Consumer prices fall for third straight month

[CatholicGerman]

In 1979 the median, pre-tax adjusted income was $32,600. In 2007 it was $41,700. After-tax it went from $26,500 to $35,700.
Even the median wages have been going up.

Again, that is income, not wages. The Bureau of Labor Statistics data says that the median weekly wage for men over 25 was $836 in 1979, and it was $823 in 2007.

We’re discussing whether the normal Family Man can provide for his family by working a full-time job. That is becoming increasingly difficult. It is true that his federal income tax burden is lower now, than then. But all other costs (and taxes) have increased significantly, as you can see here:



Here you can see how the men below the median have seen their wages decline, while the men above the median have seen their wages increase. This increasing split is the reason for the median stagnation, and growing inequality.

The reason that income doesn’t look as bad as wages is because:

• The people on the bottom are being propped-up by the people at the top. This pushes up the median (as the poor become wealthier through income transfers), while the middle class shrinks.
• Retirees collecting SS checks and retirement pay-outs are generally wealthier than the average citizen, so they push up the median. As they grow in number each year, they further skew income statistics, while wage statistics remain unaffected by their presence.
• There are significant wealth transfers from old to young. Many young people are regularly receiving income from their parents (life insurance payments, private school fees, cash for mortgage down-payment, etc.), but it is money that they did not earn themselves, so it is not included in wages.

But how else do we compare wages then with wages now? Inflation is measured using the CPI, which tries to account for these things.

The CPI is notoriously useless for tracking median income.

Since wages, Social Security cost-of-living increases and some agency budgets are tied to it, the government has a vested interest in keeping it as low as possible.

Yet your real cost of living – what you keep after taxes, medical bills, college expenses and other household costs – is probably much higher than the 2 percent annual rate the government reported in July, showing a slight decline.

Millions are falling behind inflation because wage increases aren’t keeping pace with the cost of medical care, lost employment benefits, homeownership expenses, energy and transportation.

And there’s also a goliath looming in the U.S. economy that makes the government’s consumer gauge more deceptive. Even with the stinging reality that housing values are dropping in many markets, homeownership costs such as taxes, maintenance and financing are still rising much faster than the index.

Last week’s half-point cut in the Federal Reserve’s target rate – to 4.75 percent – will do little to shield more than 2 million homeowners from foreclosure for adjustable-rate mortgages that are resetting to monthly payments people can’t afford.

The recently expired U.S. housing boom is continuing to strain household budgets, though little of this home-related inflation is measured by the consumer index.

Little Relief

Rising home values forced up assessments for property taxes, which are slow to fall when the housing market recedes. Since these levies are based on rising home values for last year, few will see relief in 2007.

Gerald Prante, an economist with the Washington-based Tax Foundation, found that median real-estate taxes on owner- occupied housing went from $1,614 in 2005 to $1,742 last year.

``That’s an increase of 7.93 percent, more than double the inflation rate in that time period,’’ Prante says.

Those tax levels may sound like nirvana to a New Jersey resident, where median levies are almost $6,000. Vermont, Illinois, Rhode Island, Massachusetts, New York, Connecticut and New Hampshire all have rates that are more than $3,000, with many upscale areas exceeding $15,000 per year.

The single-largest expense for most Americans is housing, accounting for as much as a third of household outlays. Yet the Labor Department’s Bureau of Labor Statistics only tracks ``owner’s equivalent rent,’’ or what a home would yield if it was rented out. Rental units and homes are two very different animals, though, and the government casts a blind eye to total homeownership expenses.

 

[CatholicGerman]

“Consumer prices fall for third straight month”, huh?

We’re at the point in our house that we don’t even dare walk by the meat counter at the grocery store; tough-as-leather steaks running around $10/lb, hamburger running around $5/lb, even chicken is $4-5/lb and I can’t find a cheapo corned beef for under $15 a chunk; pork is still reasonable but I’m sure it will catch up.

Check the stats. Meat, eggs, milk, etc. were not down. The average grocery purchase fell, not necessarily in all categories.

 

[MugenOne]

That’s what I was about to tell the man to do. Get a 1-2 years old calf. Hire a local butcher. It is not that expensive. It will save you a boat load of cash. If you can debone and cut meat into ribeye, porterhouse, or whatever, you will save even more.

A bit off topic, but my advice to you is to find a rancher who will sell beef to you on the hoof. Lots of ranches in Colorado. Surely, surely there are small, family-operated slaughterhouses there as well. And, you’ll know what you’re getting. Same is true of pork. You need to find a hog farmer. That’s where my entire extended family buys its pork. I raise beef cattle, and a well-tended steer is a lot better beef than what you buy in the store. And it’s not all full of growth hormones, either. There’s a rancher out there who will sell you the best beef you ever had, and a small slaughterhouse that will butcher and package it for you. You just need a big freezer.

I advise you to get to know somebody who works in a poultry processing plant as well. They always have “overruns” and sell them cheap to workers, who will resell them to you for very little. Some of the processors will just let anybody walk into the “factory store” and buy. Sometimes you have to buy something that’s not on the top of your list, but I think the best deal I have ever gotten was six cents/pound for leg quarters (leg and thigh)when the Russians embargoed American poultry (which they do from time to time). Americans like white meat and processors have a tough time getting rid of the dark meat. Think about it, virtually all fast food chicken is white meat. That leaves a lot of leg quarters for the processors to get rid of. I have a friend who operates a couple of pet food plants, and I have seen tons of perfectly good, USDA inspected leg quarters just go into pet food. Chicken livers too, by the tank car load.

Hope it helps.

 

[philochsfan]

Deflation is considered bad because it tends to lead to entrenched joblessness and economic decline. It also makes it more expensive to pay back debt. New purchases are cheaper (which is good), but people will increasingly default on their debt. If you have a 30-year mortgage, and your income is steadily declining, soon you will be unable to make your mortgage payment, despite the fact that you have kept the same job.

Entrenched joblessness? Economic decline? I don’t understand, really I don’t. If someone can hire someone to work for them for 5 dollars a day, would that person not hire more people? Sure, the profits of the boss will not be as exaggerated as they are now, but is that so very bad?
As far as property is concerned, those who have debts, the debts should be adjusted for deflation, what is the harm in that? IOW, if someone has a house on which they owe 200,000 dollars, why could the bank not reduce the debt to what the equivalent in the deflated market would be?

Sure, it is drastic, but I don’t see why some people would refuse. Let us get back to where a dollar is actually worth something and people are not making obscene money because they can hit a ball.

Our parents and grandparents lived through inflation, which is why so many of them managed to buy their own home. They had more real income (by purchasing power), houses were cheaper, and their income was steadily rising. So their house payment (and other debt) declined in value every year, at the same time that their pay increased every year. In addition, they generally started off with one income, with the wife at home. They bought their house based upon that, so when the wife later went to work, their income increased substantially. Most modern couples, the house is being paid for with both incomes, so the loss of any one income (compounded by deflation) results in a loss of their home.

And deflation is especially dangerous when one considers that the government can already hardly pay the interest on it’s debt, as it is. If the currency increases in value, the government debt will become more expensive and there will be an increase in sovereign defaults.

So, you think it is the better option to encourage inflation, have a gallon of milk cost $10 eventually, and keep those who are poor, even more so, all because the federal government has been in the habit of borrowing more than it can pay back? The federal government should declare bankruptcy and be done with it.

Janice

 

[CatholicGerman]

Entrenched joblessness? Economic decline? I don’t understand, really I don’t. If someone can hire someone to work for them for 5 dollars a day, would that person not hire more people? Sure, the profits of the boss will not be as exaggerated as they are now, but is that so very bad?

No, they’d hire fewer people. Their profits and business prospects decline along with the wages. They’d try to hire as few people as possible, in order to hedge against a shrinking economy and the likelihood of higher taxation.

As far as property is concerned, those who have debts, the debts should be adjusted for deflation, what is the harm in that? IOW, if someone has a house on which they owe 200,000 dollars, why could the bank not reduce the debt to what the equivalent in the deflated market would be?

If the bank restructured loans down to reflect deflation, they would have to write off the difference. The money is already been paid to the original seller of the house, so they would have to accept a loss. It would be similar to a foreclosure, and the banks would go bankrupt if that were done on a national scale.

So, you think it is the better option to encourage inflation, have a gallon of milk cost $10 eventually, and keep those who are poor, even more so, all because the federal government has been in the habit of borrowing more than it can pay back? The federal government should declare bankruptcy and be done with it.

Low inflation is the best situation. It’s true that the dollar would eventually lose worth, but that could be corrected by a currency reform (lopping off a few zeros). It is high inflation or deflation, both caused by loose monetary policy and the sharp increase in debt levels, that are chocking our economy.

The problem we are facing is that we have had a long period of high inflation that was ignored because the government’s inflation indices tend to leave out things that are core to our personal experience with inflation. House price, health insurance, and investment (stocks, bonds, life insurance, etc.) increases aren’t included in CPI measurements, for example.

 

[Suudy]

Again, that is income, not wages. The Bureau of Labor Statistics data says that the median weekly wage for men over 25 was $836 in 1979, and it was $823 in 2007.

Ok, this is wages. But our economy has shifted to be more than just a wage based economy. People find other ways to supplement their income.

We’re discussing whether the normal Family Man can provide for his family by working a full-time job. That is becoming increasingly difficult. It is true that his federal income tax burden is lower now, than then. But all other costs (and taxes) have increased significantly, as you can see here:

If you are comparing single-income, wage-only earnings, then the argument holds some water. But to suggest that on average, or even the median income, of families is the same or worse than it was 30 years ago is inaccurate.

My point is that the nature of making a living has changed. People have shifted away from wage only earnings and have started to look at other areas.

