It might seem that calculating the hit to living standards from rising commodity costs would be difficult, but that is not the case.\u00a0 To measure the trend in \u201creal\u201d or inflation-adjusted incomes, the Bureau of Labor Statistics deflates nominal wages by the Consumer Price Index; all else equal, the faster the CPI rises, the slower real wages grow.\u00a0 But an alternative price index is available\u2014the \u201cCore\u201d CPI, which excludes food and energy.\u00a0 By comparing trends in the Total CPI and Core CPI, we can see how much rising (or falling) commodity prices are impacting living standards.\u00a0 It turns out that this was a key driver of the \u201cwage stagnation\u201d during George W. Bush\u2019s administration.\u00a0 Whereas declining commodity costs boosted<\/strong> real wages during the 1980s and 1990s, they reduced<\/strong> real wages after 2002.\u00a0 See Table 1.<\/p>\n So in the 1980s and 1990s the Total CPI lagged<\/span> the Core CPI by 0.3% per year, or nearly 11% over a nineteen-year period, because of weak commodity prices; this boosted real wages by 11% over the period.\u00a0 But over the next decade this pattern reversed.\u00a0 With the price of food and energy rising much more rapidly than other products, the Total CPI rose faster than the Core by 0.6% annually, or 7.5% over a decade.\u00a0 In other words, real wages would have been a huge 7.5% higher <\/strong>if commodity prices had only climbed as fast as other products in the CPI basket.<\/p>\n Now, it\u2019s true that not all the recent strength of commodity prices can be blamed on green policies. Rapidly rising emerging market demand for commodities certainly was an important driver.\u00a0 However, commodity inflation has been systematically exacerbated by green policies that constrain production of inexpensive food, coal, natural gas, oil, and electricity.\u00a0 (Food is an energy-intensive commodity, due to fertilizers, transportation, etc.) \u00a0Judging from various progressive websites, liberals almost completely ignore this driver of poverty. \u00a0And more conservative observers fail to emphasize it enough.\u00a0 All around, there is a dearth of \u201clateral thinking\u201d \u2013 spotting the unintended side effects of environmental laws.\u00a0 As an aside, these laws have unintended environmental side effects as well; paving thousands of acres of pristine desert with solar panels is an obvious example.<\/p>\n Green Inequality<\/strong><\/p>\n Because food and energy claim a larger share of the budgets of low income families, Green Poverty exacerbates income inequality.\u00a0 Households with incomes of $30,000-$40,000 spend 19% of income on food and energy while affluent households spend just 9%.<\/p>\n The U.S. is entering a new era of energy abundance, but thus far green policies have limited the payoff to consumers and workers.\u00a0 If a Romney Administration pursued a pro-growth, pro-consumer, pro-worker energy policy emphasizing \u201call of the above\u201d production along with increased energy efficiency, the resulting growth in employment and restraint of commodity prices would raise living standards and reduce poverty fairly quickly.\u00a0 This would benefit low-income consumers far, far more than efforts to redistribute income via the tax code, which mainly pad the already fat wallets of bureaucrats and influence peddlers in Washington DC\u2014already the richest area of the U.S.<\/p>\n <\/p>\n <\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" The absurd spectacle of the U.S. burning 40% of its corn crop as ethanol during a drought that has sent corn prices skyrocketing exemplifies a broader problem.\u00a0 While professing grave concern about \u201cwage stagnation\u201d and the financial plight of the … Continue reading \n\n
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