ABSTRACT
This chapter examines the effects of automatic indexing on federal benefit spending. During the 1970s, automatic indexing effectively tied the hands of both Congress and the president while driving up benefit spending far faster than our economy was growing. With indexing, projections can be made with great confidence: the old priorities will always win. The history of indexing is altogether one of the sorriest stories in federal policymaking, and the history of double indexing is perhaps the most flagrant case in point. The consumer price index (CPI) has a long reputation among economists as a mistakenly buoyant price index—one that the careful expert should stay away from. The major conceptual problem with the CPI is that the statistical weights the Bureau of Labor Statistics employs in translating yearly price data into index numbers are based on a prior year and are "rebased" only once every decade or so.
