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From "anti-core" to "felt inflation": Or how I calmed my populist demons
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- Title
- Chartbook 327 From "anti-core" to "felt inflation": Or how I calmed my populist demons & resolved my cognitive dissonance on inflation, and how the Fed could do more to help.
- Authors
- Adam Tooze
- Word count
- 1906 words
This is the closest I've seen to someone making sense of the messaging I've been hearing the last few years.
If our inflation metrics ignore the critical areas where inflation has done the most damage, then for sure the reporters boasting about how strong our economy is, using those metrics, are going to disconnect from the perceived inflation in our everyday lives.
I, for one, would like to see this fellas style show up in more of that messaging. But more to the point, I'd like to see the hands on the wheel get a little more reactive to the bumps in the road this fella is referring to.
I do not know for sure, but I think that housing cost is a part of the core inflation metric, and given the fraction of your average person's income that goes to housing, and given how steeply it has risen and continues to rise in cost, I still find it hard to believe "the numbers". I am not a "fake news" populist or anything of the sort. I just a guy who can't afford rent in my town anymore. My housing costs went up 50% in 2020. Then another 50% in 2022. Then another 50% last year. I was forced to move twice due to landlords selling out from under me, and then (when I bought a home to avoid the racket of rent hikes) I was hit with such a massive property tax spike in my first year that it literally raised my monthly mortgage payment by half.
This is not the reality discussed in most economic circles, and until establishment democrats acknowledge it, they will continue losing the weak willed to the other party. I don't personally think the other party offers a fix. Also I abhore just about everything they've been doing for the last four decades. But if the left refuses to acknowledge the problem, then the draw of "elites don't get your struggle" absolutely will continue to pull folks into the fascists orbit, where they will eventually sink deeper and deeper until the light is all gone.
I was just talking about this with /u/boxer_dogs_dance and my spouse this past week, based on the same Adam Tooze article. The Harris campaign messaging did touch on going after grocery price gouging, but the light-on-policy speechifying grates hard on my ears.
If you scratch the surface, the Federal Trade Commission and Department of Justice are already going after algorithmic price fixing in real estate and agriculture. But it's hard to make populist speeches about prosecutions that will take years. Frankly, the branch of the U.S. government with the most power to take action is the Congress. The point of Republican obstruction is to create and reinforce talking points about Democratic Party impotence.
Tooze mentions "cheapflation", the convergence of prices for the lowest and highest-priced versions of a good, which unduly burdens the poor. Spouse just today mentioned going to the store and seeing the "penny saver" eggs costing not much less than gourmet organic.
Some of this is due to factors the government can't control in the short term, like avian 'flu, droughts/floods, and so on. One of the biggest price shock sources is climate change, and neither campaign is saying a damn thing about that.
Harris's stance on climate change is probably the worst we've seen from a major democratic politician in decades! She's pro-fracking, pro-natural gas, and pro car industry. The Biden administration has somehow managed to carve out billions of dollars for climate mitigation with very little to show for it. But of course, when your opponent keeps claiming it's a hoax, it's not like we have an alternative.
I think in some cases it just takes years for impacts to be felt. Our received a little chunk of climate funding for R&D and you won't see our product outputs for another 2-4 years. I point to Boris Bikes as an example. A progressive labor mayor of London put together the plan and funding for the cycle network and rental bikes, but it came out in Boris so it's attributed to him. I'd say be patient, BBB set the foundation for a lot of climate action. In 2021 we were talking to VCs who couldn't understand anything about what we were proposing, by 2022 the faucet turned on and a tidalwave of the traditional McKinsey et al folks were pouring into the space. It has been a little co-oped, but there is a lot of really great work being done as well.
Much as it is important for us to transition off of fossil fuels, its just the reality of our current situation that we still rely heavily on it and cant yet afford to stop.
Theres lots of articles I see online that talk about how renewable energy is booming at unprecedented levels, but adjacent to that has been a massive increase in natural gas consumption to displace coal and provide flexible dispatchable power. Natural gas has basically taken the place that coal had 20 years ago.
