What is acceptable, and what is unacceptable? We'll soon have to decide.
I wish the transition ahead--the unwinding of all the distortions and sources of instability in our economy and society--could be painless. That would be ideal. But history suggests that hope is unrealistic. History suggests those in power will cling to whatever is working well for them even as the economy and society decay and decohere around them.
Denial and magical thinking are the order of the day. Rome is eternal, so there's nothing to worry about. If the peasants have no bread, let them eat brioche. And so on.
If the painless option is off the table, then the issue boils down to the distribution of the pain. Ideally, those least able to sustain further sacrifices will be favored at the expense of those better able to sustain sacrifices. But those most able to sustain sacrifices are those with the power to distribute the pain to others. This dynamic leads to those least able to sustain sacrifices being distributed the majority of the pain, to the point that they have so little to lose that abandoning the status quo becomes the least worst option.
The data collected by Italian researcher Vilfredo Pareto revealed a pattern throughout Nature and civilization of 80/20 distributions, what we call the 80/20 Rule or the Pareto Distribution: 20% of the sales staff make 80% of the sales, 20% of the populace ends up owning 80% of the property, 20% of the plants produce 80% of the seeds that sprout, and so on.
The Pareto Distribution distills down to 80% of 80% and 20% of 20%, or 4/64: 4% of the populace ends up with 64% of the property. In the U.S., the top 10% own 93% of the stocks, and it's likely the top 5% own 65%--in line with the Pareto Distribution. The bottom 50% own 2.6% of all financial assets.(See Federal Reserve chart below.) This is in line with the Pareto Distribution: the bottom 64% own about 4% of the nation's financial assets.
The issue thus becomes how best to avoid the dire consequences of the 4% at the top of the wealth-power pyramid distributing 64% of the pain to those at the bottom. Unfortunately, the pain will be distributed unevenly regardless of our intentions: highly paid people in unsustainably costly industries will be laid off along with people in more precarious jobs.
Our most realistic hope is to do our best to ease the burdens of those who will suffer the most severe dislocations and shift some of the sacrifices to those with sufficient means to cushion them from any real suffering. We can rethink our winner take most financial system, our duct-taped social contract, our enfeebled civic virtue and our waste is growth Landfill Economy.
Or we can let the system run to failure and let the Devil Take the Hindmost. What is acceptable, and what is unacceptable? We'll soon have to decide.
Renewable electricity, mostly wind power, is useless in every dimension. It is extremely expensive but is made to look cheap by hiding an 80% subsidy. It is an exorbitantly expensive method for reducing CO2 emissions. Industry lobbyists and sinister environmental organizations, like the Sierra Club, have manipulated public policy to milk taxpayers and electricity users for billions.
According to the Sierra Club, wind power electricity is economically viable without government assistance. This pronouncement of the Sierra Club has no relationship to reality. For the Sierra Club the most worrisome thing about wind power, something they avoid mentioning, is that the propellors kill birds.
The government subsidizes wind power. Some of the subsidies are upfront. Others are hidden in tax rules or created by using law to change the bargaining balance between wind power providers and electric utilities. The biggest federal hidden subsidy is “tax equity financing”, a masterpiece of accounting obscurantism. The biggest state level subsidy is renewable portfolio laws. These laws require the use of renewable energy to generate electricity and require ever increasing proportions of renewable energy in the electric grid. Wind and solar are the main types of renewable electricity. These laws may be the biggest subsidy, although their subsidy nature is obscure and probably invisible to the naïve legislatures that passed them.
Renewable portfolio laws that force utilities to purchase renewable power in ever-increasing amounts makes the market for renewable power a sellers’ market by increasing demand. Only a limited number of big companies with experience and financial resources can build massive, utility-scale wind or solar farms. Given the competitive calculus, these companies are only willing to build plants with long-term contracts that reduce risk. Typically, there are 20- or 25-year contracts called power purchase agreements or PPA’s. A wind farm with a guaranteed contract to purchase all the power generated for 25 years becomes something more like a treasury bond than a business. Frequently the utility is even obligated to pay for ghost power that was not generated because the grid could not accept the amount of power available in certain circumstances.
