In the run-up to the campaign I saw reports of young people, frustrated that Biden hadn’t managed to do the huge student loan forgiveness that he’d tried to do, say that they weren’t going to vote for him or for Kamala. “If he can’t get this thing done, why should I support him?” Here’s why:
“Beginning May 5, the department will begin involuntary collection through the Treasury Department’s offset program, which withholds payments from the government — including tax refunds, federal salaries, and other benefits — from people with past-due debts to the government. After a 30-day notice, the department will also begin garnishing wages for borrowers in default.”
Remember Verner Vinge’s A Fire Upon the Deep, and its “net of a million lies”? I wonder what he’d write about a “net of a billion bots talking to each other.”
Clearly the move here is to come up with a large language model that writes really good prose that advocates for the policies that you want.
The draft says the department must greatly expand its use of artificial intelligence to help draft documents, and to undertake “policy development and review” and “operational planning.”
When Ashley was a puppy, she was pretty bad about chewing up stuff. As a stop-gap measure, we piled a bunch of stuff on the window seat, which put it out of reach of puppy-Ashley’s jaws.
The stop-gap ended up lasting about two years. But today I finally cleared the window seat, so Jackie and I can sit and look outside.
Jackie has a Big Grove old fashioned, which she says is very good. I have the Destilh ILL-IPA. I haven’t had one since they closed their local restaurant early in the pandemic.
Many politicians and financial analyst types are suggesting that the Fed should “look through” tariff-induced price hikes. Superficially this makes sense, because a one-time cost increase is not the same thing as inflation. Unfortunately, we know that the results are bad.
The example I’m thinking of is the price shock from much higher oil prices due to the 1973 OPEC oil embargo. As that price shock moved through the economy, first oil prices went up, then gasoline prices went up, but very shortly all prices moved up, because every business faced higher energy costs, and needed to pass at least a fraction of them forward. And then, of course, all the businesses that bought things from those businesses needed to raise their prices further, and workers started demanding higher wages because their costs were going up.
The Federal Reserve tried to “look through” that price shock, not raising interest rates, even though prices were rising. As I say, this makes sense. The one-time price shock will move through the economy, raising many prices by various amounts (depending on how much the inputs for each particular item increase in cost, and the market constraints on price increases for each particular item). Once that all works through the economy, the prices increases should stop.
In fact, raising interest rates could easily make things worse, because the cost of credit is another cost to nearly all businesses, so it’s just another expense that they have to pass on, and it’s a cost to employees, that they’ll want to recover in wage negotiations.
But we know what happened: Inflation rose enough that the Fed eventually decided that it needed to raise interest rates. Higher interest rates hurt the economy, threatening to produce a recession. The Fed cut interest rates to head off the threatened recession, which led to inflation, which led to the Fed raising rates again, etc.
The result was the stagflation of the 1970s, which only ended when new Fed chairman Paul Volker raised rates high enough to produce a severe recession, and then kept them high for long enough to wring the inflation out of the economy.
To me it’s clear that “looking through” the “one-time” price shock of higher tariffs will produce the same result. The Fed can probably mitigate it by holding rates at their current levels until the price shock works its way through the economy (which will probably take a least a year, because many prices (wages, rents, etc.) are only renegotiated annually), and only cut rates after price increases settle back down to close to the Fed’s 2% target.
I assume the Fed governors know this. Do they have the courage to take the right action? Only time will tell.