And it's important to remember that coal is "dirtier" but natural gas is itself a greenhouse gas, so even if burning it releases less poison, the sum of everything along the pipeline, from extraction to pipelines to burning, has a more potent greenhouse effect.
Coal is just so dirty that it's worth it to stop releasing its poisons, but don't be fooled by anyone claiming that burning natural gas has less of an effect than burning coal. A piece of coal that falls off a train is a rock lying on the ground. Natural gas that escapes from a pipe or processing plant goes straight into the atmosphere.
Everything I've seen says natural gas emissions are much better than coal. Remember acid rain from coal emissions melting statues?
That's the poison part. Natural gas burns "cleaner" than coal. Fewer sulfates, toxic chemicals, etc. And the actual burning part has less of a greenhouse effect (basically less CO2 released).
But natural gas is basically just methane and methane itself is 80 times more potent than CO2, so all the leaks and stuff make it end up having a slightly worse effect "cradle to grave." So natural gas production and use is worse as far as global warming goes.
But considering that emissions from coal already kill probably hundreds of thousands of people each year, preventing global warming isn't the only consideration as it is with some other sources of pollution.
Harris has made friendly noises to most interest groups in key swing states including that autoworkers union in Michigan and the fraking industry in Pennsylvania. She did take hard lines for abortion rights and against assault rifles but other than that she is acting like any lost vote could elect Donald Trump. She isn't doing anything that suggests her policies will lose jobs people already have.
She's not wrong to be wary about losing. It's a tight race for high stakes.
I've seen discussions online about one issue gun rights voters in Montana campaigning against Tester, their moderate democratic Senator, because they don't want her to have a friendly senate to enact an assault weapons ban,
And just to remind everyone, assault rifle bans do hardly anything to reduce gun violence. The overwhelming majority of gun violence is committed with handguns, and the perpetrator usually couldn't even legally possess a gun.
I think the point is to make school shootings less dangerous
And I'm so far unconvinced that assault weapon bans will have any immediate impact on school shootings either. Maybe it'll reduce the types of mass shootings which get the most media attention. Perhaps it'd work if there's some kind of mandatory federal buyback, but I can't see that happening.
That’s what you have to do to win. A democracy reflects its populace, in the end.
I’ve always had this feeling that food should cost more.
All of these things that we’re doing to make it cost less - the way animals are treated in massive farms, unsustainable monoculture farming - these things are making climate change happen faster.
If climate change is the reason why food prices are going up, then the methods we used to make it cheap in the first place was the problem.
If you want to see governments collapse, rioting, and other versions of "civilization go boom", raise food prices relative to income. I can't think of a less equitable burden on low-income people (water prices, maybe?).
Subsidize the heck out of vegetarian protein, collapse industrial meat-farming - sure. But the problem with rising prices for basic staples will always be that some people won't be able to afford a sufficient diet (I include basic nutrition in "sufficient", not just number of calories).
Yeah I definitely agree with government subsidies for food products, I think that was an amazing idea thats helped keep this country stable and productive for decades.
Id like to expand on it a bit, offer more money for more sustainable farming and food production practices.
For anyone who cares about poor humans being able to feed themselves, "food should just cost more" is not a viable stance, absent radical reforms to society that I don't think you'd agree with me on. There are definitely some particular foods that should cost more or have less availability or both, but what you're talking about is far broader than just affecting foods that some people can do without.
Humans can do without the amount of animal protein we consume now (we have throughout most of human history), but there would absolutely be protests if the prices of all animal products doubled tomorrow.
I agree, but it's very important to consider that the availability of healthy alternatives to animal protein (and I don't just mean things marketed as "meat substitutes", I mean the basic components of a healthy diet that contains less or no meat) is not equal among all members of society, and that it is overwhelmingly the poor who would suffer if the price of meat doubled. The free market will not solve this problem without hurting people -- and the people it hurts will be the ones least ability to influence climate change policy and the most to lose from the effects of climate change.
I'm not arguing that we shouldn't reduce consumption of meat and other animal products or that the practices that enable meat to be so cheap are a problem. But if we actually care about poor humans, the solution to this is not just higher prices, but a complete overhaul of the system and its incentives.
