There are some who are claiming that the revision of the CPI is to help the Federal Reserve stop fighting inflation. This is typical for Americans who only watch the Fed and nothing else. The formula for the CPI has been routinely altered. Real Estate used to be included but when that was rising too much, they replaced that with rents. When rents started rising, they replaced them with controlled rents.
This is NOT about helping the Fed to lower rates or stop raising rates as the majority seem to be touting. Powell is not that stupid and this will have ZERO impact on Fed decisions going forward. This is all about government spending which is a far greater problem than worrying about the pressure on the Fed. Virtually EVERY government program is automatically INDEXED to CPI. Thus, agencies’ budgets are automatically increased each year based on the CPI. Your taxes are indexed to the CPI. By reducing the CPI, they collect more taxes! There is NOBODY in Congress or at the Bureau of Labor Statistics that gives the Fed a second thought.
Even if we look at inflation using the pre-1980 formulas, the CPI is approaching 10%! When we calculate inflation by eliminating everything that is really irrelevant and focusing on food, energy, transportation, and taxation, which they do not consider at all, the reality of our number came in at 32% for 2022. That is a far cry from the official number. This is simply calculated by Socrates from an unbiased perspective.
What a new wonderful world the Biden Administration has created. Thank you, COVID & the Russian Sanctions. The largest increase we found was obvious fuel between gasoline and diesel used in trucking and homes averaging 65%+ Turning to basic food, eggs were up nearly 50%, flour rose by 25%, cooking oil 23%, butter was up 35%, Chicken by 14%, and Rice by 18%. If we throw in toothpicks, paperclips, etc, then the more we can include the lower the inflation rate. We do not include rent or real estate. Our number is far more accurate to the daily living expenses than the near 10% level of the government. They also do not include sales taxes. The national average rise in rental rates was 7.8%, in Florida it was 8.5%, and in NYC 1.5% when controlled.
When I would buy a desktop IBM XT during the 1980s, it was always about $7,000 for a top-of-the-line. Today, that cost has come down significantly. Obviously, we do not buy computers every week. Should that really be part of a formula? The BLS has made so many revisions to the CPI over the decades it is really a political tool these days.
Back in the ’90s, our staff was dissecting every statistic. We discovered that they were overstating economic growth because they counted government employees twice. The total all personal income, and then government spending. I called the head of the BLS and asked surely this had to be backed out somewhere for hiring government employees to increase GDP rather than the private sector. They reviewed it and finally just said – no comment.
The idea that this latest revision of using one year as a weight instead of two will allow the Fed to stop tightening is really the rantings of people who only look at the Fed for everything as their guidance. There is a lot more incentive behind this revision and the Fed was not a consideration.
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