The U.S. economy remained resilient early this year, with a strong job market fueling robust consumer spending. The trouble is that inflation was resilient, too.
Gross domestic product, adjusted for inflation, increased at a 1.6 percent annual rate in the first three months of the year, the Commerce Department said on Thursday. That was down sharply from the 3.4 percent growth rate at the end of 2023 and fell well short of forecasters’ expectations.
The word “population” doesn’t occur in the article, though it is critically important. If the population is growing at a 1.7 percent annual rate, for example, Americans are currently on track to become poorer on a per capita basis.
Separately, the GDP of Harvard Square is growing. An “essential” marijuana retailer seems to have opened up on Church Street. Photos from this evening:
It’s also a great time to be a tent retailer. The “Free Palestine” encampment in Harvard Yard, view from outside Harvard’s police-guarded border wall:
Here are the stickers that supporters of Hamas/UNRWA/Palestinian Islamic Jihad have added to Harvard’s “the Yard is closed” signs:
Happy Tax Day for those in the U.S. and also U.S. citizens who live abroad and get no services from the U.S. but still must pay taxes (consider the U.S. citizens held hostage by Gazans, for example).
How about a new 3 percent tax from a restaurant on the restaurant and kept by the restaurant, couched as an “Admin Fee” on the receipt?
One of my companions asked what it was for. The waiter responded, “It’s a fee that we incur to keep our prices competitive.”
I’m not sure how anyone comes up with a Gini coefficient of income inequality in the U.S. given that we have so many means-tested taxpayer-funded “not welfare” welfare programs. A person with zero income making the U.S. look extremely unequal may yet have the spending power to occupy a $60,000/year apartment, consume $30,000/year in health insurance, buy groceries, own a smartphone with service, and enjoy high-speed Internet at home via the new “free broadband” program.
… the MBTA today announced that the MBTA Board of Directors has unanimously approved the MBTA’s plan to implement a reduced fares program for riders with low-income. This program, which has been a topic of research and planning by the MBTA and many partners for the last decade, is an exciting improvement for fare equity.
The new program will provide riders who are aged 26-64, non-disabled, and have low income with reduced fares of approximately 50% off on all MBTA modes. Program participants will demonstrate eligibility via existing enrollment in programs with a cutoff of 200% of the federal poverty level (or lower).
The MBTA estimates the cost of the program to be approximately $52-62 million (including administrative costs, operating costs to meet induced demand, and fare revenue loss).
Without this program, a resident of Lockdown Land with 201% of the federal poverty level in income would be considered better off than someone with 200%. But with this program, the higher income person actually will have less spending power, assuming that he/she/ze/they ever uses public transit.
On net, any program likes this makes the quoted numbers on income inequality in the U.S. misleadingly extreme, which is good news, I suppose, for any political party that thrives by stoking envy.
Apropos of transportation, a friend of a friend’s hangar here in South Florida, complete with C1 Corvette and Nissan Fairlady Z (“Datsun” for Americans at the time):
And a photo of an almost-finished house that I snapped after departing from this airport:
(Jupiter Island, not to be confused with Jupiter; Intracoastal Waterway in the foreground and Atlantic Ocean in the background.)
… countries with more stringent lockdown measures did not experience a lower death rate, as might be expected a priori.
Sweden, with an average lockdown rate of 39 for 2020–21, shows a weak cumulative GDP growth of 3 per cent during the two years 2020–21. Compared with an average annual pre-pandemic growth rate of 2.6 per cent, the Swedish economy lost approximately one year of growth. Countries with a higher lockdown rate lost between one and three years of economic growth.
There is a clear correlation between the degree of lockdown and the budget deficit for 2020–21. It shows the same pattern that emerged in Figure 4 for the relationship between lockdowns and GDP growth: the more restrictions, the deeper was the downturn in the economy and, consequently, the larger was the budget deficit.
In Sweden, with a lockdown indicator rate of 39, the total fiscal cost measured in this way was less than 3 per cent of GDP. In other words, Sweden managed to meet the European Union’s Maastricht criteria of no more than a 3 per cent budget deficit even at the height of the crisis. The corresponding budget deficit figure for the UK, with a lockdown rate of 50, was 27 per cent; for Italy, with a lockdown rate of 60, it was 17 per cent; and for France, with a lockdown rate of 48, it was 16 per cent.
Countries with weak public finances before the crisis experienced a further deterioration during the pandemic. After the pandemic, France had a higher public debt-to-GDP ratio than Greece did in 2009 at the start of the European debt crisis. In Sweden, the debt-to-GDP ratio at the end of 2021 amounted to 36 per cent, just slightly above the 35 per cent ratio before the pandemic. By the end of 2022, the Swedish debt ratio had fallen to 34 per cent and it is expected to fall below 30 per cent in the coming years.
By being less restrictive than other countries, Sweden was able to combine low cumulative excess mortality with relatively small losses in economic growth and continued strong public finances.
Here’s an annotated version of one of the figures from the article:
In other words.. the Swedes still think that they’re right!
Where is the non-Nobel Nobel prize in economics for Anders Tegnell and his not-so-merry band of MD/PhDs who said, in February 2020, “you might as well get used to SARS-CoV-2”?
Let’s take the pulse of the economy by looking at Stern’s latest release: Jaws. Just after 1:00 pm on January 4, 2024:
By 1:05 pm:
It’s possible that it sold out prior to 1:05 because with the James Bond machine people reported adding it to their carts and being unable to check out.
The Jaws machine is actually cheaper than Bond was: $12,999 in 2022 dollars versus $12,999 in 2024 dollars. Bond might be considered a more desirable theme, but Jaws was designed by superstar Keith Elwin, the genius behind Godzilla (#1 on Pinside’s Top 100).
Sadly, we’re gonna need a bigger family room if we are ever to enjoy Jaws at home.
In a recent phone call regarding correct Christmas Card mailing addresses, a nurse friend in Boston told me that she’s moonlighting providing anesthesia at an abortion care clinic. Anesthesia is required starting at about 10 weeks of gestation and the clinic provides abortion care to pregnant people who are up to 24 weeks pregnant. She said that they are especially passionate about providing abortion care to pregnant people who’ve come from states where abortion care is illegal or unavailable in practice at the 24-week mark.
Who decides how long the pregnant person has been a pregnant person? “That’s done with a combination of ultrasound looking at bone sizes and also asking the patient about the date of the last period.” In other words, depending on what the ultrasound shows, the clinic might refuse to provide abortion care to a pregnant person who has been pregnant for only 23 weeks or, if the customer gives a later-than-reality last-period date, to a pregnant person who has been pregnant for more than 24 weeks, which is still perfectly legal in Maskachusetts:
(Note the “mental health” judgment item.)
What’s the revenue picture for the clinic? “Prices start at $600,” she replied. What about for abortion care at 23.99 weeks? “I think it is about $3,500.”
What’s her daughter up to? I learned about various biomedical internships for the college undergrad. “She wants to go to medical school and become an ob-gyn.” I told my nurse friend about our neighbor who does IVF and who tells people if their insurance won’t cover the astronomical cost to get a job at Starbucks where they’ll be immediate covered. “Oh, my daughter wants to work on the other side of O.B. She wants to work in an abortion clinic where women [hateful term quoted; her language, not mine] come from out of state if they can’t get abortions in their own state.”
At a Chevrolet dealer in Stuart, Florida on September 15, I learned that not-in-demand cars are selling at MSRP sticker price, leaving the dealer with $4000 more in profit than in the old days when the cars sold at invoice. In-demand cars continue to carry an additional markup. For example, an electric Chevy is $10,000 over sticker, as is a regular Corvette. A Z06 Corvette is $75,000 over sticker on those rare occasions when the dealer can get one.
Can you save some $$ by buying used? A three-year-old 2020 Corvette 3LT (the premium trim) is available for $95,800, which I’m sure is more than its original sticker price.
Let’s look at the Z06 Corvette. Here’s what Edmunds says about the simplest model:
According to the official prices, GM thought that the dealer would get about $7,000 in profit from selling this car. In the post-coronapanic world, however, the dealer will get $82,000 for taking an order (the difference between MRSP+$75,000 and invoice).
I’m wondering if this is why the car shortage has continued for so long. Ordinarily, if something goes up in price the producers get paid a lot more and begin working hard to increase production. If gasoline becomes more expensive, for example, gas stations don’t become insanely rich while oil producers keep getting the same old price. The gas station gets its usual small markup and the extra money for petroleum products goes to the oil company, precisely the signal that the market is supposed to give to producers in Econ 101. The legacy automakers, however, never got any financial signal that cars were in demand. Nearly all of extra money paid by consumers went to dealers, who responded by buying new beach houses, new business jets, new jet-powered helicopters for their kids, new yachts, European vacations, etc. The boost in auto prices, thus, spurred production of business jets more than production of cars.
I wrote about this back in 2022: Why aren’t cars (and pinball machines) auctioned as they come out of the factory?. The dealer agreement that I found did not prevent the manufacturer from abandoning a fixed retail/invoice price structure and instead simply auctioning cars to dealers or at least establishing a new market-based price every week. Nothing in the agreement required a manufacturer to keep the price to the dealer fixed for 6-12 months, as has been conventional for legacy automakers even during coronapanic.
Tesla, of course, has been a notable exception. The company has made frequent price adjustments throughout this period of lockdown-induced economic disruption. Thus, Tesla has had a financial incentive to maximize production, e.g., paying chip suppliers extra money if necessary to keep the lines going.
Let’s also consider the recent strike by the United Auto Workers, of whom roughly 146,000 work for the Detroit Three. They want a 40 percent pay increase to compensate for the inflation that the government says does not exist. Could the legacy car companies easily afford to pay this if they hadn’t been selling cars for far less than they were worth for nearly three years?
I think that the Detroit 3 have U.S. revenue of about $300 billion per year, combined. Let’s say that they could have gotten 10 percent more money by selling cars for what they were worth instead of selling them for whatever invoice price they’d established. That would have worked out to approximately $90 billion in additional revenue over three years. In other words, they could have given each UAW member a $600,000 coronapanic bonus and still had money left over to give to shareholders.