In general, malnutrition outside of poverty stems from families failing to prepare healthy foods. I'd agree that this has a free time component, but people have the most free time we've ever had. Essential foodstuffs have seen price increases due to global events, yet they're still affordable outside of extreme poverty.
I'm 100% in favour of continuing the war on poverty, but obesity rates show we have far more issues with too much food than too little. Even in the case of food deserts, getting nutritional essentials delivered (or taking multivitamins) isn't that expensive. It's inconvenient, but it's doable outside of extreme poverty.
"Failing to prepare healthy foods" is doing a lot of work to avoid describing any sort of access problem -- food deserts exist, for instance (and the idea that those living there should get essentials delivered because it "isn't that expensive" is completely disconnected from the reality of living in a food desert). Free time is not the only reason many poor people in rich Western countries "fail to prepare healthy foods". I think this comes from an inaccurately optimistic view of food security in the US. You also have an extremely inaccurate view of obesity if you think it's caused by too much access to food in general. I'm not talking about malnutrition outside of poverty, I am directly addressing the impacts of the suggested policies on the poor and impoverished.
Heck, it's also myopic to focus only on the American poor. There are plenty of people worldwide who are far poorer than the poor in America and for whom access to food is far more fraught. They live on the same planet as us, so any arguments that doubling food prices without regard for humans' cost of living in order to fight climate change can't pretend they don't exist, and it's not going to leave them unscathed.
If anything, they would be more impacted by large price raises than even the American poor, which is more to my point: attempting to address this solely through rising prices and the free market is disproportionately affecting the poor, who have very little power to affect climate change relative to the wealthy whose lifestyles would remain more or less unscathed.
I've lived almost entirely off McDonald's and stayed healthy. Obesity is an issue of caloric excess 9/10 times. There can be malnutrition issues too, but obesity is almost always caused by overconsumption. I'm supportive of increasing access to weight loss drugs to suppress appetite since weight loss is a losing battle for most people.
I also agree that solely leaving diet up to what sells well would just lead to more junk on grocery shelves. Governments have a role to play in securing their nation's food supply.
Edit: u/sparksbet I realized my comment is a little off topic from the original comment chain. You're right to bring up the disparate impact on the global poor from rising food prices.
Yeah, the stuff about obesity just isn't relevant to my original point (as you've agreed). My only point there is that access to food =/= overconsumption, so one can't use arguments that too many Americans are obese to argue against increasing access to food in Americans with food insecurity, because obesity is fundamentally not about having too much food security.
Averages can mislead is by including people whose situation isn't much like yours.
For the cost of housing, there are a lot of elderly people who bought their house a long time ago, and they're included in the average, too. Their housing costs aren't very relevant for renters.
Similarly for people who live in a different housing market than whichever one you care about.
I try to be mindful of the people in different circumstances than mine. But at the same time I live in a low cost of living area. My town is one of the most affordable in my state, and my state is one of the more affordable ones. Not west coast, not major metro area, not coastal. It's hard to imagine that the population at large isn't feeling what I'm feeling, unless, like you say, they bought a home prior to 2019 and locked in their homestead exemption (which I was denied due to forgetting to update my address on my friggin drivers license). Fixing that for this year, but it can't be undone.
I'm a mathematician. I'm training with programming. I'd love to get my hands on the relevant datasets. It's just so very different than the world I grew up in. And I think that sentiment is the pull that fascists use.
It's okay that the world is changing. I don't long for the 1990s. I just want to be able to support my family and give my kid a life that at least approaches comfort. And right now, despite my training, despite home ownership, and despite a salary that I would have never believed when I was in grad school, somehow my standard of living just keeps slipping.
