CPI Manipulation Has Exacerbated the Income Gap
Courtesy of ShadowStats
The second graph shows the growth in the official CPI, Average Hourly Earnings, Corporate Profits, and the ShadowStats (John Williams) computation of inflation.
As you can see from the graph, wages have only kept pace with "official" CPI, but corporate profits have grown more in line with the ShadowStats inflation rate (ShadowStats Alternative CPI, 1980-based), interrupted only by an occasional recession. It is also clear from the graph that the real divergence between the series began in the mid-1990s, about the time the government began to seriously manipulate the computation of inflation.Courtesy of ShadowStats The growing gap between the wealthy, as represented by corporate profits, and the middle class, as represented by wage earnings, has been, in no small part, caused by the understated rate of inflation. The political class, of course, rails against this growing gap. Nevertheless, it appears to be an unintended consequence of the policy of that political class, which understates inflation so as to slow the increasing cost of entitlements. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts