[Congressional Record Volume 143, Number 30 (Tuesday, March 11, 1997)]
[Senate]
[Pages S2143-S2145]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. ROTH (for himself and Mr. Moynihan):
  S. 425. A bill to provide for an accurate determination of the cost 
of living; to the Committee on Finance.


                    COST-OF-LIVING BOARD ACT OF 1997

  Mr. ROTH. Mr. President, today my good friend, Senator Moynihan, and 
I are introducing a landmark piece of legislation to create a cost-of-
living board that will improve our Government's ability to index 
Federal programs with a more accurate measurement of inflation. 
Clearly, there are a number of ways to address the accurate measure of 
inflation with regard to our indexed Federal tax and benefit programs. 
In my view, this bill represents one possible way to achieve greater 
accuracy. It is not the only way, but I believe it is our best effort 
to create a mechanism to fairly compensate taxpayers and benefit 
recipients alike.
  One of the most significant issues that faces Congress this year is 
the accuracy of the Consumer Price Index, and I believe that Congress 
and the President need to seriously address the economic ramifications 
of an inaccurate measure of the cost of living. The five-member board 
created in our bill will meet throughout the year to, first, review the 
statistical evidence about inflation produced by the Bureau of Labor 
Statistics and others, and after careful review of all the evidence 
regarding inflation, the board will then produce a cost-of-living 
adjustment by a majority vote of the members of the commission not 
later than November 1 of each year.
  This inflation adjustment number will serve as a number for which all 
Federal benefit programs and tax items will be indexed for the coming 
year without further action by the Congress or the President. If, 
however, the cost-of-living board fails by a majority vote to produce a 
cost-of-living adjustment, then current law applies. That is to say, 
that the BLS-produced CPI will be used to index tax and benefit 
programs.
  Let me be clear. This cost-of-living board will not--and I emphasize 
not--study the accuracy of the Consumer Price Index. We have already 
had the Boskin commission which did just that. The report was widely 
praised within the Economic Community, including many highly respected 
economists, such as Dr. Alan Greenspan and Dr. Martin Feldstein.
  One of the roles in Government is to protect American families from 
inflation. In doing so, it is important that we are able to measure 
inflation as precisely as possible, and I view this board as our best 
hope of accurately measuring inflation.
  I cannot emphasize too greatly the importance of an accurate 
measurement of inflation. If the index is too high, it overcompensates 
retirees and others and undertaxes many taxpayers. If it is too low, it 
undercompensates retirees and overtaxes the taxpayer. What we want is 
fairness to all with as accurate an index as possible.
  I want to stress that any action we take on this issue must be 
broadly and deeply bipartisan. We must have the full cooperation and 
leadership by President Clinton. I hope the President will not miss an 
opportunity to consider this board as one possible option that will 
``take the politics out of it'' and fulfill his goals set out in his 
State of the Union Address to ``do the right thing for the country.'' 
Clearly, this reform will not be successful without the President's 
leadership.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 425

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Cost-of-Living Board Act of 
     1997''.

     SEC. 2. COST-OF-LIVING ADJUSTMENTS.

       Title XI of the Social Security Act (42 U.S.C. 1301 et 
     seq.) is amended by adding at the end the following:

                  ``Part D--Cost-of-Living Adjustments


                ``Determination of Inflation Adjustment

       ``Sec. 1180. (a) In General.--The Cost-of-Living Board 
     established under section 1181 shall each calendar year after 
     1996 attempt to determine a single percentage increase or 
     decrease in the cost-of-living which shall apply to any cost-
     of-living adjustment taking effect during the next calendar 
     year.
       ``(b) Adoption or Rejection of Percentage.--
       ``(1) Adoption.--
       ``(A) In general.--If the Cost-of-Living Board adopts by 
     majority vote a single percentage increase or decrease under 
     subsection (a), then, notwithstanding any other provision of 
     law, any cost-of-living adjustment to take effect during the 
     following calendar year shall be made by using such 
     percentage and not by using the change in the Consumer Price 
     Index (or any component thereof).
       ``(B) Appropriate modifications.--The Cost-of-Living Board 
     shall make appropriate modifications to the single percentage 
     applied to any cost-of-living adjustment if--
       ``(i) the period during which the change in the cost-of-
     living is measured for such adjustment is different than the 
     period used by the Cost-of-Living Board; or
       ``(ii) the adjustment is based on a component of an index 
     rather than the entire index.
       ``(2) Rejection.--If the Cost-of-Living Board fails by 
     majority vote to adopt a single percentage increase or 
     decrease under subsection (a) for any calendar year, then any 
     cost-of-living adjustment to take effect


