Inflation for the Poor, Stagnant Prices for the Rich

Beneath the mortgage crisis brought about by the deliberate systematic scamming of the poor by greedy lendersis the story of the disparity between the kinds of goods with steep mark-ups. The sector that has suffered the greatest inflation, it turns out, is the sector where low and middle class consumers spend most of their money. At the same time, wages have barely risen for the people hit hardest by inflation while luxury sectors have stabilized and incomes risen dramatically.

We all knew that but a new study of govt data by WaPo reporters (doing some actual investigative journalism for a change) proves it.

Inflation is walloping Americans with low and moderate incomes as the prices of staples have soared far faster than those of luxuries.

The goods and services Americans consumed in February were 4 percent more expensive than they were a year earlier. But there is a big divide in how much prices are climbing between the basic items people need to live and get to work, and those on which they can easily cut back when times are tight.

An analysis of government data by The Washington Post found that prices have risen 9.2 percent since 2006 for the groceries, gasoline, health care and other basics that a middle-income American family has little choice but to consume. That would cost such a family, which made $45,000 on average in 2006, an extra $972 per year, assuming it did not buy less of such items because of higher prices. For a broad range of goods on which it is easier to scrimp — such as restaurant meals, alcoholic beverages, new cars, furniture, and clothing — prices have risen 2.4 percent.

Wages for typical workers, meanwhile, have been rising slowly. In that same time span, average earnings for a non-managerial worker rose about 5 percent. This contradiction — high inflation for staples, low inflation for luxuries and in wages — helps explain why American workers felt squeezed even before the recent economic distress began.

(emphasis added)

So, once again, if you’re rich, the expensive trinkets you buy cost little more than they did a few years ago. If you’re poor, a much bigger part of your budget goes for basics like food, transportation, and heat. The reporters – Neil Irwin and Alejandro Lazo – claim that the culprit is foreign market pressure.

Inflation is not occurring because labor markets are tight or because the U.S. economy has been overstimulated; if that were the case, wages would be driving inflation up, leaving ordinary households in decent shape and doing more damage to those who lent money at fixed interest rates.

Instead, this inflation is driven by global commodity markets. China, India and other developing countries’ thirst for oil has been growing faster than producers can quench it, sending the price of oil up about 60 percent since 2006. Prices for oil and other commodities fell yesterday though they remain very expensive by any historical standard.

Expensive crude oil has translated into higher costs to heat a house or drive to work. The average middle-income household must spend $378 more per year on gasoline than it did in 2006 if it consumes the same amount, and an extra $38 on fuel oil.

Apparently the pro-war WaPo decided to skip over the pressure on oil prices caused by the second Gulf War and the obscene profits netted by oil companies the last few years. “It’s all China’s fault.” But at least they didn’t gloss over the difficulties caused by a Two Americas economy.

The rise in the basic cost of living means that inflation disproportionately affects those with modest incomes. For example, in 2006, the top 20 percent of households by income spent about twice as much on staples as households in the lower-middle bracket. But the top-earning families had almost six times as much income.

***

The pinch of inflation from energy, food and health care is a significant factor in softening consumer spending, which in turn is the reason economic growth is slowing sharply this year. It is not the only reason consumers are pulling back, however. Lower home prices, less credit availability and dropping stock market values are other likely factors.

Those different sources of weakness are affecting different groups of consumers. Poor and middle-income people are suffering the worst from inflation, middle- to upper-middle-income families are bearing the brunt of the softer real estate market, and the affluent are pinched the most by problems in financial markets.

Poor babies. But don’t worry. The Fed just promised them another $$$30BIL$$$ to help stabilize the market and it worked. For a couple of days.

Of course, that’s the fourth time $$$20-30Bil$$$ has been thrown at the investor class in an attempt to chivvy them into some semblance of sanity (the Bush Admin tossed them almost $$$200BIL$$$ just a couple of months ago) and each injection of cash calmed nervous investors for, like, a week before the next batch of bad economic news sent them into a tizzy of fret and foreboding, and Wall Street took another nose dive. It isn’t news that the effect of this latest give-away had just as temporary an effect.

Meanwhile, absolutely NO ONE is suggesting that maybe wages should be raised past the level of inflation or that maybe prices on staples should be frozen for a while, and the price of oil fixed. Or all three. None of those would chill weak investor nerves or put money in their pockets. So, even though such moves would be far more likely to stimulate a recessed economy than pouring more money down the financial sector rat hole, they won’t be coming our way any time soon.

