Earlier this morning at a hearing with Ben Bernanke, Senator Tom Coburn (R-Okla.) came out as an inflation truther, arguing that if the Bureau of Labor Statistics had stuck with 1980 methodology it would show that inflation was actually running at 8 percent per year.
Here’s maybe the best way to think about this. Look above at the nominal GDP growth rate for the United States over the past 30 years. That’s doing no inflation adjustment whatsoever. You’ll see that unadjusted, the economy has basically never grown faster than 8 percent. So if you adjust for inflation with a belief that inflation’s been running at 8 percent a year (rather than the ~4%, then ~2%, and more recently ~1.5% the official numbers show) that would mean the economy has been in a state of persistent recession ever since 1983 or so. Total American prosperity, on this view, peaked in roughly 1980 and then it’s been a steady downhill slope ever since Ronald Reagan ruined everything.
Does Coburn really think that? Does he really think America produced more goods and services in 1983 than in 2013? Recall we’re talking about aggregate output, not per capital output. There are roughly 100 million more people living in the United States today than there were at the beginning of this period.