Having guaranteed long-term contracts signed before a shovel of dirt is turned changes everything. The wind farm owner can accept a far lower return on his investment because he has less risk. Further, the wind farm can be flipped to an infrastructure investment fund that specializes in long-term, low-risk investments. That is the exit strategy for wind farm owners.
The risks are borne by the utilities and ultimately by the government, the ultimate backer of electric utilities. The utilities tend to be enthusiastic believers in wind and solar, not because those are good solutions or economic, but because the utilities are willing to agree to any irrational nonsense that enhances profits. They are empowered by public utility commissions to pass exorbitant costs along to their customers.
Due to the complicated and deceptive nature of government subsidies it is difficult to directly compute the size of the subsidy. Here we use an alternate method of estimating the subsidy. We look at what price a wind power company, operating without subsidies or long term contracts, would have to get for its electricity to make a reasonable profit. We compare that to how much an electric utility would be willing to pay for the power, absent government compulsion. If the price the wind power company needs for the wind power is greater than what a utility would be willing to pay, then the difference must be made up with a subsidy, either from the government or from electricity users.
Wind power is intermittent power. It waxes and wanes with the wind. For that reason, a utility cannot count on wind power. The utility must have power plants it can count on to keep the lights on. It only makes sense to purchase wind power when the cost of the wind power is less than the cost of alternative power sources available to the utility. Due to its sporadic nature, wind can never replace reliable, dispatchable plants. Wind can only sporadically substitute for reliable plants in those temporary periods when wind is cheaper than using the cheapest alternative source of electricity.
What price does a wind power company have to get for wind power to make a reasonable profit? We estimate if a wind power company builds a one-billion-dollar wind farm it needs $154 million per year from power sales. Of the $154 million $20 million is for operating expense and the rest is net revenue. Assuming the wind farm has a life of 20 years this corresponds to 12% interest on the billion-dollar investment. That is a reasonable return for entering a highly risky business. But if the wind power company has a 20-year guaranteed contract to deliver power, the risk changes and 8% interest may be profitable.
A $1 billion wind farm would have a nameplate capacity of 400 megawatts. The nameplate capacity is the maximum output power when there is sufficient wind. But since the wind isn’t always blowing strong, the average power would be typically be around 38% of 400 megawatts or 152 megawatts. This amounts to 1,337,000 megawatt hours per year. To meet the 12% interest rate goal the electricity would have to sell for the high price of $115 per megawatt hour. To meet an 8% goal, in the case of a guaranteed long-term contract, the company would need about $75 per megawatt hour.
The main competitor to wind power will typically be natural gas generation. The marginal cost of generating electricity with natural gas depends on the cost of the gas and the efficiency of the generating plant. That cost is typically $20 per megawatt hour.
In an unsubsidized world the wind power company needs $115 per megawatt hour, but the electric utility would only be willing to pay $20 per megawatt hour. The difference must be made up by a subsidy from taxes or higher electric rates. The subsidy required is about 83% of the cost of wind power, or $95 per megawatt hour. We offer this as a fair estimate of the wind power subsidy.
Notice that we are comparing the full cost of wind power with the marginal cost of natural gas power. The marginal cost is only a function of the cost of gas and the efficiency with which gas is converted to electricity. The capital cost of the natural gas plant is rightfully attributed to the core generating infrastructure and must be paid regardless of the presence of wind power. Typically the advocates of wind power mistakenly include the capital costs of natural gas in their comparisons, making natural gas seem more expensive.
The U.S. has advanced wind power foolishness to the point where about 10% of our electricity comes from wind. Assuming a subsidy of $95 per megawatt hour, the U.S. is wasting about $41 billion every year on subsidies for wind power, which is around $300 per household annually.
Texas has gone overboard with wind power. Their massive wind system requires an annual $10 billion subsidy. That amounts to nearly $1000 per household in Texas. The subsidy money comes from federal taxes or increased electricity prices. Other states are subsidizing Texas’ wasteful spending via the federal taxes they pay.
Is Wind Power a Good Way to Reduce CO2 Emissions?
