States Need to Avoid 'Cures' that Can Make Inflation Worse - Politics Forum.org | PoFo

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#15236427
States Need to Avoid 'Cures' that Can Make Inflation Worse
By Regina M. Egea & Danielle Zanzalari
June 24, 2022

Across the United States, state governments are awash in cash. In a sharp contrast, American taxpayers are enduring a rate of inflation unseen in four decades, with the costs of everything from food to gasoline at record highs.

In our home state of New Jersey, Trenton is looking at an unprecedented surplus of $8 billion through a combination of increased tax revenue, federal pandemic aid and borrowing. A natural impulse among residents and policymakers is to offer residents “relief” in the form of rebate checks. The reality is that relying exclusively on rebates or direct cash transfers to individuals will only lead to more inflation as this puts more money in consumers’ hands exacerbating the same problem as today — too many dollars chasing too few goods.

Rather, it is prudent that states focus on long-term investment and responsible budgeting to ensure economic growth now and in the future. This is especially important in high tax, big spending states due to the greater flexibility in work arrangements that have exposed the reality that wealth is mobile. With more residents fleeing high tax states to low tax states, states will need to reevaluate their tax and regulatory climate to stay competitive. Regulation can raise the costs for consumers and slow job growth. A series of studies shows the regulation raises prices and worsens poverty. Working with local governments to revisit restrictive laws that contribute to higher housing prices, such as building height restrictions and zoning rules, as well as removing unnecessary restrictions on business operations will lead to more economic growth.

Another way states can aid productivity and long-term economic growth with their temporary budget surplus, is to fund training programs for middle-skilled jobs. Nearly every industry has experienced labor shortages and that reality is especially acute in trades like auto, refrigeration, HVAC, electrical, welding, and manufacturing. States can invest in these skills through high school and vocational school programs. With college borrowing costs astronomically high, this encourages individuals to pursue careers that are lucrative and budget friendly, as well as fill the over 75,000 job openings that our state of New Jersey is projected to need in just a few years.

To further long-term economic growth many states should also concentrate on fixing their unfunded pension liabilities for public employees. This impacts red and blue states alike, with massive liabilities in California ($1.53 trillion), Illinois ($533.72 billion), Texas ($529.70 billion), New York ($508.70 billion) and Ohio ($429.53 billion). Here in New Jersey, our liability is nearly $40,000 for every resident of the state, which can dramatically deter future growth. Beyond using some of states’ budget surplus to shore up pension liabilities, states should move public employees to defined contribution plans, which are used by more than 100 million Americans. These are found to have better investment returns than state-wide pension plans and cost taxpayers less.

Our final recommendation is perhaps our most important: Save for a rainy day. If the U.S. economy enters into a recession, this will mean fewer jobs and less tax revenue for states. To prepare for the future when states again face a budget shortfall, which may be sooner than we think, states should follow best practices of reserving 10% of their budget in a rainy day fund, to sustain essential programs should a downturn occur in the future.

As state leaders consider their budgets, they should focus on long-term economic growth initiatives. Proposals like funding middle-skilled job trainings ensure workers are ready for the next decade, whereas eliminating unnecessary regulations and focusing on pro-growth tax reforms encourages residents to build businesses and create jobs. Lastly, taking care of state finances by properly funding state employees’ retirement plans and saving for a rainy day will ensure that no state is left behind in the next economic downturn.


Regina M. Egea is the president of the Garden State Initiative, a public policy think tank based in New Jersey. Danielle Zanzalari, Ph.D. is an Assistant Professor of Economics at Seton Hall University.

https://www.realclearpolicy.com/article ... 891d8cfdc0
#15236430
Economists always talk up long term planning. It's the smart thing to do.

Politicians rarely do that, as you know.

My state rebated about half the cash they got from the Feds, me and the wife got something like $1600. Which was very nice.

However, and be that as it may, inflation is a persistent increase, a one time payment is not persistent. So it's, by definition, not inflation. You can make an argument we are close to the threshold of getting into an inflationary environment. But the financial markets and economists are discounting the possibility. I posted a video by a nobel economist saying this isn't like the 70s, just a day or two ago.

Maine is a poor state, the money the people got will help the majority of Mainers pay their bills. Which is a good thing. We're not poor, but we are retired, and every bit helps.

viewtopic.php?f=9&t=182292
#15236546
late wrote:However, and be that as it may, inflation is a persistent increase, a one time payment is not persistent. So it's, by definition, not inflation.

That's a lie! I'm not going to insult you by believing you are stupid or ignorant enough to actually believe what you you said. Using your logic Weimar Germany didn't suffer from hyper inflation, because the hyper inflation didn't last that long and didn't become persistent.

In my view 0 percent inflation is not desirable and risks slipping into deflation. For many years monetary policy was too tight, but over the last year it has been too loose. Inflation became persistent, endemic in the 1970s precisely because governments used the same weasel words back then, arguing that it was just a temporary one off price adjustments that didn't require monetary or fiscal tightening. Like in the 1970s we have negative real interest rates. Like in the 1870s we have massive irresponsible fiscal deficit financing.
#15236553
Rich wrote:
That's a lie! I'm not going to insult you by believing you are stupid or ignorant enough to actually believe what you you said. Using your logic Weimar Germany didn't suffer from hyper inflation, because the hyper inflation didn't last that long and didn't become persistent.

In my view 0 percent inflation is not desirable and risks slipping into deflation. For many years monetary policy was too tight, but over the last year it has been too loose. Inflation became persistent, endemic in the 1970s precisely because governments used the same weasel words back then, arguing that it was just a temporary one off price adjustments that didn't require monetary or fiscal tightening. Like in the 1970s we have negative real interest rates. Like in the 1870s we have massive irresponsible fiscal deficit financing.



The inflation during the Weimar was persistent. That the economy collapsed later doesn't change that...

The question is if people will develop inflationary expectations, creating a persistent inflationary cycle. That hasn't happened, and like I said, the markets aren't all that worried about it.

When there is a lot of uncertainty, people flock to safety. Hedge fund guys, institutions and foreign investors are seeking shelter in T bills despite the negative rates. The economic environment looks volatile.

#15236612
"Nobel laureate" tells you his real politics and it's not economics.

Final sentence in the video: "But let's not go overboard within like two quarters or four quarters because we could really damage growth and damage the prospects for wages for these people who are finally getting a chance."

Now you know everything you need to know about this economic hack - he's for equal outcomes, not equal opportunity.



Image
#15236613
BlutoSays wrote:
"Nobel laureate" tells you his real politics and it's not economics.



I was shown, in high school, if that you can't write properly, you can't think properly.

Thanks for demonstrating that.

You are also telling us you don't know a thing about economics. The Fed is supposed to be trying to balance risks.

We had that discussion here 2 or 3 weeks ago, about how far the Fed should raise interest rates. The Fed kicked around the idea of 200 basis points, I thought 100 basis points was safer. They split the difference, and went for 150..

You seem to think there is a safe, or correct, way to do this. There isn't, the world will occasionally dump mud in your mashed potatoes, no matter what you do.

There is the damage from covid, which includes supply chain woes, the war which is driving up petroleum and some food items. The Boomers are retiring, which is creating a tight labor market, which is inflationary, because that will persist.

But overall, we're in really good shape, considering all we've been through.
#15236658
The fed is supposed to keep inflation low and NOT pick winners and losers.

There is damage by donkey blue governors who used Covid to their advantage to create endless holidays for unionized public workers. You were told by many (including Trump) to open your states quickly and drop the idiotic mandates. You morons told Trump he didn't have the right to tell states what to do; Cuomo (D-Imbecile) was one of those governors who was going to prove a point through a power play and did just that to keep NY closed. It's all in the history books.

So, a metric shit-ton of demand destruction took place during and long after covid, and supply chains were damaged thanks to your "feels". You simply had to prove you were correct to the point where you fucked everyone.

Don't blame the war for gas prices. Petroleum was rising significantly before the war - leftist's inability to take responsibility for any idiotic actions they perform (and they're numerous) shows just how mentally debilitated they are. Biden has attacked petroleum from day one in office on orders of the progressive wing of the DNC.

Don't blame boomers. Blame yourself for voting for these imbeciles at 1600 Pennsylvania Ave.

Shit! Not even the great white hope... the Barackster himself... could endorse this idiot after him being his Vice President for eight years. That should have told you something. Inflation persists because FJB persists. Even when he was a senator, Biden was a dim bulb. Dumbest of the dumb. Everyone in DC knows it.

When the federal reserve doesn't attack inflation vigorously or promotes it for the last two decades with stupid helicopter money programs such as TANF, TALF, Maiden Lane I,II, and III, Quantitative Easing 1,2,3, etc., this is the result and you democrats can never say no to your spending on social programs. You just keep pushing more and more stimulus through congress, devaluing the dollar to the point where it's toilet paper status.

You idiot leftists did the same by causing the housing crisis and subprime mortgage crisis in 2007/2008. Just dumping helicopter money on the market thru the banks and giving NINJA loans to people who had no GD business owning a home, and didn't have sound financials to begin with. You literally CAUSED the subprime mortgage crisis. THAT went all the way back to Cuomo also during his idiotic stint in the White House as HUD Undersecretary and then HUD secretary. And of course, Maxine Waters and Barney Frank were all about easy money and no down payment to buy. Freddie and Fannie were GSE's which you nursed along with cheap $$$ like a crack whore. Then the bottom fell out, and everyone suffered from your nonsense.

As I said previously, things are not getting more expensive. On the contrary, the USD is becoming worth less and less, thanks to you.

In closing, you democrats have fucked us for a long time. You deserve to be thrown right the fook outta office for incompetence on a grand scale. Actually, you deserve to be in jail, but that for another time.
#15236701
BlutoSays wrote:The fed is supposed to keep inflation low and NOT pick winners and losers.

There is damage by donkey blue governors who used Covid to their advantage to create endless holidays for unionized public workers. You were told by many (including Trump) to open your states quickly and drop the idiotic mandates. You morons told Trump he didn't have the right to tell states what to do; Cuomo (D-Imbecile) was one of those governors who was going to prove a point through a power play and did just that to keep NY closed. It's all in the history books.

So, a metric shit-ton of demand destruction took place during and long after covid, and supply chains were damaged thanks to your "feels". You simply had to prove you were correct to the point where you fucked everyone.

Don't blame the war for gas prices. Petroleum was rising significantly before the war - leftist's inability to take responsibility for any idiotic actions they perform (and they're numerous) shows just how mentally debilitated they are. Biden has attacked petroleum from day one in office on orders of the progressive wing of the DNC.

Don't blame boomers. Blame yourself for voting for these imbeciles at 1600 Pennsylvania Ave.

Shit! Not even the great white hope... the Barackster himself... could endorse this idiot after him being his Vice President for eight years. That should have told you something. Inflation persists because FJB persists. Even when he was a senator, Biden was a dim bulb. Dumbest of the dumb. Everyone in DC knows it.

When the federal reserve doesn't attack inflation vigorously or promotes it for the last two decades with stupid helicopter money programs such as TANF, TALF, Maiden Lane I,II, and III, Quantitative Easing 1,2,3, etc., this is the result and you democrats can never say no to your spending on social programs. You just keep pushing more and more stimulus through congress, devaluing the dollar to the point where it's toilet paper status.

