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Japan, Iceland issue new whaling permits to hunt endangered fin whale

Yesterday

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The fin whale, the second largest animal on Earth, faces renewed threats from whaling, despite being listed as endangered for over half a century. Iceland and Japan, two of the three countries that still permit whaling, recently added this species to their approved whaling quotas.

“The thing that’s really interesting to me is how the two announcements, one from Japan and one from Iceland, came within hours of each other,” Kate O’Connell, the senior policy consultant for the Animal Welfare Institute’s Marine Wildlife Program, said. “I’m not sure if I’m a person that believes in coincidence or not, but I’ll just say that was a very interesting coincidence.”

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Japan authorized the hunting of 59 fin whales, while Iceland approved the hunting of 128. This marks a significant shift for both nations. Japan had not allowed commercial fin whale hunts for decades. Iceland paused all whaling activities last year after the practice underwent an animal welfare investigation.

“They put video cameras on whaling vessels and veterinarians were analyzing the results of the hunt,” O’Connell said regarding Iceland’s whaling investigation. “And they found really disturbing times to death for a number of the whales, so very clearly showing that this is not a welfare-friendly hunt.”

These new whaling permits come amid record low demand for whale meat. A 2018 poll found that 84% of Icelanders have never eaten whale meat. The country has approximately 2,000 tons of unused whale meat in storage. Similarly, Japan recently reported the smallest domestic market for whale meat in its history.

“They’re trying to find ways to promote whale meat consumption in their own countries,” O’Connell said. “And it’s just failing, completely failing. And all three of the whaling countries, there’s just no domestic demand.”

Most of the world banned whaling, and the renewed hunts by Iceland and Japan have already drawn international criticism. The controversy is expected to be a topic of discussion at the upcoming annual International Whaling Committee meeting in September.

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[JACK AYLMER]

IT’S THE SECOND LARGEST ANIMAL ON OUR PLANET.

[FIN WHALE SOUNDS]

[JACK AYLMER]

BUT THERE’S DANGER ON THE HORIZON FOR THIS MASSIVE SPECIES.

THE FIN WHALE HAS BEEN LISTED AS ENDANGERED FOR MORE THAN HALF A CENTURY.

AND NOW THEY FACE A RENEWED THREAT FROM AN INDUSTRY THAT MOST OF THE WORLD HAS ALREADY BANNED-

WHALING.

ICELAND AND JAPAN, TWO OF THREE REMAINING COUNTRIES THAT STILL ALLOW THIS PRACTICE, HAVE ADDED FIN WHALES TO THEIR APPROVED WHALING QUOTAS-

JAPAN HAS PERMITTED 59 OF THESE ANIMALS TO BE HUNTED, WHILE ICELAND AUTHORIZED 128.

[KATE O’CONNELL]

“The thing that’s really interesting to me is how the two announcements, one from Japan and one from Iceland came within hours of each other. And I’m not sure if I’m a person that believes in coincidence or not, but I’ll just say that was a very interesting coincidence.”

[JACK AYLMER]

KATE O’CONNELL IS A SENIOR POLICY CONSULTANT FOR THE ANIMAL WELFARE INSTITUTE’S MARINE WILDLIFE PROGRAM.

SHE TOLD US ABOUT HOW THIS MOVE REPRESENTS A CHANGE OF COURSE –

JAPAN HASN’T ALLOWED FIN WHALE HUNTS FOR DECADES, AND ICELAND PAUSED ALL WHALING ACTIVITIES LAST YEAR AMID INVESTIGATIONS INTO ANIMAL WELFARE CONCERNS.

[KATE O’CONNELL]

They put video cameras on whaling vessels and veterinarians were analyzing the results of the hunt. And they found really disturbing times to death for a number of the whales, so very clearly showing that this is not a welfare friendly hunt.

[JACK AYLMER]

THESE NEW WHALING PERMITS COME DESPITE DEMAND FOR WHALE MEAT HITTING RECORD LOWS.

A 20-18 POLL FOUND 84 PERCENT OF ICELANDERS HAVE NEVER EATEN IT, AS THE NATION IS ESTIMATED TO HAVE ABOUT 2,000 POUNDS OF WHALE MEAT CURRENTLY UNUSED AND SITTING IN STORAGE.

MEANWHILE, JAPAN RECENTLY REPORTED THE SMALLEST DOMESTIC MARKET FOR THE MEAT THAT THE COUNTRY HAS EVER SEEN.  

[KATE O’CONNELL]

“They’re trying to find ways to promote whale meat consumption in their own countries. And it’s just failing, completely failing. And all three of the whaling countries, there’s just no domestic demand.”

[JACK AYLMER]

THE CONTROVERSY IS EXPECTED TO BE ADDRESSED FURTHER AT THE ANNUAL INTERNATIONAL WHALING COMMITTEE MEETING IN SEPTEMBER.

JACK AYLMER – STRAIGHT ARROW NEWS.

Business

Trump floats more tariffs and eliminating taxes on tips. Here’s the price tag.

Monday

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The 2024 presidential campaign is in full swing and former President Donald Trump is making headlines with his economic policy proposals. Eliminating taxes on tips is one he introduced while campaigning in Nevada, aiming to gain support from Americans in the service industry who may directly benefit. Another campaign proposal revolves around expanding tariffs on foreign-made goods.

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Economists and policy analysts crunching the numbers point out that these policies may run up the nation’s debt even further without significant offsets.

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Last week, the former president told a crowd of supporters in Nevada that, if elected, he would do away with taxes on tips. The comment came in a state where 22.9% of workers are in the leisure and hospitality industries, many of whom rely on tips. 

“Just common sense would tell you that if you’re going to exempt a certain form of income that is not at the present point in time exempt, that means you’re going to get less revenue,” former U.S. Comptroller General David M. Walker told Straight Arrow News. 

While Walker doesn’t necessarily buy the proposal, he did offer how he would change the way tipped employees are handled in the U.S. 

“I think that what we ought to be doing with regard to waiters and waitresses and those who rely primarily on tips for their income is we ought to be going to the European model,” he said. “We ought to pay them enough money such that they don’t have to rely upon tips in order to be able to have a decent standard of living.”

The bipartisan Committee for a Responsible Federal Budget found that Trump’s proposal could add between $125 billion and $500 billion to the U.S. deficit over 10 years. 

While the prohibition of taxing tips is a relatively new proposal from Trump, tariffs have been in his toolbox since he transitioned from the C-suite to the Oval Office. The Trump campaign said a 10% across-the-board tariff policy would raise billions in revenue to pay for tax cuts, but analysis from center- and left-leaning think tanks show it could cost middle-income families between $1,500 and $1,700 per year.

“If you are going to tariff goods, it is going to affect the price of those goods and so ultimately the consumer is going to end up paying more as a result of those tariffs,” Walker said. “The real question is, in exchange for what? Is this going to be in exchange for a tax cut someplace else? So when you look at it from an economic standpoint, it will have an effect on prices. It’s not a tax, but it will have an effect on prices.”

These proposals come as the economy and inflation are top issues among voters in poll after poll just five months ahead of Election Day. 

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Simone Del Rosario:

Economists are crunching the numbers on some of Donald Trump’s campaign promises. Like this one:

Donald Trump:

“When I get to office, we are going to not charge taxes on tips, people making tips.”

Simone Del Rosario:

Which the bipartisan Committee for a Responsible Federal Budget says could add anywhere from $125 billion to $500 billion to the U.S. deficit over a decade.

Or this one on tariffs:

Donald Trump:

“When companies come in and they dump their products in the United States, they should pay automatically, let’s say a 10% tax.”

Simone Del Rosario:

Which Trump’s campaign says will raise billions in revenue to pay for tax cuts. But independent think tanks recently tallied up the cost to middle-income families at $1,500 to $1,700 a year.

Poll after poll shows the economy and inflation are top issues for voters just 5 months before Election Day.

I want to dig into the meat of some of these proposals with David M. Walker, former U.S. comptroller general under Presidents Clinton and W. Bush.

David M. Walker:

Let’s start with the tips. Okay, one of the things that I would say on any proposal, especially one that comes from the campaign trail, whether they be a Democrat or Republican, and no matter who the person is, show me the numbers. I haven’t seen any numbers on this, but just common sense would tell you that if you’re going to exempt a certain form of income that is not at the present point in time, exempt, that means you’re going to get less revenue. I don’t see how this revenue loss would be offset by additional economic activity. So therefore this quote, unquote, tax cut would not pay for itself. It also would have an adverse impact on Social Security and Medicare, because you end up getting taxed on wages and on, you know, certain other forms of income, you know, through that. So this would exempt that, presumably, you know, candidly, I think that what we ought to be doing with regard to waiters and waitresses and those who rely primarily on tips for their income is we ought to be going to the European model. We ought to pay them enough money such that they don’t have to rely upon tips in order to be able to have a decent standard of living. The other thing is, there have been estimates that up to 45% of all tip income does not get reported at the present point in time, so we don’t get revenues on that. But that doesn’t mean you ought to get rid of the other 55% that is reported.

Simone Del Rosario
want to see numbers that this is obviously something that would be advantageous, not something that would add to the deficit. That’s

David M Walker
correct. I mean, we’re already deeply in the hole. We need to figure out how we’re going to climb out of the hole, not to dig it deeper.

Simone Del Rosario
Let’s move on to tariffs. I want to really dig into this with you, because there’s a huge disconnect in how tariffs would impact American families. We’ve got some estimates from a couple of different think tanks that are saying that a 10% increase on all tariffs, which is something that President Trump has floated. We’ll get into the other proposals later, but this 10% across the board tariff on imports would end up costing the average middle income family somewhere between $1500 to $1700 per household per year. The Trump campaign is saying this idea that tariffs or attacks on American families is a lie, and in fact, they said it’s pushed by the Chinese Communist Party. What do you say about this narrative that raising tariffs on imports is going to cost Americans?

