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FOR MORE than a year, hard-pressed Americans have been trying to signal the political
establishment that something is upside-down wrong in an economy that is producing
soaring costs and flat incomes. Given the blinders associated with his fervent
ideology, President Bush's deaf ear is expected and unremarkable.
It's progressive politicians who should be paying more attention. More than
a hundred years ago, Charles Dickens's cockeyed optimist, Wilkins Micawber,
explained to David Copperfield that the difference between happiness
and misery involves the positive or negative difference between income and expenses.
The signal coming from working Americans (and retired ones, too) has been precisely
that. As the government confirmed once again last week, rising costs have outpaced
stagnant wages in ten of the last 12 months. The only positive news was recorded
last September and in June. But that was overwhelmed by the trend that has eroded
the value of the ordinary paycheck. As almost always happens in such spirals,
the problem involves wages and prices. The former are as close to stagnant as
it's possible to get; these days, a 2 percent raise is heralded as generous
and the employee who gets one is considered lucky.
It's the prices people pay, especially for necessities, that have exploded.
For more than a year, the cost of gasoline and heating oil has been soaring.
And for five years, the cost of healthcare has been exploding, too, even as
the value of what care people can buy has been eroded via sharp increases in
deductibles and copayments.
The United States has a gigantic economy, as well as a famously mixed one.
For those who simply follow the numbers, it can often seem as if good news about
living costs in some sectors (clothing, food, mortgage rates) neatly balances
the bad news from energy and healthcare.
Last month, however, the underlying trend of paycheck erosion became
harder to ignore when the Labor Department reported that consumer prices shot
up by 0.5 percent in July overall, after giving effect to areas of the economy
where costs are more nearly under control.
What is worse, the Labor Department reported that the average weekly
earnings of people in the private sector who are not bosses fell during July
by 0.2 percent.
If that were one month's statistical anomaly, that would be one thing, but
it is a continuation of a trend that Americans have been feeling for a long
time. The weekly earning data that the government collects involves roughly
four out of every five participants in the labor force. Last year, for the first
time in a decade since the US was emerging from a much different set of problems,
the weekly earnings news after adjustment for inflation was negative.
By last month, earnings were trailing costs by roughly 0.5 percent
compared to July of 2004. In this age of more than one paycheck per
household, this disturbing situation dovetails with the decline in median household
income (half above it, half below it) over the last four years. This highlights
the important fact that even before the leap in energy costs, most working families
saw the limited tax relief voted in 2001 more than wiped out by higher state
and local taxes as well as inflation.
More bad news is in store. The day after its report on consumer prices, the
Labor Department reported that costs at the wholesale level had jumped a full
percentage point, indicating that additional retail price increases are just
around the corner. For months, there has been a struggle by businesses to absorb
as much of these higher costs as possible before passing them on; the strain,
however, is showing -- in the troubles of the auto and airline businesses and
the shrinking margins in retail stores. The strain, leading to further downward
pressure on pay, is growing.
The appearance of worrying inflation numbers also underlines how nearly impossible
it is to imagine the Federal Reserve stopping its interest rate-raising campaign
to keep inflation from exploding. That year-old strategy, however, is also likely
to slow economic growth even more, without affecting the spikes in energy and
healthcare costs.
The Bush administration is in an ideological straitjacket. But progressive
politicians have several issues they should raise, particularly long overdue
increases in the minimum wage and the earned income tax credit -- kitchen table
matters that should not take a backseat to the latest fears about John Roberts.
With corporations sitting on more than a trillion dollars in idle cash,
with tax breaks helping create astonishing increases in wealth at the top, the
people who make this economy work deserve some cash of their own. They also
need it.