Free Gas!

 

Willie Wilson, a candidate for Mayor of Chicago, has spent $2.2 million giving out free gasoline to voters in three events which spanned 26 gas stations.  The Economist says that current mayor Lori Lightfoot responded to the threat on April 27 by persuading her city council to distribute 50,000 prepaid cards for gasoline and public transportation, at a cost of $12.5 million.  ‘“She’s using the city’s money, he’s using his own money,” notes Derrick Orr, a school principal waiting [for gasoline] in his Range Rover.”

Milton Friedman said that there are four ways to spend money:

  1. Spend your own money on yourself.
  2. Spend your own money on somebody else.
  3. Spend somebody else’s money on yourself.
  4. Spend somebody else’s money on somebody else.

Politicians seem to be in category 4, but there is clear personal benefit to a pol who promises to shower constituents with gas, food, or lodging.  Note that Lori Lightfoot spent six times as much money buying votes—er, gasoline cards—as Willie Wilson.  The dollars are bigger when politicians spend money that isn’t their own.

_____________________________________________________________________

Real wages are falling.

The inflation rate is eight percent;   so high that wage increases haven’t been able to keep up despite a significant shortage of labor in many industries. Workers are actually getting poorer.  Inequality is rising.

There are times when policymakers are unlucky.  This is not one of those times.  All-time low interest rates, unprecedented monetary stimulus, and unprecedented fiscal stimulus would have caused objections from the children on the TV show “Are You Smarter Than A 5th Grader?”    The economy was roaring;  The day before the third (third!) stimulus legislation was signed into law, GDP was running at 8.4%, as measured by GDP Now.

“But, but, there’s a war on—and inflation is almost as bad in Europe as it is here!”  Are you talking about the Europe that still has some negative interest rates?   Our own inflation rate was already running at 7.9% before Russia attacked Ukraine.

To get inflation under control the Fed will have to inflict more pain, especially on the housing market and bondholders.  Bonds have already been crushed, and they will be bludgeoned again and again.  The pain has spread to the stock market.  Everybody outside the Beltway knows that a recession is coming.

Inside the Beltway, nobody even bothers asking why politicians boast about compassion and then do things that cause pain.  But the Governors of the Federal Reserve System, a bit farther down Constitution Avenue, are supposed to be above all that.  Perhaps they forgot that the car they’re driving has no steering wheel.  They pressed the gas pedal too hard, for too long, and the only thing they can do now is jump on the brakes.

Nota Bene:  During the pandemic consumers, fueled by the cash that Congress had stuffed into their pockets, had an insatiable demand for goods.  So much so that corporations were able to raise prices even faster than their costs and expenses.  Wages went up rapidly, but real wages declined 2.6% from April 2021 to April 2022.    The Economist says that this wasn’t true in Europe, because European consumers weren’t flooded with government checks.  Corporate profits actually fell in Great Britain, while they rose in the ‘States;  and these rising profits turbocharged our stock market and enriched the rich.

Excessive federal spending and loose monetary policy caused inequality to increase.

 

 

 

A Balanced Budget Amendment to the Constitution

If we were to  pass a balanced-budget amendment to the Constitution (“BBA”), the federal debt would still go up each year.  Congress has a bagful of tricks that it uses to skirt any form of discipline, from “off-budget” spending to the cleverness of the  “Unified Budget” (which effectively seized the … [read more]

Welfare for The Middle Class

“The U.S. program that pays elderly Americans’ hospital bills will exhaust reserves in 2028, two years sooner than last year’s estimate, trustees of the program said on Wednesday.”
— Reuters. … [read more]