National Defense Spending - Is an Increase Necessary?

 National Defense Spending - Is an Increase Necessary?

Written by: Dom D. 

The conflict between Russia and Ukraine has raised defense spending not only across the warring countries, but in the United States as well. The graph below displays national defense spending in 2020 to showcase just how much it increases across a span of 2 years: During the month of March following the initial invasion, president Joe Biden called for a 30 billion dollar increase on national defense spending, from 782 billion to 813 billion. The unanticipated 4% increase in budget made some happy, but several members of congress called for a minimum 5% increase and as much as a 7% increase. Though the U.S. has made it clear that they intend to stay out of armed conflict with Russia, national defenses are still being bolstered in response to the war. This supposed conflict of interest raises an important question: Is this increase in spending necessary, and when it takes effect, what will it do to the economy?

To trace the roots of whether the spending is necessary, it is important to refer to the fiscal policy and the allocation of funds in relation to achieving macroeconomic objectives. The federal budget, which is used to sustain economic growth and price level stability, plays a large role in government spending tactics. Increasing spending toward the military is an example of expansionary fiscal policy, but this can have some negative ramifications for our current economic climate. The United States is currently facing an inflation crisis, with energy bills increasing by 30.3%, food prices increasing by 9.4%, and vehicle costs increasing by 13.2%. An expansionary fiscal policy could damage the economy by further widening the inflationary gap we already face. As mentioned earlier, there is talk about needing to increase the national defense spending further, even more than what Biden has already proposed. The argument to increase spending correlates with expansionary fiscal policy due to the fact that the addition of this policy would cut tax rates while also increasing government spending in order to “put more money into consumers' hands to give them more purchasing power; It also reduces unemployment by contracting public works or hiring new government workers, both of which increase demand and spurs consumer spending, which drives almost 70% of the economy” (Amadeo, 2022). While this sounds like a good thing, more disposable income and job availability will only lead to further inflation. As shown by the graph below, increasing defense spending will increase consumer demand and shift the aggregate demand curve to the right, increasing the inflationary gap already seen.

Now that we have established how the increase occurs for national defense spending and the strong forces behind this change, is it now time to figure out exactly why Biden, the rest of congress, and the general public want to see this increase. There is the argument that increasing national defense spending could still benefit the economy in some way, but there are still more effective means of stimulating or contracting an economy than through military funding. The consensus among economists is that, “A larger budget gives the country more funds to promote and defend its global interests, but it also reduces funds available for domestic programs, including those that might do more to boost economic growth” (Rooney et. al, 2021). Military spending may provide new jobs as a side-effect, but its main purpose is for defending our global interests, and the money would be better spent to benefit jobs programs, if necessary. With the United States’ position in the conflict firmly neutral and military spending not being an effective medium for economic change, I see no reason as to why national defense spending should increase any further.

Works CIted

Mcleary, Paul, Lee Hudson, Connor O’Brien and Bryan Bender. “Biden requests $813B for national defense.” Politico, March 28, 2022 

https://www.politico.com/news/2022/03/28/biden-requests-largest-defense-budget-00020859

Amadeo, Kimberly. “Expansionary Fiscal Policy and How It Affects You.” The Balance, April 5, 2022

https://www.thebalance.com/expansionary-fiscal-policy-purpose-examples-how-it-works-3305792 

Rooney, Bryan, Grant Johnson, and Miranda Priebe. “How Does Defense Spending Affect Economic Growth?” RAND Corporation, 2021. https://www.rand.org/pubs/research_reports/RRA739-2.html 

“United States Inflation RateApril 2022 Data - 1914-2021 Historical - May Forecast.” United States Inflation Rate - April 2022 Data - 1914-2021 Historical - May Forecast, https://tradingeconomics.com/united-states/inflation-cpi 

Impacts of Inflation on Automobiles

 Impacts of Inflation on Automobiles

Written by: Emma K. 

The world as we know it today is run on automobiles. As of 2019, there were 276 million registered vehicles in the United States (“Car Ownership Statistics” Lena Borrelli 2021)- a number significant enough where anything done to disrupt its market would create an immense impact on the economic state. Recent events involving the inflation of gas and the price of cars in general, have caused tremendous impacts on the economy and US citizens, looking to see if a better fate is on the horizon. 

