The inflation rate reported by the US Government has been more or less 3% since 1990. Three factors may effect our "Standard of Living" regardless of the CPI calculations. One is the rising cost of housing shown by the Case Shilling "History of Home Values. The CPI is calculated based on the "House Price - Rent Ratio. The second factor is the "Declining Median Household Income adjusted for Inflation". A Third factor is the staggering cost of education.
Housing cost almost doubled between 1995 and July 2006. The chart to the right is from The Case Shilling Report. Housing cost typically make one-third of a family's budget. If the biggest part a family's budget rises eight percent a year the "True Cost of Inflation" must be much higher than the 3% stated value of CPI the government is reporting. It is true that housing values came down fifty percent in many parts of the US, but in 2013 the median housing cost rose again by nearly thirty percent.
The American family's "Standard of Living" has been declining because of improving productivity (overseas jobs and robotics). The chart below shows both the actual median income and the "True Value" after adjusting for inflation.
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Median Household Income in the United States
First off - what is median household income?  According
to the U.S. Census Bureau, "household median income" is defined as "the
amount which divides the income distribution into two equal groups,
half having income above that amount, and half having income below that
amount."The U.S. Census Bureau currently publishes median household income data from 1967 until present day.
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A possible answer is the CPI rate is based on the price of home rentals. The price of renting a home rose at a steady rate until 2006/07 rents started rising faster. When the housing market crashed in 2009 rents only slightly declined. Renters had leases that stabilized their rent price. In 2010 when it was time to renew their leases people moved in two directions. The group of renters that lost their good jobs moved their families in with family or friends. The group of people who kept their job upgrade their home but was able to keep the same rent price range. That means people without income did not rent and people with income paid the same amount of rent. Therefore the calculation of rent prices for the CPI indicator calculates the inflation rate of housing at a low rate of inflation.
The people hurt by this effect were low-rent landlords and people who had both a high mortgage payment and student loans. In 2010 when people moved out of the leases many people were able to move into a much nicer neighborhood with better schools for the same rent price. Thousands of low-rent landlords had houses they could not rent. Landlords had long term vacancies and were not able to sell their properties for any price. Remember nobody was buying houses in 2010, The pace of existing home sales fell twenty-seven percent.
In conclusion three factors destroyed the "Standard of Living" for millions of Americans. Any one of the three factors may have affected the financial prosperity of millions of Americans, but some people experienced all three. Whether paying too much for a house during during the feeding frenzy for a seven year period or loosing a job during the "Financial Melt-down" combined with debt from credit cards or student loans caused millions of Americans to live with lower discretionary income. The time may have come where paying for a college education will not provide the life style benefits as the previous generation did.
Take a look.
Cost of education in 2013 dollars. This is staggering rate of inflation not shown in the CPI inflation
rate.
Read more about college tuition.
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