David M Walker
Well, first, I think it’s important to understand that until we had an income tax, the primary means in which the federal government obtained revenue was through tariffs, and then we went to the income tax. It. Is technically not a tax, but if you are going to tariff goods, it is going to affect the price of those goods, and so ultimately, the consumer is going to end up paying more as a result of those tariffs. The real question is, in exchange for what is this going to be? In exchange for a tax cut someplace else. So when you look at it from an economic standpoint, it will have an effect on prices. It’s not a tax, but it will have an effect on prices. Trump has floated replacing all of income tax with tariffs, something you say that this country has done in its history. Is that feasible?

David M Walker
Is it theoretically feasible? Yes. Is it politically feasible? No.

Simone Del Rosario
What makes it theoretically feasible, given the way that it’s structured right now, and how long would that take, because the government is heavily reliant on income tax?

David M Walker
Well, it is. But you know, as I said before, the world has changed a lot. Before 1912 you know, which is when we adopted a number of, you know, constitutional amendments, including the income tax. All right, before that, the federal government was funded primarily through tariffs. You know, we’re a lot different now than we were back then. Mathematically, can you do it? Yes, mathematically, you could do it, but it would be very complicated. It would have to be phased in. And frankly, I think from a political standpoint, you would never see it get passed.

Simone Del Rosario:
Walk me through the idea of tariffs in the way that you envision, former President Trump and his people are seeing this play out. What is what’s the end game with tariffs? What is the goal here?

David M Walker 9:53
Well, I think the thing that former President Trump is probably most concerned about is the. Fact that you know it’s one thing to be for free trade, but you also need to have fair trade, and to the extent that certain certain countries are engaging in practices that are fundamentally inconsistent with free trade, then one way that you can deal with that is through imposing tariffs in order to try to change the economics, which includes things like why people end up offshoring things to countries like China, because you can produce it a lot cheaper. They don’t have good labor laws, they don’t have good human rights, they don’t have good environmental laws, all right, and so they create a cost differential that ends up, you know, making their goods a lot more competitive at the same point in time, hurts employment in the United States. So I think his primary concern is, you don’t have a level playing field that is hurting the United States and people who want to be employed in the United States. That’s his primary thing, to the extent that he’s talking about going back to the future, namely, let’s just get rid of the income tax, and let’s just raise all federal government revenues through tariffs. That would be something that would be very dramatic. You’d really have to analyze it thoroughly. I don’t think it’s politically feasible, though, at this point in time, because you got to keep in mind, you got to get a majority of the House, 60 votes in the Senate, and the signature of the president.

Simone Del Rosario 11:31
But the end game beyond fair trade, as you said, the end game would be moving a lot of manufacturing back to the United States, correct? There’s no

David M Walker 11:42
question. It’s not just a matter of fair trade. It’s a matter of trying to onshore, bring back to the United States a lot of capacity. The truth is, we have become too dependent on others for certain critical materials, and whether that be rare earth materials, whether that be materials needed for pharmaceuticals, whether that be for high end semiconductors from Taiwan. You know, it’s not just an economic security issue, it’s a national security issue.

Simone Del Rosario:
let me just end with this. Do you think anybody running for the oval right now is particularly concerned about the deficit based on the proposals they’re putting forward?

David M Walker 14:29
There’s not enough concern about the deficit. There’s not a party of fiscal responsibility. The last fiscally responsible president we had was Bill Clinton. The biggest deficit this country has right now as a leadership deficit. We desperately need our next president, whomever that may be, to rise to the occasion, to use the bully pulpit and to have a clarion call for the need to right size government put our finances in order. Because if we fail to do that, the. It will be a major threat to our future, economic security, national security, international standing and domestic tranquility. And that has been echoed not just by me, but former chairmans of the Joint Chiefs of Staff, CEOs from sort of the largest companies in the world, as well as the International Monetary Fund, as well as various rating agencies. We’re late in the ball game. It’s time to do something.

Business

Federal Reserve teased a ‘glimmer of hope’ in its comments on inflation

Jun 12

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There’s a single, subtle change in the Federal Reserve’s latest comments on inflation. In May, the Federal Open Market Committee said there had been a “lack of further progress” toward its 2% inflation target. On Wednesday, June 12, hours after the latest inflation report became public, the committee changed the phrase to note “modest further progress.”

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On Wednesday morning, May’s consumer prices came in cooler than expected. Prices were unchanged for the month and up 3.3% for the year, a tick down from April’s 3.4%. Core inflation, which excludes food and energy, was up 0.2% on the month and 3.4% on the year.

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“The economy is in kind of a steady state right now with inflation running 3%, it has been for really close to a year,” former Kansas City Fed President Thomas Hoenig said. “So they really do have to stick to the higher-for-longer scenario in their alternatives and that’s what they’re doing.

“But they don’t want to give the impression that they’re ready to raise or that they are not going to eventually cut so that’s why they put the glimmer of hope in there by looking at the very small improvement so that you don’t spook the market,” he continued.

In the Fed’s latest economic projections, the committee forecasts just one rate cut in 2024, down from three projected cuts in March.

“This is my opinion only, but I think what they’re hoping is that they’re just modestly enough tight that the inflation numbers will come down over time without creating a recession, and they haven’t given up on,” Hoenig said.

While the consumer price index (CPI) gets the majority of attention because it’s the first inflation indicator to be released, the Fed relies on the personal consumption expenditures (PCE) price index for its 2% target.

What’s the difference between CPI and PCE and why does the Fed prefer the latter? Click here to learn more.

Based on the Fed’s projections, it expects core inflation, as measured by PCE, to remain unchanged in 2024 at 2.8%.

“Higher than they want, but they’re also projecting it’s not going to increase and they think it’ll tick down slightly over the course of the year and into next year,” Hoenig said. “And they’ll be satisfied with that. They’re willing to accept that as a trade-off for risking a recession.”

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Simone Del Rosario: Good afternoon and welcome to Live special coverage of decision day over at the Federal Reserve. This is straight arrow news, and I am the business correspondent here, Simone Del Rosario, and I am joined by former Kansas City Fed President, Tom Hoenig. Tom, thank you so much for being with us this afternoon.

Thomas Hoenig: Happy to be with you. Thank you for having me.

Simone Del Rosario: We’re about five minutes away from Fed chair, Jerome Powell taking to the podium. So I want to get right into what the Fed’s FOMC meeting results were today, as we saw from his statement that was released about 25 minutes ago. There is obviously no rate cut. No one was expecting a rate cut this month, but interestingly enough, their projections now are showing just one rate cut for this year, and that is compared to three rate cuts that they were projecting back in March. Now the only difference in the Fed’s statement this time around was a little bit of a glimmer of hope, and I think that has something to do with this morning’s inflation report, which is that last month, they had said there had been a lack of further progress toward that 2% inflation objective, and this month they are saying there is modest further progress. So true to the Fed Tom, and you know more about this than I do that slight word change can mean a lot. What do you take away from what we’re learning from the Fed today?

Thomas Hoenig: I think that the numbers that came in were slight as as is the right word, very, very little change in there. The economy is in kind of a steady state right now, with inflation running 3% it has been for really close to a year. Although it’s come down from highs, it’s still in the 3% range that continues. And so they really do have to stick to the higher for longer scenario in their in their alternatives, and that’s what they’re doing. But they don’t want to give the impression that they’re ready to raise or that they are not going to eventually cut so that’s why they put the glimmer of hope in there by looking at the very small improvement, so that you don’t spook the market, and you don’t have a rapid decline, and you don’t have, you don’t interfere with confidence in the market. So that’s what they’re trying to do, stay the course inflation is still too high. They’re not close to the 2% but they don’t want to scare the market or the financial industry, and therefore they’re giving that ray of hope and for the future, not not as quickly as people would hope. But still, it’s on the it’s on the line of vision, if you will, going forward.

Simone Del Rosario: Yeah, those economic projections I was talking about now, the Fed is looking at higher inflation than they were for the year just than just a few months back. They’re projecting right now that core is going to stay at 2.8% that’s where it is right now. So they’re not foreseeing a lot of movement and inflation for the rest of the year.

Thomas Hoenig: And I think that’s right. I mean, when you when you think about it, they’re in real terms, they’re very modestly tight. People keep thinking that they’re very tight in a historical context, when they’ve come from zero, that’s that’s a lot. But when you look at the economics of it, for example, most people think that the so called Real equilibrium rate for interest rates is about 2% and if you look at that right now, then with inflation of 3% and the interest rate, the policy rate of five, 5.2% they have about a 2% real Fed funds rate. So they’re in the equilibrium rate for a steady state, and that steady state, unfortunately, is around 3% so what they’re what they’re hoping, in my opinion, this is my opinion only, but I think what they’re hoping is that they’re just modestly enough tight that that the inflation numbers will come down over time without creating a recession, and they haven’t given up on. That, and that’s what this is about. So they’re still projecting 2.8 higher than they want, but they know it’s not they’re also projecting it’s not going to increase, and that they think it’ll tick down slightly over the course of the year and on into next year, and they’ll be satisfied with that. They’re willing to accept that as a trade off for risking a recession.

Simone Del Rosario: And Tom, we’ve talked about this before, and I know that based on your comments, that obviously you believe this rate, as you said, is just moderately tight. It’ll take longer for it to come down, but not so much that they want to go ahead and hike rig so they want to keep going on the path that they’re going. We’ve got about a minute before Powell is coming to the podium, so I want you to keep this pretty short if you can, but I wanted to add one more thing in here, and this is this question mark about what is happening in the banking sector. In a Bloomberg interview this week, PIMCO said they expect more regional bank failures in the US because of this very high concentration of troubled commercial real estate loans. Are you concerned that there is trouble in the banking sector that could sway the stability of the economy as it stands.

Thomas Hoenig: Well, there is that risk. I mean, the interest rates rose quickly that puts downward pressure on asset values, and that’s especially true for long term commercial real estate assets. So yeah, they’re under pressure. The banking industry is vulnerable. Number one. Number two, they have a lot of government securities on their books that were at very low interest rates. Those values are down, and that impedes their liquidity. So yes, the banking industry is vulnerable. They know that, and that’s one of the reasons they would be very reluctant to raise interest rates further at this point.

Business

Rumored $76B NBA TV deal is full of streaming options. Will prices go up?

