Support for the statewide broadcast of the state of Ohio comes from medical mutuel, providing more than 1.4 million Ohioans peace of mind with a selection of health insurance plans online at med mutual dot com slash Ohio by the law offices of Porter Wright, Morris and Arthur LLP.

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More at Porter Wright dot com and from the Ohio Education Association representing 124,000 members who work to inspire their students to think creatively and experience the joy of learning online.

At OHEA.ORG The Governor signs a bill into law drastically reducing the amount of training required for teachers to carry guns in schools.

The top leader of the Ohio Senate announces a major change in the Republican effort to ban transgender athletes and women.

Sports and economic experts discuss the inflation dilemma.

Surging gas prices and Ohio's energy future.

It's all this week on the state of Ohio.

Welcome to the state of Ohio.

I'm Andy Chao, sitting in for Karen Kasler.

Governor Mike DeWine signed a bill into law that reduces the amount of required training for teachers to carry guns in the classroom.

Teachers in Ohio have been allowed to carry guns in schools so long as they complete 700 hours of mandatory training, the same required of police recruits.

Lawmakers argued that made it nearly impossible to arm teachers, so they drastically cut that training requirement down to 24 hours and signing it into law.

DeWine stressed that the decision to arm teachers is still up to local school boards.

We're trying to layer this in and give every school the tools that they need.

Ultimately, that school is going to have to ensure the safety of the child.

They're going to do the best they can.

My job is to give them the best I can to help them do that.

Opponents, including teachers unions, slammed the bill as going in the wrong direction, saying it could make schools less safe.

The bill was signed less than three weeks after the mass shooting involved a Texas where a gunman killed 21 people, including 19 children inside an elementary school.

Republican Senate President Matt Huffman says they plan to remove controversial language in an already controversial bill that bans transgender athletes from women sports.

The bill passed by the House included a measure that required internal and external reproductive anatomy exams if an athlete's sex is disputed.

House Democrats admonished this language, calling these invasive exams.

State sanctioned sexual abuse.

Huffman, during a city club of Cleveland Forum, said the language should be removed.

The text that the speaker was talking about.

I'm not sure why that's in the bill.

It's completely unnecessary.

All of these tests can be done with a simple DNA swab.

And so that is a highlight that a lot of people would like to talk about.

And because it's, you know, outrages a lot of people, but it's not necessary.

It's not going to happen.

But we do need to address the issue that you described.

However, Huffman says the Senate still plans to work on a bill that bans transgender athletes from women's sports.

Opponents such as Equality Ohio, criticizes the bill as creating inequity for transgender youth, which could increase bullying and harassment for a group already vulnerable to mental health issues.

Governor DeWine had another high profile bill signing by giving his approval to the state's $3.5 billion capital budget Like previous budgets, this one includes money for improvements to public facilities and waterways.

But this one is different, and one significant way While the state usually issues bonds to cover many of the improvements Ohio plans to pay most, if not all, of the spending plan with cash.

The legislature has already approved tapping into the state's cash reserves to spend $1.5 billion for this budget.

DeWine said paying in cash could save taxpayers up to $1.6 billion in interest.

Advocates for low income Ohioans said a better use of that money would be as an investment into resources for those in need.

Around the state.

The pain of inflation is causing a wide ranging impact from businesses to individuals.

The cost of supplies and the fuel for shipping them can have long term effects on the economy.

I sat down with two experts on the matter.

Ray Hedman, vice president of policy for the Buckeye Institute, and Guillermo Bear, the Hilo state policy fellow for Policy Matters, Ohio.

So we're talking about the issue of inflation and the impact that it's had on people all around Ohio.

So, Ray, let's start with you.

What impacts have you seen when it comes to the rate of inflation in the country?

And here in Ohio?

Well, right now, we're starting to see people cutting back a little bit on what they're purchasing.

People are purchasing a little bit less and gas things that have gotten more expensive.

Consumers are shifting away from.

So instead of maybe just sitting there saying we're going to go out, fill the car up with gas, now we're looking at maybe taking some public transportation that came out of the numbers.

What's happening is people are finding that their paychecks and dollars are not going as far as it used to be.

So people are substitute getting cheaper goods, cheaper brands in an attempt to kind of continue to live the lifestyle they've grown accustomed to.

Yeah, same kind of thing.

I mean, you know, since since that child tax credit ran out, you know, the most recent polls I've seen is somewhere near 50%.

And families are struggling to feed themselves.

Their kids You know, one thing that I was reading recently is that people are buying smaller portions of things like half gallon of milk instead of a full gallon.

And and the gasoline is critical.

