Price Deflation: Why We Should Be Worried

There hasn't been much talk about the fact that, in three of the first four months of 2015, inflation was a negative.  In the latest report, annualized inflation was pegged at a negative 2-tenths of a percent. Deflation, even as small as this, is quite rare.  The only other time we have seen it in the last 35 years (see USInflation.org below) was from March to October 2009 in the wake of the Great Recession.  This can only happen when businesses sense a widespread slowdown in the buying of goods and services and, as a result, they either hold prices or lower them. Retailers, especially, will tend to reduce prices by running sales to attract more customers. Some will even use loss leaders -- products marked down below cost -- to attract more foot traffic to their stores. 

If this is truly indicative of a national slowdown in sales, then it could be an indicator that we are in some form of recession. We already know that, in the first quarter, the economy  only grew by two tenths of a percent.  Quite frankly, I am surprised that we haven't had another recession since 2009.  Wages today, when adjusted for inflation, are the lowest they've been since 1995.

The average American has seen 20 years of improvements in their buying power completely erased; and, there is no indication that wages will increase to previous highs until after  many years of slow growth.  Thus, without wage growth there will be reduced buying to the extent that inflation will turn negative and a recession could ensue.


References:

US Inflation by Year: http://usinflation.org/us-inflation-rate/

St. Louis Federal Reserve: Real Median Household Income: http://research.stlouisfed.org/fred2/series/MEHOINUSA672N

US economy stalled in Q1; Fed expected to pause on rate: http://news.yahoo.com/us-economy-barely-grew-0-2-pace-first-005149797.html

March job gains 126,000; miss 248,000 forecast - USA Today: http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&cad=rja&uact=8&ved=0CCoQFjAC&url=http%3A%2F%2Fwww.usatoday.com%2Fstory%2Fmoney%2Fbusiness%2F2015%2F04%2F03%2Femployment-report-march%2F70859842%2F&ei=UvBIVenUIouZoQTX54H4Aw&usg=AFQjCNGcoNCz4mLioIFQe-veWE-kmUOtdw&sig2=Ddekzo3oVqsU3SFK3rThzA&bvm=bv.92291466,d.cGU

The Big Lie: Obamacare Has Reduced Healthcare Inflation

As I have often stated, you can always find selected statistics to support any lie.  One lie that I keep hearing from President Obama, Congressional Democrats, and a whole bunch of Democrat strategists is that ObamaCare has produced the lowest cost increase for healthcare in the last 50 years.  The source was a speech that the President gave in November 2014 where he said: 

"Health care inflation has gone down every single year since the law [the Affordable Care Act] passed, so that we now have the lowest increase in health care costs in 50 years–which is saving us about $180 billion in reduced overall costs to the federal government and in the Medicare program."

In making that statement, he is apparently referencing this little-seen, per-capita spending chart for Medicare and Medicaid services:

As I pointed out, this chart has been little seen by the average American. This is because it shows that the reduction in spending started long before ObamaCare was even signed into law in 2010.  Essentially, the drop in per-capita spending began in the Bush Administration in 2003; a full 6 years before Barack Obama was even in office and 7 years before ObamaCare became law.  Also, note that 2013 has a uptick.  So, the comment  of "Health care inflation has gone down every year since the law passed" also doesn't hold water.

Disingenuously, Obama is trying to portray the Affordable Care Act as a inflation fighter when, in fact, this chart only shows that Medicare and Medicaid recipients aren't accessing the healthcare system as much as they were in 2003.  In reality, healthcare inflation has not slowed one iota, as this chart of consumer prices for medical care from the Bureau of Labor Statistics data clearly shows:

It amazes me that this lie continues to this very day despite the fact that the Washington Post gave 3 Pinocchios to Obama for telling it in the first place.   But, then, ObamaCare has always been a pack of lies from the President, his Administration, and the Democrats.

References:

Fact Checker: Obama’s claim that Obamacare has reduced health-care inflation ‘every single year’ since it was passed: http://www.washingtonpost.com/blogs/fact-checker/wp/2014/11/06/obamas-claim-that-obamacare-has-reduced-health-care-inflation-every-single-year-since-it-was-passed/

Graph: Consumer Price Index for All Urban Consumers: Medical Care: http://research.stlouisfed.org/fred2/graph/?id=CPIMEDSL,