Free Markets, Free People
Interest rates on bonds, CDs and money market accounts — staples of the retirement crowd’s portfolio — are at historic lows. (I’m always shocked to see what banks are touting. Really? 0.35% — that is, 35/100 of a percent — on a money market? 0.90% on a CD? Yep.) Stocks are nothing to write home about, still well below their highs of five years ago. As for those real estate investments? Forget about it.
The squeeze is real. Some years ago, when earning say 5% on your money was realistic, a $360,000 portfolio of CDs would produce $18,000 a year in interest — that’s $1500 a month. Couple that with an unexceptionalSocial Security payment of about the same amount, and that’s $36,000 a year, $3,000 a month. Nothing fancy, but enough to get by.
Now change that 5% to 0.9% and you’re earning $3,240 per year, or about $270 a month. Add that to $1,500 a month in Social Security and you’ve got $1,770 a month to live on; just $21,240 a year. That’s a brutal 41% cut in income. And it is why many senior citizens around the country are being forced to draw down savings to make ends meet.
Now, you’re saying, well yeah, got it but is that the President’s fault? In a political system that considers all things that happen under a president’s watch to be “his”, yes. If president’s are going to claim responsibility for good occurrences, then they also get the responsibility for the bad things as well. And if I remember correctly, the current president promised to fix all this stuff. But, this is reality:
The Federal Reserve’s low interest rates are a boon to overextended banks and to the borrowers who owe them money. (As well as the world’s greatest debtor, the U.S. Treasury). But these benefits come at the expense of savers — both those who hope to see their savings grow enough that they can retire someday, and those who have already retired expecting to live on interest at rates far higher than those that prevail today. The low rates are, basically, a tax on savers for the benefit of borrowers and those who made bad loans.
Couple that with the spendthrift ways of the past few years, with little to show for it, and you sort of have the perfect political storm don’t you.
The point about the seniors is their retirement income has been materially effected. That’s totally real to them – they live with it daily. And, frankly, they’re going to blame someone. 4 years ago they probably blamed Bush. But now, well now they’re going to blame the guy who has had ample time, in their estimation, to do something about this … and hasn’t.
And who is the guy on the hook? Right or wrong it’s the prez.
As if what is described above isn’t bad enough, there’s more:
For senior citizens, it’s a double squeeze. While incomes for retirees are going down, costs are going up. Gasoline is now roughly double what it was whenPresident Obama took office and, in many places, it’s back up in the neighborhood of $4 a gallon.
According to the Bureau of Labor Statistics, ground beef recently hit a national average of more than $3 a pound, the first time in history it’s reached that level. (When Obama was inaugurated, it was $2.35). Anyone who has spent time in a grocery store knows that this sort of thing is happening on every aisle — coupled with “shrinkage,” as manufacturers reduce the amount of product in a box while keeping the price the same, a way of hiding price increases from (they hope) inattentive consumers. And it’s going to get worse, according to the Department of Agriculture, when this summer’s drought hits food prices in a few months.
Heard anything about all of this? Yeah, me neither. Glenn Reynolds hasn’t either and he’s pretty sure he knows why:
In fact, with this double squeeze, we have the makings of a major national crisis. There’s only one thing missing: the kind of news media attention you’d usually get with this many senior citizens suffering in an election year.
I’ve been watching these developments for a while, and by now you’d expect a lot of sad news coverage about old people who diligently saved for retirement being squeezed by high prices and federal policies, being forced to choose between medicine and food or having to let go of pets and move in with children because things have just gotten too expensive, living on cat food and the like. But actually, we’re not hearing much.
And we all know why? When the 4th Estate becomes a 5th Column, you’re unlikely to hear much about the things that might reflect on their chosen one.
Report it or not, it remains a real problem and those suffering from this turn around are likely to want to point the finger at someone. And usually that someone is whoever is in charge on election day.
