[brid video=”9969″ player=”1929″ title=”The McLaughlin Group 61915″]
The McLaughlin Group (06-19-15) panelists Pat Buchanan, Eleanor Swift, Mort Zuckerman, and Clarence Page discuss the week’s events. First, the panel debates the response by the President and the community to the Charleston church shooting.
The McLaughlin Group (06-19-15) panelists Pat Buchanan,
Danish Prime Minister Helle Thorning-Schmidt, a Social Democrat, defends a deal with Goldman Sachs that tore her cabinet apart. JONATHAN NACKSTRAND/AFP/Getty Imagesdenmark
I suggested earlier this year that Denmark’s ratio of private sector workers compared with government dependents produced the world’s most depressing Powerpoint slide.
It’s hard to be optimistic, after all, if a nation has an ever-growing number of people riding in the wagon (or the “party boat“) and a stagnant population of productive people.
But I don’t want to be overly pessimistic. Denmark may have a big welfare state and a punitive tax system (I’ve joked that birthers should accuse Obama of being born there rather than Kenya), but it is very pro-market in other policy areas.
Indeed, it beats the United States in 3 out of the 5 major categories in the Fraser Institute’s Economic Freedom of the World Index.
And while the United States has a higher overall score – ranked #12 compared to #19, Denmark had more overall economic freedom than the United States as recently as 2010 and 2011.
With this introduction, you’re probably guessing that I plan on saying something nice about the Danes. And you’d be right. It turns out that our Nordic friends are slowly but surely adopting my Golden Rule of spending restraint.
Look at this data on government spending from the IMF’s database. As you can see, the burden of spending has been climbing at a much slower rate in recent years, and the forecast shows even more frugality in the near future.
Perhaps most important, the modest fiscal discipline that began in 2009 is paying big dividends.
Government spending that year consumed nearly 58 percent of Denmark’s economic output. Now, the burden of spending is “only” 53 percent of GDP.
Still astronomically high, to be sure, but heading in the right direction. And if Denmark maintains the spending restraint projected by the IMF,
the burden of spending will drop to less than 51 percent of GDP in 2017.
And that may actually happen. Just a few days ago, Denmark’s left-wing government was voted out of office and the new center-right government is promising tighter control of the purse strings.
I would like to think I played a very tiny role in this development. My friend Mads Lundby Hansen from Denmark’s free-market think tank (CEPOS) took part in a debate before the election and promoted the Golden Rule.
Here’s a picture from his Facebook page.
Lundby & Sandbergs “Golden Rule”: Lad den private sektor vokse hurtigere end den offentlige sektor – og brug overskuddet på lavere skat – Politik-udvikling under Cheføkonom-debatten 😉
Posted by Mads Lundby Hansen on Saturday, June 13, 2015
Unfortunately, even though I would like to think I played a role, Mads burst my bubble by informing me that the Golden Rule “wasn’t an issue in the election.”
But I don’t care if politicians are overtly cognizant of the Golden Rule. And I certainly don’t care if they know my name. I just want good policy.
So the moment the burden of government spending drops below 50 percent of GDP in Denmark, I’m going to declare victory in the battle.
Though I won’t declare victory in the war until we shrink government to its growth-maximizing level.
P.S. Denmark’s most famous welfare recipient is “Lazy Robert,” who was honored for his lack of contribution to society by being selected to the Moocher Hall of Fame.
P.P.S. One important lesson from Denmark is that a nation can somewhat successfully endure bad fiscal policy by being hyper-free market in other policy fields.
P.P.P.S. Another Nordic nation, Sweden, already enjoyed a big improvement in fiscal policy thanks to a multi-year period of spending restraint.
In Denmark, the ratio of private sector
Last September, I wrote about some very disturbing 10-year projections that showed a rising burden of government spending.
Those numbers were rather depressing, but a recently released long-term forecast from the Congressional Budget Office make the 10-year numbers look benign by comparison.
The new report is overly focused on the symptom of deficits and debt rather than the underlying disease of excessive government. But if you dig into the details, you can find the numbers that really matter. Here’s some of what CBO reported about government spending in its forecast.
