Plus, a question about birthright citizenship.
I’m Isaac Saul, and this is Tangle: an independent, ad-free, subscriber-supported politics newsletter that summarizes the best arguments from across the political spectrum on the news of the day — then “my take.”
Today's read: 12 minutes.
Did we get good news on inflation? Plus, a question about birthright citizenship.
In yesterday's quick hits section, we wrote that "Author Salman Rushdie will recover after being stabbed on stage at a speaking event in New York City." In fact, Rushdie was speaking in Chautauqua, NY, which is about as far away from New York City as you can be in New York state. I was on my way to the Big Apple yesterday morning, so clearly my mind was driving on autopilot. Our apologies for the error.
This is our 67th correction in Tangle's 159-week history and our first correction since July 25th. I track corrections and place them at the top of the newsletter in an effort to maximize transparency with readers.
- President Biden will sign the Inflation Reduction Act into law today.
- Lawyers for Rudy Giuliani said he is a target of Georgia's criminal investigation into efforts to overturn the 2020 election. (The lawsuit)
- Alaska and Wyoming will hold primary elections today. Rep. Liz Cheney (R-WY) is expected to lose her seat in a closely-watched race. Alaska will also begin using ranked-choice voting rules in its special election for a House seat. (The races)
- The Justice Department said it objects to releasing the affidavit used to search Trump's home, arguing it could compromise their investigation. (The details)
- First Lady Jill Biden has tested positive for Covid-19. (The test)
Our 'Quick Hits' section is created in partnership with Ground News, a website and app that rates the bias of news coverage and news outlets.
Inflation. Last week, we got the latest inflation numbers from the Labor Department.
Reminder: Inflation is measured by the Consumer Price Index (CPI), which is designed by the Bureau of Labor Statistics to measure price fluctuations for urban buyers, who represent the vast majority of Americans. The CPI tracks 80,000 items in a fixed basket of goods and services, representing everything from gasoline to apples to the cost of a doctor's visit. Core CPI is a measurement of prices that does not include more volatile food and energy prices.
Consumer prices rose 8.5% in July compared with a year earlier, and prices were unchanged from June to July, the first time that has happened after 25 months of rising prices. In June, prices rose 9.1% from a year earlier, the highest increase since November of 1981, meaning the July numbers represented a slight easing of inflation.
“I just want to say a number: zero,” President Biden told reporters. “Today we received news that our economy had zero percent inflation in the month of July.”
However, core CPI, which excludes volatile energy and food prices, rose 0.3% from the month before and 5.9% from July of last year. Both figures are down from June's 0.7% month-over-month and 9.1% year-over-year gains.
In the wake of these latest inflation numbers, U.S. stocks rallied.
The average price of a gallon of gasoline, which was $4.54 a month ago, is now $3.94. A year ago, the average price was $3.18. Grocery prices, however, rose 1.3% in July from the previous month, and are 13.1% higher than July’s prices a year ago, the fastest annual increase since 1979.
“It’s kind of a mixed blessing for individual households—they probably like what they see on gasoline prices coming down, but they’re still seeing the pain on the food side,” Brian Bethune, an economist at Boston College, told The Wall Street Journal.
Many economists believe inflation has been fueled by a combination of rapid growth in the wake of the pandemic, historically low interest rates, and government stimulus. The Federal Reserve is tasked with navigating inflation by raising interest rates to cool the economy, but is attempting to bring rates down without setting off a recession (a so-called "soft landing").
The U.S. economy shrank at an annual rate of 0.9% from April through June. However, it added 528,000 jobs in July, marking the first time the U.S. has recovered all the jobs lost since the start of the pandemic, and driving the unemployment rate down to 3.5%, the lowest rate in over 50 years.
We have covered inflation repeatedly (most recently here, here and here) and will continue to do so as polls consistently show it is the number one concern for American voters. In our eight editions on inflation, this is the first time that some of the Labor Department numbers have stoked optimism that inflation may have peaked.
Below, we'll look at some responses from the right and left, then my take.
What the left is saying.
- The left is optimistic about the numbers, but also cautions not to get too excited.
- Some insist the Fed needs to continue to raise interest rates.
- Others say Biden is right to celebrate inflation flattening month over month.
In The New York Times, Paul Krugman said "finally, some good news on inflation."
"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," he wrote. "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.
