[NEWS ANALYSIS, OPINION & TUNES]
[Welcome to another edition of TNnT which is short for “Tick’s Notes & Tunes”, where we usually start with “Notes” of interest on various, usually important, topics which are followed by “Tunes” which is the transcript of a fictional short wave radio transmission from where and when we do not know. But tonight, we’re going to change things up a bit and start with “Tunes” and then finish up with some really important “Notes” about whether the President is responsible for the economy.]
WARNING: Those who are underage, squeamish and/or insist on political correctness might want to consider another blog, vlog or other reading material.
Except where otherwise expressly noted artificial intelligence was not used in the preparation or publication of this blog post. Tonight ChatGPT was utilized in getting information regarding the the export, import, consumer spending, investment and government spending figures used to determine GDP for 2022. Thanks ChatGPT All remaining content is strictly man-made. ]
TUNES
Well, guyz galz and so on
Let’s kick things off
With a band from the mid 80s
That had a relatively short career
that was started by an actor/dancer and
an emergency medical technician
one was from Northern Ireland
And the other from Italy
Their names are
Maurizio Bassi and
Jimmy McShane
I’ll betcha can’t guess which is
From which country
But regardless of whether ya can or not
I think you’ll enjoy their tune
Here’s
Baltimora with Tarzan Boy
https://youtu.be/–6CdAypJsQ?si=m8Da_PriQ8fNdXHM
Okay next up
We go way back
To the true glory days
This is a guy
Who GURU says he just can’t enough of
He’s made our DJ Ltd lineup
A few times over the last couple of months
Here’s a hint
The wisemen
Of the Christmas story
Here’s a lyric
We 3 _____ of orient are
Bearing gifts we travelled
…I think it’s “afar” or
Maybe “so far”
Oh well whatever
If ya guess it’s one of the Kings
You’d be right
The other 2 of course
Bein’ GURU’s old buddies
Albert and BB
But this time
Once again
It’s our man Freddie
Who apparently
just loves phonetically spelling his tunes
Here’s a goody
Sen sa shen
https://youtu.be/Yg9FF973JcE?si=CbW7nccnKf-kzLfx
Okay, a while back
I said that I thought I saw
Our very sexy Zombie girl
From Messer Chups
Yinz all remember her dontchya
Yeah
Like anyone could forget
Messer Chups had the drummer
And guitar whiz
Oleg Gitarkin and
Our gal Svetlana “Zombierella” Nagaeva
Anyway.. I said that I
Thought that I saw Zombie
Somewherez
Playin’ somethin’ besides
the bass she typically plays for
Messer Chups
And lo and behold
I was right
..seems that Zombie gal
Prior to her
Surf/horror group
Messer Chups
Previously played
With another band
from
St. Petersburg
…Russia..that is
And they were
Were called the Bonecollectors
I’m not sure but
It sure looks like Oleg
From Messer Chups
In the next video too
..but it looks like he’s playin’
Some kind of Gretch guitar
Instead of the Fender he had
With Messer Chups
But that’s definitely Zombie girl
And she ain’t playin’ bass this time
….nope…she’s on guitar as well.
And singin’
Don’t Yinz just love
Zombie’s voice
.
… Which she may not ever
Get a Grammy for
..but guaranteed
…the audience won’t give a hoot
They will just sit’ and watch
…and wish…and wish for
…[ahem] [ahem]
But man don’t sell ole Oleg short
He’s one helluva geeetttar player too.
Unlike their Messer Chups gig
this tune that these folks did
more of a countrified thing
or somethin’ goin’ on
…but it still rocks
In any event
Without further ado
Here they are…a tape
Of a Live performance
The Bonecollectors with Lucretia My Reflection
https://youtu.be/HgBvA9f6S3o?si=snnZAeGmXBUcSYKI
Alright time to break things up a bit
While it’s nice to welcome
Artists from around the globe
GURU always likes to brings us
Back to our roots and
Remind us
That we is Americans
Yes indeedy’
Red, white and blue
All the way
We met our next artist
Last time in a Texas dance hall
And she is indeed quite talented
She plays guitar and mandolin at least and
Writes a lot of her own tunes
And just a few short months ago
She Finally got to play
The Grand Ole Opry
Not sure
But she may well have written
Or co-written this next tune
Here she’s playin’ with another very talented
Musician with whom she’s done
A lot of collaborating
And it’s good ole Virginie that’s
She’s a pinin’ for this time.
