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