[Congressional Record Volume 145, Number 88 (Monday, June 21, 1999)]
[Senate]
[Pages S7326-S7327]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRAMS:
  S. 1247. A bill to develop and apply a Consumer Price Index that 
accurately reflects the cost-of-living for older Americans who receive 
Social Security benefits under title II of the Social Security Act; to 
the Committee on Banking, Housing, and Urban Affairs.


         fair cost of living adjustment for seniors act of 1999

  Mr. GRAMS. Mr. President, 1999 has been declared the ``International 
Year of the Older Person'' by the United Nations.

  In honor of this special tribute, I rise today to introduce 
legislation specially designed to provide fair and accurate Social 
Security benefits in order to help all Americans achieve retirement 
security.
  I believe senior citizens in this country have made, and continue to 
make, valuable contributions to their families, communities and to 
society as a whole.
  One of the most troubling aspects of the debate over Social 
Security's future has been attempts to frighten older Americans. Many 
seniors fear that they may lose their Social Security benefits.
  To ease their fears and worries, I introduced legislation last month 
that would require the government to legally guarantee seniors full 
Social Security benefits plus accurate COLA adjustments.
  In essence, this bill would give older Americans property rights to 
their Social Security benefits, which they do not have now. It is no 
wonder they now worry about loss of benefits.
  However, an accurate method for how we calculate Social Security 
remains a subject of debate.
  In order to understand this issue, Mr. President, we need to go back 
and take a closer look at how seniors' COLAs are currently calculated 
by the government.
  To compensate for the effects of inflation, Congress passed 
legislation in 1972 to give Social Security beneficiaries an automatic 
cost of living adjustment, or a COLA.
  This COLA is based on the Consumer Price Index (CPI) as tracked and 
surveyed by the Bureau of Labor Statistics (BLS) under the Labor 
Department.
  Currently, the BLS produces two official CPIs, one for All Urban 
Consumers called the CPI-U, and one for Urban Wage Earners and Clerical 
Workers, called the CPI-W.
  The CPI-U represents the spending habits of about 80 percent of the 
population of this nation, and the CPI-W is a subset of the formula, 
representing about 32 percent of the total population. The government 
uses the later the CPI-W to measure COLAs for Social Security benefits.
  But clearly, this does not reflect the older American population and 
their consumption habits. Spending habits of urban wage earners cannot 
be equated with those seniors. Nevertheless, the government continues 
to use it calculating COLAs for Social Security beneficiaries.
  Back in 1987, after considerable criticism of the CPI-W and its 
applicability to senior consumers, Congress amended the Older Americans 
Act of 1965 to require the BLS to develop an experimental CPI that 
would better reflect the buying habits of consumers 62 years of age or 
older. This is now known as the CPI-E.
  The CPI-E places greater weight on the cost of such goods and 
services as medical care and prescription drugs, areas where seniors 
spend more than other Americans.
  Although it's still experimental, the preliminary finding shows 
annual increases in Social Security benefit payments received by older 
Americans are not keeping pace with inflation on the goods and services 
on which they spend much of their money.
  Over the past 15 years, goods purchased by seniors increased 6 
percentage points more than goods purchased by the general public. 
Their medical costs skyrocketed 156 percent. The main reason that the 
CPI-E has been higher than the other two CPIs.
  My concern is, as inflation on medical and pharmaceutical goods 
continues to rise, without a fair COLA increase, older Americans' hard-
earned Social Security benefits are worth less and less. Their 
purchasing power will continue to diminish.
  Mr. President, that's why I am introducing legislation today to 
prevent that from happening. My legislation is simple and 
straightforward. It first calls for the establishment of a CPI Review 
Committee made up of well-known economists who have expertise in the 
field, plus representatives of our senior citizens population.
  The Committee will be given the task of studying how to analyze and 
improve the CPI-E method, make recommendations, and form an 
implementation plan to produce a CPI that accurately reflects the 
senior population

