A new survey shows that food prices are expected to rise about 3.5% this year, about twice as much as the Fed wants . . . Who Cares?
Without discussing with my wife, I expect we don't spend 5% of our income on food. So, a 3.5% increase increases that 5% to only 5.175% of income. A local social worker tells me that her clients often spend one-third of their income on food. So, 3.5% inflation in food prices increases that to 34.155%.
In other words, food expense for a poor person increased 1.155%, while mine increased only 0.175%. The increase for a poor person is 6.6 times as great as the increase for me. Food inflation hurts poor people more than the more fortunate.
Economists like to talk about the Marginal Propensity to Consume (MPC) and the Marginal Propensity to Save (MPS). They measure what percentage of new income will a person consume/spend or save/invest. If you get another dollar of income, will you buy half a cup of coffee at Starbucks or toss it into your piggy-bank? If you spend 70% of that dollar, your MPC is 70%. Since you either spend/consume your money or you save/invest your money, a 70% MPC means your MPS is 30%. Some people, unfortunately, consume/spend 100% of their income. Those people are more directly impacted by inflation.
This is the "logical" basis for our progressive income tax system. You tax most heavily those people with the higher MPS. After all, they don't need every dollar of income to survive.
I know, I know . . . now we have a system whereby high income taxpayers pay the overwhelming majority of income taxes to run the government, but get less than they pay for, while poor people get more government benefit than they pay for.
One more time . . . why did Willie Sutton rob banks . . . because that's where the money is . . .
Without discussing with my wife, I expect we don't spend 5% of our income on food. So, a 3.5% increase increases that 5% to only 5.175% of income. A local social worker tells me that her clients often spend one-third of their income on food. So, 3.5% inflation in food prices increases that to 34.155%.
In other words, food expense for a poor person increased 1.155%, while mine increased only 0.175%. The increase for a poor person is 6.6 times as great as the increase for me. Food inflation hurts poor people more than the more fortunate.
Economists like to talk about the Marginal Propensity to Consume (MPC) and the Marginal Propensity to Save (MPS). They measure what percentage of new income will a person consume/spend or save/invest. If you get another dollar of income, will you buy half a cup of coffee at Starbucks or toss it into your piggy-bank? If you spend 70% of that dollar, your MPC is 70%. Since you either spend/consume your money or you save/invest your money, a 70% MPC means your MPS is 30%. Some people, unfortunately, consume/spend 100% of their income. Those people are more directly impacted by inflation.
This is the "logical" basis for our progressive income tax system. You tax most heavily those people with the higher MPS. After all, they don't need every dollar of income to survive.
I know, I know . . . now we have a system whereby high income taxpayers pay the overwhelming majority of income taxes to run the government, but get less than they pay for, while poor people get more government benefit than they pay for.
One more time . . . why did Willie Sutton rob banks . . . because that's where the money is . . .