Jun 6

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NBA on NBC could be back after more than two decades. Following months of negotiations, the NBA is close to finalizing a $76 billion, 11-year deal for broadcast rights, according to an exclusive report from the Wall Street Journal

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Here’s how it shakes out, according to the Journal: 

  • NBC would pay about $2.5 billion annually to show roughly 100 games per season. Half of those games would be Peacock exclusives.
  • Amazon would pay $1.8 billion per year to get in on the action with regular season and playoff games. It would also broadcast the NBA in-season tournament and playoff play-in games. 
  • ABC and ESPN’s parent company Disney would pay $2.6 billion a year, nearly doubling the $1.5 billion it currently pays for ESPN’s portion of the rights. The new deal allows ESPN to have games on its new direct-to-consumer streaming service, which launches in 2025. ESPN would still maintain rights to the NBA Finals.
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There’s a common theme in the way the deal shakes out. Every piece of the pie has a streaming component.

They’re going to have to grow into these rights fees and the prices. And that means the fees for these streaming services are going to continue to go up.

Bob Thompson, former Fox Sports president

But the most surprising element of the deal for former Fox Sports President Bob Thompson is what’s missing from it.

“For me, it would be the fact that it looks like Warner Bros. Discover may be out after roughly 40 years with the NBA,” Thompson said.

Current NBA partner TNT is noticeably absent from the proposed broadcast rights deal. Warner Bros. Discovery can still come to the table and outbid, but the company is facing more than $40 billion in long-term debt.

Below is an edited Q&A between Straight Arrow News’ Business Corespondent Simone Del Rosario and Thompson. Watch the interview in the video above.

Simone Del Rosario: Is there any chance for an 11th-hour deal with Warner Bros. Discovery?

Bob Thompson: My guess is Warner Bros. is probably waiting to see what the other deals look like. And I’m sure that the NBA is going to make sure those are all buttoned up from a legal standpoint before they give them to Warner Bros. Discovery, who has a right to match some form of a package.

The form of that package is the great unknown. It seems as though the Warner Bros. Discovery package from the past is being split up between Amazon and NBC, so do they have the right to match one, both, or none of them? That is the big question.

I’d be very surprised if the commissioner comes out and announces anything during the NBA playoffs. They just tend not to want to overshadow the games with business. So my guess is we’ve still got another week to 10 days before they even start talking about who’s getting what and finalizing the actual deal.

Simone Del Rosario: What about the sticker price for you? Did you expect $76 billion to be in line with what this kind of rights deal could command?

Bob Thompson: I didn’t think it was going to be quite that big. I thought maybe they get above $6 billion a year and it looks like it’s gonna be closer to $7 billion. It just shows how valuable prime real estate is in the sports world.

You had two companies, Amazon Prime and NBC, on the outside wanting to get in. And then you combine that with the fact that ESPN obviously wanted to maintain their position, maintain the finals for ABC, have enough content for their purported direct-to-consumer offering of ESPN, the main channel that’s coming up next year.

So all those things combined to raise that number to a really astounding number for the NBA, and congratulations to Adam Silver and Bill Koenig if they get it.

Simone Del Rosario: Over at NBC, there’s word of a divide over whether this is a good investment. Do you think that this is just the price to pay to boost streaming subscriptions?

Bob Thompson: I think that’s part of the price to pay. It also provides NBC with prime-time content. They don’t have to go out and develop entertainment programming, it just drops right in there. You get a certain cost. It’s not a hit-and-miss like you go through with the pilot season.

And on the streaming side, for Peacock, one thing that NBC has shown is that if you buy specific content – in their case, it was NFL games – it can be very helpful in driving subscriptions to Peacock that at this point seem to have stuck around, even though the NFL season ended several months ago. 

Simone Del Rosario: Does this deal indicate that creative content that streamers are developing is not enough to get subscriptions and now we’re going to see this huge push into live sports?

Bob Thompson: Yeah, I can see that. I think that what they’re probably thinking is that so much of the entertainment aspect and scripted dramas, things like that, have already moved off network television over to the streamers. They probably feel they’ve captured that subset pretty well.

So the next great leap is, how do you get the people who are still in the original cable bundle to get over to the streaming side as well? In many cases, the reason they’re still in the cable bundle is because they want the sports.

One thing I can tell you, though, they’re going to have to grow into these rights fees and the prices, and that means the fees for these streaming services are going to continue to go up. It’s like your cable bill used to increase every year. Your streaming service bills are going to increase every year as well. 

Simone Del Rosario: If you were in charge at NBC or Amazon and TNT is out for good, would you encourage those networks to make a play for the “Inside the NBA” crew?

Bob Thompson: Absolutely. I think that is really kind of a insignia show for the NBA. The talent is great. They have a great chemistry. I don’t know if you’re going to be able to get them all to come over, but certainly, Charles Barkley is the ringleader, so to speak, and I think he could probably convince some people to come along with him.

I believe it will be a sought-after product, or certainly sought-after individuals. I would probably give NBC the leg up because they’re going to end up having Sunday night NBA once the NFL Sunday night games are over. And I think it’s a very marquee position for the folks on that show.

Simone Del Rosario: What about the ripple effect this deal is going to have on other leagues? We know the NFL can pull the plug four years early on its broadcast contracts in 2029. Do you think the NFL is definitely going to do that and secure much higher prices?

Bob Thompson: It would not surprise me at all if they open the contract up in a few years. I think it gives them the advantage of jumping ahead of all the college rights deals that come up in the early 2030s. The CFP deal will be coming up again as well. So I think that it would behoove the NFL to get their hand in people’s pockets before others do.

The other thing you have to keep in mind is that, for other properties, Warner Bros. Discovery has a couple of billion dollars in their pocket that they may not be spending on the NBA. You kind of wonder what they might go shopping after. Maybe they go shopping after CBS if this whole Paramount deal comes down and the folks at Skydance and Redbird decide they don’t want to own the broadcast network. 

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Simone Del Rosario: If you watched basketball in the 90s, you know that tune. It’s NBA on NBC, and it could be back after more than two decades. 

After months of negotiations, the NBA is close to finalizing a $76 billion deal for 11 years of broadcast rights, according to a report from the Wall Street Journal. 

Here’s how it shakes out. 

NBC would pay about $2.5 billion a year to show roughly 100 games per season. Half of those would be Peacock exclusives. NBC hasn’t broadcast an NBA game since 2002.

Amazon would pay $1.8 billion a year to get in on the action with regular season and playoff games. 

Meanwhile, ABC and ESPN owner Disney will pay $2.6 billion a year, nearly twice the $1.5 billion they currently pay for ESPN’s portion of the rights. 

The Journal says they get fewer games for the premium price, but the new deal allows ESPN to have games on its new direct-to-consumer streaming service which launches in 2025. ESPN will still maintain rights to the NBA finals. 

Are you sensing a theme here? Every slice has streaming.

And it also leaves current NBA partner TNT out of the mix… 

Parent company Warner Bros. could still come to the table and outbid, but is also facing more than $40 billion in debt. 

For his part, Warner CEO David Zaslav has said they don’t need the NBA, and they may be in a position to find out how true that is. 

But is it really an NBA broadcast without these four in the studio? 

Joining me now to dig into all of this is Bob Thompson, former president of Fox Sports Network. Bob, for you, what would you say is the biggest headline maker of this reported deal?

Bob Thompson: I guess for me, would be the fact that it looks like Warner Brothers discovery may be out after roughly 40 years with the NBA.

Simone Del Rosario: You’ve been part of these negotiations like this before? Is there any chance that there’s an 11th hour deal? Obviously, this deal is just reported by The Wall Street Journal at this point. Do you think that Warner Brothers is trying something?

Bob Thompson: Well, my guess is the Warner Brothers is probably waiting to see what the other deals look like. And I’m sure that the NBA is going to make sure those are all buttoned up from a legal standpoint before they give them to Warner Brothers discovery, who may who has a right to match some form of a package that for the form of that package is the great unknown. It seems as though the Warner Brothers discovery package from the past is kind of being split up between Amazon and NBC, and so do they have the right to match one, both, or none of them? That is the big question. So I think that, I mean, I’d be very surprised if the commissioner comes out and announces anything during the NBA Playoffs, the championship round, which starts tonight. They just tend not to want to overshadow the games with business. And so my guess is we’ve still got another week to 10 days before they even start talking about who’s getting what and finalizing the actual deal.

Simone Del Rosario: What about the sticker price for you? $76 billion did you expect that’s in line with what this kind of rights deal could command?

Bob Thompson: You know, there’s but that could go either way. I really could. So, yeah, I didn’t think it was gonna be quite that big. I thought, you know, maybe they get above six six a year, and it looks like it’s gonna be closer to seven. I you know, it just shows how valuable prime real estate is in the sports world, and especially when you had two companies, Amazon Prime and NBC on the outside, wanting to get in, and then you combine that with the fact that ESPN obviously wanted to maintain their position, maintain the finals for ABC, have enough content for their purported direct to consumer offering of ESPN, the main channel that’s Coming up next year. So all those things kind of combined to raise that number to a really astounding number for the NBA, and congratulations to Adam Silver and Bill Koenig if they get it.

Simone Del Rosario: Over at NBC, there’s word of a divide over whether this is a good investment. Do you think that this is just the price to pay for having to boost streaming subscriptions, like you talked about, that’s an element of every part of this package.

Bob Thompson: Yeah, I think that’s part of the price to pay. It also provides NBC with Prime Time content. They don’t have to go out and develop inner, you know, entertainment programming, it just, you know, just drops right in there. You get a certain cost. It’s not a hit and miss, like you go through with the pilot season. And on the streaming side, you know, for Peacock, one thing that NBC has shown that if you buy specific content, in their case, it was NFL games. It can be very helpful in driving subscriptions to peacock that at this point seem to have stuck around, even though the NFL season ended, you know, several months ago. 

Simone Del Rosario: I mean, peacock is the most affordable option out there. I know that they’re hoping probably to raise prices with the money that they’re investing into it. I’m wondering if this, the price that these sports deals are commanding are pretty astronomical. I’m wondering if this is saying that this creative content that streamers are developing, that that’s just not enough to get subscriptions, and now we’re going to see this huge push into live sports.

