Both such activities increase stress and prices everywhere.
"The course of world affairs may depend on the price of a box of cereal. Here's why.
The U.S. is the leader of the West and the linchpin of a beleaguered global order. The president is commander in chief of America's military and the chief steward of its foreign policy. In international affairs, unlike in domestic policy, the president's choices are often decisive. And when presidential candidates' visions about foreign affairs fundamentally differ, as they almost certainly will in 2024, the outcome of the election will shape the fate of many nations.
But foreign policy rarely determines winners and losers in U.S. presidential contests. Most of the time, voters focus on matters closer to home, especially their economic circumstances. If a recession begins and unemployment rises near Election Day, the president will be held responsible.
In the current election cycle, the central economic issue isn't growth and jobs, but inflation. The most recent Economist/YouGov poll asked a random sample of Americans, "Which of the following do you consider the best measure of how the national economy is doing?" Four percent selected the stock market; 11% picked their personal finances; 15% chose unemployment and jobs reports. But 56% said the best measure was the prices of the goods and services they buy.
When economists talk about "inflation," they are referring to the rate at which prices are increasing. They have naturally been puzzled by the continued intensity of public concern about inflation, given that the rate of inflation has declined significantly. But surveys show that average Americans are at least as concerned about price levels as they are about the rate of price increases.
That brings us to the price of breakfast cereal. "I almost had a heart attack the other day when I saw a box of cereal for $8.99," said an Illinois house cleaner. "I was like, 'Does that come with a gallon of milk too?'" I'm sure she's speaking for many Americans; I know she's speaking for me. My sense of what things should cost at the grocery store is anchored at pre-pandemic levels, and I find it hard to accept that so many items have risen in price by 30% or more. My wife and I can afford the higher prices, though we sometimes choose not to pay them and do without items we regard as outrageously expensive. What about families with children who are trying to get by on $75,000 a year?
Food is only part of the picture. The average buyer of a new car in America paid $48,334 in July 2023, up from about $37,000 in 2019. To be sure, the bulk of the increase occurred in 2020 and 2021. Still, new car prices today are 31% higher than they were four years ago. The pace of price increases has slowed, but prices haven't come down -- even though pandemic-related supply-chain problems have abated.
Automobile prices are driven as much by the choices manufacturers make as by the cost of production. In recent years, according to an analysis by Kelley Blue Book, auto makers "increasingly focus on building more expensive cars, trimming affordable models from their lineups." As recently as 2017, auto makers produced 36 models priced at $25,000 or less, compared with only 10 such models now. Since 2018, the number of models priced at $100,000 or more increased from 12 to 32.
Families like mine can afford to buy a midrange car for 30% more than it would have cost four years ago, but what about middle-class families who can't find entry-level cars and must finance purchases of more expensive cars at much higher interest rates?
Another example: housing. Over the past four years, the median price of an existing home rose by 45%, from $271,500 to $394,300. But home builders haven't been rushing to provide new options for first-time home buyers; the median price of a newly built home rose by 36%, from $315,700 in the fall of 2019 to $430,300 today. Young families trying to buy their first homes have nowhere to turn.
I believe that President Biden's foreign policy advances the long-term national security interests of the U.S., and retreating from the world into a short-term, inward-looking, transactional approach would be a disaster, for our friends and allies around the world and for us.
But Mr. Biden's ability to conduct his foreign policy rests on domestic support for his administration, which is eroding under pressure from concerns about his handling of other issues, especially the cost of living. The problem exemplified by the cost of a box of cereal could end his presidency unless he addresses high prices head-on." [1]
1. Politics & Ideas: $8.99 Cereal Could Rock the Globe. Galston, William A. Wall Street Journal, Eastern edition; New York, N.Y.. 25 Oct 2023: A.15.
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