The Congressional Record is a unique source of public documentation. It started in 1873, documenting nearly all the major and minor policies being discussed and debated.
“LEGISLATING A CHANGE IN THE CPI” mentioning the U.S. Dept of Labor was published in the Senate section on pages S47-S48 on Jan. 4, 1996.
The publication is reproduced in full below:
LEGISLATING A CHANGE IN THE CPI
Mr. KENNEDY. As the President and the congressional leaders discuss ways to achieve a balanced budget, one idea should be rejected out of hand--legislating a change in the Consumer Price Index.
That kind of arbitrary action by Congress would break faith with the elderly and make a mockery of the commitment of both parties not to cut Social Security.
It would raise taxes on low-income working families qualifying for the earned income tax credit--and other working families as well.
It would lead to lower wage increases for millions of workers throughout the country at a time when one of the most serious challenges our society faces is the decline in the living standard for all but the wealthiest families.
Such a change would be harshly regressive in its impact. It would be unprecedented political meddling in what has always been an impartial, factual determination of the CPI.
Reducing the CPI would reduce cost of living adjustments for millions of Americans receiving Social Security benefits, military pensions, veterans' pensions, and civil service retirement. It would reduce the amount of Supplemental security income payments to the needy. Because of indexing of tax brackets, it would raise income taxes for most taxpayers--and reduce the earned income tax credit.
According to the Congressional Budget Office, a 1-percent decrease in the change in the CPI would reduce Government spending and increase Government revenues over the next 7 years, for a total deficit reduction of $281 billion. Some may see this large sum as a magic bullet to balance the budget and avoid other painful choices. But it is a bullet aimed at millions of Americans who need help the most, and who don't deserve this added pain. It makes no sense to fight hard to save Medicare--and then attack Social Security.
Legislating an arbitrary reduction in the CPI would clearly break the compact of Social Security. That compact says, ``work hard, play by the rules, contribute to the system, and, in return, you will be guaranteed retirement security when you are old.'' An essential part of that compact is a fair Social Security COLA, so that senior citizens can be sure that their hard-earned Social Security benefits will not be eaten away by inflation.
Overall, more than three-fourths of the lower spending under the change would come from cuts in Social Security alone. Nearly all the rest would come from other Federal retirement programs. It is the elderly who will pay heavily if Congress adopts this change.
Over the next 10 years, a 1-percent cut in the COLA would reduce the real value of the median income beneficiary's Social Security checks by
$5,300. By the 10th year, the real purchasing value of that check would be 9 percent lower--making it even harder than it is today for senior citizens to stretch their limited incomes to pay the bills for housing, food, medical care, and other necessities.
Reducing the Social Security COLA is a direct attack on the retirement benefits that senior citizens have earned. If Congress is to respect family values, it has to value families, especially the millions of elderly families all across America.
Changing the CPI also affects the deficit by increasing taxes, because income tax brackets and the earned income tax credit are indexed to inflation. If tax brackets are not adjusted for inflation, taxes go up and the earned income tax credit goes down.
Failing to adjust tax brackets hits middle income families the hardest. For the wealthy, the change in the CPI would have a minimal impact. A family earning $100,000 would see its taxes rise by one-third of 1 percent of its income. But for families at lower income levels, the differences are far more significant. A family earning $36,000 would face a tax increase that, as a percent of income, would be more than four times as large. The hardest hit of all would be low-income working families who depend on the earned income tax credit. Twelve percent of the total tax increase--$13 billion--would be paid by these low-income hard-working families.
The impact of cutting the CPI reaches well beyond the Federal budget. It is also a direct attack on the wages of working families. Many workers have CPI adjustments in their collective bargaining contracts. But every pay increase is affected by the CPI. If the CPI is reduced by Congress, wages will be lower too for virtually all workers across the country.
There is no greater source of dissatisfaction in American families than the continuing erosion of their living standards. Except for the wealthy, the story of the past two decades has been ``work harder and earn less.'' Cutting the CPI will make a bad situation even worse, by putting even greater downward pressure on the wages of every American.
Lowering the CPI has been presented as merely an overdue technical correction that should be supported as a matter of good government. This claim cannot pass the truth in advertising test.
The technical argument for lowering the CPI has been made by the Boskin Commission, which was appointed by the Senate Finance Committee to examine the issue. The Commission issued an interim report last September, which identifies several biases in the calculation. The Commission asserted that the CPI has overstated inflation by 1.5 percent a year. For the future, the Commission predicted that the CPI would be 1 percent a year too high.
The major problem with the Commission's analysis is that the sources of bias it identifies are also identified by the nonpolitical professional economists at the Bureau of Labor Statistics in the Department of Labor. They have the responsibility for setting the CPI each year. They do so fairly and impartially. They make periodic corrections to take account of any biases--up or down--that affect the index. The Bureau already plans to reduce the CPI by about two-tenths of 1 percent in 1997. This reduction is already assumed in the budget projections for the next 7 years.
The issue is not whether there should be changes in the CPI, but who should make them and how large they should be. The Boskin Commission's work is a poor basis for changing the CPI. As the Commission itself acknowledged, it did little original research. The Commission's membership was stacked with economists who believed that the CPI was overstated. According to Dean Baker, an economist at the Economic Policy Institute, ``All five members had previously testified that they believed the CPI was overstated. Economists who gave contrary testimony
* * * were excluded.''
According to Joel Popkin, another expert on the CPI, the Commission comprised five of the six witnesses before the full Finance Committee who gave the highest estimates of bias. As Mr. Popkin also pointed out, the interim report of the Commission falls far short of presenting adequate justification for its conclusions, and therefore provides no basis for Congress to change tax policies or entitlement programs such as Social Security.
In fact, for the elderly, the group most affected by any change, the most authoritative study by the Bureau of Labor Statistics suggests that the CPI may understate rather than overstate the true increase in the cost of living, because of the rapid increase in medical costs for the elderly.
To legislate an arbitrary change in the CPI would be unprecedented. In the entire history of the CPI, the Congress has never tried to impose a politically driven adjustment, and there is no excuse for imposing one now. Senior citizens and working families across the country depend on a fair CPI, and Congress should keep it that way.
Mr. WARNER addressed the Chair.
The PRESIDING OFFICER. The Senator from Virginia.
Mr. WARNER. Mr. President, my understanding is that at this point in time, the Senators desiring to be recognized would request unanimous consent to speak for a stipulated period?
The PRESIDING OFFICER. That is correct.
Mr. WARNER. Mr. President, I ask unanimous consent that I may speak for 3 minutes and then that the Senate turn and recognize the distinguished junior Senator from Mississippi, the majority whip.
The PRESIDING OFFICER. Without objection, it is so ordered.
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