Connect with us

Business

Experts thought they knew how the economy worked. After the pandemic, they’re not so sure. on December 7, 2023 at 11:00 am Business News | The Hill

Published

on

The American economy, while never simple, was at least somewhat understood — until the pandemic upended even the most basic assumptions, experts told The Hill this week.

From the recession that didn’t happen, to the relationship between unemployment and inflation, to the reason that inflation took off in the first place, to the disconnect between national economic performance and people’s experience of it, to the efficacy of interest rate hikes — American economics and the people who follow it are having an identity crisis.

It’s not clear how it’s going to resolve.

Some economists feel vindicated by what they’ve seen play out, while others have changed their positions. Others have suggested entirely new models are needed and have encountered pushback from colleagues on that suggestion as well.

Advertisement

But no matter how you frame it, it’s undeniable that where there once was confidence, now a fretful mood has descended over a discipline trying to reconcile long-held dogmas with the near-wartime economic conditions brought on by the pandemic and the sensational recovery that followed.

“What you have is a shake-up of economics here in the United States, because we’re having a shift again,” Richard Wolff, emeritus professor of economics at the University of Massachusetts Amherst and a visiting professor at the New School, told The Hill.

“It remains to be seen in this episode to what extent the normal relationships of many, many kinds — labor, spending, inflation and others — will go back to their pre-pandemic norms, or will be permanently perturbed,” former Federal Reserve Vice Chairman Alan Blinder, a Princeton University economist, told The Hill.

Blinder, who oversaw a period of quantitative tightening in the mid-1990s during the Clinton administration, said the very efficacy of monetary policy is now up for debate.

Advertisement

A quasi-wartime economy plays by different rules

Economists see the end of World War II, when debt-to-gross domestic product (GDP) ratios were about as high as where they are today and inflation was above 10 percent, as a point of comparison for the economy of today.

“The only real precedent that I can identify to the pandemic-era exertion of state control over the economy would be the two world wars,” Daniel Sargent, a professor of the history of public policy at the University of California, told The Hill in an interview.

“It’s also significant that some of the statutory authority that the federal government leaned upon in order to exercise the degree of control that it did derived from [the] Trading with the Enemy Act of 1917,” Sargent added.

While the economy of the 1970s also experienced a series of state interventions, including price controls as part of the “Nixon shock” intended to resolve inflation, the deficit spending of the pandemic makes the post-World War II period the most relevant analogue for today’s economy, Sargent said.

Advertisement

The sudden switch to such a high level of state intervention is likely a central reason that many traditional assumptions have broken down.

The comparison to the post-WWII period was also top of mind for Harvard University economist Stephen Marglin.

“During the pandemic, the same thing happened [as during the war]. There weren’t the civilian goods being produced, and people did get money, but they couldn’t spend it because the economy was shut down, just like the civilian economy had been shut down during WWII. That’s the analogy,” he told The Hill.

Marglin said that a doctrinal shift within economics akin to those that reshaped the discipline in the 1930s and again in the 1970s “probably should happen” but that he wasn’t seeing any immediate signs of a major course correction.

Advertisement

Causes of inflation spark debate but unite major thinkers

While the nation’s current battle with inflation has sparked a small industry of rhetorical debate, many experts The Hill spoke to said there’s an implicit agreement among different camps that stitches the different arguments together.

Republicans and conservative economists tend to argue that inflation was caused primarily by the trillions in deficit spending the government sent out to bolster households and businesses during lockdowns.

Democrats and liberal economists focus on muddled supply chains and even corporate greed as the primary drivers.

But the private-sector response to the public-sector spending spans both these explanations, economists say.

Advertisement

“What we had was a situation in which corporations across America understood that the money pumped into the economy to cope with the crash that we were due to have, coupled with the pandemic, was an extraordinary time. The government pumped in enormous amounts of money, enormous amounts of fiscal stimulus, and this made it possible to raise prices to improve profitability,” the New School’s Richard Wolff said.

While the cash injection into the economy made it possible for companies to raise their prices, it also allowed people to keep spending money, helping to stave off recession.

“The central view, I feel, is totally vindicated,” Hoover Institution economist and former University of Chicago finance professor John Cochrane told The Hill. “The central reason we got inflation is the government printed up about $3 trillion and borrowed another $2 trillion, and sent people checks.”