The long-term outlook for the federal budget has worsened dramatically over the past several years, in the wake of the 2007–2009 recession and slow recovery. …If current law remained generally unchanged…, federal spending rises from 20.5 percent of GDP this year to 25.3 percent of GDP by 2040.
And why is the burden of spending going up?
Well, here’s a chart from CBO’s slideshow presentation. I’ve added some red arrows to draw attention to the most worrisome numbers.
As you can see, entitlement programs are the big problem, especially Social Security, Medicare, Medicaid and ObamaCare.
Even CBO agrees.
…spending for Social Security and the government’s major health care programs—Medicare, Medicaid, the Children’s Health Insurance Program, and subsidies for health insurance purchased through the exchanges created by the Affordable Care Act—would rise sharply, to 14.2 percent of GDP by 2040, if current law remained generally unchanged. That percentage would be more than twice the 6.5 percent average seen over the past 50 years.
By the way, while it’s bad news that the overall burden of federal spending is expected to rise to more than 25 percent of GDP by 2040, I worry that the real number will be worse.
After all, the forecast assumes that other spending will drop by 2.2 percent of GDP between 2015 and 2040. Yet is it really realistic to think that politicians won’t increase – much less hold steady – the amount that’s being spent on non-health welfare programs and discretionary programs?
Another key takeaway from the report is that it is preposterous to argue (like Obama’s former economic adviser) that our long-run fiscal problems are caused by inadequate tax revenue.
Indeed, tax revenues are projected to rise significantly over the next 25 years.
Federal revenues would also increase relative to GDP under current law… Revenues would equal 19.4 percent of GDP by 2040, CBO projects, which would be higher than the 50-year average of 17.4 percent.
Here’s another slide from the CBO. I’ve added a red arrow to show that the increase in taxation is due to a climbing income tax burden.
These CBO numbers are grim, but they could be considered the “rosy scenario.”
The Committee for a Responsible Federal Budget (CRFB) produced their own analysis of the long-run fiscal outlook.
Like the CBO, CRFB is too fixated on deficits and debt, but their report does have some additional projections of government spending.
Here’s the key table from the CRFB report. Not only do they show the CBO numbers for 2065 and 2090 under the baseline scenario, they also pull out CBO’s “alternative fiscal scenario” projections, which are based on more pessimistic (some would say more realistic) assumptions.
As you can see from my red arrows, federal spending will consume one-third of our economy’s output based on the “extended baseline scenario” as we get close to the end of the century. So if you add state and local spending to the mix, the overall burden of spending will be higher than it is in Greece today.
But if you really want to get depressed, look at the “alternative fiscal scenario.” The burden of federal spending soars to more than 50 percent of output. So when you add state and local government spending, the overall burden would be higher than what currently exists in any of Europe’s welfare states.
In other words, America is destined to become Greece.
Unless, of course, politicians can be convinced to follow my Golden Rule and exercise some much-needed spending restraint.
This would require genuine entitlement reform and discipline in other parts of the budget, steps that would not be popular from the perspective of Washington insiders.
Which is why we need some sort of external tool that mandates spending restraint, such as an American version of Switzerland’s Debt Brake (which you can learn more about by watching a presentation from a representative of the Swiss Embassy).
Heck, even the IMF agrees that spending caps are the only feasible solution.
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Dan Mitchell: The new CBO report is
(Photo: PBS)
President Obama has often repeated the claim that he cut kept his promise to cut the federal deficit in half, but that has always been a gimmick. In fact, Democratic presidential candidates are trying to one-up each other on more government spending, including free college and expanding Medicare, Medicaid and Social Security.
But a new report from the Congressional Budget Office (CBO) serves as a dire warning to the president and Congress that the “outlook for the federal budget has worsened dramatically over the past several years.” The CBO notes that the deficits under President Obama — which he claims to have cut so dramatically — are little more than budget gimmicks designed to run the clock out on his tenure. Within a few years, however, largely due to rising health care costs, ObamaCare, and an aging population promised Medicare and Social Security, deficits as a percentage of gross domestic product (GDP) will explode.