I'm typing in a bit of a rush because I'm getting my kiddo ready for daycare, but it seems like profiteering in every sector is catching up to us, and skills haven't grown to match. I'll give one example:
Last year my 2014 Mazda 3 throws a rod the day after I change the oil. It has 125k miles. I ask the mechanic how this could happen. Turns out the rhetoric about 10k mile oil changes that Mazda and all other auto makers have been pushing is total garbage, and I killed it by not doing 3-5k oil changes like I did on all my other cars. Why do they claim you can go 10k between? I don't know. New engine is $7k, paint is garbage, has some body damage from getting rear ended the previous year. Total loss. I buy the best vehicle I can with my tax return, a 2007 toyata sienna. Legendary reliability. Should go to 300k miles. Test drive is solid. No engine codes. Great. Literally the second day the transmission starts slipping. Drop the pan. Swap the filter. Drain and fill the fluid. A month later the transmission pops. This is where the story really starts. AAA recommends a shop. I call them to ask for a rough quote. $4k. Okay. Timeline? One week. Okay. They take over a month to swap in a junkyard transmission which is broken. Another week to put in a second unit. It comes home after 5 weeks and immediately acts up. Transmission isn't shifting right and whines terribly. Shop has a warranty, but they argue with me for days about honoring it. I had to get media and better business buero in to get them to agree. They keep it for a month. When I get it back it lasts two whole days before the noises are back. Van is once again at their shop. Total cost so far? $5300. Total time? Like three months. Will they get it right this time? No idea.
Idk. I'm just complaining now. But I think my point is that simultaneously with the price increases, we're seeing a skill deficit. Things are more expensive and worse executed. I'd never ever seen this kind of incompetent from any mechanic. Let alone one that charges $200/hour for shop time. But they all charge that now. These guys advertise on NPR. they have great ratings. They're recommended by AAA... but they suck.
This is my morning/not quite awake brain talking, but I see examples of this stuff everywhere. And it hurts the cause to pretend it hasn't been happening. My generation (millenials) really need to step up the skills and engage with the world in an honest and meaningful way if things are to ever improve. It's as though we've fallen into the belief that if the stats can be twisted to support the claim that we're doing well, then we're doing well. But we are not. And I do think a lot of that comes down to a lack of willingness to take responsibility for our output.
From the political angle, that's a big piece of the right's pull. They don't take responsibility for shit, but they espouse the desire to do so. It'd be great to see my generation liberal politicians steal back the responsibility flag, and generally start caring about effective action while caring less about spinning stats.
I'll whipe my ass and shut up now.
I agree with a lot of what you say, though I'd add the caveat that used cars are always a gamble, cars are expensive in general, and we'd be better off as a society if you could opt out of car ownership instead of bearing all of those costs.
Two thoughts:
I feel the same about alleged cost metrics. Sure, things aren't rapidly rising in cost any more... but menu items at all of my favourite restaurants and watering holes have risen 25-50% since 2020. Maybe they've slowed down, but they could easily spike again at any time. I know the economists will never endorse this, but when a burger is starting to cost $15-20 on average, even at basic spots, I wonder if we need a little deflation.
The right does the same thing, but worse, and with more confidence. Donald is still raving about how great the economy was when he was president, even though his tax cuts and shoddy covid leadership (excepting Project Warpspeed, which actually worked pretty well) are arguably what put us in the economic situation we're in today. And now he's bragging about how clean the air was when he was president, despite literally no evidence indicating that. And how clean our power is, the cleanest IN THE WORLD allegedly, despite that being most likely not very true at all. The man, and basically everyone on the right, is an outright liar. The left certainly engages in "elvish lies", where they twist truth in their preferred direction. But it wasn't until Donald that the right essentially realised that, in the USA political game, there is no ref and no rule against straight up unfounded lies. I continue to believe that anyone who votes for Trump has simply not thought deeply enough about the man or his policies. But when the political machine makes all of our lives harder and makes it impossible to talk about politics in polite conversation, it's understandable that so many people give up and just vote for whoever seems mostly aligned with their personal stance on abortion.
I can't say I think much of the substack piece.
I follow econ news daily and virtually every piece from NPR to NYT that I read or listen to explains briefly that core inflation excludes highly volatile prices like food and fuel. The in depth pieces explain why. I can't take the guy too seriously if he claims to follow the econ news obsessively and didn't grok this already.
His suggested fix is having the Fed explain this stuff to lay people:
Why not simply say that the Fed targets domestic causes of inflation while food and fuel prices are mostly set by global events? The whole bus vs road analogy seems silly since in a very real sense, the Fed is the domestic road maker, not the bus driver.
