Food Prices Are Soaring And Washington Doesn’t Care
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Food Prices Are Soaring And Washington Doesn’t Care

Today’s economy is driven by Washington in more than just determining the location of Maserati dealerships. We see the ramifications of current government policies in numerous obvious ways. Make full-time employment more expensive with required benefits, and suddenly there are more part-time jobs; provide ample benefits and low eligibility standards for defining disabled workers, and suddenly there are more long-term unemployed going on SSDI; keep interest rates at zero, and suddenly there are more elderly workers; end unemployment insurance, and suddenly you see people accepting jobs they were reluctant to take; and as we’ve seen at the state and local level, raise the minimum wage, and suddenly teens are struggling to find work.

In all the debates over these policies, interested parties go back and forth over how and when to use the knobs and levers of government to achieve certain ends, concerning mobility and inequality and job growth and a host of other goals. But lost in these debates over statistics and trendlines are the ramifications of government policy when it comes to the (less politically sexy) burdens faced by most middle and working class Americans. In these arenas, policy debates are almost completely divorced from the experiences of most Americans – particularly on the right, where Republicans talk over and over again about the burdens of taxes without addressing the costs of energy, food, and health care, all of which are squeezing household budgets.

We have a perfect example of this within the current debate over rising food prices, where a bunch of policy elites are currently debating the question: when is food inflation real?

U.S. food prices are on the rise, raising a sensitive question: When the cost of a hamburger patty soars, does it count as inflation? It does to everyone who eats and especially poorer Americans, whose food costs absorb a larger portion of their income. But central bankers take a more nuanced view. They sometimes look past food-price increases that appear temporary or isolated while trying to control broad and long-term inflation trends, not blips that might soon reverse…

The consumer price of ground beef in May rose 10.4% from a year earlier while pork chop prices climbed 12.7%. The price of fresh fruit rose 7.3% and oranges 17.1%. But prices for cereals and bakery products were up just 0.1% and vegetable prices inched up only 0.5%. The U.S. Department of Agriculture predicts overall food prices will increase 2.5% to 3.5% this year after rising 1.4% in 2013, as measured by the Labor Department’s consumer-price index. In a typical supermarket, shoppers are seeing higher prices around the store’s periphery, in the produce section and at the meat counter.

Now, a rational person might conclude that measuring food inflation without counting meat, fruit, and vegetables is like measuring the unemployment rate without counting men. Here are the increases in a number of food costs, as well as the average hourly earnings, since the end of the recession (June 2009) through May 2014.

Ouch. The increases since June 2009 are: Beef and veal: +35.2%, Pork: +27%, Fish and seafood: +20.1%, Eggs: +33.1%, Dairy: +16.1%, Fresh Fruits: +13.8%. At the same time, Average Hourly Earnings have increased by 10.1%.

So why aren’t politicians talking about this? It’s absolutely clear that Fed, farm, energy, and trade policy have all served to drive up these costs. Well, tearing down those policies runs contrary to the interests of Washington interest groups heavily invested in controlling those knobs and levers. But a bigger part of the problem is priorities driven by a linguistic trap. Politicians who are small businessmen or attorneys by training talk about the marketplace as a place full of entrepreneurs, and talk about government in terms of its size and tax burdens and barriers to job growth. They’re caught in the trap of viewing all these things in aggregate.

But that’s not how the middle or working class think about the economy. A politician talking about “creating new jobs” or “spurring investment” of “increasing exports” sounds nice, but that’s all it is – nice-sounding. Most Americans worry generally about the lack of jobs and growth, sure, but they are far more worried about what they perceive as a higher cost of living at a time of stagnant wages. They have expectations for the life they can provide for their families and children, and they’re worried they won’t be able to meet those expectations. This is all about delivering the life they want to those they care for. But when they look to government, they don’t see interest in that. Politicians insist that inflation is under control, just so long as you don’t include food, education, health care, housing, or energy, so it’s time to start focusing on More Important Things. You wanted cheeseburgers? Well, the Fed thinks it’s fine if you settle for chicken.

The opportunity is there to change the conversation. In so many of the areas where we’re seeing price inflation, government policy is contributing to the trendline, raising the costs not just of food, but of education, health care, energy, and housing, and putting pressure which multiplies for those with kids. All it takes is a willingness to go after those policies, and for a few smart politicians to start rejecting the priorities of the boardroom table in favor of the kitchen table.

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