September's troubling inflation numbers.

I’m Isaac Saul, and this is Tangle: an independent, nonpartisan, subscriber-supported politics newsletter that summarizes the best arguments from across the political spectrum on the news of the day — then “my take.”

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Friday's post.

On Friday, I published a piece titled "Maybe we should forgive Herschel Walker's past." It drew a lot of mixed reactions from readers, including the following:

"Wow, this is one of my favorite pieces yet. Well argued."

"Fantastic article. I am not a fan of Mr. Walker but I am a fan of reasoned opinions and this is exactly that."

"This is why I read Tangle."

“As wishy washy of a piece as I’ve ever read written by you.”

"You can f—k off."

The piece is for paying subscribers — but you can read a preview (and decide if you want to subscribe for the whole thing) here.

Quick hits.

1. At least 11 people were killed and 15 injured when a gunman opened fire at a Russian military training camp on Saturday. Separately, Ukraine was attacked by a fleet of Iranian drones sent by Russian forces. (The shooting)
2. On Thursday, the January 6 committee released video footage taken by documentarian Alexandra Pelosi, the daughter of House Speaker Nancy Pelosi (D), during the riots at the Capitol. (The footage)
3. Early voting begins today in Georgia's midterm election, one of the most watched in the country. Senate candidates Herschel Walker and Raphael Warnock participated in a debate on Friday night, but Walker did not attend Sunday night’s debate in Atlanta. (The race)
4. The Biden administration is using Title 42, the Trump-era immigration policy they are fighting in court, to deny Venezuelans seeking asylum at the border entry into the U.S. (The decision)
5. With less than three weeks until election day, Republicans have regained an edge in midterm polling. (The numbers)
6. BONUS: There are three big debates happening tonight. In Ohio's Senate race, Rep. Tim Ryan (D) vs. JD Vance (R). In Georgia's gubernatorial battle, Gov. Brian Kemp (R) vs. Stacey Abrams (D). In Utah's senate race, Sen. Mike Lee (R) vs. Evan McMullin (I).

Our 'Quick Hits' section is created in partnership with Ground News, a website and app that rates the bias of news coverage and news outlets.

Today's topic.

Inflation. On Thursday, the Labor Department released its latest Consumer Price Index (CPI) numbers. Reminder: Inflation is measured by the Consumer Price Index (CPI), which is designed by the Bureau of Labor Statistics to measure price fluctuations for urban buyers, who represent the vast majority of Americans. The CPI tracks 80,000 items in a fixed basket of goods and services, representing everything from gasoline to apples to the cost of a doctor's visit.

The CPI rose 0.4% in September compared to August, after gaining 0.1%  from July to August. Economists polled by Reuters had projected CPI to increase 0.2%, meaning the actual increase was twice expectations. CPI was up 8.2% compared to this time a year ago after being up 8.3% over the last year in August.

Perhaps most importantly, core CPI, which is a measure of the index that excludes more volatile energy and food prices, showed its largest annual increase in 40 years. Core CPI jumped 6.6% in the 12 months through September, the most since 1982. It rose 0.6% in September compared to August, matching the rate it rose in August compared to July.

Food prices increased 0.8% in the last month and are up 13% from this time a year ago. Healthcare prices rose 0.8%. New vehicle prices rose 0.7%. Shelter costs, which include rent, are up 6.6% in the last year.

"This is not what the Fed wants to see six months into one of the most aggressive tightening cycles in decades," Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, told Reuters.

Meanwhile, gas prices declined 4.9%, apparel prices fell 0.3%, and used car and truck prices declined for a third straight month.

Last week, recipients of social security also received an 8.7% cost-of-living increase, the highest in over 40 years. On average, the increase means retirees' monthly payments will go up by about $146, bringing the typical monthly payment to $1,827. Some 70 million Americans receive social security.

We've been covering inflation after the monthly reports are released by the Labor Department since May. As we’ve written before, we have covered inflation repeatedly (and will continue to) because it remains the top concern for voters.

