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Obama’s Hidden Tax – Inflation
Townhall.com ^ | October 1, 2012 | Bruce Bialosky

Posted on 10/01/2012 5:34:55 AM PDT by Kaslin

The federal government – actually, the Bureau of Labor Statistics (BLS) – just announced that the inflation rate for the year ending July 2012 was 1.4% Most of us had to rub our eyes in disbelief when we saw this number; have these people not entered a supermarket recently? How could they possibly release such a figure with prices skyrocketing all over? Which brings us to Ed Butowsky, who has had enough of what he believes are misleading numbers and has decided to do something about it.

Butowsky, who runs Chapwood Investments, got peeved about what he believes are intentionally understated government inflation calculations, and how they affect not only his investors, but seniors who receive retirement benefits. He decided to look around to see if anyone else shared his suspicions, and came upon research conducted by John Williams – not the Stars Wars composer – whose work can be found at www.shadowstats.com. Mr. Williams sells a newsletter that contains his calculations of the real inflation numbers. The pitch on his website states “Have you ever wondered why the CPI, GDP, and employment numbers run counter to your personal and business experiences? The problem lies in biased and often-manipulated government reporting.” Butowsky knew he was on to something.

We called the BLS to get an understanding of their procedure. They informed us that they analyze 80,000 costs every month, compare them to the equivalent costs for the prior year, and then perform a statistical weighting based on the relative impact of each item. For example, the largest component in their analysis is housing, which they claim has increased 2.8% since mid-2011. When we asked about the soaring costs of food, they replied that these prices had risen 1.9% for in-home food and 2.9% for dining out. Of course, these increases vary by region, and the BLS frankly admits that their price comparisons are not region-specific, but are intended to produce an aggregate, blended number for the nation.

Butowsky doesn’t buy it. He feels that even though the Consumer Price Index (CPI) has been revamped twice in the past 50 years, it’s still way off the mark. If investors merely aim to achieve returns that exceed an artificially low inflation rate, then the actual value of their investments ends up going down. More importantly, Butowsky stated “This is why people are more dependent on government.” If their earnings or pay increases are based on false inflationary numbers, they end up getting squeezed and must look elsewhere to balance their budgets.

Butowsky claims that “They have been manipulating the CPI to understate the amount of inflation for three decades.” He believes that the rationale for this distortion is to minimize entitlement payments, which have automatic cost of living increases that are based on the CPI. This is why seniors are having such challenges making ends meet. Butowsky is very clear on this: “It is an intentional attempt to manipulate transfer payments.”

To formalize his research, Butowsky developed the Chapwood Index, which measures cost changes of the top 500 items on which you spend money for each of the 50 largest metropolitan areas. He then calculates, on a quarterly basis, the actual price increases (inflation) that most Americans experience in their home areas. He believes that testing 25,000 items quarterly provides a much clearer picture of the inflation we are experiencing. His index has the inflation rate for the first half of 2012 ranging from 3.6% in El Paso up to 8.3% in Fresno, with most metropolitan areas falling between 5.5% to 7.5%. Remember that is just the first six months of 2012.

Whether you believe the Chapwood Index or the BLS’s CPI depends on your own experience. For those of us who analyze these things, it is difficult to believe the government’s numbers purely on a macroeconomic basis. Since Mr. Obama was elected, the Federal Reserve has three times printed money under the quaint name of “quantitative easing” (QE1, QE2 and now QE3). They have injected a total of $1.5 trillion into the money supply with a commitment of $40 billion more per month until the economy returns to real growth. When that happens, inflation has to take place, and, trust us, when OPEC sees actions like this they jack up the price of their oil because they know they’re getting paid in devalued dollars. You pay more for gas and the government gets money to pay its bills. It is Obama’s hidden tax and it falls principally on the middle class he tells us he is protecting.

The manipulation of the inflation rate certainly didn’t begin with Obama, and by the time he became president there was already systemic distortion. But Obama’s massive deficits and the Fed’s collusion have made things demonstrably worse.

