"Apparently, inflation would be much higher if we calculated it the way we did in the 70s and 80s."
Yep. And apparently Reagan was one of the ones who changed it after accusing Carter of doing so:
"The calculation for housing in the CPI is a bit more complicated than that for new cars, but the key piece to understand is that in 1983, the Reagan administration chose to exclude interest costs, instead asking homeowners what they think they would be paying in rent if they didn’t own the home they lived in. The government simply “underestimates changes in housing costs,” according to an economist at Redfin, especially when interest rates are spiking. “And that’s because housing costs for the person who is actually active in the market experiences much greater fluctuation.”
The reason to change this measurement was so that inflation would look lower than it actually was. Over time, subsequent administrations sustained this shift. Lying about the symbols used to govern has a short-term political benefit in that it perhaps gets you some good media coverage, but over time, it meant that the CPI for housing costs isn’t necessarily reliable.
So basically, the price of money is a big deal in terms of our experience paying for things, and it’s being excluded from the inflation metric that policymakers use to look at the economy. So that’s why policymakers are confused. Some of their key tools aren’t reflecting reality, and the people who originally broke the tools for political purposes aren’t there anymore. Today’s political class doesn’t even know what they don’t know."
"Reagan Blasts 'Jimmying' of New Statistics On Economy
By Bill Prochnau
October 7, 1980 at 1:00 a.m. EDT
CHERRY HILL, N.J., Oct. 6, 1980 -- Ronald Reagan, promising a broad new attack on the "missing issues" of the 1980 presidential campaign, today accused President Carter of "Jimmying" government economic figures as a pre-election ploy."
How about Carter's first appointment to run the Fed: G William Miller. Lasted about a year, and then got kicked upstairs to Treasury. His successor was Volcker.
This captures the sense of the Carter presidency perfectly:
"On July 12, the president gives this speech and Kevin Mattson, author of What the Heck Are You Up To, Mr. President, which examines the underlying themes of Carter’s speech, the “Malaise” speech, explains the speech and its attempt this way: “Jimmy Carter had grown increasingly convinced that Americans had to face up to the energy crisis, but they could only do this if they faced up to the crisis in their own values.” Says Madison, “He tried to push the energy crisis onto a kind of moral and civic plane and the speech was used to unify around a sense of civic sacrifice.”"
"There are no quick fixes here, and for the most part the government has no plans to remove regulatory costs - only to impose more."
The fix seems to be people relocating from states with building restrictions like New York and California to those without it, which has been accelerated by the ability of much of the work force in the restricted states to work remotely.
bring back the Gipper!
It really does feel like we are re-living the malaise phase of the Carter Administration, except this time it is the vibecession.
Apparently, inflation would be much higher if we calculated it the way we did in the 70s and 80s.
The adjustment for the substitution effect seems to be doing a lot of work these days. Anyone believe food inflation is running at 2.4% annually?
"Apparently, inflation would be much higher if we calculated it the way we did in the 70s and 80s."
Yep. And apparently Reagan was one of the ones who changed it after accusing Carter of doing so:
"The calculation for housing in the CPI is a bit more complicated than that for new cars, but the key piece to understand is that in 1983, the Reagan administration chose to exclude interest costs, instead asking homeowners what they think they would be paying in rent if they didn’t own the home they lived in. The government simply “underestimates changes in housing costs,” according to an economist at Redfin, especially when interest rates are spiking. “And that’s because housing costs for the person who is actually active in the market experiences much greater fluctuation.”
The reason to change this measurement was so that inflation would look lower than it actually was. Over time, subsequent administrations sustained this shift. Lying about the symbols used to govern has a short-term political benefit in that it perhaps gets you some good media coverage, but over time, it meant that the CPI for housing costs isn’t necessarily reliable.
So basically, the price of money is a big deal in terms of our experience paying for things, and it’s being excluded from the inflation metric that policymakers use to look at the economy. So that’s why policymakers are confused. Some of their key tools aren’t reflecting reality, and the people who originally broke the tools for political purposes aren’t there anymore. Today’s political class doesn’t even know what they don’t know."
https://www.thebignewsletter.com/p/strikes-and-bidenomics
"Reagan Blasts 'Jimmying' of New Statistics On Economy
By Bill Prochnau
October 7, 1980 at 1:00 a.m. EDT
CHERRY HILL, N.J., Oct. 6, 1980 -- Ronald Reagan, promising a broad new attack on the "missing issues" of the 1980 presidential campaign, today accused President Carter of "Jimmying" government economic figures as a pre-election ploy."
https://www.washingtonpost.com/archive/politics/1980/10/07/reagan-blasts-jimmying-of-new-statistics-on-economy/eee6bf36-afd5-44d0-9f22-16d0db5ca547/
People forget how crazy it was when Carter asked his whole cabinet to resign.
https://www.nytimes.com/1979/07/18/archives/carter-offered-resignations-by-cabinet-and-senior-staff-some-going.html
https://content.time.com/time/subscriber/article/0,33009,948464,00.html
Imagine if Trump had done something like that.
How about Carter's first appointment to run the Fed: G William Miller. Lasted about a year, and then got kicked upstairs to Treasury. His successor was Volcker.
This captures the sense of the Carter presidency perfectly:
"On July 12, the president gives this speech and Kevin Mattson, author of What the Heck Are You Up To, Mr. President, which examines the underlying themes of Carter’s speech, the “Malaise” speech, explains the speech and its attempt this way: “Jimmy Carter had grown increasingly convinced that Americans had to face up to the energy crisis, but they could only do this if they faced up to the crisis in their own values.” Says Madison, “He tried to push the energy crisis onto a kind of moral and civic plane and the speech was used to unify around a sense of civic sacrifice.”"
https://slate.com/news-and-politics/2017/08/whistlestop-on-carters-cabinet-purge.html
"if they faced up to the crisis in their own values" perfectly describes the Democratic Party's outreach to voters.
"There are no quick fixes here, and for the most part the government has no plans to remove regulatory costs - only to impose more."
The fix seems to be people relocating from states with building restrictions like New York and California to those without it, which has been accelerated by the ability of much of the work force in the restricted states to work remotely.
IMO remote work might end up being the final dagger in places like NYC and SF.
That and not wanting to get pushed into the subway.
NYC used to smell like garbage and piss. Now it smells like a Grateful Dead concert.