Today, we’ll take a look at some arguments from the left and right, then my take. You can find our previous inflation coverage here.

What the left is saying

• Some on the left argue there are still encouraging signs that inflation is going to come down soon.
• Others say this is another inflection point, and the Fed must continue to raise rates.
• Some are calling for cost of living adjustments for everyone — not just those on social security.

In The New Yorker, John Cassidy argued that the inflationary pressures may ease soon.

"Earlier this year, it seemed perfectly possible that by now the inflation rate would be coming down more sharply," Cassidy wrote. "The presumption was that, as pandemic-related supply-chain problems got resolved, and the price of oil fell back from the highs it hit after Russia invaded Ukraine, prices for all sorts of things, particularly stuff that gets shipped from China and other places in big boxes, would decline. And, in fact, this has happened. Excluding food and energy, the prices of all other goods taken together didn’t rise at all last month, the C.P.I. report showed, and some widely purchased items fell in price. They included clothes, footwear, used vehicles, major appliances, smartphones, and sporting goods. The problem is that such stuff makes up less than a quarter of the Consumer Price Index.

"Several factors are pointing to further falls in inflation in the months ahead. As the calendar year comes to an end, some big price increases from late 2021 will drop out of the twelve-month inflation figures. With shipping costs having plummeted recently, the prices of many goods should continue to fall," he wrote. "Despite OPEC's announcement that it intends to reduce production, crude isn’t trading much higher than where it was twelve months ago, and it’s down about twenty-five per cent from its peak earlier this year. Predicting what will happen to prices of services is also tricky, but there are some signs that rents, which have been one of the biggest drivers of inflation in this sector, may finally have peaked. And as the Fed’s interest rates continue to slow demand and employment growth, that, too, will help to moderate price rises."

In The Washington Post, Sebastian Mallaby said the Fed must double down against inflation.

"This time last year, the Federal Reserve committed its most fateful error since the 1970s. Having made a reasonable bet that inflation would be 'transitory,' it failed to pivot fast enough when the bet proved wrong," Mallaby said. "Today, the results are all around us. Inflation has been at its highest in four decades. The Fed has belatedly hiked interest rates aggressively, driving the dollar up to nosebleed levels and adding to the global stresses from the Ukraine war. U.S. mortgage rates are at a 20-year-record high. The world’s major public companies have shed about a quarter of their value since the peak last November... One year on, the Fed faces a new version of its 2021 dilemma.

"It has raised rates five times this year, and is expected to deliver another hefty hike at the start of next month. But some Fed leaders are starting to foresee a time when a pause might be appropriate, even though the latest inflation news, released Thursday, is grim. In an echo of last year’s debate, the doves affirm their commitment to the Fed’s 2 percent inflation target but wonder whether price pressures might dissipate without too much additional tightening," Mallaby said. "Yet, however real the risk of excess tightening, the opposite risk is scarier. The central economic fact of 2022 is that inflation remains way above the Fed’s 2 percent target. And although the data bounce around a bit, there is no clear evidence that inflation has really peaked."

In The New York Times, Peter Coy argued for a cost of living adjustment (COLA) for everyone.

"We’ve come to expect that certain people will be protected from inflation by cost-of-living adjustments and others won’t. But there’s a good case to be made that COLAs should be universal, covering all wages, all pensions and even all bonds," Coy wrote. "The roughly 70 million people who receive Social Security or Supplemental Security Income will be largely shielded from the past year’s inflation surge by the COLA announced on Thursday: an 8.7 percent increase in monthly benefits next year. The COLA isn’t perfect — for one thing, it comes just once a year, and in the meantime inflation erodes the real value of those government checks. On the whole, though, the cost-of-living adjustment is an extremely valuable government benefit.

