SOME SEE NEED FOR CHANGES IN CPI; ECONOMISTS SEE `HARD SELL'

Changing the nation's Consumer Price Index to more accurately reflect inflation could save the government billions of dollars.

Economically, it makes sense; politically, it could be a tough sell, two Southeast Missouri State University economists said Thursday.

Dr. Rebecca Summary and Dr. Bruce Domazlicky teach economics at Southeast. Summary also chairs the department.

A five-member panel of the nation's top economists said this week that the CPI has overstated inflation for years. The panel concluded that the widely used measure for inflation exaggerates increases in the cost of living by 1.1 percent annually.

It suggests cutting a percentage point off CPI's annual inflation figure.

Changing the CPI would affect everyone from Social Security recipients to taxpayers, Domazlicky said. It also would affect private-sector wage contracts that are tied to the index.

Everything from taxes to cost-of-living adjustments are indexed for inflation using the CPI.

The move could reduce the budget deficit by about $133.8 billion over five years, the Congressional Budget Office said.

The savings would come from:

-- Trimming the cost-of-living adjustments made to Social Security and other government pensions received by 60 million Americans.

-- Raising taxes by making smaller inflation adjustments each year in tax brackets.

"I think it could be a hard sell for a couple of reasons, because nobody wants to touch Social Security and nobody wants to raise taxes," said Summary.

Such a change isn't likely unless budget negotiations stall. Congress and the president then might consider it, she said.

Domazlicky said Republicans on Capitol Hill would be wary of CPI changes that would lead to higher taxes; Democrats would be worried about changes that would cut Social Security benefits.

But Domazlicky said that as an economist he favors adjusting the CPI. "Statistics should reflect as accurately as possible the true economy," he said.

If the CPI overstates price increases, and people's wages are loosely or directly tied to it, then it adds to future inflation, he said.

Increased accuracy would benefit the government the most, he said.

Summary said the CPI overstates inflation because it fails to account for consumers' substitution of lower-priced goods and the fact that when consumers pay higher prices, they are often buying better quality goods and services.

Summary said adjusting the CPI could change how Americans view their economy. "If inflation is lower," she said, "maybe everybody isn't doing as bad as we thought they were."