The Corporate Media Is Complicit In Creating An Inflation Panic That Can Become A Self-Fulling Outcome

Update to Inflationary Psychology and GQP Fear Mongering Over Inflation.

The corporate media is complicit in creating an inflation panic that can become a self-fulfilling outcome as a result of panic. It is reckless and irresponsible reporting.

Fortunately, there are some more responsible reporters who are pushing back against this GQP fear mongering over inflation, and the complicit corporate media which is being reckless and irresponsible.

Paul Waldman of the Washington Post writes, Inflation is manageable. Inflation panic is out of control.

Inflation is a genuine problem, but it’s hardly spinning out of control. Inflation panic, on the other hand, is getting ridiculous.

Right now a highly motivated political opposition and a hysterical media are cooperating to characterize a real but manageable issue as a historic economic catastrophe. All you have to do is turn on your TV, pick up a newspaper or look around the Web to see what a frenzy it has become.

Once it got going, the inflation story was tossed onto a fast-moving conveyor belt that makes it seem like the most important and terrifying thing to have befallen us in pretty much forever, as an avalanche of stories probe it from every angle.

Can we find vivid but misleading individual tales that make inflation look as if it’s not at 6 percent but at 100 percent? Run ’em! How about a hundred articles on why inflation is derailing President Biden’s agenda and sending Democrats into disarray? Heck yeah.

There are multiple factors combining to encourage inflation panic, none of which have much to do with actual economic reality. First, Republicans — not just elected officials and media figures but ordinary people, too — are highly motivated to say and believe that the economy is an absolute disaster for little reason other than the fact that a Democrat is now in the White House. Inflation is the handiest focus for that belief.

While partisans on both sides have said for decades that the economy is doing better when their side is in charge and worse when the other side is in charge, that effect has essentially been supercharged — for Republicans. According to the University of Michigan’s long-standing survey on consumer sentiment, Republicans now rate the economy as doing worse than during the heart of the Great Recession or the lockdown last summer. [More alternate reality from the detached from reality.]

This is bonkers. But journalists take cues on what to cover from both sides, and if Republicans are all talking about nothing but inflation, that pushes the issue to the top of the news agenda.

Second, the product that has increased most in price is gas, which occupies a unique place in the consumer psyche. Nothing has more of an impact on perceptions of inflation, because gas prices fluctuate constantly and can shoot up quickly, and the price is advertised on enormous signs all over the place. If you drive almost anywhere, you can’t avoid them.

But here’s an important piece of context: Even if some inflation is almost inevitable as we climb out of the economic crisis created by the pandemic (other countries are experiencing it as well), in many ways, the economy is doing great.

Which seems strange to say. But this recovery has been nothing short of stunning. After the Great Recession, it took an entire decade for employment levels to return to what they had been in the beginning of 2008 [Because of Mitch McConnell and his policy of total obstruction]. Yet just a year and a half since we put the American economy into a medically induced coma and lost 22 million jobs, 18 million of those jobs have been recovered, and more are being created at a furious pace.

The rounds of stimulus that culminated in the American Rescue Plan earlier this year did contribute to inflation, along with worldwide supply chain issues and the pandemic-driven shift from spending on services to spending on goods. But that stimulus also saved millions of American families from economic cataclysm, allowing them to feed their kids, stay in their homes and weather a crisis that would have been incalculably worse without that support.

Take families in which the parents got stimulus checks, got the enhanced child tax credit, and just got new jobs with higher salaries, but are also paying a few extra dollars for groceries. How are they doing? Pretty darn well.

If you wanted, you could write plenty of stories about how great the economy is: strong job creation, rising wages, retail sales surging, the stock market setting records. But nobody’s writing those stories, because they’d be told, “What are you, crazy? Inflaaaaation!!!”

Another factor keeping those stories from being written: While Donald Trump used to trumpet, and take credit for, every sliver of good economic news, the Biden administration is doing just the opposite. Biden officials are desperate to show they aren’t “out of touch” and they feel people’s pain. So rather than telling people that things are going well, they’re saying, I know times are hard, and we’re going to help you get through it, which only reinforces the idea that we’re in a crisis.

But whenever you hear Republicans blaming inflation on Biden, ask what they think we should do about it. They almost never say (that’s the privilege of being in the opposition), but their real answer is austerity. Cut benefits, raise interest rates and reduce demand by making people miserable. Which would, in fact, reduce inflation.

It would also enable Republicans to blame that much greater level of suffering on Biden, too. “We’re going to continue to have inflation, and then interest rates will go up,” said Sen. Rick Scott (R-Fla.). “This is a gold mine for us.”

So yes, inflation is real. It imposes genuine hardship on people. It’s a problem, and there are some things the administration can do to mitigate it. But how about — for a change — we try to keep things in perspective?

MSNBC’s Chris Hayes also pushed back against the corporate media’s reckless and irresponsible inflation panic reporting.

