THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Friday, October 6, 1995 TAG: 9510060019
SECTION: FRONT PAGE: A14 EDITION: FINAL
TYPE: Editorial
LENGTH: Short : 40 lines
Coming soon, a $250 billion increase in taxes and cuts in government services. Neither Republicans nor Democrats will describe an adjustment to the consumer price index in those terms, but that will be the effect.
Not all economists feel the CPI as presently calculated overstates inflation, but a panel of those who do was appointed to recommend that something be done about it. It has, and Congress is likely to follow its advice because the consequences for the budget deficit are so desirable.
Since tax brackets and cost-of-living adjustments for Social Security and other government entitlements are based on the CPI, such a change would force some taxpayers into higher brackets and cut the cost-of-living adjustments for some pensioners. The savings add up in a hurry. If the CPI were adjusted one percentage point, the government would collect $100 billion more in taxes and pay out $150 billion less in entitlements over seven years.
Two reasons for our runaway deficit have been medical costs and COLAs that have outrun the underlying inflation rate. Health-care reform aims at addressing the first issue. Reforming the CPI calculation would address COLAs. Trying to save hundreds of billions in Medicare and Medicaid will be politically difficult and painful. Cutting the CPI will be virtually painless.
Over time, taxpayers will be taxed a little more heavily as inflation pushes them into new tax brackets. Entitlement recipients will be treated a little less generously. But something has got to be done to bring down the deficit. Or, rather, many things have to be done. This is one sensible, affordable, workable step. Best of all, it appears to be a fix that is actually doable. Everyone from President Clinton and Democratic Sen. Daniel Patrick Moynihan to Speaker Newt Gingrich is on record favoring it. by CNB