The
chart at the right was plotted from information provided by the Federal
Reserve Bank of Minneapolis (the Federal Reserve Bank is a private bank
and no more a part of the Federal government than Federal Express is).Notice the slope of the line, which indicates the rate of inflation. Compare the 2.3% slope of the line for the years 1914 to 1946 to the 2.5% slope of the line between 1987 and 2007.
Following
the double digit inflation of the late 1970's and early
1980's, inflation
was "redefined." Four
volatile product categories
were re-calculated and one was completely excluded. For example, the price of gasoline is a "volatile," so if the price of gasoline increases, the cost of living does not increase ... except as the gasoline price increase causes a general increase in the price of products that have to be shipped.
Petroleum (gasoline,
diesel, heating oil, etc.)
Housing (private
residences, rental homes, industrial buildings, etc.)
Health Costs (doctor
visits, hospital costs, medicine, etc.)
Insurance (health
insurance, home insurance, car insurance, etc.)
Tax increases,
or "revenue adjustments" (elimination of tax deductions like interest
on credit cards), were completely removed from the cost of living index.
Since
the mid 1980's, workers receiving published cost of living raises have
been losing an average of 2.5% of buying power (value of the money
they earned). For example, published inflation for
2006 was 2.3%, while actual* inflation for 2006 was 4.6%.If a worker has received published cost of living increases every year for thirty years, the 2.5% loss of annual buying power reduced their ability to buy "stuff" by 50% (Google the Rule of 72).
With NO cost of living adjustments and 6% actual cost of living increases, in just 12 years, a worker's buying power will be reduced by 50%.