[[Page S7327]]

and their consumption that will be used to determine the Social 
Security COLA each year.
  Appointing economic professionals will de-politicize this issue, and 
allow us to make sound policy based on merits rather than on political 
consideration.
  This is also consistent with the measures recommended by the Advisory 
Commission to Study the Consumer Price Index, or the Boskin Commission, 
which calls for Congress to establish an independent committee or 
commission of experts to review progress in developing a new system of 
measuring the overall cost of living adjustments.
  Within a year, the Committee I recommend is required to complete its 
work. A pilot program will test the accuracy of the CPI-E over a 3 year 
period by using improved and recommended methods.
  However, I must point out that the experimental CPI-E currently 
computed by the BLS has limitations. For instance, the number of 
consumer units was relatively small, only 19 percent of the total 
sample.
  Expenditure weights used in the construction of the CPI-E have a 
higher sampling error than those used for larger populations.
  That's the reason that my legislation specifically instructs the 
Committee to remove this and other major limitations. To construct an 
improved CPI-E that is more scientific, accurate and representative of 
older Americans' spending habits.
  We had the right idea in 1987. My legislation will improve on that 
law after we've had some time to analyze it.
  Now, Mr. President, I know some of my colleagues will raise questions 
about this bill.
  First, they are going to say, what about the issue of cost? Mr. 
President, it is perhaps true that moving from the CPI-W to the 
improved CPI-E to determine Social Security COLA increases may increase 
federal spending.
  As a consistent fiscal conservative, I am concerned about the 
budgetary impact. I believe we must exercise caution and discipline on 
how government spends our money.
  However, the issue of a fair Social Security COLA is not at its root 
a fiscal one, but rather an issue of fairness, particularly in the case 
of retired workers who rely upon their fixed Social Security pensions 
for survival.
  I have argued repeatedly that the federal government has entered into 
a sacred covenant with the American people to provide benefits for 
their retirement if they pay into the system.
  We have also committed to give them a fair COLA to keep up with 
inflation. It's our moral and contractual duty to honor that 
commitment, and to ensure the program will be there for current and 
future beneficiaries.
  Senior citizens are a unique consumer population that should not be 
lumped into a category that considers spending habits the same as the 
average American family of four.
  Once again, Mr. President, this is an issue of fairness and justice, 
not an issue of cost. All my legislation asks for is an accurate CPI 
and a fair COLA, up or down.
  Second question: if an official CPI-E is created, wouldn't it set a 
potentially dangerous precedent for creating a CPI for every seemingly 
distinct population group? The answer is no.
  Senior citizens comprise nearly 60 percent of Social Security 
beneficiaries, and this number will increase substantially as the Baby 
Boomer generation retires. Furthermore, the Social Security program is 
specifically intended to benefit senior citizens. It's only fair and 
rational to create an accurate CPI for them.
  However, we have not forgotten that there is another distinct group 
of Social Security beneficiaries who receive disability benefits.
  Because this group also spends more of their money for medical and 
pharmaceutical goods and services, their purchasing power could be 
affected by the inaccurate CPI and therefore COLA increase.
  My legislation specifically requires the Committee to look into this 
issue and make recommendations on how to resolve it.
  Third question: would this legislation overlap and contradict the 
study conducted by the Boskin Commission? The answer again is no.
  On the contrary, my legislation is a complement to the Boskin 
Commission report. It parallels the general recommendations of the 
Boskin Commission.
  These include development of a new Consumer Expenditure Survey that 
is larger and therefore more representative of the American consumer; 
development of a new market basket of goods and services that can 
register changes in the quality of products, the introduction of new 
products, and the substitution of less or more expensive goods when 
prices change; and development of a point-of-purchase survey that can 
register consumer shifts to lower price outlets.
  Finally, would this legislation set back Social Security reform 
efforts? The answer is no. As I mentioned earlier, it would be wrong to 
let Social Security beneficiaries bear the burden of a mistake which is 
not of their own making.
  In fact, when we give a legal guarantee to older Americans that they 
will receive Social Security benefits in full plus a fair COLA increase 
and take this fear away from them, it will be much easier to move the 
retirement system from a PAYGO system to a fully funded system.
  This would in effect secure retirement income for our children and 
grandchildren.
  In conclusion, Mr. President, retirement security for today's and 
tomorrow's seniors is essential to the social stability and economic 
prosperity of our society. This is all my legislation attempts to 
achieve.
  I urge the Senate to make this issue the top priority for the 106th 
Congress. Working together, we will meet the demographic challenges and 
move towards a society that allows all ages to progress in the new 
millennium.
                                 ______