Just as we predicted at the start of the year, inflation is STILL stubbornly stuck at a 4 to 4.5% annualized rate and all the happy talk on Wall Street about the death of Bidenflation was irrationally exuberant.
At the start of the year, the market was predicting five rate cuts in 2024. Now the expectation is one, as the chart below shows.
Fed chairman Jerome Powell would have been foolish to lower interest rates yesterday and flood more printed dollars into the economy under these conditions.
But we’re still concerned about his misdiagnosis of what’s going wrong and why inflation won’t go away. The Fed is STILL trapped in a "growth causes inflation” mentality. Powell declared that the current interest rate policy “is restrictive, and we believe, over time, it will be sufficiently restrictive.”
Huh? Restrictive of WHAT? Is the Fed TRYING to hold down the growth of the economy as a way to restrain price hikes? Is he happy the GDP grew at a measly 1.6% rate last quarter?
Our view on the economy is simple: we have way, way too much government growth and borrowing, and too little private sector growth. In the first quarter of this year, the federal government borrowed $500 billion! Most of the new jobs in the economy are government-dependent.
Why isn’t Powell shouting that out? The best way to restore prosperity and reduce consumer sticker shock is to put a federal restraining order on spending and keep tax rates low. Biden wants the opposite.
We’re starting to hear talk of the dreaded s-word: “stagflation” (low growth and sticky inflation). The current policy mix of runaway government spending, higher tax rates, and easy money is a sure way to get there. Just ask Jimmy Carter.
How’s this for a business model? The more EVs Ford produces, the more money they lose.
One of our favorite energy analysts, Robert Bryce, posted this shocker earlier this week:
According to Bryce: "Ford’s electric vehicle business is gaining speed on the highway to hell... During the first quarter, the company made a $1.3 billion profit on $43 billion in revenue. However, it took an operating loss of $1.32 billion on its Model E business. Ford sold 20,223 EVs during the quarter, meaning it lost $65,272 for each EV. That’s a slight increase over the operating loss of $64,731 (also known as EBIT, or earnings before interest and taxes) for each EV it sold during all of 2023."
Last year, Ford lost $4.7 billion on EVs.
Ahh, but don’t worry: profitability is just around the next street corner.
We’ll say it again: this is what happens when companies start chasing federal subsidies and produce for politicians, not customers.
Given that the EV subsidies aren’t working, Biden has moved to Plan B: mandate them.
Biden wants to outlaw the sale of 70% of internal combustion vehicles over the next eight years (with a full ban to follow).
Good news: Congress is finally fighting back against this assault on auto choice.
The Senate recently had its first vote on the Biden EPA mandates, with Democrats Joe Manchin, Jon Tester, and Sherrod Brown (the latter two running for their political lives and earning a free pass from their green group friends) joining all Republicans to vote to save gas cars. Alas, the 52 votes were a majority, but not enough to overcome a Democratic filibuster.
A more viable legislative vehicle (pardon the pun) to block the mandate was introduced yesterday by Michigan Rep. John James and Nebraska Senator Pete Ricketts.
As a Congressional Review Act joint resolution (a special procedure for banning onerous federal regulations), their bill is privileged in the Senate and cannot be filibustered.
If it passes the House and Senate, Biden would have to use his veto pen – right before the election – to impose his ban on most internal combustion vehicles. With about 80 percent of voters saying they don't want an EV, this could squeeze Biden into a tight parking spot.
There’s an old saying that the only two industries with no increase in productivity over the past several hundred years are public education and prostitution.
In public education, productivity in recent decades has been clearly NEGATIVE – more spent and worse results.
Turns out public transit is also in that ignominious category of negative returns. So naturally, Biden wants to spend billions more on this falling stock.
Last year the federal government spent a record $21 billion on transit (and more than $1 trillion has been spent on these subsidies since they began in the 1960s). Yet last year, a record-low percentage of commuters used transit.
The chart below prepared by CTUP senior fellow Wendell Cox shows the share of commuters riding on public transit in America’s 14 largest cities in 1960 and now. All of these cities have seen spectacular declines in ridership.
In all 14 cities, transit ridership has declined since the Covid pandemic ended. In part, because telecommuting has probably permanently changed the way we work in urban areas. The only city in the country where mass transit is a substantial mode of commuting is New York.
On average, the transit commuter share of all commutes dropped 42% from 8.5% to 4.9% of all commutes.
Ridership is so low in most cities it would probably be cheaper for the taxpayers to simply pay for transit riders to instead take an Uber to work.
With American campuses aflame and voter anger near the boiling point over being forced to foot the bill for low-value degrees, Old Joe issued this statement yesterday:
