Relatively Modest Inflation?

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 Copyright 2011 Susan Stamper Brown

One trip to the grocery store is enough to remind me that the recent uptick in the stock market has no bearing on the cost of living these days.  And yet, Federal Reserve Chairman, Ben Bernanke could suggest with a straight face to Congress that we are experiencing a “temporary and relatively modest increase in U.S. consumer-price inflation.”   I suppose compared to an annual salary of close to $200000, the price of a cucumber wouldn’t matter much to an out of touch Washington bureaucrat.

Over the last six months, crude oil, corn and cotton rose a visibly immodest 35 percent, 38 percent, and 89 percent, respectively. A recent Bureau of Labor Statistics report  confirms what our flattened wallets already told us: food and energy prices are on the rise.  According to the report, food prices in March made the biggest gain since 1974 – with a 3.9 percent increase. In February, energy prices rose 3.3 percent and gasoline, 3.7 percent.

Bernanke’s “relatively modest” comment conjures up images of the “two Americas” Senator John Edwards once described.  On one side, you have the Washington bureaucrats, and on the other side are those you see roaming the grocery aisles with clipped coupons in their hands and corn flakes sticker-shock in their eyes.

To be fair, Bernanke is technically correct to say that we do not have an inflation problem – because, due to their pricing volatility, the Federal Reserve does not include food and gasoline prices purchased by consumers in its calculation.  But Americans aren’t much interested in federal government technicalities these days.  They are instead focused on the newfound art of stretching those “non-inflated” dollars to provide for their families.

The same people who tell us this whole inflation business is over-inflated (pardon the pun) also tell us the economy is on the upswing. They call it a “jobless recovery.” They brag that unemployment numbers recently dropped, but somehow failed to mention that many of the jobs people recently accepted offer lower pay, fewer hours, and inferior benefits in comparison to many of the 8.75 million jobs wiped out by the recent recession. Sure, they have jobs, but those jobs pay much less with an ever-weaker dollar to cover much pricier consumables.

So, are you feeling the positive vibes from the economic recovery yet?  Me neither.  But, we are not alone.  The Bloomberg Consumer Comfort Index is a weekly poll taken since 1985 to measure Americans’ perceptions of the economy, personal finances and overall confidence in purchasing needed goods or services.  On April 7, the index was -44.5  compared to -43.0 a year ago, reflecting the lack of confidence Americans currently have in the economy.

Something’s got to give if President Obama wants to be re-elected in 2012. And if Harvard University Economics Professor Robert J. Barro’s Misery Index calculations are correct, the probability of an Obama second term is unlikely.  Barro’s book, “Getting it Right”  measures what he calls the “change in misery” over a president’s term utilizing a precise formula including metrics like: the difference between the average inflation rate over a president’s term and the average inflation rate during the previous president’s term; and the difference between the average unemployment rate over a president’s term and the unemployment rate during the last month of the previous president’s term.

Barro’s calculations are on the money. Barro’s Misery Index found Reagan’s “free market years” to be very good and Clinton’s “era of big government is over” (thanks to his Republican-controlled Congress) the same.

Barro’s predictions do not look good for Obama and his anti-free market advisors, which may be the reason why the administration pads unemployment numbers and Bernanke is hesitant to admit that inflation is on the rise. Maybe someone should tell Bernanke he would get a much better view if he’d spend some time in the “other America.”

2 Responses to Relatively Modest Inflation?

  • Susan, you seem likable, attractive, and have politics similar to mine. However, I am quite pessimistic because I believe that the US has passed a tipping point. That point was reached when the umpteenth person received a government paycheck, a welfare payment, a medicare benefit, a federal grant, etc. etc. etc.
    I wouldn’t mind raising taxes a little on the rich, but if they go too far, then the rich will relocate, and those extra tax dollars will be only be a drop in the bucket of the deficit anyway.
    And look at the voting statistics: almost all Blacks will vote for Obama, even the ones in small business, which is the group that Obama has punished the most. Most Hispanics will vote for him, although I am not sure why, other than its just a minority thing. And a good number of whites will still vote for him because they are so ideologically leftist. When you add up the votes of those in the unions, the racial demographics, and those whose paychecks or pocketbooks are enlarged by the federal government, I would say that we, as a nation, are pretty much doomed. I wish there was hope, not for my sake, but for my children’s. But I am afraid its too late.

    • I understand your heartfelt concerns for our wonderful country. If we were anyone else except America, I’d think it was too late- but, we are America! Yes, go ahead and accuse me of that “American Exceptionalism” charge, but with determination, the 2012 election can turn the tide. ALL ethnicities get it and will join together to move America back closer to the center.

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