A recent exchange [1] on Econbrowser regarding forecasts of CPI reminded me that — even among the official series — there’s more than one CPI.
Figure 1: CPI-all urban (blue), and CPI-wage earners and clerical workers (red), s.a., in logs 2020M02=0. NBER defined recession dates shaded gray. Source: BLS, NBER and authors calculations.
Figure 2: Year-on-year inflation rates for CPI-all urban (blue), and CPI-wage earners and clerical workers (red), s.a., calculated as log-differences. NBER defined recession dates shaded gray. Source: BLS, NBER and authors calculations.
Inflation for the bundle that wage earners/clerical workers has outpaced that for all-urban, by about 0.6 ppts by September.
Interestingly, the weights for the two CPI bundles indicate that wage earners/clerical workers have a higher weight on food, food away from home, and private transportation, and less weight on housing, than all urban consumers. As elevated housing costs feed into the CPI housing components, the places might switch.
Update, 6:30pm Pacific:
Barkley Rosser wonders about a CPI for those over age 62. There is, but it is a research — rather than official — series. See here for discussion of that BLS research series. I show that series, along with the research Harmonized Index of Consumer Prices (HICP) (BLS description here).
Figure 3: CPI-all urban (blue), CPI for of 62 (crimson), both s.a., and Harmonized Index of Consumer Prices (HICP), n.s.a., all in logs 2020M02=0. NBER defined recession dates shaded gray. Source: BLS, NBER and authors calculations.
Note that while the HICP includes both rural and urban consumers, it excludes housing costs (and is not seasonally adjusted). In comparing the HICP to the CPI, one would want to use a CPI excluding shelter.
For a long time advocates of old people in the US have advocated using a “CPI” focusing on the expenditures of old people, which obviously have a lot more medical expenses than younger people. I gather that such an age-specififc COLA has not been adopted. SSA recipients get the general official CPI, 5.9% adjustment for next year, not bad, although helping to cement in that this is not so-transitory inflation.
Barkley Rosser
Barkley Rosser: See addendum; you are right that the research series for the over 62 age group has not been adopted for use in indexing benefits, although it is reported.
Rosser: “For a long time advocates of old people in the US have advocated using a “CPI” focusing on the expenditures of old people.”
It is actually more sinister than that. What the austerians have been advocating is “entitlement reform” which translates not to reform but more specifically “benefit cuts” but they never want to call it that. They have been very vocal arguing the C-CPI-U (chained CPI) is a more accurate measure than CPI-W currently used for Social Security cost of living adjustments.
This is a bad faith argument. They know very well that chained CPI runs lower than CPI-W and would result in thousands of dollars of benefit reductions for the elderly. If they really wanted a more accurate measurement they would use CPI-E for the elderly as you suggest, but that isn’t what they are saying. They just want benefit cuts and they want to sneak it through using chained CPI.
Yeah. O’bomber tried to slip the chained CPI for Social Security COLA into budget negotiations with Republicans…after having campaigned on how easy it would be to “fix” Social Security. Fortunately, O’bomber wasn’t able to negotiate any kind of a deal with Republicans, and Social Security benefits escaped in tact.
You keep telling us that President Obama wanted to undermine Social Security but you tell us a lot of things that are not true.
pgl has trouble with established facts when they clash with his partisanship.
“ In both 2008 and 2012, Obama explicitly campaigned on protecting the Social Security program and rejecting plans that would cut benefits. But shortly after re-election in 2012, the Obama Administration proposed re-calculating the way Social Security’s cost of living adjustments work.”
https://theintercept.com/2016/06/02/obama-wanted-to-cut-social-security-then-bernie-sanders-happened/
And he regularly misrepresents what others say.
JohnH,
He did what you said he did after his reelection, but in 2008, after a period of time during the primaries toying with “fixing” it he went with leaving it alone, which was his position during the main part of the election against McCain.