"There’s a theory that COLAs could contribute to high inflation by insulating people from its consequences and that way making them less determined to resist it by, say, not buying something they think is overpriced," Coy wrote. "In 1989, the economists Stanley Fischer and Lawrence Summers wrote that by trying to make inflation painless, governments 'may end up increasing inflation and reducing welfare.' Indexation only makes possible sense for governments with 'impeccable anti-inflationary credentials,' they wrote. [Economist Laurence] Ball said he doesn’t necessarily buy Fischer and Summers’s conclusions; they remind him of the argument that seatbelts don’t save lives because the safety they provide just leads people to drive more recklessly. Besides, there’s something cruel about telling people that they’re going to be exposed to the ravages of inflation to make them fight harder against it."

What the right is saying.

• Many on the right blame Biden for inflation, and insist the Fed must continue to raise rates.
• Some criticize Biden for not properly grasping the difficulties facing Americans.
• Others call out the economic "experts" who are blind to inflation's persistence.

In The Wall Street Journal, James Freeman wrote about Biden's role in creating the problem.

"Despite warnings from leading economists from the Clinton and Obama administrations, Mr. Biden from the start of his presidency insisted on enacting massive spending increases based on his false claim that the U.S. economy was in a shambles and in need of emergency federal intervention," Freeman wrote. "It was never true. In the first quarter of 2021 when he took office, the U.S. economy was humming along at a robust 6.3% annual growth rate. This followed an explosive 35.3% surge in the third quarter of 2020 after many shutdowns had ended and then solid economic growth of 3.9% in the quarter before he took office. The Biden fairy tale of a struggling economy was used to sell his program of juicing demand with heavy spending.

"Meanwhile his regulatory activism discouraged supply, especially in energy. The result: too many dollars chasing too few goods. Of course Mr. Biden could not have done all his damage if the Federal Reserve was not also blundering—continuing its money-creation binge long after the rebound from lockdowns had begun. But at least the Fed is trying to learn from its mistakes and is now withdrawing stimulus," Freeman said. "Some Biden allies are even heralding a huge new cost-of-living adjustment for Social Security as a historic increase in benefits, but of course it’s just an effort to offset the historic monetary debasement authored by Mr. Biden and the Fed. This massive COLA means our government has failed in its bedrock responsibility to maintain the value of the currency."

In The Washington Examiner, Tiana Lowe said inflation will not peak and the Fed will not pivot until next year — at the earliest.

"Since the spring, the investor and so-called 'expert' classes have continually beclowned themselves, predicting that inflation has peaked, then sending markets into a boom and bust cycle with their delusion that the Federal Reserve will pivot away from its rate hike campaign," Lowe wrote. "Three data points ought to provide the definitive proof that core inflation will not peak and that the Fed will not pivot until next year at the earliest. Headline inflation is up 8.2% year-over-year, with core inflation at 6.6%, the highest in exactly four decades... service prices (up 6.7% year-over-year), which are much stickier than goods prices, are accelerating, with the monthly price increase doubling from July to September of this year.

"The second point of proof is the producer price index report released earlier this week. Given that wholesale prices run upstream of consumer costs, PPI inflation coming in at double the rate of 'expert' expectations bodes poorly for future CPI prints," she said. "Furthermore, core PPI came in at 7.2% for the year ending last month. The final set of tea leaves to emerge this week came in the form of the Fed minutes from last month's meeting. True to the Fed's continued declarations that they're willing to risk a recession to kill the worst inflation since the Volcker era, the minutes demonstrated that the Fed continues to understand that circumstances dictate it has a singular, not dual, mandate. That is to kill inflation, not keep markets or job gains in the black."

In The Washington Free Beacon, Matthew Continetti wrote about the "stagflation president."

"According to President Biden, the most recent BLS data are superfluous. After all, everybody already knows that 'Americans are squeezed by the cost of living: that’s been true for years, and they didn’t need today’s report to tell them that.' As a matter of fact, Biden said in a statement, rising costs are 'a key reason I ran for President.' ... Just a minute," Continetti said. "Biden’s reading of recent economic history is filled with evasions, half-truths, and 'yarns.' They deserve comment and rebuttal. I don’t remember Biden staking his 2020 candidacy on inflation. He couldn’t have. The inflation hadn’t happened. It didn’t arrive until the spring of 2021. By which time Biden was living—during weekdays, at least—at 1600 Pennsylvania Avenue.