In order to understand where we are at today, it is important to first look at how we got here. Taking the increase of car prices, especially used, into consideration, the inflation was caused by many different factors, but arguably, the root of the issue stemmed from the supply of a chip that is installed in cars. The shortage of a seemingly, simple chip caused more trouble than one would assume. These chips are responsible for many essential roles in cars such as: powering the dashboards and diagnostics- without these chips, new cars cannot be produced. However, the inflation was not necessarily seen as intensely with new cars.  As seen in the Bureau of Labor Statistics, accessed via FRED, the rate of inflation on used cars and trucks is not only the highest since 2008, but also, much higher than the increase on new vehicles. So what does the shortage of a chip that is installed in new cars have to do with the price of used cars? Shouldn’t the price of new cars rise too? Well, as the new car market is scarce, consumers turn to the used car market instead. As the demand for used cars increases so does the price. Normally, as these prices continue to rise, they must eventually stop before rising above the price of new cars. However, due to the shortage of new cars, there doesn’t seem to be a cap for where these prices stop. 

Not only has the actual price of vehicles increased, but so has the price of owning one. “On Monday, 3 January 2022 AAA reported that the average cost of a gallon of gas was $3.28 after steady growth since hitting a pandemic low of $1.94 in May 2020” ( “What has been the increase in the price of gas in 2022?” William Gittins). Even in the past few weeks, the gas prices have seen another increase. It is no surprise the prices rose again after the pandemic low reported by the AAA, but the war in Ukraine has continued to accelerate the increase to an unheard degree.  In order to support the Ukranians, the United States halted imports of Russian oil. Unfortunately, as our oil supply then decreased, the prices of oil inflated immensely, as seen.

Clearly, from the inflation across the board, it seems as though it is becoming a luxury just to own a car. For consumers, the impact hasn’t been small. Ryan Kelly, Chris Kukla, and Ashwin Vasan at the Consumer Financial Protection Bureau released an article stating that they believe that as the size of car loans increases, it will put more pressure on the budget of the consumer. Specifically they share, “Auto loans are already the third largest consumer credit market in the United States at over $1.4 trillion outstanding , double the amount from 10 years ago and expected to grow further”. As consumers can see a rough market in front of them, it causes them to be less likely to participate, only lowering the aggregate money supply. It also doesn’t help encourage consumers to spend when the price of gas is so high. With consumer’s seeing a need to be more cautious with their money, the stimulation of the market is dropping.

An efficient economy cannot continue like this forever, so how the United States moves forward to improve the market for cars will be essential. Many sources state that prices of cars won’t be coming down anytime soon.The key will be fixing the supply of new cars. However, there is more hope for the prices of gas. Advisors from Forbes created a list of four things the White House is hoping to do to combat the inflation of gas including: authorizing E15 gasoline sales this summer, implementing a gas tax holiday, releasing oil from the strategic reserves, and lifting sanctions on Venezuela. If success can be found in decreasing the price of buying and owning a car, positive economic effects can be found as consumers will be more willing to invest and spend their money. 

Borrelli, Lena. “Car Ownership Statistics.” Bankrate, www.bankrate.com/insurance/car/car-ownership-statistics/#:~:text=There%20are%20276%20million%20vehicles%20registered%20in%20the%20U.S.%20as%20of%202019.

Ryan Kelly, Chris Kukla. “Rising Car Prices Means More Auto Loan Debt.” Consumer Financial Protection Bureau, 24 Feb. 2022, www.consumerfinance.gov/about-us/blog/rising-car-prices-means-more-auto-loan-debt/.

Smialek, Jeanna. “Few Cars, Lots of Customers: Why Autos Are an Inflation Risk.” The New York Times, The New York Times, 10 Apr. 2022, www.nytimes.com/2022/04/10/business/economy/cars-inflation.html.

Smith, Kelly Anne. “4 Ways the White House Wants to Lower Gas Prices-Will They Work?” Forbes, Forbes Magazine, 13 Apr. 2022, www.forbes.com/advisor/personal-finance/how-will-gas-prices-go-down/.

Thompson, Wesley Wren and Keenan. “Here's What's Going on with Used Car Prices-It's Not Just Chips.” Autoweek, Autoweek, 1 Nov. 2021, www.autoweek.com/news/industry-news/a36863741/used-car-prices-skyrocketing/. 

The Wisconsin Housing Market

 The Wisconsin Housing Market: 

Written by: Mitchell Eldredge 

What are some recent effects of the housing market in Wisconsin?

