First Person: Yes, Inflation Is Out of Control

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COMMENTARY | I can't stand it when the government statisticians tell me inflation is ranging somewhere under 2 percent. Therefore, when I recently read an article on MSN Money, taken from MarketWatch, entitled, "No, inflation is not out of control", it really got my blood boiling.

Having tracked my expenses for going on two decades now, while inflation may not have been out of control, it certainly appears to be heading that way…at least in our family's case.

Issues with the Determining Timeline

My main issue with the article's stance was that it considered inflation over a 30 year period -- 1983 to 2012 to answer the question of whether inflation is out of control. Well okay, that's great for making a long-term generalization, but I wouldn't say it's completely relevant to today's situation and the situation over the past few years. It's kind of like saying texting and driving isn't out of control if you look at the number of accidents caused by texting while driving spread out over the past 30 years. Texting didn't exist for the vast majority of those years, like Obamacare hasn't existed for the past 30 years when you consider inflation and health insurance rates.

Health Insurance

Another of my biggest issues with the article is it's consideration of health insurance. It puts the rate of inflation for health insurance at 7.4 percent over the past 30 years, putting the average cost of annual premiums at $783 in 1983 and $6,693 in 2012. However, just because inflation in this area may not have been out of control for the first 25 years, it doesn't necessarily mean that it hasn't been getting out of control over the last five or so.

Our family's employer sponsored health insurance premiums jumped 25 percent year-over-year from 2011 to 2012. And with there now being reports that Obamacare could push rates for some up 50 percent or more over the next year or so, I'm afraid the author of "No, inflation is not out of control" could soon find himself eating his words when he gets his paychecks.

Taxes

I'm assuming that the author of the MarketWatch article doesn't live in Illinois, because if he did, he'd be feeling not only the effects of the increase of the payroll tax back to where it was before the Bush-era tax cuts took effect, but he'd have state tax issues to deal with as well that affect the buying power of his dollar. With nearly $100 billion underfunded pension system, Illinois is looking for any way possible to make up this funding gap…including of course, raising taxes. Our state income tax rate recently jumped from 3 to 5 percent, an increase of over 60 percent. Tell me that wasn't a hit to the old wallet and probably an overlooked aspect when it comes to figuring inflation rates.

Gasoline

I still remember buying gas for under $1 a gallon for a time back around 2000-01. While it seems laughable now, I'd fill up my car for between $12 and $16 and I'd have to choose between gas stations based upon whether gas was .97 cents or .99.

Ha! Not anymore.

Now -- just 12 years later -- gas is averaging just over $4 a gallon in our area. Even accounting for the seasonal fluctuations and other dips and rises in gas prices over this time, this is an average increase of just over 12 percent a year in gas prices.

So while the government -- and the author of the MSN Money/MarketWatch article -- can explain away rising inflation by drawing it out over 30 years, for those of us who have only been out in the real world for the past five or ten, it doesn't do us a whole lot of good.

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Disclaimer:

The author is not a licensed financial professional. The information provided in this article is for informational purposes only and does not constitute legal or financial advice. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.

Sources:

Nutting, Rex. MSN Money. "No, inflation is not out of control". March 22, 2013. http://money.msn.com/investing/no-inflation-is-not-out-of-control. March 25, 2013.

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