“I’m beginning to see the first signs of it,” Greenspan said about inflation during an interview on “The David Rubenstein Show: Peer-to-Peer Conversations” on Bloomberg Television. “We’re seeing it basically in the tightening of the labor markets first, which, as you know, have gotten very tight now. We’re beginning finally to see average wages rise and clearly there’s no productivity behind it.”
Inflation measured by the Fed’s preferred gauge of price pressures known as the personal consumption expenditure index was 2% – at the central bank’s target – in the 12 months through September after running mostly below that threshold since 2012. A separate gauge, the consumer-price index, rose 2.5% in October from the year before, according to Wednesday’s Labor Department report.
Unemployment has fallen to 3.7%, the lowest level since 1969 and average hourly earnings are creeping up. However, Greenspan said a lack of productivity growth meant “you’re getting into a system now which has no outcome that’s in equilibrium other than inflation and no productivity growth.”
“The tax cut actually did get a buoyancy, and we’re still feeling some of it, but it’s nowhere near enough to offset the actual deficit,” Greenspan said. “You can’t have a tax cut without finding the revenues elsewhere, or you run into problems.”
Tax cuts and federal spending signed by President Donald Trump helped spur business confidence and lift US growth to 3% in the year through the third quarter. But the deficit widened to a six-year high of $779 billion during the administration’s first full fiscal year, raising concern the country’s debt load of more than $21.7 trillion will grow out of control. The government this week reported a $100.5 billion budget gap for October, the first month of the new fiscal year, an increase of about 60% from a year earlier.
Greenspan said curbing spending on Social Security, Medicaid and Medicare were key to putting the nation’s finances on a sustainable footing – certainly a call to arms for Democrats who can be expected to resist any such policy shifts.
Whether or not Greenspan’s concerns have much of an impact on the long lame-duck to-do list remains to be seen and POLITICO says that most policy makers are focusing on narrower concerns. For example, it thinks that pushing a final farm bill through Congress by January is a heavy lift on its own, given the outstanding policy disagreements and sometimes bitter relations between top negotiators. It concludes that “the crush of other year-end legislative priorities makes the chances of finishing the farm bill in 2018 appear even dicier.”
House Agriculture leaders met Monday but emerged without much progress to speak of. There was talk of putting together a bipartisan House offer, which could spur negotiations among the House and Senate agriculture chiefs toward a deal.
Some items on the “lame-duck list” still include the “hope” of striking a bipartisan deal in time to pass a final farm bill before January, debates that will compete for floor time and legislative oxygen with plenty of other big-ticket issues. The Senate is expected to churn through additional nominations, both parties and chambers will hold leadership elections — and then there’s the annual year-end spending showdown, POLITICO says.
Congress still needs to fund large portions of the government by Dec. 7 when a temporary stopgap expires. There are just 12 joint legislative days until then and a partisan struggle over funds for President Donald Trump’s U.S.-Mexico border wall is sure to complicate spending talks, POLITICO thinks.
Also additional tax legislation could be on the agenda: The Senate has yet to take up the House-passed “Tax Cuts 2.0” legislative package, which would permanently establish parts of the 2017 GOP tax code rewrite. Technical fixes to that overhaul and a separate extension of expired temporary tax breaks, or extenders,” could also be on deck. The slate of extenders includes biofuel tax credits, POLITICO notes.
One final note, POLITICO is reporting that that progressives could be a roadblock to trade pact approval. The Congressional Progressive Caucus fought against trade promotion authority in 2015 and helped fend off a vote on the Trans-Pacific Partnership. Now the U.S.-Mexico-Canada agreement is expected to come before Congress in 2019.
Caucus co-chair Mark Pocan, D-Wis., said Monday that the group has major concerns about the deal. Come January, when Democrats control the House, the liberal caucus will have at least some influence over the fate of the new pact. Some observers are suggesting that Democratic leaders might be less inclined to shove it through the House if a large and influential segment of their party is opposed to it.
So, we will see. Not only is trade policy uncertain, but a vast new set of priorities and concerns can be expected to surface and demand attention, leading to new controversies that likely will drag well into the coming months – and which should be watched closely by producers as they emerge, Washington Insider believes.