Chained CPI is a big deal.. When #politicians "compromise" it's always because the elite driving force behind such "decisions" require it.
Such is the case with chained CPI.
The inflation rate is already manipulated to the hilt to low-ball the inflation rate to steal fiat from unsuspecting consumers without having to publically state a desire to raise taxes and / or cut benefits.
This [CPI] data manipulation, apparently, began in earnest under the Clinton administration, though there was much government data manipulation under Reagan as well and I'm sure before that also.
Here's a nice brief article from The Daily Reckoning entitled Manipulating the Masses which touches on the manipulations of several administrations.
Source (Tigerdroppings.com) --> How and why inflation data (CPI) is manipulated. (Posted on 12/20/12 at 12:59 p.m.)
The sole purpose in measuring inflation is to help businesses, individuals and government adjust their financial planning for the impact of inflation. Inflation erodes future purchasing power, and decreases economic prosperity, if not accurately accounted for. The accuracy of measuring inflation, and accounting for it properly, is essential to long term economic prosperity.
How CPI was manipulated:
Shortly after Clinton entered the White House the Bureau of Labor Statistics (BLS) altered the calculation of inflation by changing the weighting of goods in the CPI fixed basket. Then, over subsequent years, the method of weighting the underlying components was changed from a straight arithmetic weighting method to geometric. The primary result of the switch to a geometric weighting was a lower weighting to CPI components that were rising in price, and a higher weighting to those items dropping in price which led to lower reported inflation.
According to John Williams:
“…the net effect was to reduce reported CPI on an annual, or year-over-year basis, by 2.7% from what it would have been based on the traditional weighting methodology. The results have been dramatic. The compounding effect since the early-1990s has reduced annual cost of living adjustments in social security by more than a third.”
But the manipulation of the data did not stop there. Aside from the weighting changes the BLS instituted a system of “hedonic” adjustments. Hedonics adjusts the prices of goods for the increased pleasure the consumer derives from them.
“That new washing machine you bought did not cost you 20% more than it would have cost you last year, because you got an offsetting 20% increase in the pleasure you derive from pushing its new electronic control buttons instead of turning that old noisy dial, according to the BLS.
When gasoline rises 10 cents per gallon because of a federally mandated gasoline additive, the increased gasoline cost does not contribute to inflation. Instead, the 10 cents is eliminated from the CPI because of the offsetting hedonic thrills the consumer gets from breathing cleaner air. The same principle applies to federally mandated safety features in automobiles. I have not attempted to quantify the effects of questionable quality adjustments to the CPI, but they are substantial.”
Lastly, there is "intervention analysis" in the seasonal adjustment process. Intervention analysis is critical to the highly volatile areas of food and energy. When a commodity, like gasoline, goes through periods of violent price swings the BLS steps in and uses “intervention analysis” to smooth out the volatility. As a result, sharply rising gasoline prices are never fully reflected in the reported headline inflation number. However, declining prices, which are never adjusted, do show an impact to reducing inflation.
The obvious problem with these manipulations is it changed the measure of inflation from a cost-of-living adjustment to a reduction-of-living adjustment. The original CPI calculation allowed individuals to understand the rate of return required on investments and incomes to maintain their current standard of living. However, by artificially suppressing the rate of inflation, the future standard of living is reduced to lower levels.
So the BLS manipulates the BLS data from the orginal calculation by 1.) changing the weighting of goods, 2.) “hedonic” adjustments, and 3.) "intervention analysis".
This manipulation of the CPI has led to this chart:
But WHY would the BLS manipulate the CPI calculation?
"In particular, changes made in CPI methodology during the Clinton Administration understated inflation significantly, and, through a cumulative effect with earlier changes that began in the late-Carter and early Reagan Administrations have reduced current social security payments by roughly half from where they would have been otherwise. That means Social Security checks today would be about double had the various changes not been made. In like manner, anyone involved in commerce, who relies on receiving payments adjusted for the CPI, has been similarly damaged. On the other side, if you are making payments based on the CPI (i.e., the federal government), you are making out like a bandit."
Shadowstats.com does a great job covering this topic (as well as other manipulated government data)
Alternate Inflation Charts
The CPI chart on the home page reflects our estimate of inflation for today as if it were calculated the same way it was in 1990. The CPI on the Alternate Data Series tab here reflects the CPI as if it were calculated using the methodologies in place in 1980. In general terms, methodological shifts in government reporting have depressed reported inflation, moving the concept of the CPI away from being a measure of the cost of living needed to maintain a constant standard of living.
(Click here to view alternative inflation chart)
Also from shadowstats.com
Consumer Price Index Has Been Reconfigured Since Early-1980s
So As to Understate Inflation versus Common Experience
CPI no longer measures the cost of maintaining a constant standard of living.
CPI no longer measures full inflation for out-of-pocket expenditures.
With the misused cover of academic theory, politicians forced significant underreporting of official inflation, so as to cut annual cost-of-living adjustments to Social Security, etc.
Politicians look to expand further the concept of artificially-suppressed cost-of-living adjustments in current budget-deficit negotiations, through the use of the Chained-CPI (see Special C-CPI Supplement at end of this document).
Use of the CPI to adjust retirement benefits, private income or to set investment goals impairs the ability of retirees, income earners and investors to stay ahead of inflation.
Understated inflation used in estimating inflation-adjusted growth has created the illusion of recovery in reported GDP.
(Much more on this link)
Is our government “cooking the books”?
The short answer is yes. There are two serious problems with our national bookkeeping. The unemployment rate and the consumer price index are being cooked.
I don't wish to overwhelm with data here. Provided above are a few great links that will serve well to get anyone who desires up to speed on government manipulation of data that we rely on.
Please let your congressional critters know how you feel about the #austerity they are dumping on the backs of the people in an attempt to protect their own wealth and power while propping up their strictly debt based, boom / bust, ponzi scheme economic model at our expense.
Red pill? Or blue pill?