The premise behind renewable power is that it does not generate CO2 and thus helps alleviate the supposed climate crisis. In order to eliminate the emission of a metric ton of CO2 by substituting wind power for natural gas power, one must generate about 3.5 megawatt hours of electricity by wind rather than natural gas. The subsidy required will be about $330 per metric ton of emissions eliminated. But one can purchase a carbon offset that reduces the same amount of CO2 emissions, in the carbon offset market, for about $10 per ton. $330 is an exorbitant price for a carbon offset.
There is little point in reducing CO2 emissions because the Chinese and Indians are rapidly increasing emissions by building coal generating plants. The effect of U.S. wind power on reducing emissions is negligible compared to rapidly increasing world emissions.
The very idea of reducing CO2 emissions is a dubious quest. The science supporting climate fear is speculative. It is not speculative science that increasing CO2 in the atmosphere greens the Earth and increases agricultural productivity. Plants need CO2. They are hungry for CO2.
The Non-Economies of Scale
As one increases the amount of wind power in the electric grid a problem starts to emerge. Wind power is peaky. If all turbines are at maximum output the amount of power is about 2.5 times the average. If wind power on average is more than 20% of the electricity there start to be episodes when there is more wind power than the grid can absorb. Then the only choice is to curtail the wind output or store the excess electricity for later use, generally in batteries. In either case the cost of the wind power is increased. As a practical matter it is harder to reduce output from a coal plant to make room for wind power. In the case of a nuclear plant, it makes no sense because the cost of nuclear fuel is extremely low, perhaps 4 times less than natural gas. For this reason state renewable portfolio laws requiring 50% or 60% renewable electricity result in very expensive batteries added to the wind or solar farms.
Kill the Wind Industry
It's difficult for politicians, or anyone, to admit they’ve been conned. It’s time that everyone admits it and we kill the wind power industry.
Norman Rogers is a retired entrepreneur. He has written many articles on climate and energy as well as the Amazon book Dumb Energy.
There is a reason that the crisis at our southern border was perhaps the hottest topic in the recent presidential debate--as former President Donald Trump repeatedly noted, the border crisis touches on every other major issue, including the economy, crime, health care, the federal debt, and most especially national security. During the past three years, millions of illegal aliens have entered the United States by crossing the southern border, many with little or no vetting for national security purposes. With the United States supporting Ukraine in its war with Russia, and Israel in its war against Iranian proxies Hamas and Hezbellah, with our involvement in a maritime conflict with Houthi rebels in and near Yemen and the Red Sea, and as war clouds gather in the South China Sea and western Pacific, the possibility of terrorist or “fifth column” cells embedded in cities throughout the United States is very real and very dangerous.
Defending the homeland is the most important national defense responsibility of our government. NBC reports that the Department of Homeland Security identified more than 400 migrants that have been brought to the United States by an ISIS-affiliated human smuggling network. While some of them have been arrested, at least 50 remain at large somewhere in the United States. This caused House Homeland Security Committee Chairman Mark Green to sound an alarm about the Biden administrations’ “open border agenda.” We saw on September 11, 2001, what 19 terrorists could do to our country. Todd Bensman of the Center for Immigration Studies has been sounding the alarm about this for a few years in articles and two books: Overrun and America’s Covert Border War. Bensman has accused the Biden administration of covering-up a planned terror attack at Marine Base Quantico by two Jordanian nationals on May 3, 2024. FBI Director Christopher Wray in March testified that “We are seeing a wide array of very dangerous threats that emanate from the border.” The Heritage Foundation warned two years ago that “Biden’s open border is an open invitation to terrorist attacks.” Bensman has compared the border crisis to an invasion of the United States. With hundreds of thousands of border encounters per month, the statistics support Bensman’s assessment.
Terrorism is only part of the threat. In May, a House Homeland Security Subcomittee noted a surge of Chinese illegal immigration at the southern border. “A wide-open border presents a ripe opportunity for the CCP to undermine our national security,” said Chairman Dan Bishop. Bensman reports that since January 2021, border patrol has encountered more than 50,000 Chinese nationals. “More Chinese nationals are now crossing the Southwest border near San Diego,” writes Bensman, “than Mexican nationals.” In the event of war with China in the South China Sea/western Pacific, some of these Chinese nationals could engage in espionage, sabotage, and worse. The Washington Examinernotes that “China is infiltrating America through its open borders.” The America First Policy Institute characterized this as the “Trojan Horse at the Southern border.”
