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      Finally, Some Good News on Inflation

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      This is not the end of inflation. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.On Wednesday, the Bureau of Labor Statistics reported something we haven’t seen since the depths of the pandemic recession: a month without inflation. That is, the average price of the goods and services consumers buy was no higher (actually slightly lower) in July than it was in June.Before I get to what the latest inflation numbers mean, two notes on reactions to the report.First, there is absolutely no reason to question the numbers. There were many advance indications that this report, and probably the next few reports, would show a sharp drop in inflation. In fact, I wrote about that last week. It’s not just falling gasoline prices; business surveys point to declining inflation and supply chain problems are easing. Zero was a somewhat lower number than most observers expected, but not wildly so.Second, the enraged reaction of Republicans to the report came as something of a surprise, at least to me — not that it happened, but the form their outrage took. I expected them to accuse the Biden administration of cooking the books. Instead, most of the flailing seemed to involve a failure to understand the difference between monthly and annual numbers.When President Biden declared, accurately, that we had zero inflation in July, many on the right accused him of lying, because prices in July 2022 were 8.5 percent higher than they were in July 2021. Do they really not understand the difference? To be fair, sloppy business reporting may have contributed to their confusion — I saw many headlines to the effect that “inflation was 8.5 percent in July.” But the more fundamental issue, surely, is that it’s difficult to get people to understand something when their sloganeering depends on their not understanding it.OK, but what about the substantive implications of the Big Zero?Unfortunately, one month of zero inflation doesn’t mean that the inflation problem is solved. Economists have long known that you get a much better read on underlying inflation if you strip out highly volatile prices — normally food and energy, but there are a variety of measures of core inflation, and all of them are still unacceptably high. That’s a clear indication that the economy is running too hot. The Federal Reserve has been raising interest rates to cool things down, and nothing in Wednesday’s report should or will induce the Fed to change course.The Fed might, however, take some comfort from a different report, released Monday: the New York Fed’s monthly Survey of Consumer Expectations, which showed “substantial declines in short-, medium- and longer-term inflation expectations.”Ever since prices took off last year, Fed officials have been concerned that inflation might become entrenched. What they mean is that businesses and consumers might come to believe that large price increases are the new normal, making inflation self-perpetuating, and that getting inflation back down would require putting the economy into a severe, extended slump. That’s what most economists think happened in the 1970s, and it’s not an experience anyone wants to repeat.The good news is that there doesn’t seem to be any entrenching going on. Public expectations of future inflation are falling, not rising; financial markets also seem to anticipate much lower inflation than we’ve seen over the past year.Despite this good news, the Fed will surely keep raising rates until it sees clear evidence that underlying inflation is coming down. But it has some breathing room to be less aggressive than it might otherwise have been, waiting to see how the economic situation develops.Overall, falling inflation probably won’t have much effect on economic policy. It might, however, have big political implications.The truth, although Republicans go feral when you point it out, is that Joe Biden has presided over a huge jobs boom. Yet he has gotten no credit for that boom, possibly in part because many Americans don’t know about it, but largely because voters are focused on inflation — especially the fact that prices have risen faster than wages, reducing families’ purchasing power.Now at least that part of the story has gone into reverse. Wages are still rising fast, which is actually one reason to believe that underlying inflation remains high. But for now, at least, inflation has slowed, so workers will be seeing significant real wage gains. Indeed, average real wages rose half a percentage point in July alone.Hence G.O.P. outrage over accurate reporting on July’s inflation numbers. Republicans had been counting on high inflation, and high gas prices in particular, to deliver big gains for their party in the midterm elections. Suddenly, however, the economic facts have a liberal bias: Gas prices are plunging, inflation is down, and real wages are up.Will these facts make a difference in November? I have no idea. But the current hysteria on the right shows that Republicans are worried that they might.The Times is committed to publishing a diversity of letters to the editor. We’d like to hear what you think about this or any of our articles. Here are some tips. And here’s our email: letters@nytimes.com.Follow The New York Times Opinion section on Facebook, Twitter (@NYTopinion) and Instagram. More

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      Your Tuesday Briefing: Russia’s Faltering Campaign

