Second, it's incredibly hard to accurately measure such a nebulous concept as inflation (because there's no such thing as a "general price level"), but it's pretty bold to definitively state that the CPI understates inflation. Measuring inflation is hard. We can buy an iPhone 5 for half what we paid for the first one in 2007--how do we quantify that price change in the CPI? Does a 2013 vehicle that costs the same as its 1995 counterpart represent high or low inflation? It's not just prices that change--quality changes and spending behavior changes. And then we have to take the wildly changing behavior of 300 million consumers, buying god knows how many products, and consolidate that into a single number.
Then that single number has to stand up to those same 300 million people, each of whom is biased by 4 billion years of evolution to be loss averse, to notice bad changes and grow accustomed to good changes, and, inevitably, lots of them will point to things that are much more expensive, unconsciously blind to all the things that have gotten cheaper, and claim that the CPI understates inflation.
[I tried pretty hard myself and all I came up with was, possibly, clothing].
I don't think I ever have to change the oil in my car over the duration of my lease. Synthetic lubricants, tighter tolerances, and better seals are amazing.
Plus, at what other time could you get a 400+ hp car that can get 26+ mpg? The safety features are insane. The wipers and lights come on automatically and the car buzzes (or so I am told) if I drowse off behind the wheel. I can listen to punk rock in the middle of Wyoming, but I won't have to because my car will plot a route around it.
Clothing has gotten much better for less, but that's largely global supply chain. I checked into a hotel in China and my room had a pair of throwaway trainers for walking in the city.
I can safely fly between any points in Europe with the change left over from a beer.
I can walk into an optometrist and get a box of contact lenses for my astigmatic eyes and wear a clean, new pair every day, all for less than hard lenses cost decades ago and for which I would have to wait weeks with multiple fittings. And they still sucked, especially in a windstorm.
Bicycles that would be insanely futuristic when I was a kid, with disc brakes, aluminum frames, and more gears than I need, cost the same as my hunk-of-steel Schwinn.
Bread! Coffee! They are so good now!
Best of all, my toilet cleans me.
http://www.forbes.com/sites/afontevecchia/2011/03/11/ny-feds...
Quite the opposite, in fact.
The US government has traditionally overreported inflation, because the CPI was not hedonically-adjusted until the year 2000.
The Billion Prices Project at MIT provides an independent measure of inflation, and it tracks the CPI quite well. (Note, though that Billion Prices uses a different basket that does not include services. Thus, it will not match exactly.)