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Political Economy Fake News

Communication from media, economist, politicians
and professionals providing Inadequate, bias information concerned with
personal ideology rather than appropriate information and theories.


Preface: Are the Economics and National Media Professions
 Responsible to Educate on Important Economic Questions?

Income Stagnation Continues
Wage Growth Should Match Productivity Growth
Income Inequality Increasing
Rich Have All the Wealth


Income Stagnation Continues

 Misuse of CPI Index (Red)  
Dramatically Understates Real Income Growth

 While the Federal Reserve considers the  PCE A Index (Green) best for measuring the affects of inflation because consumers do change buying habits, especial now with online retailing.  Changing of buying habits by price helped 15 points with CPI-U-RS and 29 points with PCE A From a paper by Bruce Sacerdote

CPI Inflation Measure is Designed to be Quick
Not Designed for Long-run Analysis
 Media Doesn't Understand
Economists Follow Their Prejudice

What Receives Little News

And here’s what Average Hourly Earnings look like
when you deflate them by two often used measures.
CPI, real wages are 4% below their 1973
while PCE increased 18%.

We’ll leave the topic of which is the better measure for some other time.
But outperformance of real wages using the PCE over PCI is a very old story.

tlranalytics acknowledges the problem but doesn't organize to solve it.
No one will solve it. They are making too much money because of the poor measurements to solve a problem

Additional Analysis





Wage Growth Collates With Productivity Growth

Productivity Gains are Split among Wages,
Profit, and Economic Rent (Excess Profit)



 Income Inequality Increasing

Income inequality in the United States: it’s flatter than you probably realize (Phillip W. Magness)  Magness reviews distortions introduced in Piketty-Saez analyses by incorrect treatment of U.S. tax laws in their calculations.  Magness has constructed what he says is a corrected income distribution curve for the U.S.  Econintersect:  Of course, none of this impacts wealth distribution which also has gone through extreme swings.

When you take out the top 1/10th of 1 percent. not much has changed.
Much anxiety results.



Rich Have All the Wealth

 The major source of lower income Cohort,
Social Security and Medicare and Medicaid
are not considered wealth accumulation.

See 7-3 Additional Analysis



 7-1 Additional Analysis

 B. Price Index used dramatically
   1. CPI Adjusted Index-Chart is Red
     a) Adjusts for seasonable differences
     b) Under estimates income change source
     c) Used by people wanting quickly updated data
Used to grow support for government programs
  2. CPI-U-RS Adjusted-Chart is Blue   
     a) Measures urban purchases which is more realistic
     b) It does not incorporate all possible data on past inflation. 
     c) For example, no attempt made to reflect any new information
       on trends in the safety or comfort of air travel for which there

       is no corresponding methodological change in the CPI-U.
  3. PCE A Index-Green Chart reflects "consumer substitution" is difficult
    to implement in real time.
    a) Measures buying of economic shoppers 
    b) When oranges are really expensive substitute bananas or grapefruit.
     1. BLS examples
     3. CPI A is like always shopping at the local convenience stores
     4. PCE is like shopping at Wal-Mart, local sales and
       Internet for the now  popular as is an i-phone.
Problems With Economic Measurements Over Time 5 min video

Because CPI A is The graph shows high nominal wages
can be adjusted by
unprofessional users to look
a lot lowered by using the CPI
and a lower by
Changing buying habits by price helped 15
points with CPI-U-RS and 29 points with PCE A.


This PEW Data took the middle ground and by giving the index, was better than most. It is almost fake news and mentioning  the possibility of income growth with COI Adjusted Index would have made a better representation of reality.

Median income of the middle class in 2016 is about the same as in 2000

  C. Workers receive more than income: compensation compared to productivity determines degree of stagnation.

a. Consumer Price Index is used by many to adjust income changes over-time for inflation. CPI is for quick, timely use, not for time series analysis.

b. Total Compensation Index-CPI adds fringe
benefits to represent value received for labor.
c. TC using Persona Consumption Expenditures Price Index measure goods and services targeted toward consumers and is a better guide to consumer purchases.

d. TC Implicit Price Deflator adjusting PCE for changes in consumer behavior in response to price changes and change in taste. Source Heritage Foundation with data from US government agencies.

Measuring Worth explores adjusting trend data for inflation

Worker Compensation has Increased Even More

Productivity and Compensation Growing Together


  Share of adults living in middle-income households is unchanged since 2011 Consumer Population Survey Annual Social and Economic Supplements could be CPI


For assistance, please contact the Census Call Center at 1-800-923-8282 (toll free) or visit for further information.


  7-2 Additional Analysis

Where Has All the Income Gone?

Proper Measurements Paints a Better Picture

Wellbeing Proper
Measurement Paints a Better Picture

Politicians and Media use quickly available and  lowest income growth estimate. Since 1965 fringe benefits and household composition affected income growth. Measuring Middle Class Wellbeing Requires Adjustments for these and the use of the most appropriate inflation measure.  

See Economic Normality 1945-2015 and Americans- Forget How Good They Have It  

Source  See
Problems With Economic Measurements Over Time. 5 min video


Editor's Note: About 20 years ago I read where people concerned over the budget wanted to tie government salaries and SS to a more realistic measure of inflation and I was not surprised when government employees making the decision took about ten years to make the change.

SS still uses a  CPI Index to adjust benefits which gives recipients a bonus. "...many economists, ...conclude that the CPI overstates inflation." "... only some of the upward bias in the CPI have been eliminated."  

"The Chained C-CPI-U is another step toward eliminating the substitution bias remaining in the CPI-U and CPI-W. Source
As of 2005 the BLS reports "The C-CPI-U to our knowledge currently is not used in any federal legislation
as an adjustment mechanism."    

Recently when the IRS came under fire for going after conservative non profits I thought the reason was they thought liberal would want more government, more employees, more promotions ...

The Good Old Days Were Expensive

1964 TV's Were
Really Big and Really Expensive
and Everyone had a Sunburn

Today's TV Screens are Bigger, Set Is Smaller With a Much Better Picture
and Look at All the Extra Stuff You Get Today!