"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," Krugman wrote. "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... 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."
In Bloomberg, Mohamed El-Erian said The Fed needs to resist a quick and easy interpretation of the latest data.
"The recent combination of a stronger-than-expected jobs report and better-than-expected inflation numbers has reset the dominant narrative in markets — again the quick and easy thing to do," El-Erian said. "The decidedly much more constructive economic tone is based on the view that the Fed will be able to complete its tightening cycle in the next few months and even start easing as early as next year, thereby limiting the hit to growth, employment and incomes. This puts the Fed in a difficult position. Does it follow suit and validate through actions and words the easing in financial conditions being carried out by markets; or does it remain steadfast and risk unsettling markets that have regained their footing after a damaging first half of 2022?
"As tempting as it may be to again choose the easy course of action, the Fed should resist yet another approach that risks keeping the inflation threat alive for longer," he wrote. "This would not only result in further erosion of purchasing power but also further damage growth prospects and impose an even heavier burden on the most vulnerable segments of our society. The Fed needs to stay the course and do its utmost to put the inflation genie back into the bottle. This is not easy, and it is far from risk free. Yet it dominates the other policy alternative available to a Fed that, because of its previous mistakes, no longer has a first-best policy approach at its disposal."
In CNN, Allison Morrow said: "Yes, Biden politicized inflation." But that doesn't mean he's wrong.
"From June to July, the CPI, which measures price movements for a basket of everyday goods and services, was in fact flat. Not exactly a break-out-the-champagne kind of result, but a step in the right direction," she wrote. "But Republicans pounced on what some saw as a gaffe and others saw as a fiction. Ted Cruz tweeted that it was 'cruel gaslighting' from the president, noting that headline figure on CPI was actually 8.5%. Just to be perfectly clear: The year-over-year rate of inflation was 8.5%, as was widely reported by news outlets including CNN. That means we're comparing July 2022 to July 2021, and that is how media typically choose to frame their reporting.
"But Biden didn't lie. Did he perhaps cherry-pick the more optimistic figure to focus on shorter-term improvements in spending power? Sure! He is a politician, after all," she wrote. "As we wrote here yesterday, the CPI was flat for one reason, and one reason alone: Energy prices came down. Almost everything else was up, including groceries and housing... Both Biden and the GOP are correct about the data, and both are missing the point. Biden's optimism looks Pollyannaish when people are still working paycheck to paycheck, even after he acknowledged that 'people were still hurting.' And the GOP's knee-jerk dismissal of the 0% month-to-month reading is unnecessarily gloomy, feeding an unhelpful narrative that anything good that happens under Biden's watch either isn't real or shouldn't be celebrated."
What the right is saying.
- While the numbers are better than last month's, many on the right say they still contain very worrisome signs.
- Some accuse Biden of misleading Americans about "zero" inflation.
- Others say the numbers are still bad despite waning energy demand helping ease prices.
In The Washington Post, Henry Olsen said the inflation problem is far from over.
"July’s rate was so encouraging largely because of energy prices, which dropped by 4.6 percent... But this masks the underlying problem. The average gas price has declined by almost a dollar a gallon since its high point in mid-June, but it is now only at March’s level," Olsen said. "Even more important is that prices continued to rise in virtually every other important economic sector. Food prices are an especially problematic area for Biden. They rose by 1.1 percent last month, making them 11 percent higher than they were a year ago. Inflation was even higher for dairy products (rising 1.7 percent last month) and grain products (1.8 percent higher). In other words, food items are getting more expensive every time Americans visit the grocery store. That omnipresent fact drives home the importance of inflation to every consumer.
"Housing prices are the most ominous indicator of future, stubbornly high inflation. They increased by 0.5 percent in July, almost no change from the prior month. That puts housing prices at 5.7 percent higher than last year and shows that demand continues to outstrip supply for this essential sector," he wrote. "Our current inflation is a direct consequence of our response to the pandemic. We flooded the economy with money through the multiple aid packages and reduced the supply of services that constitute the bulk of our economic activity. That created the savings buildup, and when supply constraints were lifted as the pandemic eased, the money had to go somewhere. We won’t return to pre-pandemic rates of inflation and growth until the balance between the supply of money and the supply of goods and services is restored."
In The Washington Examiner, Tiana Lowe said even a stark drop in fuel demand did not help inflation.