The following US economic statistics were announced today:
Personal income rose 0.3% in July, while personal spending rose 0.4%. The PCE price index was unchanged at both the headline and core levels. Year-over-year, the PCE shows 1.3% inflation, with the core rate, which doesn’t count food or energy costs, at 1.6%.
Initial Jobless claims were unchanged at 374,000. The 4-week moving average rose slightly to 370,250. Continuing claims fell 5,000 to 3.316 million.
Following last month’s strong results, today’s sales reports from chain stores are good to mixed, and, on net, slightly higher than last month.
The Bloomberg Consumer Comfort Index remains weak, rising only 0.1 to -47.3, following a 6-week decline in the index.
The Kansas City Fed manufacturing index rose to 5 in July from 3 in June, indicating a slightly better growth rate. That headline hides some underlying weakness, however, as the production index fell from last month’s 12 to 2 in July. New orders are also declining, though at a slightly slower rate than last month, as the index rose to -4 from -7.
We’ve talked in the past about why these “wave” elections, as they’re called, are happening with increasing frequency.
Well one of the reasons, I would assert, is people are tiring of the same old promises – promises that are rarely if ever kept – with the same old results – business as usual with vituperative partisan sniping and finger pointing, while we spend ourselves into oblivion.
No matter who is put into power, nothing substantive happens. So voters keep switching the sides in hope that some group they put in there will “get it”.
So along come this poll, which is quite interesting. No matter how “popular” Obama is alleged to be, it seems the party he is associated with is now at their popularity nadir.
Today’s Gallup Poll, "GOP Favorability Matches 2008 Pre-Convention Level," shows the pre-convention favorability ratings of the two Parties going back as far as 1992. For the very first time, the favorable/unfavorable ratios are now higher for the Republican Party than for the Democratic Party. For the first time ever, the Democratic favorability ratio, which has always been within the range of 1.20 to 1.56, is now below 1. It is a stunningly low .83, which is 31% lower than the prior Democratic Party low of 1.20, which was reached in 2004.
The Democrats find themselves at John Kerry territory in terms of popularity. Gee I wonder why (*cough* ignore the voters and pass ObamaCare, unemployment at 8.2%, economy in the crapper, etc., *cough*)?
But before Republicans celebrate because they’re better than Democrats, they should realize they’re only marginally better.
By contrast, the Republican ratio is now .88, which compares with the 2008 ratio of .80, which was that Party’s lowest-ever ratio, reached at the end of the Bush Presidency. Prior to 2008, the ratio was 1.16 in 2004, 1.41 in 2000, 1.16 in 1996, and 1.36 in 1992.
Those figures compare with the Democratic ratios of 1.38 in 2008 (compared with the Republican .80), 1.20 in 2004 (vs. 1.16), 1.56 in 2000 (vs. 1.41), 1.50 in 1996 (vs. 1.16), and 1.42 in 1992 (vs. 1.36).
So? So right now, Republicans seem to be enjoying a slightly better level of “popularity” than are Democrats. But both should note that their relative popularity is near the bottom of their historic range.
What does that say?
It says to me that voters are truly considering the lesser of two evils. That their “popularity” is a function of there being no other choice but these two and there being little if any confidence in either doing what is necessary to turn this mess around. But, at the moment, they are inclined to give the Republicans a shot, simply because the Democrats have been so lousy.
Another “indicator” poll. Expect the media’s full court negative press to continue unabated. We now know more about Mitt Romney than we’ve ever known about the President of the United States (of course that’s partly because Romney has actually run things and done things prior to running and has an actual record to examine).
Meanwhile voters seem inclined toward the Republicans, but not such that anyone in the GOP should get arrogant or cocky by any means. This is all touch and go at the moment.
But here’s a key which is hard to ignore, speaking of Obama’s “popularity”:
The Democratic brand has thus suffered more (down 39%) under Obama than the Republican brand suffered under either of George W. Bush’s two terms (-16%, then -31%).
Democrats have reason to be worried.