Oh, also rent rent is incredibly high right now.

But the gas thing is is really impressive.

I mean, I don't know about you, but I've actually seen a lot of people stuck on the side of the road because they ran out of gas, probably because they didn't fill their tank all the way.

And I know that have been cutting down on how much I feel with my gas tank when a when the time comes to go to the pump.

So if people are changing their habits because of how much things cost right now, what does that do to the future of inflation?

Does that mean that costs will come down if people start changing their habits?

And what is the impact of people who change their spending habits?

We'll go to Gizmo first.

Sure.

Yeah.

You know, it will definitely change in changing behavior.

We'll have a press down there.

The inflationary the inflationary pressure for sure.

I think that you know, we'll get into this hopefully in this conversation.

But I think that the the issues that the underlying issues here in this in this inflation as a situation are run much deeper than that.

So at this point, it's, you know, things can get worse if we don't do something about it.

You right.

Yeah.

So basically what's happening is, you know, what economists call a drop in demand, and that will help limit the price increases that we see if people are buying less stuff.

Things are going to not prices are not going to go up as much.

What I think, though, the other problem is, is kind of a little bit like whack a mole and that prices in different areas may continue to elevate.

So, for example, you mentioned, you know, shelter in housing.

Housing is about a third of our basket of inflation.

And those prices are going to continue to rise.

And so even as people are maybe buying generic brand goods or, you know, they're filling up their tanks less or shifting to fewer eggs and milk, if housing prices continue to rise, that's going to continue to exasperate the problems of inflation.

So let's back.

Go ahead.

And you raise right here another way that you see what he's talking about is that recently we've seen an uptick in the inflationary pressures, reaching services in other types of of sectors that are not directly dependent on those input goods, those supply chains that are held back.

So when you see when you see that inflation when you see inflation in services, what that's telling you is that you know, the inflation is cycled through the economy and pressuring other sectors of the economy.

Right.

So let's back up here and take a look at how did we get here to begin with?

How did we get to where we are right now with inflation and the problem that we're dealing with right now, Guillermo.

Sure.

You know, this in my analysis, this this situation is can be traced back several decades.

We have what I would what I would argue would be are the main things to consider are a trend towards increasing corporate consolidation as well.

As increasing financialization of the economy, both of which work together to to reduce the flexibility and the physical capital stock of the country.

So what I mean by that is increasingly and you can see this in many different sectors, hopefully we'll talk about gas a little bit.

Increasingly, what you've seen is a low capital investment ratio for most of these companies, meaning they're investing less in for example, rigs or housing construction or you know, now we're seeing some some investment in semiconductors, manufacturing, that kind of stuff.

But for for decades, that wasn't the case.

So as we invest less in invisible capital and the capacity to produce, we're more susceptible to stocks like what we've had recently.

The pandemic was world historic adverse shocks and we don't have the capacity, the flexibility to respond to that shock in any kind of meaningful way.

The long term, I think there's obviously a concern that are we seeing sectors remain competitive.

When you start seeing people shrink and businesses shrink, that can create some long term problems.

But I think the real direct cause what we're seeing right now, what inflation is from the shock of the pandemic, which has reduced the supply of goods available across the world, So if you take a look at kind of international trade systems where goods have been delayed coming from everywhere from China to Europe.

And so as a consequence, it's, you know, basically when you have more goods, oh, sorry, if you're a goods being produced, you're going to see prices going up because people want to pay more, then I think you need to combine that with some of our federal policies here in the United States, which were extraordinarily generous under both our President Trump and President Biden.

So that drove up what we're calling the demand side, where people had a lot more money that they're able to go out and buy these goods.

So you had two factors, both pushing inflation.

One is fewer goods were being produced and transported around the world.

And then the second thing is people had a lot more money coming in for the first several years for first several months of the pandemic, driving up household income.

So you had more money chasing fewer goods.

And then I think, you know, the Federal Reserve Board kept money very loose.

And so a lot of, you know, the bigger businesses, your credit in everything was able to expand.

So those three factors, all of contributed in a very, very short period of time.

The inflation, obviously, we agree on on several points.

I think the biggest point of disagreement, which is to be expected, is you know, we we have seen it.

It's true.

We have we saw an increase in demand, especially once the the closures started coming down.

But but at this point, you know, the inflation is hitting us hardest right now.

And at this point, you know, people's discretionary funds have disappeared and we're seeing sky high credit card, you know, historic levels of credit card debt.

And the fact is that, like yet that I agree that that is a factor that the the increased demand.

But any in any case, the generosity of that the impact the proximate relationship between the generosity of the of the stimulus bills and the current situation is how it was captured by the financial sector and not by not how much it reached our wallets at this point.

