24 July 2010

How Does the World Work?

Not an alarmist post... but a wondering one.

Do you turn off the news when the boring "financial market" guy comes on? They talk so fast and never explain anything. I don't have any money to invest, so I really haven't bothered to find out about stocks, CDs and secret slush funds and how to manage them. So to me, words "Consumer Price Index" never meant much of anything.

But they do. And do you know where the information that makes up the Consumer Price Index comes from?

From the US Census Bureau! Really! I swear I am not making this up. I swear it isn't even Obama's fault. This is something that has apparently been going on a long time.

I saw a local newspaper article about the US Census Bureau selecting lucky, valuable, helpful Americans by a secret process (or if it isn't secret, it certainly isn't outlined!) to divulge ALL their purchases, right down to the last soda pop on several occasions. My goodness, you can't buy a roll of toilet paper without telling the Census worker about it. And somehow the price of a can of pop must be different for all y'all people of Hispanic and Asian descent at the local Wal-Mart, because it's *really* important that you tell them your race before beginning this process. But seriously... why do they need to know this? Changing prices like that is majorly illegal, not to mention it would entail too many barcodes and isn't very cost-effective for the retailer.

(Ok, that was snarky. But I like being snarky. My blog. But really. Is the Census Bureau paranoid about super-discount "white only" stores out there operating in secret? What gives???)

The mysterious people behind the curtain work the numbers that come in (they respect your confidentiality!) and come up with something called a Consumer Price Index. That is supposed to be a magic number that will give you a good idea how the economy is doing. The index uses a fixed "basket" of goods that only slowly changes over time. You know the economy is doing well when people can buy lots of stuff and badly when they can't. It has several different categories so that, say, a big increase in clothing costs will affect the CPI but not give the false illusion of total national depression.

That's my understanding of it, anyway. But wait! There's more...

From the US Department of Labor:

"The CPI is often used to adjust consumers' income payments (for example, Social Security) to adjust income eligibility levels for government assistance and to automatically provide cost-of-living wage adjustments to millions of American workers. As a result of statutory action the CPI affects the income of millions of Americans. Over 50 million Social Security beneficiaries, and military and Federal Civil Service retirees, have cost-of-living adjstments tied to the CPI. In addition, eligibility criteria for millions of food stamp recipients, and children who eat lunch at school, are affected by changes in the CPI. Many collective bargaining agreements also tie wage increases to the CPI."

YOWZA! So... because of your "voluntary" response to this intrusive questionnaire (several times in a year!), bunches of union people get lotsa money and great healthcare benefits, food stamp recipients get higher dollar amounts (a raise, mind you, for doing absolutely nothing), Grandma gets more Social Security, AND YOUR WAGES REMAIN CONSTANT. Yeah, that'll help you a lot, Mr. Salaried Worker, as I would *imagine* that everyone else getting more money and your wages remaining the same would contribute to this thing called inflation in the marketplace as goods (unions, remember?) are produced at higher cost. Meanwhile, salaried workers will see their purchasing power DECREASE when minimum wages and food stamp benefits go up.

I think I flunked most of my high school math courses, so if I'm wrong, somebody 'splain how CPI could ever possibly be a good thing to Mrs. C. I have yet to see food stamps or union wages go DOWN, so it must only ever go up based on the numbers. Wouldn't the CPI contribute to inflation in and of itself?

Yep. Somebody please explain all this to me. I have a lot of questions. :)

1 comment:

  1. Call me strange, but economics was one of my favorite subjects in college.


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