The Morning Dispatch: A Hint of Inflation Relief

Happy Thursday! Here’s some fun new conspiracy theory fodder: The sex of baby sea turtles is determined by the temperature of the sand in which eggs are incubated, and the warming globe is seemingly upsetting the balance: Approximately 99 percent of hatchlings analyzed in a recent Australian study were girls. One veterinary hospital in Florida hasn’t come across a male baby sea turtle in nearly five years. 

Quick Hits: Today’s Top Stories

• Ukrainian forces have reportedly begun a “major counterattack” against Russia in the southern part of the country, shelling a Russian-controlled airfield in Crimea on Tuesday. Ukrainian leaders have not publicly taken credit for the explosions—which reportedly sent Russian vacationers scrambling—but an official confirmed to the Washington Post Ukrainian special forces were responsible. The nine Russian military planes reportedly destroyed would represent the biggest such single-day loss for the Russian air force since the war began.

• Colonel Shi Yi—spokesman for China’s Eastern Theater Command—announced Wednesday the People’s Liberation Army had completed the military exercises that were held around Taiwan in response to House Speaker Nancy Pelosi’s visit to the island. Chinese forces had launched nearly a dozen missiles into the sea surrounding Taiwan, and Taiwanese officials accused them of rehearsing possible invasion scenarios. Shi said Chinese troops will still regularly organize combat-readiness security patrols in the Taiwan Strait and train for war preparedness.

• The Bureau of Labor Statistics reported Wednesday the Consumer Price Index held steady from June to July, while increasing at an annual rate of 8.5 percent—a slight decrease from last month’s year-over-year rate of 9.1 percent. Increases in the cost of food and rent in July were largely offset by falling energy prices. Markets rallied after the report was released, with the S&P 500 reaching its highest level since early May and the Nasdaq Composite entering a bull market, up more than 20 percent from its recent low in mid-June.

• The Treasury Department reported this week the federal government ran a budget deficit of $211 billion in July 2022, a 30 percent decrease from July 2021—due primarily to pandemic-related stimulus programs expiring and tax revenues increasing as more Americans returned to work. Outlays for the month fell 15 percent year-over-year—from $564 billion to $480 billion—and government receipts increased 3 percent.

• According to a criminal complaint unsealed by the Justice Department on Wednesday, an Iranian national attempted to arrange the assassination of former National Security Adviser John Bolton in the past year—likely in retaliation for the United States’ January 2020 killing of Qassem Suleimani, an Iranian military leader. The Iranian national—who is still at large abroad and unlikely to be taken into custody—allegedly tried to pay individuals in the United States hundreds of thousands of dollars to carry out the hit in Washington, D.C. or Maryland. Although he was not mentioned by name in the complaint, former Secretary of State Mike Pompeo was reportedly also informed by the Justice Department that he was a target in the plot.

• Ahmad Abouammo—a 44-year-old dual U.S.-Lebanese citizen and former Twitter employee—was convicted by a federal jury Tuesday on charges of wire fraud, money laundering, and illegally acting as an agent of a foreign government. Abouammo was charged with spying for Saudi Arabia, collecting information on dissidents who used Twitter’s platform. The case represented the first publicly known instance of Saudi Arabia spying in the United States.

• President Joe Biden signed the Promise to Address Comprehensive Toxics (PACT) Act into law on Wednesday, enacting the bipartisan legislation that will expand healthcare benefits to U.S. veterans exposed to toxic substances—like burn pits—during their military service.

July Brought a Hint of Inflation Relief

At some point in the middle of the second week of every month, the Bureau of Labor Statistics releases new cost-of-living data. And one day after some point in the middle of the second week of every month, we have to find a creative new way to say “inflation sets yet another 40-year high” before heading out to spend $87 at the grocery store on a pack of chicken breasts and two sweet potatoes.

So imagine our relief yesterday when the latest Consumer Price Index numbers from the BLS showed that, on net, prices for the average American consumer didn’t rise at all from June to July. Costs are still painfully (and often prohibitively) high, up 8.5 percent year-over-year, but that annual rate was down from 9.1 percent a month earlier—just the second such decline since summer 2021. 

“This is a much better report than what I expected,” Harvard University economist Jason Furman said yesterday. “This could easily be the false dawn that we saw in September 2021, but for now I’ll take it as a tick in the good direction.”

The cooling was driven primarily by falling prices for fuel, clothing, public transportation, airline tickets, used cars, and hotel rooms. Gas alone was 7.7 percent cheaper at the end of July than the beginning, and still-falling fuel prices may continue to push down inflation. “Many industries use oil as an input, from fertilizer to plastics,” University of Michigan economics and public policy professor Justin Wolfers told The Dispatch. “It’s going to have an indirect effect that will play out over a matter of months, so there’s still more good news to come there.”

