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      For the love of cars: will steep gas prices stall Democrats’ midterm hopes?

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      For the love of cars: will steep gas prices stall Democrats’ midterm hopes? Economy in focus: America has a love affair with cars – but soaring prices are causing a rift. In the midwest, Adam Gabbatt asks voters what they thinkThe Henry Ford museum, in Dearborn, Michigan, is a tribute to America’s obsession with the motor vehicle.The sprawling complex, set across 12 acres, is home to early examples of the Ford Model T, the mass-produced, affordable vehicle that set the US on the path of a car-dominant culture, as well as other era-defining vehicles right up to today.US midterms 2022: the key racesRead moreWalking past these cars, it is possible to trace the history of the car in the US. With the occasional exception, that history has been: let’s make more cars, and let’s make them gigantic. The tiny Model T – early versions were about 11ft long – was replaced by cars like the Chevrolet Bel Air in the 1950s, and the Cadillac Coupe deVille of the 1960s, leading to the gigantic trucks and SUVs that are bestsellers in the US today.With gas prices recently soaring, however, many Americans are now suffering as a result of that thirst for size. It’s a problem for people across the country, and with key midterm elections looming next month, the historic spike in the cost of fuel will be one of the issues that determines how the US votes.Republicans have hammered Joe Biden and the Democratic party over the increase, despite the cost being tied to issues, including Russia’s invasion of Ukraine, that are largely outside the government’s control. Prices have slowly declined in recent months, but news that Opec+, the global oil production cartel, will reduce daily production by 2m barrels, has rocked the Biden administration, weeks before the vote.That has provided Republicans with another opening to attack Democrats over gas prices, inflation and general cost of living. But outside the Henry Ford museum, the more than $120m the party has spent on ads related to inflation mostly didn’t seem to have had an impact – so far.“I truly believe that some of the higher prices that we’re paying right now is the price of freedom. I mean, you know, you don’t want to give in to all the dictators all over the world and you want to live in a free world, you have to make some compromises,” said Louis Sommer.“I’m willing to pay $6 a gallon or $10 a gallon if that’s what it takes to live in a free world.”Sommer, 39, drives a Ford Edge, which averages 22mpg, and also has an old Ford pickup truck, which guzzles about 14mpg. With prices hovering at just over $4 a gallon in this part of Michigan, those cars cost a lot of money to run.Despite not classifying himself as a Democrat – “If I would vote right now, I would probably vote Libertarian,” Sommer said – he supports Biden’s efforts on foreign policy, and had not been swayed by the Republican rhetoric. As for driving, Sommer, who works in the auto industry, said he had considered buying an electric car, but believes they are too expensive.“An electric car, as a second car, would make a lot of sense,” he said.“But right now, the electric cars are $50,000-$60,000. For a second car, it should be more like, you know, $20,000-$30,000. And you know, the infrastructure is not there in the neighborhood that I’m living in.”Gas prices in the US peaked, according to the Energy Information Administration, in June 2022, at an average of about $5 a gallon, compared with $2.42 in January 2021. Costs surged first as people returned to the roads post-Covid, and then again after Russia invaded Ukraine in February. By this September, prices had dropped to an average nationwide of $3.77, but the Opec+ news has not been kind: in the past two weeks prices have risen again to almost $4 a gallon.In a country where, outside a handful of cities, there is hardly a thriving public transit system, the cost of gas has always been a key issue, and a uniquely visible one: with prices displayed in neon letters at every gas station, to go for a drive is to witness multiple adverts for inflation.The increases are also more noticeable than the parallel spikes the country is experiencing with groceries as most people pay for gas on its own, rather than bundling it with other items.In Ohio, south of Michigan, the higher prices are being keenly felt, particularly in smaller, rural towns where grocery stores and doctor’s offices are frequently a long drive away.Ohio’s economy boomed through coal, oil and iron ore mining before the state switched to manufacturing cars, rubber and steel in the mid-1900s. By the 1980s those trades had moved abroad, and like much of the midwest, Ohio has suffered from a lack of well-paying jobs.In the town of Bucryus, which is ​​home to the annual Bucyrus bratwurst festival, and calls itself the bratwurst capital of America, gas was selling at $3.95 a gallon in early October, and local people are being forced to adapt.