4-17-08 by dugan
The government will never willingly change the duplicitous way
it calculates inflation, which is why it doesn’t get written about
much. So it’s worth pointing out a good column by Dean Calbreath of the San Diego Union today, on the damage done by excluding energy and food prices from so-called "core inflation" rate.
To his list I would add this: If the government’s official inflation
figure is lowballed, employers don’t have to increase wages, and
increases in Social Security payments are suppressed. That would
explain a lot about why wages stayed flat through the latest economic
"boom" cycle, while corporations and the wealthy raked it in.
From the column:
For the Federal Reserve, the core inflation rate amounts to a green
light to continue its policy of lowering interest rates in order to
keep the economy from falling into a deep recession. A higher inflation
rate could conceivably make the central bank freeze or raise interest
rates.But many economists say the core rate does not show how
inflation is affecting the typical consumer. Because salary raises for
most people are not keeping pace with the rising cost of living, people
are using a greater percentage of their wages to buy a smaller amount
of goods.
Those unaffordable goods nowadays include a full tank of gas.
The Christian Science Monitor,
toting up the consequences of high energy prices on average consumers,
says, "In the past three months, average consumer spending on energy
came to
$663 billion, or 6.5 percent of total consumer spending, according to
Moody’s Economy.com. A year ago, it represented 5.8 percent and in
2002, it was 4.1 percent of their spending."
Raise your hand if your wages have gone up by one-third over the last two years. And the poor show of hands is the problem.
