S1034 CONGRESSIONAL RECORD — SENATE February 5, 1997 countries will take their rightful place the cost of living in the by 1.1 to compute our current measure of in- as members of Europe. percentage points; flation, the CPI. The panel also in- NATO played an important in part in Whereas Dr. , Chairman of cluded leading experts in the field of securing this freedom. It has been the the Board of Governors of the Federal Re- price indexes, they include: serve System, has testified before the Senate Dr. Dale Jorgenson, Harvard Univer- most successful defensive alliance in Finance Committee that ‘‘the best available history. It is an alliance that helped us evidence suggests that there is virtually no sity; Dr. Ellen Dulberger, IBM Personal win the cold war. It deterred war be- chance that the CPI as currently published Computer Company; Dr. Zvi Griliches, tween the super powers, and it helped understates’’ the cost of living and that Harvard University; and Dr. Robert prevent confrontations between mem- there is ‘‘a very high probability that the up- Gordon, Northwestern University. ber states. ward bias ranges between 1⁄2 percentage point In their interim report, released in But if NATO is to survive, it must per year and 11⁄2 percentage point per year’’; September 1995, the Boskin Commis- adapt to meet the needs of the post- Whereas the overstatement of the cost of sion concluded that the upward bias living by the Consumer Price Index has been cold-war-World—or it will become ir- using changes in the Consumer Price recognized by economists since at least 1961, Index to estimate changes in the true relevant. when a report noting the existence of the NATO has evolved since we created it overstatement was issued by a National Bu- cost of living is about 1 percentage in 1949. We have enlarged NATO on reau of Economic Research Committee, point per year. three different occasions. Each new chaired by Professor George J. Stigler; Dr. Boskin and the other four com- member strengthened NATO and in- Whereas Congress and the President, mission members have now completed creased security in Europe. through the indexing of Federal tax brack- their final report and have concluded Today, we are facing very different ets, Social Security benefits, and other Fed- that this critical government statistic eral program benefits, have undertaken to threats to security and stability in Eu- is not as accurate as possible. Since protect taxpayers and beneficiaries of such this report suggests that the Consumer rope. We have hot spots caused by eth- programs from the erosion of purchasing nic and regional tensions. We have Price Index has an annual upward bias power due to inflation; of about 1.1 percent, clearly this is a civil wars—as in Bosnia. And we have Whereas Congress and the President in- significant finding and should be taken international crime, drugs, and ter- tended the indexing of Federal tax brackets, seriously. rorism. NATO must change and expand Social Security benefits, and other Federal program benefits to accurately reflect Dr. Boskin and his colleagues have to meet these new threats. also suggested to the Finance Com- The countries of Central and Eastern changes in the cost of living; and Whereas the overstatement of the cost of mittee that a new measure of the true Europe want to help us address these living increases the deficit and undermines cost of living may be needed. new threats. How many times has the the equitable administration of Federal ben- Inaccurate government statistics— Senate discussed burden sharing in Eu- efits and tax policies: Now, therefore, be it particularly one as important as the rope? How often have we complained Resolved, That it is the sense of the Senate CPI—are unacceptable. Steps should be that European countries were not will- that all cost-of-living adjustments required by statute should accurately reflect the best taken to change the procedures so that ing to pay their fair share for their own the measure of the CPI is as accurate defense? available estimate of changes in the cost of living. as possible. Now we have countries that are ask- I want to stress that any action we Mr. ROTH. Mr. President, today, my ing to share the burden. They are ask- take on this report must be broadly friend PAT MOYNIHAN and I are submit- ing to pledge their troops and equip- and deeply bipartisan. ting a sense-of-the-Senate resolution ment for the common defense. They are We must also have the full coopera- regarding the accuracy of the Con- asking to share the burden of peace- tion of and leadership by the Clinton sumer Price Index. Last week the Fi- keeping—in fact they are doing it right administration. I hope the President nance Committee kicked off our first now in Bosnia where thousands of will not miss an opportunity to address hearings of the 105th Congress with a troops from Poland, Hungary, the this issue in his fiscal year 1998 budget very distinguished panel of experts in Czech Republic, the Baltics, Ukraine, he submits to the Congress this week. the field of and Dr. Alan and others are helping to secure the Clearly this reform will not be success- Greenspan, Chairman of the Board of peace. ful without the President’s leadership. These countries are not asking for a Governors of the Federal Reserve Sys- Mr. MOYNIHAN. Mr. President, handout. They are not asking for our tem. might I first take the opportunity to protection. They are asking to be full Mr. President, probably the most sig- congratulate the chairman for this ini- partners in the new Europe. By trans- nificant issue that faces Congress this tiative. It is characteristic of