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**FEBRUARY 14, 2024**
On the Prospect website
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Suozzi's Triumphant Victory Defies GOP Border Push
Buoyed by big turnout in Queens, the win cuts into the Republican
House majority and continues the Democratic winning streak post-Dobbs.
BY LUKE GOLDSTEIN
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The Big Money Bets on Adam Schiff
The California Senate candidate is using every campaign tactic of
recent vintage: benefiting from pro-Israel and crypto money, and trying
to choose his general-election opponent. BY DAVID DAYEN
Breaking a Lifeline to the Internet
A popular federal program helps people with few resources stay
connected-but its funding is running out. BY RAMENDA CYRUS
Kuttner on TAP
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**** Inflation Panic
Actual consumer prices are well behaved. Financial commentators and
central bankers are not.
The Consumer Price Index for January was a bit higher than economists
had forecast. To be precise, it was up 0.3 percent for the month
, while the consensus
prediction of economists was 0.2 percent. Stop the presses! But that
blip was enough to cause the stock market to plummet, on expectations
that the Federal Reserve will wait until much later in 2024 than
expected to begin cutting rates.
Could we please get a grip?
For starters, the supply-chain inflation of the pandemic era is over.
Inflation for all of 2023 was just 3.1 percent. Getting it all the way
down to the Fed's target of 2 percent could take a while longer. But 2
percent is an arbitrary benchmark. For long periods of time, the economy
has done just fine with inflation of 3 percent or even more. It makes no
sense to use high interest rates to keep the economy from realizing its
full potential just to hit an unrealistic inflation target.
There is also the weird and misleading role of "shelter" in the
Consumer Price Index. For January, the CPI recorded that shelter costs
increased 0.6 percent in a month, bringing the annual increase in
housing expenses for all of 2023 to 6 percent, or almost double that of
the CPI as a whole. For January, the increase in shelter costs accounted
for over two-thirds of the CPI's monthly rise.
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But if you unpack the CPI calculations for shelter, it is a poor guide
to what's really happening in the economy. The index for owner-occupied
housing is calculated by looking at the presumed rental value of
occupying your own house. And in any given year, most people do not buy
houses. Zillow's index
, reflecting
actual home sales, was up only 3.1 percent for 2023. That's a better
reflection of what's actually happening in housing markets.
As for rents, they are rising because of a chronic shortage of
affordable housing. That shortage is the result of inadequate housing
policy. It's a long-term problem. Sandbagging the economy with high
interest rates will not cause more housing to materialize. On the
contrary, high borrowing costs will make it more costly for builders to
produce housing.
The Fed and the commentators in the financial press are in a kind of
conspiracy of ignorance that gives too much weight to misleading
economic indicators of price increases. The real economy-which is to
say us-pays the real price.
~ ROBERT KUTTNER
Follow Robert Kuttner on Twitter
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