So let’s enjoy
Brennen Leigh and Noel McKay with
I Wanna Be an Old Lady
https://youtu.be/DR1TfW08zwY?si=a3wBkUPTb3ucM8Tx
okay.,,, okay
folks thats our station’s secretary Suzi
tellin’ me that GURU just called in
and says he wants to hear this next tune
and of course
if GURU likes it
there’s a decent chance
that it’s from the garage
and that the record cover
is damp, musty and moldy as can be
But the record looks okay
And I must admit
That I am familiar with this
And it is indeed a great tune
From ..of course
…back in those glorious 60s
So here’s
Moving Sidewalks – by the 99th Floor
https://youtu.be/Ctt16zqgDpU?si=iRxjRqu1MDw5obek
Wheeeww
I gotta admit
GURU has good taste
Okay,
My gosh…look at the clock…
It’s time to close this episode up
And I’m just getting’ started
Oh well,
Okay,
So the question is
how does one top the the 99th Floor ?
it’s a tall order indeed !
But let’s give this next baby a whirl
And see what happens.
https://youtu.be/pwvB7ru-SmE?si=p5DIMFTS-OskmGwL
Wow great great job
I knew that
Eddie Holland
Could bring us home
With a little bounce in our step.
That was indeed his great tune
called….Leaving Here
Well..that’s it for tonight folks
As always
Yinz are the best
And so,
Until next time
This is Stony Riva
For GURU
And little Ms. Suzi
Sayin…
Thanks for listenin’
Thanks for watchin’
Good Night
And don’t let those nasty bed bugs bite!
NOTES (aka the Blog Article):
There’s an article on Business Insider by Cork Gaines dated April 11, 2024 that everyone should read because it makes an incredibly relevant and important point in Presidential election years. It is titled “Mark Cuban says there is one thing that he wishes Americans understood better about the economy in an election year.” (See: https://www.businessinsider.com/mark-cuban-presidential-election-issues-economy-donald-trump-joe-biden-2024-4)
As we’ve stated in several prior articles and videos**, the U.S. economy is affected by many factors and the President has little or no control over several very important ones. When people talk about how well the economy is doing they naturally consider things like employment, job security, wages, inflation, interest rates, their mortgage or rent payment, food and gas prices and things of this nature. Professional economists say that in reality the all of these things are mostly dependent upon things such as the rate of inflation, interest rates, the unemployment rate, gross domestic product (GDP), federal budget deficits, the total federal debt, the level of taxation, international trade and other externalities.
Putting aside war, disease and international considerations for a moment, and, if we just focus on domestic U.S. considerations, the health of the U.S. economy is driven primarily by two things: (i) fiscal policy which is the result of joint action by Congress and the President; and (ii) interest rate policy which is set by the Federal Reserve Bank, otherwise known as “the Fed”.
The first of these two policies, fiscal policy, includes matters pertaining to the federal budget meaning the taxing and spending powers of the government. Both the U.S. House of Representative (which has 435 members) and the U.S. Senate (which has 100 senators), (hereinafter collectively referred to as “Congress”) must first pass a budget and/or a tax law before it is presented to the President for his signature so that they can become law. The same is true for “appropriations” meaning how government tax revenues are spent on various governmental programs, be it on defense, public works or on other domestic programs. The President does have the power to veto any law proposed by Congress. However, Congress can override any veto by the President, if there are enough Congressional votes to do so. Overriding a Presidential veto normal requires a super-majority vote of Congress.