Transcript:

HAYES: You have no doubt heard of the supply chain issues that are coming around the holiday season. Empty shells at the store, shortages of everything from poultry, to cars, to coffee cups, to turkeys. Well that has to do in part with a backlog of shipping containers at major ports.

But you might not have heard that things are actually improving on that front. For example, the rate of idle shipping containers at the massive and critical port of Los Angeles is down nearly 30 percent just since late October according to the port`s own director.

That comes after President Joe Biden announced measures focused on relieving those backlogs last month. So, that appears to have worked. At least it`s gotten better after he did it. That`s a good thing because consumer demand right now is strong. Retail giants Target and Walmart both shared strong sales numbers for the third quarter. And the companies are now saying stores will be fully stocked for the holiday shopping season and the concerns over empty shelves are greatly exaggerated.

Those are not, however, the only big scary headlines about the economy that have not actually quite worn out. Do you remember just a few months ago hearing coverage like this?

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: August non-farm payrolls increase a minuscule 235,000.

UNIDENTIFIED FEMALE: Today, disappointment and a disconnect. Only 235,000 jobs created, just a third of what was expected.

UNIDENTIFIED MALE: I see 194,000. That is real low.

UNIDENTIFIED MALE: Tonight, help wanted. Just when America was expected to usher in a fall season of new hires, instead, U.S. job growth dropped to its slowest pace of the year.

(END VIDEO CLIP)

HAYES: Now, to be clear, that coverage was not wrong at the time. It was the correct coverage. The August and September jobs reports are pretty dismal. We covered it as such on this show. But here`s the thing about those government numbers. They often revise them later, usually just a little bit, but that happened exactly — that`s exactly what happened this week. And it turns out from June to September, the Bureau of Labor Statistics job estimates missed 625,000 new jobs.

A rounding error is one thing; but being off by 625,000 is quite another thing. This suggests to me that some statisticians at the Bureau of Labor Statistics need to lose their job. This is unacceptable job performance.

That is the biggest revision since the 1970s, enormous. If that 625,000 number was its own jobs report, it would be an enormously impressive one. So, it turns out those headlines weren`t true, not actually capturing what was happening. The job market didn`t get really bad in the summer, it is roaring. The October jobs report also excellent, unemployment is low. It has dropped to 4.6 two years ahead of schedule. That`s two years faster than the Congressional Budget Office had estimated.

Keep this in mind when the Congressional Budget Office (CBO) scores the Democrats’ budget reconciliation bill in the coming days. CBO estimates are frequently proven wrong over time. No one should take their word as Gospel (ahem, Joe Manchin). As economist Lawrence Summers explains today, IRS reform will generate a lot more revenue than the CBO thinks. Estimates are just that, estimates. Reality has a funny way of making a mockery of CBO estimates over time.

This is the fastest recovery right now in recent memory. Demand is high. Wages for the bottom 40 percent of workers are rising very fast. Fast enough to help overcome what is the big central problem that everyone is rightly discussing right now, inflation.

Now, if you listen to Republicans, they will tell you it is all President Biden`s fault. They went too big with the American Rescue Plan, the government spend too much, overheated the economy. But the alternative, the cost of doing too little – [opportunity cost] – would be catastrophic.

After the economic meltdown in 2008, the government responded with a far insufficient stimulus that did not go far enough. And monetary policy was not as accommodating. And then Republicans got in and we got austerity. And what it all added up to was so many young adults who graduated into that labor market that will see their wages lowered for decades as a result.

The answer is not doing less to help people. But here`s another problem with the Blame Biden Theory. Inflation is also up big time in the United Kingdom, more than four percent. Is that also Joe Biden`s fault? Of course not. It`s not even really Prime Minister Boris Johnson`s fault. We are coming out of a once-in-a-century pandemic where we shut down the economy in an unprecedented way, responded with an unprecedented stimulus, and no one can say for sure what the road back to a normal economy looks like.

Right now, we have a genuine problem, prices are going up too fast. That is reducing too many people`s real income. That is bad. But as Mark Zandi, chief economist at Moody`s Analytics argues in a new opinion piece today (see following), the stimulus spending is not responsible. “These factors certainly gave a boost to demand last spring, but that faded when the Delta variant gained momentum this fall. There is also no good way to connect the dots between the Build Back Better agenda and higher inflation.”

Look, all of economics is about trade-offs, and policymakers have to make difficult decisions under uncertainty. But given the choice between this economy we have right now and one in which prices are low and gas is cheap and tens and tens of millions of more people are out of work, it`s an easy call. This is the better path. Do not let bad faith hysteria convince you otherwise.

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Economist Mark Zandi writes at CNN, Here’s when high inflation will come to an end:

We can’t catch a break. Since the Covid-19 pandemic struck in the spring of 2020, the United States has suffered hundreds of thousands of deaths due to the virus and lost millions of jobs. There was much hope the pandemic would soon be behind us when the vaccines were rolled out this spring, but no such luck [Thanks to MAGA/QAnon anti-maskers and anti-vaxxers sabotage. This is a “pandemic of the unvaccinated” now.]. The Delta variant of the virus hit us hard this fall, costing more lives and doing more economic damage, this time by igniting long-dormant inflation.

