Category Archives: Economics

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Well, imagine that! As the Feds add tax credits to buy plug in electric cars, manufacturers raise the prices of them

The so-called Inflation Reduction Act was supposed to, you know, reduce inflation, right? A lot of people thought it was festooned with all sorts of things which had nothing to do with inflation, and one of those things was the Qualified Plug-in Electric Drive Motor Vehicle Credit:

Inflation Reduction Act of 2022

Enacted August 16, 2022

The Inflation Reduction Act of 2022 (Public Law 117-169) amends the Qualified Plug-in Electric Drive Motor Vehicle Credit (IRC 30D), now known as the Clean Vehicle Credit, and adds a new requirement for final assembly in North America that takes effect on August 16, 2022. Additional provisions will go into effect on January 1, 2023. Further guidance on these provisions is forthcoming. Find more information about the credit from the Internal Revenue Service.

List of Vehicles with Final Assembly in North America

The following table provides a list of Model Year 2022 and early Model Year 2023 vehicles with final assembly in North America based on data submitted to the National Highway Traffic Safety Administration (NHTSA) and FuelEconomy.gov as of August 1, 2022. Note that for some manufacturers, the build location may vary based on the specific vehicle, trim, or the date in the Model Year when it was produced because some models are produced in multiple locations. The build location of a particular vehicle should be confirmed by referring to its Vehicle Identification Number (VIN) using the VIN decoder below or an information label affixed to the vehicle.

As vehicle manufacturers continue to submit the applicable vehicle identification information to the relevant government agencies, this list will be updated as more information becomes available.

NOTE: Some manufacturers that have vehicles assembled in North America have reached a cap of 200,000 EV credits used and are therefore not currently eligible for the Clean Vehicle Credit.

Of course, the Europeans are just hopping mad that the tax credit only applies to vehicles whose final assembly takes place in North America, but wait until they figure out that Canada and Mexico are in North America. The Europeans would much rather put Canadians to work than Americans.

The tax credit is up to $7,500 for purchase of a new, plug-in electric, and since President Biden and his supervisors subordinates very much want to have Americans gobbling the things up, that $7,500 credit is supposed to help consumers who just can’t quite afford the things be able to say, “OK, yeah, with this tax credit, we can go ahead and buy a Ford Mustang Mach E!”

Oops!

Ford hikes price of electric Mustang Mach-E by as much as $8,475 due to ‘significant’ battery cost increases

by Michael Wayland | Published Friday, August 26, 2022 | 10:59 AM EDT | Updated Friday, August 26, 2022 | 2:07 PM EDT

  • Ford Motor is hiking the starting prices of its electric Mustang Mach-E crossover by more than $8,000 for some models.
  • The increased prices will go into effect for new orders placed starting Tuesday, when order banks reopen for the 2023 model year.
  • Ford said the markups are due to “significant” material cost increases, continued supply chain strains and market conditions.

DETROIT – Ford Motor is hiking the starting prices of its electric Mustang Mach-E crossover by more than $8,000 for some models, as it reopens order banks for the 2023 model year.

The company on Thursday said the markups – ranging between $3,000 and $8,475, depending on the model and battery – are due to “significant material cost increases, continued strain on key supply chains, and rapidly evolving market conditions.”

The Mach-E is the latest electric vehicle to experience a price increase, as raw material costs for batteries for electric vehicles more than doubled during the coronavirus pandemic.

The starting prices for the 2023 Mustang Mach-E will now range from about $47,000 to $70,000, up from roughly $44,000 to $62,000 for the 2022 model year. Prices exclude taxes and shipping/delivery costs.

Ford earlier this month also raised the starting prices of its electric F-150 Lightning pickup by between $6,000 and $8,500, depending on the model. The automaker cited similar reasons for those increases, specifically related to raw materials such as lithium, cobalt and nickel that are used in batteries for the vehicles.

There’s more at the original, but I’m shocked, I tell you, shocked!

Of course, the various vehicle price ranges are based on that most important characteristic: range. The ones that see price increases of ‘only’ $3,000 are the ones with the lowest battery capacity and therefore shortest range. You buy the biggest battery pack available, and you can get a listed 305 miles on a full charge. Of course, you’re also going to be getting that $8,475 price increase! We don’t know yet what the 2023 Mustang Mach E will have for a Manufacturer’s Suggested Retail Price, but the chart to the right shows MSRPs for the four versions of the 2022 model.

The “Select” model had a range of 211 miles. It was assumed that the 2023 MSRPs would see an increase anyway, but the new price hikes, well, you’d be paying $70,000 or more for the GT model.

I must say that I am amused. Who could ever have guessed that this would happen?

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European socialism has saddled Europeans with skyrocketing electricity bills

I’ve got to admit it: Ursula von der Leyen is a pretty cool name, almost as cool as Annemiek van Vleuten, the Dutch cyclist who won the Tour de France Femmes this year. But Mrs von der Leyen isn’t a cyclist.

Energy crisis: Ursula von der Leyen calls for ’emergency intervention’ in electricity market

By Jorge Liboreiro • August 30, 2022

The worsening energy crisis besieging Europe has laid bare the “limitations” of the electricity market and requires an “emergency intervention” to bring down soaring prices, Ursula von der Leyen has said.

“The skyrocketing electricity prices are now exposing, for different reasons, the limitations of our current electricity market design,” the European Commission president said on Monday while addressing the Bled Strategic Forum in Slovenia.

“[The market] was developed under completely different circumstances and for completely different purposes. It is no longer fit for purpose.

