Regional economic outlook leans toward interest rate cut in September. China expects economic challenges as it faces conflicting pledges. Designated funding in the CIP will aid Lawton's economic development process. The Supreme Court's 'Chevron' ruling is an existential threat to the 'American economic miracle' and will make the U.S. more like Europe, says Lazard chair.
Sources:
https://www.kccrradio.com/2024/07/20/regional-economic-outlook-still-leaning-toward-interest-rate-cut-in-september/
https://www.taipeitimes.com/News/biz/archives/2024/07/20/2003821039
https://www.swoknews.com/community_news/designated-funding-in-the-cip-will-aid-lawtons-economic-development-process/article_b69b8e93-67d9-59a0-8c61-3bb48d9ed33b.html
https://fortune.com/2024/07/20/supreme-court-chevron-ruling-existential-threat-american-economic-miracle-innovation-state-rulemaking/
Outline:
(00:00:00) Introduction
(00:00:40) Regional Economic Outlook Still Leaning Toward Interest Rate Cut In September
(00:02:25) China expects economic challenges
(00:04:30) Designated funding in the CIP will aid Lawton's economic development process
(00:06:53) The Supreme Court's 'Chevron' ruling is an existential threat to the 'American economic miracle' and will make the U.S. more like Europe, Lazard chair says
Simply Economics
Economic Outlook: Interest Rate Cut Expected, China’s Challenges, Lawton’s Development, and Supreme Court’s Ruling
Regional economic outlook leans toward interest rate cut in September. China expects economic challenges as it faces conflicting pledges. Designated funding in the CIP will aid Lawton's economic development process. The Supreme Court's 'Chevron' ruling is an existential threat to the 'American economic miracle' and will make the U.S. more like Europe, says Lazard chair.Sources:https://www.kccrradio.com/2024/07/20/regional-economic-outlook-still-leaning-toward-interest-rate-cut-in-september/https://www.taipeitimes.com/News/biz/archives/2024/07/20/2003821039https://www.swoknews.com/community_news/designated-funding-in-the-cip-will-aid-lawtons-economic-development-process/article_b69b8e93-67d9-59a0-8c61-3bb48d9ed33b.htmlhttps://fortune.com/2024/07/20/supreme-court-chevron-ruling-existential-threat-american-economic-miracle-innovation-state-rulemaking/Outline:(00:00:00) Introduction(00:00:40) Regional Economic Outlook Still Leaning Toward Interest Rate Cut In September(00:02:25) China expects economic challenges(00:04:30) Designated funding in the CIP will aid Lawton's economic development process(00:06:53) The Supreme Court's 'Chevron' ruling is an existential threat to the 'American economic miracle' and will make the U.S. more like Europe, Lazard chair says
- Duration:
- 10m
- Broadcast on:
- 21 Jul 2024
- Audio Format:
- mp3
Good morning and welcome to Simply Economics. It's Sunday, July 21st. On today's show, the regional economic outlook still leans toward an interest rate cut in September, while China expects economic challenges. Plus, designated funding in the CIP will aid Lawton's economic development process. This coverage and more, up next. I'm David, and you're listening to Simply Economics. We start off with the economy in the middle of the country, which continues to waffle on the edge of recession according to a new report from Creighton University. Here with more details is our Simply Economics correspondent. What can you tell us about the economic outlook based on this latest data? The Mid-America Business Conditions Index, released monthly by Creighton University, shows the economy in the central part of the United States remains on shaky ground. Dr. Ernie Goss, the Creighton economics professor who oversees the index, still expects the Federal Reserve to lower interest rates in the coming months, likely around July, in an effort to stave off a full-blown recession. But it sounds like not all interest rates may drop uniformly. What's the outlook there? That's right. Professor Goss believes that while the Fed may lower its benchmark federal funds rate, not every consumer and business interest rate will necessarily follow suit or drop by the same magnitude. Borrowing costs for things like credit cards and certain loans may remain elevated even if the Fed starts cutting rates. The housing market and mortgage industry are key sectors of the economy. Would the report indicate anything about the outlook there, especially regarding the major mortgage entities Fannie Mae and Freddie Mac? Professor Goss expressed ongoing caution about plans by the Federal Home Loan Mortgage Corporation, known as Freddie Mac, and the Federal National Mortgage Association, known as Fannie Mae. These government-sponsored enterprises play a huge role in the mortgage market. While details were limited, it seems there are some concerns about their financial stability and practices going forward. Thanks for that report on the economic trends in the heartland and nationally. Shifting our focus to the global stage, Chinese officials have acknowledged that the economic goals outlined at a key Communist Party meeting this week contain many complex contradictions, signaling challenges ahead for policy implementation. The world's second largest economy is facing pressure for deep changes amidst low consumer and business sentiment domestically and global concerns over China's export dominance. For more on this, we're joined by our correspondent. So what were some of the seemingly contradictory pledges made at this high-level meeting? Well David, following the four-day closed-door session led by President Xi Jinping, officials pledged to modernize China's industrial complex, while also expanding domestic demand to stimulate growth. At the same time, they aimed to curb debt risks. The initial summary from the meeting, known as the Third Plenum, did not provide details on how Beijing plans to resolve tensions between these policy goals, such as getting consumers to spend more while resources still flow primarily to producers and infrastructure projects. There are growing concerns that without a structural shift given consumers a greater role, China's debt could continue to outpace growth as it pursues industrial modernization and global prominence. Some analysts even warn of a prolonged period of economic stagnation and deflation, similar to what Japan experienced starting in the 1990s. What's your take on that comparison? Those parallels