Lowering CPI may be key to fiscal balance

Many Americans who aren't immersed in the alphabet soup of Washington bureaucracies might not be familiar with the CPI. Yet this acronym, which stands for Consumer Price Index, has emerged on center stage in current efforts to balance the federal budget and could be the major element in saving the future of major entitlement programs such as Social Security.

The CPI is important because it is used to make annual cost-of-living adjustments for Social Security and other retirement programs, such as those for government and union workers. The CPI has come under closer scrutiny because in December a panel of prominent economists, echoing the recommendation of a bipartisan panel in 1994, found that the CPI overstates inflation.

That means the cost-of-living increases in Social Security and other retirement programs are actually higher than the living expenses they are intended to provide for.

Slight reduction, huge savings

Economists point out that reducing the index by a mere 1 percent each year to a more accurate figure would save an estimated $1 trillion over the next 12 years - a sum that would take a tremendous bite out of the ever-mounting national debt.

Plus, Nebraska Sen. Bob Kerrey and New York Sen. Daniel Patrick Moynihan suggest adjusting the CPI to an accurate level may be the only way to save the Social Security system itself, which is threatened by its own looming bankruptcy and the long-term damage of entitlement spending to the future of the national economy.

Word is that current budget negotiations between the White House and congressional Republicans are revolving around a CPI lowering of 0.6 percent over the next five years in order to help produce the huge savings government has to make in order to bring a halt to deficit spending.

Already, liberal Democrats and labor union officials are screaming about "cutting" Social Security benefits. This is flatly untrue. The same shameful scare tactics were used last year when Republicans sought to save money by achieving smaller increases in Medicare and were accused by the Clinton administration of "cutting" that program.

Not a cut in benefits

Nobody is trying to cut benefits. Nobody is trying to deny retirees the fair and honest increases they need to keep up with inflation.

But the whole system by which the federal government now pays out the mandated spending that makes up some two-thirds of the entire budget must be brought into alignment with standards that reflect real-world economic facts.

People who are over 65 need to understand that if we don't, as Kerrey says, there are going to be American children who graduate from high school who will not be able to send kids to college. From that perspective, the CPI change is critical to the long-term health of the budget and the future growth of the American economy. It's in the greater interest of the common good.