“That is why we, the Commission, are now working on an emergency intervention and a structural reform of the electricity market. We need a new market model for electricity that really functions and brings us back into balance.”

It wouldn’t have anything to do with the European nations supporting Ukraine in its war against Russia with more than just words, would it?

Well, part of the pain is the European Union’s regulations setting the cost of electricity:

Today, the EU’s wholesale electricity market works on the basis of marginal pricing, also known as the “pay-as-clear market”.

Under this system, all electricity producers – from fossil fuels to wind and solar – bid into the market and offer power according to their production costs. The bidding starts from the cheapest resources – the renewables – and finishes with the most expensive ones, usually gas.

Since most EU countries still rely on fossil fuels to meet all their energy demands, the final price of electricity is often set by the price of gas. If gas becomes more expensive, electricity bills inevitably go up, even if clean, cheaper sources also contribute to the total energy supply.

The system was initially praised for boosting transparency and promoting the switch to green sources, but since late 2021, it has come under intense criticism.

In other words, all electric consumers are paying for sparktricity based on the cost of the most expensive means of production. That’s European socialism for you!

Of course, Russian’s invasion of Ukraine brought about swift sanctions against the bear, but the Russians hold the high cards here: Europe is dependent upon natural gas from Russia for fuel for power plants and winter heating. And much of democratic Europe is not east of the United States, but due east of Canada. Berlin, for example, is at approximately the same latitude as the southern border of Labrador. To quote Ned Stark, “Winter is coming.”

Natural gas futures are more than ten times what they were a year ago:

There’s no stopping Europe’s gas bills.

On Thursday, future gas prices at the Title Transfer Facility (TTF), the continent’s leading trading hub, reached €321 per megawatt-hour, a stratospheric figure compared to the €27 set a year ago.

The new all-time high follows a surprising announcement by Gazprom, Russia’s state-controlled energy giant, who last week said it would soon shut down Nord Stream 1 – which pipes gas from Russia to Germany – for a three-day maintenance operation, performed alongside Siemens.

Gazprom argues the pipeline must be checked for cracks, dents, leaks and other potential glitches.

European politicians have repeatedly accused the company of weaponising energy flows and exploiting technical questions as an excuse for piling pressure on countries at Vladimir Putin’s will.

Well, of course Russia is weaponizing energy flows. After all, some of the European nations are sending money and military equipment to Ukraine, to use to fight Russia. What else would you expect Russia to do? Vladimir Vladimirovich is attacking Europe that same way Europe is attacking him: economically. The only thing cannier Russia could do is keep sending limited, though slightly increasing, amounts of gas to Europe, keeping prices high but also lulling the Europeans to sleep, then, maybe around December 15th, Pow! shut it off completely.

The German government might think differently about sending military aid to Ukraine if the German people are freezing in their flats.

But you can’t say they weren’t warned!

Trump accused Germany of becoming ‘totally dependent’ on Russian energy at the U.N. The Germans just smirked.

by Rick Noack | September 25, 2018 | 2:44 PM EDT

BERLIN — Out of President Trump’s speech at the U.N. General Assembly on Tuesday, it probably won’t be the script that will be remembered by diplomats but, rather, world leaders’ laughter, caught on camera and shared in viral videos.

One of them captured the amused reactions of the German delegation as Trump said: “Germany will become totally dependent on Russian energy if it does not immediately change course. Here in the Western Hemisphere, we are committed to maintaining our independence from the encroachment of expansionist foreign powers.”

German Foreign Minister Heiko Maas could be seen smirking alongside his colleagues.

Who’s smirking now?

It wasn’t the first time Trump had lashed out at Germany over its gas imports from Russia.

During a NATO summit in July, he took aim at the Germans for the same reason, specifically singling out a planned 800-mile pipeline beneath the Baltic Sea called Nord Stream 2. “Germany, as far as I’m concerned, is captive to Russia because it’s getting so much of its energy from Russia,” Trump told NATO Secretary General Jens Stoltenberg, also speaking on camera at the time. “We have to talk about the billions and billions of dollars that’s being paid to the country we’re supposed to be protecting you against.”

Looks like President Trump, the hated, evil reich-wing fascist, was right all along, and the Europeans were what they have so often been, wrong. I will confess to being somewhat amused.

You don’t have to somehow like Russia’s invasion of Ukraine, or hope that Vladimir Putin wins, to have been bitterly opposed to the responses of the United States and Europe: I might want Ukraine to win, to throw out the Russian invaders, but I don’t want it so much that I’m happy that the world is closer to nuclear war over it.

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Economics aren’t #woke

My good friend Robert Stacy McCain recently wrote about an article in Jezebel which claimed that normal men were going “unpartnered” because women’s “relationship standards” had been raised. Women might be willing to occasionally copulate with said lonely guys, but they weren’t really interested in anything more serious. I found the math strained, because unless you include homosexual males, the very people who ought to be excluded in an article about how normal men are having more difficulty finding women with whom to have serious relationships, the number of “partnered” men ought to equal the number of “partnered” normal women. Given that women slightly outnumber men, and that women live longer than men, the math Jezebel cited just doesn’t work out.

I was reminded of Mr McCain’s article when I read this one in The Wall Street Journal.

Inflation Widens Married Couples’ Money Lead Over Their Single Friends

Rapidly rising prices and more than two years of living in a pandemic increase the financial stress on those without pooled assets

by Julia Carpenter | Tuesday, August 16, 2022 | 7:14 AM EDT

It is better, financially, to be married than single, as has almost always been the case. But the money gap between young married couples and singles has widened, thanks to inflation and rising home prices.