I'm gonna need the author to repeat after me: The Fed is not a partisan body. The Fed is not a partisan body. The Fed is not a partisan body.
Now, what I will say is I think this advice is good for the Democrats, who in my opinion have failed to message this issue. In fact, I think the Democrats have mismanaged it so badly that they will lose the Senate and White House next month. I hope I'm wrong, but it's clear that most swing voters care about the economy, and the Dems have flubbed the messaging repeatedly.
But that isn't the Fed. The Fed isn't trying to talk to the lay person. They are speaking to financial markets.
Yes, everyone who's paying attention knows what "core inflation" is and that food and fuel are excluded.
I think part of the point is that, while the "anti-core" inflation is easily calculated, it isn't ordinarily graphed or talked about. I thought it was a good point, worth sharing even if the article is a bit vague on who should make that change.
Also. the Fed does have a leading role in deciding which metrics are tracked.
I think this boils down to effective communication strategies. The people who have been failing to communicate to the public are largely elected officials. Economists as a whole track most measures of inflation, and the Fed focuses on the ones that are relevant to its role in setting reserve interest rates. It doesn't talk about other measures because those other measures are generally not as helpful to their specific role. The people who should be synthesizing what the Fed is doing with the broader economy and what is felt by the electorate are the people elected into office, and journalists. I largely feel that journalists at NPR and the NYT have done a decent job of reporting on these dueling issues, but it does require consuming more news than most people get.
The problem, in my opinion, isn't the Fed. It's the politicians failing to message. Rather than regurgitate what the Fed says, they need to synthesize it into a message with data from other sources that speaks to the public.
Edit: also, since tone is hard, I appreciate that you posted this and generated discussion! My contribution to the discussion is that the author is out to lunch a bit and missing the point. But that doesn't have anything to do with my appreciation for the opportunity to discuss, which your posting created.
Cheers!
For a start, I 100% agree with you.
I was writing something about how it's not the Fed's job to explain this stuff, because it's supposed to fall to congress.
But, obviously, congress has decided for 15+ years now to do fuck all about anything, and is actively against any level of clarity on basic issues like "is the sky blue" let alone something as complex as "look it sucks but there's fuck all we can do" economics.
I'm not saying it should fall to the fed, in fact i'm actively against it falling to the fed because keeping the fed non partisan is extremely important, but at the same time I'm not sure if that will every be fixed.
What I'm most surprised and disappointed about is that the Democrats, in a critical election cycle and with a massive campaign war chest, still are not messaging on the economy in a way that resonates with the electorate. If politicians can't even message this stuff when it is their best interest, then that is a pretty grim signal that they never will.
Cheers!
Harris is generally gaining on Trump when it comes to whether voters trust her with the economy. This is a pretty solid improvement considering Republicans are traditionally favoured with economics (without merit). Since Democrats have improving polling on economic issues, I think their messaging is working. Unfortunately, many voters have Trump's level of understanding of tariffs...
https://www.pbs.org/newshour/politics/most-voters-think-the-economy-is-poor-and-are-split-on-whether-trump-or-harris-can-fix-it-polls-finds
This is mostly just me rambling and my personal thoughts after sifting through far too much news on a daily basis.
Last I checked the latest poll averages showed that on the issue of the economy 48% of voters trusted trump and 46% trusted Harris, which is the closest it's been. Unfortunately, the problem is that the economy seems to be an outsize factor for swing voters, but also not the only issue and so overall Trump is viewed more favorably by likely voters in swing states.
Harris May Be Catching Up on a Key Polling Question: Which Candidate Helps You
But the polling is only one reason I'm shaking my head. Following the crush of big publicity after Harris entered the race there was a big press to get her policy platform and details around the economy. I heard that over and over on NPR Up First and Consider This, which are pretty Harris friendly channels. And when her policy platform landed, even they were dubious. The piece around rules to prevent price gouging is an obvious play to people's frustrations with no practical impact in the here and now. It might be great to prevent future problems, but people need to hear their frustrations reflected in the stump speeches. Trump is giving people who are struggling that because he talks about how horrible the economy is and that he will fix it, regardless of whether it is true.
