According to the Wikipedia, “A Consumer Price Index (CPI) is a statistical measure of a weighted average of prices of a specified set of goods and services purchased by wage earners in urban areas. It is a price index which tracks the prices of a specified set of goods and the services, providing a measure of inflation.” It is a fixed quantity and a sort of cost –of- living index.
The CPI is used to track changes in prices of goods and services purchased for consumption by urban households.
Every month the Bureau of Labor Statistics (BLS) surveys prices and generates current CPI.
The increase in CPI is called inflation. This inflation can be calculated by finding the difference in the cost of an item one year compared to the same item’s cost in a later year.
The formula for calculating inflation rate is the following:
((B-A/A)*100
If prices go down, meaning we experience deflation, then “A” would be larger then “B” and then it would be negative.
The CPI indicates effectiveness of government policy and “for inflation targeting monetary policy makers is the usage of the CPI as a measurement for the inflation a key tool in their price policies.”(1) Also, business executives, labor leaders and other private citizens use the index as a guide in making economic decisions.
The index affects the income of almost 80 million people in the US as a result of statutory action. [See note #1]. The CPI also affects cost of lunches for school children. Also, private firms and individuals use it to keep rents , royalties, alimony, payments, and child support payments in line with changing prices. CPI is used to adjust Federal income tax as well.
Some people believe that elected officials don’t want the CPI to be “An honest measure of cost maintaining the same standard of living or quality of life.”(2) Instead, they want a politically convenient index which would hardly ever rise.
The CPI is manipulated so that there is no inflation, even though prices for things we must buy to live keep rising higher and higher. In this way, people will believe that inflation is low and the “fraud” of monetary inflation will stay alive. By changing “what inflation is”, then our government won’t have to pay as much to retirees, because retiree benefits like Social Security, Medicare, and Medicaid are tied to the CPI. Inflation is understated by about 2.7% per year.
So, instead of the CPI being used to help businesses and individuals for financial planning, it is being misused by politicians intent upon stealing income from Social Security recipients.
People on Wall Street also mess with the CPI. [See note #2].
After press reports surfaced in the 1990s about the CPI significantly overststing inflation, there were arguments that if the CPI inflation couls be reduced, then entitlements would not increase as much each year, and would ultimately help bring the budget deficit under control. The people behind this thinking, were Michael Boskin, the then chief economist to the first Bush administration, and Alan Greenspan, chairman of the Board of governors of the Federal Reserve System.
Before Boskin and Greenspan, the CPI was measured in a pretty straightforward concept. [See note #3]. Afterward, the weighing of goods was shifted to basic arithmetic weighing to geometric weighing. [See note #4].
The CPI is being totally messed with and is barely something we can depend upon.
According to an article by Richard Benson, “The primary sources of manipulation are: (1) making sure the wrong items are in the index ; (2) Taking “hedonics” to ridiculous extremes; (3) Getting customers to do more of the work and receive less services; and, (4) changing to a Chain Weighted Index.”[See note #5]
Now there are three CPI measures: CPI for all urban consumers, CPI for urban wage earners, and clerical workers, and the chained CPI-U. [See note #6].
There is also a problem with GDP (Gross Domestic Product ) reporting because of the way inflation is handled . CPI is not used in GDP calculation, but price deflators, used in converting GDP data, and growth to inflation adjusted numbers, are related. The more inflation keeps being understated , the inflation-adjusted rate of GDP growth that is reported will get higher.
Notes:
#1: 47.8 million Social Security beneficiaries, about 4.1 million military and Federal Civil Service retirees and survivors, and about 22.4 million food stamp recipients. Changes in the CPI also affect the cost of lunches for the 26.7 million children who eat lunch at school. Some private firms and individuals use the CPI to keep rents, royalties, alimony payments and child support payments in line with changing prices. Since 1985, the CPI has been used to adjust the Federal income tax structure to prevent inflation-induced increases in taxes.
#2 “The Pollyannas on Wall Street like to play games wit the CPI too. The concept of looking at the “core” rate of inflation-net of food and energy-was developed as a way of removing short-term (as in a month or two) volatility from inflation when energy and/or food prices turn volatile.”
#3 Up until the Boskin/Greenspan agendum surfaced, the CPI was measured using the costs of a fixed basket of goods, a fairly simple and straightforward concept. The identical basket of goods would be priced at prevailing market costs for each period, and the period-to-period change in the cost of that market basket represented the rate of inflation in terms of maintaining a constant standard of living.
#4 Shortly after Clinton took control of the White House, however, attitudes changed. The BLS initially did not institute a new CPI measurement using a variable-basket of goods that allowed substitution of hamburger for steak, but rather tried to approximate the effect by changing the weighting of goods in the CPI fixed basket. Over a period of several years, straight arithmetic weighting of the CPI components was shifted to a geometric weighting. The Boskin/Greenspan benefit of a geometric weighting was that it automatically gave a lower weighting to CPI components that were rising in price, and a higher weighting to those items dropping in price.
#5 If the currencies are chained, the weights are changed every year. This takes into account that consumption patterns change over time. In the above example, assume that consumers now buy 10% foodstuffs but 30% of everything else (e.g. electronic gadgets), then a cheapening of these gadgets would show up less if the "base year" method is used rather than the "chained" method, since it would be weighted with only 20% instead of 30%. This would show higher price increases, overestimating inflation.
#6 The CPI-U includes expenditures by urban wage earners and clerical workers, professional, managerial, and technical workers, the self-employed, short-term workers, the unemployed, retirees and others not in the labor force. The CPI-W includes only expenditures by those in hourly wage earning or clerical jobs. Recently, the Chained Consumer Price Index C-CPI-U, a chained index, was introduced. The C-CPI-U tries to militate against the substitution bias that is encountered in CPI-W and CPI-U employing a Tornqvist formula and utilize expenditure data in adjacent time periods in order to reflect the effect of any substitution that consumers make across item categories in response to changes in relative prices. The new measure, said to be a "superlative" index, is designed to be a closer approximation to a "cost-of- living" index than the present measures. The use of expenditure data for both a base period and the current period in order to average price change across item categories distinguishes the C-CPI-U from the existing CPI measures, which use only a single expenditure base period to compute the price change over time. In 1999, the BLS introduced a geometric mean estimator for averaging prices within most of the index’s item categories in order to approximate the effect of consumers’ responses to changes in relative prices within these item categories. The geometric mean estimator is used in the C-CPI-U in the same item categories in which it is now used in the CPI-U and CPI-W.
Resources:
(1)www.safehaven.com
(2)www.gillespiereserch.com
(3)www.wikipedia.org
(4) www.inflationdata.com

