,218 final regulations.
  • Agencies issued 47 proposed regulations in the Federal Register last week, after 41 the previous week.
  • With 1,898 proposed regulations so far in 2021, agencies are on pace to issue 2,109 proposed regulations this year. 2020’s total was 2,222 proposed regulations.
  • Agencies published 399 notices last week, after 391 notices the previous week.
  • With 20,124 notices so far in 2021, agencies are on pace to issue 22,360 notices this year. 2020’s total was 22,480.
  • Last week, 1,496 new pages were added to the Federal Register, after 3,225 pages the previous week.
  • The average Federal Register issue this year contains 299 pages.
  • With 67,647 pages so far, the 2021 Federal Register is on pace for 75,163 pages in 2021. The 2020 total was 87,352 pages. The all-time record adjusted page count (subtracting skips, jumps, and blank pages) is 96,994, set in 2016.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. There are 24 such rules so far in 2021, three from the last week. Agencies published five economically significant rules in 2020, and four in 2019.
  • The running cost tally for 2021’s economically significant rules ranges from $8.83 billion to $13.72 billion. The 2020 figure ranges from net savings of between $2.04 billion and $5.69 billion, mostly from estimated savings on federal spending. The exact numbers depend on discount rates and other assumptions.
  • Agencies have published 335 final rules meeting the broader definition of “significant” in 2021, with four in the last week. This is on pace for 372 significant rules in 2021. 2020’s total was 79 significant final rules.
  • In 2021, 810 new rules affect small businesses; 85 are classified as significant. 2020’s totals were 668 rules affecting small businesses, 26 of them significant.

Highlights from last week’s new regulations:

For more data, see Ten Thousand Commandments and follow @10KC and @RegoftheDay on Twitter.

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Posted in regulation

Thankful for Good Economic News on Jobs, Consumer Spending: More to Do

Posted on November 24, 2021 | Comments Off on Thankful for Good Economic News on Jobs, Consumer Spending: More to Do

This statement originally appeared on cei.org.

During Thanksgiving week, jobless claims dipped to 199,000, their lowest level in 52 years, when the country’s population was less than two thirds of what it is today. October consumer spending grew 1.3 percent, leading to optimism about a strong holiday season. CEI senior fellow Ryan Young comments:

“It’s nice to have two bits of good news going into Thanksgiving. Jobless claims are back below 2019’s pre-COVID levels, and consumer spending increased in October enough for retailers to expect a healthy holiday season. This provides more evidence that the economy is mostly healthy, but for COVID. The more we beat back the disease with vaccines, the more people feel safe opening up. Washington’s big spending bills, which won’t begin spending money in earnest until next year, were never needed in the first place.

“There are still notes of caution. Inflation remains high, and all that deficit spending will likely make it a few tenths of a percentage point worse for several years going forward. This will make the Fed’s inflation-fighting job even more difficult. It is also possible that October’s big consumer spending increase was a reaction to clogged supply networks. People may be doing their holiday shopping early in anticipation of longer shipping times and possible shortages. To the extent this is the case, people aren’t necessarily spending more, they’re just spending earlier. In the meantime, Congress and President Biden can help by spending less, and removing trade barriers and regulatory sludge that are distorting supply networks and clogging ports.”

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Posted in Business Cycles, Economics, labor, Spending, Stimulus

Fed Chairman Powell Should Prioritize Getting Inflation Under Control

Posted on November 23, 2021 | Comments Off on Fed Chairman Powell Should Prioritize Getting Inflation Under Control

This statement originally appeared on cei.org.

President Biden has re-nominated Jerome Powell to head the Federal Reserve, and CEI Senior Fellow Ryan Young expressed hope that Powell will make the politically tough decisions needed to get inflation back under control.

Statement by CEI Senior Fellow Ryan Young:

“Getting inflation back under control is a top priority. Jerome Powell’s renomination sends a needed message of stability. President Biden did not nominate a yes-man who will do as he’s told, though some of Biden’s other nominees may yet fill that role. Under the circumstances, this news is about as good as could be expected.

“Inflation is what happens when too much currency is chasing too few goods and services. Record government spending deficits are adding to inflation and will be made worse by the infrastructure and reconciliation bills. If Chairman Powell raises interest rates to tighten the money supply, which he should, those debts will become more expensive for the government to repay. But this will raise the ire of the White House and Capitol Hill. Making matters worse, politicians also generally favor looser monetary policy heading into an election. The Fed’s independence is always under attack, and the stakes are especially high during the COVID economic crisis.

“Fighting inflation also means removing trade, labor, and energy regulations that are clogging supply networks and preventing goods and services from being created in the first place. Chairman Powell has nothing to do with those policies, but he is still tasked with fighting their inflationary effects. He is not being set up for success, but President Biden could have done far worse.”

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Posted in Economics, Monetary Theory