The inflation spook
The President of the United States currently makes about $200,000 a year. In 1951, the President of the United States, Mr. Harry S. Truman, made considerably less than $200,000 a year. Mr. Truman probably made around $60,000 a year.
In inflation adjusted dollars, however, President Harry S. Truman earned considerably more than President Clinton earns today. Adjusting for inflation, President Truman had more raw purchasing power than President Clinton has today.
Does this mean that President Truman enjoyed a higher standard of living? And was Mr. Truman wealthier than the current president?
After all, the experts claim that inflation erodes consumers’ purchasing power over time. A loaf of bread gets more expensive as inflation rises over time. This suggests that inflation should compromise one’s standard of living.
Mr. Clinton, however, undoubtedly enjoys a much higher standard of living than Mr. Truman ever did during his lifetime. And we are not merely referring to the oral perks Mr. Clinton enjoyed in the Oval Office.
Clinton enjoys more comfortable automobiles, faster airplanes, superior medical technologies, and spectacular telecommunications. He enjoys many products and services that did not even exist during Mr. Truman’s term in office.
Although Mr. Truman had more inflation-adjusted purchasing power than Mr. Clinton, when compared to the current global and tech-driven market, as a consumer, Truman had very few shopping options. He did not have the modern conveniences of the credit card and the Internet. He did not have the option of buying goods made in China, or clothes made in Saipan, for that matter.
Technology and free trade—-these are the two critical factors that have tempered the effects of inflation over time. They have kept inflation in check. They are responsible for President Clinton’s higher standard of living relative to Truman’s (despite inflation).
The original Ford Model T may have cost $300 at the time of production. The average Ford today may cost well over $15,000. Yet, can anyone doubt that, despite the ravaging effects of inflation, the car buyer today is much better off, particularly if that new Ford can be produced in Saipan, by Chinese workers, and shipped duty free to the good old US of A, which would make it cheaper?
