Sunday, November 13, 2005

The “Core Inflation Rate” at My Church: 10%

“Our budget will increase by 10% because of rises in fuel, electricity and insurance costs. Just to stay where we are, we need to increase our pledge income by 10%…”

Thus reads the pledge request included in my church bulletin today. Seems that, along with the rise in utility expenses, our insurance costs are going up 50% next year and our heating oil costs are rising—and altogether our cost increases average out to 10%.

Now, this is just one individual church in one small corner of New England. A quick Google search reveals a total of 386,000 churches in America and over 3,700 synagogues. Clearly, a 10% inflation rate at one small church does not represent the trend at several hundred thousand other houses of worship.

But, unlike government statistics—which are based on samples that are massaged, averaged and seasonally adjusted—it is a real number.

It is not presented “ex-food and energy,” the way most economists have been trained to consider inflation. And it does not whimsically delete certain costs, in the same way that the government inflation statistics delete, say, 20% increases in hotel room rates.

That’s right: in this weekend’s edition of the Wall Street Journal, we read the following:

According to the Labor Department, hotel prices were down 2.5% in September from a year earlier, but industry executives say prices are actually rising robustly.

Patrick Jackman, a Labor Department statistician, says the government's index of hotel prices doesn't include the price of hotels for business travel. That tends to strip out higher-price business rates.[Emphasis added.]

In that same article, titled “Inflation Toehold? Firms Gain Power to Boost Prices,” the paper notes that the price of a standard room at the Waldorf-Astoria hotel in New York is up 20% over last year.

Yet that 20% increase has vanished from the official government statistics because, apparently, “consumers” do not pay it.

Getting back to my church’s 10% inflation problem, I should note that not a dime of this 10% budget increase is producing better mission programs or higher administrative salaries.

Not one individual except, perhaps, the Russian men who stole state oil fields following the collapse of Communism, and their forebears in the Middle East and Southeast Asia, as well as the investors clipping coupons from Exxon-Mobil and Chevron, benefits from this 10% cost increase.

Nevertheless, it is a true, unadjusted, out-of-pocket cost increase which must be paid in order to turn on the lights and heat the building that supports the fifty twelve-step programs that use our building each week, not to mention the nursery school program and Bible studies. And, of course, Sunday services.

So enjoy the 2% adjusted, massaged, refined, imputed, restructured, and redefined CPI while you can…because my church needs to spend 10% more money "just to stay where we are."

Jeff Matthews
I Am Not Making This Up

© 2005 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations.


UrsaMajor245 said...

My shul (synagogue) has the same problem. Fortunately for them the majority of our congregation are high net worth and are well advised as far as investments go. They, in turn, are quite generous with their contributions to more than offset inflationary costs.

henrymurfey said...

Have the reams of statistics produced by the many entities of government served a productive purpose? If one deems fodder for political argument (damn the SATs, full subsidization of higher education where excess supply is overcome by artificial demand); redistribution of wealth (how many support programs in money and/or in kind are required to protect the lowest quartile from themselves and the rest of society from the threat of the socio economic netherland?); and allotment of guilt (thou shalt not be energetically productive lest your tithing of Caesar be increased manyfold).

With the only certain beneficiaries of the data being its collectors (salary, fringes, defined benefits, monetary benefit of sick days "saved", drop
programs, ad infinitum), should we not have a cost benefit analysis of the data collectors' work? But then, there's the "fox loose in the hen house" conundrum

econjohn said...

sure, henry. let's have the cdc stop collecting data on the spread of disease. or maybe, the bls shouldn't bother with the unemployment rate. nhtsa can stop counting how many people die in traffic accidents. epa should stop counting mercury levels coming out of coal burning plants. osha can stop publishing inspection data. it's all a scam.

Jason said...

While I agree with your point about the ambiguities of adjustments to the raw data for calculating inflation, the measure is called the "Consumer Price Index". Are business hotel rates excluded from the PPI? I don't know, but it seems reasonable to exclude business, government, and export prices when trying to measure consumer prices in the US. If a business raises retail prices to cover the cost of more expensive hotel stays, then it will show up in the CPI. If they eat the cost, it won't.

henrymurfey said...

Econjohn, thanks for agreeing with me that some of the data collecting may not justify the acquisition cost. I'd not go to the extreme of saying that it's all a scam. Those of us who drive
the "spaghetti bowls" of urban existence do wonder what the "T" in DOT really stands for.

Can someone help me with the following: What roles did the CDC and the NIH play in the development of the Salk and Sabin

BelowTheCrowd said...

I am not aware of any business that willingly pays a higher rate than is available to normal consumers. Certainly, they might at times pay higher rates for short-notice reservations, but so do consumers who suddenly need to go to New York for a funeral or some other short-notice event. (My dad passed away just a day before some big UN meeting last year -- our relatives sure didn't pay a cheaper "consumer" rate for their Manhattan hotels...)

In truth, my experience suggests that large businesses are far more likely than individual consumers to have negotiated deals for better rates.

This is typical fed stuff. If the rates at big-city hotels are going up, you simply declare that those are "business" hotels, and that as a result they shouldn't be part of the CPI.

the management said...

Jeff, have the church ever given you a small cash refund when oil prices fell :-)?

dimaggio said...

Wouldn't the church have an incentive to overstate the amount by which their costs increased to receive additional donations?

S said...

Thanks for bringing these issues to light. More people need to be made aware of the fact that their currency is being watered down.