Bob Thompson: Yeah, I can see that. I think that what they’re probably thinking is that, you know, so much of the entertainment aspect and scripted dramas, things like that, have already moved off network television over to the streamers. They probably feel they’ve captured that, you know, that subset pretty well. And so the next great leap is, how do you get the people who are still in the original cable bundle or whatever, to get over to the streaming side as well? In many cases, the reason they’re still in the cable bundle is because they want the sports. So as the sports migrates over, you know, people are going to have to say, okay, you know, more and more games are on these. Streaming services, you know, maybe I’m going to have to jump up from one or two to three or four streaming services. One thing I can tell you, though you know, they’re going to have to grow into these rights fees and the prices, and that means the fees for these streaming services are going to continue to go up. If you know, it’s like your cable bill used to increase every year. Your streaming service bills are going to increase every year as well. 

Simone Del Rosario: If you were in charge at NBC or Amazon, and let’s say that Warner is out for good on this, would you encourage those networks to make a play for the inside the NBA crew?

Bob Thompson: Well, yeah, absolutely. I think you know, that is really kind of a insignia show for the NBA. And, you know, the town is great. They have a great chemistry. I don’t know if you’re going to be able to get them all to come over, but certainly, you know, Charles Barkley is the ringleader, so to speak. And I think he could probably convince some people to come along with them. I believe it will be, you know, a sought after product, or certainly sought after individuals. I would probably give NBC the leg out, because they’re going to end up having Sunday night NBA once the NFL Sunday, Sunday night games are over. And I think that’s a, you know, it’s a very marquee position for for the folks on that show. 

Simone Del Rosario: You already said that you were a bit surprised to the upside. As far as the sticker price on this reported deal, what about the ripple effect that this deal is going to have on other leagues? We know the NFL is able to pull the plug early on its contract in 2029 that’s four years early. Do you think this is like that nail in the coffin that says the NFL is definitely going to do that and secure much higher prices?

Bob Thompson: It would not surprise me at all if they open the contract up in a few years. I think it gives them the advantage of kind of jumping ahead of all the college rights deals that come up in the early 2030s the CFP deal will be coming up again as well. So I think that it would behoove the NFL to kind of get their hand in people’s pockets before others do the other thing you have to keep in mind is, you know, for other properties, Warner Brothers discovery has got a couple billion dollars in their pocket that they’re probably, you know, may not be spending on the on the NBA. So you kind of wonder what they might go shopping after, you know, maybe they go shopping after CBS. If this whole Paramount deal comes down and the folks said sky dancing and Redbird decide they don’t want to own the broadcast network. 

Simone Del Rosario: That’s a really good point. We’ll leave it there. Bob Thompson, former president of Fox Sports Network. Thank you so much.

 

Bob Thompson: Thank you. 

Energy

China’s rare earth dominance fueled by human rights abuses in Myanmar

May 24

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China has dominated the global rare earth supply chain and is now using Myanmar, a nation plagued by political instability, violence and corruption, to obtain more of these resources. Its practices are known to cause harm to locals and the environment in the process. Due to the widespread proliferation of these materials to be used in emerging technologies across the globe, Beijing also implicated the international community in its exploitation of Myanmar’s rare earth reserves.

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Global Witness, an organization that works to spotlight the links between natural resource extraction and human rights abuses, highlighted the detrimental effects of this trade with China on Myanmar’s populace and ecosystem. The group revealed that this harmful practice, driven by Beijing’s need for rare earths, exacerbated many of Myanmar’s existing issues.

“It’s a really extreme example of where there is widespread destruction for these specific elements,” Ben Ayre, head of data investigations at Global Witness, said. “It takes place in the context of a really volatile region, one where there is active conflict, and the funds that are going into it are not insignificant.”

Rare earth elements are critical for the production of various advanced technologies. China processes nearly 90% of the world’s rare earths, a sector that has become highly lucrative, making them billions of dollars over the course of recent years. Historically, China met this demand through domestic mining, producing almost two-thirds of the global supply. However, the country increasingly turned to Myanmar’s extensive rare earth supply to extract these resources, which has now surpassed China’s own production.

“We’re talking in the region of 90% of all processing is happening in China, China resourcing the vast majority of its mineral supply from from Myanmar, mining operations have expanded by more than 40% across the region,” Ayre said. “The reports that we have from community members of damage to skin and to internal organs are consistent with findings, scientific studies into the effect of these chemicals on people. Governments should adopt the necessary legislation in order to ensure the human rights and the environment are protected from from this mining practice.”

The growing reliance on Myanmar’s resources transformed a national issue into a global one. Products worldwide, from smartphones to electric vehicles, depend on rare earths sourced from Myanmar. Global Witness urged companies that utilize these materials to investigate their supply chains rigorously. The organization called on these companies to ensure responsible extraction methods and to reconsider their current sourcing if they cannot confirm ethical practices.

“The burden of proof is really on any manufacturer that’s producing those products to demonstrate that they are not implicated in that supply chain,” Ayre said. “Those companies that are sourcing these elements, do the necessary due diligence in order to ensure that they know the origins of the materials that they’re putting in their products.”

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[JACK AYLMER]

MAKING THE NEXT GENERATION OF TECHNOLOGY HINGES ON ONE IMPORTANT GROUP OF RESOURCES.

AND CHINA CONTROLS NEARLY ALL OF THEM.

THEIR SECRET: EXPLOITING A NATION THAT HAS LONG SUFFERED FROM POLITICAL INSTABILITY, VIOLENCE, AND CORRUPTION.

BEIJING HAS EXACERBATED THESE PROBLEMS, AND MADE THE REST OF THE WORLD COMPLICIT IN THE ABUSE AS WELL.

WE’RE TALKING ABOUT MYANMAR AND ITS SUPPLY OF RARE EARTHS.

[BEN AYRE]

“It’s a really extreme example of where there is widespread destruction for these specific elements … 

“It takes place in the context of a really volatile region, one where there is active conflict, and the funds that are going into it are not insignificant.”

[JACK AYLMER]

BEN AYRE IS THE HEAD OF DATA INVESTIGATIONS AT GLOBAL WITNESS-

A GROUP THAT WORKS TO shine a light on the link BETWEEN NATURAL RESOURCE EXPLOITATION AND HUMAN RIGHTS ABUSES WORLDWIDE.

THEIR RESEARCH HAS REVEALED THE LEVEL OF HARM BEING DONE TO BOTH MYANMAR’S PEOPLE AND the ENVIRONMENT-

ALL TO KEEP BEIJING’S CONTROL OVER THE WORLD’S RARE EARTHS INTACT.

[BEN AYER]

“The reports that we have from community members of damage to skin and to internal organs are consistent with findings, scientific studies into the effect of these chemicals on people … 

Governments should adopt the necessary legislation in order to ensure the human rights and the environment are protected from from this mining practice.”

[JACK AYLMER]

CHINA HANDLES NEARLY 90 PERCENT OF GLOBAL RARE EARTH PROCESSING-

AN INDUSTRY WHICH HAS MADE THEM BILLIONS IN RECENT YEARS 

IN THE PAST, BEIJING HAS FED THIS NEAR-MONOPOLY WITH RARE EARTHS MINED FROM WITHIN ITS OWN BORDERS-

PRODUCING ALMOST TWO-THIRDS OF THE PLANET’S SUPPLY.

BUT NOW, THEY’RE DEPENDING MORE AND MORE ON MYANMAR’S VAST RESERVES OF THESE RESOURCES-

TO THE POINT WHERE IT NOW ACTUALLY OUTPACES CHINESE PRODUCTION.

[BEN AYER]

“We’re talking in the region of 90% of all processing is happening in China, China resourcing the vast majority of its mineral supply from from Myanmar … mining operations have expanded by more than 40% across the region … And so any company that is engaged in that supply chain has to address that reality.”

[JACK AYLMER]

BECAUSE SO MUCH OF THE PLANET’S RARE EARTH SUPPLY IS NOW ORIGINATING FROM MYANMAR-

GLOBAL WITNESS SAYS THIS ISSUE is A WORLDWIDE PROBLEM.

PRODUCTS ACROSS THE GLOBE ARE BEING MANUFACTURED WITH THESE RARE EARTHS  

THE GROUP IS CALLING ON THE COMPANIES THAT UTILIZE THESE RESOURCES TO LOOK critically INTO HOW THE MATERIALS ARE BEING SOURCED.

IF THEY CAN’T ENSURE THE RARE EARTHS ARE BEING EXTRACTED RESPONSIBLY, GLOBAL WITNESS WANTS THEM TO PULL OUT OF THEIR CURRENT SUPPLY CHAIN PRACTICES.

[BEN AYER]

“The burden of proof is really on any manufacturer that’s producing those products to demonstrate that they are not implicated in that supply chain … those companies that are sourcing these elements, do the necessary due diligence in order to ensure that they know the origins of the materials that they’re putting in their products.”

[JACK AYLMER]

FOR MORE ABOUT HOW THE RACE FOR RARE EARTHS IS IMPACTING PEOPLE ACROSS THE GLOBE, DOWNLOAD OUR STRAIGHT ARROW NEWS APP, AND SIGN UP FOR ALERTS FROM ME – JACK AYLMER – TO STAY INFORMED.

Ray Bogan

Political Correspondent

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Politics

Tim Burchett has a catch with SAN, says DC is a ‘crooked deal’

May 23

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Ray Bogan

Political Correspondent

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Rep. Tim Burchett, R-Tenn., is known for voting to oust former House Speaker Kevin McCarthy, trying to get the government to release what it knows about UFOs or UAPs, and being a first baseman on the Republican congressional baseball team. So with the game coming up on June 12, Straight Arrow News asked him to join Political Correspondent Ray Bogan for a catch on Capitol Hill.

The following interview has been lightly edited for length and clarity.

Ray Bogan: Congressman Burchett, thanks for joining us. Let me start by apologizing to you for showing up so underdressed to our catch. 

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Rep. Tim Burchett: That’s all right, brother. I’ve got my Massey Ferguson hat on. I’ve got a Massey Ferguson tractor, I was bush hogging Monday night. I finished at 11 o’clock, I had one of one headlight that worked and it was under moonlight. But I told my wife and daughter I was gonna get the horses in the field.

