Month: May 2022

FOUR WAYS TO TACKLE INFLATION AND ITS HARMFUL EFFECTS

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

This post will summarize four ways to attack the current inflation and its harmful effects, as well as one traditional way of reducing inflation that will probably be counterproductive.

Because what we are experiencing is not traditional inflation, interest rate increases by the Federal Reserve are not likely to be effective in reducing inflation and may well do more harm than good. Typically, interest rate increases slow the economy and job growth, which increases unemployment and slows the rate of wage increases. In the current conditions, this would have little effect on inflation because it is not being driven by wage increases and labor costs, but rather by price gouging by monopolistic corporations, supply chain problems from the pandemic, and the war in Ukraine. In this environment, slowing job and wage growth would increase economic hardship for workers and likely do them more harm than any good due that might come from decreased inflation.

There are other ways to more effectively address the harm that price increases are doing to household budgets. One way is to decrease household costs. The Biden Administration has proposed and taken a number of steps to do this. It is working to increase the supply of oil to put downward pressure on gasoline prices, but the big oil corporations are not cooperating. It is trying to reduce drug costs, but Congress is not cooperating. It is doing what it can to address supply chain problems and to reduce monopolistic power that lets companies increase prices unjustifiably, but these two tactics are not ones that will quickly produce benefits by reducing prices. (See this previous post for more detail on these efforts.)

A second way household budgets can be helped is by increasing incomes. An enhanced child tax credit and/or an expanded earned income tax credit would do this, but these have been blocked by Republicans in Congress with the complicity of a few corporate Democrats, most notably Senators Manchin and Sinema. An increase in the minimum wage would also be helpful but has not made progress in Congress.

Helping families pay the costs of child and elder care would have a three-fold benefit, but again, Congress, particularly the Senate, has not passed legislation to do this. Help with child care and elder care expenses would reduce costs for families, helping alleviate the hardship of increases in other prices. Increased affordability and access to child and elder care would allow parents and caregivers to increase their participation in the workforce, thereby increasing household income. Furthermore, this increase in workforce participation would expand the labor supply, reducing the upward pressure on labor costs of the currently tight labor market. This would reduce the albeit relatively small contribution of labor costs to inflation. [1]

A way to attack the “inflation” that is actually corporate price gouging would be to implement a  windfall profits tax. Senator Bernie Sanders (Independent of VT) has filed the Ending Corporate Greed Act, which would implement a 95% tax on the windfall profits of large corporations (those with more than $500 million in annual profits). The bill defines windfall or excess profits as profits in excess of a corporation’s average profits from 2015 through 2019, adjusted for inflation. (See these previous posts for examples of the extraordinary profits big corporations have been making recently:

The proposed tax closely parallels the World War II windfall profits tax. Windfall profits taxes were also implemented in the 1980s on oil and gas companies and during the Korean War and World War I. [2]

The goal of a windfall profits tax would be to get corporations to stop price gouging because their ability to inflate profits would be significantly reduced. However, if corporations continue to charge high prices and generate big profits, the tax revenue from the windfall profits tax could be used to provide assistance to working families facing economic hardship due to increased prices.

Price gouging can also be tackled directly. Senators Elizabeth Warren (Democrat from MA) and Tammy Baldwin (D-WI), along with Representative Jan Schakowsky (D-IL), have introduced the Price Gouging Prevention Act of 2022. It would prohibit price gouging during market disruptions such as the current pandemic. It would empower the Federal Trade Commission (FTC) and state attorneys general to enforce a ban on excessive price increases. It would require public companies to report and explain price increases in their quarterly filings with the Securities and Exchange Commission. [3]

I encourage to you contact President Biden and your Representative and Senators in Congress. Tell them you support a windfall profits tax, as well as other steps to combat price gouging, inflation, and the hardships they are causing.