"White House allies and the monetary doves who browbeat the Fed into keeping interest rates at zero last year will attempt to spin the BLS's report as a success, a sign that President Joe Biden releasing oil from our strategic reserves worked and that our central bank need not end our era of easy money to stave off further inflation. Nothing could be further from the truth," Lowe wrote. "First, consider just the oil question. According to the Energy Information Administration, the national demand for oil plummeted from 9.25 million barrels daily to just 8.54 million barrels going from the oil price peak of mid-June until now. Spurred by those soaring prices, our anemic oil demand matched the peak pandemic lows of July 2020, just months after oil futures actually went negative due to an unprecedented lack of demand.
"And even so, the rest of the report is a total mess," she said. "Food price hikes continue to accelerate, with the price spike of food at home nearly double that of food away from home. Even worse are shelter costs that, despite them comprising a third of the CPI basket, are a gross underestimate. Although the BLS reports that shelter costs increased just 5.7% over the past year, both monthly mortgage costs and rents have risen far higher than that. Thanks to the increase in mortgage rates, the average monthly payment on a median-priced home has increased from $1,289 to $1,877 in the past year — a staggering 45%. The average monthly rent, aggregated by Redfin, is up by 15%."
In The Hill, Joe Concha called out Biden's "lie of the year."
"'I just want to say a number: zero. Today, we received news that our economy had zero inflation in the month of July. Zero percent. Here’s what that means: While the price of some things go up — went up last month, the price of other things went down by the same amount. The result? Zero inflation last month.' That was President Biden speaking to the country Wednesday," Concha said. "His administration has attempted to redefine what infrastructure means (it’s not only about improving roads, bridges and power grids but also about paid family leave and child care) and what a recession means (it’s not two straight quarters of negative gross domestic product growth anymore). But it just moved into the lead to win the 'Lie of the Year' award with the claim that the U.S. economy is experiencing zero inflation.
"The facts: Inflation still stands near a 40-year high and came in at 8.5 percent in July. In other words, the money coming into the average household still isn’t keeping up with the cost of everyday items," Concha wrote. "But the president and this administration decided to turn the most basic economic norms on their head for cheap political gain by arguing that since the inflation rate fell by six-tenths of a percentage point to 8.5 percent in July compared to the same month of last year, that somehow means zero percent. As a fun game to play on a summer weekend, imagine what would have happened if the previous president attempted to spin numbers with alternative facts in this fashion. The U.S. media would have screamed about the need for transparency and truth, and the fact checks and scathing editorials would commence. Yet that didn’t happen here with his successor."
Reminder: "My take" is a section where I give myself space to share my own personal opinion. It is meant to be one perspective amid many others. If you have feedback, criticism, or compliments, you can reply to this email and write in. If you're a paying subscriber, you can also leave a comment.
I think the least important part of all this is Biden's comment about "zero inflation," so I figure we can get that out of the way first.
Yes, it's classic politicking. It's frustrating, misleading, and ignorant to celebrate the fact the waters stopped rising while we're in the middle of a flood. As Joe Concha noted, fact-checkers are not all over the claim like they would be if it were said by Trump. Some websites didn't even cover it — a nice sign of their bias.
Peter Coy's take that Biden is both "right" and "wrong" is pretty much on point to me. We had zero inflation month over month. But yearly inflation is still near record highs. It’s misleading to report just the month-to-month numbers, doubly so because they fell so narrowly in the energy sector. And Biden clearly wants to muddle the waters with voters. But he can also celebrate some encouraging news, and he’s technically right when speaking specifically about month-over-month total CPI numbers.
With all that out of the way, I do think it's worth entertaining a little semblance of hope. We've covered this issue eight times now. Every single post before this one has had something between consternation and doomsday fear in "my take." This is the first time I think there is hope things may finally be improving.
Obviously, for now, that's mostly because of energy prices. Lowe is probably right that those prices seem to be driven down by "recession-spooked consumer demand contraction," but that's precisely the point of the Fed increasing interest rates — to contract demand. The hope is that we don't spin off into a serious recession, so a little bit of tightening seems to be in order and what economists are hoping for.
And, if you want to be really optimistic, you can think of energy prices as the tip of the spear. There are some positive signs from businesses reporting supply chain problems easing, and when fuel prices go down, the price of shipping goes down, which can reduce the cost for just about everything that moves in the global economy. On top of that, consumer expectations on inflation are declining (which is a good thing, since consumer expectations can themselves drive inflation). All of this is very good news.
