By JLP | September 20, 2010
The Bureau of Labor Statistics publishes the Consumer Price Index, which is the standard for tracking inflation. The way the CPI is calculated was altered in the early 1980s and again in the 1990s. A facebook friend of mine sent me a link to an interesting inflation chart that publishes an alternative inflation number based on the formula used prior to the alterations. As you can see from this chart (click on the chart to see a larger version), those changes had the impact of making inflation appear much lower than it would have been had the changes not been made.
According to the above chart, inflation is running at 8.50% rather than the 1.15% that the BLS is publishing. This is important because the government’s programs like Social Security base their cost of living adjustments on the CPI. So, retirees are getting a COLA for 1.15% when the actual inflation rate is 8.5%. A lower inflation number also impacts COLA adjustments for wages.
What do you think? Do you think inflation is higher than what the government is telling us?