While it is true, that Presidents have a significant amount of influence over what Congress does because often the President can almost always get some cooperative member of Congress to introduce the President’ proposed budget, defense and/or appropriations bills, the fact of the matter is that the President has no power whatsoever to unilaterally (without the consent of Congress) have his budget or any other bill enacted into law. The same is true for laws affecting appropriations or the level of taxation. As such, Presidents are in a formal sense, subject to the whims of Congress when it comes to budget deficits, appropriation (spending) matters and the level of taxation. Moreover, the total federal debt (its total debt the U.S. has accumulated over its entire history) is very dependent on what happened before the President even took office.
The foregoing is emphatically not to say that the President has no influence on federal budget deficits, appropriations or tax rates during his term in office. The President clearly does have a lot of influence, probably more than any on particular public officeholder, over the budget, appropriations and tax rates. However, in reality, the President’s influence is only one of having enough political clout (which boils down to perceived public support for what he’s doing) so as to informally influence members of Congress to do things in the manner the President wishes. This is for fear that they, the members of Congress in question, won’t be re-elected if they don’t support the President and his or her programs. Naturally the ease with which the President can find members of Congress to do as he or she wishes is very dependent on how popular the President is with the general public at the time in question. Thus, while the President does have the power to sign budget, appropriations and tax bills into law, the President can only sign what’s put in front of him by Congress.—and even this power is potentially subject to veto override by Congress if they have the super-majority votes to do so.
It should also be noted that budget deficits and government debt affect both interest rates and inflation. How much budget deficits and the amount of government debt does so, is subject to some debate. However, generally speaking, budget deficits and the overall size of the federal debt affect how much money the government needs to borrow in order to operate. If the government needs to borrow a lot of money it has the affect of pushing up interest rates. Budget deficits also have a tendency to increase overall demand for goods and services usually because of the disproportionately large amount of government spending normally associated with government budget deficits. This tends to lead to inflation. But here again, the amount of budget deficits is determined by what Congress and the President can ultimately agree upon in order to keep the government operating. However, neither Congress nor the President has a total say in the matter.
One final point about fiscal policy should be noted. Many economists argue that it is not just a question of whether there’s a deficit. A significant number point out that government investment in otherwise productive assets or programs which will help boost the U.S. economy in the future can more than offset the negative effects of deficit spending by the government. This argument is basically the equivalent of saying that it’s okay to borrow money if the interest rate on what you’re borrowing is less than the profits or return on investment of what you are using the borrowed funds for. Spending on the national infrastructure and green energy are, some argue, two examples of this.
The last big factor to affect the health of the U.S. economy is interest rate policy which is often still referred to as “monetary policy” even though the Fed no longer places as much importance on controlling the money supply as it once did. Interest rate policy is not made by the President or Congress. Interest rate policy is, instead, determined by the Federal Open Market Committee (which is often referred to as FOMC) which is an extremely important committee consisting of certain members of the Fed itself. All members of the Board of Governors of the Fed, including the Chairman of the Fed are nominated for their positions by the President. However, they must all be confirmed by the U.S. Senate before they can take office. The Fed and thus the FOMC were established by a law passed by Congress in 1913. The purpose of the Fed is to not only regulate how member banks conduct business but also to help keep both unemployment and inflation rates low.
The Fed sets interest rate goals for the economy primarily by setting a target for the “federal funds” rate.*** The federal funds rate more or less establishes the base rate upon which many, if not most, of all other bank system and other loans which ultimately affect consumers and businesses are based. To simplify, most banks and lending institutions take the federal funds rate and then add a certain number of additional percentage points to come up with the rate that they ultimately charge consumers and businesses on car loans, mortgage loans as well as the prime rate charged by banks to many businesses.
