Inflation Rate

NOW THAT the Constitution has again been spared a Balanced Budget Amendment that would have put fiscal policy in a straitjacket, Congress and the White House ought to get down to the business of actually balancing the budget. Fortunately, a golden ring is available if only politicians in both parties will grab it.All they have to do is insist that the government use accurate figures in computing the Consumer Price Index. The CPI tracks the inflation rate used in calculating cost-of-living adjustments for Social Security benefits and tax bracket adjustments.

The Bureau of Public Debt on Tuesday released the new rates for savings bonds purchased between November and the end of April. The Series I bond rate for the next six months will be 3.06 percent, down from 4.60 percent for the previous six-month period. The inflation-protection bond is made up of two rates: a fixed rate for the life of the 30-year bond and an inflation rate that is adjusted every six months. The fixed rate remains set at zero, while the annualized inflation rate of the bond is 3.06 percent.

IF GOVERNMENT STATISTICS on the rate of inflation are grossly inflated, as a blue-ribbon group of economists now warns, why not fix them?The closely watched Consumer Price Index affects every American. It determines how much Social Security benefits increase year by year. Or how fast the Internal Revenue Service nudges citizens into higher tax brackets. Or what interest rates will be. Or whether a balanced budget can be attained. The obvious importance of the CPI is why it is so hard to fix.To achieve accurate data on the performance of the U.S. economy, government figures should reflect quality improvements, the trend toward discount buying and the substitution factor when specific prices shoot up.But the Washington Establishment is also acutely aware that explosive political issues and basic perceptions of the American condition are at stake.

After two consecutive years of no cost-of-living increase, Social Security beneficiaries will receive a 3.6 percent raise next year. That will effect nearly 55 million Social Security beneficiaries starting in January. The increase in benefits is tied to the inflation rate for the third quarter, compared with the third quarter of 2008 - the last time an increase was announced. Back then, gas prices shot up temporarily, and beneficiaries recieved a 5.8 percent increase in 2009.

WASHINGTON -- U.S. industrial production unexpectedly declined in September, while consumer prices rose at a 1.4 percent annual rate during the first nine months of the year, the lowest inflation rate in 11 years, it was reported yesterday.Output at factories, mines and utilities fell 0.3 percent last month after rising 1.6 percent in August, figures from the Federal Reserve showed.Last month's decline was the third in the last four months and completed the weakest quarterly performance since early 1991, when the economy was in recession.

WASHINGTON - Despite government attempts to help senior citizens cope with the high cost of medicine, average wholesale prescription drug prices are rising at about three times the rate of inflation, according to an AARP study released yesterday. The increases came just before Medicare began its pharmacy discount card program, negating much of the savings the government promised to seniors, AARP said. The new Medicare law establishing the drug benefit, which AARP supported, has done nothing to discourage steep price increases, the group found after reviewing the top 197 brand-name drugs used by patients 50 and older.

The Bureau of Public Debt released the new rates for savings bonds purchased from now through the end of April. The Series I bond rate for the next six months will be 3.06 percent, down from 4.60 percent for the previous six-month period. The inflation-protection bond is made up of two rates: a fixed rate for the life of the 30-year bond and an inflation rate that is adjusted every six months. The fixed rate remains a dismal zero percent, while the annualized inflation rate is set at 3.06 percent.

Everyone is talking about proposed cuts to Social Security such as changing the inflation rate used to calculate cost-of-living-adjustments or raising the retirement age. But other cuts are already underway. The agency announced today that it will close its nationwide offices to the public a half hour early each day. Why less face time with the public? Social Security Commissioner Michael J. Astrue says Congress provided nearly $1 billion less for the agency's budget than the president requested.

