[Congressional Record Volume 140, Number 7 (Wednesday, February 2, 1994)]
[House]
[Page H]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: February 2, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]


                              {time}  1530
 
         LEGISLATION REGARDING CHANGING THE COMPUTATION OF CPI

  (Mr. SMITH of Michigan asked and was given permission to address the 
House for 1 minute and to revise and extend his remarks.)
  Mr. SMITH of Michigan. Mr. Speaker, today I am dropping in a bill to 
change the way the CPI is computed for Government payouts. The Consumer 
Price Index, CPI, is probably the most widely used measure of 
inflation. A number of Federal Government programs are tied to these 
increases in CPI, such as Social Security benefits, the personal income 
tax rate, Government retiree payments, many wages, and State and local 
government payouts as well.
  The problem is that a 1-percent increase in the CPI results in a $5 
billion additional cost to the Federal Government the first year. The 
CBO estimates that with compounding and the increased number of 
recipients the additional cost would be over $100 billion in the 5 
years of our budget proposal.
  The bill that I am introducing takes alcohol and tobacco products out 
of the so-called market basket of goods that is used to calculate the 
Consumer Price Index.
  From my discussion with the U.S. Department of Labor, Congressional 
Budget Office, and Congressional Research Service, it is estimated that 
a 75 cent increase in the cigarette tax would increase the Consumer 
Price Index [CPI] by 0.7 percent, and thus, increase Federal Government 
COLA payments by $3 to $4 billion the first year. The cost to State and 
local governments would be equally significant.
  The Government should not increase Government payments to individuals 
as a result of rising prices for a product that may be harmful, and is 
not used by most of those individuals having their benefits increased. 
It is estimated that 12 percent of retirees use tobacco. But the fact 
is that cigarettes and alcohol continue to be a substantial factor in 
the market basket of goods that makes up the CPI used to calculate 
cost-of-living-adjustments [COLA's].
  Currently tobacco and alcohol products make up over 4 percent of the 
CPI-W used to increase Government payment programs. This creates a 
separate inflation index that does not include tobacco or alcohol 
products [CPI-G], to be used by the Government for increasing COLA's.
  This legislation keeps spending down, saving billions annually, and 
prevents a windfall increase for recipients of Federal benefits.

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