Truth in government statistics Consumer Price Index: Inflated inflation rate must be altered to balance budget.

December 08, 1996

IF GOVERNMENT STATISTICS on the rate of inflation are grossly inflated, as a blue-ribbon group of economists now warns, why not fix them?

The closely watched Consumer Price Index affects every American. It determines how much Social Security benefits increase year by year. Or how fast the Internal Revenue Service nudges citizens into higher tax brackets. Or what interest rates will be. Or whether a balanced budget can be attained. The obvious importance of the CPI is why it is so hard to fix.

To achieve accurate data on the performance of the U.S. economy, government figures should reflect quality improvements, the trend toward discount buying and the substitution factor when specific prices shoot up.

But the Washington Establishment is also acutely aware that explosive political issues and basic perceptions of the American condition are at stake.

The gray-power lobby is already fretting about a slowdown in the growth of retirees' benefits; small-government advocates resist a tax increase; any notion that U.S. economic growth, productivity and real wage rates are a lot higher than is commonly believed would demolish the myth of middle-class stagnation.

The CPI commission report estimates that the inflation rate has been overstated by about one-third -- that it is closer to 2 percent than 3 percent. If such a calculation were reflected in revamped CPI figures, the Congressional Budget Office estimates that deficits would be reduced by $133 billion over the next five years and make the goal of a balanced budget by 2002 a lot more credible.

Nevertheless, House Democratic leader Richard Gephardt speaks for liberals when he opposes slower growth in Social Security benefits; and Rep. Bill Archer, Republican chairman of the House Ways and Means Committee, speaks for conservatives when he opposes changes that would move citizens more quickly into a higher tax bracket. The Clinton administration is giving the CPI commission report a tepid reception.

Yet budget pressures are relentless as entitlement programs threaten a fiscal meltdown. The two major parties should share the political burden of making CPI changes an integral part of a balanced budget deal. Action must be taken if there is to be truth in packaging this most crucial statistic.

Pub Date: 12/08/96

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