“That’s also consistent with why inflation eased, even without the Fed really doing anything,” he added. “It did not repeat 1980 to 1982 when interest rates were well below inflation even after the Fed started raising them. A one time fiscal blowout raises the price level, so you get a burst of inflation that eventually goes away.”

Advertisement

So why haven’t we seen a recession?

“A US recession is effectively certain in the next 12 months,” Bloomberg News reported in October of last year, citing its own economic model.

“The latest recession probability models by Bloomberg economists … forecast a higher recession probability across all timeframes, with the 12-month estimate of a downturn by October 2023 hitting 100 percent,” the economists found — erroneously.

Some big-time financial players got swept up in the groupthink on recession. 

Bank of America CEO Brian Moynihan predicted a “mild recession” in 2023, and JPMorgan Chase CEO Jamie Dimon said a “hurricane” was forming over the economy.

Advertisement

Even the Federal Reserve predicted a “mild recession” in March before pulling that call later in the year.

Those economists could be forgiven for their confusion: Usually, after a central bank raises interest rates by more than 500 basis points, which makes financing more expensive for both businesses and consumers, the economy slows down. 

Not so in 2023. Quarterly GDP growth has exceeded 2 percent for the last five quarters, rising as high as 5.2 percent annualized in the third quarter. Corporate profits have been through the roof.

Princeton’s Alan Blinder said the channels by which the Fed slowed the economy in the mid-1990s seem to have dried up during the current cycle.

Advertisement

“I can tell you for sure, though we didn’t relish enunciating this, that what we thought we were doing is slowing the economy down by putting the squeeze on the auto industry and housing. Neither of those channels seem very much to have worked this time,” he said.

Dean Baker, an economist with the Center for Economic Policy and Research, told The Hill much the same thing.

“It didn’t work through the usual channels,” he said, specifically citing new housing starts, which were relatively unresponsive to Fed rate hikes, as well as an unexpectedly strong performance of net exports.

Severed links between employment, inflation and interest rates

Perhaps the most central relationships that have been thrown into doubt are those between the rate of inflation, the level of interest rates and the level of employment.

Advertisement

Higher and rising prices are correlated through labor costs with higher levels of employment. And higher interest rates, which squeeze the economy, are associated with lower employment and therefore lower prices.

But as the Fed raised rates, and the annual inflation rate descended from 9 percent to just above 3 percent over the past year and a half, unemployment stayed below 4 percent the whole time. This breaks the rule. 

“[Rate hikes] didn’t have the effect that just about any of us expected. If you told me the Fed was going to raise rates to 5.25 percent and the unemployment rate was going to remain under 4 percent, I wouldn’t have believed you,” Baker told The Hill.

Does Wall Street reflect America’s real economy anymore?

Surging profitability within the economy, which reached its highest level after the pandemic since the 1920s as a share of gross domestic income, has done little to raise the public’s economic mood.

Advertisement

Profits from current production increased $105.7 billion in the third quarter, compared with an increase of $6.9 billion in the second quarter, Commerce Department data released last week shows.

About 58 percent of Americans own stock in Wall Street companies, according to the Fed’s latest survey of consumer finances.

But that ownership is overwhelmingly skewed toward the extremely rich. In fact, the 99th to 100th percentile of richest households own the majority of all corporate equities in the U.S., a distribution that took off after the pandemic and is near a record high.

While the top 1 percent owns more than half of the stock market, the bottom 50 percent owns less than 1 percent of it.

Advertisement

That may be why just 19 percent of U.S. adults rate economic conditions as excellent or good “while 46 percent say conditions are only fair and 35 percent rate the economy as poor,” as public opinion researchers at Pew found earlier this year.

Despite many ostensibly excellent metrics spanning employment, GDP and decelerating inflation, public approval of President Biden’s economic stewardship is low. Only 32 percent of Americans think Biden is doing a good job with the economy, according to Gallup.

While wage growth has just about kept pace with price growth over the pandemic, longer-term trends in income distribution are almost certainly adding to Americans’ melancholy. 

While the profit share of the economy hit 8.5 percent in 2022 and has been generally rising since around 1990, the share of the economy devoted to paying workers has fallen dramatically since 1970, dropping from about 51.6 percent on national income to 43.1 percent now.

Advertisement

“We really do need additional tools for combatting supply chain issues and excess demand. The reliance on this one sledgehammer of Federal Reserve interest policy is not very good,” Harvard’s Marglin told The Hill.