I’m glad Barkley corrected the record here as by now I have grown quite bored with your pathetic rants.
Before that, Bush wanted to privatize Social Security. We see how well that worked out in Chile: https://www.bloomberg.com/news/articles/2021-05-10/chicago-boys-free-market-pension-model-is-unraveling-in-chile
You can’t trust either side in DC. At least with Bernie and the Progressive Caucus on guard, neither side can pull their usual sleaze with as easily.
There was a lot of economist blog criticism of this horrific Bush idea back in 2005. Some of it was at Thoma’s old place and some of it was featured over at Angrybear when I was one of the 3 original bears. Funny thing – we never saw you offer a single comment back in the day when this was a hot political issue.
The leading center of the opposition was Maxspeak, which I was on, and was succeeded by Econospeak. A lot of what Maark Thoma posted about it was stuff from Maxspeak, a lot of originally written and posted by me.
I just had Max in to give a talk last week at JMU, and we were reminiscing about that. We were along with Dean B?aker the main core proponents of leaving SS alone at the time Bush was trying to mess with it.
As it was, in 2008, while it is not public information, Obama changed his position to supporting leaving SS alone after he received a memo by me and Bruce Webb that went through Austen Goolsby to him. That was based largely on stuff I had been posting on Maxspeak for several years. This was what “Rosser’s Equation” was about, which you can read about on Wikipedia, and, no I did not put that entry there. It was Bruce Webb who coined that term, as is recounted there. Yeah, those were the good old days for econoblogging and some other things as well.
“Max” is Max Sawicky. He was at EPI when he ran Macspeak, but had to stop blogging when he went to GAO to get better health insurance because his wide was dying of cancer. That was when Econospeak started as Maxspeak’s successor, with me and Sandwichman the two who went from the older blog to the new one.
I miss Maxspeak – You Listen! Very smart and articulate progressive economist who I used to read on a regular basis.
Back in 2016 Bernie Sanders had a good fiscal policy proposal but his reliance on that joke of an analysis by Gerald Friedman was rather embarrassing. It turns out Max wanted to work with Senator Sanders as an unpaid analyst. I have no doubt Max could have written a credible analysis but the Senator never called him back. Big mistake.
“You can’t trust either side in DC. . . . ”
Truth.
History repeats itself. First, it’s tragedy. Then, it’s farce.
Recently, China successfully test-fired a nuclear-capable, hypersonic missile. The US elevated a trans admiral to four-stars.
You have a problem with the new admiral?
T.Shaw: Wow. On your third point, I do not understand the thrust of your statement. Do you care to elaborate?
A failed attempt at dark humor.
I was thinking in terms of the history/farce theme.
The CCP military establishment develops 21st century weapons of mass destruction. The American military establishment headlines a trans person to the top commissioned officer rank.
In the run-up to WWII, the French military may have been similarly distracted and unconcerned with winning the next war. That ended not farcically for tens of millions of murdered people. Book recommendation: Ernest May’s book, Strange Victory . . .
Peace in our time!
T.Shaw: If we want to allow people to fulfill their potential, rather than ostracizing and denigrating certain groups, shouldn’t we welcome the development of a trans admiral if that post was achieved on merit? Isn’t the character of a nation important when assessing the balance of forces.
T.Shaw: I’ll just note as a politico-military history buff, it was British PM Neville Chamberlain who said “Peace for our time”, not the French military.