The median net worth of married couples 25 to 34 years old was nearly nine times as much as the median net worth of single households in 2019, according to the most recent data from the Federal Reserve Bank of St. Louis. In 2010, married households’ median net worth was four times as much. And now, after a spell of rapid inflation and more than two years of pandemic living, single people are getting left further behind, say economists at the Fed and elsewhere.

“This 25-to-34-year-old age is a time of transition, it’s a time of household formation, and I think it matters whether or not you can pool your financial resources with someone else,” said Lowell Ricketts, a data scientist for the Institute for Economic Equity at the St. Louis Fed.

Married people are being tested by inflation, too. It is just that they have a larger, shared cushion, often with two incomes and pooled assets. They hold a greater concentration of wealth and considerably less debt, according to research from the St. Louis Fed.

Having combined assets was particularly helpful over the past decade as many households’ wealth was compounded by rising housing prices and a strong stock market.

As people marry later, the number of sole-person households is growing, which means more single people are tackling multiple financial challenges entirely on their own. Over the past four decades, the number of sole-person households has nearly doubled, according to data from Freddie Mac. And by delaying marriage, many now struggle to access money milestones at the ages previous generations achieved them.

The article continues to tell us the woes of a 27-year-old single woman in Columbus, Ohio, who recently got a raise, which is allowing her to start saving a bit, but, for her, home ownership is still out of the question. The Journal’s photo of her slicing zucchini in the small, cramped, and cluttered kitchen in her rental apartment says a lot: she has a roof over her head and food on her table, but she’s still living a fairly modest lifestyle. To relate this to Mr McCain’s article, I will note that the woman in question does not really meet contemporary standards of physical attractiveness.

Further down:

When it comes to building wealth via homeownership, finding a smaller starter home—once the gateway for single people becoming homeowners—remains especially difficult as prices remain high, say economists. Housing affordability in June 2022 hit its worst level since June 1989, and home prices are up 44% over the past two years, according to data from real-estate brokerage Redfin Corp. With housing prices so high and starter-home inventory so low, more single people are struggling to find affordable houses to buy.

So, what happened in 1989? An economic downturn happened, a housing market crash. Interest rates soared again, and housing prices had to fall, or houses just wouldn’t sell. An economic downturn which eventually cost the elder George Bush the presidency in the 1992 election. We saw the same thing in the early 2000s, as housing just plain skipped the 2001-2 recession — I was amazed at how much concrete we were selling for homebuilding even as the unemployment rate soared — but the sub=prime mortgage lending market collapsed in 2007-8, and people who had bought during the bubble, with adjustable-rate mortgages were defaulting at record paces.

I can see something similar in the not-too-distant future.

The Journal article continues along the theme of singles, and primarily single women, being priced out of the housing market.

This is where married couples have one of their largest advantages. Applying for a mortgage, these couples can work together to create an attractive application as well as amass the necessary money for a healthy down payment.

Single women face additional hurdles to generating wealth.

The gender wage gap begins to widen as early as three years after college graduation, a Wall Street Journal analysis found. Women also live significantly longer than men, which puts added pressure on them to finance their retirement years solo.

“These are scary times for anyone, but they’re particularly scary times, I think, for the reasons we have cited, for single women,” said Jill Gianola, a financial planner and the founder of Gianola Financial Planning.

This, you see, is the problem: social customs may have changed, customs which no longer have others asking, “What’s wrong with him?”, or her, if they don’t get married by the time they’re 22. But economic laws aren’t #woke, economic laws don’t care that you want to party hearty until you’re thirty. The reality of economics and the passage of time mean that if you are delaying adulthood, you are also delaying your economic advance. It might be more fun to take your whole paycheck and spend it wastefully, but those are years in which you should be building your career and setting yourself up for financial success later in life.

There was more in the Journal article, this time about a married couple, a couple which appear to have married a bit late, but one which were able to work out the husband’s pre-existing $10,000+ credit card debt by virtue of being serious and by the fact that they were paying for one residence for the two of them. When economic problems arise, there are two of them to work things out.

The way people behaved in our economy and our society in the 1950s might seem just horribly, horribly old fashioned and just not with it, but the simple fact is that they worked for people, because they made economic sense.

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How can anyone expect government action on the economy to work when so many politicians are economically ignorant?

As I have previously noted in Welfare for the well-to-do, the economics proposals of the Democrats in the so-called Inflation Reduction Act are those of people who understand virtually nothing about economics. Well, now even The New York Times is noticing what I said ten days ago.

Electric Cars Too Costly for Many, Even With Aid in Climate Bill

Battery-powered vehicles are considered essential to the fight against climate change, but most models are aimed at the affluent.

by Jack Ewing | Monday, August 8, 2022

Policymakers in Washington are promoting electric vehicles as a solution to climate change. But an uncomfortable truth remains: Battery-powered cars are much too expensive for a vast majority of Americans.

Congress has begun trying to address that problem. The climate and energy package passed on Sunday by the Senate, the Inflation Reduction Act, would give buyers of used electric cars a tax credit.

But automakers have complained that the credit would apply to only a narrow slice of vehicles, at least initially, largely because of domestic sourcing requirements. And experts say broader steps are needed to make electric cars more affordable and to get enough of them on the road to put a serious dent in greenhouse gas emissions.

Of course, most car buyers aren’t buying new cars anyway. In 2021, there were 58.4 million personal cars and light-duty trucks purchased in the United States, and 43.1 million of them, 73.8%, were purchases of used cars; only 15.3 million were new cars. In 2019, before the COVID panicdemic,[1]No, that isn’t a typographical error; the ‘panic’ part of panicdemic is entirely accurate. the numbers were 59.1 million total sales, with 42.4 million, 71.7%, being used cars. The vast majority of Americans cannot afford to buy new cars, plug-in electric or otherwise.

