Mark Twain famously said there are three kinds of lies – lies, damned lies and statistics.
Do you ever feel like you have your own little personal cloud of inflation that follows you around where ever you go, ballooning the price of everything just for you, and then dropping prices again when you’re safely out of sight? Your bills keep going up and up and up. Money is tighter and tighter, and yet the government keeps denying any of this is happening. The latest official inflation rate is an astonishing 0.8%. Supposedly everything is fine and getting better. It must be just you, right? The numbers don’t lie.
Except that they do.
Every now and then the Bureau of Labor and Statistics (BLS) comes out and reports inflation numbers, confirming that the Federal Reserve is doing a bang up job keeping inflation right around its target 2%, spurring analysts to exclaim that in fact, deflation is more of a danger than inflation. So why do prices seem to be skyrocketing all around you?
First of all, it is important to understand that the BLS is not really quite as politically independent as it should be. Take jobs numbers: Before the 2012 elections there was a bit of a firestorm about the Obama administration trying to circumvent the Senate confirmation process in order to install a crony at the top spot in the BLS. Great jobs numbers came out right before the election. Re-election was achieved. Evidence of fraud came out later. Hearings were held. The world moved on. But this is nothing new. John Williams of Shadow Government Statistics discusses here how all the way back to Lyndon Johnson, administrations have been monkeying with official data behind the scenes for their own job security interests.
Why do they want official numbers to show that inflation is low? One big reason is that a huge part of the federal budget goes to entitlement payments, like social security. These liabilities are already unsustainable for the long term. The last thing the government can afford or tolerate is for those obligations to go up not down. Yet by law they have to give out adjustments for inflation every year. The Cost of Living Adjustment (COLA) must compensate social security recipients for price inflation.