So we have identified Islamic terrorists and Chinese nationals that have joined millions from other countries that have entered the U.S. illegally in the past three years. There are echoes here with the fall of the western Roman Empire, which succumbed to barbarians that legally and illegally infiltrated the empire and helped the subsequent barbarian invasions of Rome during the 4th through the 6th centuries A.D. As the Wall Street Journal noted, by 500 A.D., “Rome had lost control of every province under its rule to uninvited immigrants.” To be sure, there were other causes for Rome’s fall, including financial mismanagement, endless foreign wars, and a corrupt elite class. But uncontrolled immigration was one of them.
Rome, like the United States, initially viewed immigration as a virtue and a strength of the Empire. But virtue eventually turned to vice. Last year, the renowned strategist Edward Luttwak in an interview with Lafayette Lee, noted parallels between the fall of Rome and the current border crisis in the United States. “[A]fter 378 years of success,” Luttwak noted, “Rome, which was surrounded by barbarians, slowly started admitting them until it completely changed society and the whole thing collapsed.” The barbarian invasions, Luttwak continued, “were in fact, illegal migrations. These barbarians were pressing against the border. They wanted to come into the Empire because the Romans had facilities like roads and waterworks.” Some, like the Goths, Luttwak noted, were “asylum seekers” seeking shelter from the advancing Huns. The Romans, Luttwak noted, like the U.S., had remarkable institutions and a “deep and profound” concept of citizenship, but they were “overwhelmed demographically.”
Luttwak expressed the fear that in America “the very concept of citizenship is being delegitimized.” Our public schools teach a tawdry history of the United States, portraying it as “founded on genocide and slavery.” There is also an ideology at work. The Biden-Obama people believe that the U.S. “has no right to the wealth of the world,” and instead must “share it” with others. This ideology holds that “it is illegitimate to prevent foreigners from coming to the United States and sharing in the wealth.” To the globalists, Luttwak says, “any border control is illegitimate.” Those who say we cannot control our border, Luttwak contends, simply don’t want to do so.
Jeffrey Peters has pointed out that Americans might want to read or re-read Edward Gibbon’s Decline and Fall of the Roman Empire. Gibbon showed how the migrant barbarians infiltrated the Empire, including its armed forces, engaged in illegal border crossings, but were unwilling to assimilate into Rome’s culture and political system--and were not made to by elite Roman authorities. Citing Gibbon, Peters writes, “an Empire cannot survive with a separate country living within it. The illegal immigrants are exactly that second nation.”
Robert Kaplan has written that the “similar destinies of the United States and Rome can at times seem eerie.” Kaplan noted that Rome’s decline started with its immersion in “small wars.” America’s decline has followed a similar path, and Kaplan places the blame on our foreign policy establishment whose ambition is to do “great things” to “create a . . . long-lasting American order.” For both Rome and the United States, Kaplan wrote, “great power wars strengthen a nation and relatively smaller expeditionary wars dissipate it.” He scolds the Biden administration and much of the foreign policy establishment for “demanding that all countries in the world become democracies.” “Issuing ideological ultimatums is a sign of decadence, that befits a country that is splitting at the seems politically and with an out-of-control national debt,” Kaplan writes. He’s not sure that America will recover from its “adventures” in Afghanistan and the Middle East.
One of the reasons the United States is “splitting at the seems” is the uncontrolled migration at our southern border. Judging by his performance in the presidential debate, it is far from clear that President Biden understands this. His cognitive impairment was evident during the presidential debate; indeed, it has been evident for some time to those willing to face uncomfortable realities. A nation that cannot or will not control its borders ceases to be a nation. The border crisis is not just about jobs and a strain on our welfare state and other resources. It is, especially in times of international conflict, a national security issue of the highest order. If we don’t begin to treat it as such, Rome’s path may be our destiny.