Ray Bogan: So, we’re having this catch because one day I asked you a question about the motion to vacate against Speaker Johnson. And you said, if the situation were different, I’d really be asking why you’re third string on the congressional baseball team.

Are you really third string or are you pulling my leg? 

Rep. Tim Burchett: I’m third string but I had a meteoric rise. I think I was fifth string at one time and one guy went to the outfield and another guy got hurt. So it worked out pretty well for me. I’m 59 years old. Those guys are obviously young and they show it but I love competition, and it’s more about relationships than anything else and I’m friends with everybody on the team. And I think I’m a confidence builder, too, because they can have a terrible day, but they go, ‘Hey, at least I’m not Burchett.’

Ray Bogan: You’re known as one of the friendliest guys on Capitol Hill. You tell everybody to call you Tim. And one time I saw the House Progressive Chair Pramila Jayapal, D-Wash., come up, give you a fist bump and check in on you.

How come the public doesn’t see more of that side of members of Congress?

Rep. Tim Burchett: I don’t think it sells. People don’t like it. You know, I was on C-SPAN last week and some guy called in, I think from New Jersey, and said, ‘I saw you talking to Goldman and Jared Moskowitz.’ I was like, ‘Yeah, what’s your point?’

The other side gets it too, you know, when I talked to a Democrat, there are people that can’t believe you’re talking to Burchett. I mean, some of the members even. Life’s too short man, I’ve been in this thing a long time. I see people that just hate the people across the aisle and people in their own party, and I just, I don’t hate anybody, man. Life’s too doggone short. It doesn’t sell I guess — the friendship and the camaraderie.

Ray Bogan: There were a couple big hearings on spending bills this week. What do you think the chances are of getting a budget for next year done before the election? What do you think the chances are of getting anything big done before the election?

Rep. Tim Burchett: I don’t think you’re gonna see a real budget. You’ll see a minibus or something to carry us over the line. We haven’t done a budget in, I believe over 30 years, a true budget.

Everybody’s got a budget, but we don’t. Because if we did you’d have to bring every spending implement in, everybody would have to justify it. And the big boys don’t want that because they got too much cushion, too much sweet stuff in there for their district, or their people or their family member working for some group. So I mean, look, it’s a crooked deal up here and the public needs to realize that. 

Ray Bogan: If Republicans swept the elections in November, and you had House Senate, White House, what would you like to see done in 2025.

Rep. Tim Burchett: I’d like to see some real spending reduction. I’d like to see the border contained. I’d like to see just some fiscal restraint, really, everything that’s in there needs to be paid for. And we can’t hide behind that. And I would honestly like to see us really do a budget, Jodi Arrington, R-Texas, chairs the budget committee. He’s a buddy of mine. I think he gets it. If he’s given the ability to do that, we ought to pass a budget, send it over to the Senate and say, ‘You all pass the budget as well,’ and force them to do that. But I don’t think we have the guts to do that. I’d like to see a lot of our alphabet agencies just dismantled. The Department of Education, send all that money to the states, let them handle it. There’s a lot of things I’d like to see. And when we do things like that, I think you’re gonna see some more accountability.

But the bottom line is, people want to get into leadership so they can get into leadership. So they can go on the sweet trips, they can have the entourage and raise all the money. They don’t want to do it because they want to help out America and, to me, that’s kind of disheartening. I worry about our country, I really do, regardless of who’s in charge. I just think if we get in this time, that the conservative base is going to hold us more accountable. I think they realize what’s going on.

Ray Bogan: You represent your constituents in your district, but so many of the issues that come up here on Capitol Hill, are national and committee based. How do you split up your time with constituent services?

Rep. Tim Burchett: We have the best constituent service people in the country. During COVID, God speaks to me — just not with an audible voice — and I heard about people committing suicide during COVID. And I just thought, ‘What a waste.’ I’ve lost friends to suicide. And so at a moment of clarity or stupidity, I don’t know, I gave my number out over the internet. And we handled stuff from all 50 states, people had health checks, people going in and checking on people. People that talked about taking their lives and called me and then some people just wanted to say, “I really didn’t think you would answer the phone,” and I did.

I mean, it was 24/7, all hands on deck. But we ended up having more constituent service than anybody, I believe in the state combined. So we and then we did and that was all over the country. We do a lot of referrals to other districts, but we handled our own very well. And that’s what’s most important, really the stuff up here. It’s going to keep we’re not going to do a whole lot. It’s like moving a glacier up here. But constituent services, what is what keeps you in office, you know, the press releases and all the all the Twitter stuff, it probably raised you a little money. And I know that does so much about getting reelected. It’s a constituent service. It does. And it’s unfortunate that we have to do it. Most of our job is just trying to undo what we’ve done up here, which is I think it’s just a waste of energy. But I’m still idealistic, I still think we can change it.

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Ray: 

Congressman Burchett, thanks for joining us. And let me start by apologizing to you for showing up so underdressed to our catch. 

 

Rep. Burchett: That’s all right, bro. I got my Massey Ferguson hat on. I’ve got a Massey Ferguson tractor I was bushhogging Monday night. I finished at 11 o’clock, I had one of one headlight that worked and it was under moonlight. But I had to get told my wife and daughter I was gonna get, like, get the horses in the field. 

 

Ray:  So we’re having this catch because one day I asked you a question about the motion to vacate against Speaker Johnson. And you said, if the situation were different, I’d really be asking why your third string on the congressional baseball team. Are you really third string or are you pulling my leg? 

 

Rep. Burchett:  I’m third string but I had a meteoric rise. I think I was fifth string at one time and one guy went to the outfield and another guy got hurt. So it worked out pretty well for me. I’m 59 years old. Those guys are obviously young and they show it but I love competition. And it’s more about relationships than anything else and I’m friends with everybody on the team. And I think I’m a confidence builder, too, because they can have a terrible day, but they go, ‘Hey, at least I’m not Burchett.’

 

Ray:  You’re known as one of the friendliest guys on Capitol Hill. You tell everybody to call you, Tim. And one time I sold the House Progressive Chair Pramila Jayapal, D-Wash, come up, give you a fist bump and check in on you. How come the public doesn’t see more of that side of members of Congress?

 

Rep. Burchett: I don’t think it sells. People don’t like it. You know, I was on C-Span last week and some guy called in, I think from New Jersey, and said, ‘I saw you talking to Goldman and Jared Moskowitz.’ I was like, ‘Yeah, what’s the point?’ The other side gets it too, you know, and I talked to a Democrat, there are people that can’t believe you’re talking to Burchett. I mean, some of the members even. Life’s too short man, I’ve been in this thing a long time. I see people that just hate the people across the aisle and people in their own party, and I just, I don’t hate anybody, man. Life’s to dang on short. It doesn’t sell I guess – the friendship and the camaraderie.

 

Ray:  There were a couple big hearings on spending bills this week. What do you think the chances are of getting a budget for next year done before the election? What do you think the chances are of getting anything big done before the election?

 

Rep. Burchett:  I don’t think you’re gonna see a real budget. You’ll see a minibus or something to carry us over the line. We haven’t done a budget in, I believe over 30 years, a true budget. Everybody’s got a budget, but we don’t. Because if we did you’d have to bring every spending implement in, everybody would have to justify it. And the big boys don’t want that because they got too much cushion, too much sweet stuff in there for their district, or their people or their family member working for some group. So I mean, look, it’s a crooked deal up here and the public needs to realize that. 

 

Ray: If Republicans swept the elections in November, and you had House Senate White House, would like to see done in 2025.

 

Rep. Burchett: 

I’d like to see some real spending reduction. I’d like to see the border contained. I’d like to see just some fiscal restraint, really, everything that’s in there needs to be paid for. And we can’t hide behind that. And I would honestly like to see us really do a budget, Jodi Arington, R-Texas, chairs the Budget Committee. He’s a buddy of mine. I think he gets it. If he’s given the ability to do that, we ought to pass a budget, send it over to the Senate and say, ‘You all pass the budget as well’, and force them to do that. But I don’t think we have the guts to do that. I’d like to see a lot of our alphabet agencies just dismantled. The Department of Education, send all that money to the states, let them handle it. There’s a lot of things I’d like to see. And when we do things like that, I think you’re gonna see some more accountability. But the bottom line is, people want to get into leadership so they can get into leadership. So they can go on the sweet trips, they can have the entourage and raise all the money. They don’t want to do it because they want to help out America and, to me, that’s kind of disheartening. I worry about our country, I really do, regardless of who’s in charge. I just think if we get in this time, that the conservative base is going to hold us more accountable. I think they realize what’s going on.

 

Ray: You represent your constituents in your district. But so many of the issues that come up here on Capitol Hill, are national in our committee based? Yeah, how do you split up your time with constituent services give us some insight on that.

 

Rep. Burchett: We have the best constituent service people in the country. During COVID, God speaks to me just not with an audible voice, and I heard about people committing suicide during COVID. And I just thought, ‘What a waste.’ I’ve lost friends to suicide. And so at a moment of clarity or stupidity, I don’t know, I gave my number out over the internet. And we handled stuff from all 50 states, people had health checks, people going in and checking on people. People that talked about taking their lives and called me and then some people just want to say I really didn’t think you would answer the phone and I did. I mean, it was 24/7, all hands on deck. But we ended up having more constituent services than anybody, I believe in the state combined. So we and then we did and that was all over the country. We do a lot of referrals to other districts, but we handled our own very well. And that’s what’s most important, really the stuff up here. It’s going to keep we’re not going to do a whole lot. It’s like moving a glacier up here. But constituent services, what is what keeps you in office, you know, the press releases and all the all the Twitter stuff, it probably raised you a little money. And I know that that’s too much about getting reelected. It’s a constituent service. It does. And it’s unfortunate that we have to do it. Most of our job is just trying to undo what we’ve done up here, which is I think it’s just a waste of energy. But I’m still idealistic, I still think we can change it.

 

Energy

Eli Electric’s affordable micro-EV coming from China to the US despite new tariff

May 17

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In the face of recently announced tariffs exceeding 100% on Chinese electric vehicles (EVs) bound for the United States, one automaker remains committed to bringing affordable EVs to American consumers. Eli Electric Vehicles is grappling with the implications of the new tariff rate on its plans to introduce a less expensive electric micro-car in the U.S. The company is headquartered in Los Angeles but has manufacturing operations in China.

