THE VIRGINIAN-PILOT 
              Copyright (c) 1995, Landmark Communications, Inc.

DATE: Thursday, January 19, 1995             TAG: 9501190022
SECTION: FRONT                    PAGE: A12  EDITION: FINAL 
TYPE: Editorial 
                                             LENGTH: Medium:   55 lines

IS GINGRICH TOO CLEVER BY HALF?: CUT, HIKE OR ADJUSTMENT?

House Speaker Newt Gingrich came to power promising no new taxes and a Social Security system that would be off the table. Now he's pursuing a course that would lead to billions in tax increases and Social Security spending decreases. But not openly. Instead, he says he's aiming at statistical adjustments in government accounting that would produce deficit reduction. Such lack of candor is the kind of thing that gives politicians a bad name.

Here's the story. The Bureau of Labor Statistics is a green-eyeshade kind of place where economists who have no partisan ax to grind calculate things like the CPI. That's the consumer price index, a measure of the cost of living and, therefore, inflation fluctuations.

Fed Chairman Alan Greenspan has complained that the way the CPI is compiled may actually overstate inflation by as much as 1 percent. This matters because a lot of government operations are computed, by law, according to the CPI number. For example, Social Security recipients get automatic cost-of-living increases keyed to the CPI. Taxes are also affected. Deductions and exemptions are adjusted on the basis of the CPI.

Gingrich has called on the Bureau of Labor Statistics to change the way it computes the CPI. In fact, he's given the BLS an ultimatum. ``If they can't get it right in the next 30 days or so, we zero them out, we transfer the responsibility to either the Federal Reserve or the Treasury and tell them to get it right,'' Gingrich has warned. ``Zero out'' is Newtspeak for cut funding to zero.

Is Gingrich threatening BLS because he cares deeply about arcane matters of accountancy? No. Because he has identified a way to reduce the deficit. But it entails back-door entitlement cuts and tax increases. Changing the method of calculating the CPI would increase income taxes collected by $21.4 billion over five years and decrease Social Security payouts for the same period by $27.5 billion. All told, the proposed adjustment of the CPI would reduce the deficit projected for 2000 by $55 billion.

Greenspan is probably right to want the statistics rationalized. It's absurd for the Fed to be raising interest rates to keep down inflation if it's already down. There's also a good case to be made for re-examining COLAs - the automatic cost-of-living adjustments that have helped make entitlements an ever larger part of the federal government.

But if that's what Gingrich wants to do, let him propose it directly and invite a democratic debate. The increase in taxes and decrease in entitlements that would result aren't unanticipated byproducts of a technical adjustment but the point of the exercise.

Taxpayers and retirees who feel the effect in their wallets won't be fooled for long. If the government really wants them to take a hit in order to reduce the deficit, it should say so - straight out. by CNB