Here you can see how the men below the median have seen their wages decline, while the men above the median have seen their wages increase. This increasing split is the reason for the median stagnation, and growing inequality.

But this is part of the point. This is only *male *wages. But many families now are two-income families. There are also a significant increase in female only households. Looking at only the male wages doesn’t paint a complete picture of the state of households.

And if the concern is how families are doing, then it is clear by the rise in mean and median incomes that families are doing better, and have been doing better over the last 30 years.

Now, if the goal is to return to the golden days of one income, male lead, wage earning households, then I would agree with the numbers that male wages have stagnated.

The CPI is notoriously useless for tracking median income.

Then we should use a different index to measure the real effect on wages. Whenever numbers are published using “real” dollars, it is relative to inflation, which uses the CPI. If that is flawed, then it should be re-vamped.

What other measure is available? What else can we use to compare household incomes then with incomes now?

 

[CatholicGerman]

But this is part of the point. This is only *male *wages. But many families now are two-income families. There are also a significant increase in female only households. Looking at only the male wages doesn’t paint a complete picture of the state of households.

Yes, we know. What we are interested in is if the Average Working Stiff’s wages have stagnated. They clearly have. That is one of the main reasons that so many households are dual-income. Cost of living (as opposed to inflation, which is measured by CPI) has increased dramatically, but wages haven’t. So the wife has to work as well, in order to maintain an identical (or usually lower) standard of living.

And if the concern is how families are doing, then it is clear by the rise in mean and median incomes that families are doing better, and have been doing better over the last 30 years.

No, it isn’t.

The income statistics are not limited to families (adults raising children), but include singles, and the elderly who are not raising children. Remember also, that a slim majority of women are now living alone, and that women’s median incomes are even lower than men’s. So an increase in female-only households results in an increase in poverty for women and children. The people below the median, but above the poverty-level, are all substantially worse-off. The poor and the rich have both gotten richer, but the middle class has shrunk dramatically.

That is why the wage information is more interesting for finding out about the income possibilities of breadwinners. The majority in that group earn income *solely *through wages. Most people are living paycheck-to-paycheck (or with short-term credit) and have no income from investments, or anything other than income-transfers. So, income statistics are nice, but they do not represent the reality for the majority of working men and women below the median.

Hidden welfare programs like the EITC, extended unemployment insurance, tax cuts, stimulus checks, the explosion in government spending (make-work schemes), and loose monetary policy (easy credit and cheap mortgages) are not a suitable replacement for wages keeping pace with COL increases. All of those tools are debt-financed! They are all tools politicians use to keep us happy and ignorant of the fact that our country is getting poorer, from day to day.

Private and public bankruptcies and foreclosures have reached record highs. Tax rates are set to increase dramatically. We are now having to pay back all of the funny-money people have been handing out to us. We felt like we were getting richer, but the increase in wealth was financed through credit. If you now look at the ration of debt to GDP, you will quickly see that we have actually been getting progressively poorer. We live in prettier houses, drive nicer cars, and own a cooler TV, but we didn’t pay for it.

We have more debt than there is money in existence. Even if we tried to pay it off, we couldn’t. It is a mathematical possibility. The only thing we can do to eliminate the government’s debt is default on our loans and dramatically cut spending. Private debt can only be eliminated through bankruptcy or tightening our belts. But that would plunge us all into the poverty we actually live in. As it is, we are attempting to keep the funny-money going until our children inherit it. Run up debt until we die, I suppose.

Now, if the goal is to return to the golden days of one income, male lead, wage earning households, then I would agree with the numbers that male wages have stagnated.

Yes, that is the goal. It is a very Catholic goal, I think. As Christians who value marriage and children, our focus should be on the purchasing power of the median male wage. We can’t continue to let the government fool us with handouts and inflation. We want it to be high enough that the majority of men can afford to marry and support a family. It is not that the wife necessarily shouldn’t work, but that she shouldn’t *have *to work.

I’m trying to hammer home the importance of the median male wage because it is the one data point that most clearly reflects the population’s ability to form stable nuclear families.

Then we should use a different index to measure the real effect on wages. Whenever numbers are published using “real” dollars, it is relative to inflation, which uses the CPI. If that is flawed, then it should be re-vamped.
What other measure is available? What else can we use to compare household incomes then with incomes now?

The CPI is a “cost of goods” index. What we need is a reliable “cost of living” index. As far as I know, there is no reliable historical COL data set to use for comparison. We can only make some sort of computation with CPI, insurance, investments, real estate, etc. But there is no national standard, as far as I know.

The government makes the CPI, but it has an interest in keeping it as low as possible. For instance, when house prices started skyrocketing in the 1970s, they simply removed house prices from the index, and replaced it with a dubious measurement of what it would cost someone to rent his own home. Even though health insurance is a huge portion of many household’s expenditures, they don’t include it because it would make the statistics “look bad”. When the gas prices exploded last year, they briefly considered removing petrol from the list. You get the idea. CPI is better than nothing, but not much better.