Kevin Phillips, author of Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism, has expertly detailed the history of false economic achievement in a recent Harper’s Magazine article. The culmination of 40+ years of gradual but consistent distortion of economic statistics have come home to roost and explain much of our current morass. Inflation statistics help determine interest rates, cost-of-living increases for wages and Social Security benefits as well as interest payments on the national debt. Inflation statistics also affect the planning, spending, saving and investing habits of every American. And lastly, decades of understated inflation means that GDP growth has been overstated.

It is Phillips contention that the under-measurement of inflation has put the country at great risk. To acknowledge the reality would send interest rates sharply higher. This would directly affect the continued viability of the massive build-up of debt, both public and private, that has fueled the economy over the last two decades. In addition, if the true state of inflation were acknowledged, the government would face huge increases in pension, retirement benefits and borrowing costs, overwhelming an already debt-burdened federal budget. Ultimately of course, the market will acknowledge the truth about inflation and interest rates will climb anyway. If government statistics remain distorted, institutional trust and credibility will be just two more victims of inflation.