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taco bread and fillingsIn our house we measure inflation through the “Index Burrito”: how has raised the price of a regular burrito in our place favorite food?

In 2016, the same donkey costs $ 6.50. This represents a 160% increase compared to 2001. In the last 15 years, the official inflation rate indicates that what was bought with a dollar in 2001, supposedly now could buy with $ 1.35.

If official figures from Taco Santo had guided the “Index Burrito”, the colt should cost $ 3.38 at the concession stand. That is, an increase of only 35% compared to 2001. Compare this with the current price of $ 6.50 and that is almost twice what it should cost according to official estimates on inflation. Since 2001, the “Index Burrito” real world is 4.5 times higher than the rate of inflation the government, which is not a negligible difference.

Our “Index Burrito” is a crude but effective thermometer of inflation in the real world. To ensure that your measurement is not a peripheral aberration, also you have to use more expensive issues such as college tuition, medical insurance, and state or municipal services. When we do, results of similar magnitude are obtained. Which are? For the loss of purchasing power of our money, it is much faster than the government would have us believe.

BURRITOS: A SHOCKING REALITY AND DIVERGENCE BETWEEN THE OFFICIAL INFLATION

According to government statistics, inflation has reduced the purchasing power of the dollar in just 6% since 2011: just over 1% per year. Apparently, our purchasing power has declined 27% since 2004 and an average annual rate of 2.25%.

But the real world experience tells us that the official figures do not reflect the actual cost increases, both burritos as health insurance. An average taco was $ 1.25 in 2010. According to government standards, should have risen only 10 cents. Oops! The taco already costs $ 2 in 2016, which is 60% or six times the official figure of inflation.

The amount of a Vietnamese – style sandwich (banh mi) -in our favorite deli in the Sino district rose from $ 1.50 in 2001 to $ 2 in 2004. In 2016 is $ 3.50. This increase of $ 1.50 since 2004 is a leap of 75% and almost tripling the collapse of 27% in purchasing power reviewed by official bodies.

But do the role of devil’s advocate and say that these extraordinary increases have affected only “those who eat away from home,” to use the jargon we acquire food in fast food, deli, cafes, local beer artisan, and restaurants.

And what about college tuition? That’s not something you can buy every week like a burrito. If we take the calculator, we realize that four years of tuition and fees at a public university will be about 8,600 burritos. We include books and assume that the student lives at home, therefore, has no accommodation costs or food on campus. If we add other disbursements in college, burritos reach 10,000 or $ 65,000 for the four-year career.

University of California, Davis:

  • In 2004, tuition for state residents was $ 5,684.
  • In 2015, tuition for state residents was $ 13,951.
  • Present it implies an increase of 145% in a period in which the official inflation tells us that enrollment should have gone up 25% compared to 2004. That is, enrollment in 2015 should have been $ 7,105.
  • There is a difference of about $ 30,000 between the cost of annual tuition to $ 7,105 ($ 28,420 for four years) according to the official inflation rate and the amount of real world for a year- of $ 13,951 ($ 55,804 for the entire race).
  • Costs essentially are twice as stipulated by the official figures.

And this is our Alma Mater (no, there will not earn a college degree in surfing Sorry.):

The University of Hawaii at Manoa:

  • In 2004, tuition for state residents was $ 4,487.
  • In 2016, tuition for state residents is $ 10,872.

Of course, public and private universities offer tuition waivers and financial assistance to needy or the most talented student’s support, but most households / students have hitched its budget for a big chunk of these expenditures. Recall that many students must cover their necessary expenses and thus the cost of a college degree is increased twice in areas near Taco Santo.

Therefore, the cost gap between the real world and the official inflation is not confined only to burritos; It is equally overwhelming for those things that cost us tens of thousands of dollars.

Steak-taco

THE OFFICIAL ADJUSTMENTS

Hedonic adjustments -in government estimates of inflation offset other rising costs. This increase of 160% in the amount burrito is offset by a lower price of computers, especially when taking into account that they have more processing power and more memory. Clothing is also cheaper, and this theoretically offsets the higher costs in other areas.

Save $ 100 a year in new or $ 600 clothing every three years on a personal computer, does not offset the increases to double or triple in things we consume every day or essential onerous issues such as college education, renting the house or health insurance.

The Inflation and Blemished Metrics

The official inflation also assumes that consumers actively replace items that go up in price by cheaper. If a burrito doubles the amount, it is expected that the customer will choose -in his place for banh mi sandwich. (Oops! That was also up twice. So much for this device replacement).

It is that the problem is too obvious: there are no alternatives for how expensive it is essential. There is no more “cheap” substitute for a four-year degree at a public university or a necessary insurance. There is also no alternative if you can only rent a roof because you do not have money to buy a house (or do not want to bet in the casino of the housing bubble).

Scale care costs. If we purchased a burrito every weekday for four years (five per week without putting the two weeks annual holiday), that yield a result of 250 thousand per year or burritos after four. That is one-tenth the cost of a university degree, assuming we can muster the requisite number of credits to graduate in four years.

We could always lower the price of our lunch sandwiches prepared at home peanut butter and jam, instead of purchasing a burrito for $ 6.50. However, there are many limitations to reduce the costs of studying at a public university: already, this is the most “cheap” alternative to private schools. Even a primary health insurance has skyrocketed in multiples compared to the official rate of inflation.

Increase in goods or expensive services adds tens of thousands of dollars, and these expenditures can not be compensated by buying a cheaper cell phone, more affordable or substituting a burrito food stand for a sandwich peanut butter homemade clothes.

Even if you stop buying lunch for four years, you will have paid only a tenth of a degree. We talked a lapse of four years that the student lives at home and only ingest sandwiches of peanut butter and jelly (as explained earlier, this would only include the cost of books, tuition, and fees, without adding accommodation or food on campus ).

If the average household income had remained the official inflation rate, for a decade, this family would have had to generate at least, $ 20,000 additional annual just to cover increases in goods and services more expensive. And that’s the problem, right?

If the salaries are accrued in that home had been located on par with inflation, there would be $ 20,000 -at complementary year- with which to pay those goods and services more expensive. Therefore, the deficit must be circumvented with family loans and debt burden with interest carryforwards in the coming decades. Otherwise, the children will not go to college, and there will be no health insurance.

Over the past 25 years, we acquired our primary medical insurance providers one of the most competitive non-profit: Keiser Permanente. We’d had the same plan for an entire quarter century: zero coverage in medicine, dentistry, and goggles or a copayment of $ 50 for each visit to the doctor.

Now our plan has been exonerated, and the equivalent of Obamacare is more expensive. To maintain contrast apples to apples, we will compare identical coverage for people of the same age, year after year.

In 1996, the monthly cost to assure a person of 43 years was $ 95. Now, the same plan for someone of the same age is $ 416. That’s more than four times the value of 1996.

If costs had been equated with official inflation of 52%, since 1996, the plan would be $ 145 and $ 416 not. Ensure someone aged 58, in 2008, required an outlay of $ 325 monthly. Currently, ditto plan for an individual of 55 years is $ 558, a jump of 72% in a period which is registered officially-inflation of 11%.

Finally, but not least, they are the services provided by the government: the weekly garbage collection is an example. Since 2011, our rates have increased urban sanitation 34.5% according to the official figure of 6% reduction in purchasing power since 2011. Once again, the real-world costs have increased at a rate nearly six times higher than the official figures.

The reality is that the real inflation of goods and expensive services is devastating to families who can not receive government aid for college education, house rent or health insurance.

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