July 9, 2006 in City

The haves and have nots? More like haves and have mores

By The Spokesman-Review
 

Everything costs more. Right?

Think health insurance, child care, postage stamps, gasoline, electricity, cable television, movies, newspapers, coffee, cigarettes, dope and lawyers.

Getting gouged by high prices again and again every single day is frustrating. Personal bankruptcies are at an all-time high. And now we hear inflation is on the march, part of an insidious take-away that threatens middle-class lifestyles.

But the cost of consumer goods is a little bit like people: Each has its own story.

For instance, I don’t complain much to my reared-on-a-farm, Depression-era parents about my job, or salary, or the price of things. I fear they might ask to look over my budget. Scrutinize my spending habits. Extol the virtues of buying whole chickens instead of boneless and skinless.

And the truth is, many things are cheaper – a lot cheaper – than they were even a decade or two ago.

Household goods like laundry detergent, toilet paper, shampoo, store-brand aspirin, household plants, vacuum cleaners and televisions cost less because companies like Wal-Mart Stores and Costco Wholesale Corp. have made an art of volume purchasing and super-efficient distribution.

Computer- and car-makers manufacture far superior products compared with 1990. Computers offer the easiest axiom: Buy one today and tomorrow another will be on the market that’s more powerful and cheaper.

But we still believe everything is costing more. Asked why that is, Avista Corp. economist Randy Barcus did what any self-respecting economist does: he recast so-called economic truths into questionable beliefs and muddied a perfectly populist thesis.

Consider this: Between 1984 and 2004, household incomes in Idaho and Washington kept pace with inflation. So perhaps things cost more, but we also brought home more money, according to the U.S. Census Bureau.

Add to that a phenomenon called “deflation” that Barcus talks of. Basically the price on many goods dropped for a time beginning about six years ago, coinciding with the low, lower and lower-still interest rates that turned mortgage refinancing into a version of that old rollerskating contest “the limbo.”

Americans locked in interest rates well below 6.5 percent on their single biggest debt – the family home. The monthly savings became the beefy pay raise employers declined to award.

Yet, as is frequently the case with a sudden infusion of discretionary income, it wasn’t segregated from the family budget and socked away for retirement and college savings. It found its way into someone else’s till – like Starbucks, where thrifty drip-coffee drinkers are now willing to spend $1.40 for a cup that used to cost less than half that, and fancier drinks like a latte with a squirt of flavored syrup cost more than $3.

But is this a rising cost or, as Starbucks calls it, “an affordable luxury”?

Barcus credits the Seattle coffeemaker with stupendous marketing at a time when other businesses are producing profits by cutting not only luxuries, but also things that used to be considered essential services. “It’s really the antithesis of the peanuts fare that is Southwest Airlines,” Barcus says of the Starbucks approach.

Manufacturers haven’t gone broke selling the cheaper goods we’ve all come to rely on. Laying off expensive American workers and outsourcing work to Mexico and China have helped keep prices low and stockholders happy.

Those companies that stayed stateside adopted new manufacturing means and employed better technology. Take American automakers. Though in financial straits, they are not charging more to recover losses. Ford is selling new F-150 pickup trucks for less than 16 years ago – equipped with airbags and other standard equipment that would have widened the price divide.

And car buyers can spend less than $10,000 on a new Chevy.

Economists say such savings on big-ticket items equals more play mon …. er, retirement savings.

So everything costs more? Not so fast.


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