Unfortunately, two of the goals set for the Fed by Congress are to a significant degree inconsistent with each other. By this it is meant that it is theoretically impossible to reduce both unemployment and inflation rates to zero percent at the same time. There are several structural reasons for this. One is that there will always be, at least temporarily, people moving from one job to another and thus there will always be a certain amount of unemployed even in the very best of times. But the bigger reason is that at some low level of unemployment, as the number of available workers (as well as the amount of other supplies) becomes more and more scarce (because of very low unemployment), this inevitably causes wages to skyrocket as employers start to compete with each other to attract the few remaining available workers to fill much needed positions by offering higher and higher wages. This in turn tends to ignite another round of higher inflation as the cost of higher wages seeps into the cost of producing all goods and services. Thus, when it establishes interest rate policy the FOMC has to balance competing unemployment and inflation considerations because it cannot achieve complete success in achieving its low unemployment goal without adversely affecting its ability to achieve a low inflation rate. And, similarly, it cannot achieve a low rate of inflation without accepting that a certain amount of unemployment has to occur. This is because if the country is operating full employment high inflation rates will eventually force the Fed to increase interest rates (by raising the Federal Funds rate) so as to slow down the economy and reduce inflation to acceptable levels. (The current target rate for inflation is 2%) Thus, a key question for FOMC and thus the Fed is: What are the acceptable and achievable low rates of inflation and unemployment and how low can one or the other go without making the other rate go to unacceptably high levels.
Beyond domestic fiscal and interest rate policy considerations, one must also remember that externalities such as war, drought, disease, trade embargos, tariffs, currency exchange rates and international trade have an important effect on the health of any economy, including that of the U.S. Naturally, the President has some affect on these things, but much also depends again on the policies and actions of not only foreign countries but also Congress and the Fed as well. For example, Fed interest rate policy will have an effect on the currency exchange rates of the U.S. Dollar versus that of foreign currencies. And importantly, these currency exchange rates will affect the level of both U.S. exports to and U.S. imports from foreign countries. Additionally, one need only consider the effects that the war in Ukraine which has affected both wheat prices (an important ingredient in cost of bread, cereals and livestock feed) and oil prices to realize that foreign conflicts can have a significant affect on the U.S. economy. Moreover, Covid created immense supply chain issues for a couple of years which also affected domestic prices of many items whose components parts were produced overseas.
Naturally, the President has a lot of influence on U.S. foreign policy and military matters. The extent to which these matters, in turn, affect the U.S. domestic economy can be said to attributable to Presidential causes. However, several caveats and limitations on the Presidential effect and responsibility must be noted. The President needs the support of Congress to do anything affecting the amount of defense spending and/or foreign aid contained in the budget. Moreover, regarding international trade, the President needs the support of Congress to make the laws necessary to impose or change tariffs, quotas, trade embargos and trade sanctions pertaining to foreign countries. In fact, with respect to these later matters the President’s ability to control what is actually done by the government is much like what happens with respect to the U.S. budgetary process discussed below. Moreover, and in any event, the total affects that things like international trade (exports minus imports) have amounted to only about a negative seven percent of the total economy in 2022.**** As such, many might reasonably argue that that these international effects on the economy are not as important as the domestic fiscal and interest rate policies that were discussed above.
The bottom line is that the President has virtually no direct effect on one major influence on the nation’s economy. The President has no direct effect on FOMC interest rate policy (other than to initially nominate persons to become members of FOMC which of course is subject to for Senate confirmation ). The President often has no control over things like pandemics, severe weather and many, if not most, foreign wars. The President has virtually no power to unilaterally impose his will on the U.S. economy unless Congress has first given him that power in situations for example like certain emergencies. In short, the President has very little control over the U.S. economy unless the House of Representatives and the Senate pass a law or a budget requiring his signature.
The foregoing does not mean the President has no power over the economy. It only means that the President’s power is limited to his or her power to informally persuade Congress to enact his legislative agenda. While there is no doubt that this informal power is extremely important, it is nevertheless very largely dependent on how popular the President is at the time any particular budgetary plan, policy position or law is being considered. If the President is not popular and/or if his party does not control both the House of Representatives and the U.S. Senate the President’s ability to influence the economy goes down significantly.