And, you know, in fact, the Economic Policy Institute did an analysis of that of the increase, trying to find the nonfinancial sectors breaking down the nonfinancial sectors, price increases.

And they found that.

54% of price increases in the past in the since 2000 from 2020 quarter two to 21 21 quarter four were 54% were accounted for by corporate profits at 38% by non-Labor input costs and only 8% by labor input costs.

So it doesn't go quite to the question of the demand.

But my point here is that where I believe that this is a major supply, supply driven inflationary shock.

Yeah, I think, you know, the supply is what we're seeing is definitely had a major role.

I think the concern that we've seen is that, you know, demand has driven up the spike in goods and we're now starting to see the inflation leak from the goods to the service sector.

And so I think, you know, underlying this remains the fact that a lot of households, you know, you take a look at research by Brookings other center left, a lot of households actually had income go up during the pandemic because the United States had one of the largest bailout packages of any country.

That's one of the reasons the United States core inflation outstripped Europe.

Inflation during the first several years, the pandemic, and obviously before the Ukraine invasion.

But I think, you know, Guglielmo and I are in agreement that a lot of what we're seeing and I think the part of hopefully the way out is to increase the supply of a lot of these goods and labor supply of services that can help bring down inflation in the future.

So let's talk about gas prices.

That's the thing on a lot of people's minds.

Of course, it's having an impact on a lot of people.

First of all, when we talk about inflation, and then we look at the price at the pump.

Do those correlate is one because of the other?

Are we seeing inflation?

Are we seeing gas prices higher because of inflation?

Right.

Yeah.

You know, it's kind of a chicken and egg.

I mean, you know, energy prices, it's about 8% of the goods basket.

And so, you know, when gasoline is going up, that's going to drive up the overall price of inflation.

You know, a lot of times, you know, energy and food are so volatile because they go up and down so much.

We try to strip those out and we're looking at the underlying inflation measures.

But I think at this point, you know, the higher price of gas has become a real contributor and kind of outstripping its role in the CPI basket of goods because gas is an input now to what so many businesses need.

When gas starts getting too expensive, you know, what you're going to see as anybody that's relying on transportation, i.e., basically every business that sells goods target to grocery stores, to Wal-Mart, that's going to be driving up the cost of putting those goods on the shelves because they're going to be hard to paying so much more to transport those goods, you know, to their end point of destination.

And that's one of the reasons we saw corporate profits fall in the last quarter is because the cost to a lot of these companies are putting goods on the shelves has increased due to the price of gas.

And now, again, that's going to be an ongoing concern because energy prices is an intermediate good.

It's used to make so many other goods that people use, you know, and so you think about a lot of people just think about gas is taking their car, you know, getting to school, getting to work, you know, getting to the gym.

It's a lot more than that because so many businesses rely on goods to complete their work product or to be able to deliver their service to the consumer.

So to give you just a super brief history about why we're here so then we had the fracking boom, 20, ten to 20, 14, you know, tons of money into exploration production all over the state, all over the world here in Ohio, but all over the country.

And what happens in 20, 15, 20, 16, right, was that OPEC changed their strategy.

They flooded the market with, with oil, the prices dropped off a cliff and all that investment that that people put into the fracking industry, just a lot of people were left broke.

So then 2017 to 20, 20 somewhat of an increase Right.

But then again pandemic shock and then again Ukraine shock.

So what we've seen is a series of shocks that have that can affect again what I was saying earlier today that the, the physical capital invested in these sectors.

So what you see is, is the oil sector has reduced their sensitivity to price to price fluctuations.

Prices have gone up and the oil sector isn't investing directly like they used to because because of the volatility of the market.

So.

So what happened?

You know, once the once the pandemic, once it was clear that gas prices were coming up after the 2020 decline, you started seeing investor calls and in conferences for the oil for oil companies and the oil sector the investors and the the the manager the investors of the financial sector basically begging the managers of the oil companies to do what to discipline capital, to discipline their investment, to hold back on investment and to capture more profits by keeping the oil in the ground.

So they're holding back on the on invest in and building new rigs because they see this as a means of capturing profit, buying back stocks, increasing the value of what they hold and benefiting the stockholders rather than the American populace as well.

So, Guillermo, what we're seeing right now with the higher gas prices, what do you think that means for Ohio when it comes to its future energy policies?

Does this send any signal that Ohio needs to diversify in any way to look at other energy resources?

Absolutely.

You know, this I mean, the problem here, of course, is that the volatility itself doesn't help.

The volatility isn't a good symbol, a signal economic signal to investors So actually, I don't think in of itself it's going to lead to some kind of diversification of energy sources.