to Japan's lost decades are certainly troubling. As one economist noted, China's high debt levels, combined with increasing deflationary pressures, could eventually result in an extended period of very low growth and inflation, forcing a change of course in policies. However, such a shift might not happen immediately, potentially taking a few years to materialize if the current approach doesn't deliver the desired results. The path forward for the Chinese economy appears challenging, as officials grapple with competing priorities laid out at the party plenum. Achieving the right balance between boosting domestic consumption, managing debt and pursuing industrial upgrades will be critical. Speaking of industrial development, the city of Lawton, Oklahoma is proposing a capital improvements program extension that includes $35 million for industrial development activities. The goal is to support economic growth in the community. For more on this, we turn to our correspondent. So why is industrial development seen as so critical for Lawton's economic health? Well David, city officials believe that attracting and supporting industry is key to creating jobs and expanding the tax base in Lawton. The existing capital improvements program from 2019 does have some funding for economic development, but Mayor Stan Booker says much of that money has been used up on necessary infrastructure projects to make industrial sites ready for development. Things like roads, water lines and sewer lines. What kind of infrastructure is needed to support industrial development and make these sites attractive to businesses? Having site-ready tracts of land is hugely important. That means locations that already have road access, utilities, proper zoning, all the basics in place so a company can come in and build their facility quickly without a lot of extra site work. Mayor Booker noted that constructing roads in particular eats up funding fast, so the idea with this $35 million allocation is to be proactive and get more of these industrial sites prepared and shovel ready. Attracting new industry is often very competitive between cities and regions. How important is having this type of infrastructure in place compared to other economic incentives that are often offered? It's definitely one of the top considerations for companies looking to locate a new facility. Tax breaks and other financial incentives get a lot of attention, but the logistical advantages of a site that's ready to build on from day one can be just as valuable if not more so. Time is money, and if a company can start construction immediately without spending months on site preparation, that's very appealing. The capital improvements program extension with this $35 million for industrial development will go before Lawton voters on August 27. It will be interesting to see if residents agree with city leaders on the importance of this type of proactive economic development spending. On the topic of economic impacts, the Supreme Court's recent decision to overturn a decades old ruling that gave regulators more leeway to set rules could have major economic consequences according to one financial executive. Kenneth Jacobs, the executive chairman of Lazard, argues in a new op-ed that the court's ruling in Loper Bright Enterprises, V's Raimondo, is actually anti-business and threatens U.S. economic vitality. For more on this, let's bring in our simply economics correspondent. So what exactly did the Supreme Court overturn here, and why does Jacobs think it will harm the economy? The court overturned the so-called Chevron doctrine from a 1984 case. Under that doctrine, courts deferred to federal agencies when there was ambiguity from Congress about rules interpreting the law. But now, courts no longer need to defer to the agencies. Jacobs argues this will lead to a balkanization of the U.S. economy. Instead of having a large, cohesive national economy with consistent federal regulations, there will likely be a patchwork of differing state level rules and economies organized around ideology and local business interests. He says this unpredictability will be bad for the economy and financial markets. Jacobs also argues that innovation will suffer as a result of this decision. What's his reasoning there? He says litigation over agency rules will now favor entrenched companies over startups and upstarts with new competing products. The complex web of state level regulations will undermine innovation from the start, similar to the situation in Europe. Jacobs believes the U.S. has had an economic miracle thanks to uniform rule of law and a cohesive national economy, but he thinks overturning the Chevron doctrine poses an existential threat to those pillars. But not everyone agrees with Jacobs' take, correct? Some business groups have actually supported the Supreme Court's decision. That's right. U.S. Chamber of Commerce, for example, has argued that regulator overreach under the Chevron doctrine made doing business too burdensome and unpredictable. They say Congress outsourced too many decisions to federal agencies who could then change positions and expand their own authority too easily. In their view, this instability, uncertainty, and lack of accountability from agencies has harmed productivity, investment, and innovation. Thinking industry groups have also hailed the Supreme Court's decision as an important win for accountability. It sounds like this is an issue that could take years to fully evaluate in terms of its economic impact. Are there any agencies or sectors that might be particularly affected in the near term? Financial regulators are expected to be among the hardest hit. That includes the Federal Reserve, FDIC, OCC, and the Consumer Financial Protection Bureau. Any agency that deals with complex regulations could face more legal challenges to their rulemaking going forward. Some worry this could further slow down federal permitting and infrastructure projects. But banking groups at least seem to welcome the pushback on what they see as agency overreach and excessive regulation in their industry. This Supreme Court decision certainly has the potential for major economic implications. Thanks for breaking it down for us. And with that, we wrap up our stories for today. Thanks for listening to Simply Economics. We'll see you back here tomorrow. [MUSIC] [BLANK_AUDIO]