“I’ve been doing less traveling and just generally doing less stuff,” said Ned Ohl, who works at the Crazy Fox Saloon. “Everything just takes a little more money than I would have normally spent.”Ohl, 33, is a history buff, and had planned a trip this summer to the Waverly Hills sanatorium, a Tudor gothic former tuberculosis hospital in Louisville, Kentucky. He postponed the trip indefinitely as he couldn’t afford the gas.As for who is to blame, Ohl said: “I try not to get into the politics of it.”Kim King, who was in the bar celebrating the finalization of her divorce, said she had also been affected.“Nobody’s traveling,” King said. “I drive my daughter to volleyball and softball, but I don’t do anything outside of that. I’m not about to take a road trip anywhere.”Bucryus was among the towns to benefit from the rise of the motor vehicle. For decades Route 30, which runs across the US from New York City to San Francisco, ran right through the center of Bucyrus, and the town had a boom period during the prohibition era, when bootleggers used underground tunnels to hide and transport their wares. A speakeasy bar underneath the Crazy Fox Saloon, allegedly frequented by Al Capone, still exists today, but only as a little-visited tourist attraction.There was no sign of mob activity in the Crazy Fox, where bar patron Mike, who declined to give his last name, was more than happy to link gas prices to politics.“It went up right after that dumb-ass president stopped the pipeline,” Mike said. He was referring to Biden, and the planned Keystone XL pipeline, which would have carried oil from Canada to Texas. Biden revoked the permit for the pipeline on his first day in office. Politifact and other factcheckers have found no connection between the cancellation of the pipeline and the increase in gas prices.Nevertheless, Mike, who manages a hotel next to the Crazy Fox Saloon, was set in his opinion: “I think we could have put a puppet in and done a better job,”Mike said his car use had been affected.“​​I don’t go anywhere other than to the grocery store,” he said.“I go to Marion [a town 20 miles south of Bucyrus] once every other week to pick up my son; other than that it costs too damn much to run a vehicle right now.”Mike said his son stays with him every other weekend. They used to take trips out to Lake Erie, but: “You can’t do that any more.”Americans tend to drive larger cars than people in other countries do. So far in 2022 the three top-selling vehicles in the US are all pickup trucks – the Ford F-Series takes top spot – and the majority of the rest are SUVs. The bestselling car in the UK is the Vauxhall Corsa, a compact car that is four feet shorter than the smallest of Ford’s F-Series vehicles. The bestselling cars in France, Italy and Germany are all tiny compared with American vehicles.Bigger cars need bigger engines, and more fuel. The Corsa, according to its stats, will average 45.6mpg in the city. The most economical of the Ford F-Series vehicles will burn through 25mpg.It wasn’t always the case. The Henry Ford museum documents a move in the US toward smaller cars in the 1970s, triggered in part by spikes in gas prices, while the New York Times reported in 1973 that the rush “toward smaller, less extravagant cars” had left Ford, Chrysler and GM scrambling to switch up assembly lines.The museum also offers a glimpse into a time when the government was more willing to clamp down on car use.In 1974 Richard Nixon signed into law a 55mph speed limit on all national highways, after Opec caused a gas price spike when it stopped shipping oil to the US. The new speed limit was designed to conserve gas. Thirty years earlier, during the second world war, the US had introduced another effort to encourage people to carpool to save fuel for the war effort, with one public awareness poster in the Henry Ford museum telling Americans: “When you ride ALONE you ride with Hitler!”Driving south-east into Ohio – and not with Hitler – the flat, open landscape gave way to thick woods and rolling hills, marking the beginnings of the Appalachian mountains. This part of the state is not doing well financially. The