First of all, The Federal Reserve was established in 1913 and was made to look respectable by placing it under the control of a Board appointed by the President. It is a cartel of private banks and the Bank of New York is the most powerful. The official purpose of the federal reserve is to provide elasticity to the supply of money. It uses the securities it buys as assets to offset the cost of buying them in the first place. So, it effectively buys government securitites with money it never had to begin with. During the great Depression, the Federal Reserve encouraged investment in the real economy which discouraged investment on Wall Street. The US Federal Reserve has caused inflation and oversupply of money and continues to be a massive transfer of wealth to everyone who is already wealthy.
Secondly, the history of the IRS goes back to March 1791, when, shortly after George Washington became president, the brand new congress approved a law establishing a tariff system on selected imports and an internal excise tax on whiskey. In the next year Alexander Hamilton established the Office of the Comissioner of Revenue, the predecessor to the IRS today. Also, the IRS's roots go back to the Civil war when President Lincoln and Congress created the Commissioner of internal revenue and enacted an income tax to pay war expenses. In 1913, the states ratified the 16th Amendment, which gave Congress the authority to enact an income tax. Then, in 1913, the states ratified the 16th Amendment, giving Congress the authority to enact an income tax.
The Internal Revenue Service (IRS) is the United States government agency that collects taxes and enforces the tax laws. It is a department of the treasury.Its four major operating divisions are: Large & Mid-Size Business (LMSB), Small Business / Self-Employed (SB/SE), Wage and Investment (W&I), and Tax Exempt & Government Entities (TE/GE).
Both the IRS and Federal Reserve have a problem with hurting the US economy and need to be kept under control. The actions of these two departments may be hurting the US dollar as well.

