Wednesday, October 19, 2005

The Wacky, Wacky World Of Conservative Economics

Today another disparaging report on inflation came out with wholesale prices takng yet another steep monthly inflationary leap. All serious business community analysts blamed the September 1.9% wholesale price and 1.2% consumer price increases on increased energy costs. Those in the wacky world of conservative economics continue to blame unions or wage increases for inflation.

Gasoline prices are 50% higher than one year ago. In Portland, Oregon, the average home price increased by $30,000 from last year to $250,000 this year. Yet according to the wacky conservative world of economics, a 10 cent an hour increase in the minimum wage for an employee of McDonalds who works 20 hours a week, or a mere $2 a week wage increase is inflationary. Yet this insignificant wage increase of $2 a week does not even come close to paying for the increased fuel costs for those employees to drive to work. Even for those that ride the bus, Portland, Oregon has seen three rider fee hikes just this year alone, all related to increased fuel prices. Any $2 a week wage increase for a minimum wage employee employed part time at 20 hours a week has lost significant ground due to these fuel price increases, not counting all the food, housing, or other inflationary costs related to incrased fuel prices or increased housing costs pushed up by developers or real estate community members to squeeze new profits from every square inch of real estate property.

Today another depressing news item stated the weak state of unions in America. General Motors and the United Automobile Workers hammered out an agreement to cut the 750,000 UAW member health care benefits by as much as $1 billion dollars. Many current union deals no longer include a pay increse offer, but simply attempts to hold on to what current benefits and wages are offered. Yet according to the wacky world of conservative economics, unions are a cause of inflation. Things are nearly as bad nowadays for unions as when Mr. Slate used to offer Fred Flintstone, "nice big, fat and juicy, no salary cuts" in the Honeymooners inspired Flintstones primetime cartoons in the early 60's.

Federal Reserve Board Chairman, Alan Greenspan, will no doubt attempt to "stem inflation" by raising the prime interest rate again soon. But again this is yet another wacky conservative response to the problem of inflation that is wholly inappropriate to the problem at hand. For a variety of resasons, fuel prces have dramaticly increased this last year, pushing up the cost of production of all items. Raising interest rates will not prevent the increase of fuel prices due to hurricane damage or by the increased world demand as the economy of China demands more and more of the world's fuel supplies for their growing industrial economy. The one note conservative economics answer of Greenspan to increase interest rates will only increase the cost of credit card, home, auto, or personal loan interest payments, but will do nothing to stem the increase in fuel prices due to the storm damage or world supply demand issues. At one time in America, wage and price controls were used to control inflation, first during the FDR years, and again in the inflationary Nixon 70's as the Vietnam War spending helped to fuel inflation. But this would not answer the current issues due to fuel shortage, demand or storm issues either.

The problems of fuel supply versus demand needs should be addressed according to supply issues. The old fashioned conservative economics that address the pain of inflation with the pain of increased prime rate boosts that result in more in more inflation of interest rates is no answer. And the conservative complaints against minimum wage increases or against unions are equally groundless. The claim that a busy McDonald's that grosses several thousand dollars a day will hire less workers if a $2 a week wage increase is paid is outrightly silly compared to the business daily gross. Some Portland McDonalds actually made a profit from the last minor minimum wage increase by raising prices by 5 or 10 cents an item.

The Bush White House has proven no ability to control spending or to balance the federal budget compared to the Bill Clinton years. Yet conservatives strongly stand by this free spending administration, yet take a Scroogelike line when minimum wage employees seek a mere $2 a week wage increase, but ignore a $30,000 increase in home prices or a 50% hike in gasoline prices. Yet like their beloved Bush Administration, they show no ability to be able to add or subtract, where massive price increases don't mentally register, but tiny increases in worker salaries are met with a pathlogical resistance. But that's the wacky, wacky world of conservative economics. As long as it can be called "conservative" it doesn't need to make sense in their own minds or in the minds of anyone else.

2 Comments:

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