By John Stark
It was only two percent. It was only $15 a week for someone who makes $40,000 a year. The federal payroll tax hike that kicked in at the start of 2013 was no big deal, according to government economists and media pundits.
But now, evidence to the contrary is trickling in.
Last week, Bloomberg News provided leaked emails from Walmart executives, expressing dismay at company-wide February sales figures. Now, the experts are revising their expectations about what may be in store for the economy. Here, Bloomberg provides additional analysis, noting that higher gasoline prices are hitting household budgets at the same time.
I suspect that the $15-a-week tax hike probably would not be a big deal, were it not for the fact that it comes on top of a lengthening list of higher costs for many people who make less than the median income. Gasoline is among the most obvious, since we see the painful prices displayed at every gas station. But it’s just the beginning.
Raise your hand if your medical coverage premiums went up at the beginning of the year.
Higher fuel prices plus drought are also helping to push food prices up.
In Bellingham, water and sewer bills took a big jump this year, and I doubt that this city is unique in that respect. Across the country, municipal utility systems need more money to expand to serve population growth, while also repairing and replacing pipes and pumps installed a generation or two ago.
State and local taxes are also rising in many places, wherever political forces will permit it.
College tuition continues its dizzying climb.
What am I missing?
By John Stark
Executives at more than 80 big U.S. companies have called for spending cuts and tax increases to avoid the “fiscal cliff” and restore business confidence.
“This is not about advocacy, it’s about governance. It’s not about partisanship, it’s about citizenship,” said Paul Stebbins, executive chairman of World Fuel Services Corp.
Citizenship. What a concept.
“What we’re trying to do is drive support for the radical middle,” said Dave Cote, chief executive of Honeywell International Inc.
The U.S. has been losing manufacturing jobs to China, Mexico and other cheaper-labor countries for decades. But millions of Americans still punch the clock and head out to the factory floor every day. Why do some U.S. manufacturers still survive, and even flourish?
This report from Atlantic Monthly focuses on a single fuel-injector manufacturing facility in Greenville, South Carolina to suggest some answers.
I thought this was a terrific piece of reporting. After reading it, I felt as though I had a better understanding of the economic forces that move the world and the people in it.
It’s the cover story in this month’s print edition of the magazine, although the cover photo and headline promoting it provide no clue as to what the article is actually about.
Here is NPR’s version of the same story, broadcast today.
In the Washington Post, Ezra Klein has a thought-provoking column today reminding us that governments can have only limited impact on the state of the economy.
That has become painfully obvious this week, after the U.S. government more or less resolved the “crisis” that resulted from its own debt ceiling rules. Stock markets responded with a scary selloff that is continuing today, Aug. 4.
Governments here and abroad have no quick fixes for the fundamental problem of this economy: The prosperity that peaked in 2006-2007 was based on borrowed money. Money was borrowed and lent on the assumption that there was no limit to the rise in real estate prices. When that foolish assumption became demostrably false, there was a crash. Household mortgages were under water, banks had books full of bad loans, and the big financial firms were stuck with all kinds of complex instruments that multiplied their losses.
Now everyone is retrenching. Lenders have less to lend and are more cautious with what they do have. Consumers are (rightly) cautious about borrowing and spending.
The economy needs some real productivity to replace the collapsed economy based on borrowing and consumption. Eventually, we hope, entrepreneurs will provide that. But it won’t happen fast.
Here’s another good summary of the current situation from Fox.
Over at the Seattle Times, Jon Talton is always worth a read too.
Here, prominent conservative David Frum, on his blog FrumForum, suggests that events are proving that Paul Krugman, not the Wall Street Journal editorial page, has been proved right about the economy.