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      Plus climate’s role in Australia’s upcoming election and a Covid-19 protest at Peking University.Good morning. We’re covering Russia’s struggling military campaign, Australia’s halting recovery from bush fires and a Covid-19 protest at Peking University.A damaged apartment complex in Kharkiv.Finbarr O’Reilly for The New York TimesRussia scales back its charge eastAfter a series of military setbacks, Moscow now appears to be focusing on a narrow objective: widening its holdings in Ukraine’s eastern region of Donbas. But even there Russia may be forced to scale back its ambition to take most of eastern Ukraine, according to the Institute for the Study of War.Russia still controls the wide swath of southern Ukraine it seized early in the war, including Kherson, and continues to impose a naval blockade that is strangling the Ukrainian economy. But Russia has not secured a major strategic gain in the east.On Sunday, the Ukrainian military released a video purporting to show a small group of soldiers reaching the Russian border near Kharkiv — a powerful symbolic moment. Russian forces had to retreat from the city, Ukraine’s second-largest, earlier this month.NATO: The alliance is preparing to fast-track admission for Finland and Sweden, which formally announced that they will seek membership. On Monday, NATO forces from 14 countries held a large, long-planned military exercise on Russia’s doorstep in Estonia, a tough Kremlin critic.Vladimir Putin: The Russian president is increasingly isolated. He met with his five closest allies on Monday; only Belarus spoke up in support of Putin’s war.Soldiers: Russia has likely run out of combat-ready reservists, forcing it to draw from private companies and militias, the institute reported. But to many Russians, defeat remains inconceivable.Other updates:As the U.S. and Europe seek to deprive Russia of oil and gas income, their leaders hope Qatar can help fill the void.After 32 years, McDonald’s is selling its Russian business, once a symbol of globalization.Olga Koutseridi, a home cook from Mariupol who now lives in Texas, is fighting to preserve her city’s distinctive cuisine.Jamie Robinson, who lost everything during the 2019 fires, has been struggling to rebuild his house.Matthew Abbott for The New York TimesAustralia’s bush fire reckoningIn late 2019 and early 2020, fires tore through southeastern Australia. Barely one in 10 families in the affected region of southeastern Australia have finished rebuilding, local government data shows. Most have not even started.The halting recovery efforts could have profound political import. The ruling conservative coalition holds a one-seat majority in Parliament and is already expected to lose some urban seats.The once-conservative rural towns south of Sydney could also defect. Angered by a lack of government support after the bush fires, they may vote for the opposition Labor party in the Australian election on Saturday.Background: The record-setting “black summer” bush fires killed 34 people, destroyed 3,500 homes and burned more than 60 million acres over two months.Analysis: Our Sydney bureau chief, Damien Cave, spoke to the Climate Forward newsletter about climate’s role in the Australian election.The U.S.: Half of all addresses in the lower 48 states are at risk of wildfire damage. Climate change will make the U.S. even more combustible.Peking University has a history of occasional organized unrest.Thomas Peter/ReutersPeking University’s Covid protestStudents at one of China’s most elite academic institutions protested strict Covid-19 lockdown requirements on Sunday, arguing that the measures were poorly communicated and unfair.Students are upset that they cannot order food and are required to isolate, while teachers and their families can leave the campus freely. On an online forum, one student called the policy contradictory. Another said it was “a joke indeed.”In response to student frustrations, the authorities tried to put up a wall separating students from faculty and staff. More than 200 people left their dorms to protest.Reaction: The government quickly moved to censor videos and photos from the brief protest, which quickly spread on China’s internet.Analysis: Peking University, which has a history of occasional organized unrest, holds a special place in Beijing’s cultural and political life. The demonstration underscores a growing challenge for officials, who must assuage anger while fighting the highly infectious Omicron variant.In other news:Evidence is growing that Covid-19 has mutated to infect people repeatedly, sometimes within months, a potentially long-term pattern.THE LATEST NEWSWorld NewsTensions were high in the Somali capital ahead of Sunday’s presidential election. Malin Fezehai for The New York TimesPresident Biden approved plans to redeploy hundreds of Special Operations forces inside Somalia and target Al Shabab leaders. Conservatives kept Germany’s most populous state, a blow to Chancellor Olaf Scholz and his party.President Emmanuel Macron of France named a new, left-leaning and climate-focused prime minister: Élisabeth Borne. Currently the minister of labor, she will be the second woman to occupy the position.Buffalo ShootingInvestigators searched for evidence at the supermarket.Brendan Mcdermid/ReutersHere are live updates from the Saturday mass shooting in upstate New York.The accused shooter, an 18-year-old white man, had previously been investigated for a violent threat. He had planned to attack a