Biden and Media Spin Economic Data

• Inflation increased in January by the largest percentage since last October
• Food prices continue to outpace the CPI index, rising 11.3% in the last 12 months
• Consumer debt has reached an all-time high and household savings rates have plummeted
• Despite robust wage growth, real wages are declining at a record pace 

President Biden shuffled a victory lap after the Bureau of Labor Statistics (BLS) released its Consumer Price Index (CPI) report for January.   "Inflation in America is continuing to come down, which is good news for families and businesses across the country," the president crowed to the media.

His words were dutifully mimicked by the nation's pliable media:

The New York Times: "Pace of U.S. Inflation Eases Slightly Again, Data show."'

The Wall Street Journal: "January CPI Reports Shows Annual Inflation Cooled."

The Washington Post: "Inflation Eases Again, But Bringing Prices Further Down will Take Time."

Truth is elusive even when the economic data is staring you in the face.  The lackadaisical media apparently read the headline of the BLS report and nothing else.  The CPI Index came in at 6.4%, which represents the increase in prices over a 12-month period ending in January.  

The headline number--6.4%--sounds marginally better, compared to December's 6.5%. But wait, the data shows prices increased by .05% month-over-month, the largest jump since last October. No matter what you read, inflation increased.  That's not good news for American families or businesses.

Food costs continue to spiral.  The food at home index has risen 11.3% over the last 12 months.  It climbed 0.5% in January.  Prices for major grocery staples are marching upward.  Meats, poultry, fish and eggs ticked up 0.7% in January, compared to the previous month.  

Americans household budgets also took a blow from energy prices. Gasoline prices soared 3.2% and the index for natural gas spiked 6.7% over the previous month.  Electricity prices were up "only" 0.5%, which may provoke jubilation in Washington but not among Americans grappling with inflation

Month-over-month, the CPI has increased every month since August of last year.  That fact is lost in the blizzard of news about the rolling 12-month data.  Americans are feeling the pinch with nearly two-thirds (63%) of households now living paycheck-to-paycheck, according to LendingClub. 

The other shoe dropped when the Labor Department reported that the producer price index (PPI) surged 0.7%, the steepest monthly increase since last summer.  Inflation at the wholesale level usually seeps into the retail costs for inflation weary consumers.

Wall Street likes to point out that consumers are still spending based on January's 3% hike in retail sales. But the spike reverses two consecutive months of declining sales.  Consumers are financing spending with debt. Credit card debt reached an all-time high this month: $930 billion, leaping 18.5%.  

Americans also are paying near record interest rates for debt, topping 20% on outstanding balances. With debt climbing,  savings rates, which rose to 33% in 2020, are now hovering at a paltry 2%. The data suggests consumers may be on a last gasp spending spree.

Often the administration stubbornly insists Americans are doing well because wages are increasing. Really?  The latest report from BLS shows real average hourly earnings, adjusted for inflation, dipped 0.2% in January from December.  Over a 12-month period, hourly earnings decreased 1.8%.

In fact, since Joe Biden became president wages are up 9.5%, a fact he often touts.  However, after adjusting for inflation, real wages have plunged 4.1% since 2021. Americans wages have not kept up with inflation, which explains why credit card debt is ballooning and savings rates have cratered.

Those wizards on Biden's economic team beat you over the head with the jobs numbers whenever you use the "I" word (inflation).  In the January report, U.S. payrolls added an impressive 517,000 jobs, the largest gain since July, 2022.  That appears to be good news without impartial perspective.

More Americans are working two jobs, an estimated 400,000 according to the BLS.  A second job counts as a new job in the data. Overall, the economy added an unprecedented 4.5 million jobs in 2022.  Yet there are nearly three million fewer workers in the labor force compared to February, 2020.

The Great Resignation also weighs heavily on the job data.  On average, 4 million workers quit or lose their jobs monthly. Figures for the latest month reveal 5.9 million Americans quit, were laid off or discharged. Layoffs at large and medium-sized firms have picked up steam since the fourth quarter. 

Hiring in low-paying jobs in the hospitality and leisure sector is fueling the job growth.  Since 2021, those jobs have fluctuated between 7 to 9 percent of total hiring, outpacing other sectors. The  Labor Department estimates the sector still has about one million fewer jobs than it did before the pandemic.

