Is there a chance you could give an example with numbers or is this just a word thing? This talking about something being "more" than something else has either got to be based on numbers or it's some personal feeling type story.
Yes it is very simple. For instance, using the “CPI” adjusted figures above, average income has grown from about $82,000 to about $87,000 per annum in 7 years. That is a 1% per annum real growth rate, which is hardly “soaring.” BTW that is well below advertised GDP growth rates, but we will leave aside implied mal-distribution of income in the government supplied and adjusted statistics and just address the present question.
I posted a link above http://www.financialsense.com/stormwatch/2005/0624.html#_ftnref3, which is a detailed discussion of how the basket of goods used to calculate the CPI, are adjusted, along with the items in the basket. Since this was a new accounting invention under Clinton, which has just continued, I am not sure why everyone just buys into it unquestioned.
The question is do you believe your own lying eyes or do you believe the BLS’s lying statistics once you understand all of that? What is the real truth? What would the raw uncorrrected data show We don’t actually know, but I don’t think that anyone serious who buys things in the market would suggest the the government is currently overstating the rate of inflation.
For instance let us take the issue of hedonic corrections in cell-phone purchases. Sure there are all these wizz bang improvements in 7 years, but they cost the manufacturer nothing to put in. You cannot even buy an old stripped down phone that doesn’t do very much, if you wanted to. Besides, who actually buys their cell phone, now or in the past? Do you think replacement of roast beef by chicken when the cost of one soars and the other stays stable is a justified substitution to keep prices flat. In fact, given the health implications, we could ajust the price downward for the “hedonic” factor.
In sum, the point is that if inflation is understated by 1% per year then there was no income growth. If inflation is understated by 2-3% per year, an argument made by John Williams at shodowstatistics http://www.shadowstats.com/cgi-bin/sgs/data then there is negative income growth, which matches his calculated negative GDP growth.
Who to believe - it is your choice, but once you understand how the government calculates CPI, I don’t see how you can believe that that is a meaningful number.
A couple of other articles of interest
Shodow statistics discussion of CPI corrections
http://www.shadowstats.com/cgi-bin/sgs/article/id=343
And a detailed discussion of charts and corrections in the economy:
http://www.shadowstats.com/cgi-bin/sgs/article/id=871
Here is another example showing the discrepency between the BEA’s calculation of income growth and the IRS’s http://www.shadowstats.com/cgi-bin/sgs/article/id=344
Really the IRS should have a pretty good idea, but BEA includes the hedonic “increases” in things like “free” checking and “improved” automobile fuels.
INCOME GROWTH 2002/2001
— IRS VERSUS BEA
(Not Adjusted for Inflation)
Income Category IRS GDI
Wages & Salaries -0.4% +6.8%
Interest Income -20.9% -6.4%
Dividend Income -14.9% +5.1%