My friends, when the government tells you an inflation number or an unemployment number or a GDP amount that doesn’t make sense, follow your instincts. Look elsewhere for solid information, because the figure out of Washington is probably bogus. And when President Obama states he has lowered middle class taxes remember his inflation caused by his reckless overspending has more than offset that in the devalued money you have in your pocket and the prices you pay at the pump and grocery store.


TOPICS: Business/Economy; Editorial; Government; Politics/Elections
KEYWORDS: barackobama; federalreserve; inflation; tax

1 posted on 10/01/2012 5:35:00 AM PDT by Kaslin
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To: Kaslin
As I understand it, the government reported inflation rate excludes food and energy because they are too "volatile".

Uh, excuse me, feds, but those are the two most often purchased items by the American people. Me thinks the inflation rate provided is obviously going to be off if it does not include those two items.

2 posted on 10/01/2012 5:45:07 AM PDT by MEGoody (You shall know the truth, and the truth shall make you free.)
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To: Kaslin

They have redefined the way they measure inflation, in part because some payments (e.g., Social Security) are index to it. Another thing I’ve noticed over the years is that producers are “downsizing”. I used to buy a one pound smoked sausage link for about $2.50. Now they have downsized it to 13-14oz for $3.00, depending upon what you buy. Have you notice the fancy curve in your hand soap? They say its to give you a better grip. BS! The bar weighs less with that shape. Plus, they now “whip” the soap to work air into it. There are a ton of these downsizing changes but I wonder if the CPI corrects for it. I doubt it.


3 posted on 10/01/2012 5:49:18 AM PDT by econjack (Some people are as dumb as soup.)
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To: Kaslin
The dems economic plan they refer to as “Trickle up economics” is inflation.

The higher you raise taxes on the rich to provide goods and services to the poor, the rich will get richer and the poor will get poorer.

It's the rich that provide the goods and services so if you raise their taxes, they raise their prices.

People that get the goods and services for free from the govt don't pay more, it's the people that have to pay for the goods and services themselves that pay more.

Raising taxes on the rich is a hidden tax on the middle class, the people that pay their own way.

In short, it's the welfare state that is responsible for creating poverty.

4 posted on 10/01/2012 5:51:10 AM PDT by IMR 4350
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To: Kaslin

I hate going grocery shopping now. $42 for what use to be a $20-$25 quick run-in for things. Trying to cut corners, grow my own veggies, use coupons, etc., but I’m going to miss the convenience. Oh well. Only get worse before it gets better.


5 posted on 10/01/2012 5:54:02 AM PDT by Thorliveshere
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To: Kaslin
The Fed Gov lie about inflation is a horribly disservice!! Any idiot knows their figures do not represent the day to day cost of living increases. Further it is truly a form of taxation on our savings as its diminishing value is the payment for the excessive funny money being printed by the Fed!!!!!
6 posted on 10/01/2012 5:56:37 AM PDT by RAY (God Bless the USA!)
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To: IMR 4350

“In short, it’s the welfare state that is responsible for creating poverty.”

I agree completely, but let us not forget the welfare to WS and corporations. It must all be stopped. Corn to ethanol must be the first to go, then everything else. NO MORE BAILOUTS.


7 posted on 10/01/2012 6:06:11 AM PDT by A Strict Constructionist (We're an Oligrachy...Resistance to tyrants is obedience to God. Thomas Jefferson)
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To: Kaslin

Attempting to derive an aggregate, blended number for inflation for the whole country, is as stupid as trying to sum up the economy in 1 number, the DOW.

The government cooks the numbers any way it wants. It is to their advantage to help inflation rage on, while they claim it is very tame.


8 posted on 10/01/2012 6:10:23 AM PDT by I want the USA back (Inflation renders savings worthless, making all equally miserable, except the liberal elite.)
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To: Kaslin

We live under a system where we are taxed on the NUMBER of dollars we earn, but the Fed controls the VALUE of those dollars.


