Fed Chief Suggests Skirting Cost Index

Federal Reserve Chairman Alan Greenspan suggested Thursday that Republican lawmakers frustrated over a government inflation gauge should create a commission of experts to bypass the Labor Department.

Reducing the Consumer Price Index would lower Social Security benefits, increase taxes and make it easier to balance the budget.

Greenspan contends that the index overstates inflation by between 0.5 and 1.5 percentage points.

But the professional economists at the Bureau of Labor Statistics have been unwilling to make quick changes in the gauge, which they’ve been compiling since 1919.

The bureau has said it believes Greenspan is exaggerating the CPI’s inaccuracy and said it planned changes in the index in 1998 that would cut it 0.2 or 0.3 percentage points.

But, rather than waiting years, Congress could ask “a professional group of analysts” to meet annually to “indicate the most likely bias,” Greenspan said.

Government programs such as Social Security benefits, which are increased to take account of changes in the cost of living, then could be adjusted based on what the panel of experts believed the CPI ought to say.