The Elder Law Forum

The Elder Law Forum
"Hedonics" and "Exclusions" Understate CPI

I now engage in a task that I evaded for 42 years: paying bills.

It is a distasteful monthly undertaking that I resent; not because it depletes our cash balances, but because it forces a person to confront, one bill at a time, the influence that creditors exercise upon our daily life. Also, it causes a person to call into question the government's method of computing the consumer price index.

Since 1962, when Mary Ellen Schaefer naively contracted to spend the rest of her life with me, I have been insulated from checking account balances, the cost of a kilowatt of electricity, a BTU of natural gas, or the house assessment for property tax purposes. My job, we agreed, was to earn the money. Her job was to spend it.

Accordingly, she took possession of the checkbook and maintained control of it until recently when her eye sight deteriorated to the point where she can no longer read the amounts being demanded by the clinic, the pharmacy, the hospital, the gas company, the electric company, the telephone provider, the cable company, the water supplier, the auto, life, health, and fire insurers, the dentist, and assorted vendors to whom we have become indentured.

Instructed to retrieve the bills from our mailbox, I was impressed by both their number and amounts. They sparked a curiosity about how the Bureau of Labor Statistics can spin back-to-back double-digit inflation in healthcare, soaring energy costs, unprecedented credit card interest costs, and pumped-up real estate taxes into an annualized CPI rate of 2.6 percent.

How does the Bureau do it? Easy: "Hedonics," and "exclusion from the consumer basket." Hedonics is an arcane statistical technique that permits the Bureau to assign an artificial value to technological improvements. For example, it might assign a value of $135 to a 2006 improved television set that sells for the same $350 it sold for last year. Hence, concludes the Bureau, the price of the television set has fallen 29 percent.

And what about those horrendous increases in the cost of electricity and natural gas? Excluded from the calculation, they tell us. Why? Variability does not permit accurate price tracking. And healthcare costs? They dumb-down those numbers by looking at health plan premiums, ignoring the shifting of costs through exclusions, deductibles, and copayments. Is it better that we not know?

(Pro bono legal information and advice is available to persons 55 and older through the USD Senior Legal Helpline, 1-800-747-1895; mmyers@usd.edu)

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