mybudget360:
Inflation has been picking up since the recession ended in 2009. The problem with the CPI increasing year over year with no rise in household incomes is that the standard of living for most Americans erodes every year that incomes do not keep up. Household incomes are back to levels last seen in the mid-1990s while the cost of necessities has gone up. This brings us to our article today that examines the nuts and bolts of what constitutes the Consumer Price Index (CPI). The CPI attempts to measure the changes in price for consumer goods and services. Overall it did a very poor job of measuring the housing bubble because of the owner’s equivalent of rent metric. Today, it is understating inflation because of the excess spending on “wants” that occurred in the 2000s has now shifted to spending on “needs” but is being dragged down by the amount of family spending on needed goods. We will dig deep into this data but suffice it to say that the Fed is creating inflation in items most Americans actually need to live their daily lives and the burden on the poor is actually increasing.
Do not believe the talk that inflation is nonexistent
Even a one percent rate of inflation is troubling if incomes are stagnant or falling. Since the recession has ended inflation has occurred even as measured by the CPI:
Over this same timeframe, household incomes have remained stagnant and household net worth has fallen close to 40 percent. Yet there is something more troubling in the actual data. The inflation rate is actually being understated because Americans have shifted consumption from non-essential goods to actually seeing inflation in things that they actually need. In the 2000s spending on wasteful items was rampant and much of it came because of the easy access to debt. Yet with 100 million credit cards being yanked out of the system, this spending has fallen dramatically. So where exactly is the inflation occurring?
Change in Family Spending: 2007 – 2011
Source: The Atlantic
This is a very important chart to examine.
In the state of Virginia, a person on welfare gets about $69,000 a year ( welfare, food stamps, free medical et al). If you want to be a foster parent you get $2600 a month ( verified) granted there are some good foster parents but a lot are not. Oh in addition to this money, if you work the govt ( not sure what part is state and what part fed) will pay for after school care. Want to go on vacation without them? You can put them in something called respite which the gov’t pays for. Not a bad gig if you can get it, and I may be mistaken but that money is tax free. – and we wonder why we are going broke. Yes things are out of control.
So where do “Utilities” and “Travel expenses” fit on that chart? My cost for driving to work has doubled since 08, and my utilities cost more, as well.
The Obama administration’s energy policies and their disproportional inflationary effect on the poor and middle-class are never mentioned in reports. The people are suffering under these outrageously increased energy costs that are always passed on to the consumers. Yet, the MSM and Democrats want to ignore it because it doesn’t sell the far-left ecological extremist agenda. It would be wise for Romney and Ryan to bring this up in the debates.
Only natural gas costs have gone down due to increased production as a result of fracking and new wells (very little of which was as a result of government support of the industry). The Obama administration, again following in line with eco-fanatics, has turned it’s target sights on natural gas has already started institution backdoor measures and new regulations to reduce production. Clearly, despite his claims to the contrary, Obama only wants to support alternative energy production.