9 posted on 10/01/2012 6:12:02 AM PDT by STYRO (Do not accept unconstitutional government as legitimate government.)
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To: econjack
Yeah, my coffee can shrank to about 2/3 of it's previous size. The price went down a bit, but per ounce it's more. I haven't seen a beef roast under $10 in several months, we've quit having the Sunday roast.
10 posted on 10/01/2012 6:17:58 AM PDT by pepperdog ( I still get a thrill up my leg when spell check doesn't recognize the word Obama!)
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To: Kaslin
I retired in 1992 with a reasonable income. We could afford to eat out several times a week, and had the luxury of owning two cars, both payed for. Fast forward to now. Our non-inflation inflation has me on the ropes. No more dining out, no gas for the cars, no weekend vacations. And some blabbermouth says we don't have any inflation.
Vote for the American!
11 posted on 10/01/2012 6:20:25 AM PDT by ANGGAPO (Layte Gulf Beach Club)
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To: A Strict Constructionist
Agreed, all of it needs to go.

The school lunch program with the “mandates” to put certain foods on kids lunch tray is another hidden way of driving up prices.

12 posted on 10/01/2012 6:31:27 AM PDT by IMR 4350
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To: econjack
Another thing I’ve noticed over the years is that producers are “downsizing”. I used to buy a one pound smoked sausage link for about $2.50. Now they have downsized it to 13-14oz for $3.00, depending upon what you buy.

Mad Magazine covered that way back in the 1960s.

There are a ton of these downsizing changes but I wonder if the CPI corrects for it. I doubt it.

That is one thing they cover pretty well. They measure per ounce, not per package. They don't cover changes in the product very well, such as changing from sugar to corn syrup so you get arguably a worse product for the same price as before.

13 posted on 10/01/2012 7:20:27 AM PDT by KarlInOhio ("Government is the only thing that we all belong to"=implicit repeal of the 13th amendment for all.)
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To: Kaslin

I’d love to lay the blame 100% on Obama, but we all know that Republicans LOVE tax hikes that they don’t have to vote for.


14 posted on 10/01/2012 7:41:40 AM PDT by Buckeye McFrog
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To: RAY
"The Fed Gov lie about inflation is a horribly disservice!!"

Maybe, maybe not. We all suspect that the government lies to us about damn near everything. This transparent little deception proves it to us.

15 posted on 10/01/2012 7:52:08 AM PDT by I am Richard Brandon
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To: Kaslin

Inflation is the easiest way to spread the wealth around.

Remember who said that.

Government spends on its favorite groups with printed money. The value of dollars held by people who worked for them decreases.

I’m surprised that Inflation hasn’t become a major campaign issue, since it really how the middle class is getting screwed.

The rich own property and other real assets which do well in inflation, while dollars go down. (which is where most the middle class has their wealth, in dollars).


16 posted on 10/01/2012 7:59:16 AM PDT by desertfreedom765
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To: Kaslin
And how do we curb inflation, class? Produce more (increase supply) or raise interest rates (lowers demand).

Obama is working against supply (private sector growth).

And to raise interest rates (which the Fed said won't happen until at least 2014) will increase the cost of our national debt. Imagine too, that you can not afford today a 1) house, 2) car or 3)what ever to finance and interest rates go up tomorrow? Any scent of economic expansion just hit a brick wall.

Point is: fasten your seat belts. It's going to be a bumpy ride !

17 posted on 10/01/2012 9:34:10 AM PDT by llevrok (By comparison to Obama, at least Nero could play a fiddle.)
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To: Kaslin
When you make more money to keep paying for the same goods and services, there is another little bugaboo.

When you make more money, you move into a higher tax bracket. So you have to make even more money, which bumps you up further yet. The government cashes in, and you end up working harder than ever just to tread water.

In the meantime, they give even more cell phones away.

18 posted on 10/01/2012 5:38:25 PM PDT by Smokin' Joe (How often God must weep at humans' folly. Stand fast. God knows what He is doing)
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