No inflation according to the Federal Government. This is a big lie, and in multiple ways. For example, in accounting for prices of items we buy in the market, the relationship between price and package size does not have to be adjusted for – so a big package of potato chips made smaller, without a price reduction, does not get measured as an inflation, when obviously it is.
The "chained CPI" is another issue. See Bruce Krasting's Irrational Exuberance – July 2011. Excerpt:
One aspect of the “compromise” talk is a story about how changing inflation calculations could generate significant new revenue for the IRS. The technical description is a change from CPI-W to the Chained CPI for the purposes of indexing various aspects of the tax code.
The Joint Committee on Taxation did a review of this. I was surprised with the results. The consequences are measured in the following chart that looks at things out in 2021. Look at what income groups have a tax increase as a result of this. Those making Less Than $100k would get hit by the highest percentage. Those that make $500k-1mm do pay 0.1% more, but the really fat cats making over a Mil don’t feel it at all.
Washington’s BIGGEST Lie
Courtesy of Dr. Paul Price at Beating Buffett
How do you choose just one when there are so many whoppers to pick from? I’m going with this one because it affects 100% of the population and the deception is so blatant.
The most egregious falsehood? The one repeated by Uncle Bernanke and Uncle Sam on a daily basis…
“There is little to no inflation.”
For the period ended June 30, 2012 preliminary Chained CPI [C-CPI-U] was reported as being just 1.6% [source: Bureau of Labor Statistics].
Most individuals think of inflation as the increase in cost of buying the same basket of goods and services that they did versus the previous month or year.
That’s not how the BLS reports things. They readily admit …
The CPI is a statistical estimate that is subject to sampling error.
Chained CPI for All Urban Consumers (C-CPI-U) covers approximately 88 percent of the total population. CPI-U include in addition to wage earners and clerical worker households, groups such as professional, managerial, and technical workers, the self-employed, short-term workers, the unemployed, and retirees and others not in the labor force.
The C-CPI-U in its final form accounts for any substitution that consumers make across item categories in response to changes in relative prices.
Translation: Chained CPI assumes those who used to eat filet mignon have switched to chuck steaks, pork chops or hamburger due to rising filet prices. It could mean comparing from-concentrate orange juice prices to what fresh-squeezed, not-from-concentrate OJ was selling for one year ago.
Including perhaps involuntarily self-employed people, part-timers, unemployed, retirees and others ‘not in the labor force’ stacks the deck in terms of BLS’s license to assume trading down in response to higher prices.
But wait, there’s more.
If you pay your bills or shop for your own groceries you’ll recognize another big source of hidden inflation. Here are some common examples.
New ‘cases’ of Coke now contain 20 cans- not 24, a 16.67% price change if the ticket price remains unchanged. Half-gallons of ice cream are almost universally 1.5 quarts now while their packaging appears identical to the naked eye.
If you’re a healthier soul consider the change in Tropicana orange juice and my own Independence Blue Cross premiums from 2011 to 2012.
Blue Cross offered me a static premium if I was willing to take a much higher deductible plan with way bigger co-pays. Tropicana charges the same now as they did before the 7.8% shrinkage in their package size. [Thank you, George Constanza].
Why does our government lie to us about such an important topic?
They’re committed to cost of living adjustments for active and retired civil servants, welfare recipients, and social security beneficiaries.
It’s much cheaper to lie and costs less votes to cheat rather than reporting the truth. Undocumented inflation steals from everyone in the same lethal way that fudging LIBOR rates did. That sin is being talked about daily. False CPI numbers never get mentioned.
Please let me know in the comments section if you think I’m off-base in my conclusions based on your own real-life experiences.
Dr. Paul Price
