RECAP: The Persistent Thief with Oren Cass

American consumers should watch their spending choices to reduce the impact of excessive inflation on everyday goods, American political author and commentator Oren Cass told Consumers’ Research (CR) in a Feb. 24 webinar.

Cass spoke at “The Persistent Thief: How underestimating inflation is depriving consumers of the American Dream,” a CR event moderated by executive director Will Hild. The two discussed problems with measuring and calculating American inflation and why the typical American consumer may be concerned.

“Looking at your budget and asking, ‘what is the most my budget can afford?’ isn’t a good choice,” Cass said.

He provided a scenario where a consumer is house hunting but chooses to spend more towards the higher end of their budget. “All things considered, there’s been a growth in the size of an average house in recent decades that I think is entirely uncorrelated with people’s needs and wellbeing.”

Cass implied that consumers who irrationally attempt to “keep up with the Joneses” end up making it harder on themselves to afford other necessities, including healthcare or education, areas of the economy that have become more costly the past few decades compared to other common goods such as the price of an apple.

Thinking seriously about societal norms and pressure to have higher status can help consumers curtail rising costs the most, Cass added. Consumers can still be healthy and provide for their families just as much – if not more – if they “go down two notches.”

As a bonus, “it would relieve pressure on housing prices,” Cass said, citing the economic effects of supply and demand in the housing market.

“We’ve gotten caught up in a status race that not only drives up costs but is probably making us less happy,” he said.

Cass applied the same principle to higher education norms. “More expensive isn’t necessarily better,” he said. He added that “we are overeducating people” and that policymakers and cultural norms prevent average Americans from thriving in non-college pathways.

“You can always go back to school later,” he said. “Partnerships with private-sector employers, subsidized initial years of work, alternative types of credentialing…you can be happier and more successful in virtually any field without a college degree.”

Cass published a report last year detailing the problems with inflation calculations. He argued the CPI (Consumer Price Index) does not tell the real story about the rising costs of achieving the cultural-mobility goal of the American Dream. He recommended economists and policymakers adopt his “Cost of Thriving” index as another lens for understanding events affecting the economy.

In his research developing the Cost of Thriving measure, Cass observed that high-pressure costs for average American families did not reflect the same areas discussed by economists.

“The core challenge with measuring inflation is discovering what counts,” he told Hild in the webinar. “If you ask families what costs are concerning, they would say that healthcare is rising at 12% and college is costing $150,000 per year.”

American economists and policymakers have historically relied on two standard measures of inflation: the CPI, calculated by the Bureau of Labor Statistics (BLS), and the Personal Consumption Expenditures Price Index (PCE), calculated by the Bureau of Economic Analysis (BEA). In these measures, prices of common goods and services are packaged into baskets to measure how the general price level of goods has changed.

In Cass’s Cost of Thriving measure report, he notes that the basket weights for major American consumer spending services are tiny, including 1.1% for insurance and 1.6% for college tuition and fees.

Cass said that a year after his report was released, it had influenced both consumers and policymakers.

“People feel more comfortable making the argument that families are feeling squeezed. There hasn’t been enough work done to quantify household budgets, and this is just a starting point.”

Other measures that designate consumers’ ability to afford goods have been developed through time, including late economist Amartya Sen’s welfare-based human capability approach, where social provisions are measured by the extent of freedoms one has in their everyday life.

In a prepared release, BLS stated that the January core CPI for all items rose a minuscule 0.3% from December and 1.4% over the past 12 months, mainly influenced by an increase in gas prices. Broadly, the index for all items was unchanged in January, excluding volatile food and energy prices.

Inflation will “rise briskly” the next few months, according to BCA Research chief global strategist Peter Berezin in a Jan. 25 note to reporters. Because prices dropped last spring, the price rebound seen in the past year will register as a large increase due to inflation being reported in year-over-year changes.

Oren Cass worked on the presidential campaign of Mitt Romney in 2008 and 2012 while attending Harvard Law School. In 2018, he published The Once and Future Worker, a book that reevaluated American society that earned broad respect across the political spectrum. He currently serves as the executive director for American Compass, an economic consensus group.

+ posts



Subscribe to get the latest consumer news

More consumer News