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THE FAITH-BASED ECONOMY IS ABOUT TO MEET REALITY

By       Message Randolph T. Holhut     Permalink
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DUMMERSTON, Vt. -- We keep hearing statistics about how well the American economy is doing and how it is growing, creating new jobs and shrugging off high energy prices.
We're hearing this despite the aftermath of Hurricane Katrina, one of the worst natural disasters to hit the United States.
We're hearing this, despite seeing energy prices nearly double in the past couple of years.
We're hearing this despite being in the midst of an economy that doesn't seem to generate jobs that pay a living wage.
In the mind of soon-to-be-outgoing Federal Reserve Chairman Alan Greenspan, the biggest threat to the U.S. economy is not the $200 billion or so it's going to cost to rebuild the Gulf Coast.
Nor is it the money being syphoned out of people's wallets every time they fill up their cars with gasoline.
Nor is it the lack of jobs other than those that require you to ask, "Would you like fries with that?"
No, in Greenspan's mind, inflation is the threat. So this week, for the 11th time since June 2004, the Federal Reserve raised its short-term interest rates.
This is turn drives up the cost of credit for consumers -- higher credit card interest rates, higher home equity loans, higher mortgages. A nation already overextended in debt gets another kick in the wallet.
But that doesn't matter to Greenspan and the Fed. As long as economic growth is sufficiently restrained to keep wages low and price growth minimal, who cares who gets hurt? Just keep the financial markets safe.
A rise in the Gross Domestic Product doesn't mean much if your expenses -- particularly your energy costs -- are rising faster than your salary.
The price of gasoline is now around $3 per gallon for unleaded regular. A year or so ago, we were paying about $1.50 per gallon.
Let's say you drive a reasonably fuel-efficient vehicle that averages 25 miles to the gallon. If you drive 15,000 miles a year, you buy 600 gallons of gasoline. At $1.50 per gallon, that's $900 for a year's worth of gas. At $3 per gallon, you're paying $1,800.
That's $900 you won't have for food or shelter.
If you heat your home with oil or propane, your cost will also likely double this winter. That's more money gone from your monthly budget.
Then there are the ripple effects of higher energy costs through the rest of the economy. If everything costs more to make and transport, those costs eventually get passed on to the consumer.
Government statistics may not reflect it, but suddenly you're looking at a lot more families becoming very stressed financially because they have to pay a lot more to keep their car on the road and to heat their homes.
Families aren't seeing their income keep up with expenses. The latest U.S. Labor Department statistics show that the purchasing power of an average worker's wage has fallen about 1.5 percent since the summer of 2003, and that figure appears to be a huge understatement.
But the Bush administration is still pretending that increased energy costs have no appreciable effect on the economy.
Tell that to the food banks around the country who are seeing more people forced to choose between putting gas in the car to go to work or buying groceries.
Tell that to the social service agencies that are bracing for an increase in fuel assistance applications; they already know they will not have enough money to help everyone.
Tell that to the many Americans who are working harder than ever but are finding it more and more difficult to make ends meet.
This is the real economic picture, the one the policymakers don't want to talk about.
They want to continue to pretend that Americans can accept the doubling of oil prices without an impact on the rest of the economy. How are people going to keep shopping at Wal-Mart if they can't afford to drive there?
Equally inexplicable is the pronouncement by the Fed that Hurricane Katrina will have no long-effect on the U.S. economy. A major American city, New Orleans, has been devastated. Worse, New Orleans is one of the most important ports in the U.S. Most of the nation's agricultural products go through New Orleans. Most of the raw materials for the nation's factories come through New Orleans. And a good chunk of the nation's energy comes through the Gulf Coast.
How can that not affect the U.S. economy?
All this adds up to one thing -- a major recession next year and a lot of Americans in financial trouble. And the new bankruptcy rules take effect next month, making it harder for people to seek relief from their debts.
It doesn't look good, and not even a truckload of rose-colored glasses can change things.

 

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Randolph T. Holhut has been a journalist in New England for more than 25 years. He edited "The George Seldes Reader" (Barricade Books). He can be reached at randyholhut@yahoo.com.

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