Ricochet is the best place on the internet to discuss the issues of the day, either through commenting on posts or writing your own for our active and dynamic community in a fully moderated environment. In addition, the Ricochet Audio Network offers over 50 original podcasts with new episodes released every day.
This is the Kind of Inflation That Republicans Should Worry About
We should want the US economy to be as innovative as possible. For instance: Innovative new companies provide new goods, services, and high-paying jobs. Innovation also helps raise living standards by making good and services more affordable. As Scott Andes of Brookings notes in a blog post:
Computers, information technology services, and appliances are all cheaper today than 25 years ago, while the price of automobiles has grown by less than a percentage point annually. Today it takes fewer hours of work for a middle income wage earner to afford a car than at any time in history. These price declines constitute unequivocal wins for the American middle and working classes.
But as the above chart from Andes shows, the cost of some key services — including health and education — have outpaced incomes. And this reflects a lack of innovation and productivity and competition. Many Republicans fret about inflation. But it’s the wrong kind of inflation that they are worrying about. The problem isn’t the government central bank’s “money printing,” but the government’s distortion and inefficient provision of important services. And it is addressing these cost-of-living issues that is at the core of the conservative reform movement. As Ramesh Ponnuru wrote just after the 2012 election:
The Republican story about how societies prosper — not just the Romney story — dwelt on the heroic entrepreneur stifled by taxes and regulations: an important story with which most people do not identify. The ordinary person does not see himself as a great innovator. He, or she, is trying to make a living and support or maybe start a family. A conservative reform of our health-care system and tax code, among other institutions, might help with these goals. About this person, however, Republicans have had little to say. ..
The perception that the Republican party serves the interests only of the rich underlies all the demographic weaknesses that get discussed in narrower terms. Hispanics do not vote for the Democrats solely because of immigration. Many of them are poor and lack health insurance, and they hear nothing from the Republicans but a lot from the Democrats about bettering their situation. Young people, too, are economically insecure, especially these days. If Republicans found a way to apply conservative principles in ways that offered tangible benefits to most voters and then talked about this agenda in those terms, they would improve their standing among all of these groups while also increasing their appeal to white working-class voters.
I guess I view it this way: A smart, center-right policy agenda would include a focus on a) revitalizing US entrepreneurship, b) modernizing the safety net to make it more affordable long-term and more pro-work, and c) dealing with the cost, availability, and quality of education (K-12 and college) and healthcare. What am I missing here?
Published in General
I’m curious. Is there a reason they didn’t include basic groceries and shelter (either rented or owned) in the chart?
From a political standpoint, controlling cost in K-12 education is the short road to the end of your career. Cost = spending. And spending = I love my children. Stick with focusing on availability and quality.
Higher ed might be doable, but it’s still tricky. There are two costs, of course — the invisible and the visible (tuition). Controlling the invisible cost — the money that states send directly to state colleges — would be as hard to run on as controlling K-12 cost (see above).
Controlling tuition would of course be popular, but the prevailing solution — more funding for the schools, and more grants and loans and loan forgiveness for the students — would be hard to oppose. I think the best way to frame it is to oppose indentured servitude. And since men tend to get more STEM degrees, I imagine women suffer more from indentured servitude than men do. That might resonate. Sure, there will be those who claim that the reason women don’t get more STEM degrees is because some guy wore a shirt, but I don’t think that’ll stick.
As I said elsewhere, I am VERY skeptical of any of these government statistics. My mom and dad bought several new cars in their lifetime (for cash), with my father as head of a one income household. My wife and I are in a two income household and there is simply no way we could afford to pay the price of a new car.
I also noted that groceries weren’t on the chart. While I believe that education and healthcare are going up like crazy, I just don’t believe that the chart in your post reflects the reality of the moment, with the exception of computers, which really have fallen dramatically in price while increasing in computing power.
We could reduce the skyrocketing costs of tuition in two weeks time – make student loans eligible for bankruptcy discharge after seven years if the degree did not lead to a substantially better income than the student would have had otherwise.
Hold on there James Pethokoukis…….. “It’s the wrong kind of inflation that they are worried about.” How about the government inflation number is bunk (and, yes, I am adjusting my foil hat as I type).
Let’s take one example from the post “ Today it takes fewer hours of work for a middle income wage earner to afford a car than at any time in history.”
I call nonsense, even using government numbers. Just to quote some statistics……let’s use the Ford Taurus….pretty run of the mill vehicle…..in 2003 a base MSRP was $19,630 and in 2013 it was $26,700 that is a 36% increase.
The government reported median household income number for 2003 was $43,318 and 2013 was $51,939, a 20% increase.
So, the example of something that is “cheaper than ever” had it’s price go up going on twice as fast.
My concern is if the research can’t even get the basic numbers right, what is the hope that we have the right policy?
And I don’t want to hear about how the 2013 model had heated seats. Both the 2003 and 2013 were average cars that got people from A to B……all the other CPI adjustments saying that paying twice as much is a great deal because you can now get it in more colors are nonsense.
All fun and statistics aside, thanks for the post to get thinking going!