small rural towns that dot Morgan county are pockmarked by closed storefronts and buildings with flaking paint. After decades of decline, as industry left, frequently the only businesses still active are car-related: repair shops, gas stations and the occasional car dealership.That the auto industry is the only thriving trade speaks to the reliance people here have on their cars. There’s no public transport, and frequently people have to drive miles to stores like Family Dollar, Dollar General or Kroger for groceries or essentials.In Stockport, a town of about 500 people on the Muskingum River, CJ’s Family Restaurant is one of the most popular eateries. Carolyn Schramm, 78, has owned the restaurant, which offers diner-style breakfasts and coffee, and more substantial dinner options such as an $8.25 sirloin steak and $6.80 spaghetti with meat sauce, for 35 years.The price of food has gone up this year, and with the rise in gas prices so has the price of traveling to buy supplies.“I need to put prices up,” Schramm said. “But I haven’t done it yet.”It’s difficult in a restaurant where Schramm said “customers become your family”. Some people come to CJ’s two or three times a day to eat, and in a town where the median household income is $34,338 – that figure for the US as a whole is $67,521 – many people are not flush with cash.“There’s one couple I know they say they have to be careful how much they come.”Schramm was wearing a T-shirt that said “Proud grandma of a 2020 senior”, in recognition of her granddaughter, who graduated from Morgan high school two years ago. She said gas prices had “made a big difference” for her children and grandchildren, who all live an hour’s drive away.“So far they haven’t had to come less; fortunately my kids have pretty good jobs, but you never know from one day to the next,” she said.Despite the spike, it won’t affect how, or whether, Schramm votes in November. She doesn’t blame the government for the increase, but said: “I don’t get in much on politics because frankly I think they’re all crooks.”The road from Stockport to the Pennsylvania border is quite wiggly, the rapid ascending and descending placing stress on both vehicle and stomach. Washington, a town of 13,000 people that lies 10 miles across the border, had the cheapest gas prices yet, with Sam’s Club offering it at $3.71 a gallon.On one of Washington’s main streets Tyler Weller, 21, had just finished work. He works as a traffic controller at a construction site, and is able to walk to work, but he knows a lot of people who have struggled more to cope with gas prices.“We don’t have a lot of public transport in this town, it’s kinda small. So some of my friends have been borrowing money just to drive to work,” he said. “The grocery store, you can push it off or whatever, but you have to get to work.”Weller said he is thankful he gets paid weekly – he earns $15 an hour – as he hasn’t had to worry as much about filling up his car. But he has still had to make sacrifices.“Usually I just like driving around, like a decompression ride,” he said. “I’ve had to drop those.”Others, like Weller, drive to relax, and it could be that there are impacts on people’s mental health as they are unable to turn to traditional forms of release. Weller said while he had noticed prices had gone down, they weren’t low enough for him to run his car the way he used to. And at the Luxury Box restaurant in Washington, a woman who gave her name as Kath said people celebrating cheaper gas have a short memory.“I think people are naive when they see the prices drop – they get excited, and that’s not exactly where they should be – even though it’s a little better on our wallets,” Kath said.“They notice the prices are better, they think they’re saving money, but in actuality we’re not, compared to where we were when it used to be $2.50-something.”Kath believed Biden and the Democrats could have done more to prevent the increase in prices, although she didn’t have specifics.“I think there’s a lot behind the scenes that we don’t know,” she said.As for how she was faring financially, Kath echoed a sense of hopelessness that others had exhibited across Michigan, Ohio and Pennsylvania.“It’s just not the gas prices. At this point it’s the whole economy. Our food prices are outrageous. There are increases on everything – other than how much you get paid,” Kath said.“I make very decent money for myself, but I feel like I’m now making minimum wage, and I haven’t felt like that in years.”TopicsUS midterm elections 2022GasInflationAutomotive industryJoe BidenUS economyUS politicsfeaturesReuse this content More