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“We know there’s a strong, unfulfilled demand for affordable EVs in America,” James Seargent, head of U.S. operations for Eli Electric, said. “We are aware of the tariff communication that came through and I think one of the major components here is that it is an opportunity for us to look at how can we make sure that we are being very efficient with our supply chain.”

The compact dimensions of the company’s micro-car, the Eli ZERO, hold the potential to help the car remain relatively inexpensive.

“This is a targeted tariff on some of the vehicles that came through,” Seargent said. “We’re really evaluating how that fits with us as micro-EV manufacturer, and the [low-speed electric vehicle] space in America, it’s a little bit different than golf carts, but also a little bit different than full-size electric vehicles.”

High costs have long stood as a significant barrier to widespread EV adoption in the United States. Eli Electric sees leveraging China’s dominant EV supply chain as a means to drive prices down. Additionally, the company’s leaders also hope the company can facilitate the transition to electric mobility for American drivers.

“We actually have a subsidiary of our company, Eli Electric Vehicles, in China, particularly to be close to the supply chain,” Seargent said. “It’s the fact that we’re able to be there to see it, to build those relationships, and understand what we should utilize for our vehicle and kind of roll with that EV hub in that area. That’s what it really is going to be set us apart.”

Eli Electric currently manufactures the Eli ZERO, a street-legal vehicle boasting a range of up to 90 miles, in Shanghai. The manufacturer bills the car as an automobile capable of bridging the gap between micro and full-sized cars. The ZERO offers a range of features including power-assisted steering, radar parking sensors, a Sony infotainment system and more. All that comes at a cost of under $12,000. It is a price point which Eli Electric aims to keep steady despite the Biden administration’s new trade rules.

U.S. customers already started reserving their Eli ZERO models through a fully refundable $200 deposit with the company. Eli Electric anticipates a pre-Christmas debut on American roads. The EV manufacturer plans to make the ZERO available through local distributors and dealer partners nationwide.

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[JACK AYLMER]

WANT A CHEAP ELECTRIC VEHICLE?

WELL, THAT’S TOO BAD, BECAUSE THE GOVERNMENT THINKS THEY’RE A THREAT TO OUR ECONOMY.

[PRES. JOE BIDEN]

“We’re never going to allow China to unfairly control the market for these cars, period.”-Biden

[JACK AYLMER]

BUT, ONE AUTOMAKER REMAINS DETERMINED TO BRING LESS EXPENSIVE EVS FROM CHINA TO THE STATES-

DESPITE THE RECENTLY ANNOUNCED OVER 100 PERCENT TARIFF ON THESE PRODUCTS.

[JAMES SEARGENT]

“We are aware of the tariff communication that came through and I think one of the major components here is that it is an opportunity for us to look at how can we make sure that we are being very efficient with our supply chain.”

[JACK AYLMER]

JAMES SEARGENT IS THE HEAD OF U.S. OPERATIONS AT ELI ELECTRIC VEHICLES.

THEIR HEADQUARTERS IS BASED IN LOS ANGELES, BUT THEIR CARS ARE BUILT IN CHINA.

SEARGENT SAYS THE COMPANY IS STILL LOOKING INTO HOW THE NEW TARIFF RATE WILL IMPACT ITS PLAN TO BRING AN AFFORDABLE ELECTRIC MICRO CAR TO the states.

THE SMALLER SIZE OF THEIR ELI ZERO MIGHT JUST BE ITS SAVING GRACE.

[JAMES SEARGENT]

“This is a targeted tariff on some of the vehicles that came through, we’re really evaluating how that fits with us as micro EV manufacturer, and the LSEV space in America, a little bit different than golf carts, but also a little bit different than full size electric vehicles.”

[JACK AYLMER]

HIGH EV COSTS HAVE BEEN LISTED AMONG THE BIGGEST HURDLES PREVENTING GREATER EV ADOPTION.

SO, ELI ELECTRIC WANTS TO LEVERAGE CHINA’S EV SUPPLY CHAIN DOMINANCE TO LOWER PRICES AND MAKE IT EASIER FOR U.S. DRIVERS TO MAKE THE SWITCH. 

[JAMES SEARGENT]

“We know there’s a strong unfulfilled you know, a demand for affordable EVs in America I mean this basically points directly directly at it. As a plan to be close to the supply chain. So we actually have a subsidiary of our company, Eli electric vehicles in China, particularly to be close to the supply chain.”

[JACK AYLMER]

THE ZERO IS A STREET LEGAL VEHICLE WITH A RANGE OF UP TO 90 MILES THAT IS CURRENTLY BEING MANUFACTURED IN SHANGHAI.

BILLED AS AN AUTOMOBILE THAT CAN BRIDGE THE GAP BETWEEN MICRO AND FULL-SIZED CARS, IT ALSO INCLUDES FEATURES LIKE POWER ASSISTED STEERING, RADAR PARKING SENSORS, A SONY INFOTAINMENT SYSTEM AND MORE.

ALL FOR UNDER 12 THOUSAND DOLLARS.

IT’S A PRICE POINT ELI ELECTRIC IS STILL AIMING FOR EVEN WITH THE NEW TRADE REGULATIONS AGAINST CHINA.

[JAMES SEARGENT]

“Us as a manufacturer, we’re still targeting, being able to make our Eevee affordable. So people can utilize this. So we’re still evaluating the situations.”

[JACK AYLMER]

U.S. CUSTOMERS HAVE ALREADY STARTED RESERVING THEIR ELI ZEROS THROUGH A FULLY REFUNDABLE 200 DOLLAR DEPOSIT WITH THE COMPANY.

WITH THESE MICROCARS EXPECTED TO HIT AMERICAN ROADS BEFORE CHRISTMAS, ELI ELECTRIC PLANS TO MAKE THE ZERO AVAILABLE THROUGH LOCAL DISTRIBUTORS AND DEALER PARTNERS ACROSS THE COUNTRY.

FOR MORE UPDATES ON THESE MICRO CARS COMING TO THE U.S., DOWNLOAD THE STRAIGHT ARROW NEWS APP AND SIGN UP FOR ALERTS FROM ME- JACK AYLMER – SO YOU NEVER MISS A THING.

Business

How much sway does Fed’s interest rate policy have over residual inflation?

May 15

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The latest consumer price report released on Wednesday, May 15, showed a slight easing of inflation in April. It was led by lower grocery prices and declining auto prices, both new and used. The Bureau of Labor Statistics said overall consumer prices rose 3.4% on the year and 0.3% on the month, with shelter and gas prices accounting for more than 70% of total monthly inflation.

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Meanwhile, core inflation — which excludes food and energy categories — rose 3.6%. That is the lowest annual increase for core prices since April 2021.


Every bit of new economic data brings speculation on the Federal Reserve’s next move with its interest rate policy. The Fed has very few tools to help bring down inflation; the one it has used the most is hiking interest rates.

The Fed has vowed to keep interest rates restrictive until there is clear evidence inflation is on its way to the preferred 2% target. While markets had initially predicted the Fed would cut rates six times in 2024, now even two rate cuts is an optimistic stance.

“We’ve had a lot of trouble getting inflation down and I think there’s also the argument there where it’s like, ‘Are the Fed’s tools even the right tools to be fighting inflation? Are interest rates even something we should be paying attention to?'” said Kyla Scanlon, an economic commentator and author of “In This Economy? How Money & Markets Really Work.”

In April, JPMorgan Global Market Strategist Jack Manley told Bloomberg that higher interest rates are driving inflation at this point. Scanlon brought that up and pointed out that the highest areas of inflation may be outside the Fed’s control.

“Shelter inflation is a huge contributor to the print that we see in the consumer price index,” Scanlon said. “Auto insurance — something that can’t really be controlled by interest rates in a really big way — is also a huge part of the CPI print.”

Motor vehicle insurance is up 22.6% over the past year, according to the latest CPI report. Shelter is up 5.5% on an annual basis. Both are areas of spending that are necessary. In the latest inflation report, shelter and gas prices comprised more than 70% of the monthly increase for all consumer items. 

In an interview with Straight Arrow News, Scanlon spoke more about Americans feeling negative about the economy in contrast to the data, where inflation is slowing, unemployment is low and wages are up. Below is an excerpt from that interview. Watch the exchange in the video above.

Simone Del Rosario: You were really at the forefront of the bad vibes economy that we’ve unfortunately been living in for a couple of years now. We’ve gone through a lot. But I wanted to ask you, what is the biggest source behind the current bad vibes?

Kyla Scanlon: I don’t know, I’ve spent two years trying to figure that out. I mean, I think it’s really tough. We have a structural affordability problem; the housing market is a nightmare, inflation is a pressure cooker.

It would be silly to think that just because inflation is going down — so things are getting less expensive, less fast — that people would be feeling better. So I think that we have these structural issues that maybe aren’t being addressed as quickly as people want. That’s leading to negative consumer sentiment.

And then you can point to things like media headlines being extraordinarily negative. You can point to the polarization. The United States is just really disconnected right now. We all feel it, we all see it.

I think in that sort of environment, it’s difficult to have positive consumer sentiment, even if GDP is going up, even if the labor market is doing okay, even if inflation is slowing down. There are real reasons behind the negative consumer sentiment despite a relatively okay economy.

Simone Del Rosario: I like to say that there are the prints and then there’s the perception. You’ve talked about needing to be really good at media literacy when trying to navigate this. How much do you think the bad vibes are driven by this negative news coverage?

Kyla Scanlon: I think a lot. I feel like it’s sort of lazy to be like, ‘It’s just the headlines,’ but if you have a negative word in the headline, the click-through rate increases by 2.3%. If you have a positive word, the click-through rate decreases by 1.9%. So I think that sort of statistic just tells us quite a bit about what people are clicking on and what they’re consuming.

There was an article from the Center for Economic and Policy Research. They had this piece talking about how CNN was not covering the restaurant inflation metrics right. Restaurant inflation has slowed down and CNN had a piece talking about how expensive it is to go to eat.

So I do think there is this framing issue that the media has just because of the inherent business model. And of course, you’re going to feel bad if everything you read is bad.