Simply put, all those jobs lost during the pandemic are the main reason behind the robust job data as Americans gradually return to the workforce and pandemic unemployment benefits expire.    

Americans rarely get any perspective on the data gushing out of Washington.  Relying on the media for an honest interpretation is pointless.  Household budgets are the real gauge for Americans.  No matter how the data is spun, most Americans are worse off than they were a year ago.

Social Security Running Out of Money & Solutions

• Social Security is the single largest expenditure of the federal government: $2.01 trillion
• The 86-year-old program currently consumes 22.6% of the federal budget
• Inflation is driving up funding because of cost-of-living-adjustments (COLA)
• Social Security trustees project the program will be insolvent in 13 years

The contentious issue of Social Security burst into the spotlight after the State of the Union address when President Biden accused Republicans of wanting to pull the plug on the program. His partisanship may be a stumbling block for an overdue overhaul of the the 86-year old government benefit plan.

Social Security has a looming financial shortfall that threatens the program's solvency by 2035, according to Social Security's trustees. Even the prospect of an impending crisis is not likely to produce more than political lip service because no lawmaker wants to rile the 65.9 million beneficiaries. 

Nothing irritates seniors more than Washington crying wolf about Social Security running out of money or facing Draconian cuts.  You never hear lawmakers raising the alarm about the prospect that congressional pensions or welfare programs will have to be cut because of rising costs.  

Although Social Security has undergone a plethora of changes since its inception in 1937, little has been done to address the fundamental tenants of the program.  Inaction is unconscionable because Social Security consumes 22.6% of the federal government's annual budget and keeps sopping up more money.

In 2022, the federal government paid $2.01 trillion in Social Security benefits, primarily to retired workers and dependents.  The program also includes payments to survivors and disabled workers and their dependents.  It is the largest single item in the federal government's fiscal budget. 

In addition, this year's budget includes $13.3 billion in funding for administration of the program.  That represents a $785 million increase from the previous year.  The Social Security Administration employs about 64,000 workers. By comparison, the average Fortune 500 firm employs 60,629 workers.    

Since 1970 the number of beneficiaries has more than doubled and the program's costs have soared by 10,234% or more than 10 fold, The data for this and the other numbers cited above comes from the federal government and the Social Security Administration.  

Three Congressional acts are responsible for the ballooning costs, including: In 1950, lawmakers doubled the value of benefits; In 1975, Congress enacted legislation approving cost-of-living adjustments (COLA). In 1983, Congress approved borrowing from the program's trust funds.

The trust funds are under increasing  pressure now because of COLA, which usually runs 1.7% or less.  But during the hyper-inflation of the last two years annual increases were 5.9% in 2022 and 8.7% this year, the highest in 40 years.  The last time it was higher was in 1981when the increase was 11.2%.

Borrowing from Social Security began when it ran a surplus from 1984 through 2009. That money was borrowed and spent by the government to pay for other programs.  In exchange, the the Social Security trust funds were issued special Treasury bonds to redeem in the future.  

Since 2010, Social Security has been running an annual deficit, meaning it has been collecting less than it has paid out, according to the Urban-Brookings Tax Policy Center.  Social Security trust funds currently total $2.9 trillion, enough to cover about one year's worth of benefits.    

The trust funds collect money raised from a 6.2% Social Security tax on wages for employees and a matching amount (6.2%) is  paid by employers. Beneficiaries also pay taxes on their Social Security income. However, the total of all these taxes is insufficient to pay for current benefits. 

Fixing Social Security won't be easy because Congress has too long neglected the crisis, preferring to kick the proverbial can down the road.  Just raising the age for benefits is a band-aid solution. Here are some modest proposals to begin to realign Social Security to deal with the rising costs of the program

• Eliminate the wage base limit for the Social Security tax.Currently, no taxes are collected on income above $160,200. There's no wage base limit for the Medicare tax.
• Exclude COLA adjustments on Social Security benefits for single people making over $100,000 and couples earning more than $200,000.
• Reduce, but do not eliminate, benefits to the top 20% of earners receiving Social Security checks.

Changes also need to be made to the current CPI formula used to calculate the COLA adjustment.  The most controversial move would be to invest Social Security trust funds in equities and bonds to mimic other public pension plans. Currently, funds are invested in U.S. Treasuries, which historically have returned 1%.

