George Orwell at AEI
Jude Wanniski
January 7, 1997


Mr. Irwin M. Stelzer
Director of Regulatory Policy Studies
American Enterprise Institute
Washington, D.C. 20036

Dear Mr. Stelzer:
A copy of your article in The Weekly Standard of Dec. 23, " 'Lies, Damned Lies, and Statistics' Revisited," has come to my attention. I must protest your assertion that "no one seriously contests" the argument of the so-called Boskin Commission that the Consumer Price Index "has long overstated the rate of inflation in the American economy." How convenient that Michael Boskin has such an iron-clad case that you can begin your essay with the announcement that there is no need for debate.

You really should be ashamed of yourself. The fact that you and Boskin share the same roof at AEI does not mean you absolutely must share the same intellectual fraud. It is no trivial matter for you to announce that "the nation's old folks are being overpaid" and that we must quickly find a way to cut their pay. Were you among those who advised Newt Gingrich to cut the school lunch program, to cut Medicare benefits, and to otherwise straighten out the nation's finances by throwing widows and orphans into the snow?

The Boskin Commission, Mr. Stelzer, was an intellectually dishonest enterprise from the outset. It was not commissioned by those who are interested in the truth. It was commissioned by politicians and their corporate backers of both parties who knew in advance — as you so indelicately put it --  that the "Consumer Price Index is wrong and has been wrong for more than two decades or more... [which is] what so many of us have suspected all along."

In fact, there are those of us who believe the CPI has been understated as a measure of inflation these last 30 years — ever since the Johnson Administration began edging away from a dollar as good as gold by closing the London gold pool. In the years since, the dollar has lost more than 90% of its value relative to gold. That is, by rising to $360 from $35, the dollar inflation rate has been in excess of 1000%. Meanwhile, the CPI over that period has run up only 400%. The reason is that at every opportunity the government has massaged the CPI in order to cheat the old folks out of their Social Security benefits. I've lived through the last 25 years watching the Social Security checks of my parents dissolve in purchasing power, as housing costs have risen by 1000%, transportation costs have risen by 1000%, entertainment costs have risen by 1000%, the costs of drugs are up 1000%, the cost of All-Bran, for goodness sakes, is up 1000%. They could buy groceries generally at less than 1000% more, but they had to travel further to a supermarket to shop, and in the end there was no saving. The statistical gymnastics the Boskin Commission had to do to make its case are laughable, based on the principle that people will be too dumb to resist. 

On top of that, I could not believe my eyes when I read into your piece and saw you breathlessly citing the work of Leonard Nakamura, who "at the request of The New York Times plugged a more accurate inflation indicator into economic data from the past 20 years — and it\urns out that, instead of declining by 9 percent between 1976 and 1996, real average hourly earnings actually rose by 35 percent! Nakamura estimates that the CPI overstated the annual inflation rate by 1.25 percentage points in the 1970s and that the overstatement has risen steadily to 2.75 percentage points now. In his view, not only have real average hourly earnings increased rather than decreased, but the gross domestic product has grown by twice as much as the statistics said."

What horse manure. Where in blazes have you been for the last 30 years, Mr. Stelzer? This is George Orwell country you have wandered into. Why not have Nakamura run his CPI back into the 1930s, where he can convert the Great Depression into a Great Boom? What colossal nerve you and the editors of The Beltway Standard have in using the "Damned lies" line to introduce your Orwellian article! Have you not noticed that the capital component of GDP has been in steady decline for 30 years while the labor component has been steadily rising? The only way we can even pretend to have expanded in these three decades is by recognizing that one breadwinner is no longer sufficient to support a family and that husbands and wives both have to work to make ends meet.

Don't you realize how stupid you seem in swallowing this crap? What Boskin did in bending every statistic in his grasp in order to fulfill his contract is astounding in its dishonesty, causing me to lose my usual good temper and announce it for what it is as A Giant Hoax. But for you to carry it ahead into Orwell country would cause anyone to reach their wit's end. Twenty years ago I was a resident fellow at the American Enterprise Institute. Is this what has become of it?

Sincerely, furiously,

Jude Wanniski