"Nor do I recall Biden warning the country about the coming threat of rising prices. To the contrary: Varsity Joe was captain of 'Team Transitory.' The 'temporary' inflation would subside, he and his teammates argued, as kinks in the supply chain got worked out and the Federal Reserve tightened the money supply. They were wrong, of course," Continetti said. "Inflation persisted. By the winter of 2022, Biden was blaming high prices on corporate greed and 'Putin’s price hike.' Now he says inflation is the fault of the opposition party. No reason is provided; this president isn’t into causality. 'If Republicans take control of Congress,' Biden warns, 'everyday costs will go up—not down.' It's unlikely that voters see things the same way. At the least, a Republican Congress will check Biden’s big-spending instincts for the next two years. And most people draw a straight line between Biden’s policies and the parlous state of the economy."

My take.

Reminder: "My take" is a section where I give myself space to share my own personal opinion. It is meant to be one perspective amid many others. If you have feedback, criticism, or compliments, you can reply to this email and write in. If you're a paying subscriber, you can also leave a comment.

• It is harder and harder to imagine a "soft landing."
• Columnists on the right have mostly been far more accurate in predicting what would happen over the last year.
• It's impossible to avoid that the numbers on inflation continue to disappoint.

The news is getting increasingly grim.

As an exercise today, I went back and skimmed through our previous coverage on inflation. In October of 2021, Paul Krugman wrote that "wait-and-see looks like the prudent thing to do." In November he insisted we not panic, noting that previous price spikes were often one-time events. By December, conservative commentators were several months into begging the Fed to take action and raise interest rates, and hoping Biden would pause his economic agenda. By May, Biden was delivering national addresses on inflation, while some on the left were arguing it was corporate greed or Americans' lack of understanding about inflation that was the biggest problem.

In the five months since then, we've gotten a steady stream of predictions from the left that inflation indicators were increasingly good and relief was just around the corner, while the right has mostly warned it was only going to get worse.

Participating in the exercise of reviewing those pieces was illuminating. To put it plainly: Columnists on the right have been mostly right, while columnists on the left have spent most of the last year arguing things were just about to get better, weren't actually that bad, or weren't being caused by anything that the president could control.

To some degree, that last part is true. The Fed has more influence on macroeconomic movement like inflation than a president does. But there should be little doubt that at the intersection of fiscal policy (the spending policies of the federal government) and monetary policy (the actions of the Fed, like interest rates or buying up billions in bonds), we have real-world results. In this case, huge injections of stimulus into the economy from the federal government combined with many years of historically low interest rates and lots of money printing have put us where we are now.

In this most recent round of opinion-making, new explanations for the latest numbers on inflation have percolated. Krugman, for example, is now arguing that core inflation may not be as useful right now because it is driven by housing costs. And housing costs are driven in large part by market rents. And most renters have leases, which means that their rent largely reflects the state of the rental market some time in the past. Which means core inflation — heavily influenced by rent prices — is really lagging by roughly a year. It's an alluring argument, and it also does little besides tell us that we can expect core inflation to continue rising for months to come, since the post-pandemic rent and housing frenzy happened in the last year.

Throughout this entire affair, I'm proud to say I've championed the "I don't know" stance: I didn't know when inflation would end, whether it was transitory, how precisely to bring it down, or what proportional impact major events like Covid stimulus or the war in Ukraine were having. I didn’t know the degree to which inflation was due to domestic policy or global pressures. I didn’t think anyone knew as surely as they claimed. But we’re far enough along into inflation now to be able to draw some conclusions on real world outcomes.

The few things I have taken a definitive stance on are outcome-based, and the outcomes aren’t great. This is very, very bad for lower-income Americans, very bad for Americans on fixed incomes (like the 70 million receiving social security), and very bad for Democrats and Joe Biden. I've also explained why I changed my mind on "greedflation", and why I expect it to be a long haul to get out of this mess. None of those opinions have moved recently.

