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 calculates 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 think 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.