Baker Says 20% Rental Fees and 2.7% Insurance Costs Skew U.S. Inflation
Updated
Updated · CounterPunch · Jul 2
Baker Says 20% Rental Fees and 2.7% Insurance Costs Skew U.S. Inflation
1 articles · Updated · CounterPunch · Jul 2
Summary
Rental fees averaging 20% of rent and home insurance equal to 2.7% of median family income may be slipping through official inflation gauges, Dean Baker argues, helping explain why households feel worse than headline data suggest.
Baker says CPI and PCE may miss landlord add-on charges because surveys rely on tenants reporting total rent, while shelf-price checks can also understate inflation when stores charge more at checkout than posted.
Home insurance is another gap: mortgage holders paid about $2,700 on average last year, up from 2.0% of income before the pandemic, yet the CPI gives it less than a 0.28% weight.
That mismatch may matter because rent and owners' equivalent rent make up just over one-third of the CPI, so missing even 3-4 percentage points of rental inflation over five years could move the overall index.
Baker says mismeasurement alone cannot justify "worst economy ever" sentiment with unemployment at 4.3%, pointing instead to partisan polarization, social media and a broader disconnect between official metrics and lived costs.