The answer is obviously, yes, we need to diversify For decades, we've been trying.

People have been arguing.

I mean, this is decades old, right?

We know that we need to go into renewable energy sources, all those kinds of things.

But it's not going to happen.

Just by market signals.

We have to we have to make it happen as a society.

Right.

Yeah.

I think what we need is a policy of, you know, energy abundant So diversification is fine.

I think what we really need is just more or more of different types, everything from solar to nuclear to obviously to fossil fuels.

And industry.

You know, I'm talked about fracking.

I mean, fracking was a great boon because it made Ohio Industries a lot more competitive around the world.

Because all of a sudden one of our main inputs declined in price.

So, you know, I think if you look at it from a business perspective, from an oil company or other types of major production, you know, they want to take a look at the long run and, you know, and try to escape a little bit of the volatility cycle.

And so I think, you know, we need to make sure that we're putting in place first policies that can encourage long run adjustment and not restrict, you know, basically people who want to produce an energy plant, you know, not telling them they can't do it when it comes to inflation and gas prices.

There is obviously a lot of finger pointing and it becomes political when it really comes down to the economic issue of inflation and of gas prices.

Is it a political issue?

Is it something that politicians can fix or is it bigger than that?

I'll let Guillermo go first on that.

Sure.

Yeah.

I think this is clearly political.

I think that part of the problem is depending too much on the markets with this situation, you know, we could we could approach it at it from a whole lot of sectors.

I mean, part of it has to do with our foreign dependance on oil.

And, you know, the steps that we've taken against Russia, against Saudi Arabia, Venezuela.

I don't you know, those are political decisions.

But how do we bring on more production to get more supply You know, companies are forward looking.

And so making big expansion decisions that are costly to recoup is going to require, you know, some thinking that I'm saying.

There's going to be a long term horizon.

The tension, I think, in the economy of your position is, yes, he says we need more production now.

But the same standpoint, we need to transition away from some of these fossil fuel companies.

If you're an investor, you know, you're hearing that comes from the government, that may not and that's definitely not going to encourage you to invest long term.

If you think that the government may come in and cancel from your leases or claw back your production in the future.

So I think that's a political concern.

What will we see in the next six months?

Are we going to see things start to taper off or do we see this continuing?

Well, you know, it's I can predict a future like that.

I'd be doing well.

I've been out of the stock market entirely.

So I think, you know, what you're going to see is I think the actions the Federal Reserve Board are going to be keen to short term, how much are they going to be raising rates that'll basically put some downward pressure, hopefully on prices.

I think, you know, we've learned our lesson a little bit on acting aggressively when you're starting to see inflation numbers just big.

I think what to look for in the next two to three months is going to be inflation month over month.

And is inflation shifting more from goods to services showing up in wages?

They may cause the Fed to continue to raise rates faster which will drive down consumer spending and really starting to threaten the overall health of the economy.

GMO.

Yeah, it's so definitely not optimistic about the next the next few months.

You know, the Fed is meeting this week originally.

The expectations were that they would raise interest rates by half a percent.

People are talking about a full 100 basis points right now.

You know, those sounds like pretty abstract numbers, but just, you know, the math is such that if if the interest rates go up a couple of percentage points for your 30 year mortgage doubles in price.

You know we're talking about a huge impact on people and people's capacity to to have money to pay the things that we need.

I think that I'm not optimistic in part because there is a paradigm dominance of this idea that the only response that we have is this heavy handed said blunt instrument kind of response.

But you know, the only the only encouragement perhaps is that Democrats know how dire the things are going to be in November if they don't do something about it.

So perhaps that will encourage some kind of courageous action in, you know, things like we've been talking about in terms of ensuring long term investment in key sectors, but also antitrust regulation and making sure that that corporate corporations can't capture you know, 50% of the inflation, the inflationary value.

That's it for us this week for my colleagues at the Statehouse News Bureau.

Thanks for watching Please check us out at State News dot org.

You can follow the show, Karen Kasler, Joe Ingles and myself on Facebook and Twitter and be sure to join us next time for the state of Ohio.

Support for the statewide broadcast of the state of Ohio comes from medical mutuel, providing more than 1.4 million Ohioans peace of mind with a selection of health insurance plans online at med mutual dot com slash Ohio by the law offices of Porter Wright, Morris and Arthur LLP.

Now with eight locations across the country, Porter Right is a legal partner with a new perspective to the business community.

More at Porter right dot com and from the Ohio Education Association representing 124,000 members who work to inspire their students to think creatively and experience the joy of learning online at OHEA.org