You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

You can find contact information for your U.S. Representative at  http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

[1]      Bivens, J., 4/8/22, “Child care and elder care investments are a tool for reducing inflationary expectations without pain,” Economic Policy Institute (https://www.epi.org/blog/child-care-and-elder-care-investments-are-a-tool-for-reducing-inflationary-expectations-without-pain/)

[2]      Avi-Yonah, R., 4/18/22, “Time to tax excessive corporate profits,” The American Prospect (https://prospect.org/economy/time-to-tax-excessive-corporate-profits/)

[3]      Johnson, J., 5/12/22, “New Warren bill would empower feds to crack down on corporate price gouging,” Common Dreams (https://www.commondreams.org/news/2022/05/12/new-warren-bill-would-empower-feds-crack-down-corporate-price-gouging)

GOOD ECONOMIC NEWS ACCOMPANIED BY PRICE GOUGING AND INFLATION

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

There is good economic news, in case you missed it, which is likely because the mainstream media tend to give it little coverage. The bad news is that price gouging and inflation continue. Multiple ways to tackle them will be presented in my next post.

Good economic news:

  • The number of workers receiving unemployment benefits (1,384,000) is at the lowest level since Jan. 17, 1970, i.e., over 52 years ago. Applications for unemployment benefits are below pre-pandemic levels. [1]
  • Employers posted 11.5 million job openings in March, an unprecedented two job openings for every unemployed person.
  • The economy has generated over 400,000 jobs per month for an unprecedented 12 consecutive months.

Bad economic news:

  • Inflation remains high at 8.3% in April, although it was down a bit from 8.5% in March. Major contributors were airlines’ fares (up 33.3% with only a small fraction attributable to higher fuel costs), energy prices (up 30%, see below for some background), and food (up 9.4%, the highest rate in 40 years).
  • Gasoline prices continue to be a key driver of consumer “inflation.” However, price gouging seems like a more accurate description as gasoline prices have gone up or remained very high despite falling or stabilizing prices for a barrel of crude oil. Moreover, Exxon Mobil and Chevron, the largest U.S. oil corporations, reported soaring profits again for the first quarter of 2022. Exxon Mobil reported $5.5 billion in profits for the quarter despite a $3.4 billion loss from abandoning its operations in Russia. Chevron reported $6.3 billion in profits for the quarter, over four and a half times its profits in the first quarter of 2021. [2] Energy giant Shell reported record first quarter profits of $9.1 billion, up from $3.2 billion the previous year. This prompted calls from the British government to impose a windfall profits tax on the London-based corporation. [3] (More on a windfall profits tax in my next post.)
  • Top executives of six of the largest oil and gas corporations were called to appear before Congress. They refused to commit to lowering gas prices for consumers. They refused to reduce record profits, dividends to shareholder, or buying of their company’s own stock. Over the last year, they’ve spent roughly $40 billion buying back their own corporations’ stock, which drives up the stock price, rewarding themselves and other shareholders. [4]
  • The oil and gas executives also refused to increase production of gasoline, which would tend to lower prices.

Josh Bivens, Director of Research at the Economic Policy Institute, describes consumer inflation as “corporate … greed and market power … channeled into much higher prices and profit margins.” He notes that “normally corporate profits should be about 12% of the cost of anything … [but now] corporate profits [are] accounting for 54% of the total rise in prices.” He notes that increased costs of labor are not driving inflation as they are lower than the overall rate of inflation. Corporations, he states, are able to increase prices and profits now because unusual events have distorted the normal operation of the economy. [5] In other words, this “inflation” is opportunistic price gouging by the airlines, the oil and gas corporations, the meat packers, and others.

In my next post, I’ll summarize four ways to attack the current inflation and its harmful effects, as well as one traditional way of reducing inflation that will probably be counterproductive.

[1]      Ott, M., 5/6/22, “More Americans applied for jobless aid last week,” The Boston Globe from the Associated Press (Note the negative headline on an article that had overwhelmingly good news.)