Francis P. Sempa writes the Best Defense column each month.
The dark reality of Bidenomics is the alarming 19.5% inflation under the President’s watch, which is 5.7% annually. When he took office, inflation was at just 1.4%. Since March 2021, inflation has consistently remained above the Federal Reserve's 2% target for 40 consecutive months.
Under Biden, the federal debt has increased by $6.9 trillion. To finance his spending spree, the Federal Reserve printed money from nothing. The increased money supply, without a corresponding increase in goods and services, reduced the value of each dollar, causing prices to rise quickly and leading to high inflation, effectively acting as a hidden tax on everyone.
Prices have increased by 19.5%, while real wages have declined by 1.8%. Average hourly earnings for all employeesdropped1.8% to $11.18 in June 2024 from $11.39 in January 2021, when Biden took office.
The typical U.S. household now requires $1,069 more each month (equivalent to $12,828 annually) compared to three years ago.
Many Americans feel a single income is insufficient to sustain their lifestyle. According to Bankrate’s Side Hustles Survey, more than one-third (36%) of U.S. adults work second jobs to earn extra money, often through gig apps, freelancing, or weekend jobs. Many rely on this additional income to cover essential living expenses like rent and groceries, with 32% believing they will always need this extra work to make ends meet. A survey by GOBankingRates from October 2023 also found that about four in ten adults continue to need side jobs.
Credit card debt and delinquencies are surging amid high interest rates. According to WalletHub analysis, credit card debt hit a new record high of $1.27 trillion in May 2024, 4% more than in May 2023. The average credit card debt is $10,479. According to the WalletHub survey, nearly one in three people say they will have more credit card debt by the end of 2024, and nearly one in four Americans are extremely stressed about their credit card debt.
Credit-card delinquency rates hit a record high of almost 3.5% in Q4, according to the Federal Reserve Bank of Philadelphia. This i
Housing affordability has alsocollapsedunder the weight of Bidenomics, and due to skyrocketing home prices and high mortgage rates, it is likely to become a significantissuein the 2024 election.
Persistent inflation and the Federal Reserve's stance on interest rates have contributed to the decline in home affordability. According to First American’s Real House Price Index (RHPI) report for May, affordability in the housing market is at its worst in over three decades, with no relief expected this year. The report shows a 9% year-over-year decline in affordability, driven by a 5.9% increase in nominal home prices and a 0.6% rise in the 30-year fixed mortgage rate.
The median home price when Biden took office was $335,000; it was $445,000 in June, an increase of 32.8%. The home price-to-income ratio has reached a record high of nearly 6-to-1. The monthly mortgage payment on a median-priced home has increased 115%. According to a recent analysis by the real estate site Redfin, prospective homebuyers need an annual income of $113,520 to afford a typical house in the U.S., which is 35% higher than the average household income of $84,072The last time the typical household income exceeded the amount needed to afford a median home was in February 2021, ironically, the month after Biden took office.
Nearly half of all renters spend more than 30% of their income on rent, with a quarter spending over 50%, making it difficult to save for a down payment.
Inflation is hitting wallets hard. According to a recent LendingTree survey, nearly 80% of Americans now consider fast food a 'luxury' due to its high prices. Thesurveyfound that 78% of consumers view fast food as a luxury purchase because of rising costs, with 62% eating it less frequently.
Therefore, it is unsurprising that inflation and food prices emerged as the top economic issues among Americans in a recent nationwide TIPP Poll.
CPI Report
The government's Consumer Price Index (CPI), released on Wednesday, showed a 3.0% year-over-year price increase from June 2023 to June 2024.
The CPI rate declined steadily for 12 consecutive months, from a 40-year high of 9.1% in June 2022 to 3.0% in June 2023. An increase to 3.2% in July 2023 interrupted this trend. Since then, the CPI rate has fluctuated, with the lowest reading of 3.0% in June 2024.
After adjusting for seasonality, the Consumer Price Index (CPI) declined by 0.1% between May 2024 and June 2024 for the first time in more than four years. During the same period, food prices increased by 0.2%, energy prices declined by 2.0%, and core prices (all items except food and energy) increased by 0.1%.
