America's Latest Proposal To Deal With Its Insolvency And Pursue Stealth Dollar Devaluation: Change The CPI

Tyler Durden's picture

A few months ago we reported on Goldman's proposal to change the definition of GDP to make the US economy appear to be growing faster than it really is. So far, it has not caught on, as even the revised definition will soon confirm a contraction. But that proposal appears to have given Joe Biden some ideas, who now has taken the Fukushima approach to (sur)reality, whereby one merely changes the terms of data measurement when the data does not cooperate. Enter the revised CPI: "Lawmakers are considering changing how the Consumer Price Index is calculated, a move that could save perhaps $220 billion and represent significant progress in the ongoing federal debt ceiling and deficit reduction talks." And because nobody has an issue with the current artificial hedonic and otherwise adjustments to the CPI which always reflect a far lower increase in prices than what is actually happening, here comes the government with another idea to make inflation appear to be rising even slower: "According to congressional aides familiar with the discussions, the proposal would shift how the Consumer Price Index is calculated to reflect how people tend to change spending patterns when prices increase. For example, consumers tend to drive less when gas prices increase dramatically.  Such a move is widely seen by economists as resulting in a slower rise in inflation. That would impact an array of federal programs that are linked to CPI including the Social Security program and income tax brackets set by the federal government. The proposal could lower federal spending by around $220 billion over the next decade, based on calculations by last year's White House deficit commission, which recommended the change as part of its final report." What does this mean practically? SImply said, the worst of all worlds for the US middle class: "[the proposal] would likely lead to both lower benefits paid to seniors and higher taxes paid by most people who pay federal income tax." We expect this last-ditch accounting gimmick will be implemented shortly, and the broader American population will not care one bit that it's purchasing power will see a step function drop yet again in the ongoing crusade to destroy the dollar.

More on this surreal idea which is actually being very seriously discussed in DC:

According to two congressional aides familiar with the budget negotiations, the shift is being "seriously discussed" as part of the ongoing talks to strike a budget deal, that would be used to ease the passage of a required increase in the country's debt limit.

Those talks involve Democratic and Republican lawmakers from both chambers and are led by Vice President Joe Biden. The group held its latest meeting Tuesday as they strive to reach the broad outlines of a compromise on federal spending by the end of the month.

In a press conference that took place before the meeting, House Majority Leader Eric Cantor (R., Va.) declined to comment on the specific proposal, other than to say that "a lot of things are on the table." But asked whether the proposal would be interpreted as a tax increase and therefore a non-starter for Republicans, Cantor said it could be seen as both impacting tax rates and benefits paid out by the federal government.

When asked about the idea after the meeting, Rep. Jim Clyburn (D., S.C.) said everything is being discussed.

It could be easier for both parties to agree on than a significant overhaul to the Medicare proposal or an increase of taxes on wealthier Americans.

"It's certainly something that is going to be considered," said James Horney, director of federal fiscal policy at the Center for Budget and Policy Priorities, a liberal think tank. "There are questions whether it would be politically easy."

Several senators that are not party to the Biden-led talks voiced support for the proposal including Budget Committee Chairman Kent Conrad (D., N.D.), while Sen. John Thune (R., S.D.), a member of the Republican leadership team, said it should be looked at as part of the negotiations.

Washington just took extend and pretend to a whole new level.

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ElvisDog's picture

Wow, all that and a deficit reduction of $22B a year? What a deal.

SheepDog-One's picture

Thats like 1 day of Bernanke POMO.

baby_BLYTHE's picture

everytime budget cuts less than 100b are discussed that is always the first thing that comes to my mind.

mkkby's picture

Let's just get this over with.  Let Goldman decide what each person should pay in taxes, and let them collect it directly for themselves.

Hugh G Rection's picture

Who uses food and energy anymore?


New CPI needs to be based on Ipads and dildos

krispkritter's picture

DPI: Dil-dough (i)Pad Index...

TruthInSunshine's picture

My advice to the Bernank, NerObama and CONgress if they really want to swing for the fences (aka keep on doing what they've been doing, only harder - destroying the economy):

Get the BLS to Adjust the CPI in the following ways -

1) Remove anything that is digestable.

2) Remove anything that is tangible.

3) Remove anything that constitutes a service.

4) Remove anything that has any relationship to or involvement with 'energy.'

5) Remove anything that is derived from commodities of any kind (see 2 above).

6) Remove anything containing High Fructose Corn Syrup (HFCS), now known as Corn Sugar (contained in most Americans products).

7) Remove anything that is produced, manufactured, processed, designed, engineered, assembled, planned, or filmed, in whole or in part, either in the United States or in any other nation.