[[Page S2144]]

     during the following calendar year shall be determined 
     without regard to this part.
       ``(c) Report.--Not later than November 1 of each year, the 
     Cost-of-Living Board shall submit a report to the President 
     and Congress containing a detailed statement with respect 
     to--
       ``(1) the percentage (if any) agreed to by the Board under 
     subsection (a); and
       ``(2) the decision of the Board on whether or not to adopt 
     such a percentage.
       ``(d) Judicial Review.--Any determination by the Cost-of 
     Living Board under subsection (a) or (b)(1)(B) shall not be 
     subject to judicial review.
       ``(e) Definition of Cost-of-Living Adjustment.--In this 
     part, the term `cost-of-living adjustment' means any 
     adjustment under any of the following which is determined by 
     reference to any Consumer Price Index (or any component 
     thereof):
       ``(1) The Internal Revenue Code of 1986.
       ``(2) Titles II, XVI, XVIII, and XIX of this Act.
       ``(3) Any other Federal program.


                         ``COST-OF-LIVING BOARD

       ``Sec. 1181. (a) Establishment of Board.--
       ``(1) Establishment.--There is established a board to be 
     known as the Cost-of-Living Board (in this section referred 
     to as the `Board').
       ``(2) Membership.--
       ``(A) Composition.--The Board shall be composed of 5 
     members of whom--
       ``(i) 1 shall be the Chairman of the Board of Governors of 
     the Federal Reserve System;
       ``(ii) 1 shall be the Chairman of the President's Council 
     of Economic Advisers; and
       ``(iii) 3 shall be appointed by the President, by and with 
     the advice and consent of the Senate.