How much would the cost of K-12 education go down if teacher unions were outlawed, and teachers had no pension, just the 401(k) the rest of us have? How much would the cost of government in general go down if all public-sector unions were disbanded and government employees had no pensions, just the 401(k) the rest of us have?
Why the scare quotes around “money printing?” Is that not what the Federal Reserve has been doing?
What are you missing? That the modernization of the safety net will never happen as long as the Federal Government knows it can avoid painful but necessary spending cuts by financing spending through inflation and QE. Do you really think government spending would be anywhere near where it is if our currency were still linked to gold?
The problem isn’t the government central bank’s “money printing,” but the government’s distortion and inefficient provision of important services
And Jim can’t see that the former enables the latter.
More importantly, would the size and intrusiveness of government be anywhere near where it is if it couldn’t be financed through “money printing” and the enormous debt it has enabled? I hope Jim will at least agree that inflation in the size of government should be something conservatives should worry about.
The way the game is played, the 2013 Taurus is so much better than the 2003 Taurus that we have to discount the price of the 2013 Taurus for the inflation calculation, making the “true” inflation much smaller than the “nominal” inflation.
Don’t you feel better now?
And by the way, it’s not just Republicans who are worried about inflation. It’s pretty much the American people who are worried.
Sure there’s a reason. It would blow their nice chart up. Hamburger is $8 a pound here now. It was half that 2 years ago.
No, I feel worse. The fact that Ford added a Big Gulp cup holder and people accept that the improvement means there was “no real price increase” makes me feel worse. I suppose if we get to the point when cars cost five or ten times average earnings more people than us will start asking questions on CPI.
Somewhat OT, but I have a Toyota Tacoma. If there are people riding with you that you don’t like very much, you can fit 4 people in it. There are 10 cup holders.
Musta been designed by Homer Simpson.
The Obama administration has cooked the books on deportations, GDP, unemployment, Obamacare enrollment, green jobs, and (of course) inflation.
I notice inflation a lot because I’m in an industry–publishing–desperate to keep costs down.
The money consumers are willing to pay for books doesn’t cover the cost of editorial development.
The costs of discretionary purchases are being held down by inflationary forces elsewhere in the economy–taxes, fees, insurances, and so on.
The rest of the economy is being held hostage by the high costs of the things people have to have.
Obviously not.
It reflects the increasing returns on education. If something increases in the benefits it provides, it should also increase in the cost it takes to provide these benefits.
This is one of the more “absurd” comparisons that far too many “conservatives” make between higher ed and other goods in terms of “inflation”.
There’s absolutely no conceivable reason to compare costs of…higher ed…with ….appliances, for example. It’s absurd.
The reality is that “conservatives” who talk about these sort of things…are being pure populists. They want votes from the “middle class” (a term with no meaning) by telling people “vote for us, and we’ll decrease the costs of higher ed. Somehow. Don’t worry about the how! Just vote for us!”
If anything, higher ed should be MORE EXPENSIVE. A good chunk of it is subsidized for state schools, which doesn’t reflect the actual cost of providing that education to the student.
I may find myself alone in the comments here, but I think that Mr. Pethokoukis is right. The areas in the chart above with high rates of inflation correspond with high amounts of regulation. Maybe that isn’t the best argument because other areas under high regulation are not seeing high inflation (automobiles for example, although the comments above seem to argue that automobile costs have skyrocketed).
If I read it right, Mr. Pethokoukis is arguing that regulation stifles innovation which leads to higher costs. The argument conservatives and those right-of-center need to make to constituencies not under the GOP tent is that our policies release innovation and lead to better lives. Less government is the best government for innovation. Innovation is the way to raise everyone’s station.
Agreed. I work in education in a charter heavy state I can attest that increasing availability increases quality and over time decreases cost. Three local public school districts just held ballot initiatives for bond overrides during the last election. In decades past it probably would have been a no brainer (per the argument above, who is against education?).
However, because so many students now attend charters (there are now as many students in my charter district as in the local public district), voters are now falling into new categories.
1: My children don’t go there, why would I pay higher taxes/take on more municipal debt for that school.
2. I don’t have children, but if the charters are providing the same services for cheaper (here we only get 80% of the state dollars per student that a public school gets, and no local tax support), then why can’t the public schools do it?
3. I have kids, they are in the public schools, but if Charters offer the same services and quality of education for cheaper, why pay more?
The initiatives didn’t pass, forcing some tough decisions on local schools. One can hope that they would shed the dead weight and broken systems that are costing so much. Whether they do or not, at least they aren’t costing the tax payer any more money.
What do you think there’s more of: unemployed graduate degree holders, or unemployed HS degree holders?
Costs don’t matter. Costs vs. benefits matter.
Although purely anecdotal, I just can’t resist noting: “New Vehicles” surely can’t include trucks, especially pick up trucks. My one ton diesel (F350 Powerstroke) cost $28,000 in 2001, today that same make and model would cost me $58,000. That is one steep hill.
(Thankfully 289,000 hard working miles ain’t too bad for a good diesel.)