Inflation Has Been Killing You for 40 Years. Why Are You Noticing Now?

Alternate Inflation Charts

            Far be it from me to carry water for the Biden Administration or to downplay the impact of inflation on working families as White House officials did in June when they dismissed rising prices as merely “transitory.” When 87% of Americans say they are very or extremely worried about higher prices, and one out of ten people say they can’t afford to buy holiday gifts this year, it’s a serious issue.

            Still, you can see why ruling elites are a little mystified by the collective freak-out, and it’s not just because they’re rich so they don’t care (although that’s true).

            Truth is, nothing new is happening.

Real inflation has been soaring for four decades. What changed is the artificially-deflated official inflation rate. Which is why people are finally paying attention.

            Presidential administrations have repeatedly changed the methodology the Bureau of Labor Statistics uses to calculate the U.S. inflation rate. Why? Politics, of course. The government wants to fool voters into thinking that they are better off, or at least thinking that they aren’t losing ground as quickly as they actually are. Lowballing price increases also saves the Treasury money on big costs like Social Security payouts, which are tied to the official inflation rate.

Housing, food and fuel account for a significant share of typical household expenses, but because they have been rising steadily in price for years, the feds keep lying about how much people really spend on those items. They’ve also factored in “shadow inflation”—the relative cost from year to year of, for example, a phone, is discounted going forward because an iPhone is of higher-quality, with more features, than Ma Bell’s “old reliables.” In reality, of course, you need a standard phone—which, today, is a smartphone. It’s not like you can time-travel back to 1980 to buy a rotary dial. So the BLS doesn’t count a $1000 iPhone as a significant price hike over a $20 plug-in model.

John Williams’ Shadow Government Statistics presents inflation the old-fashioned way, as it was calculated in 1980. The difference is significant, often as much as 10% per year. In September, for example, Forbes reported that the BLS announced the official inflation rate to be 5.4%. But the “real” inflation rate was 13.4%.

            According to the official inflation rate, an item that cost $100 in 1980 now costs $336. Because inflation—official inflation—ticked up a few percentage points each year, it has not been a major political issue over the last 40 years.

No one was paying attention to the truth: inflation has been destroying living standards for many years. According to Shadow Government Statistics, due to exponential calculations that $100 item in 1980 now costs about $2,200. But median family income has stagnated; a $100 paycheck in 1980 is now a $335 paycheck, almost exactly the official inflation rate. Wages haven’t come close to keeping up, except for the top 1%. They’re doing great.

Median monthly rent has skyrocketed from $243 in 1980 to $1098 this year; median house-purchase price rose from $47,200 to $382,000. Gas was $1.19 per gallon; now it’s $3.41. College tuition, room and board was $3,900 and is currently $35,720.

So inflation is an ongoing problem. The only thing that’s new is that we are noticing it because it’s being reported. Although, it’s important to note, the inflation rate that is tanking Biden’s poll numbers is still being radically downplayed.

Because the rate is now high enough to register officially, Joe Biden is the first president since Jimmy Carter to be blamed for inflation. Reagan, both Bushes, Clinton, Obama and Trump had high inflation too—but they got off scot-free.

“There is a psychology to inflation that is different from everything else, and it tends to drive how people view the economy because they experience it every day whether it is at the grocery store, gas pump or buying household goods,” says Democratic pollster John Anzalone. As the last 40 years prove, though, the government is also very good at convincing people not to believe their own lying eyes.

(Ted Rall (Twitter: @tedrall), the political cartoonist, columnist and graphic novelist, is the author of a new graphic novel about a journalist gone bad, “The Stringer.” Order one today. You can support Ted’s hard-hitting political cartoons and columns and see his work first by sponsoring his work on Patreon.)

SYNDICATED COLUMN: Recovery? What Recovery?

Behind the New Jobs Numbers, Dull Statistics Tell a Terrifying Story

“Worst U.S. Jobs Data in a Year Signals Stalling Recovery,” The New York Times ran as its lead headline on June 2. The Labor Department reported that the U.S. economy created 69,000 jobs during May. The three-month job-creation average was 96,000. Unemployment ticked up a tenth of a point, from 8.1 to 8.2 percent.

