Despite consistent claims of low inflation during this endless Great Recession, Americans are paying dramatically more for gasoline, electricity, heat and food — everybody notices the $4 gas, but the jump in food prices to a 36-year record is harder to see because it’s spread out across your grocery bills. And now the official inflation rate is rising, up half a percent for January and .06% in February, just as millions of American households are running out of emergency unemployment benefits and many millions more are surviving on stagnant or part-time wages. With federal, state and local governments slashing services at a furious clip while taxes most harmful to the poorest people are shooting higher — check out what you’re paying in sales tax this year! — the basic cost of existing in this teetering country has gotten completely out of hand.
“As the cost of living increases, we are headed toward a bigger problem with the slowing of housing permits,” said JJ Kinahan, chief derivatives strategist at thinkorswim, a division of TD Ameritrade. “As the staples start to cost more, this could lead to a quick slowdown in the auto and technology sectors as an iPad is an easy thing to pass on if you are paying more for your gas and food and need to cut back somewhere.”
To be sure, it’s nearly impossible to get a perfect “cost of living” measure, and the BLS acknowledges this on their web site: “An unconditional cost-of-living index would go further, and take into account changes in non-market factors, such as the environment, crime, and education.” Still, states will be cutting back services drastically this year at the very same time they are raising taxes in order to close enormous budget deficits and avoid a muni-bond defaults crisis. So while it may be the missing link to a perfect cost of living measure, one can assume that Americans will be paying more for unquantifiable services such as police enforcement and education, but getting them at a lesser quality.