Fill up your gas tank or buy a gallon of milk, and you can't help but think that the inflation rate that comes out each month doesn't reflect the pounding your wallet is taking. That's Lois' complaint. The Baltimore County retiree's pension and Social Security benefits are pegged to the Consumer Price Index. This year, for instance, her Social Security benefits will go up 2.3 percent. Yet the price of one of her prescription drugs has shot up 50 percent in the past five months. "Every time I buy milk, it's gone up. Bread is almost $3 for a loaf.

There used to be a time when consumers strode into shopping malls, pockets bulging with credit cards.At the first sign of a sale, they would flick out their plastic like old-west gunslingers reaching for a sixshooter.Well, the party's over, says Cardtrack, a Frederick, Md., newsletter. Cardholders now are charging less and are having ++ more trouble paying off their bills.Consider these recent findings:* On average, cardholders will pay an extra $25 in interest charges this year because of higher balances.

Between now and next year's presidential election, you may hear a lot about the misery index. No, I'm not talking about the death metal band by that name formed in Baltimore, although you may hear more about it, them, too. (Some of its stuff could be the soundtrack for Occupy Wall Street rallies.) This is about the macroeconomic indicator conceived by economist Arthur Okun. The misery index became part of 1970s pop culture when Jimmy Carter wielded it to defeat incumbent Gerald R. Ford for the White House.

I find that the recent editorial in The Sun regarding Social Security falls far short of the reality of the situation ("Social Security sets off sparks," Sept. 14). Joe Biden said the same thing the editorial did on a CNN interview before the last Republican debate. It's easy. "A simple thing," he said. If it's so simple, then why hasn't anyone fixed it? Because it's not simple. Yes, in a vacuum Social Security is relatively easy to fix. If we didn't have the exploding costs of Medicare and Medicaid.

Everyone is talking about proposed cuts to Social Security such as changing the inflation rate used to calculate cost-of-living-adjustments or raising the retirement age. But other cuts are already underway. The agency announced today that it will close its nationwide offices to the public a half hour early each day. Why less face time with the public? Social Security Commissioner Michael J. Astrue says Congress provided nearly $1 billion less for the agency's budget than the president requested.

After two years without seeing an increase in their Social Security checks, more than 59 million retirees and other beneficiaries can expect a bump up in benefits next year. The Social Security trustees' annual report released this month estimates that the cost-of-living adjustment in next year's checks will be 0.7 percent. The increase, which will be announced in October, could be higher, depending on where prices head in the coming months. Still, experts say, retirees could see all or some of that raise eaten up by higher Medicare premiums.

Low inflation is a welcome economic sign for spenders, but for savers, it can be too much of a good thing. The effect of super low inflation could be seen in recent days when the government announced changes to savings bond rates and retirement account limits that are pegged to inflation. Savers can now expect meager returns on the inflation-protected Series I Savings Bonds, if they even still want to buy them. And employees won't be able to sock away more next year in a 401(k)

WASHINGTON - The job of the Federal Reserve and government policymakers got considerably more complicated yesterday when the Labor Department reported that consumer inflation is running at an annual rate of 5.6 percent, its highest level in 17 years. The Federal Reserve has been worried about inflation, or the rise in prices across the economy, for months. But it has left its benchmark federal funds rate at 2.0 percent since April, betting that the inflation pressures will ease when energy prices fall back.

After two consecutive years of no cost-of-living increase, Social Security beneficiaries will receive a 3.6 percent raise next year. That will effect nearly 55 million Social Security beneficiaries starting in January. The increase in benefits is tied to the inflation rate for the third quarter, compared with the third quarter of 2008 - the last time an increase was announced. Back then, gas prices shot up temporarily, and beneficiaries recieved a 5.8 percent increase in 2009.

Caught between inflationary pressures and a weakening economy, the Federal Reserve's policymakers voted yesterday to deal primarily with the weakening economy by keeping interest rates at their present level. The decision to hold at 2 percent the key short-term federal funds rate - which affects what consumers pay for mortgages, car loans and other credit - brought to a halt a stream of rate cuts since August, reductions that brought the fed funds rate to its lowest level since November 2004.