Saturday, May 25, 2024

Jake's power has been restored

Weird week here, partly due to my real job being busy, but also because I was one of the 1% of Madison Gas and Electric customers that was without power from Tuesday night until midday Saturday.

Now we were able to save most of our food and the temperate climate of the week kept things from being too uncomfortable at home, but it made it near-impossible to post from home or do anything else with the ole laptop.

Some things left to catch up on (the economy still good, people still not connecting their reality to the country's reality), but that'll be brought up in due time.

Tuesday, May 21, 2024

Fund special ed just like we would for vouchers, and stop all those annoying referenda!

If you're annoyed by the prospect of having to deal with referenda to keep your community's public schools afloat, State Sen. Chris Larson recently brought up a way that could avoid some of those ballot questions. Why not have the state pay more for special ed, and lower your district's property taxes in the process?
Larson, a Democrat from Milwaukee, called on Republican lawmakers to convene a special session to use some of the state's budget surplus to raise state reimbursement of special education costs to 90%. A Legislative Fiscal Bureau memo requested by Larson showed the move could cost about $970 million annually, if costs next year are similar to this year.

Republicans previously rejected calls to raise the reimbursement rate. Gov. Tony Evers had proposed raising the rate to 60%, after calls for an increase from a broad coalition of business executives, public school leaders and private school leaders. Republicans walked it back to 33%, a slight increase from the previous rate of 30%.

That leaves districts on the hook to cover the rest of their costs. Most districts had to pull between $1,000 and $2,000 in regular education funding for each district student to cover special education services in the 2019-20 school year, according to a report by the Education Law Center, a New Jersey-based nonprofit that advocates for equitable school funding.
In addition, previous studies have shown that many higher-poverty districts have higher percentages of students in need of special education than schools in more affluent district, which furthers constrains resources for those often higher-cost services. For example, the Education Law Center noticed that Milwaukee Public Schools have to deal with higher burdens from special education services than the North Shore suburb of Whitefish Bay does.
The special education reimbursement shortfalls tend to be highest for districts with higher rates of poverty, an analysis by the Education Law Center found, as those districts have higher numbers of students with disabilities who need special education services....

[For example], in the 2019-20 school year, 84% of MPS students qualified as low income, and 20% were identified as having disabilities. In Whitefish Bay, 2% of students were low income, and 11% had disabilities. MPS had to use about $2,000 of its general funding per student to cover special education costs, while Whitefish Bay had to pull about $1,100 per student.
Larson then combined the two concepts and noted that if the state funded 90% of those special ed costs, there would be a much lower need for referenda, because schools wouldn't need to use as much of their "regular" property-tax supported funding to pay for special ed.
Unreimbursed special education costs were equivalent to 63.8% of the annual dollars sought via operating referendum in those 68 districts.

In 16 districts, unreimbursed special education costs accounted for 100% or more of the annual operating referendum amount

Two-thirds of districts with operating referenda had unreimbursed special education costs equivalent to at least half of the annual referendum amount

57.0% of the recently-passed Milwaukee Public Schools referendum ($143.5 million out of $252 million) can be attributed to unreimbursed special education costs.

Another reason Larson chose the 90% reimbursement figure is that it's the same percentage as voucher schools get for their special needs scholarships that go to students with special needs that attend those voucher schools. This costs of this state-funded program for voucher schools has risen substantially since it became law in 2017, including an increase of more than 50% in funding for this current school year.

So if it's good enough to raise funding for voucher school special ed, why wouldn't it be good enough for the rest of the state? Or at least give each school the $15,000+ per special education student in state funding that voucher schools get under the special needs scholarship.

It's yet another example of how 14 years of GOP favortism towards voucher schools have hurt our community schools and the students and parents who rely on them, and led to higher property taxes for all of us. And it's yet another thing that has to be fixed when we get new legislators and fair maps in place for the next session.

Monday, May 20, 2024

Surprise! CBO says Americans have been beating inflation

You’ve probably heard a ton about how “inflation is eroding wages and standard of living!” And many Americans are understandably frustrated in seeing more of their after-tax income going to pay for food and rents and other expenses.