Even these proposals may not be enough to insure Social Security's long term future. With more Baby Boomers retiring, the number of beneficiaries will continue to escalate through 2030.  At the same time, the ratio of the number of workers-to-beneficiaries is declining.

The Social Security trustees estimate the ratio of workers-to beneficiaries will drop from the current 2.8-to-every beneficiary to 2.1-to-one by 2035.  Unless the ratio improves, the program will be on life support, requiring steep tax hikes or harsh cuts in benefits. 

In light of these serious issues, the current Congress will be derelict if it does not begin taking steps to put Social Security on firm financial footing.  It will take more political courage than currently exists in Washington,  Therefore, lawmakers likely will do what they always do. Posture and little else.    

Egg Prices Are Nothing To Yolk About

• Egg prices bolted 138% higher in December from a year ago
• A dozen eggs retails for as high as $12.99 in some areas
• Smugglers are trafficking eggs from Mexico to the U.S. 
• A massive bird flu epidemic is to blame for the surging prices 

Skyrocketing egg prices are cracking up comedians.  "My wife wants something expensive for Valentine's, so I'm going to get her two dozen eggs. Prices are so high, I traded three dozen eggs for two Super Bowl tickets. Shoppers are so mad, they are giving the bird to store managers."  You get the yolk.

But egg prices are no laughing matter for consumers.  Large Grade A eggs cost an average of $4.25 a dozen in December, a 138% increase from a year earlier, data from the Bureau of Labor Statistics shows. Organic cage-free eggs retail for an average of $7 per carton nationwide.  

Overall, food prices soared 10.4% between December of 2021 and December, 2022, the U.S. Department of Agriculture (USDA) reports. Egg prices led the inflationary march by climbing 267% in December at the peek of the holiday baking season, before settling lower by the end of the month. 

Depending on where you shop, egg prices can fluctuate widely.  In the Upper East Side of Manhattan, a grommet store is selling a dozen large Grade A eggs for $12.99.  Organic cage-free eggs will set you back $17.99.  That's not chicken feed. 

Even as prices somersaulted above $4 a dozen, American consumers continued to purchase eggs.  In 2022, the average American consumed 177.5 eggs annually, only slightly lower than 2021, when Americans on average ate 183.5 eggs annually.  

A perfect storm of an outbreak of avian bird flu, peak demand and higher costs for feed and transportation are to blame for the historic prices for eggs.  Bird flu struck laying-hens in February of last year and continued in waves throughout the U.S., Europe and other countries. 

For commercial and small farms, many infections centered along the major Central and Mississippi migratory flyway.  Wild birds carry the disease and infect chickens, turkeys and other birds.  

The disease claimed 57 million birds, including 44 million laying hens, last year, according to USDA data. At the end of 2021, there were 389 million laying hens in the country. By the end of last October, the number had shrunk to 373 million.  As a result, egg inventories were 29% lower in December.  

The unprecedented poultry health disaster ravaged chicken yards in 46 states. The last major avian flu outbreak was in 2014-2015, which wiped out 50 million birds. That earlier outbreak started in winter like the current one but the ordeal ended in the following June.  The current one lasted through summer.

Texas A&M experts point out that the outbreak of bird flu is not the only factor driving up egg prices. The costs of corn and soybean used in feed have risen with inflation.  Additionally, diesel and electricity needed to transport eggs and run farms are more expensive.  

With egg prices cracking record levels, U.S. customs officers are intercepting shipments of eggs on the southern border.  Customs and Border Protection recorded a rise of 108% in egg seizures in the last three months of 2022. Violators shell out fines of up to $10,000.

Not everyone believes the avian flu is to blame for roiling egg prices. A liberal advocacy group called Farm Action suspects fowl play.  The group is urging the Federal Trade Commission Chair Lina Khan to investigate profiteering and collusion between major egg producers.

However, food economists are skeptical an inquiry would uncover wrongdoing.  Amy Smith, Vice President at Advanced Economic Solutions, said: "I don't think we've seen anything that makes us think there's something other than normal economics happening right now."

How soon will consumers get a break in egg prices?  There may be a temporary drop in prices but with Easter on the horizon demand will rise again.  Government experts are forecasting the bird flu may return in the spring,  If accurate, consumers again will be scrambling to deal with rising prices.  

