ARTICLE
America’s rampant inflation is imposing severe pressures on families, forcing them to pay much more for food, gas and rent and reducing their ability to afford discretionary items, from haircuts to electronics. Economists do expect inflation to ease this year, though not by very much. Some analysts have forecast that the inflation gauge the government reported last Friday — the consumer price index (CPI) — may drop below 7 percent by year’s end. In March, the year-over-year CPI reached 8.6 percent, the highest such rate since 1982. Research by the Bank of America Institute, which uses anonymous data from millions of their customers’ credit and debit card accounts, shows spending on gas eating up a larger share of consumers’ budgets and crowding out their ability to buy other items. For lower-income households — defined as those with incomes below $50,000 — spending on gas reached nearly 10 percent of all spending on credit and debit cards in the last week of May, the institute said in a report this week. Gas prices nationally hit over $5.00/gallon last week, but that pales in comparison to gas prices here in California — in the Monterey Bay Area prices can be just under $6.00/gallon and just under $7.00 in stations in my neighborhood. With inflation hitting everyone’s pocketbook, the Governor and the California Legislature have some novel ideas. California Legislative leadership passed its version of the state’s 2022-2023 budget ahead of the June 15 deadline. However, lawmakers continue to negotiate with Governor Newsom to reconcile their spending plan to align with the Governor’s May Revised budget. It is a perplexing sort of circumstances that the Governor has one plan to provide financial relief to rising gas prices while U.S. inflation levels are the highest in 40 years with consumer prices up 8.6% from 2021. The Governor’s $11.5 billion proposal would send $400 checks to vehicle owners and cap it at $800 for up to two vehicles. The California Legislative Leaders (Senate President Pro Tem Toni Atkins and Assembly Speaker Anthony Rendon) have a different plan — entitled the “$8 Billion Better for Families Rebate Plan” which would give $200 to all California taxpayers earning up to $125,000/year and $250,000 for joint tax filers. They would also give families an additional $200 per dependent. According to Erica Li, the Department of Finance chief deputy told the Assembly Budget Committee, “While the legislature’s budget includes a very important relief proposal to address these rising costs, as it’s currently structured, it will take longer to implement the smaller $8 billion and will not reach as many Californians when compared to the governor’s $11.5 billion proposal.” Newsom’s plan would use the Department of Motor Vehicles (DMV) and a third-party vendor to distribute funds using debit cards. The Legislator’s plan would go through the Franchise Tax Board (FTB) — the same agency that distributed California Golden State Stimulus funds last year. There are concerns on both sides using either state agency. The debit cards would be mailed to each vehicle owner with a high possibility of mailbox theft which happened with the Employment Development Department (EDD) and the Bank of America in the past couple years. This is only the beginning of the discussion on where a large sum of California taxpayer funds, i.e., billions, would be directed to special projects supported by the Governor and the California Legislative leadership. Once the budget deal is signed by the Governor before July 1, the Legislator will recess for the month — while budget subcommittees will work on what is termed budget trailer bills”: those behind-the-scenes crafting of negotiated deals between varying parties — public sector unions and state workers, special interest groups from A to Z sectors (think education, housing, environment, transportation, water, etc.) all wanting a small portion of the $90 billion surplus. Indeed, nearly 1/2 of that amount will go to K-12, community colleges and higher education, and the remaining would be split between a variety of state programs and money placed in the “rainy day” reserve fund. The major concern is not the amount of rebate in the Governor’s or the Legislator’s plan. At 2:30 EDT on Wednesday, the Federal Reserve raised interest rates by three-quarters of a percentage point in an aggressive move to tackle white-hot inflation that is plaguing the economy, frustrating consumers and stifling the Biden Administration. Americans are struggling with rising costs from the grocery store to the gas pump and the Fed is mandated with the task of keeping prices stable. Surging prices on everything from food to gas -- which has hit a series of daily record highs in the past month -- have led to the lowest consumer sentiment since 1952. It's the largest rate hike since 1994, and will affect millions of American businesses and households, pushing up the cost of borrowing for homes, cars and other loans in order to force a slowdown in the economy. The Federal Open Market Committee said in its statement it was "strongly committed to returning inflation to its 2% objective." This is likely intended as a response to criticism that the Fed has been behind the curve in tackling the nation's inflation problem. It also indicates that more aggressive hikes are not off the table. The central bank also decreased its economic projections for 2022, stoking recessionary fears: The Fed's median GDP forecast for 2022 is now 1.7%, down significantly from 2.8% in March. Notably, the Fed does not predict a decrease in inflation this year and sees unemployment rising to 3.7% in 2022, higher than its March prediction. The rate hike is not entirely unexpected: Some major banks, including Barclays, Jefferies, Goldman Sachs and JPMorgan, all expected the Fed to increase its rate by 75 basis points, or three-quarters of a percentage point. Now, we will watch and see how America reacts to the increase.
