Wednesday, June 22, 2011

Why Price Inflation is Going to Register Milder While You Pay More for Everything

 Lawmakers are considering changing how the Consumer Price Index is calculated, reports Dow Jones.

According to congressional aides familiar with the discussions, a proposal would shift how the Consumer Price Index is calculated to reflect how people tend to change spending patterns when prices increase. For example, consumers tend to drive less when gas prices increase dramatically.

Got that? When something goes up in price, which means you can't afford to buy as much, some in Congess want to reduce that product's weighting in the basket of goods used to calculate inflation. Are food, gasoline and clothes prices going up? Hey no problem, you must be buying less, those products will be given less weight in the index.

Naturally, aside from the propaganda value of slower inflation, there are some real hard number benefits for the government that will screw, surprise, the retired via smaller increases in inflation adjusted social security payments and the like.

 The proposal could lower federal spending by around $220 billion over the next decade, based on calculations by last year's White House deficit commission, which recommended the change as part of its final report.

According to two congressional aides familiar with the budget negotiations, the shift is being "seriously discussed" as part of the ongoing talks to strike a budget deal, that would be used to ease the passage of a required increase in the country's debt limit, reports DJ.



  1. Inflation minus the inflation = no inflation, no?

  2. Be aware of the future! The US will experience a Zimbabwe-like inflation, yet CPI stands at 0% (or perhaps it's a negative 5%, if Fed needs an excuse to print money. Deflation is a bad thing after all).

  3. This is all about defaulting on obligations that are tied to inflation (SS, Medicare, etc.).

  4. the workings of the hidden tax, not even a blip on the public's radar

  5. Hi Bob! I'm a big fan of your blog; I read it pretty much every day. Really great stuff, and certainly one of the best sources out there for news/commentary on world events from a thoroughly Austrian-Libertarian perspective.
    However, I would like to offer one piece of advice, which I hope is somewhat constructive. I apologize in advance if this comes across as critical or nit-picky

    Often times, I really want to repost your content to Facebook (the above article for example), because I really want others to read it, who might not have much exposure to this perspective or your blog. But often I hesitate, and then decide not to post to Facebook, because of blatant spelling or grammar errors(usually just typos). The above example being "you can't afford to buy has much".

    I know, I know - it's a BLOG, and I also really appreciate the amazing amount of content you are able to get on here each day... BUT a quick proof-read of each post might help you root out enough fat-fingered mistakes to get you many additional reposts, and thereby more unique visitors, click-throughs, ad revenue, etc. It would be a classic positive-sum, win-win situation! Like capitalism!

    Thie typos aren't a big deal for me as a reader and likely not your audience - I just want to ensure that when introducing this to whomever may read my Facebook posts, that small things like this don't become intellectual turn-offs.
    Hope this is helpful. Thanks either way and keep up the great work!

  6. So, as a soon to be retiree, the double whammy:

    1. Fixed income in inflationary environment
    2. "COLA" denied by CPI falsification.

    I feel like a gang-bang victim.

  7. @Robert Williams

    As you have noted, I really push this product out. Which means I tend to re-read my post just after writing it, which is not the best way to proofread copy. The best that can be done, and many do this, is for readers, who spot a typo or incorrect grammar, to just leave a comment and I will correct it.