CPI changes benefit government income and hide inflation

Inflation, COLA declines and tax increases

Another change to the CPI is being proposed by the congressional "supercommittee" just as the elderly recipients of Social Security are anticipating their first COLA (cost of living adjustment) in 3 years. It is expected to reduce future COLA increases and increase taxes for most families with the largest pain being felt by the populace with the lowest incomes.

Congressional "supercommittee" proposes new CPI calculations that show a lower level of inflation than currently is in use that would hurt low income earners and elders because it would let policy makers cut benefits and increase taxes in a way that might not be aparent to Americans. Changes would at first be small. Max Richtman, president and CEO of the National Committee to preserve Social Security and Medicare stated "I think the thought process behind this is slip this in, people won't understand it." His message to Congress was, "Don't believe that taking this approach to cutting Social Security will not be noticed, you will pay for it".

The eventual effrects of these changes are as follows:

TAXES: By 2021 taxpayers making between $10,000 and $20,000 would see a 14.5% increase in their federal taxes while those making in excess of $1 million would see a tax increase of 0.1%.

SOCIAL SECURITY: COLA adjustments would be reduced by an average of 0.3% each year. At 65 that would mean about $136/yr less but for someone who is 95 the loss would amount to about $1,392. "For someone in the first year, it may not seem like a lot", said David Certner of AARP, "But as people get older and then they get poorer and more reliant on Social Security, the cut gradually gets larger and larger".

 Just exactly what is the CPI? The U.S. Consumer Price Index (CPI) is a time series measure of the price level of consumer goods and services. a Core CPI, which excludes volatile food and energy prices and a Chained CPI are also widely used measures of consumer inflation. The U.S Bureau of Labor Statistics (BLS) publishes both a headline CPI which counts food and energy prices and in August they released the statistics for July of 2011 reporting an increase in year-over-year CPI growth to 3.63%, the highest rate of U.S. price inflation since October of 2008. July's official government reported year-over-year U.S. price inflation rate of 3.63% was up from 3.56% in June, 3.57% in May, 3.16% in April, 2.68% in March, 2.11% in February, 1.63% in January, 1.5% in December, and 1.1% in November. This means that The official rate of U.S. price inflation has increased by 230% from November of 2010 through June of 2011. http://inflation.us/debtpoliticalcrisis.html

How does this affect you and I? As shown in the chart in my November 6th post, our dollars are able to buy less and less, the purchasing power has declined at an alarming rate due to the quantitative easing (QE) policy of the Federal Reserve (a move to print more and more fiat currency putting it into circulation and watering down the value of what is already in circulation). Bernanke has already given us QE 1 and QE2, with the potential of QE3 coming along as the government tries to raise the debt ceiling and put the current $14 trillion debt on the backs of the children's children's children of our country into perpetuity! (some are already saying it is now $15 trillion). The world is now recognizing the truth about how U.S. price inflation is spiraling out of control with the price of gold rising at an amazing rate -- $230/oz a few short years ago, now hovering around $1,700 - $1,800/oz. 

The National Inflation Association (http://inflation.us) went on to state in its December 9th article, "If there is one American who deserves to be charged with treason, it is Federal Reserve Chairman Ben Bernanke." "It is not humanly possible to betray ones country in a way that is more egregious than Bernanke's despicable acts."

Some economists would argue that as prices increase, consumers will switch to lower cost alternatives, as an example if the price of beef goes up and pork does not, people will buy more pork, and as the cost of home heating oil goes up, people will turn down the heat and put on more sweaters!

Perhaps Bernanke, the congress and especially the bureaucrats of  this Supercommittee would like to experience what it is like to live like the rest of us!!!

Till next time,

Merlyn