If you dig deeper, you will notice that the apparent improvement in the inflation situation is an illusion due to the Base Effect. The CPI Index increased from 314.07 in May to 314.18 in June this year, a 0.04% increase. However, during the same period last year, it had increased at a sharper rate of 0.32%, from 304.13 in May to 305.11 in June. The "base effect" creates the illusion of improvement, making it seem that the decrease in the inflation rate from 3.3% in May to 3.0% in June is an improvement, even though inflation persists at a slightly worse level on the CPI Index. The media has not yet widely acknowledged this observation.
TIPP CPI
We developed the TIPP CPI, a metric that measures the rate of change using February 2021, the month after President Biden's inauguration, as the base. All TIPP CPI measures are anchored to this month, making them exclusive to the economy under President Biden's watch.
What is the motivation behind the TIPP CPI?
Although prices aren't rising as quickly as before, today's inflation is adding to past increases, making it even harder for Americans to manage their expenses. The BLS CPI rate doesn't accurately capture Americans’ inflation struggles.
The official BLS CPI year-over-year calculations compare prices to already inflated bases, and these statistics could mask the full impact. Further, the media and some economists frequently use the low CPI rate to present a rosy economic outlook supporting Biden’s policies.
In contrast, the TIPP CPI rate offers a clearer understanding of Americans’ economic challenges under President Biden. We use the relevant data from the Bureau of Labor Statistics (BLS) to calculate the TIPP CPI, but we adjust the period to Biden's tenure. When discussing the TIPP CPI and the BLS CPI, we convert the index numbers into percentage changes to better understand and compare them. CPIs are like index numbers that show how prices affect people's lives, similar to how the Dow Jones Industrial Average reflects the stock market.
Bidenflation, measured by the TIPP CPI using the same underlying data, increased to 19.5% in June. It was 19.4% in May, 19.2% in April, 18.8% in March, 18.0% in February, 17.3% in January, and 16.6% in December.
TIPP CPI vs. BLS CPI
The following two charts present details about the new metric.
For June 2024, the BLS reported a 3.0% annual CPI increase. Compare this to the TIPP CPI of 19.5% - a 16.5-point difference. Prices have increased by 19.5% since President Biden took office. On an annual basis, the TIPP CPI rate is 5.7%.
Food prices increased by 21.5% under Biden per TIPP CPI, compared to only 2.2% as per BLS CPI, a difference of 19.3 points.
TIPP CPI data show that Energy prices increased by 34.4%. But, according to the BLS CPI, energy prices rose by 1.0%. The difference between the two is a whopping 33.4 points.
The Core CPI measures the price increase for all items, excluding food and energy. The Core TIPP CPI is 17.8% compared to 3.3% BLS CPI, a 14.5-point difference.
Further, gasoline prices have increased by 39.1% since President Biden took office, whereas the BLS CPI shows that gasoline prices have declined by 2.5%, a difference of 41.6 points.
Shelter costs rose by 21.6% under Biden’s watch, compared to the BLS reading of 5.2%, a difference of 16.5 points.
TIPP CPI finds that Used car prices have risen by 20.9% during this President’s term. Meanwhile, the BLS CPI reports that the prices have dropped 10.1%, a difference of 31.0 points.
Air ticket inflation is 34.4% compared to the BLS CPI’s finding of an improvement of 5.1%, a difference of 39.5 points.
The latest TIPP Poll, completed at the end of June, shows that nearly nine in ten (84%) survey respondents are concerned about inflation. As the chart below shows, the concern is shared by all income levels.
Since January 2022, inflation concerns have stayed above 80%. The "very concerned" share has been at least 50% since March 2022, i.e., for twenty-nine months.
Over half (54%) say their wages have not kept up with inflation, while only one in five (20%) say their income has. Since December 2023, this statistic has moved in a tight 18% to 21% range.
Our data shows that households in all income brackets are likely to say that their earnings have kept pace with inflation: 19% for under $30K and 17% for $30K—$50K, 19% for $50K—$75K, and 30% for $75K+ households.