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      Can Latino voters help Democrats hold Arizona in crucial Senate race?

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      Can Latino voters help Democrats hold Arizona in crucial Senate race? The economy with high inflation is a major issue for voters, but Latinos are not a monolithic bloc and shifted slightly right in 2020, a factor that could decide the race this timeIn her back pocket Ana Diaz carries a smooth grey pebble she calls her “knock knocker”. She uses it to get a loud rap on the front doors of the South Phoenix neighborhood where she is canvassing for the Democrats ahead of November’s crucial midterm elections.It’s 110F (43C) in the early afternoon sun and Diaz is aiming to knock on 80 doors in this largely Latino neighborhood and speak to at least 20 people, encouraging them to vote. Diaz, a Los Angeles-based bartender and Unite Here union member, is a familiar face to many in this working-class area. In her T-shirt that reads WORKER POWER she has been knocking on these doors since 2018.Voters are all talking about the economy. Diaz too worries about inflation, her grocery bill is so high she thinks she may have to stop buying beef. But, for her, the Democrats and good union jobs are the answer. “When we get together, we can make them change,” she said.“Donald Trump called us ‘the crazies.’ Well we kicked him out,” she said as we walked the block, chugging water and looking for shade. Not many people were in. Diaz and her colleagues will be back. “We’re not going to stop,” she said.Joe Biden narrowly won Arizona in the 2020 election, beating Trump with 49.4% of the vote to Trump’s 49.1%. As in neighboring Nevada, campaigners like Diaz who got out the Latino vote were crucial to that victory. It’s going to take every vote this time too for the Democrats to hold the state – where a crucial Senate seat is up for grabs and with it control of Congress.But Democrats enter election season with two major handicaps: the incumbent party historically loses seats in the midterms and the economy – the top issue for voters – is a mess.For the first time since 1980, when Ronald Reagan defeated Jimmy Carter in a landslide, inflation is a major electoral issue. For decades the specter of inflation had seemed vanquished – hovering around 2% in the US. Now the shadow of soaring prices hangs over everything. In Phoenix the inflation rate hit an annual rate of 13% in August, a record for any US city in data going back 20 years. The national average is 8.3%.chartHistory tells us that the economy is usually the deciding factor in US elections. But whose economy? If there is one word that economists are using to describe the current state of the US economy, it is “weird”. Inflation is at a 40-year high and yet unemployment is at a 50-year low. There were more than 10m job openings in July in the US, over one and half jobs for every person currently looking for work. Interest rates are rising sharply, the once white-hot housing market looks like it could fall, loan rates are rising, and yet consumers are still spending.Phoenix maps all the contradictory signals the economy is sending. The city’s long economic boom continues. About 200 new residents have moved there every day in recent years, attracted by a lower cost of living and by businesses moving for less regulation and lower taxes. It’s not enough. The construction industry alone needs to add 265,000 qualified workers. Healthcare, financial services, all are struggling to fill vacancies.That pressure cooker environment has led to soaring rents in the city – up 46% over the year – but still lower than many other US cities. The situation is particularly hard for lower wage workers and long-term residents now competing with more moneyed migrants from nearby California and elsewhere. For many, wages are failing to keep up with the cost of living crisis as inflation pushes up the price of everything from gas and food to construction costs.“As cross currents buffet the Arizona economy, it looks different depending on the lens used to view it,” University of Arizona professor George Hammond wrote in his latest report on the state of the state. Hammond is expecting slower growth in 2022 and 2023, which could help with costs but also cost people their jobs. Over the long term, he expects Arizona’s economy will still outpace the rest of the country.Diaz believes the Democrats are best placed to navigate these strange seas. “People are like ‘I really don’t care who gets in.’ But you should. Your streets need cleaning, you have no lights, your alleys are full of trash, we have a problem with homelessness. If we don’t choose the right people to snake these changes, it’s not going to happen,” she says.In Scottsdale, Phoenix’s affluent neighbor that is rapidly being absorbed by Phoenix’s sprawl, others have different views. “Biden is a nut,” says Jim Baumann, 60, shopping in Whole Food in his orange Harley Davidson T-shirt. “He screwed this up.” The retiree’s grocery bill now averages $300 to $350 a month he says, up from $200 before inflation bit. “I didn’t like Trump’s mouth but he was better than Biden.”Like so many other issues in the US, views on the economy are fractured, filtered by political and personal views and not always in line with today’s party doctrine.Immigration is a major issue for Republicans, and one that has big economic consequences in the area. Kari Lake, the Trump-backed candidate for governor, has said the Central American migrants now entering the US “could