The people who caused this disaster with their greed and unscrupulous, predatory practices are focused on saving their own asses at our expense.

And as usual, the Bush Administration is happy to oblige.

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Foreign Aid Money for Katrina Relief Rejected or Unused

On Sunday, the Washington Post reported that $$$hundreds of millions of $$$ in hurricane relief after Katrina has gone unused.

Allies offered $854 million in cash and in oil that was to be sold for cash. But only $40 million has been used so far for disaster victims or reconstruction, according to U.S. officials and contractors. Most of the aid went uncollected, including $400 million worth of oil. Some offers were withdrawn or redirected to private groups such as the Red Cross. The rest has been delayed by red tape and bureaucratic limits on how it can be spent.

In addition, valuable supplies and services — such as cellphone systems, medicine and cruise ships — were delayed or declined because the government could not handle them. In some cases, supplies were wasted.

“Could not handle them” my ass. As we’ve shown time and again, the Bush Administration had no desire to “handle them”, no desire in fact to do anything that would help the refugees or bring them home. Tens (hundreds?) of thousands of Katrina refugees still languish in FEMA trailer parks from Louisiana to Texas to Arkansas, reconstruction of the poorer neighborhoods is all but at a standstill while HUD refuses to either spend appropriated money or release it to be spent by Gulf state govts and Bush refuses to sign the waiver that would let those state govts do it themselves, and now we find out that not only did the Bushies turn down help offered by Europe, but the help they deigned to accept has been rotting away in banks and warehouses while the Administration claims it “can’t afford” any more aid.

We have proved over and over again that this inaction on the part of the Bush Admin is deliberate. It can’t be an accident, an oversight, a mistake, or incompetence. It has to be policy. There is no other rational explanation.

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Response to Mr Blair 3

I haven’t read Assets and the Poor, though I’ll give serious consideration to ordering it the next time I get a spare 25 bucks, but there is an excerpt – the first 5 pages – at Amazon which at least gave me a flavor for what Sherraden’s after and where he’s coming from. First response? Not good.

Unfortunately, Amazon won’t let me copy any of the excerpt and as rotten a typist as I am, I’m not going to copy large chunks by hand – it’s only 5 pages and you can read it for yourself in under 5 mins. The main thrust of his thesis seems to be that anti-poverty strategies have been based on income tansfers and income transfers don’t work. (Reminder: this book was written in 1991 and is therefore 16 years old and outdated by at least 10.)

There is widespread discontent with the failure of income transfers, such as Aid to Families with Dependent Children (AFDC).

Who, may I ask is discontented with it? And why? He doesn’t say though this is the opening and obviously the place to summarize that discontent. If he’s going to argue unhappiness, it would be nice to know where that unhappiness comes from and what its basis is. Especially since later on he admits income transfers have had a positive impact.

[I]ncome transfer has maintained…a minimum level of subsistence in the United States….In addition, welfare policy has buffered the severity of economic cycles by providing strong countercyclical fiscal stimuli.

IOW, it has done as much as conservative means-testing has allowed it to do and provided the minimum safety net which is all conservatives could stomach. Their intention was to hold welfare to the subsistence level and they succeeded in doing that. How, therefore, do we justify calling it a failure?

After decades of federal programs, it cannot be demonstrated that means-tested welfare policies permanently change people’s lives for the better.

Well, duh. Of course not. The policy was built to actively prevent “changing people’s lives for the better”. Conservatives, as I have demonstrated, wouldn’t stand for it. They didn’t even want the minimum subsistence aid, as they showed quite clearly when they came to power in ’94 and immediately began gutting as much of it as they could.

So already, right at the beginning, we’ve got problems. Continue reading

Response to Mr Blair 2

What you – and a lot of other people; you’re not alone – don’t seem to realize is that poverty is not a state of mind. It’s an economic condition that’s often forced on people.

[T]here are a lot of people…who think poverty is the result of stupidity or laziness, people who simply can’t believe that in America talent and intelligence could go unrewarded. Well…they do. Every day.

One of the smartest people I know is a cook at a nursing home. He had two years at a technical college where he learned how to be a tool-and-die maker because he liked to work with his hands. That craft has been taken over by computers, so now he cooks. He’s good at it, proud of what he can do and how people feel when they eat what he makes. He can do wonders with a budget slim as a Chihuahua hair. He makes $9/hr. His family wants to know why he doesn’t do more with his life. In a weak moment (when we’d been drinking), he told me that, and then he told me what he didn’t dare tell them–that he kept the job because he was happy doing it, and that money really wasn’t very important to him as long as his family had a roof over their heads and enough to eat.

