The CPI doesn’t consider … for the Social Security COLA

I often hear the claim that the CPI – U or W does not include certain items and thus is not reflecting real cost increases. Health care is often mentioned.

Following are the items used in the calculation.

The CPI represents all goods and services purchased for consumption by the reference population (U or W). BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups (food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services).

Included within these major groups are various government-charged user fees, such as water and sewerage charges, auto registration fees, and vehicle tolls.In addition, the CPI includes taxes (such as sales and excise taxes) that are directly associated with the prices of specific goods and services. However, the CPI excludes taxes (such as income and Social Security taxes) not directly associated with the purchase of consumer goods and services. The CPI also does not include investment items, such as stocks, bonds, real estate, and life insurance because these items relate to savings, and not to day-to-day consumption expenses.

For each of the item categories, using scientific statistical procedures, the Bureau has chosen samples of several hundred specific items within selected business establishments frequented by consumers to represent the thousands of varieties available in the marketplace. For example, in a given supermarket, the Bureau may choose a plastic bag of golden delicious apples, U.S. extra fancy grade, weighing 4.4 pounds, to represent the apples category.Additional information about published items and item classification structure is available in the CPI section of the BLS Handbook of Methods.

Some people say the CPI-W is not reflective of senior spending and push for the CPI-E. Not so quick.

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