Year-to-year percentage changes in the CPI will always be called “stubborn” in the headlines simply because each new month is averaged together with eleven previous months.

Even on a year-to-year basis, however, CPI inflation has been falling for All Items Less Shelter (Rent), as I noted in a previous blog. 

The year-to-year change in goods inflation (“commodities”) is also down nicely, even aside from energy (41.5% Jun vs. 17.5% Oct).

Food inflation still looks painfully high on a year-to-year basis but has slowed every month since May. Among big items (32% of the CPI) only Rent is rising.

And that is from old leases in an outdated 6‑mo. survey.

Yet Fed Chairman Jerome Powell recently closed his Press Conference by saying, “we haven’t seen inflation coming down… We would have expected goods inflation to come down by now, long since by now. And it really hasn’t although it’s, actually it has come down but … not to the extent that we had hoped. At the same time, now you services inflation, core services inflation [mainly rent] moving up and I just think that … means that we have to be more restrictive.”

It seems like everywhere you go in Washington these days, you find some aspiring politician, bureaucrat, or wonk lamenting the supposed plight of today’s American worker and—of course—promising to fix it. President Trump, for example, had a 2020 “Pledge to America’s Workers” that heralded past executive actions supposedly helping American workers, and President Biden has embraced similar rhetoric and policies (e.g., his “worker centric” trade policy and recent infrastructure, energy, and semiconductor laws that, he says, create jobs for American workers).

Unfortunately, and as the Trump and Biden examples demonstrate, most of the “pro-worker” stuff being proposed – tariffs, wage subsidies, restrictions on independent contracting, mandated paid leave, and so on – all demand more and bigger government, usually on the assumption that the “free market” has failed today’s American workers. Yet these proposals almost uniformly ignore all the current laws and regulations – on occupational licensing, housing, childcare, healthcare, welfare, and many other issues – that depress most Americans’ real wages, labor force participation, new business formation, or mobility. They similarly ignore the numerous market‐​based solutions that boost workers’ independence, mobility, wealth, resilience, or quality of life—all without the inevitable economic and political problems that come with more spending and bureaucracy. And, perhaps most importantly, they target an “American worker” that often bears little resemblance to the U.S. workforce’s complex and ever‐​changing reality, especially in the wake of the pandemic.

To correct those failings, the Cato Institute is releasing a new book, Empowering the New American Worker: Market-based Solutions for Today’s Workforce, which covers what my colleagues and I believe to be the most important issues facing workers today and offers pro-market reforms that can help workers meet these challenges. Among the 17 subject chapters, each deeply researched and data-rich, are the obvious issues like education and remote work, but also ones that greatly affect many of today’s workers but get less attention, like home‐​based business, criminal justice, transportation, and basic necessities (food, clothing, etc.).

The chapters generally fall into four categories: (1) foundational macroeconomic principles that broadly improve workers’ living standards and the long-term health of the U.S. economy; (2) policies to facilitate workers’ professional improvement or advancement; (3) policies to promote worker mobility and independence; and (4) policies to improve workers’ access to, and lower the cost of, essential goods and services.

Today, we’re releasing online the book’s Introduction (by me), as well as Section 1 (Ensuring a Sound Macroeconomic Foundation by Jeff Miron and Pedro Braga Soares) and Section 2, which includes the following chapters:

• Private sector labor regulation by Ryan Bourne and Brad Subramaniam;
• Higher education by Neal McCluskey;
• Occupational licensing by Chris Edwards;
• Independent contracting and gig work by Ilana Blumsack and me;
• Entrepreneurship and homebased business by Edwards; and
• Criminal justice by Blumsack and me.

Each chapter identifies current problems and their causes and then suggests pro‐​market ways for federal, state, and local policymakers to fix them—in the process empowering all American workers, not just those favored by our political class.

The full book will be out later this year. In the meantime, enjoy the sneak peek and be sure to check out my new Cato podcast on the project.

After this week’s election, members of Congress will return to Washington for a lame-duck session during which they will confront a “must‐​pass” deadline of their own making. Lawmakers will need to address the December 16th expiration of discretionary appropriations or federal government operations will partially shut down.

They have two main choices: adopt a continuing resolution to extend federal funding at current levels into early 2023 or adopt a massive new spending bill. Extending the continuing resolution into 2023 offers lawmakers the best chance to take another crack at putting discretionary spending on a more responsible path.

A more responsible approach would return discretionary spending to pre-pandemic (2019) levels (see the chart below for historic spending and a selection of possible spending projections). Lawmakers running up emergency deficit spending at the height of the COVID-19 pandemic should not establish a higher spending baseline for years to come. As pandemic needs wind down, so should government spending.