Straight Arrow News also spoke to Scanlon about the impact proposed tariffs on China could have on inflation. You can watch that interview here.

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Simone Del Rosario: The latest inflation report shows a slight slowdown in the rise in consumer prices. That’s led by lower grocery prices – groceries were cheaper in April than the month before – along with declining auto prices, both new and used. 

Overall consumer prices rose 3.4% on the year, while core CPI, which excludes food and energy categories, rose 3.6%. That’s the lowest annual increase for core prices since April 2021. 

Every little bit of new economic data brings speculation on the Federal Reserve’s next move with its interest rate policy. The Fed has very few tools to help bring down inflation. And the one it’s used the most is hiking interest rates. And markets are eager for inflation to come down so the Fed starts cutting.

Kyla Scanlon: We’ve had a lot of trouble getting inflation down. And I think there’s also the argument there where it’s like, are the Fed’s tools even the right tools to be fighting inflation? Are interest rates even something we should be paying attention to?

JP Morgan published a piece where they were talking about, you know, high interest rates actually are inflationary sometimes, right? If we have a housing crisis, like all of the inflation that we have is really sort of a supply issue, or it has been historically, I think that’s kind of shifting now, but a lot of it is because, like, we don’t have enough housing like shelter and shelter inflation is a huge contributor to the print that we see in the consumer price index. Auto Insurance, something that can’t really maybe be controlled by interest rates in a really big way, is also a huge part of the CPI print. 

Simone Del Rosario: As Kyla Scanlon just mentioned, housing and auto insurance are major pressures on inflation. Motor vehicle insurance is up 22.6% over the past year. And shelter is up 5.5%. Both areas of spending that are necessary. 

In fact, in the latest inflation report, shelter and gas prices make up more than 70% of the monthly increase for all consumer items. 

I spoke more with Scanlon about how people feel pretty negative about the economy in stark contrast to the data, where inflation is lower, unemployment is low and wages are up.

You were really at the forefront of the bad vibes economy that we’ve unfortunately been living in for a couple of years now. We’ve gone through a lot. But I wanted to ask you, what is the biggest source behind the current bad vibes?

Kyla Scanlon: I don’t know. I’ve spent two years trying to figure that out. I mean, I think it’s really tough. You know, we have a structural affordability problem, like the housing market is a nightmare. Inflation is a pressure cooker. It would be silly to think that just because inflation is going down so things are getting you. Less expensive, less fast, I think that people would be feeling better. So I think that, you know, we have these structural issues that maybe aren’t being addressed as quickly as people want. And so that’s leading to negative consumer sentiment. And then you can point to things like media headlines being extraordinarily negative. You can point to the polarization, the bipartisanship the United States is just really disconnected right now. We all feel that. We all see it, and I think in that sort of environment, it’s difficult to have positive consumer sentiment, even if GDP is going up, even if the labor market is doing okay, even if inflation is slowing down. And so there are real reasons behind the negative consumer sentiment despite a relatively okay economy?

Simone Del Rosario: Yeah, I like to say that there are the prints, and then there’s the perception you’ve talked about needing to be really good at media literacy when trying to navigate this. How much do you think that the bad vibes are driven by this negative news coverage?

Kyla Scanlon: I think a lot I feel like it’s sort of lazy to be like it’s just the headlines, but if you have a negative word in the headline, you know, the click through rate increase increases by 2.3% if you have a positive word, the click through rate decreases by 1.9% and so I think that sort of statistic just tells us quite a bit about what people are clicking On and what they’re consuming. There was an article from the Center for the CEPR, the Center for Economic Policy Research. I think it is, but they had this piece talking about how CNN was not covering the restaurant inflation metrics, right? Like restaurant inflation has slowed down. CNN had a piece talking about how expensive it is to go to eat. So I do think there is this streaming issue that media has just because of the inherent business model. And of course, you’re going to feel bad if everything you read is bad.

Simone Del Rosario: If you want more unbiased, straight facts on the economy, download the SAN app. You can customize your push notifications to the news you care about. 

Business

Tariffs 101: Is raising tariffs on China a win for Americans?

May 14

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Regarding tariffs on Chinese goods, 2024 presidential candidates Joe Biden and Donald Trump are more in lockstep than not. Both candidates appear to believe raising tariffs on China is a winning issue in key battleground states.

On Tuesday, May 14, President Biden announced additional tariffs on Chinese electric vehicles, solar cells, advanced batteries, and semiconductors. The White House said increased tariffs will apply to about $18 billion worth of annual imports from China.

Four years ago, Biden said then-President Trump was going after China in the wrong way. However, since becoming president, Biden has not only kept Trump’s tariffs on China in place, he’s now tacking on.

As for how the two candidates differ in their tariff goals, Biden’s additions are more targeted while Trump has floated enormous tariff increases on all Chinese goods if reelected in November.

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To understand why both candidates are leaning into tariffs and what price Americans pay, Straight Arrow News spoke with Kyla Scanlon, an economic commentator and author of “In This Economy? How Money & Markets Really Work.”

Below is an excerpt from the interview, edited for clarity. Watch the conversation in the video above.

Simone Del Rosario: Kyla, I want to talk about how tariffs really work. What do Biden and Trump think these tariffs will achieve versus what really happens when we increase tariffs on foreign trade partners? 

Kyla Scanlon: Tariffs are tough, right? So it’s a tax on imports. Here specifically, it would be on China. And right now, it’s definitely a political talking point.

Everybody wants to see friend-shoring, reshoring, and that’s why these tariffs are being positioned as such and being talked about right now. I think people are hoping that it’ll achieve electoral votes, political points.

It’s tough because normally the U.S. consumer does end up paying the cost for these tariffs in the long run because they make everything more expensive to consume.

Simone Del Rosario: Are tariffs a proven way to protect the American manufacturing sector? And is America’s manufacturing sector robust enough to be able to benefit from this?

Kyla Scanlon: It’s a good question. Detroit has seen a slowdown in clean energy production and electrification. You’ve seen an uptick in dirty energy, as they call it. We don’t import a lot of solar cells and EVs from China but it’s something that we’re relying on more and more, and that’s why the tariffs that Biden is imposing are a little bit more strenuous. We are relying on it more so it is going to be more economically impactful. It’ll just take time.

It’s not a lot of money, it’s about $18 billion worth against 8% of total exposed volume that the tariffs end up amounting to. So it’s not a lot of stuff and it’s unsure if China will retaliate yet, they’re not very happy about it.

But there’s definitely going to be an economic cost to doing this. The clean energy fight is super important and we kind of have to do everything that we can and getting into a political war about it is not always so useful, right? 

Simone Del Rosario: You said that the American consumer ends up paying for this. We’ve already shouldered so much in goods inflation over the past couple of years. How might increased tariffs affect the current inflation rate?

Kyla Scanlon: Reshoring is inflationary, inherently, right, because it is cheaper to import certain things. Comparative advantage is a real economic concept. So I think that’s the big worry with things like this is that we are reliant on some aspects of pulling technology from other countries, and if we try to produce everything ourselves, that’s going to be expensive.

It’s going to be expensive in building the manufacturing plants and hiring the labor and training up the labor. And we have the Inflation Reduction Act, but even with that, it’s still going to be probably a meaningful cost.

Simone Del Rosario: I’m curious why these politicians, again, think that tariffs are a winning issue. What do you think the message is to Americans when we increase tariffs on places like China versus what’s actually happening with prices? Where’s the disconnect?

Kyla Scanlon: It’s a framing thing. President Biden tweeted out that part of his housing plan was to give people $400 per month for two years so they could purchase their first home or contribute money toward their first home.

That’s not a great way to talk about housing policy – we really have to build more homes – but if you’re framing it from a political perspective, people do like the idea of getting $400 per month. But if you’re like, ‘We’re gonna build 100 more homes,’ sometimes that doesn’t fly as well.

So tariffs are ultimately that sort of thing. They’re ultimately a framing tool. And that’s why it’s been implemented and why they’re talked about. It is like, ‘Okay, we’re going to go up against China.’

We have outsourced a lot of manufacturing to China. We have outsourced a lot of work to China and now with worries around AI and whether the economy is actually slowing. The more that you can politically position to be like, ‘We’re bringing everything back here,’ the better.

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Simone Del Rosario:

Biden and Trump agree on something? That appears to be the case with tariffs on China. Both believe it’s a winning issue in key battleground states. 

Four years ago, Joe Biden said Trump was going after China in the wrong way. But since becoming president, he has not only kept Trump’s tariffs in place, he’s adding on some of his own, on Chinese EVs, solar cells, advanced batteries, semiconductors, and aluminum and steel. Trump also wants to escalate his tariff policies if elected in November. 

I want to bring in Kyla Scanlon, an economic commentator and author of “In This Economy? How Money & Markets Really Work.” And Kyla, I want to talk about how tariffs really work. What do Biden and Trump think these tariffs will achieve versus what really happens when we increase tariffs on foreign trade partners? 

Kyla Scanlon: Tariffs are tough, right? So a tax on imports here, specifically it would be on China, and right now it’s definitely a political talking point, like everybody wants to see friendshoring, reshoring, and that’s why these tariffs are being positioned as such and being talked about right now, and I think people are hoping that it’ll achieve electoral votes, political points, but yeah, it’s tough, because it’s normally the US consumer does end up paying the cost for these tariffs in the long run, because they make everything more expensive to consume.

Simone Del Rosario: Are tariffs a proven way to protect the American manufacturing sector. And I, I’m going to ask a second one to this, is that, is the America’s manufacturing sector robust enough to be able to benefit from this?

Kyla Scanlon: It’s a good question. Detroit has seen a slowdown in clean energy production and electrification. You know, you’ve seen an uptick in dirty energy, as they call it. We don’t import a lot of solar cells and EVS from China, but it’s something that we’re relying on more and more, and that’s why the tariffs that Biden is imposing are a little bit more strenuous, and we are relying on it more. So it is going to be more economically impactful. It’ll just take time. It’s not a lot of money, like, it’s about $18 billion worth, against 8% of total exposed volume that the tariffs end up amounting to. So it’s like, not a lot of stuff. And it’s unsure if China will retaliate, yet they’re not very happy about it. But there’s definitely going to be an economic cost to doing this. The Clean Energy fight is super important, and we kind of have to do everything that we can and getting into a political war about it is not always so useful, right? 

