MSNBC reports that two-thirds of people surveyed by Pew are hurting thanks to flat incomes and rising prices. I've posted on this here, here, and here. But MSNBC's stories of how these numbers affect families make for compelling reading. This could be the key issue that determines the outcome of the 2008 elections.
Pew's statistics suggest that rising prices and flat income are a chief concern for U.S. citizens. In July, 45% of the public -- compared to 24% in February -- say rising prices are the biggest economic problem. 66% say their incomes are lagging behind their living costs. Gasoline prices are hovering below $4 a gallon while prices of fruits and vegetables have risen 7.6%, dairy products have jumped 9.2%, and cereal costs 10.4% more.
Here are three of MSNBC's stories:
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School teacher. Carol Netzel, a retired elementary school teacher, says people feel as though their incomes don't cover their growing expenses. MSNBC quotes Netzel as saying: "It doesn't matter what the economists say. All the people I chat with at the grocery store, the gas station, shopping for school clothes, all are feeling very depressed because of the beating their budgets are taking."
- Social worker. Edward Maxwell, a social worker, says that his flat paycheck can't keep up with his mortgage and rising food costs. MSNBC quotes Maxwell as saying: "The price of food is going through the roof. The only thing that is staying the same is my salary."
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Sales woman. Kim Wargo, a saleswoman for pharmaceutical packaging, says she and her husband are cutting back due to what MSNBC quotes her as saying is a "a serious cash flow issue. Gas, food, utilities are at an all-time high with no dramatic increase in our pay scale. We limit our dining out to one night per week, and grocery shopping has been limited to needed items."
The presidential candidates have different views on how to fix the economy. One wants to provide a middle-class tax cut and raise rates on upper income taxpayers while strengthening the dollar. The other wants to make permanent the $1.3 trillion worth of tax cuts -- 36.7% of which went to the top 1% -- that were put in place by the current president.
Which option works better for you?
Update. Former Nixon speech writer and Ferris Bueller's Day Off economics teacher, Ben Stein, writes in the New York Times that cutting taxes and increasing spending leads to big budget deficits. I've posted on this basic failure of Republican orthodoxy. But Republican, Stein, is thinking it's time to restore the concept of a balanced budget. He questions whether his party's candidate agrees.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter
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Reader Comments (Page 1 of 1)
8-10-2008 @ 9:40AM
NowWhat said...
Neither solution is going to work until someone redefines the income tax standards. It is time to adjust to the right - in fact, it's long overdue. Middle class should now be $50,000 - $125,000 for household incomes. Maybe all the way to $140,000. Justification? It's based on cost of living. Health insurance and medical bills (even with insurance) are high, cost of buying a car has doubled since the last time brackets were changed significantly, home prices have doubled or tripled in some areas. It's also too broad to account for the whole county. Different metropolitan areas should have different measurements when it comes to taxes - why punish us for having to live near jobs? I could not find work in the middle of Idaho, but I can in Boston, San Francisco and Los Angeles. You've heard of a living wage? How about a living tax?
8-10-2008 @ 9:59AM
Warren said...
"Gasoline prices are hovering below $4 a gallon while prices of fruits and vegetables have risen 7.6%, dairy products have jumped 9.2%, and cereal costs 10.4% more."
Are those percentages really enough to break people financially? If someone was living close enough to the cliffs edge that a 7% rise in the price of apples would break their financial back, then they were going over the ledge eventually anyway.
Not that it isn't a problem for some people, but it seems silly to talk about 7% or 8% there as if the world is ending.
My fellow Americans: once this economy turns back towards the sun, SAVE SOME MONEY. Then you won't feel the pinch quite so much and will be able to comfortably ride out a down market.
8-10-2008 @ 11:00AM
william lindblad said...
Nowhat, you have a point, however all government needs to have a tax base. Therefore, the job market in the metro areas has to pay accordingly. Downside is that everything costs more and merely balances the books. The only advantage to this living is at the end, when you can retire and move to a less costly area.
Warren: you sound like Doris Duke, during the great depression. People used to throw rocks at her until she got smart and stayed at her estate. The percentage figure that are being discussed are ACROSS THE BOARD. If this is a family making 50 g's it equates to 4,000 at 8%, or around 84.00 a week loss. That is also real money, after taxes. You are not taking into account that this same family has to pay taxes, rent/mortgage, utilities and when these costs are removed - the 8% looks more like 10-14%. The cost factor here is high enough to bother people that are financially stable, because they will all cut back on spending which reflects in the general economy - in a negative sense.
All in all, the full impact is months away and default is already appearing in the "conforming" mortgage sector. It is also high in the auto loan and credit card areas. Job loss is adding to the problems and more can be expected.
If you want bright stars - look at the sky at night.
8-10-2008 @ 3:00PM
Dan Barnett said...
Yes, Warren,
A 7%-10% increase in the costs of food, continued increases in transportation (both public & private), and rising utility prices are enough to drive some over the edge financially.
It is at the best callous to state that such people were going over the ledge anyway. At the worst, you fail to notice that the economic failures of some, impact all of us (see the above post on 6-Flags) as there are fewer consumers of whatever products we are invested in.
Saving money is fine when there is money to be saved. But that is not an option, which I thought the point of Mr. Cohan's article.