Inflation

Puerto Rico – you don’t count……to the U.S. government

Hurricanes Irma and Maria devastated Puerto Rico in September destroying homes, crops and communications. Many weeks later, less than 20 percent of the electricity has been restored, and no one really knows when the rest of the island will regain power.

How much did the devastation caused by these storms on Puerto Rico impact key U.S. mainland indicators like GDP, unemployment and inflation?  The answer might surprise you; not at all.

How Does The U.S. Government Handle Puerto Rican Numbers?

Branches of the U.S. government that collect statistics generally do not include Puerto Rico in national totals.  For example, the U.S. Census Bureau has calculated Puerto Rico’s population since 1910.  It even lists the island’s almost 4 million people along with the population of the other 50 states.  However, the total population of the U.S. does not include the island’s people unless they move to the mainland.

GDP shows the size of a country’s economic pie.  The U.S. Commerce Department’s Bureau of Economic Analysis tracks U.S. GDP at a very detailed geographic level.  If you want to know the GDP of Oshkosh, Wisconsin ($10 billion in 2016) or Altoona, Pennsylvania ($5 billion), the U.S. government has you covered.

What they don’t track is Puerto Rico.  This is strange since the Bureau does track the GDP of four smaller U.S. territories.  Data are published annually for the U.S. Virgin Islands, Guam, American Samoa and the Mariana Islands.  The press release discussing territorial GDP does not explain why Puerto Rico isn’t part of the list.

One reason might be that Puerto Rico produces its own numbers.  However, Puerto Rico produces Gross National Product (GNP) figures. The U.S. mainland tracks Gross Domestic Product (GDP).  While the two sound alike, they are not comparable.  GNP measures what Puerto Ricans produce where ever they live.  GDP tracks what is produced within the U.S. borders irrespective of citizenship or immigration status of the worker.

Unemployment and Prices

Other important economic data are information on unemployment and inflation, which are produced by the U.S. Department of Labor’s Bureau of Labor Statistics.  Like population, the unemployment figures for Puerto Rico are calculated and released along with other states.  However, Puerto Rican numbers are not included in the national total, which means Maria’s destruction of jobs and businesses will have no impact on U.S. unemployment.

Just as interesting is the region in which the Bureau of Labor Statistics classifies Puerto Rico.  The Caribbean island is part of the New York-New Jersey region.  It is not part of something geographically close like Florida.

Hurricane Maria has raised the price of food and other necessities on the island.  However, the hurricane will not impact U.S. mainland inflation.  U.S. inflation figures are calculated by changes in the Consumer Price Index or CPI.  The U.S. CPI collects prices from 87 cities.  None of those cities is in Puerto Rico.

Conclusion

Does Puerto Rico count at all in U.S. statistics?  The answer seems to be summed up by the Central Intelligence Agency, CIA.  The CIA publishes an amazing statistical resource called the CIA World Factbook.  The Factbook provides a fast and simple method of tracking key statistics needed to understand the political, economic and military capability of any country.  The CIA has a separate entry for Puerto Rico, which they consider “a self-governing commonwealth in political association with the US.”

Overall, there is no impact on the U.S.’s GDP, unemployment or inflation after the extensive devastation of Hurricane Maria since Puerto Rico is not included in the calculation of key economic data.

Is there any silver lining to being ignored by the U.S. government?  The Internal Revenue Service (IRS) does not care about Puerto Rico. Island residents do not have to pay U.S. federal income taxes on their earnings.  This means there is at least one upside to being overlooked by Washington.

How Trump’s nominee for the Fed could turn central banking on its head

President Donald Trump on July 10 nominated Randal Quarles to be one of the seven governors of the Federal Reserve System, the central bank of the United States.

Before I get to Quarles and his qualifications, it’s important to understand the Fed and what it does. Its decisions are vital to every person on the planet who borrows or lends money (pretty much everybody) since it has enormous influence over global interest rates. Its board of governors also influences most other aspects of the global financial system, from regulating banks to how money is wired around the world. Continue reading How Trump’s nominee for the Fed could turn central banking on its head →

Update for 2017 on the “Cost of Going to the Prom”

In both 2014 and 2015 I wrote about the cost of going to the Prom. I found the results surprising. The cost of going to the prom from 1998 to 2015 was going up much slower than the cost of inflation. The findings appeared in outlets like the Washington Post, US News and The Conversation. It is now two years later.

