Saturday, December 10, 2011

A CPI Prism

Graph #1

On the right, from the bottom up, we have

ORANGE: Apparel

PURPLE: Transportation

RED: Food

BLUE: All Items

GREEN: Shelter

GRAY: Medical Care

PINK: Education (Tuition, fees, & child care)

Perhaps the CPI goes up fastest for the things we value most highly, like education in a tough economy. And for things we are unwilling to cut corners on, like medical care.

And the CPI goes up most slowly where there is greater flexibility, as with apparel.

CPI for Food and All Items run very close together.

Oops, I forgot energy.


jerry said...

I wonder - it's not really a measure of "inflation", but of prices. So, for instance, if you start outsourcing all of your manufacturing of "apparel" to chinese sweatshops or whatever (good ol' "free trade"), then the price of that stuff would go down.

Education and health care are by their nature things that can't really be outsourced (are you going to fly to china to visit the doctor or attend a class?)

So I wonder if inflation looks like the upper couple of lines, and the lower couple of lines just don't look like that because of a change in where the manufacturing is done?

I don't know what would be going on with food. (What fraction of our food spending is on imports?)

Jazzbumpa said...

ORANGE: Apparel. To jerry's point - outsourced to 3rd world countries

PURPLE: Transportation - low margin industries

RED: Food

BLUE: All Items Energy is baked into food and all items

GREEN: Shelter. Can't imagine why this is so high, given the real estates collapse

GRAY: Medical Care. Totally out of control.

PINK: Education (Tuition, fees, & child care) Ditto -and it is NOT to to compensation of the educators.


Clonal said...

It appears, that the divergence began around 1982. Reagan started the process of decimating education by cutting Federal support, and started privatizing state and county owned hospitals

See Health policy in the Reagan administration: a critical appraisal. A 1983 article

The administration's earliest health strategy was the The administration's earliest health strategy was the consolidation of about 35 health programs into block grants at sharply reduced funding levels. Congress wrestled with the proposal and finally authorized four block grants covering 24 programs, funded at levels about 25% below the previous year's appropriations.' There are two main obstacles to a fair appraisal of this policy: it was enacted less than a year ago, and it is difficult to disentangle the effects of devolution from those of lost funds. The states-hit all at once with these four block grants, several more in other fields, and budget cuts-are implementing the programs at different speeds and with uneven levels of commitment and competence. It is clear, however, that the loss of funds for maternal and child health and nutrition programs, hypertension control programs, community health centers, and of course Medicaid, hamper local efforts to serve the poor.

This cutting of Federal support lead inexorably to privatization, and ultimately to higher costs being passed on to healthcare consumers.

For Reagan's impact on education, see - The Educational Legacy of Ronald Reagan

Once elected, Mr. Reagan set the educational tone for his administration by:

a. calling for an end to free tuition for state college and university students,

b. annually demanding 20% across-the-board cuts in higher education funding,[2]

c. repeatedly slashing construction funds for state campuses
Ronald Reagan left California public education worse than he found it. A system that had been the envy of the nation when he was elected was in decline when he left.
In campaigning for the Presidency, Mr. Reagan called for the total elimination the US Department of Education, severe curtailment of bilingual education, and massive cutbacks in the Federal role in education. Upon his election he tried to do that and more.

Significantly, President Reagan also took steps to increase state power over education at the expense of local school districts. Federal funds that had flowed directly to local districts were redirected to state government. Moreover, federal monies were provided to beef up education staffing at the state level. The result was to seriously erode the power of local school districts.[6]

As in California, Mr. Reagan also made drastic cuts in the federal education budget. Over his eight years in office he diminished it by half. When he was elected the federal share of total education spending was 12%. When he left office it stood at just 6%.

Clonal said...


You will be able to glean more information if you plot the logs, and look at the slopes.

The curves intersect 1982, because the CPI is based at 1982-84

When we do this, a few thing stick out. Education and Health Care grew faster than the CPI, and Apparel grew slower than CPI. Food tracked CPI.

Apparel kind of sticks out. Before 1992, it tracks CPI, but after 1992 it flat lines (cheap imports)

My comments about Reagan still hold.

Jazzbumpa said...

Clonal makes a point that can be generalized, I believe.

Whenever a particular thing can be done on either a public or private basis - education, (universal) health care (Medicare), SS, postal service*, roadways, etc. - I will be done more cost effectively - and probably better - by the public sector.

This is because there is no need to make a profit to satisfy shareholders, and no need to pay massive salaries and bonuses to CEOs and their cronies.

Just off the top of my hear, I'd say the common thread among these things is that there is little or no opportunity for competition to force low cost and better service.

* I learned recently that something like 25% of UPS deliveries are complete by the U.S. Postal Service, because they go to destinations that are not profitable for private enterprise to service.