[2]      Business Talking Points, 4/30/22, “Exxon Mobil and Chevron report soaring earnings,” The Boston Globe from the New York Times

[3]      Business Talking Points, 5/6/22, “Shell earnings soar on higher oil prices,” The Boston Globe from the Associated Press

[4]      Joselow, M, & DeBonis, M., 4/7/22, “Panel grills oil company executives,” The Boston Globe from the Washington Post

[5]      Martinez, A., host of Morning Edition, 5/10/22, “Are corporations using inflationary times to raise prices and up their profits?” National Public Radio (https://www.npr.org/2022/05/10/1097820864/are-corporations-using-inflationary-times-to-raise-prices-and-up-their-profits)

GOOD ECONOMIC NEWS AND THE FIGHT AGAINST INFLATION

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

President Biden gave an important speech last Tuesday on the economy, including both the good news and an update on the fight against inflation. However, I saw very little coverage of the speech in the mainstream media. Here are some highlights:

  • 3 million jobs have been added to the economy in the first 15 months of Biden’s presidency – a record.
  • The unemployment rate is down to 3.6%.
  • 4 million new businesses were started in 2021 – 20% more than any other year on record.
  • The federal deficit declined $350 billion last year and is projected to decline by $1.5 trillion this fiscal year – which would be the biggest decline in history. Biden noted that this will decrease inflationary pressures. This quarter the U.S. will actually have a surplus and will reduce the accumulated federal debt. This is the first time this has happened since the Clinton presidency in 2000. (Note that under President Trump, who pledged to reduce the debt, it instead grew by $8 trillion [40%] – from $19.6 trillion to $27.5 trillion. The growth of the debt in Trump’s last year was almost $5 trillion, while in Biden’s first year it was $2 trillion.)

Biden stated that inflation is a serious problem and that reducing it and its impact on families will be his top priority. It is a major problem worldwide and the strength of the U.S. economy has put us in a better position to deal with it than almost any other country. It is driven by supply chain problems and the war in Ukraine that have put supply and demand out of synch. (Why Biden didn’t include corporate price gouging I don’t know. More on this in my next post.) He noted that 60% of inflation in March was due to gasoline prices. Food prices are up in part because Ukraine and Russia are major producers of wheat and corn. However, their shipments of these food supplies have effectively stopped. The Biden Administration and European allies are working to get the 20 – 30 million tons of grain in Ukrainian silos shipped out and into world markets. Biden also noted that four meat processors control the U.S. market and set meat prices. The Administration is working to increase competition in the meat industry as well as elsewhere. Biden repeated his statement that “capitalism without competition isn’t capitalism, it’s exploitation.”

The Biden Administration has also worked with allies to release 240 million  barrels of oil from strategic reserves to increase supply and put downward pressure on prices. Biden noted that the price of a barrel of oil has been steady for weeks but that gas prices have continued to go up. In addition, the Administration is working to increase domestic oil production, the production of biofuels, and the generation of clean energy. These steps could reduce household utility bills by up to $500 per year. (Note that the big oil corporations are not responding to requests to increase oil production, presumably because low supplies and high prices fuel high profits for them.)

The Biden Administration has been fighting to decrease other costs for families in addition to those of food and gas. It has asked for authority to negotiate drug prices in Medicare and cap the price of insulin. However, the U.S. Senate has not passed these proposals. It is tackling supply chain problems by working with labor and port operators to speed up the movement of goods at ports. It has also been working with trucking companies and truckers to speed up the movement of goods to markets.

FACEBOOK KNOWS IT PROMOTES MISINFORMATION AND WILL CONTINUE TO DO SO WITHOUT GOVERNMENT REGULATION

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Facebook’s promotion of low-quality, right-wing content and disinformation has been clearly documented. For example, in April 2021, The Daily Wire, a bigoted, sexist, anti-immigrant, far-right website that produces no original reporting and a low volume of articles had by far the highest distribution / engagement on Facebook. Second highest was the British tabloid, the Daily Mail, followed by Fox News. Four of the top six sources of content engagement on Facebook were right-wing publishers of disinformation. Credible media got much less engagement due to Facebook’s content promotion algorithm. For example, for April 2021: [1]

  • The Daily Wire (1st)          74.9 million Facebook engagements based on 1,385 articles
  • CNN (4th)                         23.1 million Facebook engagements based on 4,765 articles
  • NBC (7th)                         18.7 million Facebook engagements based on 2,596 articles
  • New York Times (8th)      18.6 million Facebook engagements based on 6,326 articles
  • Washington Post (14th)   12.3 million Facebook engagements based on 6,228 articles

Facebook’s reality, driven by its content promotion algorithm, is NOT the reality outside of Facebook. The Daily Wire is NOT more popular than CNN, NBC, the New York Times, and the Washington Post in the world outside of Facebook, let alone more popular than all four of them combined – and the almost 20,000 articles they publish per month compared to the less than 1,400 articles of The Daily Wire, none of which contain original reporting. Facebook promotes this alternative reality because it maximizes its profits. (See this previous post for more detail.)

