chapter
4 Pages

INTRODUCTION

Why the sudden interest in the CPI? Two years earlier, Federal Reserve Board Chairman Alan Greenspan told Congress that he thought the CPI over­ stated the true rate of consumer inflation by at least 1.0 percentage point an­ nually. Furthermore, he suggested that Congress take this overstatement into account in setting indexation formulas for government benefits and income tax brackets; under current law, both are adjusted each year by the rate of inflation reported by the CPI. After 10 years, the cumulative impact of lower­ ing the indexation formulas by 1.0 percentage point a year would be a reduc­ tion in the federal debt of $700 billion.