Before concluding at least two other things are also important to consider. The first is consumer confidence *****. If consumers do not feel secure in their jobs and/or confident about the future they will not spend money which has the effect of lessening overall economic activity. This is obviously somewhat of a wild card in terms of determining what combination of factors are contributing to consumer confidence because the contributing factors could be both foreign and/or domestic. For example, does the introduction of ChatGPT create employment uncertainty leading to a lessening of consumer confidence? How about uncertainty about the situations in Ukraine? The Middle East? Taiwan?
A second additional point is the inevitable lag that occurs between the time that any economic policy is instituted and the time it’s effects are actually felt in the economy itself. For example, changes in tax laws and/or changes caused by the process of implementing new domestic and/or defense spending programs take time to have an effect on the overall economy. How long it takes depends largely on the type of program involved and how big the program is. However, the guess here is that if someone were to say that it takes at least 6 months for any fiscal policy change to have a discernable effect on the overall economy, we wouldn’t argue. Moreover, fiscal policy changes can and do in many instances have long term effects which can slop over from one Presidential administration to the next. Generally speaking, however, it is probably fair to say that changes in fiscal policy take longer to have an effect on the overall economy than FOMC’s changes in interest rate policy. This is because Fed changes to the federal funds rate can usually be built by banks into the new lending rates that they offer consumers and businesses fairly quickly.
Conclusion:
In conclusion, it’s our opinion that it is correct to say that the general public mistakenly believes that the President has more power and influence over the nation’s economy than he really does. While the President is arguably the single most important actor on the economy (along with, many would argue, the Chairman of the Fed and/or FOMC) generally speaking, when the economy is good Presidents are probably given too much credit and when it’s bad they probably get too much blame.
For more on the things that affect the health of our economy readers may want to check out one or more of our many videos on this vitally important topic. See our blog article, “Finance Macro Economics & International Business Videos” (see end note **).
David Dixon Lentz April 14, 2024
(© Copyright as to all written content in this article/ post 2024. David Dxion Lentz; All Rights Reserved)
END NOTES
** See the videos linked on the following blog post for many relevant educational videos on the subjects of economics (including interest rate and fiscal policy), finance, currency exchange rates and international trade. The blogs title is: “Finance Macro Economics & International Business Videos” https://reasonandbalance.com/finance-macro-economics-international-business-videos/
*** The federal funds rate is the interest rate banks charge each other so that they can maintain sufficient “reserves” to satisfy the bank reserves requirements established by the Fed. The Fed sets a target federal funds rate, by publicly announcing that target and then uses certain market-based mechanisms to manipulate interest rates to the targeted level it has set. It does this by and through the buying and selling of U.S. treasury securities (via its open market operations), establishing/changing reserve requirements and establishing/changing the discount rate which it charges member banks when they borrow money from the Fed to meet reserve requirements.
**** It must be remembered that imports are “netted” against exports when calculating GDP. See
the next footnote below. As such, calculating the portion of gross domestic product dependent on trade can be misleading, especially when a country such as the United States imports more than it exports. Nevertheless even in the rawest of raw terms, if exports and imports were added (and not netted like they properly are) then at most total exports and imports amounted to less than 24 percent of all U.S. economic activity. The point being that domestic fiscal and interest rate policies have far more effect on the economy than international trade.
***** This subject gets into how the nation’s collective income is determined. This is often referred o as “gross domestic product” (GDP) and is calculated generally by the formula:
GDP = C + I + G + (X -M) where C is consumer spending; I is investment spending; G is government spending; X is the amount of exports and M is the amount of imports. (X-M) is net exports. For the year 2022, C was $14,831, I was $4,592, G was $4,338, X was $2,930 and M was $4,406. Thus GDP in 2022 was $14,702.
For many years this X-M figure has been negative because the U.S. imports more goods and services than it exports. Naturally if C or I or G go up or down then so will the level of economic activity in the U.S. Thus if C goes down because of, for example, low consumer confidence then the economy will slow down as well.