26 February 2020   1 comment

The Manhattan Institute has published a fascinating report entitled “The Cost-of-Thriving Index: Reevaluating the Prosperity of the American Family”. The report is an attempt to determine how cost of living metrics actually capture the well-being of US families. We all well aware of the effects of inflation on income, but we lack the ability to translate that numeric index into something which actually tells us how well off the family living on that income may be. The report points out the inadequacy of simple numeric indices:

“It sounds like an absurd riddle, or perhaps a kindergarten-level math problem: the median male full-time worker earned $314 per week in 1979, while his counterpart at the median in 2018 earned $1,026;[3] who was better off?…

“The most commonly used index, the Consumer Price Index (CPI), published by the Bureau of Labor Statistics (BLS), estimates that inflation has reduced a dollar’s value by 71% from 1979 to 2018. Put another way, one 2018 dollar is worth 29 1979 cents. A different index preferred by the Federal Reserve and many economists, the Personal Consumption Expenditures Price Index (PCE), published by the Bureau of Economic Analysis (BEA), estimates that a dollar’s value has declined by 66%; so one 2018 dollar is worth 34 1979 cents.

“Using CPI, our 2018 worker’s $1,026 in 2018 earnings is worth $297 in 1979 dollars—or 6% less than the $314 in 1979 dollars earned by the 1979 worker. Using PCE, the 2018 earnings is worth $353 in 1979 dollars—a 13% gain.

“….the question is how well the typical male worker can provide for a family. 

“This report shows that his ability to do so has degraded dramatically. A generation ago, he could be confident in his ability to provide for his family not only the basics of food, clothing, and shelter but also the middle-class essentials of a comfortable house, a car, health care, and education. Now he cannot. Public programs may provide those things for him, a second earner may work as well, his family may do without, although his television may be larger than ever. The implications of each is surely worth pondering. But the fact that he can no longer provide middle-class security to a family is an unavoidable economic reality of the modern era.”

The report then analyzes the problems with both the CPI and the PCE metrics, and it proposes a new index which it calls the “cost of thriving” (COTI). The new metric purportedly shows the quality of life better than the two used by economists. Unfortunately, the new index also shows that the quality of life for most US families has declined precipitously since 1985, and that current income levels are no longer sufficient to provide the quality of life in 1985 despite all the major technological benefits that have been available in that time.

Al Jazeera has published a very comprehensive analysis of the many Middle East Peace Plans that have been proposed since the creation of the state of Israel in 1948. It then compares those plans with US President Trump’s most recent peace plan. The newspaper has put an extraordinary amount of information on the site and it is a remarkably useful summary of the different proposals. There is little question that Al Jazeera is sympathetic to the Palestinian position, but the presentation is fairly free of ideology. For students of the Middle East this site is a useful place to begin one’s research.

Posted February 26, 2020 by vferraro1971 in World Politics

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  1. Pingback: 27 February 2020 | World Politics News

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