According to an article called, "The End of Dollar Hegemony, Part II", we are becoming less dependent on ourselves for goods which can in turn ruin our economy. We are using fiat currency to buy these goods (fiat currency is the printing of currency out of the air with no intrinsic value), but over time, because we borrow money from other countries, our dollar will be rejected. Without our dollar, it will in turn ruin our military, a main reason why we "rule" in the world.
Not only do we have a problem worrying about our fiat currency, but we also have a problem with Iran ruining our dollar as well. Iran has made the decision to start wanting euros for their oil instead of dollars. This could ultimately ruin our dollar. That is one reason why we want to go to war with Iran. Also, Iran already has problems with Denmark, which involves the cartoons that the Danish printed in their papers, making fun of the Muslim prophet Mohammed. However, there have been alleges that Iran is only using its anger as a diversion and even goin so far as to stop eating Danish pastries, to divert international pressure over its nuclear program. A nuclear issue which gives the US , but another reason to go to war with Iran.
But then there is the whole issue with Bush, who wants the United Arab Emirates taking control of our ports. The people who had ties with Al Quaeda when 9/11 happened. Bush said that we should not be afraid and the deal would not threaten US security. So at the same time we have reason to go to war with Iran, we are allowing these people who have had ties with terrorists, to control our borders.
So, we are going to war in order to keep the US hegemony, or in other words the "who ever has the gold makes the rules" thing, and at the same time doing this off the wall deal with the United Arab emirates, because he thinks they will be important allies in our war against terrorism.
Is this good or bad? I guess its up for you to decide.

Disparity in wealth does exist and it is a major concern.
First of all, disparity of wealth, is when the "gaps in wealth between the rich and the poor and between whites and minorities widens."
It has been named a "massive maldistibution" of wealth and has considered to have "severly weakend U.S. political institutions and democracy."
It has been traced back to President Reagan, who "sold a political philosophy blending antigovernmentism, deregulation, and tax cuts for the most affluent." This trend also known as "Reaganism" prevailed under Clinton's Democratic administration, because he, in essence, "ratified" the idea, becuase he did not refute it.
In Bush's 2004 campaign, he was given huge contributions by wealthy indidviduals and corporations so that they could maintain their control of the government, i.e. a "plutocracy."(1)
This is what our government is becoming. This is the idea of disparity in wealth.
A USA Today article from 2003 also highlights this phenomenon. The article says that there was a "braod increase in stock ownership in the USA." People with stocks, with Bush's help, would not have to pay taxes on their dividends, making the wealthy, even wealthier.
The wealth gaps' widening may also have to do with the fact that the "lower-income and minority families are less likely to own assets-including homes-that have increased in value in recent years..."
So, if we don't try to control it, the disparity in wealth will increase more and more, and the big corporations and wealthy people will control the government. Will the poor people and the little business be spared? I think not.

Notes:
(1)Borrowed from the USA Today article by Barbara Hagenbaugh "Nation's wealth disparity widens"-"Economists and government officials use the study to evaluate trends and to set policy. Its release comes as the debate heats up over President Bush's plan to stimulate the economy. The centerpiece of Bush's proposal is the elimination of taxes on stock dividends ppaid by individuals which Democrats say would be a handout to wealthy Americans."


Sources:
USAToday.com
eurekalert.org