be terrorists, they could be murderers and they are most likely hardcore criminals”. Blake Masters, running for Senate, has accused Democrats of being pro-immigration to “change the demographics of our country”. Privately some local, Republican-leaning, business leaders are embarrassed by the rhetoric and see immigration reform as essential to solving their worker shortages. At the same time Latino voters are not a monolithic bloc and shifted slightly right in 2020, a factor that could decide the race this time.Then there is abortion. Few decisions have greater economic consequences than the decision whether or not to have a child. In recent elections Republicans have paid the price for the supreme court’s decision to end the constitutional protection of abortion even in deep red states like Kansas. Last month an Arizona judge revived a highly restrictive law, that dates back to 1864, banning almost all abortions. Polls show the majority of Arizonans (Republicans and independents included) are in favor of keeping abortion legal in the state in most cases.All this complexity is exacerbated by the weirding of the economy. “Strange would be an understatement,” said Greg Ayres, president of Corbins and chief operating officer of Nox Group, construction companies that specialise in water and waste management, data centers and work for the semi conductor industry.Prices have soared for the construction industry, talent is in short supply, wages are rising and pandemic-related supply chain issues are still rippling through and causing delays. “Everything is so volatile,” he said. “Almost every project is over budget.” And yet business is good. His biggest immediate issue is finding enough people for all the projects he has on the go.The company employs 750 people at present, up from 650 before the pandemic. He wouldd like to be at 1,000 within the year. “But it’s really competitive,” Ayres said.To attract workers Corbin has upped its training programs, benefits and wages. Across the street from his office is a cavernous gym, recreation and health center with a full-time trainer on staff, added to attract and retain talent. Salaries are rising too. With overtime, Ayres said, a mid-twenties journeyman could make over $104,000 a year. The company will train up as many competent workers as it can get its hands on, he says.It’s the same story across the Valley of the Sun, said Todd Sanders, president of business lobby group the Greater Phoenix Chamber in 2009. “It’s almost like we are defying the laws of physics,” he said. The area is suffering from high inflation like the rest of the county but companies are still moving there in large numbers, he said. “By and large we are seeing an economy that is still very strong. It’s an interesting time.”For some low-wage workers buffeted by these economic riptides “interesting” doesn’t even begin to describe it.People know Jarvis Johnson in Phoenix. He went viral for his high-octane audition on reality show So You Think You Can Dance and again for his dedication to Black Friday bargain shopping. His friends describe him as a “ball of energy” and an “eternal optimist”. But when I caught up with him between jobs he seemed tired. It’s not surprising.Johnson, 32, has been working three jobs in order to support his wife and his three young children. His day starts at 3.30am at a Covid testing center, at 11am he starts his shift at a senior living center. Often he isn’t home before at 8pm. He also puts in shifts at a local gas station and is hoping to increase his hours there now that the Covid work is tapering off.All of the jobs pay better than Arizona’s minimum wage of $12,80 an hour. The testing job paid $25 an hour during the worst of the pandemic and at one point Johnson was working there 40 hours a week. But even then, his wages were barely keeping up with the cost of living.Two years ago when he moved into his apartment, he was paying $960 a month in rent. Now it’s close to $1,500. Gas prices have fallen in Arizona, as they have across the US, but are still about $4.90 a gallon, up from just over $3 a year ago. The couple have two cars and it costs $160 to fill them. Food is more expensive. His wife could go to work but daycare costs would wipe out her wages. “It’s crazy. Everything has got more expensive,” he said.“It’s hard. It’s hard right now. I’m just trying to keep my head up and not let my kids see I’m struggling,” he said. “I have to work my butt off to make it. I’m getting by but it’s still not enough.”Biden has promised a fairer, more equitable economy. His administration passed the Inflation Reduction Act which will increase taxes on the US’s largest companies and cut prescription drug prices. He’s also pouring money into solar energy and silicon chip production – both of which will benefit Arizonans. But will it be enough to persuade voters he really has a plan to steer them through this strange economic landscape?Johnson says he will vote Democrat but he doesn’t believe either party has the solution. “They can’t do nothing for me, these employers, they need to pay their people,” he says. “People are struggling.”He wants to start his own business, a hot dog food truck. “I think I’d make more money working for myself, to be honest,” he said. At the moment he has about $1,000 saved but it’s not enough and he’s worried that an incident, a broken car or worse, could wipe out his savings. “Anything can happen,” he said.TopicsUS midterm elections 2022ArizonaUS politicsUS economyInflationEconomicsJoe BidenfeaturesReuse this content More