But the Congressional Budget Office took a longer-range view, back before the COVID pandemic hit the country. And know what they found out? That all American income groups paid less of their incomes for everyday items last year than they did in the Trump presidency.
CBO used 2019 consumption bundles to assess changes in the prices of goods and services commonly consumed by households. To assess the effects of inflation on households at different income levels, CBO estimated the change in the share of income required to purchase the 2019 consumption bundle for each income quintile; the agency used the same framework for those estimates that it regularly uses to measure the distribution of income as well as transfers and federal taxes.

CBO’s analysis focused on two measures of income: market income and income after transfers and taxes. Market income consists of labor income, business income, capital income, and other income from nongovernmental sources. Income after transfers and taxes accounts for additional factors such as cash payments from the government (that is, transfers such as those for Social Security and unemployment benefits) and federal taxes. Both measures were adjusted to remove the cost of health care benefits that people receive from the government or their employer, because consumption of those benefits is not included in household consumption as measured by the consumer price index for all urban consumers…. By CBO’s estimate, aggregate incomes grew more than prices did between 2019 and 2023. Over that four-year period, the average annual growth of real adjusted income (that is, adjusted income with the effect of the increase in the CPI-U removed) after transfers and taxes was 2.1 percent, and that of real adjusted market income was 2.6 percent.
Oh did it, then?

We forget what things were like before the pandemic, and how much less everyone made in typical jobs. For example, average hourly wages jumped by a significant amount early in the pandemic (mostly due to lower-wage jobs being the ones more likely to have layoffs), and stayed elevated even after the most severe parts of the pandemic had passed and those lower-wage jobs and businesses came back.

Just because people have more of a cushion, it still doesn’t mean inflation hasn’t jacked up prices in the meantime. CBO admits that things cost quite a bit more than they did in 2019, by an average that ranges to 4.4% to 4.7% a year. In addition, the cost of everyday expenses have gone up slightly more for lower-income Americans than richer ones.

Those differences in cost burdens help to explain why CBO says that lower-income Americans ended up having smaller gains vs inflation than richer Americans did over those 4 years. CBO also says that richer people had bigger gains in income in that time period.
The difference in those percentage changes reflects two factors: Price increases were greater for the typical consumption bundle purchased by lower-income households than they were for that purchased by higher-income households, and the income of households in the highest income quintile grew more in percentage terms than the income of other households did (see Figure 1).

(Reminder - in these charts, the more the share declines, the easier it was to pay the bills.)

We also haven't seen much evidence of a consumer pullback in the face of these higher prices over the last 2 years, which you'd likely be seeing if people were really falling further behind.

Whatever else you can say about the economy, consumers are not pulling back on spending

And guess what? The government also publishes lots of other handy statistics! I'll spare you the charts, but real wage growth has been up steadily; home sales are down from their 2021 boom year but have increased lately; auto sales are up and have been steady lately; and durable goods consumption is up. Inflation has been hovering around 3% for an entire year, which is not especially dire. Hell, even consumer sentiment, which sparked this article in the first place, has been steadily up except for the single month of May—so it's a little early to be pretending there's some kind of downward trend.
I did notice that retail sales were flat in April, so seems like something we'd want to keep an eye on for the next couple of months of data. But we have also seen Aldi and Target announce price cuts this month, which tells me that these companies are starting to see consumers being less accepting of higher prices....and that much of our "inflation" was GREEDflation all along.

Perhaps that's a sign that we are continuing to head back toward trends we saw before the pandemic, which had generally lower nominal increases in wages, spending and prices. But that CBO report is a reminder that as 2023 ended, Americans were generally better off than they were 4 years ago when it came to making ends meet, no matter how annoyed they might be when they get reminded of higher prices in their everyday lives.

Friday, May 17, 2024

Lots of good signs for Wisconsin's job market this week

While the US unemployment rate has slowly been inching up toward 4% in the last few months, we got more proof on Thursday that Wisconsin is going in the other direction, with our rate falling below 3.0%.
Place of Residence Data: Wisconsin's April 2024 preliminary unemployment rate fell to 2.9% from 3.0% in March. The labor force decreased 500 over the month, to 3,139,500. The number of people employed increased 600 over the month, to 3,047,700. The number of unemployed people decreased 1,300 over the month, to 91,700.