his lead- forming their countries into free mar- year is the accuracy of the Consumer ership of the Finance Committee, ket democracies, they have earned this Price Index, and I believe that Con- which is bipartisan whenever that is right. gress and the President need to seri- possible, which is factual, which seeks Mr. President, NATO is moving to- ously address the economic ramifica- evidence and answers. ward enlargement. In July President tions of an accurate CPI. This sense-of-the-Senate resolution Clinton will join the leaders of our One of the roles in government is to recognizes the mounting evidence that, NATO partners in naming the first protect American families from infla- contrary to the intent of the Congress countries to be asked to join NATO. tion. In doing so, it is important that and the President, Federal tax provi- This resolution states that the U.S. we are able to precisely measure infla- sions, Social Security benefits, and Senate stands with our President as he tion. other Federal program benefits are leads our effort to prepare NATO for I cannot emphasize too greatly—that being overadjusted for inflation. the 21st century. I urge my colleagues is what these discussions are all The resolution expresses the sense of to join us in supporting this resolution. about—the accurate measurement of the Senate that: inflation. If the index is too high, it f * * * all cost-of-living adjustments re- overcompensates retirees and others quired by statute should accurately reflect SENATE RESOLUTION 50—REL- and undertaxes many taxpayers. If it is the best available estimate of changes in the ATIVE TO COST-OF-LIVING AD- too low, it undercompensates retirees cost of living. JUSTMENTS and overtaxes the taxpayer. What we In its final report issued on December Mr. ROTH (for himself and Mr. MOY- want in fairness to all is as accurate an 4, 1996, the Advisory Commission to NIHAN) submitted the following resolu- index as possible. Study the Consumer Price Index—the tion; which was referred to the Com- Obviously, this is a very sensitive Boskin Commission concluded that: mittee on Finance: issue, affecting retirees and taxpayers While the CPI is the best measure cur- rently available it is not a true cost of living S.RES. 50 directly as well as wage earners and others. index. . .. Whereas the final report of the Senate Fi- nance Committee’s Advisory Commission to In the spring of 1995, the Senate Fi- The Boskin Commission concluded Study the Consumer Price Index, chaired by nance Committee appointed a blue rib- that the CPI overstates the cost of liv- Professor Michael Boskin, has concluded bon commission, headed by Dr. Michael ing in the United States by 1.1 percent- that the Consumer Price Index overstates Boskin, to study the methodology used age points.

VerDate Mar 15 2010 21:55 Oct 24, 2013 Jkt 081600 PO 00000 Frm 00054 Fmt 0624 Sfmt 0634 E:\1997SENATE\S05FE7.REC S05FE7 mmaher on DSK5TPTVN1PROD with SOCIALSECURITY February 5, 1997 CONGRESSIONAL RECORD — SENATE S1035 The Commission’s findings are very to teach me to the extent I was teach- with adjustments for quality improve- much in line with the prevailing pro- able. They even shared professional ments; that is, it is close to the 1.1 per- fessional judgment of economists as to confidences. And so it was that I came centage point estimate of the bias. the size of the upward bias in the CPI. to have some familiarity with the field. I hope we will have broad support for In October 1994, in a memorandum to Upon our arrival in Washington with this resolution on both sides of the the President entitled ‘‘Big Choices’’, the new administration in 1961, we had aisle, and that we will do the Republic then-OMB Director Alice Rivlin stated waiting for us a report on price indexes some good today. Mr. President, thank that the ‘‘CPI may be overstated by 0.4 from a committee led by George J. you for your courtesy. I yield the floor. percent to 1.5 percent.’’ And in testi- Stigler, who later won a Nobel Prize in Mr. ROTH. Mr. President, let me mony at a joint hearing of the Senate economics. The committee noted that: thank the Senator from for and House Budget Committees in Janu- If a poll were taken of professional econo- his continuing leadership in this mat- ary 1995—and reinforced in testimony mists and statisticians, in all probability ter. I would like to underscore two last week before the Senate Committee they would designate (and by a wide major- things that he said. on Finance—Alan Greenspan, Chair- ity) the failure of the price indexes to take One is that all we seek to do is to full account of quality changes as the most man of the Board of Governors of the make the measurement of inflation as important defect in these indexes. And by al- accurate as possible. That is just good Federal Reserve System, estimated the most as large a majority, they would believe range of plausible values at 0.5 to 1.5 government. that this failure introduces a systematic up- Second, we are anxious to have the percentage points. ward bias in the price indexes—that quality support of our colleagues on both sides The standard objection to correcting changes have on average been quality im- of the aisle and we will be sending a the Consumer Price Index has been, to provements. letter to our colleagues, signed by the cite one such statement, ‘‘The right Through indexation of Federal tax two of us, urging them to join us in way to adjust the CPI is to allow the brackets, Social Security, and other this good government venture. experts at the BLS to continue doing Federal programs, Congress and the Mr. MOYNIHAN. Good government their jobs and keep politics out of it.’’ President have undertaken to protect venture. We now have the definitive response taxpayers and beneficiaries from the Mr. ROTH. I thank very much the from Alan Greenspan, Chairman of the erosion of purchasing power due to in- distinguished Senator for his able lead- Board of Governors of the Federal Re- flation. ership. serve System. In testimony last week Based on over 35 years of mounting before the Finance Committee, he re- evidence, it is clear that the current f ported that the Federal Reserve Board formulas for indexation overstate the AUTHORITY FOR COMMITTEES TO had made its own study of this issue true cost of living. Over 12 years the MEET and had come to roughly the same con- upward bias increases outlays and re- COMMITTEE ON ARMED SERVICES clusions as those of the Boskin Com- duces revenues, for programs tied to Mr. HATCH. Mr. President, I ask mission. He recommended a two-track the CPI, by a cumulative $1.07 trillion. unanimous consent that the Com- procedure. First, let the BLS improve The actuaries of the Social Security mittee on Armed Services be author- the CPI by as much as can be done and system estimate that a 1.1 percentage ized to meet at 2 p.m. on Wednesday, as quickly as it can be done. And sec- point correction would eliminate about February 5, 1997, to receive testimony ond, establish an independent national two-thirds of the long-run deficit in the on the nomination of Federico F. Pen˜ a commission to correct for the remain- Social Security Program. The trust to be Secretary of Energy. ing upward bias. He then said: fund exhaustion date would be ex- The PRESIDING OFFICER. Without There has been considerable objection that tended by more than 20 years, from 2029 objection, it is so ordered. such a second track procedure would be a po- to 2052. COMMITTEE ON BANKING, HOUSING, AND URBAN litical fix. To the contrary, assuming zero Somewhat more than one-half of the AFFAIRS for the remaining bias is the political fix. On 1.1 percentage bias can be eliminated Mr. HATCH. Mr. President, I ask this issue, we should let evidence, not poli- rather quickly if the BLS would de- unanimous consent that the Com- tics, drive policy. velop a cost-of-living index [COLI] and mittee on Banking, Housing, and To say again, to do nothing in the factor into their calculations research Urban Affairs be authorized to meet face of overwhelming evidence would on quality improvements. Members of during the session of the Senate on be a political decision. Wrong-headed the Boskin Commission think it can be Wednesday, February 5, 1997, to con- and shortsighted, with large long-term done within a year. Over time, some of duct a hearing on the following nomi- implications the remainder of the bias could be re- nee: Janet Louise Yellen, of California, And to do nothing until we have a duced by further research on meas- to be Chairman, Council of Economic more precise estimate of the bias—as if uring quality improvements. Any re- Advisers. estimating changes in the cost of living sidual can be dealt with by an inde- The PRESIDING OFFICER. Without is equivalent to measuring atomic pendent national commission, as sug- objection, it is so ordered. weights—recalls the wise admonition gested by the Boskin Commission and COMMITTEE ON COMMERCE, SCIENCE, AND of Lord John Maynard Keynes who by Federal Reserve Chairman Green- TRANSPORTATION said: span. Mr. HATCH. Mr. President, I ask It is better to be approximately right than The computational procedures that unanimous consent that the Senate precisely wrong. would be used by BLS for a new cost of Committee on Commerce, Science, and There is some history here. living index [COLI] are now used by the Transportation be authorized to meet It happens that this Senator’s asso- Bureau of Economic Analysis [BEA] in on February 5, 1997, at 10 a.m. on pend- ciation with the statistical system in the calculations of GDP and its compo- ing committee business. the executive branch began over three nents—consumption, investment, and The PRESIDING OFFICER. Without decades ago. I was Assistant Secretary so on. BEA uses a Personal Consump- objection, it is so ordered. of Labor for Policy and Planning in the tion Expenditures [PCE] deflator to es- COMMITTEE ON ENERGY AND NATURAL administration of President John F. timate changes in real consumption. RESOURCES Kennedy. This was a new position in For the 12 months ended November Mr. HATCH. Mr. President, I ask which I was nominally responsible for, 1996, the CPI increased by 3.3 percent. unanimous consent that the Com- inter alia, the Bureau of Labor Statis- Yet over roughly the same period, the mittee on Energy and Natural Re- tics. I say nominally out of respect for PCE deflator increased by only 2.5 per- sources be granted permission to meet the independence of that venerable in- cent. BEA’s use, in the PCE deflator, of during the session of the Senate on stitution, which as I noted earlier long more up-to-date consumption patterns Wednesday, February 5, 1997, for pur- predated the Department of Labor and of adjustments for quality, lowers poses of conducting a full committee itself. The then-Commissioner of the the reported inflation rate by 0.8 of a hearing which is scheduled to begin at BLS, Ewan Clague, could not have been percentage point relative to the CPI. 9:30 a.m. The purpose of this hearing is more friendly and supportive. And so And this is consistent with what you to consider S. 104, the Nuclear Waste were the statisticians, who undertook would get if BLS developed a COLI Policy Act of 1997.

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