Weekend Wrap Up: Stagflation, Abundance!, Resistance

There goes another week.

The biggest econ news of the week…

…from my perspective, was the February personal income report, which, as I wrote, really did carry a whiff of stagflation, with the core PCE index coming in a tick hotter than expected and consumer spending, a bit softer. The forecasters at Goldman Sachs, who have in recent years often been upside outliers in their forecasts, and have been more right than wrong in doing so, marked their Q1 real GDP forecast down to 0.6% on the back of this report. If they’re right, the demand inherent in that growth rate, should it persist, is insufficient to prevent unemployment from rising.

That said, this week’s UI claims did not send any layoff signal that I or other close data watchers could pick up.

Finally, consumer confidence is way down and inflation expectations are way up. We all now know, of course, that there can be a persistent gap between bad vibes and strong growth, so we cannot blithely map the soft data (surveys) onto the hard data (jobs, growth, incomes, spending). But the steepness of the dive, the fact that it’s occurring among consumers, business and in the markets too, which are clearly reacting to heightened tariff-driven uncertainty (see figure), leads me to expect that if they keep doubling and tripling down on tariffs, the future data flow will bring more than the whiff of stagflation we got from the price/income report.

Chatting it up with the great PK

Many thanks to the great Paul Krugman for hosting me for a video-chat on his Substack. I won’t try to summarize the ground we covered but there was a lot of it. Bidenomics to Trumponomics is indeed quite a journey. Simply put, Paul is a national treasure. He’s also a mensch. There is an intersection between those two sets, but it’s not that large.

I will say the following, which includes a teaser. I only recently migrated over to Substack and having spent a fair bit of time on social media, I learned to avoid comments like the pool of toxic brain snot that they mostly are. But on my Substack, the comments are invariably thoughtful, interesting, and even kind. Paul, of course, has zillions more folks over at his place, but there too, the quality of the comments and questions generated by our chat was mostly top shelf.

With this in mind, wouldn’t it be great if there were a venue where folks with questions about these econ issues could get them answered in real by those of us in the econ policy field? Well, that’s precisely what myself and some colleagues are working on. More to come on this next week…

Abundance! (When you write it that way, it looks like the Broadway Show musical version!)

I read it, thoroughly enjoyed it, and heartily recommend it. I don’t think I’ll review it as that market’s been flooded, but I’ll share a few brief thoughts and impressions.

--It reads really well. Not every policy wonk is a great writer, but these two are. I found the text crisp, the arguments muscular, data driven, and efficiently delivered.

--I’ve picked up a fair bit of criticism that their agenda is too narrow and not sufficiently progressive. Such claims don’t resonate with me. First, of all, they’re just flat out right about this. It is too hard and too expensive to build in many places in the U.S., especially cities where people want to live. Government—and research that depends of gov’t support—has become too risk averse (yes, this is high-class problem given the Trump attack on knowledge); we’re too quick to outsource the implementation of our innovations. The affordability crisis is real in the areas of housing, child care, health care, and education, and far too many policies enforce such scarcity. As a former senior member of team Biden econ, I assure you that our biggest pieces of unfinished business were addressing the affordable housing and child-care shortages, along with permitting reform.

--In sympathy with some of the criticisms I’ve seen, it is true that their body language sometimes sounds like this is THE way forward for Ds and progressives. In fact, it’s one important answer to the “what-are-we-for” question. It’s nowhere near a complete answer, as I’m certain Klein/Thompson would agree. Any agenda that purports to be progressive must deal with power, specifically worker bargaining clout, full-employment macro, and the distribution of growth.

--A lot of these sorts of books that identify a discrete problem have a policy chapter that poses solutions, but KT don’t go there. I think that’s mostly fine in this case. For one, the implied policy agenda is glaringly obvious: take down the barriers—the permitting, the zoning, the layers of redundant evaluations—that support scarcity and block abundance. For another, while essential, the policy solutions tend to make a mind-numbing read for most readers relative to what they have here. For those who want to go there, this recent Brian Deese article is a great place to start.

--That said, especially on housing, I would have liked them to go deeper into one of the biggest blockages to upzoning (loosening land-use restrictions): homeowners’ objections to adding housing units that they believe will lower their home values and stress their already scarce community resources. There’s nothing that makes a liberal sound conservative faster than a local initiative to free up zoning in their ‘hood. KT are well aware of this dynamic, but when they write “cities should reform their zoning laws to make it easier to build homes and apartments of all sizes,” they know that’s so much easier said than done. I would have liked to hear them hold forth on this very tough constraint.

--Finally, there’s a word that I thought a lot about while reading the book and particularly while thinking about why these obvious problems (and they really are obvious—just look at high-speed rail in California…oh, wait…there is none) persist, and that word is…courage. Especially in the section on how funding research has gotten so risk averse, having spent many years in gov’t myself—and the philanthropy world is not much better—I could easily picture the mental calculus of the grant maker who is too scared to take a chance on a high-risk, uncertain-reward proposal. Or the local official who doesn’t want to tell her constituents that we must “make it easier” to build multifamily housing in their single-family development. Especially in an era wherein an unpopular stance can be disseminated and amplified in nanoseconds, risk-aversion becomes a form a job security.

If we’re going to fight the scarcity-industrial-complex, we’re going to need courageous leaders. In one of the last scenes from Reacher, season 3, another character asks him “what do you do when you can’t forget the awful things from your past?” He responds, “I find the awful thing and I kill it.”

I’m not saying progressives should go there. Also, he’s a TV character. Also, a hyper-violent-revenge-porn star. But, with significant contextual adjustments, that’s the spirit.

Resistance

I think one of the most helpful things policy and data folks like me can do right now is to carefully curate the list of “things we didn’t vote for.” These are policy actions by the Trump administration that betray the non-MAGA supporters who believed Trump would help them. Of course, cost-increasing tariffs, but also the rescinding of the higher minimum wage for workers on federal contracts, the (surely illegal) new exec order to disempower public unions, the facilitation of tax evasion by wealthy tax cheats, the attack on Medicaid, and on and on.

Relatedly, while I always like to stay in my econ lane, I’ve got to say something about the horrible human rights violations happening to legal immigrants, like Rumeysa Ozturk from Tufts University, who is, as of this writing, still being unjustly and surely illegally held in a Louisiana detention center. From a CNN article:

Secretary of State Marco Rubio “determined” Ozturk’s alleged activities would have “potentially serious adverse foreign policy consequences and would compromise a compelling U.S. foreign policy interest,” Tricia McLaughlin, a spokesperson for the Department of Homeland Security, told CNN Thursday. She declined to provide further details about Ozturk’s alleged activities or how they could pose adverse consequences to US foreign policy.

Meanwhile, Sec’y Rubio was on a non-secure Signal chat sharing attack plans with a journalist. And neither he nor his fellow security breachers have taken any responsibility or been subject to any official consequences for their actions.

Now, who’s a bigger threat to national security??