That should fix the inflation problem rightful concerns over inflation growing far more serious a problem in the coming months/years, and get Amerika back on track.

Djirk's picture

Not to mention fjuking buyers of worries the FED will destroy the dollar and buy up all the debt since no one else will....I smell a yard sale coming

Broomer's picture

The proposal could lower federal spending by around $220 billion over the next decade

Which is the same as

a deficit reduction of $22B a year

Ferrari's picture

America runs on bullshit.

nowhereman's picture

Just finnished reading "Atlas Shrugged" again.  Whatever you think of Ayn Rand and her outfit, it is still quite unnerving in it's accuracy of the description of the "powers that be" and  their manipulation of the unthinking masses.  I think it is now more important than ever to be asking "Who is John Galt?", or more precisely "Do we deserve him?"

Oh regional Indian's picture

nowhere man, please listen.....

Did that get your attention? ;-) A very purrrrrtinent question yuo ask in the end, and I'[ll take it that it is not rhetorical.

Do we deserve him? I say we are John Galt. I am John Galt.

It's going to take a collective initiative behind a seriously enlightened movement/person to turn this ship around  or find a safe place, ark like, for next. 

Cometh the hour, cometh the man/collective, eh?


Rhodin's picture

Excepting here, and a few other places on the web, I see very few "John Galt" types around today.  Unfortunately, the character types portayed in Rand's earlier novel "We the Living" are much more common.

RafterManFMJ's picture

Been doing some re-reading as well...just started Fight Club for the third time - will have to re-read Atlas as well as The Fountainhead.  Rec. Fountainhead if you've not already partaken.

nope-1004's picture

Biden and Obama leading the parade..... or, rather, charade.

Temporalist's picture

They are going to tax that next...fuel tax on bullshit.

Cash_is_Trash's picture

tax on bullshit.

Taxes on bullshit have been proven to close federal deficits since the beginning of human history in a matter of hours.

Chuck Norris retired from this job at the end of the gold standard.

Arrowflinger's picture

This joins FASB 157 as an example of:

Trying to lie our way back to prosperity.


RockyRacoon's picture

From the latest issue of The Privateer:

How did a US government “govern” a nation of 92 million people with an annual budget of $US 0.7 Billion and a TOTAL (funded and unfunded) debt of $US 2.7 BILLION one hundred years ago? The answer is very simple. For the most part, they didn’t. And because they didn’t, they didn’t indulge in economic make believe. They had no income tax to “fund” them and no central bank to print more money - if necessary.
Today, the US government “GOVERNS” 310 million people with an annual budget of nearly $4,000 Billion and a TOTAL (funded and unfunded) debt approaching $US 100,000 Billion. It takes about 5400 times as many Dollars and about 37000 times more debt to “govern” about 3.35 times as many people as it did a century ago. Why? The answer is equally simple. Today, the US government “governs” everything. It is all pervasive. It has taken over the economy from its people.
At the same time, the present government reassures the governed that the cost involved is not theirs to bear but can be perpetually shifted to future generations if only they will continue to go along with economic make believe. Officially, this is known as the “full faith and credit” of the US government.


TruthInSunshine's picture
by Ferrari
on Wed, 06/22/2011 - 10:03



America runs on bullshit.

Agreed. Who couldn't/wouldn't agree?

Stated somewhat differently:

Enron Ad: Why?

YHC-FTSE's picture


And deflection. In the course of an ordinary hour on the msm, there isn't a country which isn't blamed for their woes except of course theirs. 


It's an old and worn solution. If the facts are bad, change the facts and the way it is reported. 

MiguelitoRaton's picture

This is all part of their plan for FINANCIAL REPRESSION they claim inflation is 2% when it is 6-8%, they get more in taxes, pay less in benefits, next on the docket will be forced allocation of "safe" treasuries in pensions and retirement accounts, because the sheeple cannot handle the manipulated fluctuation inherent in the market. Throw in some capital controls and we are off to the races.

Atomizer's picture

If you can't dazzle them with brilliance, baffle them with bullshit.

financeguru500's picture

Don't forget, if people are driving less because of high gas prices they must be walking more. All that exercise means they will live longer and social security should be pushed back to age 65 for eligibility. I am sure they already thought of this but won't implement it until after the CPI change. These guys are total douche bags.

Btw. I'm a vet using the gi bill to go to school. They are putting through sweeping changes to the gi bill now to where if a student has a hard time with a class required for a degree and doesn't pass it the first try, the gi bill will not pay for you to retake the class even though the gi bill is only limited to 3 years of use anyways. That means all those kids who joined the military because they didn't have the grades to get scholarships for college will now find themselves losing thei gi bill they earned from 4 years of military service too. The system is so fucked up.

