Question about CPI

[democrattotheend]

I have not looked into it too much because I have been buried with studying for exams, but I read a little bit last night, and one thing I noticed about the current formula is that it is based on the price of goods in urban areas. So my question is, why do they use the urban formula for the whole country? Some things are a lot cheaper in rural areas...if they are going to tweak the formula, why not do so by varying it by geographic area and using urban prices only for urban areas?

I know this is how they set the federal pay scale. They have a base and then a supplement for high cost of living areas.

Please don't jump all over me...I am just asking why they don't do it that way and whether it has been considered. Do you think this is a better option than chained CPI? It seems sort of unfair to me to use the same cost of living index all over the country despite big differences in the actual cost of living.

[Recursion]

1. Worse yet, it's based on the spending patterns of families in Europe in the 1950's

It's one of those decisions that gets made as a stopgap early on in a system's development and becomes locked in. I'd love to see the CPI modernized.

[Panasonic]

2. CPI needs to be fixed... first, a boost of 75% COLA increase for all of us

then readjust the CPI for real time inflation.

[democrattotheend]

3. But why not use different prices for urban/rural

Seems only fair, no?

[Panasonic]

4. Yes, I live in a urban area..

COLA is higher here than it is in a rural area.

[Recursion]

5. DoD does something like that with per diem

Per Diem is set by your ZIP code or something like that (I got Manhattan per diem once on a temporary duty... YOWZAH! $350/day!)

But then the COLA is set for the entire CONUS at once.

That's a very good question, why don't we have a smarter system for doing this?

[democrattotheend]

6. Probably because of the politics

Because of the structure of the Senate rural states are way overrepresented.

I think it would make a lot more sense though. I think taxes and CPI formula should vary based on geography, since there is a huge difference in the cost of living in different parts of the country.

[Bluenorthwest]

8. To mention a $350 a day per diem while discussing a monthly raise that for most is

under $50 shows exactly how and why the buget is fucked up. So DoD cats are out eating at the Pool Room while Obama negotiates away tiny raises for the least among us.
Good stuff, that. A per diem like that is Show Biz worthy.

[Bluenorthwest]

7. Your pay is tied to your employment, which dictates where you live.

People not employed should not be chained to a place of residence, and the system for constant adjustments to account for those who move would be expensive. Many retirees go to other nations. How do you do that? How long a stay gets a review of funds? If they give you a NY cola and you move to Alabama do you have to pay it back? How many employees do you think you need to add to make this function?
I'm just asking a few questions. Did you consider any of these?

[democrattotheend]

9. You wouldn't have to pay it back

But the following year, when you live in Alabama, you should get an Alabama COLA.

That's a good point about the administrative cost. But people have to file tax returns from an address...they could base it on that. Of course, there is probably a lot of potential for abuse, and some people don't file tax returns.

On the other hand, seniors tend to be less mobile than younger people, so maybe it would not be as difficult as it would be for people like me who have moved 6 times in 3 years.