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Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: Win-Lose-Draw who wrote (194245)	9/29/2002 7:47:50 PM
From: Les H	Read Replies (1) \| Respond to of 436258

Curve Ball ``All possible policy solutions should be on the table,'' Greenspan said of the government's burgeoning liability as the baby boomers start to retire. ``Recently, the Bureau of Labor Statistics introduced a new index that could provide a more accurate measure of the cost of living for the indexation of both retirement benefits and tax brackets.'' One wonders if the AARP is listening. A powerful lobby, the American Association of Retired Persons won't like the idea of cost-of-living increases on Social Security benefits to constituents getting nicked because of a new and questionable index. Data on expenditures, on what consumers actually bought, are available with a one-year lag. With the release of the July consumer price index in August, the BLS introduced a new ``chained'' CPI, which does away with a fixed-basket approach to measuring inflation and instead allows for the substitution of lower priced items for more expensive ones. Some 30 percent of all government expenditures have a cost-of- living adjustment attached to them, so the new index, if approved by Congress for that purpose, would have a material effect. The old CPI rose 1.5 percent in the year ended July compared with a 1.1 percent increase for the chained CPI. Foul Ball It was the large budget deficits of the early 1990s that prompted the previous CPI retooling. The Boskin Commission, which was charged with examining the overstatement in the CPI, reported in 1996 that the index exaggerated inflation by 1.1 percentage points. ``From a policy and statistical standpoint, inflation is being kept down,'' says Joe Carson, an economist at Alliance Capital Management. ``But underlying pressures are going to build.'' Without the various CPI ``fixes'' over the years, which have depressed reported inflation, core inflation (excluding food and energy) is running at 3 to 4 percent, Carson calculates. ``We'd already be in a stagflation period if we didn't change the measure of prices.'' Inflation? Who's worried about inflation? Most folks think the applicable model for the U.S. economy is deflationary Japan.