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Archer Supports Revising Inflation Calculation

Thursday, December 5, 1996

OnLine

House Ways and Means Committee Chairman Bill Archer, R-Texas, urged the Bureau of Labor Statistics to "take a careful look" at the new recommendations to revise the Consumer Price Index.

The Bureau of Labor Statistics should revise its method of calculating consumer price inflation, the congressionally appointed Advisory Commission on the Consumer Price Index recommended in its report issued Dec. 4.

The Consumer Price Index overstates inflation by 1.1 percentage points annually and causes the cost of living adjustment to Social Security and other government benefit programs, as well as income tax bracket adjustments, to be too high, according to a report released Dec. 4.

It is up to the President to implement the suggested changes, Archer said. "If President Clinton opposes a change in the CPI, it just won’t happen," the chairman said.

The administration has been reluctant to act unilaterally on revising the CPI because it does not want to be blamed for inflicting pain on taxpayers and on government beneficiaries.

'Blue Dogs' support change

Moderate House Democrats will continue to advocate a reduction in the CPI and include the policy change in their fiscal 1998 budget proposal, Rep. Charles Stenholm, D-Texas, told the American Council for Capital Formation.

Stenholm, one of the so-called "Blue Dog" moderate group of Democrats, said the panel’s finding that the CPI overstates inflation by 1.1 percentage points is "not out of the realm of political possibility." The Blue Dogs in their fiscal 1997 budget proposal called for a 0.5 percentage point downward adjustment to the CPI.

AARP Objects

The American Association of Retired Persons warned that recommendations to adjust the Consumer Price Index would result in a tax increase and a Social Security benefits cut.

"We should leave the calculation of the CPI as a technical process, and not a legislative one," advised the AARP, which lobbies on behalf of senior citizens.

Reverse IRS Ruling: Sen. Dick Lugar, R-Ind., urged the Internal Revenue Service to back away from its ruling on the tax treatment of commodity contracts.

Under the ruling, farmers must pay tax on income in the year that a commodity contract is made, not the year that the commodity is delivered and the cash received.

"The use of deferred contracts has been an important tax management tool for cash basis farmers since Congress eliminated income averaging in 1986," said Lugar, a member of the Agriculture Committee. Lugar is not a member of the Finance Committee, which has jurisdiction over tax issues.