The election-related disinformation that flourishes on Facebook is a global crisis. There are 36 national elections in countries around the globe in 2022 and many of them will be affected by disinformation on Facebook. Some may be affected to an even greater degree than what has occurred in the U.S., where a strong case can be made that disinformation on social media (with Facebook as a major if not the major player) led to the election of Trump in 2016.

Facebook (and its parent Meta) know how to stop the proliferation of disinformation and have done so for short periods of time at least twice. Meta refers to these instances as “break the glass” emergencies, but the emergency is not short-term and specific incident related, it’s long-term and endemic.

For five days after the 2020 U.S. national election, Facebook’s News Feed and other features operated very differently. Facebook adjusted its content promotion calculations, i.e., its algorithm, to more strongly promote credible news sources. By implication, it deprioritized or down ranked sources publishing disinformation and divisive or hateful content. Facebook did this to slow the spread of disinformation about election fraud and the presidential election being stolen. However, it was too little and too late, lasting only five days in the face of many months of spreading lies about the election. Nonetheless, during the life of the adjusted algorithm, Facebook engagement for credible sources such as the New York Times, CNN, and NPR spiked up and the engagement dropped for the extreme right-wing sources, as well as for hyper-partisan left-wing sources.

Some Facebook staff pushed to make the algorithm change permanent, but were overruled by Facebook’s senior management, including Joel Kaplan, a Republican operative who had previously intervened on behalf of right-wing sources and the Facebook algorithm that promotes them. Moreover, as Facebook returned to “normal” operation, Facebook also eliminated its civic-integrity unit.

After the January 6, 2021, insurrection at the U.S. Capitol, Meta and Facebook again “broke the glass” and instituted more preferential promotion for credible news sources, but again, only for a few days.

Many concerned people from across the globe and from all walks of life – from policy makers to advocates to marginalized people – are calling on Facebook (and other social media platforms, including Instagram [also owned by Facebook’s parent Meta]) to take three steps: [2]

  1. Be transparent: disclose business models, algorithms, and content moderation practices; and release internal data on the effects and harms of the current mode of operation. This would allow independent verification of whether content amplification and moderation are effectively combatting disinformation, protecting elections and democracy, and keeping people, especially young people and children, safe.
  2. Change content promotion algorithms: stop preferential promotion of the most incendiary, hateful, and harmful content to the most vulnerable audiences.
  3. Protect all people equally: bolster content moderation to protect all people, especially marginalized and vulnerable groups, in all countries and all languages.

Facebook and the other social media companies won’t do this on their own. Without government regulation, they will continue to put profits before social responsibility . We must take steps to reduce the disinformation and divisiveness spread by Facebook and other social media platforms. Doing so is critical to the well-being of all of us, especially our children, and to the well-being of society and democracy. Government regulation clearly has to be an important part of the answer.

I encourage to you contact President Biden and your Congress people. Tell them you want strong regulation of Facebook and other social media platforms, including requirements to implement the three steps outlined above. (See this previous post for more on fixes for the harmful behavior of Facebook and other social media platforms.)

You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

You can find contact information for your U.S. Representative at  http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

[1]      Legum, J., 5/6/21, “Facebook’s problem isn’t Trump – it’s the algorithm,” Popular Information (https://popular.info/p/facebooks-problem-isnt-trump-its)

[2]      Change the Terms Coalition, retrieved from the Internet 5/2/22, https://www.changetheterms.org/

FACEBOOK KNOWS IT PROMOTES MISINFORMATION AND DOES SO TO MAXIMIZE PROFITS

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Facebook promotes misinformation. It knows this is harmful, it knows how to fix it, but it does it anyway – for the sake of profits. This is true across the full range of content from racist and misogynistic disinformation to Russian propaganda. It is true globally and across languages with the worst abuses probably occurring outside the U.S. and in languages other than English.

