CPI

Commentary by Pete du Pont

Host intro: If your eyes glazed over and your attention wandered last week when you heard stories about government statistics, Pete du Pont of the National Center for Policy Analysis says it's time to wake up and pay attention.

If you didn't get the importance of refiguring the Consumer Price Index, try this: the CPI measures the rate of change in the cost of things -- inflation. It's off by a percentage point a year. That throws the whole economy out of kilter because so much is tied -- or "indexed" -- to the rate of inflation.

Overstating inflation has made the national debt go up a trillion dollars over 12 years. Instead of falling 13 percent, real earnings have gone up 13 percent since 1973. Real median family income's up 36 percent, not the 4 percent the CPI reported. By accurately figuring the CPI, we could cut the federal budget $148 billion and the federal debt $691 billion by 2006. Interest rates could drop by one or two percentage points, and you could pay lower interest rates for home, college and car loans.

The CPI has become meaningless because it measures price increases of a fixed set of items, but doesn't take into account the selective habits of American buyers or the flexibility and choice available in the marketplace.

Change the CPI, and we could improve the economy and your finances almost overnight.

See, it is important.

Those are my ideas, and at the NCPA, we know ideas can change the world. I'm Pete du Pont, and I'll see you tomorrow.

Host outro: Tomorrow, Pete du Pont has a report from the Firing Line.