They Lied About Everything Else So Why Not Lie About Inflation?

Many times we have discussed how badly the current set of politicians have managed the economic affairs of the country. Their ineptness, greed, and cronyism has put all of us and the country in the following dire straits: 

• Over 20 million Americans are unemployed or under employed.
• The official unemployment rate for the country has been above 7% for a record setting number of consecutive months. 
• The vast majority of the paltry number of jobs created this year have been part time jobs, a factor heavily driven by the disastrous Obama Care legislation. 
• Over 47 million Americans are on government food assistance support programs. 
• We continue to run trade deficits in the tens of billions of dollars every month. 
• We are fast approaching an astronomical national debt of $17 TRILLION, an individual debt burden of more than $54,000 for EVERY man, woman, and child in the country. 
• America has now fallen to ninth in the world in a major index of economic freedom and is continuing to trend downward. 
• The political class's inability to formulate effective economic policy and programs has caused the Fed to actively step in, resulting in the artificial creation of $85 billion of fake wealth every month by way of their Quantitative Easing programs, programs that could lead to massive inflationary times in the future. 
• Their failure to operate efficient and fraud free social programs such as Medicare, Medicaid, and Social Security costs the American taxpayer at least $200 billion a years. 
• Their failure to operate efficient and fraud free tax collection processes results in the IRS unable to collect at least $380 billion a year from tax evaders. 

But the Fed and others in Washington do not seem to believe such economic incompetence is happening, often pointing to the fact that inflation, as measured by the Federal government, is under control and quite tame. Thus, running TRILLION deficits is okay and creating $85 billion a month in fake wealth is also okay, since inflation is seemingly under control. But is inflation really under control? 

Consider some official government numbers that were published in a recent issue of Business Week. These government numbers measured the rise in prices overall in the country and by specific subsets of typical household expenses, e.g. gasoline, food, clothes, etc. over the past five years. Their findings indicate that overall inflation rose only 7% over those five years, far below the historical average. 

However, if you look at the individual components, from the same government source, it strains the limits of credibility to believe that 7% figure. Our first graph below looks at the household expenses that were below the overall 7% inflation growth rate (click directly on the chart for a larger view): 

 







Thus, if your only concerns in life were new televisions, toys, gasoline, novels, car rentals, wine, vegetables, and girls’ clothes, your household expenses would have been well below the overall 7% inflation rate. But most households have additional expenses beyond televisions, toys, gasoline, novels, car rentals, wine, vegetables, and girls’ clothes. In fact, I would bet that the majority of households never or rarely ever to worry about the price of TVs, toys, novels, car rentals, and girls’ clothes.

The next graph contains the other items that the government reported inflation growth on in the article: 









These categories include those household expenses that grew faster than the overall 7% inflation estimate. These categories include:

• Airfare
• New Car
• Movie Tickets
• Cereal
• Bread
• Ice Cream
• Kids’ Shoes
• Restaurants
• Funeral Expenses
• Liquor
• Cable/Satellite TV Service
• Dental Services
• Child Care
• Nursing Homes
• Beef Roast
• College Tuition
• Hospital Services
• Textbooks
• Cigarettes

A couple of observations on this graph: 

• There were far more household expenses (19) that grew faster than the government's assertion of 7% for overall inflation while only eight grow slower. 
• Many of those items that grew faster than the overall inflation rate are those that most households use on a regular basis, e.g. cereal, movie tickets, beef, bread, restaurant visits, a lot of money on items whose average prices grew faster than 7%. 
• And those items in this latter category that most households rarely or never purchase are more expensive versus those rarely purchased items that had an inflation rate below the overall 7%, e.g. a car purchase is usually going to be more expensive than a TV purchase, dental services are likely to be more expensive than toy purchases, etc.

Thus, I question whether the overall inflation factor in the economy is truly only 7% since many more items that the government measures had a higher price growth rate, the items that Americans are likely to purchase more often usually had a price growth rate higher than 7%, and infrequently purchased items tended to have price growth higher than the overall 7%. Throw in the fact that we recently reached a milestone with the average price of gas being over $3.00 for a record set of consecutive months and you can see my doubt.

Thus, given that the government, especially the Obama administration, has consistently lied to us (e.g. if you like your doctor and health insurance plan you can keep it under Obama Care, the cause of the Benghazi terror attack was a lousily made YouTube video, the government is not spying on every American but it actually is), it is not beyond my realm of believability to conclude it is also not being truthful about inflation. 

Which puts another economic nail into the assumption that this current set of Washington politicians has the worst set of economic skills of all Washington politicians that came before them. National debt of almost $17 TRILLION, record high unemployment rates, record lengths of high unemployment rates, etc., and now an apparent misrepresentation or outright lie about inflation. Lord help us and protect us from the liars.

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