[Pages S11211-S11212]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

HOW NOT TO BUILD CONFIDENCE IN GOVERNMENT STATISTICS

<bullet> Mr. MOYNIHAN. Mr. President, on October 16, following the
release of monthly price data by the Bureau of Labor Statistics [BLS],
the Social Security Administration announced a 2.1-percent cost of
living adjustment [COLA] for Social Security and other Government
programs. Yet a week earlier, the Social Security Administration
circulated a table which indicated that the benefit increase would be
2.7 percent.
How could this happen? Simple. The Administration, as I have noted on
numerous occasions, insisted on using an outdated economic forecast so
as to obscure the fact that the budget was approaching balance in
fiscal year 1997 in the absence of a budget agreement. While that
budget legislation was pending in Congress last summer, it was feared
that if the economic outlook was too favorable, pressure for the budget
bills would decrease and agreement would not be reached. And so the
Social Security Actuaries had no recourse other than to use the
official forecast when presenting data on the actuarial status of the
trust funds.
Here is why the numbers were, to put it mildly, misleading. The
Administration notes that its midsession budget review--released almost
2 months late on September 5--is based on economic projections
finalized in early June. But even by then it should have been clear
what was happening to prices. By early June 1997, data for 8 months of
the benefit computation period, August 1996-April 1997, indicated that,
on an annual basis, CPI-W had increased by 2.4 percent. To increase by
2.7 percent for the full year would require, on an annual basis, a 3.2-
percent increase in CPI-W for the remaining 4 months, April 1997-August
1997, of the computation period. Put another way the Administration was
predicting a one-third increase in the inflation rate. Yet, on an
annual basis, CPI-W increased by only 1.5 percent during these 4
months. That is, the inflation rate actually declined by almost 40
percent.
In short, by the spring it should have been clear that the benefit
increase would be less than 2.7 percent. And by late summer it was
virtually certain that the increase would be 2.0 to 2.2 percent, but
nowhere near 2.7 percent.
What does this mean to the average beneficiary now receiving a
monthly benefit of $749? Instead of a $20 monthly benefit increase--2.7
percent of $749--the benefit increase will be about $16. Fortunately,
few if any Members of Congress rushed out in early October and
announced to constituents, based on the Administration's estimates,
that they would receive an expected 2.7-percent benefit increase.
The Advisory Commission to Study the Consumer Price Index--the Boskin
Commission--concluded that the Consumer Price Index [CPI] overstates
changes in the cost of living by about 1.1 percentage points. And many
other researchers concur with the findings of the Boskin Commission.
The American Association of Retired Persons [AARP], and others, have
argued that the only way to keep politics out of the process is to let
the BLS do it. Such critics should be mindful that accurate statistics
include timely and accurate projections. By late September or early
October of each year Social Security beneficiaries should be able to
rely on their Government to provide reliable projections of upcoming
benefit increases.
Mr. President, I ask that a table prepared by the Social Security
Administration, Office of the Actuary, on October 7, 1997, be printed
in the Record.
The table follows:

TABLE 1.--ECONOMIC ASSUMPTIONS UNDERLYING THE MID-SESSION REVIEW OF THE PRESIDENT'S FISCAL YEAR 1998 BUDGET
[In percent]
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1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
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Change in real GDP.............................. 2.4 3.5 2.0 2.0 2.1 2.4 2.4 2.4 2.4 2.4 2.4 2.4
Civilian unemployment rate...................... 5.4 5.0 5.2 5.4 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5
Change in average annual CPI.................... 2.9 2.7 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5
Change in average covered wage.................. 4.3 4.6 3.2 3.8 3.9 3.7 3.6 3.8 3.8 3.8 3.9 3.9
Real wage differential.......................... 1.4 2.0 0.7 1.2 1.4 1.2 1.1 1.3 1.3 1.3 1.4 1.4
Benefit increase................................ 2.9 2.7 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5
Average annual interest rate.................... 6.6 6.7 6.1 5.7 5.6 5.4 5.4 5.4 5.4 5.4 5.4 5.4
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Note: Social Security Administration, Office of the Chief Actuary, October 7, 1997.<bullet>

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