The Buying Power of a Dollar, for Christmas Gifts and Beyond

Twelve drummers drumming, eleven pipers piping, ten lords a leaping, nine ladies dancing… If you are like me at this time of year, busy with last-minute gift shopping, you may have the sinking feeling that every year it costs more and more to buy presents for our loved ones. To put it another way, a dollar just doesn’t seem to go as far as it used to. This is not your brain playing tricks on you but rather a real world encounter with the important economic concept of inflation. For those of us working on community and economic development, the idea that the value of a dollar changes over time should impact our thinking on everything from the buying power of our citizens to the future cost of capital improvements. Eight maids a milking, seven swans a swimming, six geese a laying… Perhaps the best known measure of inflation is the Consumer Price Index which is published monthly by the Bureau of Labor Statistics. The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Those goods and services are classified into eight major groups including food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services. Also included are various government-charged user fees, such as water and sewerage charges, auto registration fees, and vehicle tolls and taxes on goods and services. The Consumer Price Index is a good measure of the relative buying power of an [...]