The bad news is, well, everything else.
Core prices are still running way too hot, which means the Fed is — or, should — continue to bump interest rates and stay aggressive. There seems to be a strong consensus on this from economists across the political spectrum. Perhaps the most important thing, for Biden and the economy, is that real hourly wages are still down 3% over the last year. Food prices, grocery prices, and housing are all still rising quickly, and we'll need a few more good months of those prices falling and wages continuing to grow or staying steady for real wages to catch up. Energy prices are notoriously volatile and could reverse course due to any number of factors.
So: the numbers aren't all good. Most, frankly, are still bad. But inflation was never going to dissipate in one month. The hope, from every American, should be that this report indicates we are on the way down from peak inflation and not maintaining cruise control at this altitude. It's the first remotely encouraging sign we've had in a long time on inflation. We'll find out in the coming months if it is the beginning of a trend.
Your questions, answered.
Q: Why does the US continue to provide automatic citizenship to babies born on our soil? And should we do this? Why?
— Jennifer, Seattle, Washington
Tangle: Birthright citizenship comes from the concept of jus soli (“right of the soil”) or jus sanguinis ("right of blood”). The former is about being born on U.S. soil, while the latter is about being born to U.S. citizens. Europe tends to favor automatic citizenship for children of citizens, while the U.S. is one of about 30 countries that has birthright citizenship.
Birthright citizenship has not always been the law of the land in the U.S. It became law in 1790, and at the time applied only to "free white persons" who could become citizens after living in the U.S. for two years. Then their children under the age of 21 could also become citizens. In 1857, the Supreme Court's famous Dred Scott v. Sandford case found that an escaped slave was not a citizen; nor was any other person of African descent born in the U.S.
But in 1864 Congress passed a civil rights law that extended citizenship to all people born in the U.S. "not subject" to a foreign power. And the Fourteenth Amendment furthered that idea, defining citizenship as “All persons born or naturalized in the United States, and subject to the jurisdiction thereof.” In 1898, the son of Chinese immigrants fought for his citizenship because he was born in the U.S. but prohibited from being naturalized thanks to the Chinese Exclusion Act. He won, and his case has defined birthright citizenship ever since. History.com has a very simple and clean write up on this.
I think we could do a whole newsletter on whether we should have this, as it's a fascinating topic to me. There are about 4.1 million U.S. citizens who are children living with undocumented parents (sometimes derided as "anchor babies”), so it's definitely an issue impacting a significant number of people. On the surface, I think I'm preferential to the dominant European system (of gaining citizenship from parents), but I'd be a lot more supportive of that system if gaining legal citizenship here were easier and more straightforward.
Want to ask a question? You can reply to this email and write in (it goes straight to my inbox) or fill out this form.
A story that matters.
California governor Gavin Newsom has proposed keeping California's last nuclear plant open for another 10 years. Plans to close Diablo Canyon Power Plant over the next three years were supported by Newsom in 2016, but now he is introducing — at a cost of $1.4 billion — a plan to keep it operating. Newsom's office said the governor is focused on maintaining reliable energy for California households while also attempting to reduce carbon emissions. The plant provides about 9% of the state's electricity, and in 2020 California faced a series of rolling blackouts when a heat wave caused a large surge in power use. President Biden has embraced nuclear energy as part of his plan to help reduce U.S. emissions, but it's a divisive topic among environmentalists. AP News has the story.
- 70 million. The number of retirees and disabled people who receive Social Security benefits.
- 9.6%. The estimated forthcoming increase in their monthly checks in 2023, to keep up with inflation.
- 8%. The drop in gasoline prices last month.
- 44.6%. The increase in gasoline prices over the last year.
- 38%. The increase in the price of a dozen eggs in the last year.
- 6.3%. The increase in rent over the last year.
Have a nice day.
Researchers at the University of California Irvine say they have discovered a new signaling molecule for hair growth called SCUBE3. The research was published in the journal Developmental Cell, and claims to have uncovered the precise mechanism that encourages new development for the cells at the bottom of each hair follicle. The team behind the research hopes the discovery could lead to potential cures for androgenetic alopecia, a type of hair loss that impacts 50 million men and 30 million women in the United States alone. Sci Tech Daily has the story.
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