High prices are caused by shortages of batteries, of raw materials like lithium and of components like semiconductors. Strong demand for electric vehicles from affluent buyers means that carmakers have little incentive to sell cheaper models. For low- and middle-income people who don’t have their own garages or driveways, another obstacle is the lack of enough public facilities to recharge.

Haven’t I said that before? And haven’t we noted General Motors suggestion that people not charge their electric vehicles too close to other cars?

One would think that a New York Times writer would know that, in densely populated cities, it isn’t just “low- and middle-income people” who might not have private garages and/or driveways. Private garages and driveways are, for the greater part, luxuries of suburban and rural areas, where people have enough space on their property for such things. Alas! So many small town and rural areas, where people do have the room for driveways and garages are also areas of lower income. People may live just as well as in wealthier cities, because the costs of living are so much lower, primarily due to housing costs, but costs-of-living differences don’t affect new car prices; a 2022 Tesla Model 3 costs just much in Mt Sterling, Kentucky as it does in Rochester, New York.

There are, naturally, other costs. As it happens, I have the private garage, complete with separate electric service, and the Knowledge, tools and skill to install an electric vehicle charging unit, but how many other people do? If someone has to hire an electrician to install that device, it could easily cost $2,000. The Federal Reserve Bank of Minneapolis noted that, just prior to the catastrophic economic response to the COVID panicdemic, 36% of Americans would have difficulty paying an unexpected $400 expense, while another 11% wouldn’t be able to pay it at all. Where are such people going to be able to pay $2,000 for an electrician to install a 220 volt, 50 amp circuit to run an electric car charger?

The bottlenecks will take years to unclog. Carmakers and suppliers of batteries and chips must build and equip new factories. Commodity suppliers have to open new mines and build refineries. Charging companies are struggling to install stations fast enough. In the meantime, electric vehicles remain largely the province of the rich.

Also see: William Teach: NY Times: Say, These EVs Are Rather Expensive For The Middle And Lower Classes, Eh?

I will admit it: I am somewhat shocked that the Times would even tell the truth about the economics of the Inflation Enhancement Reduction Act.

Only a few years ago analysts were predicting that electric vehicles would soon be as cheap to buy as gasoline cars. Given the savings on fuel and maintenance, going electric would be a no-brainer.

Instead, soaring prices of commodities like lithium, an essential ingredient in batteries, helped raise the average sticker price of an electric vehicle 14 percent last year to $66,000, $20,000 more than the average for all new cars, according to Kelley Blue Book.

And there you have it: the “analysts” had gotten it wrong . . . again.

This has been the problem all along with economic legislation in Congress and from the Administration, regardless of whether Democrats or Republicans were in charge: they never get it right! The economy isn’t a monolith, but 270 million economic actors taking literally billions of economic decisions every day, and those decisions are not always based on the things the professional economists believe they should be. Before I retired, I used to stop at a small bagel shop on my way to work, selected not because its prices were lower than the Dunkin’ Donuts a bit further down the street — they weren’t — but because it was on the right-hand side of the road and had an easy-in, easy-out parking lot, rather than Dunkin’, which was on the left-hand side, and in a somewhat more congested area.[2]Alas! That independent bagel shop is gone now, possibly due to the panicdemic, but I also attribute its closing to losing me as a customer. Economically, it was a bad decision — by a whopping 20¢ a day — but convenience-wise, it was the correct one.

This new legislation, which the left are cheering — even as many say it doesn’t go far enough — will fail to live up to its promises, because such legislation always fails to live up to the rosy promises made to pass it. The government simply cannot control the economy, and when it’s led by so many economic dummies, so many people who, despite their claims, have no flaming idea how most Americans live, there simply isn’t a prayer that the government will get it right. We don’t know how badly the Inflation Enhancement Reduction Act will fail, but we do know that it will.

References

References
↑1 No, that isn’t a typographical error; the ‘panic’ part of panicdemic is entirely accurate.
↑2 Alas! That independent bagel shop is gone now, possibly due to the panicdemic, but I also attribute its closing to losing me as a customer.
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Welfare for the well-to-do Joe Manchin's deal will have his West Virginia constituents helping to pay for electric vehicle purchases by Rhode Islanders!

Remember “Cash for clunkers”? From Investopedia:

Cash for Clunkers

By Julia Kagan | Reviewed by Lea D Uradu | Fact checked by Kirsten Rohrs Schmitt | September 30, 2021

Cash for Clunkers was a U.S. government program that provided financial incentives to car owners to trade in their old, less fuel-efficient vehicles and buy more fuel-efficient vehicles. The purpose of the program was primarily to act as an economic stimulus during the Great Recession by providing the population with monetary incentives to buy new cars, thereby increasing automobile sales, while at the same time reducing carbon emissions by replacing old vehicles with new, fuel-efficient ones.

The program, passed by a Congress controlled by Democrats and signed into law by President Barack Hussein Obama, the plan ran from June 2009 through August 24, 2009, when it ran out of money.

At the time, I called it welfare for the well-to-do, and I was right. Running during the so-called “great recession”, the only people who could afford to buy a new car were the ones whose jobs had survived the cuts, knew that their jobs were secure, and had good enough credit to qualify for a new car loan. In other words, they were the people during the “great recession” who didn’t need help from the government. Only 49% of the new vehicles sold through the cash for clunkers program were manufactured in the United States.