“Moreover, debt would still be on an upward path relative to the size of the economy. Consequently, the policy changes needed to reduce debt to any given amount would become larger and larger over time,” the CBO stated in the budget outlook report. “The rising debt could not be sustained indefinitely; the government’s creditors would eventually begin to doubt its ability to cut spending or raise revenues by enough to pay its debt obligations, forcing the government to pay much higher interest rates to borrow money.”
While the deficit is projected to shrink in 2015 to its smallest percentage of GDP since 2007 — CBO projects it at 2.7 percent, a much smaller percentage than the recent peak of nearly 10 percent in 2009 — the true cost of these programs have largely been delayed. The longer proponents of big government spending put off the inevitable, which is either a massive debt crisis of an end to demagoguing anyone who puts forward serious federal budget reforms — the more serious the pain will be.
“Throughout the next decade, however, an aging population, rising health care costs per person, and an increasing number of recipients of exchange subsidies and Medicaid benefits attributable to the Affordable Care Act would push up spending for some of the largest federal programs if current laws governing those programs remained unchanged,” the report says. “Moreover, CBO expects interest rates to rebound in coming years from their current unusually low levels, raising the government’s interest payments on debt.”
Deficits over the entire 10-year period examined by the CBO would total roughly $7.4 trillion, most which will begin to explode in the later part of the decade. From 2016 to 2021, deficits are projected to stay close to their current percentage of GDP for only the next few years before the amount of federal debt held by the public begins to jump off of the 73- to 74-percent of GDP) range. Thereafter, the larger deficits would boost debt—to 78 percent of GDP by the end of 2025.
“How long the nation could sustain such growth in federal debt is impossible to predict with any confidence,” the CBO says. “At some point, investors would begin to doubt the government’s willingness or ability to meet its debt obligations, requiring it to pay much higher interest costs in order to continue borrowing money. Such a fiscal crisis would present policymakers with extremely difficult choices and would probably have a substantial negative impact on the country.”
Here are a few predicted impacts of a budget crisis if Washington — and the American voter — do not get their acts together:
It’s a dire warning, indeed. Though the CBO did a good job of sugar-coating this warning, the result is more than an abstract economic argument. In a debt crisis such as this, government promises to seniors turn into broken promises; there are no food stamps for those who need it, let along those 125 percent above the poverty line. How will that play out in our already-tumultuous, inner-city neighborhoods where the fabric of civil society now threatens to tear with each new headline?
And, despite the CBO’s willingness to look at possible tax increases to solve the problem, their is simply not enough money to tax and spend our way around it. Here are a few solution scenarios the CBO put forward, but it’s important to keep in mind that many economists argue that they do not adequately factor the nearly $100 trillion in unfunded liabilities.
“Even if policy changes that shrank deficits in the long term were not implemented for several years, making decisions about them sooner rather than later could hold down longer-term interest rates, reduce uncertainty, and enhance businesses’ and consumers’ confidence,” the report states. “Such decisions could thereby make output and employment higher in the next few years than they would have been otherwise.”
Given the Democrats’ (and some Republicans’) loyalties to ideological purity over common sense, as well as the utter lack of spine, straight talk and leadership found in Washington D.C., it is easy to see why a solid majority of Americans say the country is headed in the wrong direction. Still, unfortunately, major media outlets are derelict in their duty to inform and alarm them just how bad of shape we are in as a nation.
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A new report from the Congressional Budget
FILE – This July 24, 1997 file photo shows a plastic casting of the skull from the bones known as Kennewick Man in Richland, Wash. The ancient skeleton, found nearly 20 years ago in a river in Washington, is related to Native Americans, says a DNA study published Thursday, June 18, 2015. The finding could help resolve a long-running dispute over its ancestry and custody. (Photo: AP/Elaine Thompson)
A recent DNA analysis of an 8,500-year-old skeleton found in Washington state 19 years ago says the so-called “Kennewick Man” is related to Native Americans, blowing a massive hole in the theory that he arrived from Siberia via a land bridge that used to extend to Alaska.
