Oct 30, 2006
The government recently announced that the 53 million people receiving Social Security and SSI benefits in the country will get a 3.3% cost-of-living increase for 2007. This is smaller than the 4.1% increase last January. Yet it seems to most people like inflation has picked up, not slowed down, and that prices are increasing much faster overall.
In fact, they are. Over the years, the government has changed the way the CPI, or Consumer Price Index, is calculated so that today it seriously underestimates real increases in the cost of living.
For example – what the government calls “substitution.” If the price of porterhouse steak goes up, the government says more people will start eating cheaper rib eye steaks. That’s true! But the government uses that to say prices didn’t go up! What?
John Williams, an economic consultant to Fortune 500 companies, says that inflation has actually gone up about eight% last year, not just a little more than three%.
If the CPI were accurate, what would that mean? Retirees getting Social Security and SSI benefits would be getting a cost of living increase two and a half times as big. So would auto workers and anyone else who has automatic COLA built into their contracts.
So if you feel like your personal finances aren’t in as good shape as the government claims they should be, trust your feelings. Like everything else, the government is manipulating its statistics to increase the profits of the bosses at the expense of everyone else.