He was lying, like a lot of us do, by telling himself that what he could get was all he wanted. I challenged him, and he admitted he’d really like to learn gourmet cooking and work in a legitimate restaurant where he didn’t have to make superior food out of inferior product. I asked him if he’d considered going back to school, get a degree in Culinary Arts. Sheepishly, he told me he’d applied but his income ($9/hr!) was over the guidelines and there was no financial aid available since the Feds had cut their grant programs to the bone.

The most brilliant guy I know is a Hungarian émigré. He was trained as a surgeon in Eastern Europe, has a raft of degrees on the wall of his tiny apartment, and speaks 4 languages, 3 of them reasonably well (English, he tells me, is tough). But the degrees aren’t recognized in America, he’s over 50, and his accent is so thick, his English so rudimentary, that a lot of prospective employers thought he was retarded. He works as a janitor. He makes $7/hr after three years; he started at $5. It was all he could get. His shame is so great that he won’t tell his family where he is or what he’s doing now.

If intelligence and talent were what counted in America, that janitor would be running a huge hospital and Bill Gates–who stole everything MicroSoft is from smarter people–would be sweeping the floors of the wards. But they aren’t.

It’s a rigged game, Mr Blair. Leaf through the categories Poverty and/or The Class War and/or War on the Poor on this blog and you will find dozens of posts written over the last few years documenting the tricks, lies, and outright cruelty practiced on the poor by conservatives, first because they believe poverty is the result of laziness, and second because it’s what their corporate supporters want.

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Response to Mr Blair 1

This is one of those posts that started out to be a comment on someone else’s blog until I decided that a) it was too long for a comment, and b) the issue has enough resonance to deserve wider exposure.

A brand-new blog (born March 17, barely a month ago) called Asset Almanac and authored by one Benjamin Blair linked to Monday’s post on infant mortality along with posts on several other blogs he’d never heard of that also featured pieces on the NYT article. Mr Blair’s point in this particular post, gently made, was that we were all having “knee-jerk responses” that aren’t “constructive” because they “impl[y] we ought to return to the good old days pre-welfare reform.”

Before I do answer him, however, I want to acquaint you with Mr Blair so we know who we’re dealing with and can put his remarks in some kind of context.

He describes himself as a “do-gooder…always working for fragile nonprofits” whose “passion” is for something called “asset development”. Asset development, it turns out, is a relatively new anti-poverty strategy built around, apparently, teaching poor people to save money.

The logic is very simple (important ideas are often simple): 401k account-holders save more when there’s a company match; perhaps poor people (few of whom have access to any 401k account, much less a matched one) would save more, and have a better chance of clawing their way out of poverty, if their difficult efforts to save for the future were also matched (…picture penguins marching through the polar winter — that metaphor may suggest the discipline and sacrifice necessary to save on an extremely low income). Michael Sherraden at the Center for Social Development at Washington University had that epiphany (well, not the goofy penguin part — I take full responsibility for that) and he wrote about it in his 1991 book, Assets for the Poor: A New American Welfare Policy. He argued that asset development, as opposed to (or in addition to) income support, is what can give poor people a chance at financial security and real self-sufficiency.

The beauty of the matched savings account is that the match can be used as not just an incentive to save but also a source of leverage about what to save for. Matched savings accounts, dubbed individual development accounts (IDAs), allow low-income people who complete a required financial education program to use their savings and the matching funds (which are often a generous two or three times the amount saved by the individual, up to a certain limit) to invest in a productive asset such as a first home, higher education, or the capitalization of a micro-business; in other words, the kind of investment that has been shown to move many people permanently up the economic ladder, and though certainly not risk-free investments (which we are being reminded of with the current subprime mortgage crisis), they have proven to be more practical and effective than most other investment options for the poor.

As regular readers have probably already guessed, warning flags starting going off all over the place, if not red then at least blazing orange. The idiotic concept that the poor are poor because they don’t manage their money well enough or save enough has been a right-wing talking-point for a generation, largely employed to frame the blame for poverty on the poor themselves and then sidetrack the discussion into a thoroughly useless cul-de-sac that neatly avoids the only real long-term solution whether we like it or not: income redistribution, an idea that drives our home-made oligarchs into fits of pique and panic.