Nominal wages represent the amount of money one earns without considering changes in the cost of living. On the other hand, real wages consider inflation and measure the purchasing power of wages. Real wages provide a more accurate reflection of what is affordable with the income earned by factoring in the changes in the cost of living.
Real weekly wages, measured year-over-year, showed negative readings for 26 out of the 41 months during the Biden presidency from February 2021 to June 2024. The 26-month negative streak was broken in June 2023. Since then, the measure has posted positive readings.
As a result of inflation, Americans are cutting back on household spending.
They are cutting back on eating out (82%), entertainment (80%), purchasing big-ticket items (77%), holiday/vacation travel (76%), and memberships/subscriptions (70%).
Nearly two-thirds (63%) are cutting back on charity giving. Over half (58%) of households spend less on groceries, and the high gasoline prices forced 56% to cut back on local driving.
The cutbacks are more prevalent among lower-income households than their higher-income counterparts.
Inflation Direction
The chart below compares the 12-month average of monthly changes against the 6-month and the 3-month averages. We also show the reading for June 2024.
The 12-month average considers 12 data points and presents a long-term reference, while the six-month and three-month averages consider recent data points.
Typically, we compare the June 2024 data to the three-month average to gain a clearer perspective. In June 2024, the all-items category declined by 0.10%, less than the three-month average of 0.07%. This indicates an improvement in June.
Meanwhile, the three-month average of 0.07% is smaller than the six-month average of 0.22%, indicating a recent slowdown over the last three months. Furthermore, the six-month average of 0.22% is smaller than the twelve-month average of 0.24%. Therefore, the data shows a decreasing stair-step pattern, consistent with an overall improvement.
In June, Food prices increased by 0.2%, higher than the three-month average of 0.10%. Although the three-month average is smaller than the six-month average of 0.13%, the June increase is concerning.
Meanwhile, Energy prices declined by 2.00%, a greater decrease than the three-month average of -0.97%, indicating a slowdown. The three-month average is lower than the six-month average of -0.07% and the twelve-month average of 0.21%. In summary, the data presents an improving picture.
All items less food and energy, known as "core inflation," was 0.10%, lower than the three-month average of 0.20%. Further, the three-month average of 0.20% was smaller than the six-month average of 0.30%. The data here again shows improvement.
In summary, except for food, we witnessed an improvement in energy prices, core items, and all items in June.
Based on our trend analysis, June was a good month.
Monetary Policy
The Federal Reserve's ongoing efforts to control inflation by maintaining high interest rates contribute to the financial strain.
Since March 2022, the Fed has raised interest rates 11 consecutive times, bringing its benchmark interest rate to 5.25%, the highest level in 22 years.
With the core CPI entrenched at 3.0% and geopolitical tensions that could lead to volatility in the energy markets, we are unsure of what lies ahead. We believe it won't be easy to bring CPI inflation down to the Fed's target of 2.0%.
JPMorgan Chase CEO Jamie Dimon on Friday said:
There has been some progress bringing inflation down, but there are still multiple inflationary forces in front of us: large fiscal deficits, infrastructure needs, restructuring of trade and remilitarization of the world. Therefore, inflation and interest rates may stay higher than the market expects.
On Tuesday, Federal Reserve Chair Jerome Powell wasconcerned that holding interest rates too high for too long could jeopardize economic growth. Powell said in remarks during his Capitol Hill appearances this week:
Reducing policy restraint too late or too little could unduly weaken economic activity and employment.
In an election year, the Fed must balance rate cut pressures to help Biden's reelection and the larger interest of taming inflation.
Fiscal Policy
The national debt is kissing $35 trillion, according to the Debt to the Penny dataset, which the Treasury updates daily. For the current fiscal year, which began in October 2023, the U.S. is expected to pay over $1 trillion in interest, more than the U.S. defense budget.
Most Americans are concerned about the sustainability of this trajectory. The high interest rates are also hurting Americans and sapping their confidence.
Earlier this month, Fed Chairman Powell expressed concerns about a large deficit being run during full employment. Powell said:
The level of debt we have is not unsustainable, but the path that we’re on is unsustainable.