Troll Magnet's picture

Hey man (or lady),

thanks for your service and best of luck to you. 

Cash_is_Trash's picture

I've seen the faces of the kids that joined the Armed Services. They are just kids. 18 and 19 years old, that don't have the money to pay for artificially high tuition caused by the federal student loans.

Recourse of many young people is to join the Armed Services in hopes of someday receiving an education for the sake of having a decent job.

Too bad, there is no recovery for jobs and those returning home won't find decent pay.

Reminds me of the last scenes from the movie 'Jarhead'.

Temporalist's picture

Teach them to kill, destroy their ability to learn something else (not that they'd learn something new in college necessarily), then put them on the streets with no chance of getting a job.

financeguru500's picture

I'm in that exact scenario you refer to. My parents couldn't afford to put me through college so I joined the armed services to get the gi bill. Trouble is the original gi bill couldn't cover the cost of tuition at most colleges and the new gi bill is modified to where students can easily lose it. This will mean many vets taking out student loans while going to school and the loans can't be dropped even through bankruptcy. I'm beginning to think the people who never went to college to begin with are better off than those of us who took the chance.

At the point we are currently at, I feel those who still have a job or unemployment income are playing a game of musical chairs hoping they won't be left without a chair the next time the music stops. Though each time the music stops there are less and less people left that are still gainfully employed, the only ones outspoken are the ones who've lost their chair and let's face it, no one cares about the homeless people. They have a stigma attached to them that they purposely put themselves in that situation.

tip e. canoe's picture

did you learn a useful skill in the military?

Temporalist's picture

1001 ways to kill someone with dental floss.

Silver Dreamer's picture

I joined way back in 1989.  The National Guard then paid about 9K for GI Bill.  It was used within a couple years and did not help much at all.  Grants, scholarships, and lots of loans later I finally finished my degree with the help of my employer in 2005.

The money you get for joining today is not worth it in my opinion however.  When joining as an Enlisted gets you paid enough to not be on welfare, then we can talk.  Until then it is a complete insult.  How much does an E-1 make take home a month now?  When I was in Basic Training, it was about $640 a month.  Woo hoo!

NotApplicable's picture

Hey, $9k was a whole lot more than the $5.4k had you joined back in '84. Also, you had to contribute $2.7k just to get it.

At least they let you have your money back, so I liquidated mine for truck down payment (back in the crazy days when they still had down payments).

Stuck on Zero's picture

In this area we have large numbers of Navy and ex-Navy.  My observation is that useless, idiot kids who have spent 14 years in public education learning nothing become excellent workers after just two to four years in the Navy.  CPOs are extremely prized and we have hired many as technicians because of their acquired skills and perserverence in a task.  Our observation is that college grads have attitudes and no work ethic and ex-military have no attitude and a strong work ethic (and more colorful expletives).

mkkby's picture

Yes, thanks for your service.  Hope you enjoyed the free agent orange, depleted U and experimental drugs/vaccinations.  If you get sick, they'll deny treatment for 25 years until it's too late for most.

I hope you guys/gals turn on your leaders and free this country from the REAL terrorists and traitors.  The rest of us will cheer you on.

Sgt.Sausage's picture

==> social security should be pushed back to age 65 for eligibility


Whatchu talkin' 'bout Willis?

It's already 65 for current retirees (unless you take the "early option" for a significantly reduced benefit).

My age cohort is 67.5 for eligibility.



GeneMarchbanks's picture

Reminds me of the recent book/article by Harry Frankfurt On Bullshit. What a great read, all Americans should keep it in their glove compartments at all times. You know... just in case.

traderjoe's picture

Happy ZH anniversary to me!

Thanks for the sanity Bitchez.

Thanks for the site TD(s)!

GeneMarchbanks's picture

You're Welcome! Now please, work the shaft a little.

lieutenantjohnchard's picture

funny but predictable that tptb use gasoline sales (in the sales data) as indicative of a booming economy, but then change the cpi for gasoline hedonics to show less inflation.

101 years and counting's picture

sounds like they are gearing up for QE3....$6 gas and $5 bread. 

"see, since gas is $6, you are driving less (since you no longer have a job), which means there is no inflation.  and since you sold 1 of your kids, your food bills are flat even with $5 bread and $7 milk."

Zymurguy's picture

and lots of government cheese.

go long on comfy walking shoes... you'll need them while standing in soup lines.

Cash_is_Trash's picture

Damn, I should start buying stools and cushions, and when the soup lines get nice and long, sell them to the masses.

Wait, that won't work cause if you're in a soup line, you are flat broke and so is everyone else.

Greenhead's picture

Lies, damn lies and statistics.