The consumer price index, which measures prices paid by the typical consumer, is up 6.2% over the past year through October, the highest inflation rate in more than 30 years. Prices are up strongly for everything from gasoline to a pound of ground beef to a used vehicle, which is putting a heavy financial weight on already hard-pressed families struggling with the economic fallout from the pandemic. For a household earning the median income of almost $70,000 per year, the acceleration in inflation is adding an estimated nearly $200 per month to living costs.

But this uncomfortably high inflation isn’t here to stay. It won’t be lower a month or even three months from now, as quelling the chaos created by the pandemic will take time. But a year from now, as the pandemic recedes, inflation will be low enough that we won’t be talking about it. The hair-on-fire discourse over high inflation is understandable, but it’s overdone.

Consider that inflation is up in part because businesses that suffered a direct hit from the pandemic, such as clothing stores, hotels, rental car companies and restaurants, are simply restoring prices they slashed earlier in the pandemic to survive. This is a one-time adjustment in their prices. To understand the size of the impact, consider that consumer price inflation over the past two years through October, which abstracts from the wild pandemic-induced swings in prices, is up 3.7% annually. Still high, but much less than 6.2%.

The higher inflation is also the result of businesses only slowly increasing production in response to recovering demand. This isn’t unusual coming out of a recession. Businesses are unsure whether the stronger demand has staying power and are cautious about ramping up production. And it takes some doing to get shuttered factories, oil rigs and hotels back up and running. But if history is a guide, the higher prices will convince consumers to buy less of what costs more and convince businesses to increase production given how much money can be made at these higher prices. Frictions that slow supply catching up with demand ease, and inflation moderates.

This dynamic is playing out in the global oil market. Prior to the pandemic, the world was consuming, and oil companies were producing, more than 100 million barrels of oil a day, and gas cost $2.50 a gallon. Today, because of the pandemic, the world is still consuming roughly 100 million barrels a day, but oil companies are producing even less, causing gas prices to soar to close to $3.50 a gallon. It’s not that the oil industry doesn’t have the capacity to produce more, but it likes the higher prices and is thus reluctant to increase production. But it won’t take long before the juicy profits and competitive pressures entice the industry to increase output. Oil and gas prices will come back down, and instead of adding to inflation, they will become a drag on it.

There is no doubt that the gap between demand and supply, and thus inflation, will be much more persistent coming out of the pandemic. Global supply chains have been severely scrambled. Emerging economies, particularly in Asia, where many global supply chains begin, were especially hard-hit by the Delta wave. For example, Malaysian semiconductor plants were severely disrupted as infections surged in the country, forcing factories to shut down and upending vehicle production that depends on those chips across the globe. Vehicle inventorieshave never been lower in the US, and prices have surged.

The Delta wave also reshuffled the already topsy-turvy job market. Millions of workers weren’t able to fill the near-record number of unfilled open jobs because they got sick, were taking care of the sick or fearful of getting sick. Employers have had no choice but to provide signing bonuses and higher pay to attract and retain workers, and then raise prices to help cover their higher labor costs. But as Delta fades and workers get healthy and return to work, the acute labor shortages and outsize pay increases will end, which means higher prices will too. What’s more, workers who permanently lost jobs during the pandemic will find a new employer; parents who’ve been home tending to children in school online will return to work as schools continue to return to in-person learning; and parents with younger children will take jobs as children eventually get vaccinated and daycare becomes more widely available.

My inflation outlook could be Pollyannish, but only if inflation expectations — what investors, businesses, consumers and economists think inflation will be in the future — rise. If there is a widespread view that inflation will remain high, workers will demand higher wages to compensate and businesses will ante up, believing they can pass along their higher costs to their customers. This vicious wage-price spiral was behind the persistently high inflation we suffered 30 years ago. But there is no evidence that this is happening today. Investors’ inflation expectations remain steadfast at just above 2%. This is spot-on with where the Federal Reserve Board, whose job it is to manage inflation, wants them.

All of this refutes the notion that the government spending and tax breaks to support the economy through the pandemic, including the American Rescue Plan this past March, are somehow behind the higher inflation. These factors certainly gave a boost to demand last spring, but that faded when the Delta variant gained momentum this fall. There is also no good way to connect the dots between the Build Back Better agenda, which is currently being debated in Congress, and higher inflation. The legislation provides support for public infrastructure and various social programs, and longer term, it is designed to lift the economy’s growth potential, which will ease inflationary pressures.

The economy remains closely tethered to the pandemic. This summer’s Delta wave of infections hurt growth and sparked inflation, but as infections subside, growth is already picking up and inflation will go back into hibernation.