Once again, the media is downplaying a blockbuster story—recovery? what recovery?—by dulling it down with a pile of dry, impenetrable statistics.

Wonder why you can’t find a job or get a raise, and your house has been sitting on the market for years? The new jobs numbers are the key to understanding how bad the economy is—and why it’s not likely to get better any time soon.

Q: If nearly 100,000 Americans per month are finding jobs, why are securities markets tumbling?

A: Because it’s actually a net jobs loss. The U.S. population is growing, so the work force is too. We need 125,000 new jobs a month just to keep up with population growth. “In the last 22 months, businesses have created more than three million jobs,” President Obama claimed in his January 2012 State of the Union speech. True or not, a more straightforward claim would have been net job creation: 350,000 jobs over 22 months, or 15,000 per month. (Politifact rates Obama’s line as Half True.)

Q: If we’re losing jobs, why is the unemployment rate hovering? Why isn’t it going up faster?

A: Discouraged workers, i.e. people who would take a job, but have given up looking, don’t count as officially unemployed. Neither do those whose unemployment benefits have run out, yet haven’t found new work. Ditto for those who are underemployed—a laid-off middle manager who earned $100,000, now scraping by on a fraction of her former salary by taking odd jobs.

The officially unemployed—men and women who lost their jobs recently enough to still collect unemployment benefits—are remaining more or less steady. Since the number of long-term unemployed is rising, however, the unofficially unemployed is growing fast—but neither the government nor the media acknowledges their existence.

To muddy things up even further, the feds have rejiggered the numbers to make it look like there are fewer officially unemployed than there used to be. The respected blog Shadow Government Statistics, which calculates unemployment using the way the Labor Department did until the 1980s, says this Alternate Unemployment Rate is about 23 percent—about the same as at the peak of the Great Depression.

No wonder why there are so many empty storefronts.

The really interesting number is the Labor Force Participation Rate: how many people want a job, but don’t bother blitzing the Internet with their resume? Melinda Pitts of the Atlanta branch of the Federal Reserve Bank points to “marginally attached” “nonparticipants” in the labor force. “A nonparticipant who is marginally attached indicates they want employment or are available for employment. Also, they indicate having looked for a job in the previous year but not actively looking for a job at present,” she says. This group is failing to return to the “real” labor force at higher rates than in the past.

Q: So what’s up?

A: The jobs figures reflect a big structural problem in the U.S. economy. Real wages have been steadily dropping since the 1970s. We’re creating a permanent class of unemployed and underemployed. And there’s no help on the way from government or private sector, both of which are cutting back and laying off. Even if we got “up” to 125,000 new jobs a month, that would still leave at least 8.1 million people who lost jobs between 2007 and 2010 out of work.

That’s a huge hole. Taking Obama at his Half True word of 15,000 net new jobs a month, it would take 45 years to find gigs for the victims of the 2007-to-2010 subprime mortgage meltdown. Only something big and dramatic, like a new FDR-style Works Progress Administration, could fill it. “Normal” post-recession growth can’t do it. And this recovery—if you can call it that—is anemic at best.

Q: Anything else?

A: Yeah. Jobs don’t equal jobs. If you replace a $70,000-a-year job with a $60,000-a-year job, that’s a net decline in income. Politicians will claim that the old lost jobs have been replaced with new ones, but multiply that trend over millions of workers, and you’ll see reduced consumer spending. Among the still-employed, inflation-adjusted wages are dropping.

Oh, and what about the debts people accrued while they were between jobs? Because many employers refuse to hire jobseekers with bad credit, the unemployed are punished for being unemployed with…more unemployment. As for those who return to work, even workers who get the same pay have to pay off credit card bills they lived on.

The economy is a whale of a problem. But politicians of both parties—and the media—are only paying it the thinnest of lip service.

(Ted Rall’s next book is “The Book of Obama: How We Went From Hope and Change to the Age of Revolt,” out this week. His website is tedrall.com. This column originally appeared at MSNBC.com)

(C) 2012 TED RALL, ALL RIGHTS RESERVED.

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