But Americans’ wallets didn’t stop feeling the pinch in July just because the month-over-month CPI calculation came out to zero. Food prices rose 1.1 percent last month, and are up nearly 11 percent year-over-year—the highest annual rate since May 1979. Eggs led the way, climbing 4.3 percent from June, and baby food prices rose 2.1 percent. Rent also got more expensive—up 0.7 percent from a month earlier—and it was a bad month to buy window coverings, the cost of which increased at a 48-percent annual clip in July for some reason.

Once the more volatile food and energy categories were stripped from the report—an accounting trick upon which economists rely to detect longer-term trends—core inflation came in at 0.3 percent month-over-month in July, a smaller jump expected and well below June’s 0.7 percent reading. “With the important caveat that one month is not a trend, the slowdown in core goods prices is welcome and makes a soft landing more likely,” Wendy Edelberg, senior economics fellow at the Brookings Institution, told The Dispatch. “Demand for core goods is coming down. If we are going to see inflation come down as demand slows—we sure better see it here.”

With Federal Reserve officials now signaling a willingness to crush inflation with higher interest rates no matter the recession risks, Americans’ inflation expectations began to fall last month, possibly contributing to a self-reinforcing cycle. And industry research suggests supply chain snarls that have contributed to higher prices are untangling, easing another source of price pressures. Rates to ship freight from Asia to the West Coast, for instance, have fallen nearly 70 percent from this time last year, according to industry booking company Freightos Group.

Still, like Edelberg, most economists are quick to note that one good report does not an inflation victory make. Rising rents and the tight labor market are still exerting upward pressure on prices despite two straight quarters of economic contraction, and a new COVID-19 variant or geopolitical conflict could potentially reverse these trends in an instant. Russia’s invasion of Ukraine contributed to the recent spike in gas and food prices, and the U.S. Energy Information Administration notes that more geopolitical instability—or a bad hurricane season disrupting oil production—could easily drive energy prices up again. 

Even if those major disruptions don’t come to pass, it’s just too soon to be sure the economic winds are blowing in a disinflationary direction—meaning the Fed will likely wait for more data before deciding how much to raise interest rates in September. “We might see goods inflation and commodity inflation come down, but at the same time see the services side of the economy stay up—and that’s what we’ve got to keep watching for,” Loretta Mester, president of the Federal Reserve Bank of Cleveland, said earlier this month. “It can’t just be a one-month. Oil prices went down in July, that’ll feed through to the July inflation report, but there’s a lot of risk that oil prices will go up in the fall.”

The Fed is “too old, too experienced, and too wise to draw too much from just one report,” Wolfers said. Plus, as Fed chairman Jerome Powell noted in June, the central bank learned a hard lesson in 2021, when inflation retreated slightly only to come roaring back worse than before. “I think we’re going to be careful about declaring victory,” Powell said last month.

While hailing Wednesday’s report as “unambiguously good news,” Wolfers agreed it’s not time for inflation hawks to fold their wings just yet. “This isn’t yet a run of good news,” he said. “And so I think people who are concerned about inflation will be only moderately less concerned today.”

Republican Leaders Split in Response to Mar-a-Lago Search

Many Republican lawmakers and pundits have increased their DEFCON level to 1 in the days since the FBI executed a search warrant at the Mar-a-Lago home of former President Donald Trump, but some are taking a noticeably more cautious approach. In a piece for the site today, Audrey takes a look at the differing reactions—and what they could portend.

Senate Minority Leader Mitch McConnell is exhibiting restraint while House Minority Leader Kevin McCarthy and many of his colleagues adopt an increasingly combative posture toward federal law enforcement agencies.

“When Republicans take back the House, we will conduct immediate oversight of this department, follow the facts, and leave no stone unturned,” McCarthy wrote on Twitter Monday evening. His fellow House GOP leaders quickly followed suit in their knee-jerk condemnations of the search—as did many rank-and-file Republican members, some of whom are already using the search as fundraising fodder ahead of the November midterms.

In a Tuesday evening tweet that accused the White House of weaponizing executive agencies to target the Biden administration’s political foes, House GOP Conference Chair Elise Stefanik echoed McCarthy’s proclamation that a House Republican inquiry into the matter is imminent pending her party’s takeover of the lower chamber following the midterm elections. House GOP Whip Steve Scalise took things one step further by comparing the search—and the FBI’s seizure of House Freedom Caucus Chairman Scott Perry’s phone—to the “playbook of corrupt leftist regimes in failed dictatorships.”

But in a move that reflects the House and Senate GOPs’ often conflicting political priorities, Senate Minority Leader Mitch McConnell and his Senate leadership colleagues offered a wait-and-see reaction to the news—calling for an immediate explanation from the Justice Department regarding the purpose of the search while stopping short of condemning it outright or announcing a prospective congressional inquiry. 

“The country deserves a thorough and immediate explanation of what led to the events of Monday,” McConnell said in a statement Tuesday evening, which came hours after he dodged a question about the search in a press conference in his home state of Kentucky. Sens. John Thune and John Barrasso—the Senate Republican conference’s whip and conference chair—struck a similar tone in public statements that contrasted sharply with that of their House counterparts.

Similarly, GOP Sen. Tim Scott of South Carolina said in a CBS interview Tuesday that Americans should let the investigation “play out” before they jump to conclusions about whether the FBI acted with nefarious intent in carrying out the search.

Worth Your Time

• For Texas Monthly, Sonia Smith reports on the decade-long fight to free Austin Tice, the Marine Corps veteran and freelance journalist who was abducted in Syria in 2012. “August 14, 2022, marks ten years of captivity in Syria for Austin, a particularly grim milestone for the longest-held American journalist in history and the only one currently a hostage,” Smith notes. “In those years, the only public clue about Austin’s whereabouts came in the form of a YouTube video uploaded five weeks after his disappearance, titled ‘Austin Tice still alive.’ In the shaky 46-second clip, a blindfolded Austin is hurried up a rocky path on a scrubby hillside by a group of men clutching assault rifles. After reciting a prayer in Arabic, Austin sighs and adds, in breathless English, ‘Oh, Jesus. Oh, Jesus.’ Debra and Marc, a former business manager in the oil and gas sector, are convinced their son is still alive, and the U.S. government concurs with that assessment. Austin was rumored to have been spotted at a hospital in Damascus in 2016, being treated for dehydration, according to the New York Times. The intelligence community has concluded he is in the custody of the Assad regime in Syria—which denies holding him—or a group aligned with it.”

• Sen. Josh Hawley’s vote against NATO expansion last week is a perfect example of our broken media incentive structure, George Will argues in his latest column. “This umpteenth episode of a senator using the Senate as a stepping stone to a cable television green room illustrates what Chris Stirewalt deplores in his new book, Broken News,” Will writes. “The fans, consumers of emotional-impact journalism, wear, figuratively speaking, their teams’ colors—red shirts against blue shirts. This journalism’s constant attention to politics instead of government—to gaining power instead of its exercise—makes the players on the field, Stirewalt says, ‘want to show off to the fans in the stands instead of trying to win the game.’ Hence Hawley, the quintessential example of the politics that the new journalism encourages. And hence his absurd vote against NATO expansion—spoon clenched in infant fist, banging the highchair tray to say: ‘Pay attention to me!’ Hawley … is the senator-as-symptom: Define news down, and this is the kind of newsmaker you get.”

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Toeing the Company Line

• When politicians have to choose between policy and politics, it’s no contest, Scott Lincicome argues in Wednesday’s Capitolism (🔒). “Congress and President Biden have been really busy these past two weeks addressing all sorts of existential ‘crises’—American deindustrialization, China’s tech ambitions, climate change, etc., that they say they care deeply about,” he writes. “Yet dig into the actual legislation they’re championing, and you find a different set of priorities—priorities that often undermine the very things that supposedly demand urgent legislative action.”

• Trump supporters’ response to the Mar-a-Lago search is exemplary of the very “banana republic”-style politics they claim to detest, Jonah argues in Wednesday’s G-File (🔒). “If your ‘belief’ in our country is so fragile and pathetic that you will lose ‘hope for our nation’ unless Donald Trump is given free reign to cleanse the land of evildoers, then you don’t actually believe in this nation,” he writes. “Presidents are not redeemers, messiahs, incarnations of mystical aspirations, or righteous settlers of seething grievances. … They’re politicians elected to do some specific things as the head of one branch of one level of government.”

• It’s August, so time to get off-topic. David and Sarah are joined by Kevin Stroud on today’s episode of Advisory Opinions for a deep dive into the history of the English language and the roots of legalese. What roles do poetry and alliteration play in the court? And why does language evolve so much over time?

• Jonah couldn’t nail down a guest for Wednesday’s episode of The Remnant, so he subjected himself to an hour of listener questions selected by Guy, his AEI research assistant. How do Liberal Fascism and The Tyranny of Clichés hold up? Did Jonah enjoy his time at Goucher College? And can Jonah and Guy discuss episode 11 without turning to ash?

• He’s got a guest today, though: On Thursday’s episode of The Remnant, Jonah is joined by Kevin Williamson for a discussion of the FBI search at Mar-a-Lago, the problem with new ideas in politics, and Texas’ midterm elections.

Let Us Know

How would the world be different if human babies’ sex was determined by temperature? Get creative.