‘Workarounds’ galore – How real Americans deal with ‘real’ inflation

(Guest article by Bill Rice) While working on a story on inflation and “shrinkflation,” I quickly zeroed in on the concept of “workarounds” as an alternative, perhaps superior, way to gauge the true state of our economy.

I define workarounds as the changes individuals or families (or businesses) must make in their daily living to adapt to a world of rising prices. If nothing else, these examples, taken in the aggregate, challenge the conventional wisdom that inflation is “low” or “contained,” or that the economy is just fine, thank you.

As decades have passed, the list of workarounds families have utilized to deal with rising prices has rapidly grown.

Women and mothers entering the workforce in massive numbers – the disappearance of families where one income was sufficient to maintain a “constant standard of living” – might be the earliest and most important workaround on my list. Other trends from this expanding list include:

Shoppers switching to less expensive store or private-label brands, families “substituting” hamburger or chicken for steak, buying from “value” menus, couponing, shopping at discount or “dollar” stores more often, buying in bulk to get the lowest unit-cost (think Costco), buying more items at yard sales or from Internet swap meets, “cutting the cord,” cancelling the land line, getting fewer haircuts per year, taking clothes to the dry cleaners less often, cutting out the maid service or paying for it fewer times each month, attending sporting events less often (here, here, here and here), going to the movies less frequently, playing golf or hunting less frequently, dropping out of country clubs and civic clubs, going to the dentist less often, cancelling newspaper and magazine subscriptions …

Cremation instead of burial, casual instead of (more expensive) “business” attire, eliminating or “rationing” prescription medications, moving from high cost-of-living states (or cities) to lower-cost-of-living communities, adult children moving back in with their parents (and aging adults moving in with their grown children), car-pooling and now “car sharing,” the growth of “do-it-yourselfers,” delaying or “reversing” retirement, taking on a part-time job … the list of  “workarounds” goes on and on.

Americans have always resorted to workarounds to counter rising prices or help “make ends meet.” However, the list of necessary workarounds has “absolutely” been increasing Ron Paul told me, a trend he said is “going to continue to grow.”

As it always has, the market place has rewarded businesses that helped families save money. Then again, lower prices do not necessarily equal a higher standard of living, a point made by John Williams, the creator of ShadowStats, the best known “alternative” measure of inflation.

To illustrate the difference between simply compiling prices without taking into account reductions in the quality of goods (or of “buying experiences”), Williams cited the example of his long-time tailor, who eventually had to close his haberdashery as customers fled to the mall and more affordable prices.

Yes, Williams could still buy clothes (in fact for a lower price), but the quality had diminished; so too had the level of service. The experience of acquiring clothes was not as satisfying or memorable.  His question: Had he in fact maintained a “constant standard of living” by “substituting” suits from, say, JC Penney for the finer suits and richer experiences he had grown accustomed to?

Walmart assuredly saves consumers money. However, it also helped kill the downtown merchant, and with it our Norman Rockwellish memories of downtown America. “Self serve” killed the neighborhood “full-service” filling station, saving customers 40 cents a gallon on a fill-up, but also taking away our grandmother’s ability to get her tires and oil checked and her windshields cleaned on a regular basis (not to mention eliminating a popular first-time job for many males).

Netflix killed the neighborhood video store. Clothes that don’t require pressing, as well as employers allowing casual attire in the workplace, thinned the ranks of dry cleaners. iTunes largely killed the record store. Craigslist helped kill the (more expensive) newspaper classified section, expediting the slow death of the journalism industry. Barnes & Noble placed the independent book store on the extinction list, before Amazon threatened this same retailer.

Today, Uber is killing the taxi driver. Hulu and streaming video services threaten cable and the TV networks. TD Ameritrade threatens the traditional stock broker. Aldi (with its more affordable private label brands) threatens Kroger. Walmart, once unchallengeable, is today threatened by Amazon and Dollar General.  People choosing to make their own turkey sandwich probably contributed to Subway closing more than 1,100 of its stores.

Most of these innovations/trends/changes kept CPI lower than it would have been otherwise, but did they actually allow people to maintain the same “standard of living” they enjoyed in prior years?  Some innovations probably did; more probably did the opposite.

And how exactly did families from prior periods of time (often with just one income) afford to pay those full-service gas prices, or trade with the downtown hardware store instead of Home Depot?

Today it’s uncomfortable to think about, but in working on this story, a question I’d never thought about suddenly occurred to me. Namely, how did so many middle and upper-middle class families (families with just one income from the “poor” South) actually afford the full-time domestic “help” depicted in the movie of the same title?

Was everyone richer back then? Or is inflation higher today? Or, in “real” terms, is it possible the answer is “both?”

Labeled by Ron Paul as the “cruelest tax,” inflation is not a trivial topic, especially for the poor and those on fixed incomes.  Even if people manage to “get by,” their new “standard of living” cannot be described as improved, superior or welcome.

Yes, the “Ten Percent” are doing better than ever, but is this really the case for the bottom 50 or 60 percent? If real standards of living were rising would it be this easy to identify so many “workarounds?”

All of these workarounds and business trends have been noticed. Details have been provided in journalism, academic papers, books and seminars.

What’s missing from much of this coverage is any effort to connect all the dots. That is, for some reason, the elephant in the room is too often ignored.  The “elephant?” Practically every trend mentioned above shares one common antecedent – prices that, in the minds of consumers, had become unaffordable.

Perhaps we never pause to add up all the workarounds we are using. We might think about our decision to drop out of the civic club (and save on those membership dues), but we don’t tally up the other 10 changes we made for the exact same reason. If more people did this, inflation might become a bigger political issue than it is.

In fact, this might already be happening.  In a country where so many people are forced to employ so many workarounds to make ends meet, politicians of a certain ideological bent might see a grand opportunity. In such a nation, for example, one might see a surge in presidential candidates suddenly espousing “solutions” straight out of a Socialism 101 textbook.

At least at the micro level of the economy, families are increasingly forced to deal with a reality they’ve been told is not a reality.  Today’s economic conventional wisdom tells us that rising prices are no big deal. Indeed, we’re told what the economy really needs is more inflation.

But in a country where 46 million Americans rely on charity food banks to supplement their food intake, and 42 million qualify for food stamps, and millions more Americans are forced to max out credit cards to purchase necessities, do we really need higher prices?

Another trend I identified was the proliferation of payday and title loan businesses. Montgomery, AL (population 200,000) has nearly 100 such businesses, according to one city councilman. (By way of comparison, the city has 11 McDonald’s restaurants.)

One council member proposed an ordinance to limit the growth of such “stores.”

“If you see 18 of them on a main thoroughfare going into our city, it makes you think that the people who live around here must be desperate,” he said.

Well … yes. Apparently providing “quick cash” is another workaround created by entrepreneurs to serve (some say exploit) “desperate” people.

In researching this topic, I read dozens of stories on inflation. I also read the Reader Comment sections that followed these stories. As a measure of “Man on the Street” sentiment, these message boards were often more illuminating than the articles proper.

While Fed governors, academics and the business press declare that inflation is “low” and “contained,” real, live Americans are calling BS.

If one is seeking to determine whether inflation is a bigger deal than we are being told, simply read the Reader Comments. And then add up all the changes Americans have been forced to make in their lives to keep up with rising prices.

At least in my opinion, it’s this list of workarounds – always growing, never shrinking – that’s telling us the true story of inflation in America.