The Consumer Price Index, a big lie

What is the "real" CPI or cost of living? Is the CPI extraordinarily understated?

Average inflation rate per the CPI (2002-2004) is 3.3% per the chart below

Item Average inflation per year, 2002-2004 Data
Housing 14%+ Median US house 2002 = $158,000. Mid 2005 $240,000. (source = US Census and OFHEO data)(see hedonics in the glossary)
Food 7%+ The agricultural price index (all farm products) has moved from 95 to 120, about 26% per here.
Health care 9.5% "Total national health expenditures increased by 7.7 percent in 2003...In 2004, employer health insurance premiums increased by 11.2 percent" (source). The Health Care Index is also up over 80% in the two year period ending in August of 2005.

See a health care popup chart here, click here for regular link.
See a premiums/benefits popup chart here, click here for regular link.
Education 5%+ College education has gone up 5-6% per year since mid '90s per here. 2005 - Increases in tuition, fees, room and board by the schools ranged from 4.3 percent at Ithaca, N.Y.-based Cornell University, which will charge $41,767, to 5.5 percent at Yale University…, which will cost $41,000… Harvard… raised its rate by 4.5 percent to $41,675. “The University of Colorado’s board of regents approved a 28 percent tuition increase for the 2006 fiscal year", the Denver Post reported.
Gasoline 20%+ Wholesale unleaded gas without any taxes in 2002 was about $.75 per gallon average. Late 2004 - $1.40.
Taxes -1% Tax freedom day remained about the same per the Tax Foundation.
New Cars 2.3% Per Edmunds's data, the increase from 2003-2004 was 2.3%.
"Other" -10%+ Many consumer items that are infrequent purchases like computers, clothing, DVD players & microwaves have gone down in price. But one doesn't buy them every week or month, and they are not essentials like food, housing, etc.
What is this on the inflation "core rate" which excludes food and energy too? Does someone seriously think that a broad price index should not include daily use items like food and energy? We fail to see any purpose for the concentration on it other than political and similar ones.

Note that there are no factors for quality changes, either up or down, so add or subtract your own adjustments as desired.

Does that look like an average of 3.3%, like the CPI states, to you?

We maintain that it has been severely understated for years, by at least half.

Actual Consumer Price Index from the U.S. government

Some final notes: All we're saying here is that inflation is roughly at least 3% higher than what is being reported and has been reported since when the Boskin Commission Report recommendations were implemented. For our predictions and thoughts on future inflation, please see our forecast and other pages.

Longer term CPI accuracy is also far from accurate. From mid 1955 to mid 2005, CPI has risen slightly over 7 times. During that same period, houses have gone up over 18 times and even Disneyland admission has risen over 15 times.

Lastly and stated again, we think the inflation rate that has been reported and emphasized called "core inflation" is more than a little ridiculous. It's basically the CPI rate after food and energy price changes have been removed - last time we looked, we pay for them every day... and are tempted to make a very sarcastic comment.

The Finster Dollar Index
An index of the value of the US dollar (and therefore global inflation) in terms of global real goods, services, capital and labor.

The Consumer Price Index
An article from a series called "Government economic reports: Things you've suspected but were afraid to ask".

Smoothing out inflation
A very good treatment of specific problems with the CPI and how it is calculated.