Most middle and working class people get raises based on the Consumer Price Index, yet have the sinking feeling that they're not keeping up with the real cost of living.
And they/we are right.
Everything, except cheap Chinese electronic stuff, seems to be going up much more than the 3 percent a year the CPI alleges.
From what I know and what I've read, the cost of gas, food, electricity, health insurance, home insurance, local property taxes, cable/satellite TV and self-service car washes (necessary to get the salt off where I live, up from $2 to $3 this year) have all risen substantially more than the notional 3 percent.
I'm no bonddad, and don't have a lot of links to back this up, but something inflationary is squeezing the vast majority of Americans.
But I do have one interesting link, below.
I stumbled across this at work; it comes from the Free Market News Network, which is no "far-left Democratic fringe site," like some we know and frequent.
Deep in a larger article about the "Probabilities of Recession," with yield curve stuff and all, there is this scary first-person story from the owner of an American steel fabrication company:
Something is bothering me that I must comment on. Maybe you are fully aware of the situation and think we are still OK.
Our business is very liquid and totally debt-free, but I am very concerned. I am a third-generation business owner in manufacturing -- machining of iron castings, steel bar, forgings, etc.
snip
What is bothering me as one of the few left directly in manufacturing is the hyper-inflation I am seeing. I don't know if you are fully aware of what we are experiencing.
Some examples. These are increases from 2000.
* All grades of steel bar, increase in price from 28 cents a pound to 80 cents a pound.
* My tier 2 suppliers, the big boys like Grede and Thyssen Krupp Waupaca, have passed through total price increases of well over 20 percent by part number on thousands of parts for Cat, John Deere, Case, etc. For example, scrap metal has gone from $150 a ton to $450. Plus the base metals to make the iron.
* My heat treaters have instituted 15 percent gas and energy surcharges as a percentage of the total bill.
* The truck lines have implemented as high as 40 percent fuel surcharges on the total freight bill.
* Wood spacer boards for packaging finished product have gone from $1.25 to $2.47 per board.
* Cardboard for packaging from 22 cents each to 48 cents.
* Hydraulic oil for all of my machine tools has gone from $4.80 to $7 per gallon and I use thousands of gallons a year.
* Cutting fluid coolant oil is up from $7.70 to $11.30 a gallon. I use thousands of gallons per year.
* Inserts and cutting tools of all kinds are up 40 percent.
* Cleaning supplies, roll towels, toilet paper, degreasers and paper are up 25 percent to 40 percent.
* Utility bills are 30 percent higher.
This is just a sampling. Where does this end? In many cases, it is very hard to pass it on.
However, and this is the key, when we quote new work, the costs are much higher and the piece price comes out much higher. (My competitors are all doing the same thing).
All this leads to being less competitive in the global marketplace. China will take even more work.
When the big slowdown comes, everyone will be searching for work, but with all their price increases, they will have priced themselves out of the market. Then they start buying work to keep cash flow going and many end up out of business.
I have seen this too many times over the years. It is going on now.
The writer of the article adds the conventional wisdom that the Fed will continue to raise interest rates for a good long time, because Fed economists know that there's more inflation out there than shown in the CPI:
This is just one anecdotal reason the Fed is worried about inflation. There are others. Unless the economy gets soft in the next few months, which does not now look likely, the Fed is going to keep raising rates.
This steel fabricator guy probably voted for Bush, out of presumed class solidarity. But the Bush economy is screwing him, big time.
Just as it's screwing everybody in the middle and working classes.
But this is a good news/bad news story. The polls show that the vast majority are economically insecure.
And who will they blame for this?
Bushite Republicans in Congress who have dug this hole.