A Little Good Economic News-- And A Lot That's Not So Good

The good news came early this morning in Asia. The price of oil is continuing to drop. The bad news, despite concerns that Big Oil is dropping it a little to help their Republican buddies before the election (like they did in 2004), is that it went below $114 a barrel because "investors speculated slowing economic growth in the world's largest economies will continue undermining global crude demand."

'Worries about an economic slowdown in the U.S. and Europe, and even Japan, are weighing on the oil market,'' said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore.

Europe's biggest economies-- Germany, France and Italy-- all contracted in the second quarter. Japan said this week its gross domestic product also shrank in the April-June period.

An unstable Russian has stock markets spooked but oil markets aren't factoring in a real trouble that would disrupt oil and gas deliveries. Musharraf's impending resignation isn't spooking anyone in the markets yet, although the CIA may be a little freaked.

Me? I'm spooked and freaked. I bought a Prius this week. I don't have a job and live off my savings. Inflation scares me. The return of inflation will probably be one of Bush's ugliest legacies.

The cost of living, led by the soaring cost of gasoline and food, is rising at the fastest rate since the recession of the early 1990s, the government said on Thursday, handing a de facto pay cut to the American worker.

The report, from the Labor Department, offered quantitative proof of what Americans have been feeling for months: almost everything costs more, even as they have less money to pay for it.

Prices of a wide range of common products in the Consumer Price Index were 5.6 percent higher last month than they were in July 2007, the sharpest annual increase since January 1991.

...In July, rank-and-file workers-- those in production or nonsupervisory roles-- earned 3.1 percent less than they did a year ago, after adjusting for the rising cost of living.

“Any way you slice it, incomes aren’t keeping up with the inflation rate,” said Michael T. Darda, chief economist at the trading and research firm MKM Partners.

It was the 10th consecutive month that the weekly average salary had failed to keep pace with inflation, according to statistics from the Labor Department.

Employers are doling out modest wage increases, but not nearly enough to compensate for more expensive food and fuel.

“People see it and they feel it on a daily basis,” Mr. Darda said. “If it’s gasoline or food, that’s visible inflation, and the stuff that households need the most and depend on.”

Prices have not risen at the speed they did during the oil crises of the 1970s, and financial policy makers have said they do not expect a repeat of the so-called wage-price spiral that led to double-digit inflation rates during that decade.

But with home values falling and the stock market in a slump, Americans are finding it more and more difficult to pay for basic purchases. Credit card debt has spiraled upward, home foreclosures are rising, and banks have become more guarded in giving out loans and mortgages.

Social Security recipients are now on track to receive the highest cost-of-living increase since 1982.

I've been hanging on to an extremely interesting report from Congressional Quarterly all week about how most corporations don't pay any income taxes. The GAO conducted a study that spanned Bush's entire presidency and found that "72 percent of foreign-owned corporations went at least one year without owing taxes, and the same was true for 55 percent of domestic corporations."

[M]ore than 3,500 large domestic corporations-- with more than $250 million in assets or $50 million in gross receipts-- did not pay taxes in 2005.

The report said about 80 percent of the companies studied paid no taxes because they didn’t generate any profit after expenses. Money-losing companies can legitimately owe no tax, and others can use provisions of the tax code to lower or eliminate their liability.

But the lawmakers who sought the data seized on the report as proof of corporate gamesmanship.

“It’s shameful that so many corporations make big profits and pay nothing to support our country,” said Byron L. Dorgan, D-N.D., who requested the report along with Carl Levin, D-Mich. “The tax system that allows this wholesale tax avoidance is an embarrassment and unfair to hardworking Americans who pay their fair share of taxes. We need to plug these tax loopholes and put these corporations back on the tax rolls.”

And if you wonder how all this is going to play out at the ballot boxes in November, take a look at the winning ad from the Republican primary in the Kingsport/Knoxville congressional district in eastern Tennessee, where a far right-wing Republican was beaten by another far right-wing Republican based on this:



I don't think there's a Democrat running who won't win if he or she runs an ad like this. Yesterday Obama's economic policy director, Jason Furman, responded to the report on rising inflation:

"Today, we got the truly shocking news that inflation hit a 17-year high of 5.6 percent as the prices of gas and groceries continued to soar. Families have now lost an entire decade's worth of raises to inflation as weekly earnings adjusted for inflation lie below the level they reached in August 1998. While Senator McCain apparently thinks the economy is doing just fine, and refuses to support any meaningful, short-term relief for America's struggling families, Barack Obama has proposed an Emergency Economic Plan that would immediately put $1,000 in the pocket of families to help them pay for gasoline, groceries and other necessities. In addition, the Obama plan includes $50 billion in immediate measures to save more than one million jobs from being lost. America cannot afford four more years of a policy that puts tax cuts for the wealthy and corporations ahead of the real change America's middle-class families need."