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Home Publications Blogs Beat the Press Politico Confuses Inflation With Growth

Politico Confuses Inflation With Growth

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Thursday, 14 October 2010 08:43

Politico told readers that: "On Friday, Social Security recipients will learn that they won’t receive higher benefits for the second year in a row because the economy isn’t growing fast enough." Actually, this is not true. The cost of living adjustment for Social Security has nothing to do with the economy's growth rate. It is based on the rate of inflation as measured by the consumer price index. The reason that beneficiaries will not receive higher benefits is because the CPI shows no inflation over the last year.

The difference between inflation and growth is very important and fundamental. Reporters should be able to get it right.


Comments (13)Add Comment
...
written by cervantes, October 14, 2010 10:02
Indeed. That is egregious stupidity -- and, obviously, objectively false. It calls for a correction. Will we get one?

Hah!
PISSED SENIORS
written by Queen of Sheba, October 14, 2010 10:18
Every senior citizen I know who is collecting SS are severely pissed that they are not getting a COLA increase for the second year in a row. They see all sorts of price increases, especially food, energy and medical costs - both liability and health insurance increases as well as drug and test costs not associated with Medicare.

I've tried repeatedly to explain to my mother and her friends about the CPI, but their anger and panic is not assuaged. Luckily I doubt any of them read Politico or I would have to explain that the reporter of this article was an idiot and the growth of the economy has nothing to do with their COLA. No wonder seniors are confused and angry - as are we all.
...
written by izzatzo, October 14, 2010 11:15
The difference between inflation and growth is very important and fundamental. Reporters should be able to get it right.


Wrong again Mr Whose Your Nanny. Politico understands the well known Phillips Curve, the trade off between unemployment and inflation.

The reason the economy hasn't grown fast enough is due to the fear of inflation, not inflation itself. Current levels of unemployment are actually necessary to keep growth rates from falling even lower from even more expected inflation due to excess government spending.

Those on Social Security would have received a COLA increase if government spending had been contained and allowed the economy to grow more with actual inflation, which doesn't create fear like expected inflation. They can thank Obama's socialist stimulus spending for not getting an increase for the second year in a row.

Stupid liberals.
Inflation over last year
written by Mike B., October 14, 2010 11:42
Actually, there has been inflation over the last year. The reason there will be no increase in benefits is that this CPI increase was less than the decrease in CPI the previous year. There was a big spike in gas prices in the summer of 2008, which resulted in a Social Security increase of 5.8%. Then, gas prices fell and the CPI dropped, which would have resulted in a drop in benefits of 2.1% last year, except that they do not drop benefits when inflation is negative. Therefore, the CPI has to increase by more than 2.1% before there are benefits increases, and it hasn't yet (it's up about 1.4% over the last year).
Every Senior Citizen
written by jayeno, October 14, 2010 12:49
Should be able to comprehend WHY they are not receiving a COLA, they are only elderly, not morons. I work with the elderly and, when explained in basic terms, they completely understand why there is no increase for the past two years. So, Queen of Sheba, maybe you need to explain it in simpler, more basic terms. The elderly have been educated you know.
...
written by Queen of Sheba, October 14, 2010 2:24
Jayeno;
Thank you so much for your edifying comment. If there is one thing I sincerely appreciate, it is advice delivered in a patronizing tone. I'll try to do better.
...
written by bailey, October 14, 2010 4:41
Perhaps Economists should demand any discussion of "Inflation" start with a definition, correlated to a population sampling?
...
written by bailey, October 14, 2010 4:45
izzatzo, stupid? Care to explain excess Gov't. spending & cola increases under "Chauncey" Bush?
I thought not.
People who write for Politico are reporters?
written by mickster99, October 14, 2010 8:16
Where'd you get that notion?
...
written by Calgacus, October 15, 2010 10:46
Bailey, there's an outside, maybe, one in a million chance that izzatzo writes well-edumucated satire. I think he's either Dean Baker or Keynes' ghost.
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written by China Electronics Wholesale, October 20, 2010 10:49
izzatzo, stupid? Care to explain excess Gov't. spending & cola increases under "Chauncey" Bush?
I thought not.
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Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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