Bloomberg View: A Bipartisan Deficit Fix

Congress and the White House seem incapable of agreeing on substantive measures to tackle the $10.4 trillion mountain of U.S. debt. There is, however, one long-overdue piece of important business that can and should get done: the adoption of a more accurate gauge of U.S. inflation. Such a fix would yield immediate savings and help put the economy on firmer ground. It’s already been endorsed by lawmakers in both parties, the Obama administration, many economists, and a series of bipartisan deficit-reduction panels. Best of all, it would help shore up Social Security. Trustees for the retirement fund projected on April 23 that it would run dry in 2033, three years earlier than last year’s forecast.

It has been widely recognized for almost two decades that the current measure of inflation, the consumer price index, contains several biases that cause it to overstate inflation by anywhere from 0.3 percentage point to 0.8 percentage point, depending on which expert you talk to. The CPI is the benchmark that determines cost-of-living adjustments for a wide range of government programs, including Social Security and federal employee pensions. It’s also used to peg income tax brackets, exemptions, deductions, and credits.