The Department of Agriculture projects that food prices will increase by two or three percent this year. That’s a much higher increase than previous years, when prices increased by small fractions of one percent. Rising food costs have even forced McDonald’s restaurants to announce price increases. An L.A. Times report attributes this price hike to increasing commodity prices, along with increased demand for ethanol.
What’s ethanol? Well, that’s one of those “biofuels” President Obama spoke of so glowingly in his State of the Union address. It’s made from corn, which is also the key resource for much food production. Corn used for ethanol is corn that cannot be used to feed livestock. Demand drives up price.
American taxpayers subsidize ethanol production to a staggering degree. We have laws that require ethanol to be blended into regular gasoline, and since this serves no practical or economic purpose – it’s purely a political decision – it must be supported with taxpayer loot. You might recall the frantic efforts to push ethanol subsidies back into the lame-duck budget negotiations last December.
A recent Forbes article described ethanol as “a story of rent-seeking that transcends party lines, providing $6 billion in benefits to an industry that has been created by the government.” It is “worse for health and the environment than regular gasoline” and “it takes more energy to produce a gallon of ethanol than it actually contains.”
How about those commodity prices? Most economists agree one of the major factors is loose American monetary policy. That would be the famous “QE2” strategy implemented by the Obama Administration, devaluing the dollar to increase American exports, in an effort to jump-start our moribund economy. Critics of the move, including Sarah Palin, said it was better viewed as an attempt to create inflation, and buy Obama more time to avoid doing anything about the national debt. Looks like it worked!
Steve Liesman, senior economics reporter at CNBC, says not to worry too much about rising commodity prices, because “on average, about 19 cents of every dollar spent on food pays for commodities. The remaining 81 cents goes to such things as labor, taxes, profit and energy and transportation. There’s a healthy amount of packaging and marketing taken out of the dollar, too.”
Thank goodness, that’s a relief… hey, wait a second. “Energy and transportation?” Would that include gasoline? Because that’s going through the roof. It’s up by 41 cents a gallon in the past year, and we’re on a collision course with $4 gas this summer.
Another factor in food prices Liesman mentioned is the cost of labor. That’s going up too, thanks to ObamaCare and various other job-killing regulations. If the standard liberal approach to Social Security insolvency is followed, FICA taxes will go up too. Besides increasing the cost of goods, that’s also driving our staggering unemployment rate, which just increased by another “unexpected” jump of 51,000 new jobless claims. The President’s biggest laugh line in the State of the Union was when he claimed to have “broken the back of the recession.” It’s even funnier that fresh evidence against his delusional claims hit the news almost immediately afterward.
These are all factors which heavily degrade the standard of living for the poorest Americans. They’re not good for anyone, of course, but every toxic emission of Obamanomics hits the poor especially hard. Food and gas are a big expense against their modest incomes. Unemployment hits entry-level workers hardest. The less well-trained and senior employees in any operation are, logically, the first to be laid off during hard times.
President Obama gives you a lot of fantasy talk about a future filled with glittering, gold-plated government infrastructure and mythical “green jobs,” but the grim reality of the present is especially hard on the poor. The magical future of a million electric cars, powered by sunlight and water, forces today’s low-income worker to choose between buying increasingly expensive food for his kids, or gas for his car, to work at a job that might not be there next week.
The truth behind all those airy Obama promises is readily on display at your local convenience store, grocer, gas station, fast-food restaurant, and unemployment office. No expensive government proclamations will improve the situation. They’re what caused it.