Newspaper article St Louis Post-Dispatch (MO)

Consumer Price Index Overstates Rise in Cost of Living, Experts Say

Newspaper article St Louis Post-Dispatch (MO)

Consumer Price Index Overstates Rise in Cost of Living, Experts Say

Article excerpt

Congress and the White House are having second thoughts about changing the way the government figures cost-of-living increases. Many programs are indexed to the Consumer Price Index, but most experts think the CPI overstates the real rise in the cost of living.

By revising the way it indexes payments, the government could produce a quick budget fix. It would nip a few dollars out of almost everyone's pocket but ease the pressure on Medicare and other popular programs.

A couple months ago, you heard abrave talk about a bipartisan commission to figure how to proceed. But the moment appears to have passed. No one dares take a step that might cost a voter even $1 more. Most of us are indexed to the CPI ione way or another. If the reported CPI is too high, we're getting a bit of money we shouldn't. Indexation is supposed to keep us even, not give us a raise. The Bureau of Labor Statistics,m which computes the CPI, has been steadily improving its data. The CPI is probably closer to the cost of living than it was 10 years ago. But incremental change comes slowly. Reformers want Congress to reduce all indexed payments by a specified percentage. The most recent report on the CPI, headed by economist Michael Boskin of the Hoover Institution at Stanford University, estimates that it overstates the average cost of living by 1.1 percentage points a year (with a range of 0.8 percent to 1.6 percent). An earlier study by the Congressional Budget Office put the overstatement at 0.2 to 0.8 percentage points. If Congress cut, say, 0.5 percentage points from the cost-of-living adjustment, here's what would happen: Social Security payments would be a little bit lower. If your monthly benefit came to $745 last year, your check is projected to rise this year to $768. A reduction of 0.5 percent would leave you with $765 - a loss of $3 a month, $36 for the year. Other federal payments would similarly be shaved: federal and military pensions, indexed veterans benefits, and Supplemental Security Income. …

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