
Today I woke up to my morning paper and found—Ghasp!—some optimism in Paul Krugman’s column. Yes, this is my second blog entry, and so far I’m two-for-two in mentioning Paul Krugman. Is this a coincidence or some sort of conscious effort on my part? There is insufficient data to tell at this point.
There is, however, some data that lends credibility to Krugman’s albeit ominous optimism concerning current market conditions. Only 20,000 jobs were cut in April—about 60,000 fewer than expected. The GDP grew by 0.6 percent in the first quarter, representing slow growth yet growth nonetheless. Moreover, the Dow is back up to hovering at around 13,000 points, up over 1,000 points since plunging at the beginning of the year.
These indicators seem to point in the direction that this recession—if it even is one—will avoid the standard recession-defining two consecutive quarters of economic contraction. I should mention, however, that Krugman still managed to inject some good old healthy pessimism into his column by suggesting that the recent market stabilization will probably stifle any efforts for what he sees as crucially needed regulation in the financial markets. I offer a bleak outlook for different reasons.
You can peak into a standard 401(k) portfolio and notice some substantial gains in recent weeks. You can also find a little bit of comfort in knowing that up to $600 is on its way courtesy of the economic stimulus package. Times aren’t looking so bad for those on the middle tier of America’s socioeconomic ladder. It sounds like time to splurge: take a vacation, buy season tickets to your favorite baseball team, or buy that 13-inch plasma television you’ve always wanted. Right?
But in the face of exorbitant commodities inflation, what good does it do to have a retirement portfolio that grows at only 5-9% per year if you’re lucky, or to have 600 bucks of extra expendable income if you paid enough taxes to even warrant the full rebate? Furthermore, what about those who don’t have stock portfolios, pension plans, or income at all for that matter? Again, there is insufficient data to tell at this point, but things don’t look so good.
Start with a mess of housing deflation, add a tinge of healthcare and education inflation, toss in a $120 barrel of crude oil, mix with farming subsidies, and smother with exorbitantly inflated food prices and you’ve got a perfect recipe for increased poverty. I’m not our resident economist, but my guess is that the current commodities crisis will lead to more poverty, both here and abroad.
We’ve already been witnessing an increasing amount of working poor using our basic services the last several years.
Though I’m not optimistic about this situation, I am optimistic that St. Anthony Foundation will continue to meet the needs of the hungry in our community—even as the numbers of those who are hungry will undoubtedly rise.