Now we have the ‘deal’ between Senator Joe Manchin (D-WV) and Senate Majority Leader Chuck Schumer (D-NY) on electric vehicles. From Reuters:

U.S. Senate Democratic deal would expand EV tax credits

By David Shepardson | July 27, 2022 | 11:00 PM EDT

WASHINGTON, July 27 (Reuters) – A Senate Democratic deal includes a new $4,000 tax credit for used electric vehicles and other new tax credits and grants for automakers to retool factories to build greener cars.

The deal struck between Senate Majority Leader Chuck Schumer and Democratic Senator Joe Manchin also includes an expansion of the existing $7,500 EV tax credit as well as a new $10 billion investment tax credit to build clean-technology manufacturing facilities, according to a summary from Schumer’s office.

The bill that Schumer and Manchin agreed to also includes $2 billion in cash grants to retool existing auto manufacturing facilities “to manufacture clean vehicles, ensuring that auto manufacturing jobs stay in the communities that depend on them.”

If it becomes law, it will further provide up to $20 billion in loans to build new clean vehicle manufacturing facilities and $30 billion for additional production tax credits “to accelerate U.S. manufacturing of solar panels, wind turbines, batteries, and critical minerals processing.”

Schumer said the Senate was expected to vote on the proposed legislation next week and it would next go to the Democratic-controlled House of Representatives.

President Joe Biden last year proposed boosting EV tax credits to up to $12,500 per vehicle — including $4,500 for union-made vehicles — and lifting a cap of 200,000 vehicles per manufacturer on the $7,500 credit. Automakers including General Motors (GM.N) and Tesla (TSLA.O) have hit the cap and are no longer eligible for the existing EV tax credit.

Toyota Motor Corp (7203.T) said this month it had hit the sales cap, which means its $7,500 credit will phase out over the next year.

Automakers have heavily lobbied for an extension of the EV tax credit, warning they cannot meet aggressive goals to cut emissions without tax incentives that make electric vehicles more cost competitive.

Also see: William Teach: NY Times: Democrats “Inflation” Plan May Lower Costs Sometime In The Future

In other words, plug-in electric vehicles cost more than gasoline engine vehicles. But tax credits only come after you have purchased the vehicle, which means that buyers will have to pay the full (negotiated) price for them, including whatever interest payments accrue. If you couldn’t afford the car without the tax credit, you still won’t be able to afford the car with the tax credit!

The new EV tax credits would be limited to trucks, vans and SUVs with a suggested retail price of no more than $80,000 and to cars priced at no more than $55,000. They would be limited to families with adjusted gross incomes of up to $300,000 annually.

This is kind of laughable. How many people, and, for Mr Manchin, how many West Virginians, can afford to buy an $80,000 truck or a $55,000 new car? Once again, this is welfare for the well-to-do!

Limited to families with an AGI of less than $300,000? Median household income was $67,521 in 2020, down 2.9% from the 2019 median of $69,560, thanks to the idiotic COVID restrictions. Guesstimates of current median family income vary, but this estimate of $76,563 seems at least somewhat realistic.

Of course, the median household income for Senator Manchin’s constituents is just $51,615. They could really use that $7,500 tax credit, but how many outside of Charleston or Morgantown will be able to afford to buy a Tesla? In reality, Mr Manchin’s constituents will be taxed to subsidize new car purchases for federal employees in Maryland and executives in New York and Connecticut. 🙂

I found nothing stating that the bill would require, as the old cash for clunkers bill did, that the cars the well-to-do traded in for a new electric vehicle be destroyed, so while the bill, theoretically reducing carbon emissions from new cars, wouldn’t take their older, gasoline-engines off the road, but hey, if the goal is to reduce emissions, then it should. Take the newer used cars — we assume here that the people who can afford to buy a new vehicle have the newest existing cars — off the road, and that not only reduces the total emissions, but makes the used car market relatively older, meaning that those gasoline-powered vehicles will wear out sooner. In 2021, there were 43.1 million used cars purchased, versus only 15.3 million new vehicles, meaning that roughly 73.8% of all car sales were of used, not new vehicles. And the poorer the state, the higher percentage of used cars bought, simply because fewer residents can afford new.[1]Full disclosure: when we bought Mrs Pico’s 2021 Toyota Camry in June, it had been a dealer demonstrator with just 6,000 miles on it. This was the second car we bought with just dealer demo … Continue reading

As always, this act will not do what it is purported to do. It was put together by Democrats, who have virtually no understanding of economics; if they actually did understand economics, they wouldn’t be Democrats! The only question is: just how badly will it fail?

References

References
↑1 Full disclosure: when we bought Mrs Pico’s 2021 Toyota Camry in June, it had been a dealer demonstrator with just 6,000 miles on it. This was the second car we bought with just dealer demo miles. If we had bought new, well, we probably wouldn’t even have the car yet, due to supply issues.
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Recession! The Biden Administration won’t admit it, but people know it

To absolutely no one’s surprise, second quarter Gross Domestic Product figures came in showing real economic contraction. From The Wall Street Journal:

U.S. GDP Fell at 0.9% Annual Rate in Second Quarter

The economy contracted after shrinking earlier in the year, held back by rising inflation and interest rates—marking a recession in many eyes

by Harriet Torry | Thursday, July 28, 2022 | 8:47 AM EDT

The U.S. economy shrank for a second quarter in a row—a common definition of recession—as businesses trimmed their inventories, the housing market buckled under rising interest rates, and high inflation took steam out of consumer spending.

