The following comes from a news article I was reading. I regularly have this confusion set in when reading about the economy/inflation etc.
“When she looked at the receipt closely, she was shocked to see that she once paid just $2.59 for two beefy five-layer burritos.
In 2024, just one of those burritos now costs approximately $3.69, though prices differ depending on state.
– In January 2012, the buying power of $1 has the same buying power as $1.35 does as of December 2023, according to the Bureau of Labor Statistics’ inflation calculator.
– At the same time, retail food prices have generally increased by an average of 2% per year from 2013 to 2022, according to the U.S. Government Accountability Office.
– However, inflation has been steadily leveling out, climbing 3.4% in December after the COVID-era recession sent inflation spiking to a 40-year high of 9.1% in June 2022.”
If the price of something has more than doubled, then why are the numbers describing inflation always 1-9%, or $1 dollar in 2012 has the same buying power as $1.35 in 2023? I understand those numbers don’t specifically represent Taco Bell’s food, they’re the nation as a whole, but from Home Depot, to Taco Bell, to the grocery store, to my car insurance, to home prices, to medical care, to tuition, to rent prices, to car prices, everything has jumped so massively, at least these things in my life. Are there other numbers I’m just not aware of? Like I know tv’s have gotten cheaper, but it seems like the things that have gotten cheaper are few and far between, and nowhere near enough to put a dent in how much most everything else has gone up. What pulls these numbers down to 1-9%?
In: Economics
You’re onto the scam. Inflation is measured with a weighted “basket of goods.” It’s full of subjectivity and bias. Inflation for the bottom 50% has gone up 50-100% in the last 3-4 years. You’re not crazy. Biden nuts will come out and gaslight you. While he is responsible for a large portion of the inflation, the Fed starting under Trump is the main culprit. Think of these jerks as background static. There is no shortage of people here desperate to be intelligent that won’t give you a long, biased counterargument. But facts are facts. You can see it.
Inflation is calculated by many other things, there are too many variables to compare it to any single item. It’s simply a moving average of things, but it’s generally understood the CPI data from the bureau of labor is always rounded down to make it seem better bc of the metrics that they use. They calculate it on many other things than just groceries, food, etc.
It doesn’t really make a whole lot of sense to talk about inflation in general, since prices raise differently for different things. We pretend it is just one number for convenience and simplicity, but that’s not how it really works.
It is theoretically possible that one group could see a massive drop in their buying power while another group sees an increase, depending on the things they tend to buy. More typically, everyone’s buying power goes down, but at different rates because of the things they are buying.
There are different ways to reduce inflation down to a simple metric. We can choose a “basket of goods” that we pretend represents the economy as a whole, and then watch the changing price of the total basket. We could argue endlessly about how to construct this basket.
In 1980, the us govt changed the way it calculated inflation, then again in 1990. These changes made the numbers look lower vs how they used to calculate it. Coincidentally it’s good politically for the govt if the number looks lower.
https://www.shadowstats.com/alternate_data/inflation-charts
Another aspect I didn’t see in the first few comments is that inflation metrics don’t take into account quality of goods. If there are much lower quality items on the market, or more accurately consumers and retailers replace higher quality items in their life with more lower quality items, then the average cost of everything has technically lowered by inflation metrics even though goods are noticeably lower quality than before. Skews the results to look better and is a change recently made to the metrics to prevent reporting high numbers for inflation, as naturally when economic times are bad, people tend towards lower quality items
There are many different measures of inflation, and some of them exclude things like food and energy and housing from the “basket of goods” used to calculate inflation rates. So if food and gas and rent all double but the price for a tv goes up 2% then it’ll be reported as 2%.
I’d just like to add that the government has a vested interest in making you believe inflation is lower than it actually is. The CPI comes from the government.
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