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      in World Politics

      Time for Americans to Stand for a New Moral Core

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      The Fair Observer website uses digital cookies so it can collect statistics on how many visitors come to the site, what content is viewed and for how long, and the general location of the computer network of the visitor. These statistics are collected and processed using the Google Analytics service. Fair Observer uses these aggregate statistics from website visits to help improve the content of the website and to provide regular reports to our current and future donors and funding organizations. The type of digital cookie information collected during your visit and any derived data cannot be used or combined with other information to personally identify you. Fair Observer does not use personal data collected from its website for advertising purposes or to market to you.As a convenience to you, Fair Observer provides buttons that link to popular social media sites, called social sharing buttons, to help you share Fair Observer content and your comments and opinions about it on these social media sites. These social sharing buttons are provided by and are part of these social media sites. They may collect and use personal data as described in their respective policies. Fair Observer does not receive personal data from your use of these social sharing buttons. It is not necessary that you use these buttons to read Fair Observer content or to share on social media. More

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      in US Politics

      The broken US economy breeds inequality and insecurity. Here’s how to fix it | James K Galbraith

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      The broken US economy breeds inequality and insecurity. Here’s how to fix itJames K GalbraithOn one side, oceans of wealth and power. On the other, precarity and powerlessness. But we have the tools for reform Rising interest rates, a falling stock market, a seesaw in the price of gas, a high dollar and chaos in world finance – we see in all this, once again, the folly of trying to run the world’s largest economy through a central bank. It’s time to rethink the basics: what has happened in America? And what should be done?Adam Smith wrote: “Wealth, as Mr Hobbes says, is power.” Today in the United States we find islands of wealth and power on one side and an ocean of precarity and powerlessness, alongside poverty, on the other. This is a structural development over 50 years, the effect of politics and policies, but also of industrial change, globalization and new technologies, with intense regional, social, demographic and political implications.US mortgage rates climb to 6.7%, highest for 15 yearsRead moreFrom the 1930s to the 1970s America had a middle-class economy centered in the heartland, feeding and supplying the world with machinery and goods while drawing labor from the impoverished south to the thriving midwest – an economy of powerful trade unions and world-dominant corporations. This has become a bicoastal economy dominated by globalized finance, insurance and high-end services on one coast, and by information technology, aerospace and entertainment on the other.Finance and technology do not create many jobs, and the conduct of business in those sectors is rapacious and predatory, shading often into fraud. Some years ago we calculated the rise of income inequality measured between counties during the 1990s boom years, and found that half the increase was due to income gains in just five counties: Manhattan, Silicon Valley, Seattle. There have been other big gainers since, but the fact remains: the largest income and wealth gains in America have become highly concentrated in a few very specific places, sectors – and people.Yet practically all new jobs created in the past 30 years have been in services, and most of those in “stagnant services” – the profusion of restaurants, retail shops, hospitals and clinics, offices and entertainment venues, fueled by household incomes (and borrowings) exceeding requirements for material goods. Pay in these jobs is mediocre and employment is unstable. Families compensated by having two or more earners, each sometimes holding two or more jobs, where 50 years ago the norm was one earner with a steady job paying a living wage. Then Covid blasted the sector.For better or worse, we can’t go back: globalization and the digital revolution are irreversible facts of life. The June 2021 White House Review on the supply chain made this very clear, using semiconductors, rare earths, batteries and pharmaceuticals as examples. Our advanced sectors need world markets – including the Chinese market – as much as they need access to the world’s resources. US consumers benefit from imported goods and from the efficiencies of the information age.The question is: what do we do now? We can adjust, and build a fair and secure middle-class society, free of poverty and of oligarchy alike, with tools that are broadly familiar. These tools include:Expand social insuranceSocial security, Medicare, Medicaid, unemployment insurance and Snap already greatly reduce poverty, insecurity and hunger in America. They can be broadened and strengthened. If we can’t get Medicare for All, then drop the age of eligibility to 55 – that would cover a large part of the most vulnerable population and reduce in a stroke the burden of private health insurance on employers.Raise the minimum wageA federal minimum wage at $15 per hour would provide a raise to at least 20% of all working Americans. It would solve in a stroke the supposed problem of “labor shortage” – without hurting any employer relative to any other. Nor would it encourage immigration, since US workers would step up to take decently paid jobs.Implement a job guaranteeA federal job guarantee is well-prepared proposal that would eliminate involuntary unemployment, set a basic wage standard, and provide willing workers with continuous employment on useful projects, giving private employers a labor pool from which they can easily recruit the workers that they need.Stabilize energy prices and suppliesThe TVA and other agencies provide stable power under long-term contracts. Why should oil and gas be run by private equity on a boom-and-bust basis? Stabilize energy prices and supplies – with regulation, quotas, price controls (as in Germany right now), long-term contracts and public utilities – and many other problems would become much easier to solve.Build public services, infrastructure, and fight climate changeAnd do this while cutting military commitments and spending. The main job of infrastructure is to improve the quality of life, with clean water and air, good transport and communications, and – urgently – to change the resource mix so as to mitigate, so far as possible, global warming. We cannot meet these needs and at the same time devote our talents and resources to wars – the limits to that are clear after Afghanistan and Iraq. It is past time to end the illusion that the United States can or should run the world.Shift taxation toward land rentA great principle of classical economics was that taxes should encourage labor and enterprise while discouraging waste in both the public and private spheres. In the 1980s, taxes were shifted away from personal and corporate incomes and capital gains and toward payrolls and sales – and the unsurprising result was the rise of an oligarchy of hyper-wealthy persons. The remedy now is to tax these accumulations and the associated rents – land values, mineral rights, technology “quasi-rents” – so as to bring the new plutocrats back to earth. A stronger estate-and-gift tax can spur the transfer of great fortunes to foundations and non-profits, such as hospitals, universities and churches, while working to prevent the emergence of dynasties, financial and political.Reform banking before it’s too lateThe Glass-Steagall Act protected the middle class – the ordinary depositor at a commercial bank – from the speculative whims of the elites. Today big money is back in charge, despite the great financial crisis – and much of the American public as well as the larger world is sick of it. Perhaps the toughest, most necessary reform is to reduce debts including student debts, to shrink the banks, to restore effective regulation, to prosecute frauds, and to discipline finance to serve the public good. This will take the glamour out of being a banker – and the intoxicating power out of running the Federal Reserve.Is this program realistic? Perhaps not. But consider the path we’re on. What I propose is an alternative – to pitchforks, anarchy and civil war.
      James K Galbraith holds the Lloyd M Bentsen Jr chair in government/business relations at the Lyndon B Johnson School of Public Affairs at the University of Texas at Austin. In the 1970s, he drafted the monetary policy oversight provisions of the original version of the Humphrey-Hawkins Full Employment and Balanced Growth Act
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      Corporate greed, not wages, is behind inflation. It’s time for price controls | Robert Reich

