Hope And Change: Paying for gas today is eating up nearly 9% of the average American’s PRE TAX income

By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.

John Maynard Keynes

Friday, the AP published its obligatory “hey everyone, it’s Memorial weekend, and wow gas is really expensive” story. Mostly, it is the same story they publish almost every year. However, this year’s story did contain an interesting factoid:

The median household income in the U.S. before taxes is just below $50,000, or about $4,150 per month. The $369 that families spent last month on gas represented 8.9 percent of monthly household income, according to an analysis by Fred Rozell, retail pricing director at Oil Price Information Service. Since 2000, the average is about 5.7 percent. For the year, the figure is 7.9 percent.

Only twice before have Americans spent this much of their income on gas. In 1981, after the last oil crisis, Americans spent 8.8 percent of household income on gas. In July 2008, when oil price spiked, they spent 10.2 percent.

Average hourly earnings, meanwhile, have risen just 1.9 percent in the past year. That’s only just enough to keep up with inflation.

Paying for gas today is eating up nearly 9% of the average American’s PRE TAX income. Considering the average American who earns $50,000 will pay nearly 50% of that income on taxes (Federal, State, property, sales tax etc.) the net income bite on that gas bill is more like 18%.

Also, that 1.9% earnings increase “that’s only just enough to keep up with inflation” statement in the AP blurb isn’t entirely accurate.

If you are a regular reader of MCT, you know one big theme here is that energy is a key component to having a strong economy. From a MCT post on December 1st, 2010:

Real energy (not the wind or solar nonsense) and raw material production is the foundation of a strong economy. Obama’s latest oil drilling ban is not only going to destroy all the direct and indirect jobs in the effected areas, this ban will spread higher prices for virtually everything across the entire economy, causing further damage.

Six months later we are still have 9% unemployment and gas prices eating up nearly 18% of an average American’s take home pay. This, coupled with out of control spending coming out of Washington, is not a recipe for economic growth.

Washington can’t create economic activity. It can only redistribute income through taxation and borrowing. What Washington can create is inflation and since the beginning of our era of “hope” and “change” we have lost 5% of our purchasing power through inflation.

Going back four years we have lost 8% of our purchasing power due to inflation.

Great, isn’t it?

Comments
  • Christopher May 30, 2011 at 11:11 am

    Steve, I hope you are relaxing some on this day that we honor those that have served and fallen with honor.

    That out of the way it might be more illustrative of your valid point to use the figure of $100.00 in your calculator(s) being the ‘change’ is more visible and substantial to the casual viewer and needless to say $1.00 has not bought much in many years so it does not register to most.

    • steve May 30, 2011 at 11:18 am

      I’m taking it easy this weekend and laying low. Good point about the $1 vs. $100. If I get a chance, I’ll make the change later tonight.

      Thanks for the pointer.

  • Jim at Conservatives on Fire May 30, 2011 at 8:10 pm

    Most central banks are owned, liked the Fed, by private banks. Banks lose with deflation. Hence they always try to maintain some inflation. Banks before people. That’s the way of the world. Sigh!

    I have been trying without success to determine how much of today’s gasoline price is due increased use and increased cost of ethanol. The Feds monetary policies are causing all commodities to rise including corn. By chance do you have any info?

    • steve May 30, 2011 at 9:31 pm

      Price increase due to ethanol… I’ll have to look into that one.

  • Matt May 30, 2011 at 9:13 pm

    And the administration still refuses to do anything about it.

    Actually, they are-keeping it high.

    • steve May 30, 2011 at 9:32 pm

      Well, they have all kinds of green energy ideas! /sarc

  • theCL June 2, 2011 at 10:31 am

    Do you not listen to our benevolent overlords? Prices are not rising, they’re going down. And lower prices are bad for consumers, dontcha know? Say it with me now … Deflation. Deflation. Deflation. Deflation. Deflation.

    • steve June 2, 2011 at 7:13 pm

      Between the media and politicians it seems whatever they say is the opposite of what is actually happening. The recession is over! Global warming! Government run heath care will be great!