Many unassuming Americans rely upon the flawed Consumer Price Index (CPI), which has unfortunately resulted in irreversible long-term repercussions. While the CPI was originally a measure to evaluate a pre-defined, consistently weighted basket of goods, over time, the basket of goods grew to an unreasonable 80,000+ items, and the way the CPI is calculated has been consistent manipulated to provide misleading information.
Modification of the CPI and the Unfortunate Consequences
In 1983, the government CPI rose roughly 12% and the government modified the CPI calculation to save money. In order to save money on salary increases and entitlement benefits, which are tied to CPI, the government changed their calculation of the CPI to reflect a much lower number.
Social Security Payouts
Military and Federal Service Retiree Payouts
Income Tax Structure
Stock and Bond Pricing
Salary Raises (Public and Private Sector)
Rent or contractual payments
Cost of lunches at public schools
The statistic underwent another reconfiguration of the statistic in 1995/96 with the Boskin Commission. It is estimated that between 1996 and 2006, this reconfiguration of the CPI saved the US government over $680 billion. It also made the CPI an even worse indication of the real cost of living increase. Since then, the government has been artificially deflating the CPI to keep figures as low as possible. Due to this, it no longer represents out of pocket expenditures incurred by Americans today.
The government’s baseline CPI measure excludes items such as taxes, energy, and food. As explained, it is clearly manipulated and biased, therefore it is far from accurate. The CPI increase from 2008-2012 was a total of 10.2%, but our research has found that for many cities, the cost of living increase was more than that for just 2012.
As an unintended conclusion, we realized that people were relying on the CPI as a benchmark to beat in order to keep up with their costs of living. In reality, if people were keeping up with CPI, they really were falling behind because the index isn’t appropriately reflecting their cost of living increase. This is the negative result of the 30 years of CPI manipulation by the government in an effort to keep government entitlement increases to a minimum.
The Chapwood Index is our attempt to help people understand why they feel like they aren’t keeping up and why, as they get older, they feel as though their money does not go as far – even when they’re following the rules and working hard.
Start planning smarter.
Learn more about how we computed the Chapwood Index and how using the Chapwood Index can help you better plan for your future.