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      Corporate greed, not wages, is behind inflation. It’s time for price controlsRobert ReichCorporations are using rising costs as an excuse to increase their prices even higher, resulting in record profits. We need limited price controls to break this cycle On Wednesday, policymakers at the Federal Reserve – America’s central bank – continued their battle against inflation with a third straight supersize interest-rate increase. And they warned that they’re not done. They’ll continue to raise borrowing costs until inflation is tamed.They assume that the underlying economic problem is a tight labor market, causing wages to rise – and prices to rise in response. And they believe interest rate increases are necessary to slow this wage-price inflation.This is dead wrong.Wage increases have not even kept up with inflation. Most workers’ paychecks are shrinking in terms of real purchasing power. Rather than causing inflation, wages are actually reducing inflationary pressures.The underlying economic problem is profit-price inflation. It’s caused by corporations raising their prices above their increasing costs.Corporations are using those increasing costs – of materials, components and labor – as excuses to increase their prices even higher, resulting in bigger profits. This is why corporate profits are close to levels not seen in over half a century.Corporations have the power to raise prices without losing customers because they face so little competition. Since the 1980s, two-thirds of all American industries have become more concentrated.Why are grocery prices through the roof? Because just four companies control 85% of meat and poultry processing. Just one corporation sets the price for most of the nation’s seed corn. And two giant firms dominate consumer staples.All are raising prices and increasing profits because they can.Big pharma, comprising five giants, is causing drug prices to soar.The airline industry has gone from 12 carriers in 1980 to just four today, all rapidly raising ticket prices.Wall Street has consolidated into five giant banks, raking in record profits on the spreads between the interest they pay on deposits and what they charge on loans.Broadband is dominated by three giant cable companies, all raising their prices.Automobile dealers are enjoying record profits as they raise the retail prices of automobiles.Gas prices have started to drop but big oil still has the power to raise prices at the pump far higher than the costs of crude.And so on.This is why Congress and the administration need to take direct action against profit-price inflation, rather than rely solely on the Fed to raise interest rates and put the burden of fighting inflation on average working people who are not responsible for it.Bold antitrust enforcement is essential. Even the credible threat of antitrust enforcement can deter corporations from raising prices higher than their costs.A windfall profits tax could also be helpful. This would be a temporary tax on price increases exceeding the producer price index’s costs of producing consumer goods.Price controls should be a backstop. The current inflation, emerging from the pandemic, is analogous to the inflation after the second world war when economists advocated temporary price controls to buy time to overcome supply bottlenecks and prevent corporate profiteering.Limited price controls should be considered now, for the same reasons.The inflation we are now experiencing is not due to wage gains from excessive worker power. It is due to profit gains from excessive corporate power.It’s profits, not wages, that need to be controlled.
      Robert Reich, a former US secretary of labor, is professor of public policy at the University of California, Berkeley and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His new book, The System: Who Rigged It, How We Fix It, is out now. He is a Guardian US columnist. His newsletter is at robertreich.substack.com
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      in US Politics

      Democrats will struggle to keep control of Congress in midterms, expert says

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      Democrats will struggle to keep control of Congress in midterms, expert saysRay Fair’s latest analysis suggests Democrats will get 46.7% of the national vote – and he usually comes within 3% of the final tally Since 1978 Ray Fair, ​​professor of Economics at Yale University, has been using economic data to predict US election outcomes. His bare-boned, strictly by the numbers approach has a fairly impressive record, usually coming within 3% of the final tally.Sadly for Democrats – if Fair’s on track again this time – the Biden administration will struggle to keep control of Congress in November’s crucial midterm elections.Elections are noisy events and this year’s is no different. Recent polling suggests Joe Biden is on a roll, reclaiming some of the ground he lost earlier in his presidency. The Democrats have passed major legislation. There has been a surge in women registering to vote after the supreme court overturned Roe v Wade. Abortion rights drove voters to the polls in deep-red Kansas. Gas prices, if not overall inflation, are falling. In the meantime, Donald Trump and the candidates he has backed are dominating the headlines and helping Democrats’ poll numbers.But if Fair is right, we can largely set aside the personalities and the issues: the economy is the signal behind the noise and Biden is still in trouble.Using data going back to 1916 Fair’s latest analysis suggests that Democrats will get 46.7% of the national vote in November – down from the 51.3% in 2020 when Biden defeated Donald Trump and took control of the House and a slim majority in the Senate.Fair’s model looks at the national picture, he doesn’t dig down to state battles and won’t be drawn into more granular prognostications. But given the gloomy economic picture in recent months, his prediction is unlikely to improve before November and suggests a loss in the House and a very tough fight to keep control of the Senate.When Fair’s last prediction was published in July, the Democrats’ share of the vote had fallen from 48.99% in October “due to two fewer strong growth quarters and slightly higher inflation”. The economic malaise has only deepened since then.“This prediction is based on business as usual,” said Fair. “It’s based on estimations back to 1918, a 100-plus years of data. In that period what seems to matter, election after election, is inflation, output, growth and the penalty you get for being the incumbent party in the White House.”Fair will update his model before the election and given its economic focus, Biden’s percentages are unlikely to improve. Inflation remains close to a 40-year high – soaring prices are now costing the average American household an extra $717 a month. The US economy has shrunk for two consecutive quarters, a sign taken by many as a harbinger of recession. Interest rates are rising at their sharpest pace since the 1990s as the Federal Reserve fights to tamp down price rises.The strength of the economic headwinds Biden faces are apparent even in his improving poll numbers. About 69% of Americans think the nation’s economy is getting worse – the highest percentage since 2008 – according to a recent ABC News/Washington Post poll.Fair doesn’t think elections are only about the economy. “This is not a perfect story, there’s room for other stories in each election,” he said. Given the equations narrow, economic focus he said it was “reasonable” that people were now looking at what other factors might impact the Democratic vote share in the midterms.One factor that may have skewed his results in the past, and could do again, is Donald Trump. In 2016 Fair’s model predicted Hillary Clinton would beat Trump. She did win 2.9m more votes than Trump, securing 48.2% of the vote to Trump’s 46.1%. But she lost in the electoral college.This time too Trump could be a factor, although he is difficult to measure. “There are many reasons why the Democrats may do better. Certainly Trump could be one of them,” said Fair.But history – or at least the history that Fair measures – suggests for all the recent positive polling, the Democrats face an uphill struggle this November.“How large is the error I make on average? It’s about 3 percentage points. If the prediction is 47 that would get you up to 50. So it’s a long shot that the Democrats would get more than half,” he said.TopicsUS politicsUS economyEconomicsJoe BidenDonald TrumpnewsReuse this content More

