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April 19, 2004
A Sampling of Advisory Opinion
Benson's Economic & Market Trends
the CPI to Rob Americans Blind"
April 14 With an election approaching, our
elected officials don't want the consumer price index to be an honest measure
of the cost of maintaining the same standard of living....they want [an] index
cleverly devised to hardly ever rise at all! Manipulating the CPI
(specifically because benefits to the retired on Social Security, Medicare and
Medicaid are tied to it) and making people believe inflation is low, will keep
the "fraud" alive.....
If productivity's so high, why isn't government pushing
through a 10% flat increase in Social Security benefits so the retired can get
their share of the productivity miracle?
Sources of manipulation: 1) [putting] the wrong items in
the index; 2) taking "hedonics" [used to identify and adjust prices of
quality-changed good] to ridiculous extremes; 3) getting consumers to do more
work and receive [fewer] services; and, 4) changing to a chain-weighted index:
As the cost of some items goes up and you can no longer afford to buy them,
you're forced to use that item less and find a less-expensive alternative.
Then, the weight of that expensive item goes down - but the weight of the less
expensive item goes up, resulting in prices that have hardly changed at all!
(Orwell would love this!)
Or: Granny used to buy steak and croissants, but [higher
prices made her switch] to spam and dough balls....items she never used to
buy...so her cost of living goes down! (Her weight for steak is now zero.)
Her standard of living went down when the price of steak went up. So what's
[counted] is not Granny's standard of living, but her cost of living!