The Great ‘Deflation Lie’

by: Paul Price

Our political leaders tell us that there is little to no inflation and that we face "deflationary" pressures. Ask yourself, though, what’s going on with your own cost of living before believing what you’re being told by Washington.

What are my largest annual expenses? Income taxes, property tax, energy costs (utility bills and gasoline) and health care (medical insurance and out-of-pocket payments).

Unless something unexpected happens, my income tax rate will be going up dramatically in 2011. The capital gains rate will go up a minimum of 33% (from 15% to 20%) and the tax rate on dividends is set to skyrocket from 15% to perhaps 39.6% or over 43% (after proposed surcharges). Then figure in whatever change there is in the new top rate and imaging the net reduction in my after-tax, spendable income. This is not what "stimulus" looks like.

Property tax rates in my area are rising at 3% - 6% a year and showing no signs of slowing down despite the punk economic conditions.

PECO Energy has preannounced that electricity will cost from 20% - 30% more starting January 1, 2011 due to energy rate deregulation that was delayed until that time. They are planning to make up for past lost rate increases as quickly as the utility board allows them to do so.

Gasoline prices have been rising steadily since bottoming in January of 2009. Oil has been back around $80/barrel again even in the face of recessionary demand levels. I doubt we’ll significant pullback under present laws and you can imagine the cost surge if "Cap and Tax" is rammed down our throats during a lame duck, post election, congressional session.

Independence Blue Cross sent me a nice letter informing me of a 9.9% increase in my health insurance premium effective October 1st. This is before all the added costs of Obama Care really start kicking in.

I would bet your own lives reflect very similar price increases in these are many other areas.

Remember, the government tends to state the inflation rate excluding food and energy. They also conveniently exclude taxes and healthcare from their index calculations.

Keep all this in mind next time you hear someone tell you that there is no inflation.

Disclosure: Author is an official U.S. Government taxpayer