second target.Officials released the full list of victims, almost all of whom were Black.The gunman published a hate-filled racist screed before the attack, connecting it to the livestreamed murder of 51 people by a gunman at two mosques in Christchurch, New Zealand, in 2019.Some right-wing politicians have helped promote “replacement theory,” the racist ideology that the gunman espoused. In recent years, other perpetrators of mass shootings have also cited the idea, popularized on Tucker Carlson’s Fox News show.In other news: A gunman killed one person and critically wounded four others at a Southern California church before congregants overpowered him and tied him up. He has been charged with murder.A Morning Read“I keep telling the other sisters, ‘Get on TikTok!’” Sister Monica Clare said. “‘If we’re hidden, we’re going to die out.’”Daniel Dorsa for The New York TimesNuns are joining TikTok, offering a window into their cloistered experiences. “We’re not all grim old ladies reading the Bible,” one said.Lives lived: Pandit Shiv Kumar Sharma single-handedly elevated the santoor, a 100-string instrument little known outside Kashmir, into a prominent component of Hindustani classical music. He died last week at 84.Russia-Ukraine War: Key DevelopmentsCard 1 of 4Mariupol steel plant. More

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      Disney vs. Florida

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      A debate over taxes is rapidly unraveling Florida’s long relationship with Disney, with broader implications for corporate America.Supporters of Florida’s so-called “Don’t Say Gay” bill at a weekend rally outside Walt Disney World in Orlando.Octavio Jones/ReutersNot so special anymoreYesterday, the Florida Senate voted to revoke special benefits that, since the 1960s, have given Disney the ability to essentially self-govern a vast area around its Disney World theme park and issue tax-free municipal bonds. The state’s House, which like its Senate is led by Republicans, is expected to vote for the measure today.It’s a rapid unraveling of a long relationship. Last month, Disney C.E.O. Bob Chapek, facing a backlash from employees, spoke out against Florida’s so-called “Don’t Say Gay” law, which prohibits classroom discussion of sexual orientation and gender identity until the third grade, and limits it for older students as well. Gov. Ron DeSantis, who is eying a 2024 presidential run, has hit back, calling the company “Woke Disney,” and saying it no longer deserves its long-held special status. “If Disney wants to pick a fight, they chose the wrong guy,” DeSantis wrote in a recent campaign fund-raising email.This is about more than taxes, with broader implications for Disney, Florida and all of corporate America:For Disney: The company’s theme parks are flying, thanks to looser pandemic restrictions and higher-priced ticket sales. The loss of Disney’s special tax district could put a dent in that growth, and it would also restrict the company’s ability to develop the land it owns and tap state resources to do it.For Florida: The biggest issue is nearly $1 billion in tax-free bonds that have been issued by Disney. Florida law says that if a special tax district is dissolved, the responsibility to pay those bonds reverts to local governments. Democratic state lawmakers say that the interest on those bonds equates to an additional tax burden of $580 per person for the 1.7 million residents of neighboring Orange and Osceola counties, which would also have to step in and provide many of the public services for the area that are currently funded by the company. Disney employs about 80,000 people in Florida.For corporate America: Disney’s clash with Florida is the latest example of how companies’ growing willingness to speak out on social and political issues puts them in conflict with some lawmakers. Last year, Georgia politicians threatened to raise taxes on Delta after the airline spoke out against the state’s restrictive voting laws. More recently, Texas lawmakers have said they would bar Citigroup from underwriting the state’s bonds unless the bank revoked its policy to pay for employees to travel out of state for abortions, which are severely restricted there.“I don’t think this is going to stop companies that have a strong reputation and value system,” Paul Argenti, a professor at Dartmouth’s Tuck School of Business, told DealBook. “It’s a real test of what is the Disney value system and what they are willing to stand up for.” Lloyd Blankfein, the former Goldman Sachs C.E.O., tweeted that Disney’s special tax status may not have been a good policy when it was first adopted, but DeSantis’s recent move looks like “retaliation” for the company’s stance on unrelated legislation. “Bad look for a conservative,” he said.HERE’S WHAT’S HAPPENINGThe Justice Department appeals to reinstate the transportation mask mandate. It will challenge the ruling by a federal judge in Florida who struck down the mandate on Monday, with the C.D.C. declaring that the mask rule was necessary to prevent the spread of the coronavirus. Meanwhile, Gov. Kathy Hochul of New York urged people to take “common sense” safety measures, as New York City prepared to raise its Covid alert level amid rising cases.Workers at an Apple store in Atlanta move to form a union. If they are successful, it would be the first of the tech giant’s stores in the U.S. to unionize. The move reflects increasing momentum in service-sector unionization, with recent union wins at Starbucks, Amazon and REI locations.The