Compared to assumptions by the Congressional Budget Office, a return to pre-pandemic discretionary spending (after adjusting for inflation) would save American taxpayers $4.8 trillion over the next 10 years (assuming an annual growth rate of 2 percent). More modest scenarios would freeze discretionary spending at current levels (saving $3 trillion over 10 years) or grow discretionary spending at no more than 2 percent based on current levels (saving $1 trillion over 10 years). See the table below for a comparison of 1‑year and 10-year savings under these alternative spending paths.

To achieve the savings necessary to return to pre-pandemic spending levels, Congress can eliminate spending that is unnecessary, wasteful, ineffective, or outside the scope of federal government involvement. This requires better prioritization and acting on recommendations made by governmental and advisory groups. Unauthorized appropriations would be a great place to look for potential savings. Cutting programs that received massive cash injections from the COVID stimulus bills down to their pre-pandemic size is only reasonable. Outside groups such as the Cato Institute, the Heritage Foundation, the Committee for a Responsible Federal Budget, Citizens Against Government Waste, and the National Taxpayers Union Foundation in collaboration with the U.S. Public Interest Research Group Education Fund, among others, have offered up many ideas for spending cuts. Even the nonpartisan CBO includes several discretionary options to reduce the federal deficit.

Where there is a will, there is a way.

And discretionary savings are just the beginning. The discretionary spending bills, set to expire on December 16th, govern the funding levels for about one‐​third of the federal budget. That includes national defense and about a thousand domestic social and economic programs. The remaining two-thirds of the budget consists of so-called mandatory spending and interest payments.

Mandatory spending, unlike the name suggests, does not mean “required” spending. Instead, it refers to programs like Social Security and Medicare, which Congress has structured such that they spend money on autopilot. These programs grow with inflation and wages, based on increases in eligible populations, and with growing life expectancies. What makes mandatory programs unique is that once authorized, they spend and grow without regular budgetary reviews.

All non-interest spending should be subject to regular review. Senator Ron Johnson (R‑WI) suggested that “we ought to be paying attention to the sustainability of Social Security, Medicare, and other ‘mandatory’ spending programs, by putting everything ‘on budget’ as discretionary spending.” Senator Mitt Romney (R‑UT) introduced the more modest bipartisan TRUST Act, which would “establish congressional rescue committees to develop recommendations and legislation” to improve programs governed by trust fund mechanisms, including Medicare and Social Security.

Congress can buy goodwill and establish an effective precedent for reforming entitlement programs by first controlling the growth in discretionary spending.

The 118th Congress should dedicate itself to restoring fiscal responsibility across the federal budget, starting with putting discretionary spending on a more responsible path. When lawmakers return to Washington next week, this lame-duck Congress should extend the current continuing resolution into early 2023, giving the new Congress a chance to return discretionary spending to pre-pandemic levels with sensible spending cuts.

A Washington Post reporter writes, “Child-care workers have long been underpaid.”

By what standard? How does the reporter know that? There’s no official list of the “right” wage for any job. The reporter goes on to say, “The country’s economy depends on child care, but its workers, nearly all of whom are women, earn an average of $27,680 — less than bellhops and taxi drivers.”

There are about 130 million private-sector jobs in the United States. No central planner sets their wages. Wages and salaries generally reflect supply and demand, that is, what consumers are willing to pay for a service, what an employer can pay for workers to provide the service, and what wage a potential employee is willing to accept.

It’s understandable that we “feel” that child-care workers should be paid more — they take care of our children, what job could be more important? And who is the “we”? If parents seeking child care think providers should be paid better, they can seek out child-care facilities that do pay workers more and probably charge customers more.

We hear complaints about salaries all the time: Why does a movie star make more than a teacher? A few years ago a theory called “comparable worth” emerged, arguing that employers should be “required to set wages to reflect differences in the ‘worth’ of jobs, with worth largely determined by job evaluation studies, not by market forces.” But economists insisted that such theoretical analysis could not be as accurate, efficient, and dynamic as the market process. 

Elected officials can always increase the wages of government employees, in response to either voter demand or special-interest pressure, and there’s evidence that government jobs pay more than similar private-sector jobs. But private employers have to make revenue exceed expenses, or they go out of business. 

The economy isn’t perfect at any moment. People’s wants and needs are constantly changing, and so are wages and prices. The average pay for child-care workers isn’t “right,” it’s just the one that has emerged — for now — out of the play of supply and demand. If child-care workers become more likely to leave to become taxi drivers, bellhops, or Walmart greeters, then wages would tend to rise. 

With the City Council’s recent vote, Cambridge, Massachusetts becomes the latest city to reform parking requirements. Cambridge is unique among Massachusetts cities in that it is the first to fully eliminate parking minimums citywide. But it is not unique among U.S. cities more generally, and comes as a wave of other locations, including San Francisco, California; Lexington, Kentucky; and St. Paul, Minnesota; have made sweeping parking reforms.