Researchers relied upon a DNA analysis to try to settle the skeleton’s ancestry after many scientists disputed the theory based on features that didn’t comport with theory. They were able to recover DNA from a fragment of a hand bone and map Kennewick Man’s genetic code. Then, they compared that to modern-day DNA from native peoples of the Americas and various other humans around the world.
The results showed a greater similarity to the DNA structure of natives in the Americas than from anywhere else, with a close relationship to at least one Native American population in Washington. The research, by an international team of scientists, was published online Thursday by the journal Nature.
Kennewick Man was uncovered in 1996 after two men stumbled across part of its skull in the Columbia River near the city of Kennewick in southern Washington.
But the origin of Kennewick Man isn’t the only controversy surrounding the discovery.
Several Native American tribes have asked that the skeleton be handed over to them for reburial, under a 1990 federal law aimed at returning certain Native American cultural items, including human remains, to descendants and culturally affiliated tribes. Their request was set to be granted without incident by the U.S. Army Corps of Engineers, which manages the land where Kennewick Man was found.
However, a group of scientists sued to block the Army Corps of Engineers from doing so, claiming the bones should be kept available for study. In 2004, a federal appeals court agreed with lower court decisions to block the Army from granting the request based on the scientists’ claims that the law did not apply because there was no evidence to connect the remains to any existing tribe.
Still, it isn’t yet clear how the results of the DNA analysis will impact the ruling.
The Washington-based Colville tribe, a Native American group that had filed one of the initial requests, donated DNA to be analyzed, which found that Kennewick Man is “very closely related to the Colville,” said Eske Willerslev of the University of Copenhagen, senior author of the study. Mr. Willerslev said DNA from the other tribes had not been offered for testing yet, but he suspects they are closely related, as well.
Jim Boyd, chairman of the council that governs the Confederated Tribes of the Colville Reservation, said the findings will aid the tribal efforts to rebury the remains.
“We have always maintained the belief that the Ancient One was one of us,” Boyd said, using the tribal term for Kennewick Man.
Doug Owsley, one of the scientists from the Smithsonian Institution’s National Museum of Natural History who sued to block the Army Corps of Engineers, contends the new DNA findings do not sufficiently link the skeleton to the Colville group to justify handing them over under the federal law.
“The results do not tie Kennewick Man exclusively to the Colville,” said Owsley, adding that other data show Kennewick Man was “a traveler…. His people were coming from somewhere else. We don’t know who that people (were), we don’t know what their culture was.”
Willerslev said that until researchers have a more comprehensive collection of DNA samples from native populations in the Americas, they won’t be able to definitely tell what tribe or population Kennewick Man is most closely related to. Yet, despite the Smithsonian’s claim, this isn’t the first time bones have been handed over to a tribe for burial purposes.
Last year, the 12,600-year-old bones of a baby boy found in Montana were reburied in a tribal ceremony after DNA showed links to native peoples.
Brig. Gen. John Kem, commander of the Northwestern Division of the Corps of Engineers, said his staff will analyze the research so he can decide whether to turn the bones over to the tribes. The skeleton is stored at the Burke Museum of Natural History and Culture in Seattle.
A DNA analysis of the 8,500-year-old skeleton
(Photo: Reuters)
The Philadelphia Federal Reserve’s Manufacturing Business Outlook survey of the mid-Atlantic region increase to 15.2 in June from 6.7 the month prior. The reading far outpaced Wall Street expectations for a rise to 8.
“Firms reported higher prices for raw materials and other inputs in June compared with reported price decreases in recent months,” the report said. “The survey’s indicators of future activity suggest that firms expect continuing growth in the manufacturing sector over the next six months.”
The Philadelphia Federal Reserve’s Manufacturing Business Outlook
Dylann Roof, 21, the suspect in the Charleston shooting at a historical black church, and the suspected vehicle, right.