Obamas are leaving Spotify. Barack and Michelle Obama will not renew their production company’s lucrative podcasting contract with the streaming service, Bloomberg reports. In a speech at Stanford today, the former president is expected to speak about the scourge of falsehoods online, as he wades deeper into the public fray about how misinformation threatens democracy.Nestlé raises prices steeply, suggesting that inflation will persist. The world’s largest food company said today that the prices it charges for products rose by more than 5 percent on average in the first quarter, the biggest jump in that quarter since at least 2012. The largest increases, of more than 7 percent, were in pet food and bottled water.Chinese energy giant Cnooc surges in Shanghai debut. The company’s listing comes months after it was delisted from the New York Stock Exchange to comply with a Trump-era executive order banning American investment in companies that the U.S. says aid China’s military. Cnooc raised $4.4 billion in the offering.Tesla’s mixed messageTesla reported its latest quarterly earnings yesterday and, no, the company’s C.E.O., Elon Musk, did not talk about his attempt to buy Twitter. (Musk could fund the purchase, in part, by selling some of his Tesla shares or using them as collateral for loans.)Musk instead kept the discussion focused on Tesla, delivering some good and bad news to the electric carmaker’s shareholders. The company’s shares rose 5 percent after the results were released.The good: Tesla made a $3.3 billion profit in the first three months of the year, up from $438 million a year earlier and the biggest quarterly profit since the company’s creation. Tesla sold 310,000 vehicles in the first quarter, up almost 70 percent from a year earlier.The bad: Tesla said it resumed “limited production” in Shanghai after a three-week shutdown, but “persistent” supply-chain problems and the rising cost of raw materials mean that it expects its factories to run below capacity for the rest of 2022. Despite concerns that supply-chain issues could hamper the company’s growth, Musk told analysts that his “best guess” was that Tesla would produce 1.5 million cars this year, meeting the company’s goal of 50 percent sales growth.The lithium interlude: Musk said that soaring prices for lithium, a key material in batteries, had forced the company to raise prices, potentially slowing the pace at which people switch to electric vehicles. Soaring demand for the metal has given producers 90 percent profit margins, Musk said. “Do you like minting money? Then the lithium business is for you,” Musk said. He hinted that Tesla could get more involved in the supply chain for raw materials but didn’t say whether it would expand into mining metals like lithium directly.What’s Happening With Elon Musk’s Bid for Twitter?Card 1 of 3The offer. More

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      This Presidency Isn’t Turning Out as Planned

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      Joe Biden was Barack Obama’s vice president. His Treasury secretary, Janet Yellen, was Obama’s pick to lead the Federal Reserve. The director of Biden’s National Economic Council, Brian Deese, was deputy director of Obama’s National Economic Council. His chief of staff, Ron Klain, was his chief of staff for the first two years of the Obama administration and then Obama’s top Ebola adviser. And so on.The familiar names and faces can obscure how different the new administration, in practice, has become. The problems Biden is facing are an almost perfect inversion of the problems Obama faced. The Obama administration was bedeviled by crises of demand. The Biden administration is struggling with crises of supply.For years, every conversation I had with Obama administration economists was about how to persuade employers to hire and consumers to spend. The 2009 stimulus was too small, and while we avoided a second Great Depression, we sank into an achingly slow recovery. Democrats carried those lessons into the Covid pandemic. They met the crisis with overwhelming fiscal force, joining with the Trump administration to pass the $2.2 trillion CARES Act and then adding the $1.9 trillion American Rescue Plan, the trillion-dollar infrastructure bill and the assorted Build Back Better proposals on top. They made clear that they preferred the risks of a hot economy, like inflation, to the threat of mass joblessness.“We want to get something economists call full employment,” Biden said in May. “Instead of workers competing with each other for jobs that are scarce, we want employers to compete with each other to attract work.”That they have largely succeeded feels like the best-kept secret in Washington. A year ago, forecasters expected unemployment to be nearly 6 percent in the fourth quarter of 2020. Instead, it fell to 3.9 percent in December, driven by the largest one-year drop in unemployment in American history. Wages are high, new businesses are forming at record rates, and poverty has fallen below its prepandemic levels. Since March 2020, Americans saved at least $2 trillion more than expected. And that’s not just a function of the rich getting richer: a JPMorgan Chase analysis found the median household’s checking account balance was 50 percent higher in July 2021 than in the months before the pandemic.It is easy to imagine the wan recovery we could’ve had if the mistakes of 2009 and 2010 had been repeated. Instead, we met the pandemic with tremendous, perhaps excessive, fiscal force. We fought the