Link to article here.
One has to wonder, if proposals to increase toll rates based on inflation and to index the gas tax to inflation which is so overtly manipulated by the government, do we have any business supporting these policies? What will happen to these toll roads propped up with billions in leveraged debt if retirees demand an end to inflation manipulation to steady the dollar and their Social Security paychecks causing massive toll tax or gas tax increases (like the 281 toll rates tied to the consumer price index or CPI and proposals to index the gas tax to inflation)? We must demand a return to sound financial policy in this country or risk bankrupting us all.
View Congressman and Presidential candidate Ron Paul chiding the Fed for stealing seniors’ money on YouTube.
Expert says feds stealing half of seniors’ paychecks
Contends government manipulating data to keep cost-of-living index low
November 8, 2007
By Jerome R. Corsi
© 2007 WorldNetDaily.com
The Social Security payments Americans receive in the mail are roughly half of what they would be if the U.S. Bureau of Labor Statistics reported the Consumer Price Index honestly, a veteran econometrician told WND.
John Williams contends the U.S. government statistics intentionally understate inflation as measured by the Consumer Price Index, or CPI.
By understating CPI data, Williams argued, government officials are able to avoid increases in Social Security payments that are mandated by law as “cost of living adjustments.”
Williams maintains a website called Shadow Government Statistics that is dedicated to examine “analysis behind and beyond government economic reporting.”
In an analysis of the CPI, Williams contends the index is understated by roughly 7 percent per year by government intentionally manipulating the data.
Many of the CPI manipulations, Williams asserts, were masterminded by Alan Greenspan, the Federal Reserve chairman from 1987, under President Reagan, to 2006, under President Bush.
Williams points out that one of Greenspan’s manipulations of the CPI involved the consideration that when steak got too expensive, the consumer would substitute hamburger for the steak. So, Greenspan argued, the inflation measure should reflect the costs of buying hamburger, not steak.
“Of course, replacing hamburger for steak in the calculations would reduce the inflation rate,” Williams commented, “but it represented the rate of inflation in terms of maintaining a declining standard of living. Cost of living was being replaced by the cost of survival.”
Williams noted the old system “told you how much you had to increase your income in order to keep buying steak. The new system promised you hamburger and then dog food, perhaps, after that.”
Williams concluded Greenspan’s arguments violated the “intent and common usage of the inflation index.”
“The CPI was considered sacrosanct within the Department of Labor, given the number of contractual relationships that were anchored to it,” Williams wrote. “The CPI was one number that never was to be revised, given its widespread usage.”
The Consumer Price Index is the central statistic the federal government uses to calculate inflation.
The CPI is a complex government statistic that was introduced in the 1920s to track the market cost of a “basket of goods and services.”
Beginning in the Carter administration, federal economists have cleverly redefined the CPI, with the goal of removing from the index expensive items, including food and energy, that would push the it higher.
Today, when setting interest rates, the Federal Reserve focuses on a variation of the CPI that measures “core inflation.”
The government’s calculation of core inflation now excludes items such as food and energy, because food and energy “face volatile price movements.”
In other words, since food and energy prices can spike, as they have this year, the Bureau of Labor Statistics calculates “core inflation” without them. The rationale is that the price shocks are temporary and, therefore, would distort the measurement of underlying long-term inflation.
To a family faced with paying rising food and gas prices, however, “core inflation” at 2 percent does not reflect the cost of living.
Other items also can be thrown out of the CPI market basket if their price spikes under the premise that the big price changes reflect passing market disequilibrium that would distort the measurement of long-term trends.
Williams says the inflation rate is further deflated by changing “weighted factors” used in the index.
He estimates the true inflation rate in the U.S. would be close to 11 or 12 percent if the CPI were not manipulated.
The results of this under-reporting are dramatic, with the compounding effect just since the early 1990s of reducing annual cost-of-living adjustments in Social Security so that today’s checks are roughly half what they would be if the CPI were reported honestly, according to the standards of the 1980s.
Greenspan’s recently released autobiographical book, “The Age of Turbulence,” openly admits the political influences behind the calculation of inflation.
He notes President Richard Nixon imposed wage and price controls in 1971, even though the rate of inflation then was less than 5 percent.
Greenspan argues that the 4.5 percent inflation the U.S. experienced for the half century since abandonment of the gold standard may become the norm, with the consequence that saved dollars will lose half of their purchasing power in about 15 years.
At the height of the gold standard between 1870 and 1913, just prior to World War I, Greenspan correctly notes that the cost of living as calculated by the Federal Reserve Bank of New York rose only 0.2 percent annually.
The dilemma the Fed faces is that under the U.S. fiat currency system, to keep inflation low it must keep interest rates high.
“Yet to keep the inflation rate down to a gold standard level of under 1 percent, or even a less draconian 1 to 2 percent range,” Greenspan wrote, “the Fed, given my scenario, would have to constrain monetary expansion so drastically that it could temporarily drive up interest rates into the double-digit range not seen since the days of Paul Volcker.”
High interest rates constrict the money supply, make borrowing difficult and generally depress economic growth.
During his term, Greenspan justified 1 percent interest rates, which in 2003 were the lowest rates in 45 years, in a determined plan to keep the economy growing.
Williams argued, however, that the result has been to fuel real inflation.