DEVELOPING: Local law enforcement officials and the FBI have confirmed the suspect’s identity in the Charleston church shooting on Wednesday night. Dylann Roof, 21, of Colombia, S.C., was identified by his uncle who saw the pictures released by the police and was arrested in Shelby, North Carolina.
Shelby, which is roughly 240 miles from Charleston, sits on the border between North and South Carolina. A citizen reported suspicious activity after noticing the suspect’s vehicle and the police officer who responded knew immediately that it was the person authorities were looking for. Roof, who was cooperative, was arrested and taken into custody without incident.
Reports say that he was given a .45 caliber handgun by his father, which was used in the shooting. He was previously arrested on a drug charge in March, 2015.
Nine people were killed after Roof walked in during a prayer meeting and sat down for an hour before he began shooting. Authorities have classified the Charleston shooting as a hate crime, and the Justice Department has already opened an investigation classifying it as such.
“This is a tragedy that no community should have to experience,” Charleston Police Chief Greg Mullen said at a press conference early Thursday. “It is senseless and unfathomable in today’s society that someone would walk into a church during a prayer meeting and take their lives. This tragedy that we are addressing right now is indescribable. No one in this community will ever forget this night.”
The church is a well-known historic black American church that traces with roots dating back to 1816. After several churches split from Charleston’s Methodist Episcopal church, the congregation became part of the Underground Railroad that helped runaway slaves get to the North. Denmark Vesey, one of the founders of the church, even tried to organize a slave revolt in 1822 but was caught and the church was burned to the ground. Parishioners worshipped underground until after the Civil War.
This undated photo shows South Carolina state Sen. Clementa Pinckney, pastor of Emanuel AME Church in Charleston, S.C. Pinckney was killed Wednesday in a mass shooting during a prayer service at the church. (Emanuel AME Church)
Among the dead was the church’s pastor, state Sen. Clementa Pinckney, 41, who had been a pastor since he was 18. Pinckney was the youngest African-American elected to the South Carolina legislature when he won office in 1996 at age 23 and had been a state senator since 2000.
“We know that it was definitely a hate crime, but it is just to early to know if it was race-related,” said Samuel Rivers Jr., a personal friend of Mr. Pinckney. “To pick it out a say that it is race-related at this particular moment is unfair.”
Mr. Rivers called for calm and urged everyone to wait for the facts. He was joined by Bishop E.W. Jackson, Bishop of THE CALLED church in Chesapeake, Virginia, who said it may turn out that this attack was targeting Christians. At this point, we just don’t yet know the facts.
“We’re urging people to wait for the facts, don’t jump to conclusions,” Jackson said. “But let me tell you, I’m deeply concerned that this gunmen chose to go into a church because there does seem to be a rising hostility toward Christians in this country.”
Authorities said the shooting took place at approximately 9 p.m. (local) ET, but would not immediately confirm the identities of the victims. Mullen said there were 6 females and 3 males among the dead. PPD has learned that the suspect let a female go free in order to tell the story about what had happened, though we do not know what else may have been said or transpire. Another two victims, including a 5-year-old girl, survived the attack by following her grandmother’s instructions to play dead. Including the girl and her grandmother, there were 3 survivors in the attack.
South Carolina Gov. Nikki Haley issued a statement calling the shooting a “senseless tragedy,” but cautioned that the community and those looking on should wait until we learn more before turning a bad situation into a worse one.
“While we do not yet know all of the details, we do know that we’ll never understand what motivated anyone to enter one of our places of worship and take the life of another,” Haley said. “Please join us in lifting up the victims and their families with our love and prayers.”
Republican Sen. Tim Scott, the South’s first black senator elected since Reconstruction, posted a series of Twitter messages on the tragedy.
This senseless tragedy at a place of worship-where we come together to laugh,love&rejoice in God's name-is despicable&can't be understood
— Tim Scott (@SenatorTimScott) June 18, 2015
“My heart is breaking for Charleston and South Carolina tonight,” another one of them read.