You idiot leftists did the same by causing the housing crisis and subprime mortgage crisis in 2007/2008. Just dumping helicopter money on the market thru the banks and giving NINJA loans to people who had no GD business owning a home, and didn't have sound financials to begin with. You literally CAUSED the subprime mortgage crisis. THAT went all the way back to Cuomo also during his idiotic stint in the White House as HUD Undersecretary and then HUD secretary. And of course, Maxine Waters and Barney Frank were all about easy money and no down payment to buy. Freddie and Fannie were GSE's which you nursed along with cheap $$$ like a crack whore. Then the bottom fell out, and everyone suffered from your nonsense.

As I said previously, things are not getting more expensive. On the contrary, the USD is becoming worth less and less, thanks to you.

In closing, you democrats have fucked us for a long time. You deserve to be thrown right the fook outta office for incompetence on a grand scale. Actually, you deserve to be in jail, but that for another time.

Hey, Lurkers, Bluto is so ignorant and incapable of thinking through a plan, that he can't see that when the Fed raises interest rats, it is making lenders and bankers be winners, while making prople who need to borrow or have flexible interest debts be loosers.

So, much for the Fed can't make some people winners and others loosers.

It may be that there is nothing the Fed or even the Gov. can do that doesn't make winners and losers. In this case Bluto's claim is silly. Not acting make winners and losers. And, doing (I sort of assumed this above) anything also make winners and losers. What they do just changes who are winners and who are losers.

.
#15236793
Steve_American wrote:Hey, Lurkers, Bluto is so ignorant and incapable of thinking through a plan, that he can't see that when the Fed raises interest rats, it is making lenders and bankers be winners, while making prople who need to borrow or have flexible interest debts be loosers.

So, much for the Fed can't make some people winners and others loosers.

It may be that there is nothing the Fed or even the Gov. can do that doesn't make winners and losers. In this case Bluto's claim is silly. Not acting make winners and losers. And, doing (I sort of assumed this above) anything also make winners and losers. What they do just changes who are winners and who are losers.

.


Lose vs. loose. Learn it.

I stated the Fed SHOULD NOT decide winners and losers. Just create a level playing field for maximum stability of the currency over the long term.

If you craft policies that will create high interest rates to raise minimum wages, then you are necessarily inflicting damage on people on fixed incomes. In other words, the fed IS creating winners and losers by policy.

The fed can stop things from getting out of control with rosy and unrealistic forecasting. Just create a neutral environment and let the chips fall where they may.
#15236836
"U.S. Treasuries, the global fixed income benchmark, have delivered total year-to-date losses of 11%, setting them on course for the worst year on record, according to an ICE BofA index tracking seven- to 10-year Treasuries since 1973.

That also marks the worst first half performance since 1788, Deutsche Bank estimates."

https://www.reuters.com/markets/rates-b ... 022-06-30/

https://invesbrain.com/worst-start-sinc ... rformance/
#15236838
BlutoSays wrote:"U.S. Treasuries, the global fixed income benchmark, have delivered total year-to-date losses of 11%, setting them on course for the worst year on record, according to an ICE BofA index tracking seven- to 10-year Treasuries since 1973.

That also marks the worst first half performance since 1788, Deutsche Bank estimates."

https://www.reuters.com/markets/rates-b ... 022-06-30/

https://invesbrain.com/worst-start-sinc ... rformance/


Lurkers, what has any of this have to do with "cures making inflation worse"?

Besides which, AFAIK, bond yields fall when their price increases. So, how are holders of bonds being hurt by this situation? They will get their interest on time, right? And, if they choose to sell them they get more for them. It seems like a win win.

OTOH, it is possible that I'm just confused. If so, someone set me straight.

BTW -- All the source in the 1st article are staffers of big banks, who all have axes to grind. Beware of believing such people, their axes make them untrustworthy.

Also, the 1st article also says the European bonds are doing worse than US bonds. So, how it this Biden's fault? The inflation is a worldwide problem, and is worse in many nations than it is in the US.
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