As of 2021, the total value of housing in Wisconsin had the greatest rate of increase in about 15 years. As a consumer in the market for a house, this could come off as frightening because the spread of homes available is lessening while the price of each is on a great increase. The average value of a single residential property in Wisconsin increased at a rate of 34.4% from $126,500 to $170,000 in a matter of 6 years. This is considered a statewide increase, however the urban counties that took the greatest hits include Milwaukee, Winnebago, and Kenosha. There are many that are being affected, however the majority are millennials; this is because in the past 3 years, millennials in the housing market have increased to a great extent. 

Why is this happening?

According to the Wisconsin Realtors association, the increased rates across Wisconsin are mainly due to the recent inflation. However, other factors include an increase in the amount of millennials reaching the age in which they are in the market for a house as well as a limited supply of homes. In 2021, the percentage of millennials (ages 23-31) in the housing market rose to 43% from 37% the year previously. During the beginning stages of Covid-19, millennials took advantage of the pandemic and cut their costs of rent by moving in with family. As a result, in 2019 those under the age of 25 accounted for only 14.86 percent of the total housing market. This number has more than doubled in 2 years as the nation has progressed through Covid-19.  As a result of inflation, construction costs have increased significantly and with this, there have been persistent labor shortages in wisconsin. Evidently this has led to a housing shortage statewide. 

Bibliography

Daykin, Tom. “The Value of Wisconsin Properties Sold in 2021 Increased at the Fastest Rate in 15 Years. It's Another Sign of a Strong Housing Market.” Milwaukee Journal Sentinel, Milwaukee Journal Sentinel, 24 Mar. 2022, https://www.jsonline.com/story/money/2022/03/24/wisconsin-home-property-sales-values-increased-rapidly-2021/7142902001/. 

“January 2022 Home Sales Report.” Wisconsin REALTORS® Association, https://www.wra.org/HSRJan2022/. 

Giovanetti, Erika. “'Wave of Millennial Buyers' Flood the Housing Market amid Record-High Home Prices: Report.” Fox Business, Fox Business, 6 Apr. 2022, https://www.foxbusiness.com/personal-finance/millennial-homebuyers-housing-market-rising-prices. 

The Economic Effects of China’s “Zero COVID” Policies

 The Economic Effects of China’s “Zero COVID” Policies

Written by: Will Smyczek

Although it is essential for China to keep its citizens safe and healthy, there is a certain point when changes need to be made to uphold economic growth and stability for the greater good of the citizens and people of the workforce.

The “Zero COVID” policies that China has implemented have damaged their economy and is something to keep an eye on for the rest of the world as well. If you are unfamiliar, these policies include mass testing, border restrictions, and strict lockdowns. They held a teleconference with more than 100,000 officials in China to discuss keeping the economy strong and focusing on growth looking into the future. 

So how bad is it? With a record-breaking number of students about to graduate from colleges, there is a youth unemployment rate of 18.2%, this will have a strong impact on these students as they enter the workforce and begin their careers. The timing couldn’t possibly be worse for them to graduate as many will likely miss out on opportunities or have to postpone prior career plans a few years when the economy might be stronger. 

With on-and-off lockdowns, due to the omicron variant spreading to China, affecting many cities, including the capital of China, Shanghai, factories have been shutting down, and later opening back up again for production. Citizens or “consumers” have been restricted to their homes as well. This has led to China’s GDP growing only 4.8% in the first 3 months of 2022, with the goal of 5.5%. Considering the lockdowns and current condition of China with the “Zero Covid” policies. The economy can certainly reach their economic goals if they decide to diminish these policies. 

Since these policies were implemented, the cases in China have made up only a small fraction of the amount compared to the USA, so they are clearly effective for keeping citizens safe, however the economic and social impacts will come back to bite them if they don’t address the other concerns that come along with this COVID prevention strategy. 

These policies can be pretty difficult on citizens with the contact tracing and mass testing. Let’s say you lived in an apartment in Beijing, if there were 300 people who lived in your apartment complex and only one resident tested positive, everyone would have to stay isolated at first and be tested every 48 hours. Roads have been blocked to prevent people from traveling. Some of these policies create great inconveniences that have a potent effect on citizen’s lifestyles. “There will likely come a point when the costs [of zero COVID] outweigh the benefits,” says Zhangkai Cheng, a respiratory specialist at Guangzhou Medical University. “Whether that point has arrived is up for debate.”

The World Health Organization had some concerns with these policies as well. "The virus is evolving, changing its behavior," said Dr Tedros Adhanom Ghebreyesu of the WHO. "With that... changing your measures will be very important." Although the omicron variant is more contagious, it comes with a lower risk of hospitalization. This backs up the point that it is vital to protect the safety of your citizens, but at the same time, weighing your options to make sure that what you are doing is most valuable is key.