Local law enforcement officials and the FBI
Sen. Rand Paul, R-Ky. arrive to a cheering and photo taking crowd for his announcement of the start of his presidential campaign, Tuesday, April 7, 2015, at the Galt House Hotel in Louisville, Ky. (Photo: Carolyn Kaster/AP)
Our nation very much needs fundamental tax reform, so it’s welcome news that major public figures – including presidential candidates – are proposing to gut the internal revenue code and replace it with plans that collect revenue in less-destructive ways.
A few months ago, I wrote about a sweeping proposal by Senator Marco Rubio of Florida.
Today, let’s look Senator Rand Paul’s tax plan he has put forward in a Wall Street Journal column.
He has some great info on why the current tax system is a corrupt mess.
From 2001 until 2010, there were at least 4,430 changes to tax laws—an average of one “fix” a day—always promising more fairness, more simplicity or more growth stimulants. And every year the Internal Revenue Code grows absurdly more incomprehensible, as if it were designed as a jobs program for accountants, IRS agents and tax attorneys.
And he explains that punitive tax policy helps explain why our economy has been under-performing.
…redistribution policies have led to rising income inequality and negative income gains for families. …We are already at least $2 trillion behind where we should be with a normal recovery; the growth gap widens every month.
So what’s his proposal?
…repeal the entire IRS tax code—more than 70,000 pages—and replace it with a low, broad-based tax of 14.5% on individuals and businesses. I would eliminate nearly every special-interest loophole. The plan also eliminates the payroll tax on workers and several federal taxes outright, including gift and estate taxes, telephone taxes, and all duties and tariffs. I call this “The Fair and Flat Tax.” …establish a 14.5% flat-rate tax applied equally to all personal income, including wages, salaries, dividends, capital gains, rents and interest. All deductions except for a mortgage and charities would be eliminated. The first $50,000 of income for a family of four would not be taxed. For low-income working families, the plan would retain the earned-income tax credit.
Kudos to Senator Paul. This type of tax system would be far less destructive than the current system.
That being said, it’s not perfect. Here are three things I don’t like.
But it’s important not to make the perfect the enemy of the good, particularly since the debate in Washington so often is about bad ideas and worse ideas.
So the aforementioned three complaints don’t cause me much heartburn.
But there’s another part of the Paul plan that does give me gastro-intestinal discomfort. Here’s a final excerpt from his column.
I would also apply this uniform 14.5% business-activity tax on all companies…. This tax would be levied on revenues minus allowable expenses, such as the purchase of parts, computers and office equipment. All capital purchases would be immediately expensed, ending complicated depreciation schedules.
You may be wondering why this passage is worrisome. After all, it’s great news that the very high corporate tax rate is being replaced by a low-rate system. Replacing depreciation with expensing also is a huge step in the right direction.
So what’s not to like?
The answer is that Senator Paul’s “business-activity tax” doesn’t allow a deduction for wages and salaries. This means, for all intents and purposes, that he is turning the corporate income tax into a value-added tax (VAT).
In theory, this is a good step. After all, the VAT is a consumption-based tax which does far less damage to the economy, on a per-dollar-collected basis, than the corporate income tax.
But theoretical appeal isn’t the same as real-world impact.
Simply stated, the VAT is a money machine for big government.
All of which helps to explain why it would be a big mistake to give politicians this new source of revenue.
Indeed, this is why I was critical of Herman Cain’s 9-9-9 plan four years ago.
It’s why I’ve been leery of Congressman Paul Ryan’s otherwise very admirable Roadmap plan.
And it’s one of the reasons why I feared Mitt Romney’s policies would have facilitated a larger burden of government.
These politicians may have had their hearts in the right place and wanted to use the VAT to finance pro-growth tax reforms. But I can’t stop worrying about what happens when politicians with bad motives get control.
Particularly when there are safer ways of achieving the same objectives.
Here’s some of what I wrote last year on this exact topic.
…the corporate income tax is a self-inflicted wound to American prosperity, but allow me to point out that incremental reform is a far simpler – and far safer – way of dealing with the biggest warts plaguing the current system.
