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Senators consider Boskin commission’s Social Security proposal

January 29, 1997

WASHINGTON (AP) _ It wasn’t so much what senators said about one way to raise taxes and trim Social Security. It was what they didn’t say.

In the first legislative airing Tuesday of the politically touchy plan designed to save Social Security by adjusting cost-of-living increases, members of the Senate Finance Committee refrained from criticism.

Instead, they asked questions delving into the details of the proposal from a bipartisan commission of economists. Even senators from Florida, a state heavily populated by retirees, held their fire.

Sen. Connie Mack, R-Fla., listened to testimony but made no comment. Sen. Bob Graham, D-Fla., asked questions about how the plan could be implemented fairly and impartially.

The five-member commission, headed by Stanford University economist Michael Boskin, said the CPI overstates the true increase in the cost of living by 1.1 percentage points a year.

Lowering the index by that amount would save $1 trillion over 12 years, the commission estimates. The savings would come from trimming annual cost-of-living adjustments for the recipients of Social Security and other benefit programs and by raising taxes through a smaller adjustment in tax brackets and the standard deduction each year.

The CPI, which rose 3.3 percent last year, is biased upward, the economists said, because it only partially accounts for quality improvements in products such as computers, fails to adjust for consumers switching from one product to another (buying more chicken when the price of hamburger rises, for instance) and doesn’t account for such trends as the spread of discount retailers.

Finance Committee Chairman William V. Roth Jr., R-Del., and the senior Democrat on the panel, Daniel Patrick Moynihan of New York, appointed the commission nearly two years ago and are pushing for action this year. Roth said any steps Congress takes ``must be broadly and deeply bipartisan.″

Both he and Moynihan urged Clinton to embrace a CPI adjustment in the fiscal 1998 budget he submits Feb. 6, but administration officials have indicated that’s unlikely.

The plan could resurface this fall, however, as Congress and the administration look for ways to construct a budget that balances by 2002.

Boskin commission members said the Labor Department’s Bureau of Labor Statistics is considering changes that would eliminate a quarter to a third of the bias in the CPI but cautioned that could take two to four years. That leaves the immediate decision with Congress.

``You must decide. This is not something we’re going to do for you, or the BLS or anyone else,″ said Harvard University economist Dale Jorgenson, a member of the commission. ``You must pass legislation.″

Commission member Robert J. Gordon of Northwestern University suggested that Congress empower a panel of experts to determine the appropriate CPI adjustment each year, rather than writing a specific number into law.

The only note of caution at the hearing came from Sen. Charles Grassley, R-Iowa, who said the variety of estimates on the bias in the CPI indicates ``there is more work to be done before final action is warranted.″

But Gordon cautioned that a delay in implementation of only two years would reduce the estimated $1 trillion in savings by $300 billion, because of compounding.

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