Considering the greater likelihood of the omicron variant spreading, it simply doesn’t make sense to shut down large cities after only a handful of cases. This is a good concept to safeguard the health of citizens in China, but the economic and social punishments are far too severe to ignore. Dialing back these policies and making them a little bit less harsh will dramatically improve the economic state of China.

Sources Cited

Chengevelyn. “China Holds an Unprecedented, Massive Videoconference on the Economy.” CNBC, CNBC, 27 May 2022, https://www.cnbc.com/2022/05/26/china-holds-an-unprecedented-massive-videoconference-on-the-economy.html.

“China Quietly Plans a Pivot from 'Zero Covid'.” Science, https://www.science.org/content/article/china-quietly-plans-pivot-zero-covid.

“Foreign Investors Are Fleeing China.” The Economist, The Economist Newspaper, https://www.economist.com/finance-and-economics/2022/05/22/foreign-investors-are-fleeing-china?itm_source=parsely-api.

“How Xi Jinping Is Damaging China's Economy.” The Economist, The Economist Newspaper, https://www.economist.com/leaders/2022/05/26/how-xi-jinping-is-damaging-chinas-economy.

Mozur, Paul, and Alexandra Stevenson. “In China, Concerns Grow over the Economic Impact of 'Zero Covid.'.” The New York Times, The New York Times, 26 May 2022, https://www.nytimes.com/2022/05/26/world/asia/china-economy-zero-covid.html.

Song, Wanyuan. “China: Why Is the Who Concerned about Its Zero-Covid Strategy?” BBC News, BBC, 17 May 2022, https://www.bbc.com/news/59882774. 

College Tuition Skyrocketing

 College Tuition Skyrocketing

Written by: Aiden Burkemper 

It’s no secret that college is expensive and the price of tuition is only going up but why is that? There are numerous factors relating to college tuition rising at a rapid rate, before getting to that we should first take a look at how much college tuition has actually risen. 

“In 1980, the price to attend a four-year college full-time was $10,231 annually—including tuition, fees, room and board, and adjusted for inflation—according to the National Center for Education Statistics. By 2019-20, the total price increased to $28,775. That’s a 180% increase.” (Forbes.com) That is a huge increase especially when adjusted for inflation as the cost on average to go to college now is almost triple the cost just 40 years ago that is a concerning increase. Within a few more decades that cost of tuition on average will only continue to rise at that rapid rate which will greatly affect future generations as it already has massively affected this generation with over half of students who receive their bachelor's degrees ending up in thousands of dollars of debt. 

There are a few reasons for why colleges and universities are rising so fast, one of them is because of how much more colleges offer now, they offer many more courses, extra help, mental health help, and so many more great things which makes the schools cost more to attend to make up for the extra costs on the school to get these things. 

Another reason is the rising demand for colleges and limited supply for this rising demand. “Between 1990 and 2020, the total number of college students in the U.S. increased from 13.8 million to nearly 20 million.” (affordablecollegesonline.org) With college degrees becoming vastly more important in today’s society to get better and more desirable jobs students are much more encouraged to attend universities to get these degrees which gives colleges a reason to increase prices because they know students need these degrees more and more and are willing to spend more. Colleges are essentially an oligopoly as they have very limited competition that being other universities which allows them to raise prices without driving consumers out of the market which has partly led to this massive increase in cost of tuition. 

Another reason is the cost of administration services is growing as now there are so many more employees employed in colleges to help with the administration, registration, etc. That now college professors don't even make up half of the employees, paying these salaries costs lots of money and because of that prices for students to attend these colleges gets driven up. 

There are many more reasons why the cost of college has risen so dramatically, but it is clearly becoming a problem. “College costs outpaced inflation by 28 percent at public institutions and 19 percent at private nonprofit ones in the decade preceding the pandemic, according to the National Center for Education Statistics.” With how bad inflation is getting recently this tuition problem is shockingly bad and continuing to get worse and something needs to be done with these students suffering from thousands and thousands of dollars in debt justy getting a bachelor's degree, not to mention the students furthering their degrees past that. If something isn’t done soon students will continue to suffer. 

Work Cited:

McGurran, Brianna. “College Tuition Inflation: Compare the Cost of College over Time.” Forbes, Forbes Magazine, 28 Mar. 2022, https://www.forbes.com/advisor/student-loans/college-tuition-inflation/#:~:text=Between%201980%20and%202020%2C%20the,there's%20more%20to%20the%20story. 

