Inflation, Our Way of Life, and Getting Poorer

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In 1966 the average American income was approximately $29,448.  When you calculate for inflation, the purchasing power of someone making that amount, in 2010 would be $198,000.00.

In 2010, the average income was $29,840.  If you calculate for inflation, in 1966, that amount would be the same as a person making $4,440.00 a year.

“…The aftermaths of the Great Recession and the Great Depression produced sharply different changes in U.S. incomes that tell us a lot about tax and economic policy. The 1934 economic rebound was widely shared, with strong income gains for the vast majority, the bottom 90 percent. In 2010, we saw the opposite as the vast majority lost ground.

National income gained overall in 2010, but all of the gains were among the top 10 percent. Even within those 15.6 million households, the gains were extraordinarily concentrated among the super-rich, the top one percent of the top one percent. Just 15,600 super-rich households pocketed an astonishing 37 percent of the entire national gain.

The different results in 1934 and 2010 show how a major shift in federal policy hurts the vast majority and benefits the super-rich….”

If you look closely at this chart, while it appears that incomes begin to drop in 2005. The real drop began around 2008, and have plunged during Obama’s tenure in office.

Reuters

The problem with the GOP, currently, is the fact that perception is everything.  We need to understand, if Mitt is the nominee, this is what we are going to be facing.

“...I said yesterday that there are actual stakes to this election, even if we’re all inclined to treat the event like a good ball game. Well, this is one of them. President Obama’s policies on income inequality aren’t great—at most, his push for higher taxes on the rich will make social investments more affordable—but they are radical compared to the GOP’s plan to increase the rate of upwards redistribution with lower taxes on wealth and high incomes, paid for by massive cuts to entitlements and social programs. In other words, if we go by their actual policies, Republicans—including “moderates” like Mitt Romney—want to take the trend that Johnston describes, and accelerate it. That alone is reason enough to care about the outcome of this election….”

Let’s get back to inflation.

What causes it?

One thing is high gas prices.

The Hill

We don’t got no stinkin’ inflation!

“...The liberal Bloomberg News went all Baghdad Bob in denying that inflation is back. In its report on the new Consumer Price Index numbers from the Bureau of Labor Statistics, Bloomberg News insisted that only the price of gasoline is up.

From Bloomberg News: “The consumer-price index climbed 0.4 percent, matching the median forecast of economists surveyed by Bloomberg News, after increasing 0.2 percent the prior month, the Labor Department reported today in Washington. The so-called core measure, which excludes more volatile food and energy costs, climbed 0.1 percent, less than projected.”

Right. And we can just replace oil with algae.

The price of gasoline jacked up inflation in the 1970s, giving the baby boom generation as it entered the work force its first taste of the madness of price rises run amok. Oil prices affected the price of everything else.

Inflation cost President Ford his job and helped cost President Carter his job.

But this time is different, Bloomberg News insisted: “The biggest jump in gasoline in more than a year accounted for about 80 percent of the increase in prices last month, leaving households with less money to spend on other goods and services. Federal Reserve policy makers say the advance in fuel costs will be temporary, and most see little risk inflation will flare out of control as unemployment exceeds 8 percent.”

Yes, because as we all know unemployment offsets inflation. Unless it is the early 1980s when we had them both….”

It seems to me that Newt is the only one running who is willing to address the root cause of more than a bit of this inflation and our economic downturn.  What is fascinating about this article is the fact that it quotes Mitt, who doesn’t appear to care that much, one way or the other, and doesn’t mention that this is Newt’s issue.  Then again, the MSM is disparately trying to pretend Newt Gingrich does not exist.

“…Gasoline prices have followed oil prices up. Oil is rising, in part, because of tensions surrounding Iran’s nuclear program. Iranian leaders have threatened to close a shipping route into the Persian Gulf. Experts say the standoff could lead to tighter global oil supplies later this year. Contributing to higher gas prices is stronger demand from China and other developing economies.

Most economists expect gas prices to top $4 a gallon by May. That would drag on consumer spending and the economy. “It’s like a tax,” Hanson said. Economists note that gas prices tend to hit consumer confidence especially hard once they surpass round numbers, such as $4 a gallon or $5 a gallon. Consumer confidence levels provide a rough guide to what Americans will actually do when at the mall or their favorite store.

A Gallup poll last week found that nearly half of Americans would make “significant” spending cuts in other areas if gas topped $5 a gallon. On average, Americans said gas prices of $5.30 to $5.35 are a “tipping point” that would cause them to make those cutbacks.

Motorists have responded to rising pump prices by driving fewer miles in more efficient vehicles. They’ve conserved so much fuel this year that they’ve effectively reduced gasoline spending even though a gallon is an average of 32 cents higher than it was a year ago, said Tom Kloza, chief oil analyst at the Oil Price Information Service.

“Gas prices really choked the consumer in 2008,” Kloza said. “This year I’m not so sure.”
Retailers have begun to worry that higher gas prices will eventually force many consumers to cut back. “If gas prices do start (going) upward again and creeping back up to $4 and $5, I think that is going to be a problem for our customer,” Charles Holley, Wal-Mart’s chief financial officer, said this month.

Some trends in the economy should cushion the impact of higher gas prices. Americans saved more last year. That gives them some leeway to pay for costlier gas out of savings rather than cutting spending in other areas. Easing the impact further, other energy prices have fallen even as gas costs have soared. The price of natural gas to residential consumers has dropped an average of 8 percent a year since 2009.

Consumers saved more money in January from lower natural gas and electricity prices than they paid in higher gas costs, Christopher said. The price of gasoline will likely follow developments in Iran. Continued sparring between Iran and the West means prices will keep going up. But if Iran adopts a more conciliatory tone, oil and gasoline prices could tumble.

The outcome will help determine the U.S. elections in November. Obama has been under pressure to do something to ease prices even as the economy is producing its best job growth since the recession ended. A Washington Post-ABC News poll conducted last week found that 59 percent of voters disapproved of the way Obama has handled the economy. A month ago, the same poll found that 53 percent disapproved.

Obama’s Republican opponents have criticized him for blocking efforts to expand drilling in restricted areas of the Gulf of Mexico and in the Alaskan National Wildlife Refuge. In a TV interview this week, front-runner Mitt Romney said Obama should “absolutely” be held responsible for the higher prices because “he has not pursued policies that convince the world that America is going to become energy secure, energy independent.”…”

 

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