I think also you are thinking of not Ernst May, but Ernest May, Harvard historian. I have not read his book “Strange Victory”, but did read his book w/Neustadt “Learning in Time”. I commend it to you – so as to learn how not to make facile historical analogies.
http://www.cepr.net/index.php/blogs/cepr-blog/thoughts-on-the-chained-cpi-social-security-and-the-budget
December 17, 2012
Thoughts on the Chained CPI, Social Security, and the Budget
By Dean Baker
According to reliable sources, the Obama administration is seriously contemplating a deal under which the annual cost of living adjustment for Social Security benefits would be indexed to the chained consumer price index rather than the CPI for wage and clerical workers (CPI-W) to which it is now indexed. This will lead to a reduction in benefits of approximately 0.3 percentage points annually. This loss would be cumulative through time so that after 10 years the cut would be roughly 3 percent…
Proper reference link:
https://cepr.net/thoughts-on-the-chained-cpi-social-security-and-the-budget/
December 17, 2012
Thoughts on the Chained CPI, Social Security, and the Budget
By Dean Baker
Thanks for reminding us of the very thorough analysis of this issue. Dean Baker led the opposition to cutting Social Security benefits quite ably. Maybe this sneaky cut was under discussion but note we never saw any real action on it – thankfully!
“Maybe this sneaky cut was under discussion but note we never saw any real action on it – thankfully!”
It wasn’t just under discussion. It was literally on the table. Obama had it written into his budget agreement and the only reason it wasn’t implemented was because Republicans refused to take the deal (although on other grounds.)
Obama did a lot of good things but one of the worst was buying into Republican arguments that the most important crisis facing the country in 2011 was the national debt, while still in the midst of the worst recovery since the Great Depression. And the worst of the worst was Obama’s willingness to sell out seniors on Social Security. For decades the Democrats’ signature claim to differ from Republicans was that they would never cut Social Security. And Obama threw that away. And today Republican crow about even Democrats wanting to cut Social Security. Obama can’t be forgiven for that.
what you should blame obama for is being gullible. he believed the republicans would work with him on obamacare. he believed republicans would work with him on social security. they lied on both counts. and republicans have basically been lying ever since. obama is much wiser today.
“Obama can’t be forgiven for that.”
obama did plenty of good. he should be forgiven. we need to stop all this bernie bros propaganda. bernie is a loser who has accomplished nothing but being a back bencher throughout his career. there is a very good reason bernie could not be elected president.
It is easily forgotten now, but Dean Baker initially posted from Maxspeak before he started his own blog. So indeed it was the original econoblog that pushed defending the Social Security system from those who kept wanting to mess with it.
Good point. Using FRED I checked the increase in 3 series from Dec. 2012 to Sept. 2021. For CPI-E, the rise was 20.56%. But CPI-W rose by only 19.12% while CPI-U increased by a mere 18.56% over the same period.
What about vegetarian CPI, since meat substitutes have been dropping in price?
Feel free. The best nputs for such an index are available.
The inputs are all available.
If the working class can’t afford chuck chopped meat, it’s rice and beans with concomitant rising prices.
A Historian wrote regarding causes of the decline and fall of the western Roman Empire, “There are as many theories as there are writers.”
CPI [and inflation] will be whatever the powers-that-be want. The man in the street will feel it.
Re vegetarian diets. We’ve been on veggies for two years. The health benefits are there. Those fake meats are the worst part. The bite is the ‘issue.’
Likely, fake meat stock prices are about to come down to earth.
Me? I eat a lot of chicken and fish which have become a bit more expensive.
Aren’t price signals telling you to go full vegan?
unless u r vegan on “organic” u r getting a share of roundup which is nasty if you are unlucky wrt cancer…..
paddy kivlin: You should stop reading disinformation from an anti-GMO/anti-vaxxer organization.
I generally oppose new and different ways of defining inflation for one very simple reason: misuse by the media and others unschooled in what is actually being measured, and how it differs from “inflation.”
By all means, measure things accurately and differently.
But, let’s not use such measures as if they were what we normally think of when we say the word inflation.
The prime example of misuse is U-6 unemployment, which the right-wing nuts periodically trot out to explain to the rest of the great unwashed that the REAL unemployment rate is double-digits, and THEY are hiding the fact. When it is pointed out that U-6 always has been (with very rare exceptions) in the double digits, and that it actually isn’t a measure of what most people think of as unemployment, they don’t seem to care.
