Inflation up 1.2% last year??

Discussion in 'Economics' started by jbtrader23, Mar 18, 2004.

  1. What are the folks at the BLS smoking these days? Really. Gas, oil and commodities are surging to 10 year highs. Medical costs are going up at least 8-12% a year. Is rent only increasing 1.2% a year?

    These figures are just laughable. Sure, some prices are certainly falling; DVD players, electronics, etc. But taken as a whole, inflation is going up much more than 1% a year.

    Greenspan must be sleeping great these days. The market is over 10,000. Money is sloshing around the economy. Housing hasn't cracked yet. And of course, inflation will never move over 2 or 3%. Not a bad deal....
  2. jstanton


    Statistics Lie On The True
    Cost Of Living
    By Robert Kuttner
    The Boston Globe

    What is the matter with the whiny American voters? They keep telling pollsters that they think America is on the "wrong path." But don't they read the statistics? Don't they know that unemployment is at a comfortable 5.6 percent, that inflation is almost nonexistent, that the economy is growing smartly at around 4 percent?

    These happy statistics, alas, don't accurately capture the economic reality of ordinary people. Take inflation. It's true that measured inflation is very low, but look at all that's left out.

    In the case of health care, the government's consumer price index tracks the cost of medical services. But it is less precise about tracking who pays for them. If your employer's health plan is increasing your share of premiums and cutting the company's contribution or if the plan is increasing out-of-pocket charges or reducing what drugs it will cover, this shift is accounted for indirectly, after a lag of two years. But it hits your pocketbook immediately. And if rising medical costs deter you from seeing the doctor, that doesn't show up in the index at all.

    Or consider housing. There are parts of the country where housing prices have been declining for a decade because few people want to move there. Statistically, these declines get averaged with astronomical housing costs in major metropolitan areas to show only modest average housing inflation. Around big cities, prices have plateaued at very high levels that are plainly outstripping incomes. Try telling a young person in Greater Boston or New York or LA that there's no serious housing inflation or that rents have not increased faster than earnings.

    Another case of hidden inflation: A great many people in late middle age find themselves subsidizing their newly launched young. The causes of this trend are multiple: low starting salaries, skyrocketing rents, and the high cost of college tuitions and health insurance. Is this a dent in the cost of living for the middle aged? You bet. Does it show up in government statistics? Nope.

    The inflation numbers also fail to capture pocketbook realities for retired Americans. A low official inflation rate plays a cruel trick on seniors. For starters, it means that cost-of-living adjustments in Security Security checks are mere pocket change. One new prescription can more than eat up this year's Social Security increase.

    Further, a low rate of inflation translates into a low interest rate on savings accounts, Treasury securities, and other prudent investments for the elderly. Moreover, older people on fixed incomes who are not homeowners are also at the mercy of rising rents.

    And the same deficiencies in the consumer price index that fail to capture cost shifting in health care particularly affect the elderly, who spend a disproportionate share of their income on doctor's bills, hospital costs, and drugs.

    Or take energy costs. Gasoline is near an all-time high. That doesn't affect the overall index much because energy costs are a relatively small share of average total consumer spending. But if you need your car for your business, you certainly feel it.

    Then we have the unemployment numbers. Nominally, unemployment is a nice, manageable 5.6 percent -- about where it was during much of the booming 1990s. But that statistic leaves out all the people who left the labor force because they gave up on ever finding a job. If you include those, the real unemployment number is more like 7.7 percent. The proof of the soft job market is that earnings have not kept up with inflation. In 2003, the official inflation rate was 2.3 percent. The median wage increase was just 2 percent. And the 2004 statistics are likely to be worse.

    The "average" voter got a tax decrease that the administration likes to put at around $1,000. But that artful statistic averages Joe Sixpack with Bill Gates. The typical voter got a federal income tax cut of more like $300, and in many cases that small federal tax cut was overwhelmed by local property tax increases that were caused by declining federal aid to states and cities.

    President Bush may have gotten away with telling the voters things about Iraq that just aren't true. But he'd better watch out when the evidence against his rosy statistics is right in voters' pocketbooks.

    Ordinary people may not be professional statisticians, but they are not fools. America's voters know better than the experts whether their own personal economy is thriving. Bogus economic optimism only reinforces the growing sense that this president speaks with a forked tongue.

    - Robert Kuttner is co-editor of The American Prospect. His column appears regularly in the Globe. © Copyright 2004 Globe Newspaper Company.
  3. EBOAH


    Yeah makes you wonder?

    Hmmm, we just had a few years of Wall Street and corporate Scandals related too Fraud & False Accounting!!!

    Now I ask, Are these Gov't numbers being release like PPI, CPI, Payrolls, Jobless Claims, Factory Orders, Retail Sales, etc.... ARE THEY REALLY ACCURATE and TRUE???

    Who's auditing these numbers? It would not surprise me to find out that a lot of these numbers are in fact fudged and false! Always so many revisions and such, blah blah blah...

  4. ertrader1

    ertrader1 Guest

    PPI is full of shit and so is the CPI......i believe, like most Government department, the accounting methods are out dated and do not reflect the true fact i would even wager to say that they have a HUGE Standard other words they are off by a whole hell of a lot.

    Is it a conspircy NO......its typicl of the Governemnt, tooooooo lazy and toooooo much red tape to correct anything, so they just leave it be.
  5. It's not just laziness or ineptitude, there are incentives for the gov't to keep inflation figures as low as possible to support low rates and screw CPI adjusted pensions.
  6. Diode


    Exactly. Also TIPs (inflation-indexed Treasuries). The US government has several incentives to underreport the true rate of inflation.