     The President shall consult with the leadership of the House 
     of Representatives and the Senate in the appointment of the 
     Board members under clause (iii).
       ``(B) Expertise.--The members of the Board appointed under 
     subparagraph (A)(iii) shall be experts in the field of 
     economics and should be familiar with the issues related to 
     the calculation of changes in the cost of living. In 
     appointing members under subparagraph (A)(iii), the President 
     shall consider appointing--
       ``(i) former members of the President's Council of Economic 
     Advisers;
       ``(ii) former Treasury department officials;
       ``(iii) former members of the Board of Governors of the 
     Federal Reserve System;
       ``(iv) other individuals with relevant prior government 
     experience in positions requiring appointment by the 
     President and Senate confirmation; and
       ``(v) academic experts in the field of price statistics.
       ``(C) Date.--
       ``(i) Nominations.--Not later than 30 days after the date 
     of enactment of the Cost of Living Board Act of 1997, the 
     President shall submit the nominations of the members of the 
     Board described in subparagraph (A)(iii) to the Senate.
       ``(ii) Senate action.--Not later than 60 days after the 
     Senate receives the nominations under clause (i), the Senate 
     shall vote on confirmation of the nominations.
       ``(3) Terms and vacancies.--
       ``(A) Terms.--A member of the Board appointed under 
     paragraph (2)(A)(iii) shall be appointed for a term of 5 
     years, except that of the members first appointed under that 
     paragraph--
       ``(i) 1 member shall be appointed for a term of 1 year;
       ``(ii) 1 member shall be appointed for a term of 3 years; 
     and
       ``(iii) 1 member shall be appointed for a term of 5 years.
       ``(B) Vacancies.--
       ``(i) In general.--A vacancy on the Board shall be filled 
     in the manner in which the original appointment was made and 
     shall be subject to any conditions which applied with respect 
     to the original appointment.
       ``(ii) Filling unexpired term.--An individual chosen to 
     fill a vacancy shall be appointed for the unexpired term of 
     the member replaced.
       ``(C) Expiration of terms.--The term of any member 
     appointed under paragraph (2)(A)(iii) shall not expire before 
     the date on which the member's successor takes office.
       ``(4) Initial meeting.--Not later than 30 days after the 
     date on which all members of the Board have been appointed, 
     the Board shall hold its first meeting. Subsequent meetings 
     shall be determined by the Board by majority vote.
       ``(5) Open meetings.--Notwithstanding section 552b of title 
     5, United States Code, or section 10 of the Federal Advisory 
     Committee Act (5 U.S.C. App.), the Board may, by majority 
     vote, close any meeting of the Board to the public otherwise 
     required to be open under that section. The Board shall make 
     the records of any such closed meeting available to the 
     public not later than 30 days of that meeting.
       ``(6) Quorum.--A majority of the members of the Board shall 
     constitute a quorum, but a lesser number of members may hold 
     hearings.
       ``(7) Chairperson and vice chairperson.--The Board shall 
     select a Chairperson and Vice Chairperson from among the 
     members appointed under paragraph (2)(A)(iii).
       ``(b) Powers of the Board.--
       ``(1) Hearings.--The Board may hold such hearings, sit and 
     act at such times and places, take such testimony, and 
     receive such evidence as the Board considers advisable to 
     carry out the purposes of this part.
       ``(2) Information from federal agencies.--The Board may 
     secure directly from any Federal department or agency such 
     information as the Board considers necessary to carry out the 
     provisions of this part, including the published and 
     unpublished data and analytical products of the Bureau of 
     Labor Statistics. Upon request of the Chairperson of the 
     Board, the head of such department or agency shall furnish 
     such information to the Board.
       ``(3) Postal services.--The Board may use the United States 
     mails in the same manner and under the same conditions as 
     other departments and agencies of the Federal Government.
       ``(4) Gifts.--The Board may accept, use, and dispose of 
     gifts or donations of services or property.
       ``(c) Board Personnel Matters.--
       ``(1) Compensation of members.--Each member of the Board 
     who is not otherwise an officer or employee of the Federal 
     Government shall be compensated at a rate equal to the daily 
     equivalent of the annual rate of basic pay prescribed for 
     level III of the Executive Schedule under section 5315 of 
     title 5, United States Code, for each day (including travel 
     time) during which such member is engaged in the performance 
     of the duties of the Board. All members of the Board who 
     otherwise are officers or employees of the United States 
     shall serve without compensation in addition to that received 
     for their services as officers or employees of the United 
     States.
       ``(2) Travel expenses.--The members of the Board shall be 
     allowed travel expenses, including per diem in lieu of 
     subsistence, at rates authorized for employees of agencies 
     under subchapter I of chapter 57 of title 5, United States 
     Code, while away from their homes or regular places of 
     business in the performance of services for the Board.
       ``(3) Staff.--
       ``(A) In general.--The Chairperson of the Board may, 
     without regard to the civil service laws and regulations, 
     appoint and terminate an executive director and such other 
     additional personnel as may be necessary to enable the Board 
     to perform its duties. The employment of an executive 
     director shall be subject to confirmation by the Board.
       ``(B) Compensation.--The Chairperson of the Board may fix 
     the compensation of the executive director and other 
     personnel without regard to the provisions of chapter 51 and 
     subchapter III of chapter 53 of title 5, United States Code, 
     relating to classification of positions and General Schedule 
     pay rates, except that the rate of pay for the executive 
     director and other personnel may not exceed the rate payable 
     for level IV of the Executive Schedule under section 5316 of 
     such title.
       ``(4) Detail of government employees.--Any Federal 
     Government employee may be detailed to the Board without 
     additional reimbursement (other than the employee's regular 
     compensation), and such detail shall be without interruption 
     or loss of civil service status or privilege.
       ``(5) Procurement of temporary and intermittent services.--
     The Chairperson of the Board may procure temporary and 
     intermittent services under section 3109(b) of title 5, 
     United States Code, at rates for individuals which do not 
     exceed the daily equivalent of the annual rate of basic pay 
     prescribed for level V of the Executive Schedule under 
     section 5316 of such title.
       ``(d) Termination.--Section 14 of the Federal Advisory 
     Committee Act (5 U.S.C. App.) shall not apply to the Board.
       ``(e) Authorization of Appropriations.--There are 
     authorized to be appropriated to the Board such sums as are 
     necessary to carry out the purposes of this part.''.