Facebook undermines democracy and promotes divisiveness and hate (as do other social media platforms such as Instagram, TikTok, Twitter, and YouTube) based on conscious decisions by senior management. (See this previous post on the harm being done by Facebook and other social media platforms.)

The reason that Facebook (and other social media platforms) refuse to effectively control (i.e., “moderate”) content is that profits come first. In 2021, Facebook made $39.4 billion in profits primarily from advertising exquisitely targeted to its almost three billion users.

Perhaps the ultimate confirmation of this is that Facebook and Instagram (both owned by Meta) have been blocked in Russia after the invasion of the Ukraine, but Facebook and Instagram are still publishing and promoting Russian propaganda around the world. Although they claim to be moderating disinformation from Russia, 80% of disinformation about U.S. biological weapons has been posted without being flagged or blocked. [1]

Currently, Facebook’s only incentives to moderate the content it allows and promotes are to avoid government regulation and to not be so offensive that advertisers pull their ads. In an effort to address concerns about content moderation – which admittedly sometimes requires making difficult, judgmental decisions that will be unpopular with some people – Facebook created an “Oversight Board” in 2019 to review its moderation decisions. Facebook claims the Board is independent and recruited an impressive set of individuals to serve on it. [2]

Roughly a year ago, the Board issued its first major report, a 12,000-word review of Facebook’s decision to indefinitely suspend Donald Trump from Facebook. The Board affirmed the decision to suspend Trump, but stated that it was inappropriate to make the suspension indefinite.

The Board said Facebook should either make the suspension permanent or set a specific length of time for it. The Board noted that Facebook management was seeking to dodge responsibility and that it should impose and justify a specific penalty.

The Board also posed questions to Facebook management whose answers it felt were essential to enabling it to do its oversight job. However, Facebook management refused to answer questions and failed to provide information on:

  • The extent to which the Facebook’s design decisions, including algorithms, policies, procedures, and technical features, amplified Trump’s posts.
  • Whether an internal analysis had been done of whether such design decisions might have contributed to the insurrection at the Capitol on January 6, 2021.
  • Content violations by followers of Trump’s accounts.

The Board noted that without this information it was difficult for it to assess whether less severe measures, taken sooner, might have been effective in solving the problem of Trump’s violations of Facebook’s standards.

As the Board suggests, the central issue is not simply Trump’s posts, but Facebook’s amplification of those posts and others like them. In other words, the real issue is the nature of Facebook’s content promotion algorithm and whether it promotes posts from Trump and from people expressing views like or in support of Trump’s posts. However, the Board’s jurisdiction, as defined by Facebook management, excludes oversight of Facebook’s algorithm and business practices. Furthermore, the Board has no power to compel Facebook management to abide by its decisions and recommendations – or even to simply answer its questions. It will be effective only to the extent that Facebook management voluntarily cooperates, which would mean reducing profits – not something they will do voluntarily.

Although Facebook founder and now chief executive of its parent Meta, Mark Zuckerberg, once stated: “At the heart of these accusations is this idea that we prioritize profit over safety and well-being. That’s just not true.” The data clearly show that this is true – and hardly anyone believed Zuckerberg when he said it wasn’t.

My next post will provide documentation of Facebook’s promotion of disinformation and divisiveness, as well as its conscious decision to do this and its ability – and occasional willingness – to change this. The post will also include steps that can and should be taken to force Facebook and other social media platforms to change their behavior.

[1]      Benavidez, N., & Coyer, K., 4/17/22, “Facebook ought to be protecting democracy worldwide every day,” The Boston Globe

[2]      Legum, J., 5/6/21, “Facebook’s problem isn’t Trump – it’s the algorithm,” Popular Information (https://popular.info/p/facebooks-problem-isnt-trump-its)