Parking minimums are a type of urban regulation that require developers to provide a predetermined number of parking spaces for a certain number of residential units or a given developed square footage. These mandates centralize decision making and impose uniformity, rather than leaving parking decisions to developers or property owners who are likely to understand the needs of residents and appreciate how these needs vary across geography and over time.

As such, parking mandates are a great example of an urban regulation that reduces efficiency and unnecessarily increases costs. Parking mandates also compel vehicle-centric transit in what is—or would otherwise be—urban areas. Because land is expensive, especially in urban and development constrained areas, the costs of parking mandates can be substantial.

For instance, one paper found that the construction cost of a parking space ranged from $17,000 (aboveground, in Phoenix) to $48,000 (underground, in Honolulu). But even these estimates underestimate the true cost of a parking space by ignoring the cost of land for above ground parking as well as the opportunity cost related to foregone, higher utility development, both above and below ground: in places where parking is required, office, retail, or residential space could be developed instead. For example, in suburban Seattle, parking minimums were estimated to reduce the number of residences in buildings by 13 percent.

Parking minimums meaningfully affect the cost of office and retail space. For example, providing parking in an aboveground structure is estimated to raise the construction cost of office space by an average of 30 percent, while providing parking underground increased the construction cost of office space an average of 47 percent. For shopping centers, parking minimums are estimated to increase the cost of construction even further, by 37 percent (aboveground) and 55 percent (underground).

Figure 1. The Cost of Retail Parking Requirements Across Select U.S. Cities

Source: The High Cost of Minimum Parking Requirements

But more importantly from the typical person’s perspective, parking minimums increase the cost of housing. Recent research finds that the cost of garage parking is approximately $1,700 per year or an additional 17% of rent for renters. Unfortunately, these costs, like zoning regulations more generally, fall hardest on low-income renters that are unable to readily absorb the costs of increased rents and that often have no need for parking spaces in the first place.

This is beginning to change with current reforms. A Parking Reform Network map indicates that parking reform is occurring across the United States (Figure 2). Better yet, the effects of those reforms are beginning to materialize.

Figure 2. Parking Reform Activity in the U.S.

Source: Parking Reform Network

As one example, in 2012 Seattle eliminated parking minimums in neighborhoods with multifamily housing in urban centers and urban villages near high-frequency transit, along with reduced parking requirements elsewhere and for certain housing types (Figure 3). As a result of the reduction in parking requirements, researchers found that $537 million in construction costs were saved over a five-year period. Without Seattle’s reform, the authors predict that developers would have been required to construct an additional 18,000 parking stalls, at an approximate cost of $30,000 per space. That would surely result in higher costs for Seattle buyers and renters.

Figure 3. Seattle Residential Development and Parking Requirements, 2012–2017

Source: Parking policy: The Effects of Residential Minimum Parking Requirements in Seattle

Similarly, following a 2015 Minneapolis reduction in parking requirements, developers were able to untether housing offerings from parking amenities. As a result, new studio apartments were reportedly offered 17 percent below typical market price.

As parking reform continues, examples of cost reductions and improved affordability will inevitably continue to surface. The market is both responsive and innovative when it is allowed to operate in a context of regulatory freedom, and it can respond to the varied demands and preferences surrounding parking much more precisely than any city planner could hope to. With luck, cities will continue to get out of the way and let the market do its work.

My post yesterday discussed voting on state and local government bonds. I argued that funding routine government spending by debt is misguided, and that issuing debt this year is a particularly bad idea because governments are already flush with cash and interest rates are rising.

Voters usually reject tax increases at the ballot box, but they usually approve the passage of bonds—often by large margins of around 75–25. Apparently, voters do not realize that general obligation bonds are equivalent to tax hikes.

Voters in Arlington County, Virginia, will decide today on six bonds to fund schools, parks, and other items. Interesting, the county has posted its bond election results back to 1951. Not every year has a bond election, and some years have multiple bonds on the ballot.

The chart shows that the average bond passage rate has risen substantially since the 1950s, although it has leveled out in recent decades. The average passage rate increased from 58 percent (1951–1979) to 75 percent (1980–2021).

Arlington voters have become more supportive of government debt, or maybe less aware of the risks and costs. I wonder whether that is true nationwide? Is federal government debt so high today because congressional budgeting is broken or because Americans have become more tolerant of debt?

One caveat: The share of Arlington’s population voting on bond issues has increased over the decades, which could be a cause of the changing results.

U.S. arms transfers have become a salient issue during the Biden administration given the Saudi-led war in Yemen, the Russian invasion of Ukraine, and continued sales to risky neighbors.

