Mainers are struggling to afford food, heat and gas. More government is not the answer.
By Matthew Gagnon
“How am I going to afford my life?”
If I was going to try to find one statement that encapsulates the general sense of unease that is permeating our lives right now, and as such is likely to be the primary motivating factor in voting behavior in next year’s midterm elections, that would be the statement.
We hear versions of this statement in our everyday lives, when we talk to other people and they talk about the struggles they are facing. People are having a very difficult time finding an affordable place to live. Day care is both extremely expensive, and also hard to find. Buying a car — new or used — is now wildly expensive, and filling that car with gas hurts more financially by the day. Electricity rates are rising. The price of simple groceries — especially things like chicken, pork, steak — has become truly shocking. My home heating oil bill nearly sent me into a catatonic, vegetative state when the invoice came last week.
Just how bad is this problem? According to Forbes, in the last year food has increased in cost by 5.4 percent, shelter by 3.5 percent, and vehicles by 9.8 percent. Groceries have grown by 1 percent in just the last month. This is a problem that is creating a feeling of despair among all economic classes.
Frequently we hear, particularly from leftist political activists, that the problem tracks to evil business owners and corporations who “don’t pay a living wage.” But that isn’t the root cause of this problem. As a matter of fact, even through the pandemic, the United States saw very strong wage growth, and Maine saw a steep increase in personal income this year — 18.2 percent from January through March — compared to the prior year. Indeed, median household income and per capita personal income in Maine has been consistently rising at a steady rate for years. We are earning more money.
The actual problem is that wage growth is in danger of being outstripped by inflation. If you make a thousand dollars more this year, but your life is five thousand dollars more expensive, that means you’re having a hard time. And right now, that is everyone’s experience.
In October, prices rose by 6.2 percent compared to a year ago, which according to the Washington Post represents “the largest annual increase in about 30 years.”
The underlying reasons for the inflation we are seeing are complex and varied. Supply chain issues and production problems have conspired to lower supply and increase demand, putting upward pressure on prices. Higher energy prices have also played a large part in the story. And there is really no way of denying that a decade-long expansionist monetary policy, and massive injections of government spending into the economy have also played a major role by devaluing the dollar and warping markets.
None of which matters to the people just trying to live their lives and make ends meet. To them, what matters is the feeling that doing so is much harder than it used to be, and they want someone to understand them.
To the Democrats, the answer is basically two-fold. On the one hand, they continue to advocate for seemingly endless increases in the minimum wage, which they hope will put more money in the pockets of Americans, and force upward pressure on wages above the minimum. Beyond that they propose (of course) more spending, more debt and more programs meant to solve the litany of problems facing Americans.
And yet, plans to use the government to solve major economic problems always fail to do so, and in so failing end up creating new ones. The wage inflation strategy ends up causing, you guessed it, inflation as corporations react to the higher wage expenditures by raising prices, ultimately wiping out any net positive impact of the higher wage.
Simultaneously, the massive amounts of spending and the money printing and debt required to fund it also help drive up inflation, as does the twisted contortions in supply and demand created by the spending itself, once again making things more expensive and ultimately making those well-intentioned programs ineffective.
As this happens, the policy failure becomes the justification for further attempts at artificially raising wages and spending more, in an endless cycle of futility that never ends. And here we are, caught in the middle.
Gagnon of Yarmouth is the chief executive officer of the Maine Policy Institute, a free market policy think tank based in Portland. A Hampden native, he previously served as a senior strategist for the Republican Governors Association in Washington, D.C.