Real wages are rising in America

USA: inflation rises, real income falls

Even if unemployment has fallen to a record low, tax revenues will decline, while spending and national debt will continue to grow

With the financial crisis, inflation had dropped to zero from the end of 2008 and then even turned negative in 2009. According to the consumer price index compiled by the Ministry of Labor, the main cause was the sharp fall in energy prices. They rose again briefly at the beginning of 2010 and at the beginning of 2011, but did not increase continuously until the beginning of 2017.In the last few months they rose sharply from May onwards due to the beginning of the American sanctions on Iran and were 12 percent more expensive than in June one year ago. The main reason was the oil price increase of more than 30 percent since last year. This also pulled the consumer price index up by 2.9 percent, the largest increase since February 2012, although there was only a temporary interim high between February 2011 and February 2012 after the slump in 2008.

Inflation is rising more sharply than it has been in 10 years, largely due to Donald Trump's sanctions policy. In July alone, the consumer index rose by 0.2 percent compared to the previous month. Analysts also blame rising property prices for this, which is also reflected in rising rents. In addition to slightly rising food prices, the reason for this is the continued decline in the construction of houses and apartments.

Higher rents or rental income and generally higher inflation reduce the income of many people. Since last year, average weekly wages have fallen 0.1 percent from now $ 371.38, and real hourly wages have fallen 0.4 percent, according to the Department of Labor. However, that is downscaled to -0.1 percent. Unemployment fell further in July by 0.1 percent to 3.9 percent, confirming Donald Trump's "jobs, jobs, jobs" policy. The US president, who continues to fight the "witch hunt" of the media and special investigator Robert Mueller, boasted in view of the numbers yesterday: "Unemployment figures are better than in the past 50 years and perhaps the best ever. Our country is booming like never before - and it will get better. Lots of companies are coming back to the US. "

However, it is expected that inflation will be driven by Trump's trade wars. In addition, government spending is rising, driven for example by increased military spending, while tax revenues are also falling due to Trump's tax reform, which, like that of George W. Bush, continues to favor the rich. According to the Treasury Department, $ 224 billion in taxes were collected in June, 2.9 percent less than in June. By then, they have actually increased. Corporate tax contributed just 4 billion, income tax 110 billion and wage tax and social security tax 91 billion.

While tax revenues are falling, government spending has been rising steadily under Trump since spring 2017. Since July 2017, they have increased by 9.9 percent from 275 to 302 billion US dollars. Social security represents the bulk of it with 83 billion, followed by spending of 49 billion and Medicare with 24 billion. Alone 35 billion flowed into debt interest. The budget deficit increased enormously by 28 percent to now 684 billion US dollars. In July 2018 it was 77 billion, 34 billion more than in July 2017.

And of course the national debt continues to rise and is now at $ 21.342 trillion. When Trump took office it was just under 20 trillion. One problem is not only the increasing national debt, but above all that the interest burden is getting higher and higher. It has increased enormously since the third quarter of 2017. At that time it was "only" 476 billion US dollars, in the second quarter of 2018 it was already 537 billion.

This is due to the rising debt burden, rising inflation and the key interest rate, which the Fed has raised several times since 2015, from 0.25 to 2.0 percent in June 2018. The Fed left it at that on August 1st. She had announced that she would increase it to 2.5 percent in 2018 and to 3 percent in 2019, which will continue to drive the interest burden and also the national debt. Things are not looking so rosy in Trump country. (Florian Rötzer)

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