Traditional divisions between monetary policy, which is handled mainly by the Fed, and fiscal policy, which is handled by Congress, mean that even while the field of economics may be going through a period of change, policymakers may have limited tools to turn those changes into reality.

​Administration, Business, International, News, Policy, corporate profits, economics, inflation, Interest rates, unemployment, US economy, Wages The American economy, while never simple, was at least somewhat understood — until the pandemic upended even the most basic assumptions, experts told The Hill this week. From the recession that didn’t happen, to the relationship between unemployment and inflation, to the reason that inflation took off in the first place, to the disconnect between…  

Advertisement
Continue Reading
Advertisement
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Business

Why 9 Million Americans Have Left

Published

on

The Growing American Exodus

Nearly 9 million Americans now live outside the United States—a number that rivals the population of several states and signals a profound shift in how people view the American dream. This mass migration isn’t confined to retirees or the wealthy. Thanks to remote work, digital nomad visas, and mounting pressures at home, young professionals, families, and business owners are increasingly joining the ranks of expats.

Rising Costs and Shrinking Wallets

Living in the US has become increasingly expensive. Weekly grocery bills topping $300 are not uncommon, and everyday items like coffee and beef have surged in price over the last year. Rent, utilities, and other essentials also continue to climb, leaving many Americans to cut meals or put off purchases just to make ends meet. In contrast, life in countries like Mexico or Costa Rica often costs just 50–60% of what it does in the US—without sacrificing comfort or quality.

Health Care Concerns Drive Migration

America’s health care system is a major trigger for relocation. Despite the fact that the US spends more per person on health care than any other country, millions struggle to access affordable treatment. Over half of Americans admit to delaying medical care due to cost, with households earning below $40,000 seeing this rate jump to 63%. Many expats point to countries such as Spain or Thailand, where health care is both affordable and accessible, as a major draw.

Seeking Safety Abroad

Public safety issues—especially violent crime and gun-related incidents—have made many Americans feel unsafe, even in their own communities. The 2024 Global Peace Index documents a decline in North America’s safety ratings, while families in major cities often prioritize teaching their children to avoid gun violence over simple street safety. In many overseas destinations, newly arrived American families report a significant improvement in their sense of security and peace of mind.

Tax Burdens and Bureaucracy

US tax laws extend abroad, requiring expats to file annual returns and comply with complicated rules through acts such as FATCA. For some, the burden of global tax compliance is so great that thousands relinquish their US citizenship each year simply to escape the paperwork and scrutiny.

The Digital Nomad Revolution

Remote work has unlocked new pathways for Americans. Over a quarter of all paid workdays in the US are now fully remote, and more than 40 countries offer digital nomad visas for foreign professionals. Many Americans are leveraging this opportunity to maintain their US incomes while cutting costs and upgrading their quality of life abroad.

Conclusion: Redefining the Dream

The mass departure of nearly 9 million Americans reveals deep cracks in what was once considered the land of opportunity. Escalating costs, inaccessible healthcare, safety concerns, and relentless bureaucracy have spurred a global search for better options. For millions, the modern American dream is no longer tied to a white-picket fence, but found in newfound freedom beyond America’s borders.

Advertisement
Continue Reading

Business

Will Theaters Crush Streaming in Hollywood’s Next Act?

Published

on

Hollywood is bracing for a pivotal comeback, and for movie lovers, it’s the kind of shake-up that could redefine the very culture of cinema. With the freshly merged Paramount-Skydance shaking up its strategy, CEO David Ellison’s announcement doesn’t just signal a change—it reignites the passion for moviegoing that built the magic of Hollywood in the first place.

Theatrical Experience Roars Back

Fans and insiders alike have felt the itch for more event movies. For years, streaming promised endless options, but fragmented attention left many longing for communal spectacle. Now, with Paramount-Skydance tripling its film output for the big screen, it’s clear: studio leaders believe there’s no substitute for the lights, the hush before the opening credits, and the collective thrill of reacting to Hollywood’s latest blockbusters. Ellison’s pivot away from streaming exclusives taps deep into what unites cinephiles—the lived experience of cinema as art and event, not just content.

