Gift-giving in America did not stop when Santa went home. Our political masters — or servants, depending on your point of view — did not rest between the Sundays that bracketed Christmas and New Year. While Americans were fighting their way home through record-breaking snowstorms and figuring out what to do with that jumper — the most frequently returned of all presents in a year in which retailers expect 18 per cent of every gift they sold to be returned — Congress was at work.
The House and Senate (Democrats and a few Republicans) went on a shopping spree to add gifts to those their constituents had just unpacked. Few members of Congress know what is in the $1.7 trillion, 4,155-page spending bill that they were handed by the leadership 48 hours before the vote. The aim was to spread joy up to the maximum, bring gloom down to the minimum, as songwriter Johnny Mercer put it.
It would be churlish to complain to the joy-spreaders that they are paying for these gifts with the recipients’ own money — called taxes. And if taxes aren’t enough to cover the cost of the gifts, whip out the national credit card and borrow money to be repaid by the recipients’ grandchildren. As for gloom, leave that for Federal Reserve chairman Jay Powell to deliver, his anti-inflation fight made more difficult by the cash the politicians pumped into the economy.
Whether the coming Republican takeover of the House of Representatives will make any difference to spending or anything else is anyone’s guess. Here are my own guesses — not forecasts — on what you probably will and won’t be reading about by the end of 2023.
There is a 100 per cent probability that with Republicans in control of the investigative apparatus of the House, you will be hearing more about Hunter Biden’s laptop and his father’s business affairs; Democrats’ refusal to control our southern border, which has been illegally crossed this year by a record 2.76 million migrants, most in search of jobs rather than asylum; the failure to protect the Capitol from Trump-encouraged rioters. Make that probability only 80 per cent to account for the mainstream media’s reluctance to report news unfavourable to President Biden.
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There is at least a 50 per cent chance that you will find predictions of rapidly rising unemployment more than a bit overdone. Almost 80 per cent of recently laid-off workers in the tech sector found a new job within three months. And in the hospitality sector (the “hospitality” statistics include restaurants with surly waiters and hotels with inhospitable desk clerks), restaurants and bars have almost doubled the number of workers from the April 2020 low.
That sector seems to have solved its problems the old-fashioned way: higher wages (26 per cent higher than pre-pandemic levels), better benefits, more flexible work schedules. Which means that despite a slowing housing market, Powell’s hopes for a weaker labour market and slower wage increases remain just that — hopes. So far.
You are highly likely, probability 85 per cent, to continue to read about energy markets. Not because the planet contains too little fuel to meet the world’s needs, but because energy is now a weapon of war. Consuming nations have put a cap on the price they will pay for Russian oil. Vladimir Putin, the well-known advocate of free markets, responds: “I would like to quote American economist, Nobel Prize winner Milton Friedman: ‘We economists don’t know much. But we do know how to create a shortage. If you want to create a shortage of tomatoes … pass a law that retailers can’t sell tomatoes for more than two cents per pound. Instantly, you’ll have a tomato shortage.’ It’s the same with oil and gas.” Not quite: historically, tomato vendors have not needed revenues from sales of that pizza-topper to finance a war.
There is a good chance, 65 per cent, that you will hear more about Covid in China and less about Covid in America, where it is becoming accepted as a normal risk with which we have learnt to live, rather like flu. Unless you seek out channels that cover Dr Fauci’s appearances before Republican-dominated congressional committees digging for proof that the funds he controlled funded research in biological weapons in China.
Which brings us to inflation. By the year-end, boredom with the topic, an annual inflation rate coming closer to although still distant from the Fed’s 2 per cent target, and an unemployment rate that has risen but not to deep recession levels will have combined to make Americans treat inflation more as they will treat Covid — like the flu, an unpleasantness to be borne. I can predict with confidence that Powell will say the Fed has more work to do, with a 50 per chance that this will include what cautious physicians often recommend: watchful waiting.
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Finally, surely in your country and mine, deep pine green will fade to pale mint green as politicians scramble to transfer resources from fighting climate change to fighting the misery caused by policies to combat it.
Irwin@irwinstelzer.com
Irwin Stelzer is a business adviser