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      Fed raises interest rate by 0.75 percentage points as US seeks to rein in inflation

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      Fed raises interest rate by 0.75 percentage points as US seeks to rein in inflationThird outsized rate increase in a row as central bank struggles to fight runaway inflation, increasing the cost of everything The Federal Reserve announced another sharp hike in interest rates on Wednesday as the central bank struggles to rein in runaway inflation.The Fed raised its benchmark interest rate by 0.75 percentage points, the third such outsized rate increase in a row, bringing the Fed rate to 3%-3.25% and increasing the cost of everything from credit card debt and mortgages to company financing.The central bank signaled more raises to come, predicting rates would reach 4.4% by the end of the year and not start coming down until 2024. The Fed expects the rate rises to hit the job market – raising unemployment from 3.7% to 4.4% next year – housing prices and to lower economic growth.“We have got to get inflation behind us. I wish there were a painless way to do that. There isn’t,” the Fed chair, Jerome Powell, said. “We have always understood that restoring price stability while achieving a relatively modest increase in unemployment and a soft landing would be very challenging. And we don’t know. No one knows whether this process will lead to a recession or if so, how significant that recession would be.”Central bankers around the world are raising rates sharply as they too attempt to tackle the cost of living crisis. This week the Bank of England is expected to announce its largest rate rise in 25 years. The European Central Bank raised interest rates across the eurozone by a record margin earlier this month.The Fed initially dismissed rising inflation, arguing it was a “transitory” phase triggered by the pandemic and supply chain issues. But as prices escalated the Fed announced a series of aggressive moves in the hopes of bringing prices back under control.Until recently Powell had said he hoped that the economy could achieve what he called a “soft landing” – a slowdown that would bring costs down but not lead to a spike in unemployment and a recession.Speaking at a congressional hearing on Wednesday, some of the US’s top bankers said it was too early to tell how rate rises would impact the economy. “I think there’s a chance, not a big change, a small chance, of a soft landing,” said Jamie Dimon, chief executive of JPMorgan Chase.“There’s a chance of a mild recession, a chance of a hard recession. And because of the war in Ukraine and the uncertainty in global energy and food supply, there’s a chance that it could be worse. I think policymakers should be prepared for the worst, so we take the right actions if and when that happens,” he said.Raising rates makes borrowing more expensive which should reduce spending and lower prices. But the policy is a blunt instrument and rate rises take time to filter through to the wider economy. So far the Fed’s rate rises have not had a significant impact.The US jobs market remains robust, with unemployment still close to a 50-year low, consumer spending rose last month and inflation remained stubbornly high in August, 8.3% higher than a year ago.There are, however, some signs of a slowdown. Existing home sales fell in August for the seventh consecutive month, according to the National Association of Realtors. Sales were 19.9% lower than in August 2021 and are now at their lowest level since they briefly stalled during the height of the pandemic in 2020. And large employers including BestBuy, Ford and Walmart have announced layoffs or hiring freezes.TopicsFederal ReserveUS economyBank of EnglandInflationEconomicsEuropean Central BankUS politicsnewsReuse this content More

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      in World Politics

      The EU Faces Major Challenges This Autumn

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