recession and won. The problems we do have shouldn’t obscure the problems we don’t.But we do have problems. Year-on-year inflation is running at 7 percent, its highest rate in decades, and Omicron has shown that the Biden administration wasted months of possible preparation. It is not to blame for the new variant, but it is to blame for the paucity of tests, effective masks and ventilation upgrades.The conversations I have with the Biden administration’s economists are very different from the conversations I had with the Obama administration’s economists, even when they’re the same people. Now the discussion is all about what the economy can produce and how fast it can be shipped. They need companies to make more goods and make them faster. They need more chips so there can be more cars and computers. They need ports to clear more shipments and Pfizer to make more antiviral pills and shipping companies to hire more truckers and schools to upgrade their ventilation systems.Some of these problems reflect the Biden administration’s successes. (Read my colleague Paul Krugman for more on this.) For all the talk of supply chain crises, many of the delays and shortages reflect unexpectedly strong demand, not a pandemic-induced breakdown in production. Supply chains are built to produce the goods that companies think will be consumed in the future. Expectations were off for 2021, in part because forecasters thought demand would slacken as people lost work and wages, in part because the fiscal response was massively larger than anyone anticipated and in part because when people couldn’t go out for meals and movies, they bought things instead. Overall spending is more or less on its prepandemic trend, but the composition of spending has changed: Americans purchased 18 percent more physical goods in September 2021 than in February 2020.Now the Biden administration fears that its supply problems will wipe out its demand successes. In recent remarks, Biden took aim at those who would lower prices by breaking the buying power of the working class. “If car prices are too high right now, there are two solutions,” Biden said. “You increase the supply of cars by making more of them, or you reduce demand for cars by making Americans poorer. That’s the choice. Believe it or not, there’s a lot of people in the second camp.”He’s right, but this is a practical fight, not just an ideological one, and the Biden administration is making its own mistakes. His administration is suffering right now from directly mismanaging Covid supplies. It did an extraordinary job in its first months, flooding the country with vaccines. Today, any adult who wants one, or three, can get the shots. But vaccines aren’t the only public health tool that matters, and there was every reason to believe the Biden administration knew it. The American Rescue Plan had about $20 billion for vaccine distribution, but it had $50 billion to expand testing and even more than that to retrofit classrooms so teachers and children alike would feel safe. Where did that money go?Getting the pandemic supply chain right would help ease every other supply chain, too. If Americans could move about their lives more confidently, they could buy services instead of things, and if companies could test and protect their work forces more effectively, they could produce and ship more goods.But the Biden administration hasn’t fully embraced its role as an economic planner. When Jen Psaki, the White House press secretary, was asked about testing shortages in December, she shot back, “Should we just send one to every American?”Psaki’s snark soon became Biden’s policy. The administration is launching a website where any family can request four free tests. That’s a start, but no more than that. For rapid testing to work, people need to be able to do it constantly. But because the administration didn’t create the supply of tests it needed months ago, there aren’t enough tests for it or anyone else to buy now. Part of this reflects the ongoing failure of the Food and Drug Administration to approve many of the tests already being sold in Europe.The same is true, I’d argue, about masks. There’s simply no reason every American can’t pick up an unlimited supply of N95s and KN95s at every post office, library and D.M.V. Instead, people are buying counterfeit N95s on Amazon and wearing cloth masks that do far less to arrest spread. Now the Biden administration is moving toward supplying masks. But more needs to be done: How about ventilation? How about building the vaccine production capacity needed to vaccinate the world and prevent future strains from emerging? How about building capacity to produce more antiviral pills so that the next effective treatment can ramp up more quickly?For decades, Democrats and Republican administrations alike believed the market would manage supply. We live in the wreckage of that worldview. But it held for so long that the U.S. government has lost both the muscle and the confidence needed to manage supply, at least when it comes to anything other than military spending. So Biden’s task now is clear: to build a government that can create supply, not just demand.This may not be the presidency Biden prepared for, but it’s the one he got.The Times is committed to publishing a diversity of letters to the editor. We’d like to hear what you think about this or any of our articles. Here are some tips. And here’s our email: letters@nytimes.com.Follow The New York Times Opinion section on Facebook, Twitter (@NYTopinion) and Instagram. More