They succeeded in reducing the reported level of inflation, which reduced cost-of-living adjustments

[ThomCat]

Here is an interesting blog I found through Reddit. This is an interview with an economist who is talking about how the government cooks their numbers when they provide economic indicators and numbers. Interesting and depressing reading.

http://carolynbaker.net/site/content/view/1075/1/

When it became popularly used in auto-union contracts after WWII, the concept of the Consumer Price Index was fairly simple. But they wanted to measure changes in the cost of living, and they needed to maintain a constant standard of living. That was the traditional definition; the way the CPI had been designed.

That held pretty much in place until we got into the 1990s when Alan Greenspan and Michael Boskin, the head of The Council of Economic Advisors for the first Bush Administration, started talking about how the CPI really overstated inflation. The rationale was that when steak goes up in price, people buy more hamburger instead of steak; therefore you should reflect the substitution in the CPI.

That is not the concept of a constant standard of living; it is the concept of a declining standard of living that has no value to anyone other than politicians in Washington. They succeeded in reducing the reported level of inflation, which reduced cost-of-living adjustments in Social Security checks. Because of the changes in the 1990s, our Social Security checks are about half what they should be!

[Hannah Bell]

1. Greenspan = antichrist

[Selatius]

2. All Greenspan did was obscure the victories Corporate America achieved over Labor in America.

By redefining the CPI to measure, essentially, the cost of survival vs. the cost of maintaining a constant standard of living, they basically blinded most people to the reality that their paychecks do not grow as fast as the cost of living. I think, partly as a response, people started abusing credit cards more and more. I say, "abuse," because maxing out credit cards and paying a minimum balance that guarantees you won't pay it off until the Sun itself burns out is nothing short of suicidal financially speaking.

Now, your average consumer carries over 8,000 in credit card debt in a bid to maintain a standard of living, whatever that is. People, faced with decreasing paychecks, replaced the lost revenue with credit, but now that house of cards has collapsed. The result is consumers are currently retrenching into a more sustainable spending pattern. This recession is deep because people were substituting credit cards and equity in their homes in place of lost income that has failed to keep up with the cost of living.

It was simply easier to borrow against the future than pick a fight with the employer to get pay concessions. Now the future is here, and the bill is past due. Sadly, I fear people will learn far too late that picking a fight with their employer was probably the better fight than fighting the soup kitchen line. It's already too late.

[ThomCat]

3. He did far more than that.

This change in reporting also diluted what people on Social Security take home, as this article mentions in passing (and I deliberately quoted). It reduced the officially calculated poverty level, which had a wide range of negative effects for poor people nation wide, and for organizations that fight poverty.

He basically stacked the deck so that less money would go to people at the bottom, so that more money would go to people at the top.

This was one of many steps that shows it was orchestrated.

[annabanana]

4. When was it that they took food & fuel out of the equation...

because they were too "volatile"? It was as if they suddenly decided that food, gasoline & heating oil no longer mattered in "quality of life" issues. .

That was one of my early "wtf" moments.

[RC]

5. The inflation index went down as the price of gasoline and food went sky high last year.

With food and fuel in the equation, inflation should have been in the double digits.

[unblock]

7. the do NOT take food & fuel out of the equation

they report two numbers, one with food & fuel and one without. actually, they report a whole lot of numbers, but these are the two that get the most attention.

with food and fuel, you get the "headline" inflation rate.
without food and fuel, you get the "core" inflation rate.

the headline inflation rate is the one that matters for cola adjustments and so on. it's the only one that legally matters (actually i think there are a few differences but removing food and fuel are not among them).

the core inflation rate is the one economists are usually more concerned with, because short-term fluctuations in food and energy often obscure a real trend in core inflation. true, sustained increases in food and fuel prices are inflationary, but the thinking is that if there's really inflation going on it will show up in the core rate, whereas if it remains confined to food and/or fuel then it's either noise, temporary, or non-systemic.

[Festivito]

6. Yet another method of Republican borrow, spend and cheat. /nt