TIME: It's Worse Than You Think

[question everything]

It's Worse Than You Think

By DANIEL KADLEC

Tuesday, Apr. 26, 2005

Inflation is back. It's official, and you can blame costlier gasoline and other fuels. But make no mistake: the tab for common services like a hotel stay and garbage removal are jumping too, as is the sticker price on packaged foods and many other household items. Companies are finding that they can pass on part of their soaring raw-material costs.

Yet inflation--at 3%, about par for a growing economy--is actually worse than it appears. That isn't widely understood by the millionaires on Wall Street, who were shocked--shocked!--to learn that life is getting more expensive and sent stocks into a brief tailspin. But most of us have been dealing with stealth inflation for a couple of years. One underappreciated development: folks have gone so much deeper into hock that even the lowest interest rates in a generation haven't cut their average monthly household debt payments, which are at an all-time high and increasing. As rates rise, that will get worse.

(snip)

Retailers like Wal-Mart and Home Depot are quietly replacing common items with more expensive versions, driving up the price of an average basket at their stores. Think of a plain gas grill replaced by a fancier one for $20 more. Sure, you get a warming tray, but you still pay more to grill your burgers.

(snip)

Meanwhile, the sense of wealth that President George W. Bush's tax cuts engendered has been overdone. Some of the savings have been offset by rising state and local taxes and fees. And if you pay the alternative minimum tax, which is rapidly encroaching on the middle class, say goodbye to a big chunk of your federal tax savings. Finally, we all face soaring health-insurance premiums, deductibles and co-pays as employers shift more of the burden onto employees. Yet the CPI looks at total expenditures without regard for who is footing the bill. Simply shifting the burden leaves no mark on official inflation.

http://www.time.com/time/archive/preview/0,10987,1053641-0,00.html

[fob]

1. Welcome to November 2000 Time Magazine! We told you so.

[GOPBasher]

3. Amen to that, fob.

Gee, this is all so fucking surprising! :eyes:

[hatrack]

2. "sense of wealth that . . . Bush's tax cuts engendered"?!?! WTF?!?!

Maybe $300 = "wealth" in Malawi or Indonesia. Not here.

Push that $300 four years back in time and it's even more trivial.

[hvn_nbr_2]

8. They believe their own propaganda.

What, me think? I'm just a paid shill. They pay me well for it, and I have a sense of wealth. Doesn't everyone?
:sarcasm:
I got the Lexus tax break, not the Lexus muffler tax break. Didn't everyone?
:sarcasm:
I don't even know anyone who only got the $300. They certainly don't hang out at the same country club I do, so fuck 'em.
:sarcasm:

[Benno]

9. Absolutely

I've never understood how $300 was going to make a fuck of a difference considering the cost of the Iraq war in relation to the national debt. Now rising gas prices and so on... I guess its just a knee jerk response that they try and achieve with giving a small meaningless tax cut.

[BrainRants]

4. WTF took them so long?

Idiots.

[seafan]

5. Here's another link w/o registration:

http://www.cnn.com/2005/POLITICS/04/25/worse.tm/

[gratuitous]

6. Gee, some news that really matters

And yet, who "graces" Time's cover? Why, a valentine to Ann Coulter, of cuss!

[AllegroRondo]

7. Another factor to consider

the Consumer Price Index uses rent as its base for cost of living, not home ownership. Housing prices have been going up much faster than rents, as have property taxes.

[ooglymoogly]

11. in this economy rents won't be far behind

as home ownership costs outstrips the ability of the middle class to own a home.

[MountainLaurel]

12. You've got it

Housing prices in my area (DC) have DOUBLED in the past 3 years. My salary, alas, has not.

[idlisambar]

10. The effects he describes also hike up GDP and productivity numbers

The lower the inflation the higher the real GDP and productivity growth metrics. GDP numbers can't be taken at face value.