Originally Posted by gmorlitz:
Thank you all for the excellent responses.
The absurdity of having "more to spend" when its an extra $8 or $20 is apparent.
And the same thing is true in reverse when gas prices go up. I never much understood these posts when the cost of the hobby and trip to York makes gas prices pretty much irrelevant.
Except that some people really like to whine complain.
Gerry
I understand the dislike of the whining and complaining.
That being said, historically a sharp rise in gas prices has almost a 1:1 correlation with an impending recession. This causes people to become skittish spending money because most folks know this, and you get the pocketbook hit as well.
I'll put it another way. If the economy could reliably expand at 3-4% per year, unemployment would come down and the participation rate in the workforce would go up beyond its current relatively low level (although there are contributors to that not appropriate for discussion here). Government debt and deficits would also come into line as a percentage of GDP. Put simply, it would be a good thing. The different between a solid, growing economy with reduced unemployment and one that is in recession that causes layoffs and what-not, is about 5-6%. In other words, the difference between solid growth and a bad recession (+3% to -2%) economic growth, is a small margin in percentage terms with huge implications for the economy.
Get back to gas prices. Say someone drives for work, such as a contractor who needs to travel to different job sites or our resident piano teacher (I salute you, btw. My poor mom tried to find some musical talent in me for years to no avail.) For the contractor, let's say the cost of fuel goes from $400 per month (these guys can't drive a Prius) to $550-$600 per month. I use that example from personal experience and people I know in the business. That extra $150-$200 per month will have to be recovered: less dinners out, less recreation, less discretionary spending, or the consumer runs up debt, but only to a point is that viable. And these aren't lawyer, doctor, professional or successful business owner salaries. These are likely all families with incomes well under 100k a year. All of those folks who were previously the beneficiary of that additional spending -- the local restaurant, the local dry cleaner, the local contractor/handyman -- will now take that hit. For many of them, they will take the hit from multiple sides because they have multiple customers impacted. And that's your difference between the happy +3% growth scenario and the doom and gloom -2% growth scenario, on the micro level.
Thus, the point is that for real people living in what is a challenging economic environment, the difference in gasoline prices between say $2.50 and $4.00 a gallon hits them right in the gut and it has a significant impact on the economy. And so while there is an annoying tendency of people to whine at the slightest provocation (how would some of these folks survive what my grandparents survived during the depression?), it is not all BS. It hits them hard, and it hits the economy hard. And unlike a lot of the elitist types who think we should embrace $8.00 a gallon gas, these folks don't have the ability to embrace the green lifestyle by purchasing overpriced compact hybrid or diesel cars or putting $20 light bulbs into every fixture. And often, these people live further out from the city where their commutes are longer because that's where they can afford to live.
I am happy that for me the difference in fuel prices is not that material. I can take a train to work, I can drive less, if needed we can change out the cars. But our family is fortunate, even though hard work has been involved. Not everyone is so lucky, and I have learned not to dismiss the views of these folks.
Great observation, Gerry!
. also the Camaro uses premium fuel, about $.30 more a gallon.
