- What is the matter with the whiny American voters? They
keep telling pollsters that they think America is on the "wrong path."
But don't they read the statistics? Don't they know that unemployment is
at a comfortable 5.6 percent, that inflation is almost nonexistent, that
the economy is growing smartly at around 4 percent?
-
- These happy statistics, alas, don't accurately capture
the economic reality of ordinary people. Take inflation. It's true that
measured inflation is very low, but look at all that's left out.
-
- In the case of health care, the government's consumer
price index tracks the cost of medical services. But it is less precise
about tracking who pays for them. If your employer's health plan is increasing
your share of premiums and cutting the company's contribution or if the
plan is increasing out-of-pocket charges or reducing what drugs it will
cover, this shift is accounted for indirectly, after a lag of two years.
But it hits your pocketbook immediately. And if rising medical costs deter
you from seeing the doctor, that doesn't show up in the index at all.
-
- Or consider housing. There are parts of the country where
housing prices have been declining for a decade because few people want
to move there. Statistically, these declines get averaged with astronomical
housing costs in major metropolitan areas to show only modest average housing
inflation. Around big cities, prices have plateaued at very high levels
that are plainly outstripping incomes. Try telling a young person in Greater
Boston or New York or LA that there's no serious housing inflation or that
rents have not increased faster than earnings.
-
- Another case of hidden inflation: A great many people
in late middle age find themselves subsidizing their newly launched young.
The causes of this trend are multiple: low starting salaries, skyrocketing
rents, and the high cost of college tuitions and health insurance. Is this
a dent in the cost of living for the middle aged? You bet. Does it show
up in government statistics? Nope.
-
- The inflation numbers also fail to capture pocketbook
realities for retired Americans. A low official inflation rate plays a
cruel trick on seniors. For starters, it means that cost-of-living adjustments
in Security Security checks are mere pocket change. One new prescription
can more than eat up this year's Social Security increase.
-
- Further, a low rate of inflation translates into a low
interest rate on savings accounts, Treasury securities, and other prudent
investments for the elderly. Moreover, older people on fixed incomes who
are not homeowners are also at the mercy of rising rents.
-
- And the same deficiencies in the consumer price index
that fail to capture cost shifting in health care particularly affect the
elderly, who spend a disproportionate share of their income on doctor's
bills, hospital costs, and drugs.
-
- Or take energy costs. Gasoline is near an all-time high.
That doesn't affect the overall index much because energy costs are a relatively
small share of average total consumer spending. But if you need your car
for your business, you certainly feel it.
-
- Then we have the unemployment numbers. Nominally, unemployment
is a nice, manageable 5.6 percent -- about where it was during much of
the booming 1990s. But that statistic leaves out all the people who left
the labor force because they gave up on ever finding a job. If you include
those, the real unemployment number is more like 7.7 percent. The proof
of the soft job market is that earnings have not kept up with inflation.
In 2003, the official inflation rate was 2.3 percent. The median wage increase
was just 2 percent. And the 2004 statistics are likely to be worse.
-
- The "average" voter got a tax decrease that
the administration likes to put at around $1,000. But that artful statistic
averages Joe Sixpack with Bill Gates. The typical voter got a federal income
tax cut of more like $300, and in many cases that small federal tax cut
was overwhelmed by local property tax increases that were caused by declining
federal aid to states and cities.
-
- President Bush may have gotten away with telling the
voters things about Iraq that just aren't true. But he'd better watch out
when the evidence against his rosy statistics is right in voters' pocketbooks.
-
- Ordinary people may not be professional statisticians,
but they are not fools. America's voters know better than the experts whether
their own personal economy is thriving. Bogus economic optimism only reinforces
the growing sense that this president speaks with a forked tongue.
-
- - Robert Kuttner is co-editor of The American Prospect.
His column appears regularly in the Globe. © Copyright 2004 Globe
Newspaper Company.
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- http://www.boston.com/news/globe/editorial_opinion/oped/articles/2004/03/1
7/statistics_lie_on_the_true_cost_of_living/
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