THE CORE RATE

The Disconnect

A caller into a Washington D.C. talk show asked a very pertinent question regarding the business of living. “Have they changed the way they measure the rate of inflation? The CPI report in May was zero percent, excluding food and energy. If you take those things out, that is what is primarily driving up everything. What would be the real inflation rate, if you add back everything they take out?" The host of the show turned to his guest, a financial reporter from The New York Times. The host of the show and the Times reporter were caught flatfooted. The Times reporter couldn’t answer the question. The host then went on to say, "The inflation rate as it is reported has been quite low over the last few years. Next caller."

The caller to the show reflected the growing disconnect between Main Street, Washington and Wall Street. Each month consumers see their living costs go up—whether at the grocery store, the gas station, or at the end of the month when bills are paid. Personal income has stagnated, failing to keep pace with the rise in the cost of living. In the meantime the media keeps spinning any increase—whether it is booming real estate prices, rising gasoline prices, grocery bills, doctor and dentists bills or movie tickets—as nonevents. Prices keep going up. Wages keep falling further behind. It is a repeat of the staginflationary 70’s taxes and inflation. Inflation is on the rise and so are taxes. Property taxes go up each year, making it difficult for homeowners to hang on. The social security base rises each year making more of a worker's income subject to the tax. States are raising sales tax and auxiliary fees, while some states have raised income tax rates. Like many of the items of the CPI index, rising taxes never get counted.