Phillips on Revising CPI

Kevin Phillips (“(E)Con Artists,” Opinion, Dec. 15) joins the chorus who misunderstand the point of consumer price index adjustments to middle-class entitlements. The purpose of the CPI adjustment to Social Security, for example, is not to raise or lower the real (inflation-adjusted) value of that entitlement, which is set by Congress, but rather to maintain it in the face of inflation. If the CPI is incorrect (which it is), then the inflation adjustments made using it will be wrong.

If Congress and the public want the typical Social Security check to be larger (or smaller) than it is currently, that is a separate political issue that should be addressed independently of trying to get the CPI “right,” which is a difficult but not impossible technical task that the Boskin Commission has addressed.

RICHARD MOSS

Professor of Economics

Cal State San Bernardino

* Phillips is usually very sober-minded, but on the topic of recalculating the consumer price index, he just doesn’t get it. First, lowering the CPI so that it more accurately reflects the actual rise in prices will not “take” money from anyone. Rather, it will merely stop the overpayment of money to people who don’t deserve it. Second, the “huge benefit” wouldn’t “go” anywhere. It would just stay in the pockets of other Americans (the taxpayers who earned it), where it belongs.

RICHARD SHOWSTACK

Newport Beach

* Kevin Phillips, please answer these three questions: 1) What share of the GNP should the government take in taxes? 2) What should the highest income tax rate be? 3) What share of government revenue should go to middle-class entitlements?

My answers would be: Fix the government GNP share at its current 19%. Set moderately progressive tax rates without loopholes and a large basic deduction. The most difficult issue is how to spend the government GNP share on all of the many functions of government as well as middle-class entitlements.

COLAs and the CPI have nothing to do with middle-class entitlements if this approach is taken. Something like this must be done in order to balance the budget and keep the government at its current share of GNP.

JIM KETCHAM

Malibu