The Parable of the Average American and the $ 90 Bottle of Wine – Mother Jones


Time to party like it’s 1979? Fotostorm / Getty

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It starts to look a lot like the late 1970s, when rising prices hit American households. At least, according to the financial press.

“The highest annual inflation rate in the United States in nearly 31 years has spilled over into financial markets and the minds of Americans this week, damaging consumer confidence, leaving many traders bewildered and prompting a financial firm to warn that the ‘proverbial genius is out of the bottle’. , ‘”, Reported on a Saturday morning Market surveillance room.

To support her argument that we have entered the first real inflation crisis in the United States since the heyday of disco and a president in a cardigan, reporter Vivien Lou Chen said that “average Americans pay up. ‘at $ 100 to $ 200 for a single concert ticket. , $ 90 for a bottle of wine and $ 5 a gallon for gasoline.

Move, milk panic. Let’s all join hands and panic for the wine. In fact, let’s breathe a minute before we sink into Jimmy Carter’s uneasiness about the scourge of inflation.

Concert tickets have been insanely expensive for some time now, driven by the dominance of a single giant company in the market, not by some mysterious force driving up all prices. As someone who just two days ago snagged a perfectly delicious French red for $ 11, I am amused by the idea that there is an “Average American” (a construct Lou Chen uses three times. ) who feels obligated to shell out nearly three-figure sums for the sake of a bottle.

Gasoline prices are indeed high, and unlike live music and alcohol, millions of Americans cannot refuse to drive because it is too expensive; people have to get to work and do their shopping, and our transit system is usually a joke. But as new YorkEric Levitz recently argued that this phenomenon stems from a tangle of factors, including the boom-bust fracking saga of the 2010s and demand for windfall profits from oil states like Saudi Arabia and Russia. .

In other words, to evoke the specter of runaway inflation, the Market surveillance coin relies on two phantom examples and one that cannot be easily corrected by conventional government tools to bring consumer prices down. In the 1970s then President Carter showed how to do it: he zealously pursued a policy of raising interest rates and cutting federal spending, which stifle wages and put people out of work. When people have less money, they spend less, and voila, prices go down. Carter’s program worked all too well: It ultimately killed inflation, but it also triggered the worst recession since the Great Depression.

The subtext that goes through articles like the Market surveillance one is that the time has come for the government to do something similar. Lou Chen criticized the US Federal Reserve for “sticking to its point of view in its November 3 policy statement that inflationary pressures should be transient.” Translation: The Fed Should Raise Interest Rates. A similar theme underlies Sen. Joe Manchin’s latest reason to oppose the Build Back Better bill that was recently passed by the United States House, one that includes “$ 400 billion for preschool and preschool. universal child care, $ 166 billion for affordable housing, and over $ 550 billion to tackle the climate crisis, ”as reported by Kara Voght. Manchin recently said he was loath to support BBB as it could add to “runaway inflation”. In other words: it’s time to stifle spending, even for urgent needs like tackling the climate crisis and reducing the pressure on working parents.

But as Zach Carter, author of an excellent biography of economist John Maynard Keynes (my review here) noted, “a more specific way to fight the ravages of inflation would be to focus on the handful of costs that tend to really bankrupt families, instead of sucking demand from the entire economy with higher interest rates. Carter notes that, wines and concert tickets aside, “we know what price increases are absoutely very bad for working families.

The biggest expense for most households is shelter, which accounts for about 37% of what the average family earns from home. The second most important expense is transportation, which accounts for around 16% of the average family budget. Married parents spend about 10 percent of their budget on child care, while single parents spend 34 percent. The grocery store, on the other hand, accounts for about 5% of the budget. You have to almost double supermarket prices to generate the same impact on a household’s balance sheet due to a 10% rent increase.

Carter calls for “some sort of inflation safety net for working people” – subsidies or rent controls to cushion the blow to keep going up, say, house prices; and the exact type of child care subsidies included in the Build Back Better bill. One can also imagine a serious investment in public transport that frees people from their cars and the vagaries of the oil markets. The BBB bill also contains measures to speed up the transition to electric cars, which would also help.

So open a bottle of wine (maybe not $ 90). There is a lot to worry about, but inflation is not one of them. On the other hand, hysterical responses to this one …


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