A $110 Billion Question

How soon we forget.... Late last year there was widespread agreement that something should be done about the federal government's cost-of-living yardstick.

Reason: The Commerce Department's method of calculating the Consumer Price Index (CPI), the inflation measure that determines how fast government COLAs (cost of living adjustments) rise, was exaggerating the actual rate of inflation - by as much as a percentage point per year.

That sounds small. But it's an error that could make an enormous difference in its effect on the federal deficit. And it's cumulative over the years.

The subject came up anew when a bipartisan group of 22 Senate moderates last week put forward its plan to balance the budget in seven years. The plan included $110 billion in savings achieved by an honest CPI. That's a cut of 0.5% in the first year and 0.3% in the succeeding six.

The bipartisan proposal as a whole won cautious praise from the White House and the Democrats' Senate minority leader, Tom Daschle. (With the election looming, endorsement of moderation is a must.) But the proposal's CPI-correcting provision was criticized by both Daschle and some White House planners fearful that it could turn older voters against the president if he concurred.

A few weeks earlier the influential American Association of Retired Persons made a preemptive strike against changing the CPI. AARP calculated that a 1% adjustment would cost an elderly family $1,109 and a non-elderly family $426 in year 2002. Those figures would be sharply lower under the bipartisan plan, since it uses less than one-third the figure used by the AARP.

But whatever the figure, it's intellectually dishonest to frame the argument the way the AARP does. If the CPI is wrongly calculated, it should be fixed, period. If, as a separate matter, the change causes hardship to some portion of citizens, deal with that separately.

The 22 bipartisan senators are on the right track and deserve support.

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