Gross domestic product, a broad measure of the goods and services produced across the economy, fell at an inflation and seasonally adjusted annual rate of 0.9% in the second quarter, the Commerce Department said Thursday. That marked a deterioration from the 1.6% rate of contraction recorded in the first three months of 2022.

The report indicated the economy met a commonly used definition of recession—two straight quarters of declining economic output.

The official arbiter of recessions in the U.S. is the National Bureau of Economic Research, which defines one as a significant decline in economic activity, spread across the economy for more than a few months. Its Business Cycle Dating Committee considers factors including employment, output, retail sales, and household income — and it usually doesn’t make a recession determination until long after the fact.

The GDP report offered some discouraging signs, and underscored the challenges facing U.S. businesses, consumers and policy makers—including high inflation, weakening consumer sentiment and supply-chain volatility.

Emphasis mine.

So, the Biden Administration, eager as it is to use a subjective rather than objective measure of inflation, gets some political cover from the National Bureau of Economic Research, a private organization headquartered in — drum roll, please! — Cambridge, Massachusetts.

From Wikipedia:

In September 2010, after a conference call with its Business Cycle Dating Committee, the NBER declared that the Great Recession in the United States had officially ended in 2009 and lasted from December 2007 to June 2009. In response, a number of newspapers wrote that the majority of Americans did not believe the recession was over, mainly because they were still struggling and because the country still faced high unemployment. However, the NBER release had noted that “In determining that a trough occurred in June 2009, the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity. Rather, the committee determined only that the recession ended and a recovery began in that month. A recession is a period of falling economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. The trough marks the end of the declining phase and the start of the rising phase of the business cycle.”

So, the eight economists who decide if the U.S. is in a recession using these markers declared that the 2007-2009 “Great Recession” ended 15 months after they saw the signs that it did. That’s the political cover the Biden Administration believe will take them through November 8th, election day.

But it won’t work. With a 9.1% annualized inflation rate in June, Americans don’t need dry statistics to tell them when we’re in a recession; they can feel it, in their wallets, and in their bones.

The Federal Reserve’s Board of Governors raised their base interest rates another 0.75% just yesterday, in an attempt to fight the high inflation rate, and signaled that another rate hike would probably occur.

The very low unemployment rate is what is giving the Democrats hope that this isn’t a ‘real’ recession.

GDP is measured in dollars, and spending increased across the board, as it does almost every quarter. That’s why inflation is calculated in, to keep spending numbers from obscuring actual economic growth. Yes, inflation completely wiped out the growth in spending, but there’s more to it than just that: while inflation was 9.1% in June, wage growth was much smaller, 5.1%. Consumers spent more, but their wages did not keep up with what they had to spend; the average American is poorer, in real terms, than he was a year ago.

Bidenomics has been a disaster for Americans, but, not to worry, at least he’s not sending out any mean tweets!

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Economics writer Eduardo Porter wants gasoline to rise back to $5.00 per gallon It's for our own good, don't you know?

A bit hard to read, due to the glare from the sun, but this was the price at the station closest to my home, on Wednesday, July 20, 2022, $3.999 per gallon. It has been as high as $4.699 per gallon.

Just because you are having difficulty paying your bills doesn’t mean you shouldn’t have to pay more for gasoline!

Eduardo Porter is a Bloomberg Opinion columnist covering Latin America, US economic policy and immigration. He is the author of “American Poison: How Racial Hostility Destroyed Our Promise” and “The Price of Everything: Finding Method in the Madness of What Things Cost.” A prolific writer on economic matters, I have, sadly, been unable to find a link to his net worth, but it’s obvious that he’s reasonably well-to-do, with gigs with Bloomberg, The New York Times, and The Washington Post. It’s also obvious that he doesn’t really care about how people earning less than he does live.

The Earth Wants Biden to Keep Gas Prices High

There’s one bold move President Biden could make to curb climate change: Find a way to put a $5-a-gallon floor on gasoline prices.

by Eduardo Porter | Wednesday, July 20, 2022 | 10:10 AM EDT | Updated: July 20, 2022 | 11:34 AM EDT

When President Joe Biden visits the decommissioned coal-fired Brayton Point power plant in Somerset, Massachusetts, on Wednesday afternoon to lay out his planned executive actions on climate, his allies will be looking for bold initiatives. As Oregon’s Senator Jeff Merkley put it to the Washington Post, the impasse in the Senate created by Senator Joe Manchin’s blocking of his environmental agenda “unchains the president from waiting for Congress to act.”

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An economics lesson in The Philadelphia Inquirer I suspect it was unintentional

One of my concerns when naming The First Street Journal was that I wanted to concentrate more heavily on economics, and, to be honest, The Main Street Journal name had already been taken, actually by more than one site. Mrs Pico suggested The Center Street Journal, which I considered, but, at the time we actually lived on Center Street, in Jim Thorpe, so even though I use my real name, I thought that unwise.

More, Center Street could be interpreted as implying that I am a political centrist, and I most certainly am not.

Sadly, I’ve spent so much time on politics, that I’ve neglected economics.

Philly renters should probably expect new leases to include higher rent to account for new tax assessments

Increases in rent because of landlords’ higher property tax bills will hit low-income renters the hardest.

by Michaelle Bond | Friday, July 15, 2022 | 6:00 AM EDT

Anthony Krupincza, who owns five rental units in North and West Philadelphia, usually pays his tenants’ water bills. But now that some of his property tax bills will nearly triple because of the city’s new assessments, he’s telling new tenants they have to pay. And he’s raising rents for tenants who move in or renew.