He urged policymakers to prioritize fiscal sustainability, warning that running large deficits during good economic times cannot continue indefinitely. He said:
In the longer run, we’ll have to do something sooner or later, and sooner will be better than later.
Monetary policy alone can’t fix inflation without fiscal austerity—a lesson President Biden would never learn.
We agree with Jamie Dimon. Inflation is here to stay. Coupled with a slowing economy, “the stag,” expect Bidenflation to transform into stagflation.
In the past few weeks, much airtime has been spent and ink spilled on President Joe Biden’s debate debacle. Rightfully so, since Biden currently occupies the Oval Office and is asking voters for another four years. It also makes complete sense that the political chattering class, of which I am a card-carrying member, discuss the impact of the debate on the 2024 election.
However, it oversimplifies it to suggest that Biden is losing the election simply because of his dismal debate performance.
President Biden was losing the election prior to the debate on June 27. According to the RealClearPolitics Average, Biden was trailing former President Donald Trump by 1.5 percentage points nationally the day before the debate. Biden also trailed Trump in every single battleground state. It was for these reasons the Biden campaign desperately agreed to the debate in the first place. They needed to change the trajectory of the campaign. They failed.
The key is not just that they were losing prior to the debate but why they were losing. It wasn’t just about questions regarding Biden’s mental acuity, though valid; it was about his presidency and lack of results.
Roughly two-thirds of the American people, according to the RealClearPolitics Average, believe our country is headed on the wrong track, a number that has remained very consistent for the last two years. Approval of Biden’s presidency at the same time has roughly remained stuck around 40% also for the past two years.
The reason is not about the debate. It’s about his failed policies. Period.
The American people disapprove of Biden’s handling of just about every issue of importance. Anywhere from 60%-65% disapprove of his work on the economy and inflation, energy prices, the southern border crisis and immigration, foreign policy, and crime.
These are the reasons Biden was losing the race and continues to be losing. People remember that life was more affordable under the America First policies of Donald Trump. They remember gas and groceries being cheaper, and rent, mortgages, and utility bills that cost less. Americans also know their paychecks went further. Our country wasn’t facing an invasion of an estimated 12 million illegal immigrants. Europe and the Middle East weren’t dealing with the horrors of war. On nearly every issue Americans regularly list as their top concern, life was better under President Trump.
Which brings us to an even bigger problem for Democrats. They fail to recognize why Biden was losing in the first place and don’t realize that changing names at the top of the Democratic ticket won’t change the underlying facts.
It simply does not matter which Democratic candidate is at the top of the ticket. Regardless of whether it’s Biden, Vice President Kamala Harris, California Gov. Gavin Newsom, or any other Democrat, none of those candidates or potential candidates would change the unpopular policies that Americans mostly reject.
Do you see a Democratic candidate for president saying we need to secure the border and deport illegal immigrants who entered our country under Biden? No!
Democrats will not suddenly say that America needs to pump more oil, refine more gas, lower prices at the pump, and ditch their Green New Deal EV mandates.
Big government Democrats are not suddenly going to stop inflation-causing government spending and extend the Trump Tax Cuts, which doubled the Child Tax Credit, saved average Americans thousands of dollars, and caused the total percent of taxes paid by the top 1% to increase, not decrease as the left incorrectly suggests.
The party that supported the deadly and destructive BLM riots is not suddenly going to turn its back on the “Defund the Police” radicals in their midst. Remember, VP Harris and others helped raise money to bail out the rioters, arsonists, and looters. They also support the anti-Israel/pro-Hamas terrorist activists who took over college campuses and burned American flags. No Democrat is suddenly pro-police.
Democrats are stuck with policies the American people don’t like.
So, as we discuss the president’s mental acuity, speculate on possible replacements, or watch as they press ahead with Biden, do not forget it’s not just about his debate or his mumbles, stumbles, and brain freezes. Biden and the Democrats were and are losing because of bad policies. That’s not going to change, no matter what they do in the coming weeks.
Marc Lotter is former special assistant to President Donald J. Trump and former director of Strategic Communications for the Trump 2020 campaign.