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Welfare and Medicaid Cuts Raise Infant Mortality Rate

Conservatives kill babies.

Not with their own hands, of course. They don’t strangle them in their cribs. They let their anti-life policies do it for them.

For decades but especially for the last 12 years, the very same conservatives who scream that the removal of an unformed scut of cells in a womb is murder have been systematically depriving real life pregnant women who will be carrying to term of luxuries like food and adequate medical care because they’re “too expensive”.

At the Federal level, Medicaid and welfare have been consistently cut every year conservatives have ruled the roost in order to trim taxes to the nub for the rich, hand over $$$billions$$$ in corporate welfare to their masters campaign contributors, and prosecute a war nobody wanted on behalf of neoconservative imperialists too dumb to know enough to come in out of the rain. In primarily liberal Democratic states, some of that safety net has been replaced but in the predominantly-conservative Southern states, it hasn’t and the results are coming in. They’re not pretty, but then nothing much in conservative-run America is these days.

The policies of so-called “pro-life” conservatives are raising infant mortality rates in the South to the such a point that Third World countries have lower rates than parts of the US. Are we proud yet?

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After Katrina: What the Democrats Are Up Against

In his recent press conference, memorable for a series of hypocritical and borderline-false statements, King George the Clueless berated the Democratic Congress for stuffing his supplemental war funding bill with what he called “pork”. Some $1.2B of that “pork” was headed for New Orleans and the Gulf Coast, the majority of it targeted for housing construction and redevelopment. It was the first housing appropriation of any significance in the 12 years since the Republicans took over the House, and the first to directly address the devastation to housing when Katrina hit.

During the 12 years that Republicans ran the House, their leaders didn’t pay much attention to affordable-housing activists. Despite soaring rents and complaints of a deepening affordability crisis, House Majority Leader Tom DeLay (R-Tex.) told his conference that he didn’t want to see housing bills on the floor. He thought housing programs were unreformed welfare….

But now that Democrats took over the House in November, their leaders are affordable-housing activists. Liberals Barney Frank (Mass.) and Maxine Waters (Calif.) run the two panels overseeing housing policy after agitating for years, without success, for increased government rent assistance. They came to office promising to pass the first major housing legislation since the early 1990s.

Last month, the House passed their bill, a measure to address the housing shortages that have festered on the Gulf Coast since Hurricane Katrina hit in August 2005. After the storm wiped out 82,000 rental units in New Orleans, DeLay blocked a housing bill from Richard H. Baker (R-La.) because, sources said, the majority leader did not consider Baker a “team player.” But Nancy Pelosi (D-Calif.), now speaker of the House, campaigned on Katrina inaction — a prime example, she told audiences last fall, of the “do-nothing Congress” — and vowed a fast reversal. The resulting Democratic bill includes several bold precedents, including a “right to return” for all displaced hurricane victims and “one-for-one replacement” for all demolished public housing units.

So actually appropriating the money you promised so glibly while you posed for a photo-op in Jackson Square after the storm passed is your idea of “pork”, Mr President? It was easy to make promises you knew Tom DeLay was going to kill, wasn’t it? But Tommy is back killing bugs and fending off corruption and fraud charges while comparing himself to Christ (link via Digby). Now that Nancy Pelosi is Speaker and the bill has actually passed, it’s “pork”? But…it was your idea, Your Majesty. Remember?

Fine words backed up by…nothing. And now that the Democrats have done the work for you, you won’t sign it? Are you going to veto these, too?

Democratic leaders say the Katrina bill — which has yet to come up for a vote in the Senate — is just a beginning. They hope to create a huge affordable-housing trust fund, restrict predatory lending, expand rent subsidies and tax credits for low-income housing, and push the federal government back into apartment construction.

“It’s night and day,” said Michael Kane, an affordable-housing advocate in Boston. “The atmosphere has totally changed.”

Housing has been a major problem for a decade, not just in New Orleans but all over the country. Rents have shot through the stratosphere while wages have remained stagnant for 20 years, the affordable housing market has shrunk beyond belief, the subprime mortgage market is imploding due to high-risk mortgage practices loaded with small-print clauses, tricks, and hidden charges (that’s deregulation for you), and you installed a HUD Sec who thinks it’s his job not to do his job. Marvelous.

Meanwhile, the crisis deepens.

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