Before the Boskin Commission, period-to-period CPI changes were calculated arithmetically. The Boskin Commission recommended they be calculated geometrically. The change was made to account for “substitution effects”. (An example of how these differ: The price of a hog rises from $100 to $161 over five years. The “annualized” rise – this is the geometric calculation – is 10% a year. The change each year – the arithmetic calculation – is a little over 12% each year: 61 divided by 5.) John Williams, who has reconstructed and made the comparison, calculates the geometric figure reduces the CPI by about 2.7% annually. (He is author of the monthly publication Shadow Government Statistics: Analysis Behind and Beyond Government Economic Reporting, which accomplishes what its title suggests.) Other papers roaming around the Internet estimate the geometric reduction at between 2.5% to 3.0%.

To review: adding Williams’ 2.7% New Math calculation to the 2.4% understatement for house prices, the CPI in 2005 was understated by 5.1%. The Bureau of Economic Analysis claims real GDP was 3.5%. If the 5.1% had been subtracted in 2005, the economy would have officially contracted by 1.7%. The stock market might be at a quite different level just now. By historical analogy, the sixth year of the Depression was the third year of the New Deal – 1935. Retirees living on Social security checks today may just think it is 1935.

http://www.theviewfromthepeak.net/blog/2007_04_01_archive.html

Link to Nixon is funny also:
http://www.theviewfromthepeak.net/newsblog/news.html

Also lots of talk @ Calculated Risk on flaws in economic models today.

Aren’t they like the Whigs?

-A-

While I appreciate many of the articles and ideas that you bring to your blog, this time your… selective support/criticism… exemplifies the national political divide.

While the GOP gets strong support from a heavily religious portion of the population (and the liberal press loves to dwell on this fact), this hardly typifies the moderate and swing voters that put Bush into office *twice*… and if the word dimpled even enters your mind, you need to ask yourself “If I’m right about the newly progressive America, why was it even close?”

I couldn’t quickly find where you live, but your perceptions sound similar to the statements I hear from many of my friends who live in solidly liberal areas of the northeast. If you spend a lot of time with east coast liberal elite, read papers by west coast liberals, and convince yourself that Cleveland and Detroit are typical of the midwest, you might even honestly convince yourself that your opinion is right.

Unfortunately, while the Republicans fail on several real points (environment and education top my list), the alternative is actually far more frightening. If you’re going to title your blog “Naked Capitalism”, you can’t expect us to not notice the bait and switch when it comes to your selective application of the lessons *of* capitalism.

For example, I could never vote for a candidate that is financially supported by unions. It doesn’t matter how much good the government thinks it’s doing… if a government doen’t preferve my right to liberty *and property* it’s no good to me (why Ron Paul is no doubt attracting strong, prinicpled supporters). More importantly, the astounding success of the union-free Honda plant in Union County, Ohio (ironic, yes) shows why smart capitalism trounces heavy handed government and union internvention. The Honda factory pays better wages *and* is highly profitable. The American workers in Ohio are no different than those in Michigan except that they haven’t been brainwashed by a liberal elite into believing that they’re entitled to a day’s pay for half a day’s work.

And if we want to talk about entitlement, snobby rich kids don’t even measure up to to Americans who seem to think they’re entitled to every modern amenity. Why bother taking responsibility for living a healthy life when a politician will promise to send our inflated healthcare bill to someone else? This isn’t just illogical, it’s criminal.

We must take the same smart approaches to all our problems. If we’re going to solve the problems of the economy, education, environment, and international policy… we need politicians in office that live in the real world, a world driven by economics, incentives, and a world that faces real threats from terrorists and dictators. We can speak softly (not something that the current administration has learned), but we darn better be carrying a big stick.

But what it really comes down to… rather than dwell on the weaknesses that special interest politics introduce into each party (which get us nowhere), it’s time to stop and recognize the aspects of our opponents that *have* worked. Only then can we absorb the best practices of each, get past the rhetoric, and actually solve our problems.

In addition conservatives have been morally repugnant since about the same time by using a consistent moral double standards. Reagan had more then enough liers in cabinet but Clinton got impeached because he had a problem keeping his zipper closed. Never mind GW Bush.

The truly big joke is the fact that there are actually, one supposes, reasonable discussions taking place about conservatives. Short memory, a lousy education, and an uncritical press work wonders.

Thanks for passing this along, but when I went to the video, all CNBC was showing was the intro commercial. Grrr.

http://www.cnbc.com/id/15840232?video=616655042&play=1

Banks Battle for Capital
Banks are battling for capital, Citi may be cutting jobs and Bank of America has no more soup in its cafeteria, reports CNBC’s Charlie Gasparino.

Americans have lost perspective on how far to the right this country has moved in the last generation.

As a comment in the Financial Times pointed out:

That a Thatcher-Cameron-Buffet agenda can be hyped as “populist” says more about propaganda success and media norms than anything else. Over three decades, America’s conservative movement has so deftly shifted the boundaries of debate to the right that even modestadjustments to the market system can be cast as the second coming of Marx without anyone blushing. Today’s phoney populist fears also remind us that the real problem with the media is not ideology but stenography. If official sources call something “populist” often enough, it is.

The entire piece is very much worth reading.

The “neocons” were just one foreign policy faction. Their influence was always exaggerated. After Bremer left, they were no longer in the driver’s seat, and with Rumsfeld’s resignation they were officially repudiated. Other factions from Clinton/Emanuel, to Biden, to Bloomberg, to the CIA were hawks, too — don’t ever forget that.

The younger GOP is much more libertarian than its elders. Frum is fairly intellectually honest, but his prescription is still basically lifting straight out of the Cameron playbook. Lowry and especially Ponnuru are even more clueless — Ponnuru’s most recent crusade has been the defense of earmarks. It shows you how totally the establishment GOP has veered off course.

A true GOP change will embrace anti-institutionalism by taking dead aim at the prison/ drug war fiefdom, the intellectual property fiefdoms, the intelligence fiefdoms, the tort complex, the banking fiefdoms, and possibly (regrettably in my hawkish view) the military complex as well.

FL Gov. Crist has demonstrated that credible vows of prison reform, honestly carried out, yield large gains in black votes for Republicans. It’s obvious that the drug war is probably the single biggest fountainhead of cash for anti-American forces, and needs to be eradicated. It’s evil that so many American security services are so eagerly vested in the war on drugs, and there is quite a large sample from other countries showing that drug decriminalization does not lead to social chaos by any stretch of the imagination. And with 5-ton planeloads of cocaine going back and forth, it’s obvious that highly placed American officials are in on the drug trade. Meanwhile, about 10.4% of all black males in the United States between the ages of 25 and 29 were sentenced and in prison, along with 2.4% of Hispanic males and 1.2% of white males. This is a modern day gulag system and a time bomb hidden in plain sight. If al Qaeda had any brain whatsoever, it would infiltrate the prisons.

Republicanism needs to make common cause with the two Democratic factions which have been repeatedly screwed and sold out under the DLCrats — unions and blacks — which also happen to share Republicans’ conservative social sensibilities. Unionism may not be great for corporations but compared to the combination of envirotheology, malpractice, and regulation, unions are eminently acceptable. The environmental movement has been the worst thing that ever happened to unionism. It is the classic poll tested issue that everybody is for, but nobody is willing to pay for. “Green conservatism” is an idiotic oxymoron.

Neocons are more Jacobin than American. I don’t trust ‘em as far as I can throw ‘em.

I’ll be voting for Ron Paul despite whatever the MSM says because I have faith in his ability to lead the US economy. Nobody else has a clue about the world of structured finance.. how, exactly, can they regulate it without understanding it?