Kevin Phillips says we are paying for decades of bi-partisan deceit about inflation
Kevin Phillips, author of Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism, has expertly detailed the history of false economic achievement in a recent Harper’s Magazine article. The culmination of 40+ years of gradual but consistent distortion of economic statistics have come home to roost and explain much of our current morass. Inflation statistics help determine interest rates, cost-of-living increases for wages and Social Security benefits as well as interest payments on the national debt. Inflation statistics also affect the planning, spending, saving and investing habits of every American. And lastly, decades of understated inflation means that GDP growth has been overstated.
It is Phillips contention that the under-measurement of inflation has put the country at great risk. To acknowledge the reality would send interest rates sharply higher. This would directly affect the continued viability of the massive build-up of debt, both public and private, that has fueled the economy over the last two decades. In addition, if the true state of inflation were acknowledged, the government would face huge increases in pension, retirement benefits and borrowing costs, overwhelming an already debt-burdened federal budget. Ultimately of course, the market will acknowledge the truth about inflation and interest rates will climb anyway. If government statistics remain distorted, institutional trust and credibility will be just two more victims of inflation.
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Thomas R. Cox - 7/16/2008
Since American policymakers have insisted on having both guns and butter, whether we can afford them or not, of course we have inflation--and since admitting the scope of it would undermine the appeal of such an approach, of course it is under reported. It is time to wake up and realize that we don't need to expend some 44 percent of the world's military budgets while out infrastructure, central cities, and educational systems crumble.
Rick Robins - 7/11/2008
Phillips is only stating what is obvious. The CPI is up 3% since the beginning of the year. No one who is paying the bills believes that.
Not only are inflation statistics bogus, one has to assume pretty much every statistic published by the US Government is misleading given the evidence piled up observing this current administration. Perhaps the most egregious is unemployment. Once someone is no longer receiving unemployment compensation, from what I can tell they are no longer counted as unemployed.
Much of the blame lies with a media that no longer values the truth or pursues it.
The ultimate cost is, as Phillips suggests, that the decisions made by individuals, the public and private sector are inherently flawed and we will all pay the price.