TL(PM) DIGEST: Nevertheless, inflation persisted
Plus Beijing cracks down on foreign companies, American youth in crisis, and religious liberty issues at the USPS
1. The changing face of inflation
What happened? Economic growth slowed to 1.1 percent in the first quarter of fiscal year 2023, while wages grew at a healthy annual clip of 5.1 percent. Inflation continued its glacial retreat, but remained persistent with prices rising at an annual rate of 4.2 percent. But the underlying drivers of inflation have changed: services—not goods, food, or energy—accounted for most of last quarter’s price increases, and inflation itself no longer appears to be cancelling out wage increases.
Why does it matter? No one likes to pay more for the same goods and services, but public discontent with the state of the economy and concerns about inflation have more to do with the fact that inflation exceeded wage growth over the past two years—many Americans have been taking home more pay, yes, but not enough to keep up with rising prices. That gap seems to have closed in the recent data, but it remains to be seen whether or how long it will take for this new economic reality to affect ordinary Americans.
TLP’s take: Economic data continues to give policymakers and ordinary Americans mixed messages when it comes to employment, inflation, and overall economic growth. But this recent release suggests that Federal Reserve’s strategy to cool off the economy without risking a major recession is working, albeit not as quickly as many of us would like.
2. Beijing cracks down on foreign companies
What happened? While the Chinese government claims their country remains open for business, the Wall Street Journal reports that Beijing has cracked down on a slew of foreign businesses operating in China. American consulting firms Bain Capital and the Mintz Group, U.S. chipmaker Micron, and Japanese pharmaceutical company Astellas Pharma have all been targeted under Beijing’s recently-expanded espionage laws.
Why does it matter? Foreign companies will not invest or operate in China if they feel Beijing can shut them down on a whim, and many will either pull out completely or look to diversify their overseas operations so they don’t have all their eggs in one basket. Moreover, the WSJ reports that the current crackdown appears to be targeting due-diligence and other professional services firms that provide information on doing business in China, making it even more risky for foreign companies to operate there.
TLP’s take: Contrary to what many commentators seem to believe, de-coupling is a two way street. Persistent complaints about how American and allied industrial policies and export controls amount to a harmful severing of economic ties fail to recognize that Chinese government policies may in fact be the biggest driver of and de-coupling that’s happening right now.
3. America’s young people cry out for help
What happened? The Centers for Disease Control and Prevention is out with its 2021 Youth Risk Behavior Survey concluding that across a number of indicators—from mental health to exposure to violence to substance abuse—“America’s kids are in crisis,” as Politico reports.
Why does it matter? The biennial study, which involved multiple local level surveys among young Americans from 9th to 12th grade, finds higher reported incidents of sexual violence, attempted suicide, and experiences of violence in their communities among young people. There was one bright spot in the study, however:
The number of students who said they were currently using alcohol, marijuana or binge drinking was down from 2021, though about 1 in 3 still reported having used a substance in the previous 30-day period.
TLP’s take: The COVID-19 pandemic, with its lockdowns and school closures, clearly had a negative impact on the lives of our young people. Whether these experiences will leave a permanent mark on America’s youth remains to be seen, but the policy lessons from this episode should be clear the next time a similar global health emergency arises: watch out for the kids and don’t curtail their normal lives, or else risky alternatives will fill the void.
4. The Supreme Court takes up another religious liberty issue, this time with the United States Postal Service
What happened? The Supreme Court recently heard arguments in Groff v DeJoy related to a former postal worker and observant Christian, Gerald Goff, who said his religious liberty was violated when the United States Postal Service forced him to work on Sundays.
Why does it matter? There used to be no mail delivery on Sundays, but the USPS now has a contract with Amazon to deliver its packages seven days a week. This means some people like Mr. Goff have to work on their Sabbath day, in possible violation of Title VII of the Civil Rights Act of 1964.
TLP’s take: Government agencies like the USPS with corporate contracts should be required to allow religious exemptions for work without punishing their employees—applied equally to people of any faith background or none. Religious accommodations in the workplace do not typically put an undue hardship on the government or corporate employers, and they uphold basic constitutional principles protecting religious freedom.
Just one more thing…
Who’s the protectionist now? Belgian authorities destroyed over 2,300 cans of Miller High Life beer on the grounds that its advertising slogan, “the champagne of beers,” violated European product labeling rules.