“Tuition, Fees Continues to Rise as Pandemic Inflation Woes Hit Colleges.” NBCNews.com, NBCUniversal News Group, https://www.nbcnews.com/news/education/tuition-fees-continues-rise-pandemic-inflation-woes-hit-colleges-rcna14292. 

“What Factors Are Driving Rising College Costs?” Affordable Colleges Online, 14 Jan. 2022, https://www.affordablecollegesonline.org/college-resource-center/news/what-factors-are-driving-rising-college-costs/#:~:text=Rising%20Demand%20and%20Limited%20Supply&text=The%20pressure%20to%20pursue%20higher,colleges%20to%20raise%20their%20prices. 

Drive a Tesla, Save Your Wallet Not The World

 Drive a Tesla, Save Your Wallet Not The World

Written by: Isaiah Wilson 

A trip to the gas station used to be filled with very little emotion, a few candy bars, and maybe a soda, but now it is an experience drivers, young and old, are beginning to hate. With the cost of regular gas soaring above $4.00 per gallon, many US drivers ask themselves who's to blame, and the truth is, there are many different reasons for the recent pain at the pump. Federal taxes account for about 18 cents per gallon currently. The cost of crude oil continues to rise, and due to the elasticity of gas, almost all of these expenses get pushed onto us, the consumers. So with the price of gas only seeming to know one direction, is it time for us to head to the nearest Foot Locker and get the best pair of walking shoes money can buy, or is there an alternative? 

Many say no. 

The solution may just come from the well-known Tesla brand electric cars. As more and more consumers become accustomed to the idea of driving past their friends in a piece of electro-automotive glory, more people begin to ask themselves if it's worth it. An article by FinanceBuzz.com ran the numbers, and they add up to an economic nightmare for gas-guzzling drivers. If you were to drive a Toyota Camry that gets about 32 MPG and drive 15,000 miles per year by the end of one year, you'd be at about $1,589 in gas, says Finance Buzz. Conversely, if you were to drive a Tesla Model S the same distance, you'd only be spending roughly $555. So with over a $1000 difference, the answer seems simple right? Well, not exactly installing your at-home Tesla charger can be pretty pricey, so let's look at how this looks over a few years of driving. 

Even despite a hefty upfront cost by year two, the Tesla yet again has the Camry beat, and this time it's by nearly a grand. 

As young people without oodles of expendable income, it may not make sense to jump on the newest Tesla and watch your ROI soar. However, as a world of high gas prices and inflation becomes one that we seem to be endlessly trapped in, maybe a trip to the Tesla dealership is worth the drive. 

Works Cited

Runkle, Larissa. “Is a Tesla Worth It? We Compare All the Numbers to a ‘Normal’ Car.” FinanceBuzz, 6 May 2022, https://financebuzz.com/is-a-tesla-worth-it. 

Tepper, Taylor. “Why Is the Price of Oil Rising?” Forbes, Forbes Magazine, 14 Mar. 2022, https://www.forbes.com/advisor/investing/high-oil-prices/. 

“Why Are Gas Prices so High, and What Will Bring Them down?” NBCNews.com, NBCUniversal News Group, 12 May 2022, https://www.nbcnews.com/business/consumer/why-gas-prices-high-when-will-back-down-rcna28314. 

Social media was one of the most impactful additions to the field of marketing.

 Social media was one of the most impactful additions to the field of marketing.

By: Justin Wiggins

The first social networking site that resembled our modern depiction of social media was SixDegrees.com. SixDegrees was founded in 1997 and began a new era of marketing strategy, but it wasn’t until 2006 when Facebook signed the first social media Ad deal, “a display partnership with JP Morgan Chase to promote Chase credit cards.”

This Ad deal was quickly followed by YouTube launching ads in 2007, Twitter doing the same in 2010, Instagram and Pinterest in 2013, and finally Snapchat in 2014. This new era of advertising was marked by the development of targeted advertisements.

Targeted advertisements allowed for a far more precise and dexterous use of advertisements. Since people were already logging into social media platforms such as Facebook and YouTube with their age and gender, basic assumptions could be made about their preferences in products, and more importantly, the marketing style that they’re most receptive to. These basic statistics on their own are quite powerful marketing tools, but when combined with the data gained from countless hours of media consumption, advertisers are able to become as persuasive as someone who has known you for years.

All of this new and shockingly precise data that is available to anyone who will pay for it, creates a clear demarcation between the old era of marketing and contemporary marketing. The gap between these two marketing eras is so vast, that I would go as far as to say that it’s one of the most influential and impactful additions to the field of marketing.