FORECASTS & TRENDS E-LETTER
by Gary D. Halbert
September 27, 2022

IN THIS ISSUE:

1. Defunding Police Created Cop Shortages Across America

2. Democrats Have Made Every City In America A “Border City”

3. Record 2.3 Million Border Arrests, Plus Nearly 1 Million “Gotaways”

4. Fed Hikes By 75 BPS, Powell Warns Even More Hikes To Come

Overview – Defunding Police Created Cop Shortages Across America

Last week, I wrote about the record increase in violent crime across America in big and small cities alike. As a natural follow-up to that topic, today we’ll look at how the Democrats’ efforts to defund the police have led to a dangerous shortage of law enforcement officers across the country and how this problem will be very difficult to reverse.

Even though most mayors and governors who previously supported defund the police efforts in the past have reversed their positions and are working to rebuild their law enforcement efforts, many are finding a real shortage of candidates to fill these much needed jobs. Fewer Americans are applying to and attending law enforcement training programs, and this is a serious problem.

Following that discussion, we’ll talk about how President Biden’s “Open Border” is turning more and more US cities into “Border Cities.” If you are like most of my friends and colleagues, you are not aware of this.

Finally, we’ll take a deeper dive into the Fed’s latest move to a much more hawkish position on interest rates. Following its latest policy meeting on September 21, the Fed announced another 75 basis-point rise in its key overnight lending rate, which was widely expected, but it also indicated that more large rate hikes lie ahead. Chairman Powell even hinted the Fed might be willing to tolerate a recession in its quest to get inflation under control. Let’s get started.

Defund The Police Efforts Lead To Shortages of Law Enforcement

Police departments and other law enforcement agencies around the country are experiencing shortages of officers and having great difficulty recruiting replacements. Since the Covid pandemic and the killing of George Floyd in Minneapolis, unprecedented numbers of police and law enforcement officers have been taking early retirement or resigning citing efforts to defund the police, negative public perceptions of policing, low pay, etc.

A national survey last year found there was a 45% increase in retirements and nearly 20% increase in resignations over the previous year. The police shortage has created a crisis in many cities, the survey said, with: "longer wait times for calls for service, fewer crimes solved and cleared and on-duty officers who are burned out and overworked,” which threatens the quality of life and overall safety in our communities.

Most large cities across America report they are down at least 100 officers in their police force and many report shortages of several hundred cops. Given that law enforcement training programs typically last eight months or longer, and applications are way down in most cases, there is not much police departments can do to rebuild their forces.

"One of the challenges now is every ... police department is looking for the same group of talented motivated individuals that have a heart to serve," which come out of these training programs, said Atlanta's Interim Police Chief Darin Schierbaum.

The shortages have coincided with a spike in crime rates across the nation. The rate of violent crimes in the US in 2020 rose for the first time in years, while the murder rate spiked 30%, the biggest annual increase ever recorded, as I reported last week.

Los Angeles reported it was working with 650 fewer officers in 2021. Phoenix reported it was down more than 450 officers last year. Seattle was down over 400 officers. Kansas City reported it had lost over 100 officers. The list goes on and on.

In an effort to boost their forces, many police departments across the country are recruiting more women, but they also must be trained. Many are also recruiting more ex-military people who can be trained quicker for law enforcement jobs which don’t require the same level of training as officers on the street.

I could go on with more data and examples of the shortages of police officers and reasons why it is so difficult to resolve this problem, but I think you get the picture.

Biden & Democrats Have Made Every City In America A “Border City”

House Minority Leader Kevin McCarthy (R–CA) recently told Newsmax that the White House and Democrats have made “every city in America a border city" as illegal immigration hits new highs.

During a recent appearance on "The Record with Greta Van Susteren," the California Republican criticized Vice President Kamala Harris' recent comment that the southern border is “secure.” It of course is NOT secure! Just come visit the South Texas border and see for yourself.

“They made this border insecure. She [Harris] has only been there one time. In the 41-year history of the president in elected office, he's pretty much never been there [the border] that we have a record of. They have created this," McCarthy stated.

McCarthy also drew the spotlight on the border crisis' contribution to illicit fentanyl deaths, comparing the estimated 300 deaths per day to a "full commercial airline crashing every single day in America."

"That's not the only thing coming across the border as well. There's people on the terrorist watchlist. I actually brought this forward in one of my earlier trips to the border a year-and-a-half ago and the White House tried to deny it," the Minority Leader emphasized.

His comments are in the backdrop of an increasing number of Red State governors beginning to send their illegal migrant population up North, using both buses and air travel.