And, don’t get me started on the myriad of ways in which purchasing power parity is abused …
“And, don’t get me started on the myriad of ways in which purchasing power parity is abused …”
As in that stupid Big Mac index. Who eats that garbage anyway?
From the BLS:
“The CPI-U is a more general index and seeks to track retail prices as they affect all urban consumers. It encompasses about 87 percent of the United States’ population.
The CPI-W is a more specialized index and seeks to track retail prices as they affect urban hourly wage earners and clerical workers. It encompasses about 32 percent of the United States’ population and is a subset of the CPI-U group.
The CPI-W places a slightly higher weight on food, apparel, transportation, and other goods and services. It places a slightly lower weight on housing, medical care, and recreation.”
CPI-W excludes salaried workers, self-employed and retired people.
would you accept a chained cpi if at the same time social security taxes were not capped at $117,000, but extended to all earned wages?
What? You are saying you would take a deal in which millions of poor people get poorer but a few rich people pay more taxes?
Are you daft? That’s the deal Obama wanted in his obsession with debt reduction!
quantify how much poorer those people get?
on the other hand, once we lock in those higher taxes, we have secured the solvency of social security for the next 75 years. then i can work on improving those benefits. your approach guarantees that social security cannot pay off benefits within the next two decades, making those poor people get poorer. guaranteeing republicans take an ax to the safety net. and no tax on the rich. are you daft?
my guess is the difference in our view has to do with age. you are old enough to be collecting social security, and will resist any attempt to cut back on your entitled benefits. but i am young enough to not be collecting social security, and aware that under the current system i will collect fewer benefits than current retirees. unless the system changes, one of us will be underfunded. you may be a nice guy, but i would rather you be underfunded than me, joseph.
“on the other hand, once we lock in those higher taxes, we have secured the solvency of social security for the next 75 years. then i can work on improving those benefits. “
Oh, so your strategy is to lower benefits now so in some fantasy future you can raise them.
Where have I heard this before. Oh, yeah: “We had to destroy the village in order to to save it.”
No. I advocate slowing their growth. You interpret that as a cut because you are receiving benefits now. But you are not entitled to those pay increases.
On the other hand, your approach ensures that when i am ready to receive social security, the benefits will need to be cut. So what i hear from you is not a protest against cuts, but a protest against your benefit cuts. Show me a viable solution that keeps benefits the same over the long run and you certainly have my attention. Punting the problem into the future is not a solution. If cuts need to be made, then i want everybody to have some skin in the game.
This is hilarious. Baffling, who considers himself progressive, is hauling out all of the old Republican arguments that are decades old.
It was Newt Gingrich as Majority Leader back in the mid 90s who pushed the argument that a COLA cut wasn’t a benefit cut, blurring the distinction between nominal and real dollars. People were supposed to believe that even though they were poorer, they hadn’t experienced a benefit cut. “Don’t pee on my leg and tell me it’s raining.”
It’s amusing to hear someone who aspires to understand economics parrot the exact same mendacious gibberish as ole Newt.
Social Security isn’t a big fiscal problem. The current projected shortfall could be easily fixed in a multitude of ways that don’t require benefit cuts, but Baffling has joined in the decades long Republican project to gut it.
Maybe the Democrats under Obama should have dusted off the proposal from Bob Dole back in the 1980’s:
https://www.nytimes.com/1988/01/30/us/dole-revises-budget-proposals-to-eliminate-social-security-freeze.html
Dole kept saying back then how the government could save money and make seniors better off if we replaced the indexation of Soc. Sec. benefits with an annual nominal raise of 2%. Of course back in those days, inflation was greater than 2% so Democrats rightfully shoot down this dishonest proposal.
But if we had decided to give seniors a 2% raise each year from 2009 to 2019 – they would have seen real increases.
I have twwo words for Chinny
Trimmed Mean