Government Cooks CPI to Hide Inflation 

The progressive system of governing is essentially a transactional enterprise. Their politicians create an ever-expanding and increasingly costly array of taxpayer-financed entitlements, and then dispense them to favored constituencies. In return, the favored constituencies lend their support to progressive politicians and causes. 

For progressives, this exchange of government benefits for political support is the natural order of things. As FDR put it in a speech to San Francisco’s Commonwealth Club in 1932, government always has been “a relation of give and take” under which “rulers were accorded power, and the people…[were]…accorded certain rights.” 

In a democratic republic, elected officials are formally accountable to the electorate for the consequences of their official actions, the benefits realized, and the costs incurred. Progressive governance imposes staggering costs on the electorate generally. Our national debt currently stands at $30.5 trillion, up more than 10% just since President Biden took office. Much of this deficit spending has financed benefits distributed to only a portion of the electorate.  

In hopes of avoiding electoral accountability for this mismatch between the distribution of benefits and costs, progressives routinely overstate the extent to which their spending programs will benefit society as a whole. And they do everything they possibly can to conceal the true cost imposed on all of us by their profligate governance.  

Progressives spin their consumption-focused transfer payments as “investments.” They claim that even their biggest spending proposals, such as the multi-trillion Build Back Better blowout, can magically be paid for simply by taxing some despised group such as “billionaires” or “greedy corporations.” And they peddle their delusive Modern Monetary Theory to advance the convenient fiction that the federal government can borrow and spend as much as it wants with no risk that uncontrolled deficits will produce inflation. 

There is no free lunch at the federal trough. We pay, one way or another, for every benefit payment we get from the government. As the renowned economist Henry Hazlitt explained, every dollar of government spending not paid for by taxation contributes to inflation, itself an onerous tax levied on all of us. Hazlitt, we see, was correct. There is no free lunch. Inflation’s bill for our time at the federal trough has come due. 

As inflationary pressures have increased, progressives have sought to avoid accountability by minimizing the seriousness of the problem, or by shifting the blame for the economic mess their spending has created. First, they assured us that inflation was a “transitory” phenomenon caused by COVID-related supply chain disruptions. When inflation persisted and intensified, the Biden Administration sought to shift the blame to “Putin’s war,” price-gouging retailers, and production-restricting oil companies. 

The progressive’s disingenuous blame game is failing. There is widespread understanding now that the driving force behind the destructive inflation raging across the land is a series of decisions by the administration and Congress to spend trillions of dollars that we simply do not have.  

The electorate must hold spendthrift progressives accountable in November. For voters to be fully motivated to do that, they must understand a vitally important but little-known fact about inflation: The Consumer Price Index, the most widely reported measurement of inflation, is calculated by the government using a methodology designed to greatly understate actual inflation. 

For example, the shelter component of CPI is not based on actual home prices, which rose more than 20% in the last year. Instead, CPI uses an average of what a surveyed group of homeowners say they would charge to rent out their homes, unfurnished and without utilities. That guesstimated figure rose only 5% in the last year.     

CPI also includes downward “substitution” adjustments based on assumptions that consumers will respond to rising prices for things like steak by purchasing cheaper alternatives such as chicken. And CPI price components are adjusted downward when the government concludes that there are quality improvements in products or services that offset price increases. But the government makes fewer upward adjustments to reflect declines in quality or “shrinkflation.”  

Without its downward adjustments, CPI would, by some estimates, be twice the 8.6% reported for May! 

Accountability requires transparency. We must insist that progressives stop cooking the books and come clean on the true cost of their profligate governance. Then let the voters decide. 

J. Kennerly Davis is an attorney who was formerly Virginia’s deputy attorney general and the finance executive for a Fortune 500 company.

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