Simone Del Rosario: You said that the American consumer ends up paying for this. We’ve already shouldered so much in goods inflations over the past couple of years. How might increased tariffs affect the current inflation rate?

Kyla Scanlon: Yeah, I mean reshoring is inflationary, inherently right, because it is cheaper to import certain things. Comparative Advantage is a real economic concept. So I think that’s the big worry with things like this, is that we are reliant on some aspects of pulling technology from other countries, and if we try to produce everything ourselves, that’s going to be expensive. It’s going to be expensive in building the manufacturing plants and hiring the labor and training up the labor, and, you know, we have the inflation Reduction Act, but even with that, it’s still going to be probably a meaningful cost.

Simone Del Rosario: Because you are someone who takes what’s going on in the economy and tries to really break it down for people to understand. I’m curious why these politicians, again, think that tariffs are a winning issue. What do you think the messages to Americans when we increase tariffs on places like China and, you know, versus what’s actually happening? Where’s the disconnect here?

Kyla Scanlon: Yeah, it’s a framing thing. President Biden tweeted out that he was going part of his housing plan was to give people $400 per month for like, two years so they could purchase their first home or contribute money towards their first home. And that’s like, not a great way to talk about housing policy, like, we really have to build more homes. But if you’re framing it from a political perspective, people do like the idea of getting $400 per month, but if you’re like, we’re gonna build 100 more homes, sometimes that doesn’t fly as well, and so tariffs are ultimately that sort of thing, like they’re ultimately a framing tool, and that’s why it’s been implemented. And why they’re talked about is because it is like, Okay, we’re going to go up against China. Who has? We have outsourced a lot of manufacturing to China. We have outsourced a lot of work to China. And now with worries around AI just, you know, is the economy actually slowing? The more that you can politically position to be like we’re bringing everything back here, the better.

Simone Del Rosario: Kyla Scanlon, author of “In This Economy?” That’s available for pre order now. Thank you so much, Kyla. 

Business

Fmr. Fed president: If the Fed wants 2% inflation, they have to raise rates

May 8

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At the start of the year, markets anticipated the Federal Reserve would cut interest rates six times in 2024. Five months into the year, even a single interest rate cut is questionable as inflation stays stubbornly above 3%.

Minneapolis Federal Reserve Bank President Neel Kashkari said on May 7 the Fed may need to hold rates steady all year. In an interview with Straight Arrow News, former Kansas City Fed President Thomas Hoenig said even the current rate isn’t restrictive enough for the Fed’s target inflation rate.

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“If the Fed really wants to bring their inflation numbers down to 2%, they’ve got to raise rates,” Hoenig said. “And they certainly can’t ease or cut rates at this point.”

Despite his prescription, Hoenig said the Fed does need to be careful about the “vulnerable” banking industry. He said the only case for lowering rates right now would be if there were a banking crisis, which would likely trigger a recession and force the Fed to ease rates.

Barring a banking crisis, Hoenig said a soft-landing scenario — where the Fed successfully brings down inflation without triggering a recession — is possible but very difficult considering the current economic conditions, which he called an “unstable equilibrium.”

“Either you’re going to have to raise rates to bring it down and risk a greater financial problem and recession or you’re going to have to let inflation run higher than your so-called target,” Hoenig said. “So it’s very hard to imagine a soft landing under these conditions. Maybe if enough time runs at the current level, things will align to a soft landing, but it is unlikely,” he said.

Hoenig said the Fed should never have brought up cutting rates at the turn of the year. While he said the Fed is looking at the right data, it’s not interpreting it correctly.

“If they have been looking at the data year on year … they would have known inflation was still running too high at 3% and they would have never started talking about cutting rates last January and December,” Hoenig said. “They looked at their most recent data, it looked like inflation was coming down. ‘By gosh, we’re going to cut rates.'”

“They said it too soon and that caused them, I think, greater problems and a more difficult time achieving their soft landing,” Hoenig added.

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[Simone Del Rosario]

We’ve been in a will they-won’t they cycle with the Federal Reserve all year. Of course, I’m talking about cutting interest rates. At the start of 2024, markets expected six cuts this year. But inflation’s not budging and now any cuts at all are in question. I want to bring in former Kansas City Fed President Thomas Hoenig. Tom, Minneapolis Fed President Neel Kashkari just said that the Fed may need to hold rates where they are all year. For you, what data would you need to see to justify cutting rates?

Thomas Hoenig:

I don’t think that they will be, or should be easing rates this year. If you think about it for a moment, the consensus is building among economists, it’s not universal yet, that the real rate of equilibrium, rate of interest for policy, the real rate without inflation, is around 2% it’s risen from what they used to think was less than 1% to closer to 2% and that’s because fiscal policy has been very strong. The economy has been very strong. The Labor market’s been very strong. So 2% is the new, what I’ll call equilibrium rate. And if that’s the case, if you were wanting to have 2% inflation, your rate over the long term would be different. But right now, the nominal policy rate, I’m making sense. The nominal policy rate is 5% and inflation is 3% so the real rate is 2% so in a sense, we’re in a what I’ll refer to as an unstable equilibrium, because at this level, at the current level of 5% 5.3% Fed funds rate, nominal policy rate. We’re in a situation where inflation state should stay around 3% so if the if the Fed really wants to bring their inflation numbers down to 2% they’ve got to raise rates. And they certainly can’t ease or cut rates at this point. So that’s a fairly long answer to a straightforward question, but it is. It is a complicated time, and the Fed is really going to have difficult time cutting rates. 

[Simone Del Rosario]

But what I’m hearing from you is that you don’t think that the current rate is restrictive enough.

Thomas Hoenig:

It’s it’s not if you want inflation down to 2% however you I recognize that you have to be careful, because at the moment, the banking industry is very vulnerable, and if it starts to tumble, then you’ll have a recession, a major recession, and they won’t avoid that. So they’re not they’re in a tight spot. That’s all there is to it.

[Simone Del Rosario]

Do you think that a soft landing is still possible?

Thomas Hoenig:

I think anything is possible, but I think it will be very difficult for them to do that, because we think about it, we have, we have inflation running 3% steadily for the last six months, despite different people saying taking different time periods to get a different answer, but it’s been running around 3% and the economy has done well under those under that conditions, and therefore, I think it is this, what I call this unstable equilibrium. So either you’re going to have to raise rates to bring it down and risk a greater financial problem and recession, or you’re going to have to let inflation run higher than your so called target, which you’re committed to 2% so it’s very hard to imagine a soft landing under these conditions. Maybe, if enough time runs at the current level, things will align to a soft landing. But it is unlikely, and

[Simone Del Rosario]

it seems like that last point is the direction that the Fed is going. You know, they’ve obviously been holding rates for some time now, and now hearing that maybe they want to hold rates for the rest of the year, just hoping that it’ll trickle down. Not a not a ton of fast action here, I wanted to ask you something, though there are certainly accusations out there that the Fed is too data dependent. Mohamed El Erian said that the Fed has become a play by play commentator. Do you think that the Fed is in that cycle right now where they are too dependent on the data that’s coming out every month to make their decision?

Thomas Hoenig:

Well, they certainly appear to be, don’t they? Because last, late last fall and into December, there was they were talking about rate cuts. The data changes suddenly, and the inflation numbers aren’t as hopeful as they thought. And they they start talking about higher for longer, then they say, but maybe, maybe a cut. And I would remind you of one other thing, yes, they’re data dependent, but also they very much want to cut rates. So that’s in the play. But so it’s this constant, inflation number of 3% or better. That’s holding them back. And even saying that, I would remind you that at the last meeting, they actually eased policy. They reduced their quantitative tightening substantially, so they’re now not allowing their balance sheet to run Office quickly. That makes financing for the government’s debt a little less stressful

[Simone Del Rosario]

if you were still making these decisions and having a vote on this. What data would be most important for you to look at?

Thomas Hoenig:

Well, I would look at a host of data. Certainly, I would look at the inflation numbers, since that’s your target, and I would follow that carefully. They are looking at the labor market. That’s That’s correct to look at it, see how strong it is and and I would, I would, I would look at the banking industry, just as they apparently are. So I don’t know that they’re they’re looking at their own data. It’s just that they, they keep changing how they’re looking at the data. For example, if they have been looking at the data year on year, and they’re looking at the CPI, the Consumer Price Index, as well as the personal consumption expenditures Price Index, they would have known inflation was still running too high at 3% and they would have never started talking about cutting rates last January and December. And had they done that, the market would have not, not have got quite so ambitious, if you will, in terms of their of almost turning to a boom like environment, and we might have been able to think about a soft landing now, but they got ahead of themselves. They looked at their most recent data, it looked like inflation was coming down. By gosh, we’re going to cut rates. They said it too soon, and that caused them, I think, now, greater problems and a more difficult time achieving their soft landing.

Simone Del Rosario:

So what is your best guess for what their plan is moving forward? Do you You already said that you don’t think they should cut rates this year and but you also said that they really want to. So is it hold steady? And do you see action in 2025 is that what we’re looking at right now?

Thomas Hoenig:

Well, I think, number one, they’re going to hold the rate steady. They should. Number two, they are going to, I think, continue to ease quantitative tightening, since that’s a big factor in the long term, in longer term interest rates. So in that sense, they are easing rates indirectly. So they’ll, I think they’ll continue along that plan. I think possibly, if inflation doesn’t come down, and I’m don’t see why would next year, then they may have to actually raise rates next year, which would be a slowing of the economy into 2025, and perhaps beyond. So the long term outlook isn’t necessarily for lower inflation. Long term outlook is really quite uncertain, and that’s why they should stop talking about data month to month, and look at the longer run and say, when we’re confident that inflation is at 2% then we will begin to talk about lowering rates. And I don’t mean it has to be exactly at 2% but a lot closer to 2% than 3% before they start actually moving down.

Simone Del Rosario:

Thomas Hoenig, former Kansas City Fed President. Thank you so much for your insight.

Thomas Hoenig: 

Glad to be with you. Thank you.