[Congressional Record Volume 143, Number 57 (Tuesday, May 6, 1997)]
[Extensions of Remarks]
[Page E852]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                 AVOID POLITICAL TINKERING WITH THE CPI

                                 ______
                                 

                         HON. PAUL E. KANJORSKI

                            of pennsylvania

                    in the house of representatives

                          Tuesday, May 6, 1997

  Mr. KANJORSKI. Mr. Speaker, I rise today out of concern for all 
senior citizens. As you may know, I represent one of the oldest 
congressional districts in the country. In fact, well over 20 percent 
of the people living in my district are aged 65 or older. Many of my 
constituents consequently depend on Social Security. Because many of 
those receiving Social Security live near the poverty level and because 
Social Security often represents their only source of income in 
retirement, they especially depend on their annual cost-of-living 
adjustments COLA's to maintain their standards of living.
  As my colleagues should be aware, the Federal Government currently 
calculates the annual COLA for Social Security recipients using the 
consumer price index for wage earners [CPI-W]. Because the market 
basket used to determine the [CPI-W] does not precisely reflect those 
goods and services purchased by senior citizens, some fear that the 
elderly may actually experience a higher rate of inflation. Therefore, 
the Bureau of Labor Statistics [BLS] at the request of Congress has for 
a number of years calculated an experimental price index for the 
elderly. As a result, the BLS found in 1994 that the CPI-W may actually 
understate the annual inflation rate for the elderly by four-tenths of 
a percentage point on average.
  This difference comes as a consequence of two well-known factors. 
First, older Americans spend more of their income on out-of-pocket 
costs for medical care, despite coverage by Medicare. Second, medical 
care prices have risen faster than the average of all other prices. If 
the price of medical care increases faster than average, then, other 
things being equal, the actual inflation experienced by senior citizens 
will be more rapid than is described by the CPI-W.
  Despite evidence that the CPI-W may understate the rate of inflation 
for the elderly, many people still have the perception that the measure 
overstates inflation. In a time of budgetary pressures, many 
policymakers have consequently come to view adjusting the CPI as the 
panacea for balancing the budget because curbing COLA's would reduce 
budget deficits and ease long-term entitlement funding. COLA's are such 
an important issue because about one-third of Federal budget outlays 
are automatically adjusted each year given changes in the CPI-W.
  I have closely followed all of the debate about whether the BLS 
overestimates inflation when it calculates the consumer price index. 
Therefore, when the budget negotiators announced their deal late last 
week. I was relieved to learn that they did not agree to any risky 
political tinkering with the CPI. A political determination in this 
matter would have compounded the efforts of Government economists to 
determine the accuracy of the measure. Moreover, it would have led to 
greater public confusion about the issue and distrust in the accuracy 
of Government statistics generally. Still further, any political effort 
to manipulate this statistic downward would have likely had a 
significant negative impact on those elderly individuals living close 
to the poverty line.
  Instead of a politically motivated vote on the accuracy of the CPI, 
what is needed is a factual, technical determination based on sound 
economic analysis. Despite the well-publicized findings of the Boskin 
Commission, several economists have recently issued reports that the 
CPI may understate inflation. The BLS has the expertise, tools, 
resources, and experience to weigh the conflicting evidence and develop 
an accurate and appropriate inflation measure. Moreover, allowing the 
BLS to make this determination will help to maintain the integrity, 
objectivity, and the reliability of the Federal statistical system.
  Ultimately, I believed that people should receive an accurate 
inflation adjustment, not one that gives them an unintended bonus or 
reduction. I, therefore, encourage the Bureau of Labor Statistics to 
continue its efforts to identify the most appropriate and accurate 
criteria for measuring inflation. I would also be interested in 
learning of the agency's recommendations on whether Congress should use 
the CPI for the elderly to adjust Social Security benefits and other 
programs for the elderly. Further, I encourage my colleagues in 
Congress to continue to protect our senior citizens and others on fixed 
incomes in any future effort to balance the budget.
  My Speaker, thank you for allowing me to raise this important issue. 
The Bureau of Labor Statistics alone should make adjustments, if any 
are needed, to the methodology used to determine the Consumer Price 
Index. In the upcoming weeks and months, I, for one, will continue to 
vigilantly watch the actions of the Bureau of Labor Statistics on this 
issue. I am also certain that senior citizens will also continue to 
closely examine the actions of my colleagues on this matter.

                          ____________________