“I have to explain to them it’s not like I’m making more money. It’s not like the extra money is going in my pocket,” he said. “The difference is to pay the tax bill. And if you really do the numbers, it doesn’t fully pay for the tax bill.”

That The Philadelphia Inquirer printed this is a bit amazing, because it teaches a lesson — at least for anyone willing to read and learn — that has been known for a long time, but wholly ignored by many: when the expenses of a business are increased, the prices the business must charge must also increase, or the business fails. The left think that we ought to tax those evil ol’ corporations more, but all that corporations do is pass on their costs of doing business, and taxes are very much a cost of doing business, on to their customers. The final consumer of their products, the individual, must pay all of the taxes heaped upon businesses throughout the production chain.

Rent increases due to higher property taxes demonstrates only a single level, but it’s something on which to learn for the multi-level.

Think about the price of a gallon of milk, which like everything else these days, is experiencing significant inflation. Included in the price of a gallon of milk are:

Photo by Dana R. Pico, © July 15, 2022. Free use is granted, with appropriate credit. Click to enlarge.

  • The taxes imposed on the dairy farmer for the fuel used around the farm;
  • The fuel, business, and income taxes paid by the trucker who takes the raw milk to the dairy processing plant;
  • The fuel, business, and income taxes paid by the producer who manufactures the packages for milk;
  • The fuel, business, and income taxes paid by the trucker who transports those packages to the dairy;
  • The fuel, business, and income taxes paid by the dairy which processes and packages the milk;
  • The fuel, business, and income taxes paid by the trucker who hauls the packaged milk to the grocery store; and
  • The fuel, business, and income taxes paid by the grocery store.

All of those expenses are bundled into the price you have to pay for that gallon of milk. If everyone up the production and delivery chain doesn’t have all of his expenses paid, he goes out of business! How hard is that to understand? And if any elements in that supply chain fail, the consumer doesn’t get to buy milk.

We noted here that the gallon of 1% milk at the Kroger on Eastern Bypass Road in Richmond, Kentucky was 99¢ when Donald Trump was President, rose to $1.79 on January 4, 2022, and was up to $2.19 by February 23rd.

It’s too soon to say the extent to which rents across the city might rise as a result of the city’s first property reassessment in three years, which increased Philadelphia’s total property value by 31%. Tax bills based on the new values will be mailed in December and are due March 31.

But landlords in the business of operating rental properties aren’t eligible for the city’s tax relief programs that were adjusted to soften the impact of the reassessment. So they will most likely pass on at least some of the extra costs in taxes — in addition to the operating costs inflation has driven up — to new and returning tenants, who already have faced historically high rent growth.

Of course, landlords in America are frequently thought of as Snidely Whiplash, tying Sweet Nell to the railroad tracks, so naturally Philadelphia wouldn’t make them eligible for programs to soften the impact of the reassessment. 52.8% of Philly’s housing units are owner occupied, according to the Census Bureau, a lower rate than the 64.4% nationwide, which means that 47.2% of Philadelphians rent their homes, and 47.2% of Philadelphians are not going to see any relief from programs to soften the impact of property value reassessments. After all, giving landlords relief would be welfare for the well-to-do, so who cares about them? But the lesson ought to be obvious: increasing expenses on landlords,[1]Full disclosure: My wife and I own rental property, and are technically landlords, but we are not running that business for a profit. We bought a house last December, to rent to Mrs Pico’s … Continue reading increasing expenses on any business, means increasing prices downstream. Politicians, Democrat and Republican alike. don’t want you to know, and hope that you are too stupid to figure it out, so that they can raise taxes on businesses, and the public will remain serenely unaware that they actually raised taxes on individuals.

That’s why City Councilmember Kenyatta Johnson said his “Save Our Homes” tax relief plan included $15 million in rental assistance in the fiscal year 2023 budget “to support those individuals who will be significantly impacted in seeing an increase in their rents” because of increases in tax assessments. Black and Latino neighborhoods face the highest increases in their tax bills due to the new assessments.

“We wanted to make sure not only homeowners were protected but also renters as well,” Johnson said.

Well, of course the Inquirer had to let readers know that black and Hispanic citizens would be hurt worst, because that “anti-racist news organization” always has to come up with a racial angle, but there are plenty of working-class whites living in the City of Brotherly Love as well, and their rents are going to rise as well. One wonders if Kenyatta Johnson care about that!

Economics, on the other hand, definitely does not care: there are no different principles of economics based on a person’s race or ethnicity. The Inky managed to eke out an economic lesson for its falling readership, but it might not be a lesson the editors actually wanted their readers to learn.

References

References
↑1 Full disclosure: My wife and I own rental property, and are technically landlords, but we are not running that business for a profit. We bought a house last December, to rent to Mrs Pico’s sister, and we are simply hoping to break even. When we go to our eternal rewards, the house will be inherited jointly by our two daughters and my sister-in-law’s son.

From September of 2014 through June of 2017, we were also landlords, renting out our current home while we marked time until I retired and we moved back to Kentucky. We made a very slight profit, roughly $2,200 a year, doing that, but it wasn’t the kind of experience that makes me want to be a landlord for real profit.
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Bidenflation!

We need Gerald Ford’s “Whip Inflation Now” buttons!

On May 10th, we noted in Forbes telling us that the high inflation rate might not drop as quickly as some had forecast:

Inflation May Fall Slower Than Expected

by Chuck Jones | Monday, May 9, 2022 | 8:45 AM EDT

The rapid rise in inflation is causing the Federal Reserve to aggressively raise interest rates along with deleveraging its $8.9 trillion balance sheet. This has thrown stocks into correction territory or bear markets. Two of the major reasons for the increase in inflation have been the upsurge in demand coming out of the pandemic and supply chain issues.

