What’s Your REAL Inflation Rate? Everyday Price Index

by Darwin on March 21, 2012

inflation chart

By now, you’ve probably heard enough complaints about the cost of living going up while the contrived government index (CPI) shows virtually no inflation.  Well, the American Institute for Economic Research has put out an everyday price index to gauge the inflation Americans are really seeing in their everyday lives.  High level findings show that while, yes, you pay less for that big screen TV or DVD player now than you did a few years ago, things that we buy routinely (and especially at the lower end of the economic continuum) continue to skyrocket.  Their findings indicated a true inflationary increase of 8% compared to the government’s stated 3.1% CPI increase.

Here’s some inflation pain I’m dealing with – and it’s WAY above 3%:

  • Health Care Costs – 42%.  Yes, I’m not kidding.  That’s how much my healthcare costs increased in 2012.  My employer decided to eliminate the HMO option and based on the premium increase and more out of pocket expenses moving forward, this was my increase this year.  While this may not show up in the government statistics as a 42%, that’s the impact to us.  Hundreds per month more – gone!
  • Taxes – Not only are tax rates set to increase when the Bush tax cuts expire and Congress finally pulls Americans off the public teet and reverts back to the old payroll tax rate, but I keep getting hit with NEW taxes.  It’s crazy, where I work, the local municipality has imposed a random new tax on all employees. And also, my town just started up a 1% tax on income.  Where did this come from?  I have no idea, but now I’m stuck paying new taxes that didn’t exist before.
  • Food – Admittedly, we spend a lot on food and buy a wide variety of fresh fruits/veggies and entertain a fair amount, so our monthly grocery bills exceed $1000.  To blunt the pain, we’re using this awesome 6% cash-back card for groceries which at least gives us back close to $1000 annually in tax-free cash.  But overall, we are spending more and more each year both due to a growing family and food inflation.
  • Gas – I don’t live very far from work, but we still somehow put on the “typical” 12,000 miles a year on each car.  So, aside from using getting 3% cash back on gas, I also hedge our gas prices.  But this doesn’t completely stem the increase to close to $4 a gallon nationally.  At the end of the day, we have it pretty good and I remind Americans to stop whining about gas prices.  But let’s face it, this is a substantial inflationary contribution to the budgets of most Americans, regardless of what the government statistics include or exclude. And at the end of the day, you know who doesn’t benefit from highly-inflated gas prices? A car accident law firm that might get more customers when there are more drivers there on the road. Even though it’s not the end of the world (and perhaps a positive thing, as less people are being hurt), both consumers and businesses suffer from the high cost of gas.
  • Tuition – This is becoming a joke.  Obama blasts colleges for continuing to raise the cost of tuition 6-8%/year while continuing to dole out the aide for lower and middle income students, which just artificially inflates the bubble and allows universities to continue to increase costs indiscriminately.  College tuition is the single greatest transfer of wealth from the middle-upper class to the rest of the country we’ve seen in our generation.  I’ll pay full price for my 3 kids to the tune of over $300,000 (that’s in today’s dollars; it will be more in the future) so someone else doesn’t have to earn and save.  To counter it, I’m gaming my 529 to get guaranteed 9% returns to try to beat the tuition inflation beast, but in general, Americans saving for their kids’ college tuition are paying increases WAY above CPI to keep up.

What’s Your Real Inflation Rate?

{ 11 comments… read them below or add one }

Money Beagle March 21, 2012 at 11:34 am

We haven’t gotten a raise in the last two years and what’s worse is that our taxable income continues to go down because of the impact of health care premium increases. It’s quite substantial when you really think about it, so I try not to 🙂


Darwin March 21, 2012 at 9:24 pm

Yeah, when I got my “raise” this year, I said to my boss, “I get it. The economy stinks so we’re all looking at negative wage adjustments in real terms for the next several years” and she pretty much shrugged and agreed. Good thing for side income!


Sam March 21, 2012 at 9:50 pm

You don’t have to worry about taxes going up. We got gridlock baby!

Just have your kids get full rides. There are a ton of scholarships out there!



Investor Junkie March 22, 2012 at 8:19 am

Taxes are going up automatically. Gridlock will help this happen.


Darwin March 22, 2012 at 8:34 am

I don’t know; politicians pander for votes, maybe they’ll keep them low for less than $250K to buy votes again?


PK March 21, 2012 at 11:24 pm

Haha, I love that we both posted about the EPI on the same day… good stuff!


Darwin March 22, 2012 at 8:36 am

Great minds think alike!


Wayne @ Young Family Finance March 21, 2012 at 11:50 pm

I’d like to see housing included as well. As far as expenses go, it’s necessary and the biggest expense for the average American. Plus, like most things, rent inflation is rising faster than it has in many years.


Darwin March 22, 2012 at 8:36 am

Good point! In my case, I’m in a house with a fixed mortgage, but renters are feeling some pain!


Investor Junkie March 22, 2012 at 8:49 am

My primary residence went up 12% in taxes and insurance this year! Gotta thank the bankrupt Nassau County. Property owners are also feeling the pain. Rent rates are going up because of these factors.


JT March 22, 2012 at 8:47 am

College isn’t the only thing that is made more expensive with subsidies. I mean, when you look at every item with a price growing at a pace greater than inflation, you see that they’re all necessities – products with government subsidies.

Food, housing (rents), medical care – pretty much everything necessary for life is growing at a multiple of the average inflation rate. Meanwhile, real wages have stagnated for 30 years. Add that to the list of things that make you go, “hmm…”


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