ObamaCare Skewing Inflation And GDP Numbers? by EconMatters
Healthcare Data Skewed
On Thursday the Personal Income and Outlays Report came out also known as the spending report and just like yesterday’s GDP downward revision the Healthcare component is playing havoc with the overall numbers, and it is pretty obvious due to the newly enacted Affordable Care Act also known as Obamacare.
Just throw out any comparisons or expectations regarding any government data for the foreseeable future because Obamacare is going to skew all the historical comparisons as it effects the calculations that go into the Healthcare component of any government report. The data in the calculation of Healthcare has changed, and from here to eternity the Healthcare component is going to massively under-report healthcare spending, just throw any previous assumptions out the window regarding Healthcare spending.
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Many Data Points Show Healthcare Costs Continue to Rise
The government now has another measure which underreports inflation by accounting chicanery. We all know actual healthcare costs continue to rise, and only 7 million actually signed up for Obamacare, and far less are properly qualified and using the system, but yeah Healthcare costs went down despite data in other reports of a non-governmental nature that point to the contrary! This just tops the cake, and at this point all government data is losing more credibility by the hour, just try to read between the lines and get the big picture, because the actual data points are so unreliable and flawed.
Real PCE Price Index Over 2%
PCE Price Index — Y/Y change came in at 1.8 %; the real number is probably above 2% if the Healthcare component was properly calculated and conducted, basically any proper comparison has to strip out the healthcare component for an apples to apples real comparison. Way to go Obama the entire team is working together from Janet Yellen at the Fed to bean counters at the Whitehouse reassuring the American people that there is no real inflation in the economy! Yet every American experiences inflation in almost every category that is above the government calculated numbers!
No Inflation Here
Have you noticed car prices these days? What about Chicken, Fish and Beef? Apartment prices are going up because most Americans cannot afford houses. The affordability index for houses is not where one would expect after a massive recession and housing collapse with an economy growing at roughly 2% for the past 5 years in a consistent fashion. It is inflation, inflation is everywhere one looks! It`s great that the government can change how Healthcare spending is calculated to artificially show that look, Healthcare costs are coming down and Obamacare was the savior that we knew it would be! But throw out any items that aren`t necessary for surviving as those are in essence worthless components in any inflation calculation. Because in the end, consumers just don`t acquire those items that they cannot afford, these become luxury items, and prices seem cheaper than they are because of demand, and this skews the inflation numbers.
Inflation Methodology Flawed
This is why government inflation calculations and methodology always underreport inflation and are basically a joke! Focus on the items that consumers have to buy to stay alive, food is number one, if humans don`t eat food they die, they have to buy these items! Energy is another, if they don`t buy gas, they cannot commute to work, lose their job, and cannot buy food! Focus on Apartment Rents, if they don`t pay for minimal housing in the form of Apartment Rent, then they are living with family, shelters or under a bridge! All three of these essential areas are going up, and quite notably in many cases, and yet the Fed refers to them as “Noise”!
Increasing Purchasing Power Should be the Focal Point of Fed Policy
How much higher does the stock market have to go? Does it really matter relative to improving the quality of lives of average Americans by bringing down Real Inflation in the economy? How about instead of being so focused on raising wages to keep up with soaring inflation costs, which never seem to keep pace Janet, bring down inflation so that it is commensurate with a 2% growing economy, that in the end does so much more for the majority of the population? Janet Yellen might just realize that by getting Inflation in line with the actual growth of the economy and wages, that she would vastly improve the Consumer`s Purchasing Power, and thus be stimulating the economy! The Fed has it all backwards, and they wonder why they keep having to implement these stimulus programs, it is because they don`t work – except for creating asset bubbles in stocks and bonds!
Wealth Redistribution Policy at Federal Reserve
Janet Yellen better start focusing on Inflation or she is going to have an economy that starts slowing down and enters a stagflation stage because the tepid retail sales numbers are a direct correlation to rising inflation pressures in the bulk of the economy. Struggling college students need this money to fill up their tanks to get to school and a job, forget about the fancy outfit or the new Coach Handbag! This is the real world that many Americans live in, not one characterized by ‘Noisy Inflation’ interpretations to peddle more easy money to rich Wall Street Banks at the expense of the majority of the population!