America’s rampant inflation is imposing severe pressures on families, forcing them to pay much more for food, gas and rent and reducing their ability to afford discretionary items, from haircuts to electronics.
Economists do expect inflation to ease this year, though not by very much. Some analysts have forecast that the inflation gauge the government reported last Friday — the consumer price index (CPI) — may drop below 7 percent by year’s end. In March, the year-over-year CPI reached 8.6 percent, the highest such rate since 1982.
Research by the Bank of America Institute, which uses anonymous data from millions of their customers’ credit and debit card accounts, shows spending on gas eating up a larger share of consumers’ budgets and crowding out their ability to buy other items. For lower-income households — defined as those with incomes below $50,000 — spending on gas reached nearly 10 percent of all spending on credit and debit cards in the last week of May, the institute said in a report this week.
Gas prices nationally hit over $5.00/gallon last week, but that pales in comparison to gas prices here in California — in the Monterey Bay Area prices can be just under $6.00/gallon and just under $7.00 in stations in my neighborhood.
With inflation hitting everyone’s pocketbook, the Governor and the California Legislature have some novel ideas.
California Legislative leadership passed its version of the state’s 2022-2023 budget ahead of the June 15 deadline. However, lawmakers continue to negotiate with Governor Newsom to reconcile their spending plan to align with the Governor’s May Revised budget.
It is a perplexing sort of circumstances that the Governor has one plan to provide financial relief to rising gas prices while U.S. inflation levels are the highest in 40 years with consumer prices up 8.6% from 2021. The Governor’s $11.5 billion proposal would send $400 checks to vehicle owners and cap it at $800 for up to two vehicles.
The California Legislative Leaders (Senate President Pro Tem Toni Atkins and Assembly Speaker Anthony Rendon) have a different plan — entitled the “$8 Billion Better for Families Rebate Plan” which would give $200 to all California taxpayers earning up to $125,000/year and $250,000 for joint tax filers. They would also give families an additional $200 per dependent.
According to Erica Li, the Department of Finance chief deputy told the Assembly Budget Committee, “While the legislature’s budget includes a very important relief proposal to address these rising costs, as it’s currently structured, it will take longer to implement the smaller $8 billion and will not reach as many Californians when compared to the governor’s $11.5 billion proposal.”
Newsom’s plan would use the Department of Motor Vehicles (DMV) and a third-party vendor to distribute funds using debit cards. The Legislator’s plan would go through the Franchise Tax Board (FTB) — the same agency that distributed California Golden State Stimulus funds last year.
There are concerns on both sides using either state agency. The debit cards would be mailed to each vehicle owner with a high possibility of mailbox theft which happened with the Employment Development Department (EDD) and the Bank of America in the past couple years.
This is only the beginning of the discussion on where a large sum of California taxpayer funds, i.e., billions, would be directed to special projects supported by the Governor and the California Legislative leadership. Once the budget deal is signed by the Governor before July 1, the Legislator will recess for the month — while budget subcommittees will work on what is termed budget trailer bills”: those behind-the-scenes crafting of negotiated deals between varying parties — public sector unions and state workers, special interest groups from A to Z sectors (think education, housing, environment, transportation, water, etc.) all wanting a small portion of the $90 billion surplus. Indeed, nearly 1/2 of that amount will go to K-12, community colleges and higher education, and the remaining would be split between a variety of state programs and money placed in the “rainy day” reserve fund.
The major concern is not the amount of rebate in the Governor’s or the Legislator’s plan. At 2:30 EDT on Wednesday, the Federal Reserve raised interest rates by three-quarters of a percentage point in an aggressive move to tackle white-hot inflation that is plaguing the economy, frustrating consumers and stifling the Biden Administration. Americans are struggling with rising costs from the grocery store to the gas pump and the Fed is mandated with the task of keeping prices stable. Surging prices on everything from food to gas -- which has hit a series of daily record highs in the past month -- have led to the lowest consumer sentiment since 1952. It's the largest rate hike since 1994, and will affect millions of American businesses and households, pushing up the cost of borrowing for homes, cars and other loans in order to force a slowdown in the economy.
The Federal Open Market Committee said in its statement it was "strongly committed to returning inflation to its 2% objective." This is likely intended as a response to criticism that the Fed has been behind the curve in tackling the nation's inflation problem. It also indicates that more aggressive hikes are not off the table.
The central bank also decreased its economic projections for 2022, stoking recessionary fears: The Fed's median GDP forecast for 2022 is now 1.7%, down significantly from 2.8% in March. Notably, the Fed does not predict a decrease in inflation this year and sees unemployment rising to 3.7% in 2022, higher than its March prediction.
The rate hike is not entirely unexpected: Some major banks, including Barclays, Jefferies, Goldman Sachs and JPMorgan, all expected the Fed to increase its rate by 75 basis points, or three-quarters of a percentage point. Now, we will watch and see how America reacts to the increase.