The Truth About Household Income and Inflation: Why Official Data Can’t Be Trusted

The Census Bureau’s report on real median household income for 2023 has finally been released, and it shows an upward trend for the first time in three years. However, this news is not as great as it seems. While it may suggest progress, it is important to note that household income has only returned to 2019 levels. This means that there has been zero net growth in household income over the past five years.

The term “real” in real median household income refers to the fact that the nominal dollars are adjusted for inflation using a measure called chained-type Consumer Price Index (CPI). The use of chained CPI means that if consumers substitute a more expensive good for a cheaper one, the data discounts that change. In other words, it underestimates inflation. Additionally, the CPI itself leaves out important data, misreports others, and includes unnecessary adjustments that have no basis in reality. As a result, the “real” part of the data reports a higher income, but it does not reflect the actual economic situation.

In essence, the Census Bureau’s report is incorrect. American households do not have more income in 2023 compared to 2022; they have less. Despite this reality, the official data and the narrative created around it cannot hide the truth. This discrepancy is concerning because it shows how official culture can distort information and present a false picture of the economic situation.

Turning to the latest report on the Consumer Price Index (CPI), it is important to analyze the data beyond the headline number. The Wall Street Journal’s headline, “Inflation Extends Cooling Streak,” is misleading. While the overall inflation rate may appear to be cooling at 2.5 percent over twelve months, when excluding energy costs, everything else is actually getting hotter. The Bureau of Labor Statistics (BLS) highlights that the index for all items excluding food and energy rose 0.3 percent in August, with increases in housing, rent, airline fares, motor vehicle insurance, education, and apparel. This data paints a different picture than the headline suggests, indicating that inflation is still a concern.

When considering wholesale prices and core inflation, it becomes clear that while the pace of inflation may not be as bad as before, it is still worsening. The true victory over inflation remains elusive. The Producer Price Index provides more insight, revealing that the dollar has lost a significant amount of its value since the lockdowns. This loss in value is a crucial aspect of the current economic situation that cannot be overlooked or dismissed.

Furthermore, the accuracy of the CPI itself is questionable. Industry reports consistently show price increases that are two, three, or even four times higher than what the CPI reflects. This discrepancy is evident in various categories such as groceries, housing, cars, health insurance, food away from home, and rents. The CPI fails to account for shrinkflation, added fees, diminished services, and new forms of price discrimination. This oversight has real-life consequences, including improper tax adjustments, inadequate raises, and a distorted perception of the economy in the media.

The impact of inaccurate inflation data extends beyond economic analysis. It can also affect election predictions, as many models rely on economic indicators. If the economy is inaccurately portrayed as good, it can skew predictions and mislead voters. Despite the consensus among high-end commentators that the economy is performing well, the reality on the ground tells a different story. Consumer sentiment, for example, is lower today than it was during the economic turmoil of 1980, indicating widespread dissatisfaction with the current economic conditions.

It is crucial to recognize that the public is aware of the reality, regardless of what the mainstream media and government agencies may claim. The views presented in this article are the author’s opinion and do not necessarily reflect those of any specific media outlet. It is essential to critically analyze official data and narratives to gain a more accurate understanding of the economic situation.