• Place of Work Data: Total nonfarm jobs increased 900 over the month and increased 24,100 over the year, to 3,035,300 in April. Wisconsin added 1,000 private sector jobs over the month, to 2,623,900 jobs.
That payrolls number would have been better than +900 if it wasn’t for a seasonally-adjusted loss of 5,100 jobs in Accommodations and Food Services. I’m not sure if that’s just a delay of seasonal hiring, or if that’s a sign of a slowing consumer here, but it’s a major difference from most other sectors in the last month.

That includes a welcome increase in manufacturing jobs (+2,000), which came after a loss of 2,600 in March. Likewise, there was a gain of 1,300 in health care/social assistance, making up for a loss of 1,100 in March as hosptials in Eau Claire closed, and we saw a seasonally-adjusted 1,200 in arts, entertainment and rec (reflecting a higher-than-normal April increase of 4,100 jobs there).

And there was even better news that came in another report, as Wisconsin is now among the leaders in inflation-adjusted wage growth.

We also saw a separate report on Friday that said Wisconsin’s job openings rose by a seasonally adjusted 23,000 between January and March (+14.4%), and was at the second-highest rate of openings in the Midwest.

In addition, seasonally adjusted layoffs dropped to a multi-month low in March, and quits have started to edge back up. All are good signs if you’re a worker looking for the ability to raise your pay.

While we need more capacity in Wisconsin in both people and housing to keep these good times rolling along, there’s also no doubt that the state’s economy was in very good shape in April 2024. And I couldn’t help but think about this situation might be getting portrayed in a Bizarro World where GOPs were in control and Wisconsin’s economy was this strong.

Thursday, May 16, 2024

INFLATION WATCH! Wall Street thinks it's calming down, with rate cuts coming sooner?

There was a heavily-awaited Consumer Price Index report for April. on Wednesday. And when I read that CPI went up 0.3%, I was worried that it would lead to more INFLATION PANIC, since that makes for 4 straight months of 0.3% or 0.4%, and an annualized rate of 4.2%.

But instead, the stock market loved the results, because of the expectations of the "experts".

So while a 0.4% increase in CPI in March made everyone think that info would delay interest rate cuts from the Federal Reserve, a 0.3% increase in April makes them think the Fed will cut rates sooner. Interesting.

A big positive that people were drawing from the report was that the index for the cost of food at home (i.e groceries) dropped by 0.2%, after 2 straight months of being flat. Food at home is only up 1.1% for the last 12 months, and it’s no coincidence that Aldi announced price cuts last week for many of their groceries, to front-run the other grocers that have used greedflation to grab fat profits.

And given what I saw from the Producer Price Index report, food prices should remain on the level in the near future, as food prices that businesses pay suppliers dropped by 0.7% in April, and the index for processed and unprocessed foods also fell. Maybe the Fed-watchers are realizing that the 1.1% increase in energy and 8.5% increase in gas prices between January and April is not going to continue in the next CPI report. Heck, I just paid $3.17 a gallon here in Madison this week, and the national average in mid-May is down 4 cents (1.2%) vs what it was in April.

However, two areas continue to stay high. One is shelter, which had its third straight 0.4% monthly increase, and a 12-month increase of 5.5%. And yes, I have frequently mentioned that some of the shelter increase is misleading, because it often reflects rent increases from several months ago and doesn’t account for the fact that the many Americans that are set in their homes in fixed-rate mortgages aren’t paying much more at all.

But the shelter index also hasn’t gone down in the last year, and places like Madison continue to be unaffordable for too many that weren’t lucky enough to have grabbed a home 3 years ago. It’s an economic burden that is likely an explanation for why people aren’t as happy as a growing economy with sub-4% unemployment would make you think they’d be.

Also, there was another 1.8% increase in auto insurance prices, with the 22.6% jump over the last 12 months for car insurance being the largest 12-month jump in that category since 1976! This is an unexpected expense that has to be hurting some. At the same time, it doesn’t seem sustainable and is something that would seem to beg for Congressional hearings as well as “downshifting” by consumers where they carry less insurance or pay more on claims out of pocket.

A higher print of 0.9% on the import price report should keep us from breaking out the party hats for now. That increase is largely due to higher oil prices from overseas and (oddly) an increase of 1.7% for imported food and beverages. Not that we count on imports for that much of our food supply, but maybe something to look for in the next month or two.

Still, I think the panic of 4-5 inflation for Q1 2024 is indeed looking like an early-year fluke and a last-ditch attempt to grab some profits before consumers and competitors stopped accepting higher prices. Let's see if May goes even lower than April's 0.3% increase, and if so, then we're back around 3% for the annual rate for 2024, and the Fed can stop keeping its interest rate at multi-decade highs.

Monday, May 13, 2024

US consumers grumpy due to higher prices. But maybe that drops inflation in Q2.

Last week, we found out that US consumers were grumpy as May began.
U.S. consumer sentiment fell sharply in May to the lowest level in six months as Americans cited stubbornly high inflation and interest rates, as well as fears that unemployment could rise.

The University of Michigan’s consumer sentiment index, released Friday in a preliminary version, dropped to 67.4 this month from a final reading of 77.2 in April. May’s reading is still about 14% higher than a year ago. Consumers’ outlook has generally been gloomy since the pandemic and particularly after inflation first spiked in 2021.
Well, I'd also say MAGATs not having their cult leader in the White House is a reason behind the lower numbers since 2021. But it is still a noteworthy drop that goes against an upward trend for most of the last 2 years.

While I do think that the job market isn’t booming like it was at the end of 2023 and start of 2024, I also have no doubt that GOP politicians, Wall Streeters and media trying to make “1970s-style stagflation” into a thing is a major reason for that gloominess. It is cynical and isn’t close to what our economic reality is in May 2024.

But that reality doesn’t stop the average American from being receptive to a message of “Prices are higher and isn’t that annoying? Remember when things weren’t so expensive?” And rather than be happy about higher wages and sub-4% unemployment, they’re asking (and being asked) why higher wages aren’t raising the standard of living as much as they think it should. I get that frustration, but I’d also argue that what we have now is better than the 2007-2014 era of higher unemployment, stagnant wages and declining home values.

Later on in the AP’s rundown of the consumer sentiment numbers mention a couple of large restaurant chains that are saying 2024 is going to be challenging, because the consumer is cutting back.
Starbucks lowered expectations for its full-year sales and profit in late April after a terrible quarter that saw a slowdown in store visits worldwide. Starbucks reported a sharper and faster decline in spending in the U.S. than it had anticipated.

McDonald’s last month said that it will increase deals and value messaging to combat slowing sales. The Chicago fast food giant said inflation-weary customers are eating out less often in many big markets.
OR…maybe everyday Americans have just had enough of the price hikes and profiteering from these places, and aren’t accepting what the corporations have to offer. Maybe those corporations are going to have to go back to the laws of supply and demand, and lower/limit their prices

Here's an example of a grocery chain that plans to do just that.

Earlier [last] week, Aldi announced it will further drop its everyday low prices on more than 250 summer essentials from picnic necessities to barbecue basics, which the company says will pass along $100 million in savings through Labor Day.

"ALDI is always looking for ways to help customers save money, but with more experts warning of persistent inflation, the time was right to deliver even greater discounts on our already low prices for the second year in a row," Dave Rinaldo, president at ALDI U.S., said in a statement. "We don't want food prices to hold people back from getting together with friends and family or spending time outdoors this season."

Among other items, Aldi is cutting the cost on seasonal must-haves including family packs of chicken breast, USDA choice Black Angus sirloin steak, French baguettes, organic avocado oil, organic granola bars and dried cranberries.
OR…..maybe they and other grocery giants have been jacking up prices well above cost this whole time of “stubborn inflation”, and now Aldi is trying to run ahead and grab market share in mid-2024 by lowering prices.

These types of stories make me think that the 4.5% rate of inflation in Q1 isn’t going to continue in Q2. We know that the increase in gas prices in early 2024 has leveled off in the last month, and consumer backlash may also be starting to make companies back away from keeping prices inflated in order to “increase the numbers” to the shareholders.

The big inflation reports come out in the next 2 days (PPI on Tuesday and CPI on Wednesday), and that will likely guide both Wall Street and the media as to what their theme will be for the rest of the week and the near future. They will either continue to be promoting CHRONIC INFLATION, or if the inflation rate goes back to the moderation that we saw in much of 2023, which will lead to DOW 40,000 and other “bullish” stories.