Over the past few weeks, the Biden administration has had to balance supporting Ukraine from a brutal attack while also trying to prevent concerns over weapons dispersion to dangerous groups outside of the country. The administration announced that it is sending $400 million more to Ukraine through the Ukraine Security Assistance Initiative. Additionally, Saudi Arabia’s ongoing war in Yemen continues to expand, which continues in part because of large U.S. weapons sales to the Saudis and their allies.

As we have written about numerous times, the administration’s policy is not reducing risk in arms transfers. Ironically, Biden had the right idea about arms sales in the 1980s. Specifically, during the authorization of the Foreign Assistance Act for 1986 and 1987, then-Senator Joe Biden proposed an amendment that would prohibit “military and paramilitary aid” to the Nicaraguan Contras—a rebel group that was receiving aid from the Reagan administration to fight the communist Nicaraguan Sandinista government. In his defense of the amendment, Biden raised four points that should be considered in his administration’s military aid policy.

First, the amendment proposed providing humanitarian aid instead of military aid. Specifically, Biden said that humanitarian aid will, “ipso facto help the Contras militarily because it will help them economically.” He argued that the United States would provide this aid, “because we wish at this time to confer on the Nicaraguan resistance some measure of legitimacy and practical assistance without affirming the political and moral commitment entailed by overt military support.”

As we have previously discussed, the past eight years of U.S. arms sales to Saudi Arabia and its coalition partners has directly tied the United States to the human rights abuses in Yemen. Despite numerous reports about the Saudis targeting civilians with U.S. weapons, Washington’s solution has been to send more weapons, creating a vicious cycle of killing. For Yemen to truly begin recovering, U.S. policymakers need to address the underlying problems and push for peace and offer humanitarian aid to Yemen. In doing so, the United States can disentangle itself from the “moral commitment” while offering “practical assistance.”

Second, Biden noted that “Congress shall consider further aid to the Nicaraguan opposition only if the opposition has acted effectively to remove from its ranks those persons who have engaged in serious abuses of human rights.”

Concern over human rights is a contemporary problem in Biden’s current foreign policy. Despite claiming that the government would more carefully consider a weapons recipient’s human rights record, Biden has sold arms to countries where weapons dispersion is known to lead to civilian casualties, where there is slave-like labor conditions for noncitizens, where they are fighting in violent warzones, and where there is a risk that the government uses military strength to suppress human rights. The damage from this is mitigatable if Biden simply considered human rights before transferring weapons.

Third, Biden’s 1985 proposed amendment would have required both sides to negotiate before the United States would send aid to the Contras or offer sanctions relief to the Nicaraguan government. As Biden stated, “the amendment seeks to promote negotiations by conditioning the availability of this aid on the demonstrated willingness of the administration and of the Contras to enter into talks with the Nicaraguan government.” Further, “the amendment offers to the Sandinista government certain inducements to negotiation by providing for a suspension of the U.S. economic embargo if the Government of Nicaragua enters into a ceasefire and negotiations with opposition forces.”

Admittedly, the situation in Nicaragua was vastly different from what is happening now in Ukraine, where neither side has much incentive to stop fighting. Russia is a great power with the ability to fight a protracted war, and Ukrainian forces have exceeded all expectations and stopped Moscow from winning. Domestically, too, the situations diverge. There are serious bureaucratic dilemmas that prevent Washington from offering this sanctions relief. In essence, Congress needs to remove any sanctions that are public law, which makes any sanction relief promises difficult to implement.

Nonetheless, absent a total nuclear strike, a regime change in either country, or other drastic exogenous shocks, the most likely way any war will end is through negotiations. To this end, it is important for the United States to start thinking about how it can condition both arms transfers to Ukraine and sanctions relief to Russia on attempts at ceasefires and negotiations, not dissimilar to what Biden attempted in 1985.

Finally, in this 1985 defense of his proposed amendment, Biden noted that collaboration between Congress and the president leads to a policy that works “by blending the administration’s emphasis on military aid with congressional emphasis on the practical reality that popular support in a civil war cannot be won by death squads.”

Once again, President Biden should listen to Senator Biden. He has had ample opportunity to pass legislation that would “flip the script” and empower Congress to stop dangerous weapons transfers. Yet, President Biden has continuously failed to seize the opportunity. The administration has not even released its conventional arms transfer policy, where among other things, he could advocate for this “flip the script” legislation.

Ultimately, Biden’s amendment failed to pass in 1985, winning only 22 other senators. Nonetheless, as president, he has power to implement these policies. Someone should remind Biden of what he once believed and encourage him to look to his 1985 self and attempt to change U.S. arms transfer policies for the better.