A Poor Excuse

 

Even if Putin’s war would end today, the damage is done. Europe has determined to cut its dependence on Russian fuel and possibly grain, even as power generation and grain exports have been slammed. Ukrainian fields have been ravaged, population has been massively displaced and electrical power infrastructure and generation decimated. Pipelines have been blown up, powerlines ripped and cut, and electrical power generation destroyed or seriously damaged. Russia provides 20% of the world’s wheat, making it the world’s largest wheat exporter. Blessed with some of the most fertile agricultural land on earth, Ukraine is the fifth largest. But their fields, roads and the agricultural workforce have been ripped apart.

Massive increases in the price of commodities, any commodities, are felt globally. No matter how much we may want to blame the administration in power for any domestic disruption, particularly a rise in the cost of some of our most basic necessities, there’s not much that a president can do about it. Sure, state and the federal governments can reduce or suspend some or all of their taxes at the pump, which will definitely lower consumer prices while impairing our tax base, but that has no impact on the price of a cubic foot of natural gas or a barrel of oil or the price of farm goods. I

Even assuming America’s “energy independence” – especially noting that only 1% of our gasoline comes from Russian sources (which is ending with Biden’s ban announced on March 8th) – the marketplace for oil and gas is global. If prices for those fuels skyrockets overseas, they skyrocket here too. We do not set the price of fuel, and US producers do not sell their products at way below global pricing to Americans to be patriotic or nice. They sell based on the global number, even for locally produced products. If Americans reduce demand because of high prices, they have only a very slight impact on global demand pricing. And since growing, harvesting and shipping foodstuffs are a function of fuel costs, our total supply chain costs – compounded by labor shortages – are soaring as well.

Writing for the March 5th Los Angeles Times, Maximo Torero explains a problem that will not go away any time soon. “[Lost] in the discussion is what a wider conflict might do to global food prices amid a disruption to the supply chain of grains from Europe’s breadbasket. An increase in prices could have grave consequences for countries that rely on imports from Russia and Ukraine, even as the world has already seen a steep rise in hunger and malnutrition because of the COVID-19 pandemic… 

“The war between these two farming giants is poised to disrupt a quarter of the global grain trade, slashing supply. If Russian banks are banned from using the international payment system SWIFT, as part of sanctions already agreed upon by Western allies, then buyers, traders and other supply chain actors and financial institutions would be blocked from transactions to import food from Russia.

“The global agricultural trade at stake is worth some $1.8 trillion. About a third of agricultural exports used global supply chains involving at least three countries as of 2015. A disruption in the supply chain near Ukraine’s Donbas region could have a ripple effect on the price of, say, oilseed in Africa. Ukraine’s Black Sea ports ship most of its grain exports, and with Ukraine closing its ports until the war ends, grain prices will rise. [If they even retain those ports.]

“Countries that rely most heavily on wheat imports from Russia and Ukraine don’t need a reminder that high food prices can fuel social unrest. Egypt, which gets the bulk of its wheat from Russia and Ukraine, saw revolution and waves of violence amid the Arab Spring triggered in part by food inflation. Across Kenya, higher food prices for staples such as milk, bread, sugar and maize recently fueled a countrywide social media protest.”

“In January, wheat prices globally were more than 25% higher than at the same time last year. Food prices are high because energy prices are high, which causes fertilizer prices to soar. The cost of natural gas, a key component in fertilizer, has surged. And top suppliers curbed fertilizer exports last year to tame inflation at home. Shortage of fertilizer can jeopardize the next harvest. In sub-Saharan Africa, fertilizer demand was estimated to have declined up to 30% in 2021 due to higher prices, resulting in potentially 33 million tons less food produced.” Those who are at the bottom of the economic ladder are clearly hurt the worst. 

The United States is hardly immune to these price increases, but as a richer nation, for the most part we can absorb that higher cost. For the most part. Those at the bottom of our economic ladder here, having already been slammed by the impact of the pandemic, face a double whammy: higher prices for basics and a massive reduction in governmental support programs. Writing an op-ed for the March 6th Los Angeles Times, Michael Hiltzik drills down on why the January showed an increase of 3.7 million American children into officially designated poverty.

“When it comes to anti-poverty programs, the U.S. seems to have developed the unique skill of cutting off benefits just as they’ve shown their value… The latest example is the Child Tax Credit. Part of the American Rescue Plan, the $1.9-trillion pandemic relief package signed by President Biden last March, the credit had the capacity to truly transform the economics of family life in America.

“The program was designed to deliver $3,000 per child ($3,600 for children 5 and under) to the vast majority of families over the following year. Half the amount was paid in monthly installments from July through December at the rate of up to $250 per child ages 6 to 17 and up to $300 per child under age 6… The credit is fully refundable, meaning that households are entitled to it even if they owe no federal income tax. The credit phases out for high-income families.

“The payments reached more than 61 million children in more than 36 million households, according to calculations by Columbia University’s Center on Poverty and Social Policy. The balance of the credit is to be paid as tax refunds when families file their federal income tax returns between now and April 18… The payments had a rapid and material effect on the child poverty rate, which fell from about 16% in June to about 12% in December. Then the monthly payments ceased, and the child poverty rate rebounded to 17% in January, its highest mark since January 2020. 

“[The] the entire rescue plan, which included enhanced food stamp benefits and other safety-net features, was projected to help cut the child poverty rate in the U.S. nearly in half, to 7.5% from 13.6%, according to an analysis by Columbia University.” For lack of two Democratic votes, Joe Manchin (WVa) and Kyrsten Sinema (AZ), bills extending that support died in the US Senate.

To make matters so much worse, despite jobs going begging across the land, there are over a million fewer women in our end-of-pandemic work force, women who add to our productivity and help restore an efficient supply chain – not to mention the hard dollars they earn to pay for these higher prices – who are stymied by exorbitant childcare costs. According to Move.org, “On average, infant child care costs $216 a week, which is 17.1% of the national median household income. Infant care in the US costs anywhere from 10.9% of household income—like in South Dakota—all the way up to 26.3% of household income in Washington, DC.”

Republicans have adopted the mantra of “wokeness” (which means weak and dependent in their definition and kindness and tolerance to the rest of us) to justify not fixing the child poverty and childcare problem, issues highlighted in President Biden’s State of the Union address. Billionaires in this country, having used the pandemic to cull inefficiency from their operations while benefitting from a massive 2017 35%-down-to-21% cut in corporate taxes, are paying legendarily low overall taxes, with 50 or out top corporations paying no taxes at all. They are making more money than ever. Exactly when is the government going to prioritize the vast majority of Americans and not the top 5%? “Woke” has become an very arrogant and ugly word.

I’m Peter Dekom, and we live somewhere between a plutocracy and an anocracy these days… with democracy withering.