The inflation and jobs/wages reports over the next 3-4 months, along with the US consumer sentiment that is influenced by media reports of these numbers, will go a long way towards determining whether we lose our democracy in less than 6 months. And knowing that something as simple as the spin off a CPI report could be a major influence on the outcome is terrifying and infuriating.

Saturday, May 11, 2024

The Fox-con is dead. Long live Microsoft?

We knew Microsoft was working on a new development in Racine County, but they announced something much bigger than we had heard of this week, and the Prez was happy to fly in for the photo op and do a little compare and contrast with The Former Guy.

Biden joined Microsoft President Brad Smith and Gov. Tony Evers Wednesday at Gateway College's Integrated Manufacturing and Engineering Technology Center to announce the expansion of Microsoft's data server complex, and the tech giant's plans to add about 2,000 permanent jobs over time. The new value of the development is more than three times what was announced a little more than a year ago when Microsoft signed its first deal to buy land in the village's Wisconsin Innovation Park.

Biden said the Microsoft development is a "comeback story," playing out across Wisconsin and the nation, that stands in contrast to the 2017 efforts of Trump and state Republican officials to bring Foxconn to Mount Pleasant. Microsoft is building its data center on land that Foxconn was initially expected to use for a $10 billion LCD manufacturing plant that Trump touted as the "eighth wonder of the world." Neither the investment nor the 13,000 jobs Foxconn promised materialized…..

Biden referenced Trump and Foxconn early in his 20-minute speech before an audience of about 200, using that experience to contrast with the more than 700,000 jobs that he said have been added in Wisconsin under his watch.

That growth, he said, stems from his "Investing in America" initiative, a package of bills passed in late 2021 and early 2022 that aims to encourage investments in domestic manufacturing and infrastructure, accelerate the nation's transition to clean energy, and create new, well-paying jobs.
Even more remarkable was that Fox allowed this fact to break into their BubbleWorld.

I’m generally skeptical when it comes to any of these jobs announcements, especially when it’s under the guise of “check out the number of jobs that are coming to this place in 2-3 years!” And doubly so when it comes to investments in AI, which have all of the characteristics of a Bubble with very little produced that ends up actually improving life for everyday Americans (PR Exec and tech journalist Ed Zitron had a great podcast on this a couple of weeks ago).

But I will say that this seems a lot more legitimate than what this thing was under the old regime.

The Trump/Walker scam had a much hugh level of massive public subsidies and land grabs than anything Microsoft will get. Instead of being gifted the land, Microsoft bought it from the Village of Mount Pleasant for nearly $100 million.

(Quick side note about Foxconn – have we ever found out if they paid the $30 million that they were supposed to pay to the Village of Mount Pleasant this January? I’ve never seen confirmation on this one way or the other, and I could definitely see the local yokels in village government saying “We’re good” now that Microsoft has paid for much of the land originally cleared for Foxconn.)

For the Microsoft development, the biggest form of public assistance will come in the form of a sales tax break for data centers that was part of the 2023-25 state budget (click here to see it, at provision number 13).
Define "qualified data center" to mean one or more buildings or an array of connected buildings owned, leased, or operated by the same business entity (or its affiliate) and for which all of the following apply:

a. the buildings are rehabilitated or constructed to house a group of networked server computers in one physical location or multiple locations in order to centralize the processing, storage, management, retrieval, communication, or dissemination of data and information; and

b. the buildings create a minimum qualified investment in this state of any of the following amounts within five years from the certification date: (i) $150,000,000 for buildings located in a county having a population greater than 100,000; (ii) $100,000,000 for buildings located in a county having a population greater than 50,000 and not more than 100,000; (iii) $50,000,000 for buildings located in a county having a population of not more than 50,000; or (iv) for buildings located in more than one county, the minimum qualified investment provided for the most populous county in which the buildings are located…..

Require WEDC to certify a qualified data center for purposes of the sales and use tax exemption. Require the certification to include a description of the geographic location or locations and buildings of the qualified data center and an identification of the business entity. Require WEDC to contract with that business entity and, upon request, to amend the certification and contract to include one or more additional locations and buildings of the qualified data center. If WEDC certifies a qualified data center for purposes of the sales and use tax exemption and the data center fails to satisfy the minimum qualified investment requirements described above, require WEDC to revoke the certification. All amounts of the sales and use tax exemption claimed under that certification as of the date of revocation become due and payable to each taxing authority against whom the exemption was claimed in the amounts so claimed. WEDC may grant an extension of time within which the qualified data center may avoid revocation by satisfying the applicable qualified investment requirement.
Based on DOR’s estimates related to how many sales taxes get reduced, that’s a write-off of around $130 million if the full $3.3 billion of construction is realized, and a few million a year deducted for every expenses. Still nowhere near what was given away for Foxconn, but it isn’t nothing, either.