April’s CPI estimate will be announced Wednesday before the stock markets open. Expectations are for the all items rate to drop from 8.5% to 8.1%. To hit 8.1% the month-to-month inflation rate will have to fall from 2.3% in January, 2.6% in February and 3.8% in March to no more than 1.25% to hit the expected number.

“Expectations,” were not met. Not only did the May inflation rate not drop to 8.1%, not only did it not even remain steady, but the rate rose slightly, to 8.6%.

Energy prices rose 32% on an annualized basis in March. In April Gasoline and Diesel prices were fairly flat, which will help lead to a lower inflation increase since they comprise about 4% of the inflation CPI Index and were up 48.2% year-over-year in March. However, natural gas prices increased in April, which will somewhat offset gasoline’s impact.

Well, guess what actually happened. From The Wall Street Journal:

U.S. Inflation Hits New Four-Decade High of 9.1%

Prices up broadly across the economy, with gasoline far outpacing other categories

by Gabriel T Rubin | Wednesday, July 13, 2022 | 12:08 PM EDT

U.S. consumer inflation rose last month from the year before at the highest rate in more than four decades, as prices climbed throughout the economy.

The consumer-price index rose 9.1% in the 12 months ended in June, the fastest pace since November 1981, the Labor Department said on Wednesday. The June increase also eclipsed May’s 8.6% rate, which led Federal Reserve officials to shift to a faster pace of benchmark interest-rate increases in its campaign to bring down inflation.

The report likely keeps the Fed on track to raise its benchmark interest rate by 0.75 percentage point at its meeting later this month. Stocks dropped and bond yields jumped following the inflation report.

Core prices, which exclude volatile food and energy components, increased by 5.9% in June from a year earlier, slightly less than May’s 6.0% gain, the Labor Department said.

There’s more at the original, but as I’ve asked before: why are “volatile food and energy components” excluded from the core inflation rate. Food and energy, in the form of gasoline and utility bills, have to be purchased every month, often several times a month. You see it when you fill your gasoline tank, and you see it when you go to the grocery store, and you see it when you get your electric and natural gas bills. Economics reporter for The New York Times noted that:

Gas prices rose 11.2% in June alone, and are up nearly 60% from a year earlier. Grocery prices were up 1% in June (a bit slower than in May) and were up 12.2% from a year earlier.

And:

One big reason “core” inflation accelerated in June: Rents rose 0.8% in June, the fastest one-month gain since 1986. “Owner’s equivalent rent,” the BLS’s (confusing) way of accounting for owner-occupied housing, is also picking up. Over the past three months, rents have risen at an annual rate of 8.2%. (Owner’s equivalent rent rising at 7.3% rate.) That’s especially worrying because rents don’t tend to turn around quickly.

You know what has happened? Virtually every single projection of the economic “experts,” or at least the great majority of them, has been wrong.

Back to the Journal:

Despite June’s inflation reading, economists point to recent developments that could subdue price pressures in the coming months.

Investor expectations of slowing economic growth world-wide have led to a decline in commodity prices in recent weeks, including for oil, copper, wheat and corn, after those prices rose sharply following the Russian invasion of Ukraine. Retailers have warned of the need to discount goods, especially apparel and home goods, that are out of sync with customer preferences as spending shifts to services and away from goods, and consumers spend down elevated savings.

“There’s a pretty serious recession fear affecting a broad range of asset prices,” said Laura Rosner-Warburton, senior economist at MacroPolicy Perspectives.

Retailers’ ability to shed unwanted inventory could test whether pricing is returning to prepandemic patterns, Ms. Rosner-Warburton said. Some retailers, such as Target, have already said they are planning big discounts. Others with robust warehouse capacity, such as Walmart Inc., could be more likely to hold on to their excess inventory, analysts say.

The first guesstimate of second quarter Gross Domestic Product figures is scheduled to be released on Thursday, July 28th, with a second, supposedly more refined guesstimate on THursday, August 25th. GDP decreased by 1.6% in the first quarter — the initial guesstimate was -1.4% — so if the figures show any negative reading at all, we will officially be in a recession. The second quarter already being over, there’s no time to change things.

I’m old enough to remember the last heavy inflation cycle, 1974-1982, and, after years of President Ford’s Whip Inflation Now buttons, and President Carter’s “malaise,” inflation was tamed the old-fashioned way: with a deep recession.

This isn’t 1982: inflation is not (yet) being accompanied by serious unemployment, but that’s in part due to people who should be working or looking for jobs still being paid, with phony money, not to work.

I’m not some fancy economics professional, and don’t have a PhD to my name. BUt it seems to me that things are going to get worse before they get better. The fer-mongers are attempting to scare us with dire warnings about the BA.5 Omicron sub-variant, and while those warnings are not being taken too seriously by the public in general, there’s at least the possibility that the warnings will be reasonably accurate. The Fed has been raising interest rates in an attempt to depress consumer demand, to fight inflation, but if they foul that up, such interest rate hikes could hasten a recession. Ukraine, the breadbasket of Europe, has seen its wheat crop and exports devastated by the war, and the economic restrictions put on Russian gas and oil, though they haven’t hurt Russia yet, could really mess things up in Europe, especially when winter arrives.

My wife is more worried about the economy than I am, and she’s pretty smart — smart enough to have married me, anyway! — but I am concerned enough. Perhaps it’s unfair to place all of the blame on President Biden, but hey, you know that he’ll take the credit for any good news; we might as well lay the responsibility for bad news at his stinky feet.