The first rule for comparing dollar numbers over time is to adjust them for inflation. But the rule is violated in the media more often than it is kept. It is violated so often, in fact, in small and large ways, that we hardly notice.

A small example: describing the dedication this summer of a $350,000 sculpture, the Portland Oregonian wrote that the commission paid to the artist was "the highest commission paid for a piece of public art in Oregon, just edging out the $348,000 paid" to another artist in 1982 for a different piece. But the "constant dollar," or inflation-adjusted, price for the 1982 piece is $552,000. One larger example: many people know, and some complain about, the pay of members of Congress, which is mentioned now and then in news reports. Yet few of those reports point out that in inflation-adjusted 1995 dollars the pay of representatives and senators peaked in the late 1960s and is now some $40,000 per year less than it was then.

Inflation-adjustment figures are not easily available, and can be complex to use, but the failure to do so leads to misleading stories and charts about subjects as varied as the rise of the price of postage stamps to the rise of Medicare and Medicaid spending. Adjusting for inflation can also challenge assumptions -- for example, that the national debt has increased more or less steadily under each president since John F. Kennedy (see chart); that welfare payments to individual families are on the rise (they have fallen, slowly, in inflation-adjusted dollars, for at least twenty-five years); that Jurassic Park, at $339 million in 1993, was our biggest blockbuster movie (in 1995 dollars it becomes $359 million and is beaten by E.T.'s $362 million [E.T. made $228 million in 1982], The Sound of Music's $389 million [$80 million in 1965], Star Wars's $490 million [$194 million in 1977], and, still champion, Gone With the Wind's $869 million [$79 million in 1939]).

Adjusting for inflation, with the proper tools, is not so difficult. The Consumer Price Index, calculated by determining price changes in a "market basket" of goods and services, recently has been challenged as somewhat overstating certain price changes. Still, it remains useful. The table on this page, constructed by "re-basing" the CPI base year to 1995, provides numbers that allow easy conversion of dollars of any year since 1950 to 1995 dollars, so they are more readily comparable and so we can judge the amount of real change.

The table works this way: to convert dollar figures of any year to 1995 dollars, divide the dollar figure of that year by the conversion factor for that year. For example, to convert $100,000 in 1960 to 1995 dollars, divide $100,000 by .193, resulting in a figure of $518,135. Given the number of significant digits in the CPI, that six-digit number is overly precise. It should be rounded to $518,000.

The author will make regularly updated factors, starting with the year 1800, available on the World Wide Web at:

http://www.orst.edu/Dept/pol_sci/sahr.html

Or send a self-addressed envelope to him at the Political Science Department at Oregon State University, Corvallis, Oregon 97331-6206.

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