Industry Pulse: From Crisis to Renaissance

On the financial front, the numbers are as electrifying as any plot twist. After years of doubt, the box office is roaring. AMC, the world’s largest theater chain, reports a staggering 26% spike in moviegoer attendance and 36% revenue growth in Q2 2025. That kind of momentum hasn’t been seen since the heyday of summer tentpoles—and it’s not just about more tickets sold. AMC’s strategy—premium screens, with IMAX and Dolby Cinema, curated concessions, and branded collectibles—has turned every new release into an event, driving per-customer profits up nearly 50% compared to pre-pandemic norms.

Blockbusters Lead the Culture

Forget the gloom of endless streaming drops; when films like Top Gun: Maverick, Mission: Impossible, Minecraft, and surprise hits like Weapons and Freakier Friday draw crowds, the industry—and movie fans—sit up and take notice. Movie-themed collectibles and concession innovations, from Barbie’s iconic pink car popcorn holders to anniversary tie-ins, have made each screening a moment worth remembering, blending nostalgia and discovery. The focus: high-impact, shared audience experiences that streaming can’t replicate.

Streaming’s Limits and Studio Strategy

Yes, streaming is still surging, but the tide may be turning. The biggest franchises, and the biggest cultural events, happen when audiences come together for a theatrical release. Paramount-Skydance’s shift signals to rivals that premium storytelling and box office spectacle are again at the center of Hollywood value creation. The result is not just higher profits for exhibitors like AMC, but a rebirth of movie-going as the ultimate destination for fans hungry for connection and cinematic adventure.

Future Forecast: Culture, Community, and Blockbuster Dreams

As PwC and others warn that box office totals may take years to fully catch up, movie lovers and industry leaders alike are betting that exclusive theatrical runs, enhanced viewing experiences, and fan-driven engagement are the ingredients for long-term recovery—and a new golden age. The Paramount-Skydance play is more than a business move; it’s a rallying cry for the art of the theatrical event. Expect more big bets, more surprises, and—finally—a long-overdue renaissance for the silver screen.

For those who believe in the power of cinema, it’s a thrilling second act—and the best seat in the house might be front and center once again.

Advertisement
Continue Reading

Business

Why Are Influencers Getting $7K to Post About Israel?

Published

on

Influencers are being paid as much as $7,000 per post by the Israeli government as part of an expansive and sophisticated digital propaganda campaign. This effort is designed to influence global public opinion—especially among younger social media users—about Israel’s actions in Gaza and to counter critical narratives about the ongoing humanitarian situation.

How Much Is Being Spent?

Recent reports confirm that Israel has dedicated more than $40 million this year to social media and digital influence campaigns, targeting popular platforms such as TikTok, YouTube, and Instagram. In addition to direct influencer payments, Israel is investing tens of millions more in paid ads, search engine placements, and contracts with major tech companies like Google and Meta to push pro-Israel content and challenge critical coverage of issues like the famine in Gaza.

What’s the Strategy?

  • Influencer Contracts: Influencers are recruited—often with all-expenses-paid trips to Israel, highly managed experiences, and direct payments—to post content that improves Israel’s image.
  • Ad Campaigns: State-backed ad buys show lively Gaza markets and restaurants to counter global reports of famine and humanitarian crisis.
  • Narrative Management: These posts and ads often avoid overt propaganda. Instead, they use personal stories, emotional appeals, and “behind the scenes” glimpses intended to humanize Israel’s side of the conflict and create doubt about reports by the UN and humanitarian agencies.
  • Amplification: Paid content is strategically promoted so it dominates news feeds and is picked up by news aggregators, Wikipedia editors, and even AI systems that rely on “trusted” digital sources.

Why Is This Happening Now?

The humanitarian situation in Gaza has generated increasing international criticism, especially after the UN classified parts of Gaza as experiencing famine. In this environment, digital public relations has become a primary front in Israel’s efforts to defend its policies and limit diplomatic fallout. By investing in social media influencers, Israel is adapting old-school propaganda strategies (“Hasbara”) to the era of algorithms and youth-driven content.

Why Does It Matter?

This campaign represents a major blurring of the lines between paid promotion, journalism, and activism. When governments pay high-profile influencers to shape social media narratives, it becomes harder for audiences—especially young people—to distinguish between authentic perspectives and sponsored messaging.

As user trust in mainstream news decreases and social media’s power grows, understanding how digital influence operations work is critical for anyone who wants to stay informed and think critically about global events.


In short: Influencers are getting $7,000 per post because Israel is prioritizing social media as a battleground for public opinion, investing millions in shaping what global audiences see, hear, and believe about Gaza and the conflict.

Advertisement
Continue Reading

Trending