Should all of the executives at the Detroit 3 be fired? Every day they produced assets owned by shareholders, i.e., the cars coming off the assembly lines. Every day they sold those shareholder-owned assets for far less than they were worth. They enriched the dealers to whom they owed no fiduciary duty. They starved their own production facilities of the extra cash that could have been used to motivate suppliers, workers, etc. to maximize production and ease the supply shortage that has cost consumers so dearly (and helped to generate ugly inflation numbers). They failed to capture the cash that the UAW is now on strike to obtain.
Related:
One thing that keeps the Detroit 3 afloat is a 25 percent tariff on light truck imports imposed by Lyndon Johnson (Reason), though Wikipedia says that a Mexico-built truck wouldn’t be subject to the tariff
According to the economic logic used by enthusiasts for low-skill immigration, even the lowest skill migrant makes Americans richer because he/she/ze/they causes some sort of bump in economic activity, thus increasing the aggregate GDP.
I wonder if Danilo/Danelo Cavalcante should win Migrant of the Year 2023. By escaping from a Pennsylvania Prison, he is responsible for at least 500 police officers receiving two weeks of overtime pay (timeline). He’s 34 and has been sentenced to life in prison, so that will boost the U.S. economy by at least $50,000 per year for the next 50 years or so (see “Pa. spends over $40k a year per inmate.” but remember that the $42,727 per year number is in pre-Biden dollars).
The dramatic encounter with Cavalcante, involving a helicopter, a lightning storm, a police dog and more than 20 tactical officers, led to his capture around 8 a.m. Wednesday morning, authorities said.
So the migrant can also take credit for some Jet A sales and the overhaul reserve for what was very likely a $3-6 million Eurocopter (helping the French and German economies too!).
Why is the U.S. criminal justice system so interested in this Migrant of the Year?
According to prosecutors, he stabbed Brandão 38 times in front of her two young children in Pennsylvania in April 2021. He was arrested several hours later in Virginia, and authorities said he was attempting to flee to Mexico and intended to later head to Brazil, his native country.
In addition, Cavalcante is also wanted in a 2017 homicide case in Brazil, a US Marshals Service official has said.
Like the New York Times, the Wall Street Journal has worked tirelessly to spread the Good News about the Miracle of Low-Skill Migration. An example from 2015… “Migrants Offer Hope for Aging German Workforce”:
By some estimates, Britain is on course to eclipse Germany as Europe’s biggest economy by 2030, thanks in part to its large numbers of young, energetic immigrants.
Germany “is going to be severely challenged” by demographics, said Peter Sutherland, the United Nations special representative for international migration. Managing the trends “requires a great deal of proactive thinking” and openness to immigration, he said.
About 20% of asylum seekers were from war-torn Syria—more than from any other country—and four out of five arriving Syrians are believed to be from “average or even well-off economic circumstances and have a good education,” the agency said.
In the 1950s, Italians and other Southern Europeans flooded in to help rebuild the country, contributing significantly to its fast postwar economic recovery. In the following decades, millions of Turks arrived and many ended up working in German industrial companies, helping its economy more.
Europe’s current predicament has been long in the making. An aging population with a preference for free time and job security over earnings ushered in years of lackluster economic and productivity growth.
Adjusted for inflation and purchasing power, wages have declined by about 3% since 2019 in Germany, by 3.5% in Italy and Spain and by 6% in Greece.
Karim Bouazza, a 33-year-old nurse [in Brussels] who was stocking up on half-price meat and fish for his wife and two children, complained that inflation means “you almost need to work a second job to pay for everything.”
The eurozone economy grew about 6% over the past 15 years, measured in dollars, compared with 82% for the U.S., according to International Monetary Fund data. That has left the average EU country poorer per head than every U.S. state except Idaho and Mississippi, according to a report this month by the European Centre for International Political Economy, a Brussels-based independent think tank. If the current trend continues, by 2035 the gap between economic output per capita in the U.S. and EU will be as large as that between Japan and Ecuador today, the report said.
Apparently, expert consensus is that there is no longer a connection between low-skill migration and economic vibrancy. The 2023 WSJ article does not contain any of the following words or phrases: “migrant”; “immigrant”; “refugee”; “asylum-seeker”.
Separately, here’s a luxury car in one of Europe’s richest countries, the Netherlands (photographed in Delft, July 6, 2023):
The Netherlands now contains 27 percent migrants and children of migrants and thus should be insanely rich if we believe the Wall Street Journal’s 2015 Science.
How is the Omada system working, you might ask? Quite well, but there are occasional failures of the upstream connectivity between the Arris cable modem that I purchased and Xfinity and these require power cycling the Arris device to restore. The software being run by the Arris device is controlled by Xfinity and it looks as though there hasn’t been an update for two years (see this post regarding the same issue from December 2020; the software image name is the same as what our Arris reports running).
Anyone else noticed that long-scarce items are available once more?