Opinion: China's Increasing Hostility

• Chinese surveillance balloon destroyed after traveling across the U.S.
• The Pentagon waited more than a week before shooting down the craft
• President Biden's decision-making process showed weakness
• America needs to reset its relations with China to address its hostility

The nation's eyes turned skyward as a Chinese surveillance balloon wafted over America last week. China brushed off the episode claiming it was a weather balloon gone astray, a preposterous lie even for a Communist regime.  Make no mistake: This was a deliberate provocation by China's military.  

Americans watched in disbelief as the balloon maneuvered over an underground nuclear missile silo in Montana.  The balloon hovered over the site before continuing its trek through our airspace. After nearly a week, President Biden green lighted the downing of the balloon over the Atlantic Ocean.  

The president was under increasing political pressure because the optics of a Chinese craft in American airspace called for a response. Military brass, according to the White House, advised against shooting down the ballon for days because of the risk of harmful debris in populated areas.

Finally on Saturday, an Air Force F-22 Raptor jet fired one air-to-air A9X sidewinder missile that tore through the balloon at an altitude of 58,000 feet.  The airship tumbled into the the Atlantic Ocean, scattering debris over a seven-mile area.  Military officials hope to recover sensitive spy electronics.

The administration expects popping the balloon to close the book on the Chinese spy drama.  But the entire episode raises a range of disturbing issues about America's slow response, future relations with the Communist nation and the increasing confrontational hostility of China.

China's use of an old-school espionage balloon was a curious decision. Surveillance balloons were first used in World War I.  Today's superpowers use low orbit satellites, packed with sophisticated electronics, to  photograph, eavesdrop, scoop up signals intelligence and map military installations.

So why did China use a low-tech, highly visible balloon?  The guess is that China's strategy was to invade American airspace to test America's response.  If that was the mission, the Biden administration flunked.  The president's decision-making response showed weakness that will be exploited by China.

China will not only factor Biden's actions into future military decisions, but the Communist regime will take advantage of the episode to sow skepticism among U.S. allies about America's role in protecting their interests when it cannot defend its homeland. 

There is also the issue of the Pentagon's decision to keep Americans in the dark about the approaching Chinese craft. Reports confirm the Pentagon knew January 28 that the balloon was headed to the continental U.S. after flying over Alaska, the Aleutian Islands and Canada.  

Once the airship was over Alaska, Biden should have called China's Xi Jinping and served notice the balloon would be shot down. The balloon could have been destroyed over lightly populated Alaska or the Aleutian Islands.  Inexplicably, the president said he was notified until February 1.   

If the roles were reversed, China would have obliterated a U.S. spy balloon as soon as it entered that country's airspace.  

Now there are news reports a Chinese spy balloon crashed into the Pacific off the coast of Hawaii four months ago.  Another spy airship flew over portions of Texas and Florida during the Trump administration. What other Chinese aggression has been kept secret from the American people?

Americans deserve answers.  

Congress must call the military brass accountable for its lack of transparency. The agency never acknowledged the spy balloon until it was captured by amateur photographers and television news cameras as the airship drifted over Montana.  This is not the transparency we were promised.

Why did the Pentagon wait so long?  It  seems plausible that the administration preferred to hide the airspace incursion from Congress and Americans. Perhaps, it was a desperate attempt to salvage Secretary of State Antony Blinken's upcoming diplomatic trip to China to ease tense relations. 

Once the Pentagon ended its charade, Blinken had no choice but to nix the visit to China.  If the trip had gone forward, it would have signaled America was willing to forget the affront and return to business as usual relations with the Communists.

The balloon incident underscores China's growing bellicose actions. Under Xi, China has invaded Taiwan airspace on numerous occasions and conducted military exercises near the island nation.  China has cozied up to Russia since its Ukraine invasion, even conducting joint military exercises. 

A recent memo authored by Four Star Air Force Gen. Mike Minihan warned he believes that the U.S. and China will go to battle in 2025. His warning comes on the heels of CIA Director Williams Burns' revelation that President XI has ordered his military to be ready for action no later than 2027.

America needs to stop treating China as a friendly nation.  Business ties between the two countries have skewed our perspective.  China's stated goal is dominate the world militarily and economically, spreading its Communist doctrine to every nation. Hopefully, the spy balloon is America's wake-up call.