You'd think the state rep whose district includes the Microsoft development would be happy about the new jobs and tax base. But instead, he used to occasion to whine like the partisan hack he is.

Napoleon is SALTY!

There also are some education-based assistance and link-ups with other Wisconsin-based organizations that Microsoft will be a part of.
Microsoft's push in southeast Wisconsin isn't only focused on buildings. Smith said it will also make a multimillion-dollar investment in training programs that will teach business and technical leaders how best to adapt AI and transform work culture, support start up businesses, prepare hundreds of students for careers as data center technicians, and provide boot camp-style training for more than 100,000 people who need new skills to work in the artificial intelligence economy.

The effort builds on Microsoft's previous investments in business and workforce development in Wisconsin and brings in many of the same partners, including the University of Wisconsin-Milwaukee's Connected Systems Institute, the Green Bay Packers and the Titletown Tech business development center, the Madison startup accelerator gener8tor, United Way and Gateway Technical College.

To support it, the Wisconsin Economic Development Corp. will provide $500,000 to TitletownTech, the Green Bay-based Packers-Microsoft venture capital and business development partnership. The funds will help TitletownTech set up a Milwaukee office at UWM's Connected Systems Institute, a research and education center focused on advanced industrial processes.

Microsoft also intends to open an AI Co-Innovation Lab lab at the Connected Systems Institute to help Wisconsin manufacturers, entrepreneurs and other business connect with Microsoft AI experts for guidance on implementing AI technology to grow their businesses. WEDC will provide an additional $500,000 to cover capital expenses associated with the initiative.
Yes, I still get wincy when I see businesses trying to run labs at public institutions of higher education (because the business gets a voice in what the colleges and tech schools teach and can take advantage of “free” research). But again, this seems a lot more legit than the pathetic Foxconn PR garbage where they publicly announced plans before the 2018 election to give $100 million to UW-Madison to partner on innovation and research. (The actual amount Foxconn gave? Less than $1 million.

We always knew this was BS.

When it comes to building these items, Microsoft has already spent the money to buy the land (vs being gifted it), appears to mostly be putting in their own funds and investments as part of this, and can tell you what they’re going to do. In fact, Microsoft has its own page here you can track the progress of the project in Mount Pleasant, and the steps that have been taken so far.

That’s a lot more than the empty promises and PR BS that Foxconn would occasionally spit out over the last 7 years, with little actual Foxconn activity that followed the announcements.

But the memory of empty Foxconn “innovation centers” throughout the state and the reality of modern automation got the attention of the Wisconsin Examiner’s Ruth Conniff, who gave a healthy dose of skepticism on what we'd eventually end up with.

In its press release touting the project, Microsoft does not mention a specific number of permanent jobs.....

Standing at the edge of the security perimeter two blocks outside the event, Martin Hying, a Racine resident who said he’s been an I.T. professional since the 1980s, held a sign that said “A datacenter does not create 2,000 local long-term jobs. It might create 20. I know. I run three.”

“You don’t need 2,000 people to maintain a facility like this,” Hying said.

Plus, he added, the higher skilled jobs involved in maintaining the data center’s servers can be done remotely. “They can be anywhere. They can be in Colorado, or they could be in Cambodia or Calcutta, anywhere in the globe.”
I have similar skepticism about 2,000 permanent jobs, given that the tech industry seems hell-bent on stretching as much profit out of as few people as possible these days.

But in the short term, this looks to at least be a real development that'll result in jobs and activity in what has been flattened, empty land for the last 7 years. And it lessens the chances of the Village of Mount Pleasant from going belly-up due to the heavy debts it ran up when it gambled on Foxconn and gave everything away before anything actually happened.

While I'd rather there be no need for subsidies and tax breaks for any job creation, I will say that Microsoft in 2024 seems to be a whole lot of a better deal than the Fox-con of 2017.