January 16, 2008
Economy's Woes Hit Americans In Their Tummies
Rising food prices may be one of the most underreported economic stories. New data show that this trend is impacting the larger economy.
Consumer prices rose 4.1 percent last year, according to the Labor Department. In a new report, the Federal Reserve found no growth in factories, mines and utilities last month. Inflation is the highest it's been in 17 years, and the Fed is expected to announce a half-point rate cut to ease the pain when it meets later this month.
AP reports: "Energy costs rose by 17.4 percent this past year while food costs rose by 4.9 percent. Both were the biggest increases since 1990. Gasoline prices were up 29.6 percent, the biggest increase since they soared by 30.1 percent in 1999."
Obviously, this is hitting Americans who live paycheck to paycheck the hardest, which is why we've seen the economy skyrocket among voters' lists of concerns going into the 2008 elections. But the rise in food prices is perceived as a mixed blessing by analysts.
On one hand, food banks across the country are in crisis mode. Not only is demand outpacing supply, but many food banks are reporting more middle-class families lining up for handouts.
"The real issue that we are having right now is that people that have never come to a social service agency like Catholic Charities or the Salvation Army are now coming. In many ways, some of our donors are now becoming our clients," Monsignor Patrick Leary of Catholic Charities in Las Vegas told a local news station in December.
Rising wheat, corn and dairy prices are not a uniquely American trend. They are up worldwide, in large part because as nations like China grow more affluent, demand for higher-quality food has grown. That's a good thing. But, The Economist reported in its December cover package, "the rise in prices is also the self-inflicted result of America's reckless ethanol subsidies."
The new energy bill President Bush signed into law last month contains offsets for that effect, by requiring most new ethanol to be made from switch grass, wood chips and corn husks. This is the ballyhooed "cellulosic ethanol" you've been hearing about. The main obstacle here is that manufacturing this stuff isn't anywhere near profitable, or easy for that matter.
As for those subsidies: Don't expect them to go away anytime soon. The Iowa caucuses may be behind us, but speaking critically of farm subsidies remains a taboo of American politics. (Why this is still so is unclear. What are lawmakers afraid of, angry mobs of pitchfork-wielding farmers?)
"Cutting rich-world subsidies and trade barriers would help taxpayers; it could revive the stalled Doha round of world trade talks, boosting the world economy; and, most important, it would directly help many of the world's poor. In terms of economic policy, it is hard to think of a greater good," The Economist argued.
The energy-policy realists running for president -- practically all the Democratic slate, and on the GOP side John McCain -- have tried to delicately warn voters that the change they demand in U.S. energy policy will not come without cost or inconvenience. Should one of them win the White House, the real test will be whether they are able to withstand the political heat implementing new policies would bring.
Posted at 11:25 AM
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Bush Administration, Campaigns, Congress, Democrats, Economy, John McCain, President Bush, Republicans, WH 2008
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