Record 2.3 Million Border Arrests, Plus Nearly 1 Million “Gotaways”

The government reports a record 2.3 million arrests of illegal immigrants have been made at the border so far this fiscal year which ends on September 30. This figure compares to the previous record of 1.7 million a year ago. The 2.3 million figure does not include roughly 900,000 so-called “gotaways” which came in undetected. This number is just an estimate and could be much higher.

Of the 2.3 million total, over 1.3 million came in through the Texas border with Mexico, according to the U.S. Customs and Border Protection agency. This figure does not include an estimate of how many of the 900,000 or so gotaways came in through Texas, but it’s surely more than half. Again, the number of gotaways may be significantly understated.

Thus, a conservative estimate of how many illegal immigrants have come into Texas so far this fiscal year is 1.8 million. In reality it could well be over 2 million. Needless to say, Texas border cities and towns are overwhelmed! This crisis needs stop. The border needs to be secured ASAP!

While Texas Governor Greg Abbott has received a lot of criticism for busing many illegal immigrants to so-called “sanctuary cities,” to-date that number is only about 10,000. The liberals want us to believe he’s shipping out all the immigrants and this is simply NOT true.

Fed Hikes By 75 BPS, Powell Warns of Even More Hikes To Come

As was widely expected, the Federal Reserve’s Open Market Committee (FOMC) voted last Wednesday to hike its Fed Funds rate by 0.75%, the third such increase in arow, in an effort to head-off inflation which is running at a 40+ year high. In his post-meeting press conference, Fed Chair Jerome Powell warned that the Fed will likely have to raise interest rates even further than previous projections to get inflation back to its 2% target.

The FOMC’s latest move puts its target range for the Fed Funds Rate at 3.0-3.25%. Powell also said the FOMC expects to raise the Fed Funds Rate by another 125 basis points (1.25%) by the end of this year. That implies another 75 basis points increase at the November 1-2 meeting and 50 basis points at the mid-December meeting. That would move the Fed Funds target range to 4.25-4.5% before the end of this year.

Chairman Powell also suggested it is quite likely the Fed will have to continue raising rates into 2023. The Fed Chair also hinted the Fed is willing to tolerate a recession if necessary to get inflation down. Powell said the Fed acknowledges its policy moves are negatively effecting the economy, but added that there is no way to avoid “some pain” to reach its goals. This was a new, more hawkish tone from the Fed Chair.

In addition to more hawkish comments about how high interest rates might have to go, the Fed also revised its economic projections lower for this year and next. The Fed now estimates US GDP will slow to an annual growth rate of only 0.2%, well below its last forecast of 1.75%. The Fed also lowered its 2023 GDP forecast to 1.2%, down from 1.7% in its previous projections.

All in all, the Fed’s latest economic projections and Powell’s comments were much more negative than the markets were expecting, and stocks sold off sharply following news late last week. The Dow Jones Industrial Average plunged 3.7% last week, with almost all that decline coming after the FOMC meeting and the rate hike on Wednesday.

The Dow fell below 30,000 for the first time since early 2021. It remains to be seen where we go from here.

Most market analysts and forecasters attribute the recent plunge in equity prices to the Fed’s increasingly hawkish position on short-term interest rates. The fact that the Fed is committed to raising the Fed Funds target rate to 4.25% to 4.50%, after being held near zero for much of the last decade, has come as a stunner to a generation of market participants and investors. This is largely why it has hit the equity markets so hard in recent weeks.

While Fed Chair Powell said in his press conference the Fed will keep its target range at 4.25-4.5% (or higher if need be) for as long as it takes to bring down inflation, he does acknowledge that the Fed will be able to lower it at some point. But most Fed-watchers agree it will NOT be going back to near zero, maybe not in our lifetimes.

Let’s say the Fed Funds rate settles back down to 2.0-2.5% sometime next year. That is still a very low rate by historical standards. It is certainly NOT the end of the world! So, my advice to all the bears and Millennials who have never seen this before is to take a chill pill!

Or better yet, consider some of the professionally managed strategies we offer at Halbert Wealth Management and let the cool-headed pros manage your portfolio.

Wishing you profits,

Gary D. Halbert

SPECIAL ARTICLES

House Passes Bill To Refund Police, But Do They Have A Hidden Agenda?

House Minority Leader McCarthy: Dems Have Made Every American City A "Border City"

Gary's Between the Lines column:
Inflation Running Above 12%, Not 8.3% As Reported

 

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