What has happened since 2015 to the cost of attending the prom? Continue reading Update for 2017 on the “Cost of Going to the Prom” →

What is Brazilian President Dilma Rousseff’s real crime?

Dilma Rousseff, Brazil’s first female president, is about to go on trial. She is temporarily suspended from office while Brazilian politicians debate whether she broke the country’s laws.

Her crime is she allegedly borrowed about US$11 billion from Brazil’s state banks – about one percent of GDP – to fund long-running social programs for small farmers and the poor while trying to get reelected, which concealed a budget deficit. Continue reading What is Brazilian President Dilma Rousseff’s real crime? →

To Really Beat Box-Office Records, “Star Wars” Will Need To Top These Numbers

This weekend, the newest Star Wars movie will start playing in cinemas throughout the world. Pundits in places like Forbes and the International Business Times are already predicting it will be the “biggest movie of all time.”

The headlines and superlatives about this movie’s box office records will dominate entertainment news during the winter. However, it is important to understand that the hoopla surrounding box office records is nothing new: Hollywood uses special effects for both making movies and discussing how a movie does financially. Hollywood movies consistently break box office (ticket sales) records because the industry does not adjust sales for inflation. Continue reading To Really Beat Box-Office Records, “Star Wars” Will Need To Top These Numbers →

Are Turkeys Getting More Expensive Over Time?

It is almost time for Thanksgiving, the holiday when many people in the USA cook and eat turkey.  As I was walking up and down the aisles of the supermarket yesterday, buying food for the holiday, I was wondering what has happened to the price of turkeys over time.

Continue reading Are Turkeys Getting More Expensive Over Time? →

OMG! Proms are actually getting cheaper compared with the price of everything else

Prom season is now upon us, the key social event of most people’s high school experience. My youngest child is preparing to attend her first senior prom and a steady supply of fancy dresses has begun to appear in our house. As my credit card bills climbed ever higher, I began to wonder, how has the price of the prom changed over time? Continue reading OMG! Proms are actually getting cheaper compared with the price of everything else →

Does The Federal Reserve Know More Than Other Government Economists?

The U.S. Federal Reserve has a complicated mandate. The legislation governing this agency states the Fed is supposed to “promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.” It does this by controlling or influencing interest rates and controlling the U.S.’s money supply. The Fed has pushed down interest rates close to zero for many years to increase the number of employed people and reduce unemployment. By pushing interest rates down, it has explicitly ignored two of its three mandates. The key question for the Fed is when should it stop focusing on employment and refocus its attention on stable prices and moderate long-term interest rates? Continue reading Does The Federal Reserve Know More Than Other Government Economists? →

What is Really So Amazing About “The Dress” is Not The Color!

This week a huge debate has sprung up over the color of “The Dress.”  The item in question is a two-toned sleeveless dress sold by an English clothing chain called Roman Originals.  Over the last few days many people have had furious debates over whether the dress is gold and white OR black and blue.  Even the Wall Street Journal, a staid conservative publication devoted primarily to business, devoted more than a half-page to the debate over “The Dress’s” color this weekend.  For an economist, however, “The Dress” is really amazing because of its price.

Continue reading What is Really So Amazing About “The Dress” is Not The Color! →

Is the Prom Getting Cheaper Over Time?

OMG, it’s prom season again!  This weekend was my daughter’s junior prom and before the big event a dozen teenagers and their parents were at my home for “pre-prom” pictures.  After the last couple left I did the natural thing for both parents and economists; I started totaling up the various bills for the event.  A strange thought crossed my mind.  Compared to my older children’s and my own experience, the total price tag for this year’s prom was high, but not as outrageous as in the past.  Could it be that proms are actually getting cheaper over time?

Continue reading Is the Prom Getting Cheaper Over Time? →