As convoluted as the numbers sometimes are, and as weird as this economic moment is, the inflation we're seeing appears steady. Food, shelter, energy, health care — they all continue trending in the wrong direction. And that means the Fed must keep the pressure on with higher interest rates, even if it triggers a recession.

The alternative is far worse.

Your questions, answered.

Q: Why doesn't the US install the "Iron Dome" missile defense system for Ukraine like we did for Israel?

— Frank from Lake Oswego, Oregon

Tangle: For those unaware, the Iron Dome is a missile interception system developed and operated by Israel with a huge amount of funding and aid from the United States. It regularly stops rocket attacks into Israel by tracking and shooting the rockets out of the sky.

Interestingly enough, you're not the only person who has floated some version of this idea. Just last week, The Washington Post wrote a story about how Israel was not planning to sell its air defense system to Ukraine (duh).

“Israel has great experience with air defense and Iron Dome, and we need exactly the same system in our city,” Kyiv Mayor Vitali Klitschko said in an interview Tuesday. “We have been talking with them a long time about it. Those discussions have not been successful.”

The reason Israel isn't going to hand over their missile defense system should be obvious: They need it. In August, it took down 97% of the 470 rockets fired by Islamic Jihad forces from the Gaza strip. However you feel about Israel, Palestine, and the politics of the region, you can understand why Israel wouldn't be eager to hand over that protection to someone else.

As for the U.S. "installing" one, I think the reason that isn’t happening is twofold: 1) Iron Domes aren't just sitting around ready for sale. They take tons of money to design, build, and install. And if the U.S. were to actually pull something like that off, it would require delivering and setting up the system without incident, and without crossing the red lines of the West's involvement in the war as drawn by Vladimir Putin.

And 2), it probably wouldn't work nearly as well. The rockets the Iron Dome is intercepting from Gaza are far more rudimentary than the large, guided missiles being used by Russia to bomb Ukraine. That's not to say it wouldn't be helpful — it would, since a lot of smaller rockets are also being launched into Ukraine — but it is to say that it wouldn't offer the standard of protection as it does for Israel.

Want to have a question answered in the newsletter? You can reply to this email and write in (it goes straight to my inbox) or fill out this form.

Under the radar.

Officials in Alaska have announced the cancellation of the fall king crab harvests in Bristol Bay for the second straight year. For the first time ever, they also canceled the winter harvest of snow crabs. The decision from officials comes after data from a NOAA eastern Bering Sea survey showed a 92% decline in overall snow crab population from 2018 to 2021. Snow crab populations are believed to be falling due to a combination of warming of the Bering sea, increased threats from predators, and overfishing. In 2016, the industry grossed $280 million, meaning the cancellation will be a major hit to the Pacific Northwest economy. USA Today has the story.

Numbers.

• 5.6%. The drop in the S&P 500 from the last market close before Biden's inauguration to Friday.
• 49-45. Republicans' current lead over Democrats in generic ballot polling among likely voters.
• 50-45. Republicans' current lead over Democrats in generic ballot polling among men.
• 47-47. The current split in generic ballot polling among women.
• 52-40. Among likely voters aged 18 to 29 years old, Democrats' lead in generic ballot polling.
• 59-38. Among likely voters aged 45 to 64 years old, Republicans’ lead in generic ballot polling.

Have a nice day.

A bakery in the San Francisco area has created what can only be described as a dream come true for any Star Wars fan: Pan Solo. Hannalee Pervan and her mother, Catherine Pervan, co-owners of One House Bakery in Benicia, California, spent weeks baking a recreation of the character Han Solo, who was frozen in carbonite in the Empire Strikes Back — in bread. The 6-foot bread sculpture has gotten national attention and is now on display outside the bakery. “Mom made me leave it because I was obsessing over the lips,” Hannalee Pervan joked with the New York Times. “She was like, ‘You need to walk away.’”

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