  Mr. MOYNIHAN addressed the Chair.
  The PRESIDING OFFICER. The Senator from New York.
  Mr. MOYNIHAN. Mr. President, I am honored to be a cosponsor of this 
measure which our revered chairman has brought to the floor. I would 
like to endorse each and every thing he has said.
  This legislation would create an independent Cost of Living Board to 
determine annually what cost of living adjustments should be made for 
the following calendar year. In the event a majority of the Board 
cannot agree on a decision, then by default the automatic adjustments 
would be based on the change in the Consumer Price Index as calculated 
by the Bureau of Labor Statistics.
  The Board would have five members and would be comprised as follows: 
the Chairman of the Board of Governors of the Federal Reserve System; 
the Chairman of the President's Council of Economic Advisers; and three 
others appointed by the President with the advice and consent of the 
Senate. The bill specifies that members of the board shall be 
professional economists familiar with issues related to the calculation 
of changes in the cost of living, such as index number theory.
  There is a growing consensus that the CPI overstates the cost of 
living. In December 1996, the Advisory Commission to Study the Consumer 
Price Index appointed by the Finance Committee--the Boskin Commission--
concluded that the Consumer Price Index

[[Page S2145]]

overstates the inflation by 1.1 percentage points. The distinguished 
Chairman of the Board of Governors of the Federal Reserve, Alan 
Greenspan, agrees. And in testimony before the Finance Committee, 
Chairman Greenspan provided the definitive response to those who have 
argued that this issue should not be ``politicized.'' He said:

       There has been considerable objection that such a . . . 
     procedure would be a political fix. To the contrary assuming 
     zero for the . . . bias is the political fix. On this issue, 
     we should let evidence, not politics, drive policy.

  I referred earlier to index number theory. I might add that in the 
last decade or two, there has been very considerable advancement in the 
subfield of index number theory--the point where mathematics meets 
economics. We know a lot more than we did. We can do it better than we 
do. There are persons who have specialized in this.
  The first particular study goes back to 1961, when the National 
Bureau of Economic Research, at the request of the then Bureau of the 
Budget, gave us a report by a committee chaired by George J. Stigler, 
soon to be a Nobel laureate, on the price indexes of the Federal 
Government. It concluded the indexes overstated changes in the cost of 
living.
  They did not have any estimates of the bias at the time, but they 
knew there was a bias. And in the manner of academic work, people 
addressed it. For what it is worth, perhaps one of the most 
distinguished practitioners now teaches at the University of British 
Columbia. In any event, we are able to do so much more than we have 
done, and the need to get it right is paramount, it is our obligation, 
as persons responsible for the public fisc.
  This bill represents the next step in a logical progression. We are 
beyond a fact-finding commission. The overwhelming evidence is that the 
CPI overstates the change in the cost of living by between 0.5 and 1.5 
percentage points.
  It is now time to consider how to go about getting the number right--
and getting it right every year henceforth. As the chairman indicated, 
it is our intention in introducing this bill to suggest one possible 
mechanism. Certainly there are other options, and I would not rule out 
any alternative at this point. Our purpose today is to keep attention 
focused and keep the dialogue moving on this issue, for delay is 
costly. If we get our numbers right--and that is all we propose to do--
then we save $1 trillion over 12 years. If we delay for 2 years, then 
the savings are reduced to $750 billion.
  I believe this Board, with the Chairman of the Federal Reserve Board, 
the Chairman of the Council of Economic Advisers, and the three 
economists nominated by the President and confirmed by the Senate, is a 
superb approach. We hope it will be given the attention it deserves now 
that it has been made clear by the White House that they see the 
necessity for doing this.

  Our distinguished majority leader, over there in the corner even as I 
speak, has spoken to this matter. And now we have a proposal for 
legislative action. With great and renewed thanks for our chairman, I 
yield the floor.
  Mr. ROTH addressed the Chair.
  The PRESIDING OFFICER. The Senator from Delaware.
  Mr. ROTH. Let me start out by thanking the distinguished Senator from 
New York for his leadership in this critically important matter. I can 
say, fairly, that nothing would have happened if it had not been for 
his willingness to step out early on and take measures that I think are 
in the best interests of this Nation and the people of this great 
country.

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