I'm sympathetic, because if your opponent can just lie to say whatever sounds good it's hard to compete. But her economic policy is all long term, and not the messaging she needs to decisively move swing voters on the economy (imo).
The most saleable piece of it is the down payment assistance, but even that probably feels out of reach to many people struggling today. As hollow as it sounds, she needs to stump on better sound bites that reflect the frustration of people in the here and now, so she can have the opportunity to put long term fixes in place.
I worry that like in 2016 the campaign has slept on the working class issues. I know it's hard to message all the right things to all the right people. But as someone who feels that voter sentiments are a fact that needs to be accepted, and swing voters met where they are at, I just keep seeing daylight between the messaging and the swing voter polls and panel interviews.
And to be clear, I think Harris's platform is better than Trump's. It's the messaging that I find lacking. It's not the packaging swing voters need to feel heard.
I don’t follow Econ news obsessively, but I would say I follow more than the average person. Or at least I have followed it in the past. I used to listen to Freakonomics podcast and planet money religiously, and I keep an eye on the general news when economics come up. Until this article I had no idea inflation metrics didn’t include food.
And honestly I think it’s a huge oversight. In my experience, while it might be possible to describe food prices as volatile, the only true volatility is how fast they increase. There were a few times through COVID that the price of, for example, eggs would shoot up and come back down after a few months. But except for those unique circumstances, I have never seen food fall in price. Maybe food was once volatile like gas is, but it certainly isn’t anymore, at least not in my experience.
I don't mean this on a negative way, but planet money and freakonomics aren't really what I consider economic news. They are econ related interest pieces, rather than the nuts and bolts economic pieces I'm thinking of. I'm not surprised that planet money, as much as I enjoy them, isn't getting into the details. They are good to go deep on the factors in Christmas tree prices, and their summer "school" sessions are fun. But they are more infotainment than anything else. And I just listened to several of them over the weekend.
As far as food volatility, there is a fair bit a variation in the global markets of staple goods, and that does cause prices to fluctuate. But you are right in that most of that gets leveled out by the time it reaches stores and that once prices of a good go up they usually are left there as a new anchor price for a while.
With regards to the author, what I'm trying to convey without coming across as more of a jerk than necessary, is that they really don't seem that up on the facts of the topic. And I think that shows in their analysis.
This is the chart of percent change in egg prices on a monthly basis over time.
https://fred.stlouisfed.org/graph/?g=1wJrz
You can see that the swings both up and down have gotten bigger over time. Egg prices are more volatile than they were in the past. This is just in aggregate though. Whether your local grocery store will change the prices this quickly is a different story.
From the article:
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I'd love to see some household budget example numbers. I cannot imagine anyone managing to keep their food costs level, much less reduce them, over the past 5 years. Same for heating and electricity costs. And maybe pensioners on fixed incomes have kept their mortgage payments the same, but property taxes have been on the rise pretty much everywhere to mirror spiking housing costs.
I mean... does this really happen all that much? It could just be my little bubble of experience, but I don't see a lot of it in the media I'm exposed to. What I do see a lot is this line over and over that amounts to "the so-called experts are clueless and out of touch." Kind of a core populist talking point. I think it's well understood among those even mildly keeping up with economics that there has been a divergence between sentiment and traditional economic benchmarks. Even simple things like "is the stock market up?" are not polling close to reality, even though the stock market is not really about your lived experience and the numbers are right there for anyone to see.
I don't see the point of the Fed trying to communicate too much about sentiment (felt inflation) rather than fundamentals. A crucial strategy in helping to maintain stability in the economy is for them to communicate clearly about what they are doing, why they're doing it, and what they plan to do in the future. I think it would be detrimental to have the markets and general public think that they're making policy based on public opinion rather than more objective and well-documented economic measures. Of course we could always do better, and new metrics or revisions to old metrics should be considered (and they are, frequently). Regularly reporting "Anti core inflation" as a focus of discussion would be especially bad though, because it would just be more noise distracting from what the Fed can actually do. In any case, on the monthly CPI summary food and energy are the first two categories on the list. If you think they're not prominent enough, you're just not looking.