Lower the corporate tax rate.
Replace depreciation with expensing.
Replace worldwide taxation with territorial taxation.
So here’s the bottom line. If there’s enough support in Congress to get rid of the corporate income tax and impose a VAT, that means there’s also enough support to implement these incremental reforms.
There’s a risk, to be sure, that future politicians will undo these reforms. But the adverse consequences of that outcome are far lower than the catastrophic consequences of future politicians using a VAT to turn America into France.
To wrap things up, there’s no doubt that Senator Paul has a very good proposal. And I know his heart is in the right place.
But watch this video to understand why his proposal has a very big wart that needs to be excised.
[brid video=”9889″ player=”1929″ title=”The Value Added Tax A Hidden New Tax to Finance Much Bigger Government”]
For what it’s worth, I’m mystified why pro-growth policy makers don’t simply latch onto an unadulterated flat tax.
That plan has all the good features needed for tax reform without any of the dangers associated with a VAT.
P.S. You can enjoy some good VAT cartoons by clicking here, here, and here.
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CATO economist Daniel J. Mitchell examines Senator
car at gas station
The Labor Department said Thursday that U.S. consumer prices in May posted their largest gain since February 2013, fueled by a rebound in gasoline prices.
The Consumer Price Index rose 0.4 percent last month after gaining 0.1 percent in April, indicating the disinflationary trend due to gas prices may have come to and end. Yet, the gain left the CPI unchanged in the 12 months through May after a 0.2 percent yearly decline in April.
Economists polled by Reuters had forecast the CPI rising 0.5 percent from April — a slight miss — and unchanged from a year ago. Still, despite the 10.4 percent increase in gas prices, the biggest gain since June 2009, a relatively strong dollar compared to intentionally unvalued currency is pushing back on inflation pressures.
The so-called core CPI, which excludes food and energy costs, increased by just 0.1 percent, which is the smallest rise since December of this year. The core CPI gained 0.3 percent in April, and in the 12 months through May, the core CPI rose 1.7 percent after an annual gain of 1.8 percent in April.
The Federal Reserve policy-making committee decided they will not raise interest rates until later this year, abandoning their mid-June target for sometime in September.
Food prices were unchanged for a second straight month, as an outbreak of bird flu in some impacted areas of the country led to a shortage of eggs that may still push up food prices in the months ahead.
Rental costs increased by 0.3 percent, which are likely to continue to rise with the residential vacancy rate near a 22-year low. The medical care index increased 0.2 percent after rising 0.7 percent in the prior month, while there were also small increases in the prices of new motor vehicles, tobacco and alcoholic beverages.
Prices for apparel, used cars and trucks, and household furnishings fell.
The Labor Department said Thursday that U.S.
The Labor Department said the number of Americans filing new jobless claims fell more than Wall Street expected for the week ended June 13. Weekly jobless claims dropped 12,000 to a seasonally adjusted 267,000 and claims for the prior week, which rose more than expected, were unrevised. It was the 15th straight week that claims held below 300,000, which markets view as generic gauge of health in the labor market.
The Federal Reserve (FOMC) on Wednesday offered an upbeat assessment of the labor market, claiming that market indicators “suggests that underutilization of labor resources diminished somewhat.” However, a majority on the policy-making committee bailed on the idea of raising interest rates — which have been held at near zero since the recession — in the month of June. Instead, the FOMC set a goal of September, indicating that they do not believe the economy can handle the rate hike.
Still, the language was an improvement from April, when labor market slack was viewed as “little changed” by the FOMC.
Economists polled by Reuters had forecast claims falling to 275,000 last week. A Labor Department analyst said there was nothing unusual in the state level data.
The four-week moving average of claims — which is widely considered a better measure of labor market trends as it irons out week-to-week volatility — fell 2,000 to 276,750 last week.
Though the firing rate decreased, Thursday’s claims report showed the number of people still receiving benefits after an initial week of aid remains at 2.22 million in the week ended June 6. That declined by 50,000.
The Labor Department said the number of
