Grab the golden ring Balanced budget: Inflation rate adjustment, not constitutional amendment, is the answer.

March 10, 1997

NOW THAT the Constitution has again been spared a Balanced Budget Amendment that would have put fiscal policy in a straitjacket, Congress and the White House ought to get down to the business of actually balancing the budget. Fortunately, a golden ring is available if only politicians in both parties will grab it.

All they have to do is insist that the government use accurate figures in computing the Consumer Price Index. The CPI tracks the inflation rate used in calculating cost-of-living adjustments for Social Security benefits and tax bracket adjustments. Neither Democrats nor Republicans are willing to "go first" with an initiative that has attracted the opposition of retirees who have long been overcompensated and anti-tax zealots who resist any revenue-raising measures, whatever their merits.

Lately, leaders in both parties have been hinting they might be willing to punt to a bipartisan commission -- provided they act in unison. But didn't a bipartisan commission issue a report only three months ago? Indeed it did. And didn't it estimate that the CPI is over-inflated to the tune of 1.1 percent -- about one-third the current 2.8 percent inflation rate? Indeed it did. So why another commission?

Federal Reserve Chairman Alan Greenspan is once again the man with the answer. He does not want a commission that would restudy a problem that has been studied to death. The commission he envisages would have power to assess inflated Bureau of Labor Statistics CPI numbers and adjust them downward. The result could be savings of tens of billions of dollars in excessive Social Security benefits denied or undeserved tax breaks eliminated.

Last week, 23 conservative "Blue Dog" Democrats estimated that a modest reduction of 0.8 percent in the CPI would slice $103.7 billion from budget deficits over the next five years. Such savings would put the goal of a balanced budget within range by the target year of 2002. The Congressional Budget Office, for example, has calculated that without such a change, the current five-year Clinton budget would wind up with a deficit of $69 billion instead of the $17 billion the president has claimed.

Reality suggests that unless the CPI golden ring is seized, all the Washington yak-yak about balanced budgets will signify nothing. President Clinton and Senate Majority Leader Trent Lott have indicated flexibility. Now they have to keep their troops in line -- no mean feat -- and get on with it. Without a CPI adjustment, this generation of politicians will be shortchanging the future.

Pub Date: 3/10/97

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