Death of the Dollar Menu shows Fed's Wage Erosion
“Got a buck? you’re in luck!” This jingle was a staple for you ever since your parents started giving you an allowance. At the time, you got maybe $5 a week to spend or save as you pleased. Although this was a fortune as far as you were concerned, a fiver tends to evaporate quickly, and your snack options were limited. One of the few exceptions to this was McDonalds. For just a dollar and change you could get a double cheeseburger or even hot fudge sundaes. Fast forward 5 years. You’re paying a lot for college, so the Dollar Menu is still a frequent order for you. It’s changed now: the sundae is gone, and the double cheeseburger has been replaced with a “McDouble” featuring fewer pickles and less cheese.
Today, the Dollar Menu is dead. They say it’s the Dollar Menu “and more” but the only “more” is going into the cash register. Even the substandard McDouble has been hiked by almost 60 cents. Hopefully, you make enough that you don’t need go there much anymore, but what about your kids? Assuming you pay them the same allowance, it’s not going as far as yours did just a decade ago. It’s not just happening in the fast food industry either: working Americans are feeling the pinch everywhere from grocery prices to gas, and are being forced to put less in savings for retirement so they can buy essentials today. So why are our wages shrinking? Some politicians argue that corporations are fattening their bottom line. Probably true, but at most, only half the story: in the late 90s, the “Dollar Menu” era if you will, most of our policies on taxes, trade, and regulation were, for most Americans, the same as they are today. The only thing that was different was monetary policy: under Fed Chairmen Paul Volcker and Allan Greenspan in the 80s and 90s, the Federal Reserve operated under rules that governed their interest rates and monetary production, fondly remembered as the Great Moderation. About 13 years ago, the rules were thrown out, and the result has been rapidly increasing cost of living. The sad part is the rising prices aren’t even acknowledged by government officials, since the Core CPI (which measures official inflation) excludes the cost of food and energy, things every worker needs to buy.
What can we do? First, we need to take a hard look at the monetary policies at the heart of the problem. Rep. Kevin Brady and Senator John Cornyn have taken a step forward by introducing a bipartisan, bicameral Centennial Monetary Commission to look at the data for six different monetary regimes the Fed has pursued over the past 100 years, and make recommendations as to which ones led to the greatest job creation and growth. Unlike an audit-the-fed push, this proposal hasn’t been polarized (it’s even been sponsored by the President of the freshmen Democratic Caucus, Rep. John Delaney) and would give us an opportunity for course correction without compromising the independence of the Fed. For anyone trying to save for retirement, for anyone who feels sick whenever they pay at the pump or buy groceries, for anyone who feels like their savings are shrinking, it’s time to look at our current easy money policy and say “we are not lovin’ it…”
Nicholas Arnold is the senior researcher at American Principles In Action