Despite this initiative, many problems with economic statistics remain unresolved. Objective, Scope, and Methodology

Our objective was to discuss how reported problems with selected statistics produced by the federal government can affect the federal budget and the formulation of the nation’s economic policy. A study by BLS researchers estimated that problems in measuring consumer spending patterns caused CPI to overstate inflation by 0.1 to 0.2 percent annually. Estimates of the Effects of CPI Overstatement on the Federal Budget

The CPI directly affects a significant portion of the budget because many federal benefits as well as individual income taxes are tied, or indexed, to the CPI in an effort to negate the effects of inflation. Statistical Limitations Increase the Uncertainties That Face Policymakers

Economic statistics can also affect the policymaking process. While it is not possible to demonstrate that if the shortcomings of particular statistics were resolved, policymakers would have made different decisions, such shortcomings increase policymakers’ uncertainty about current economic conditions and long-term trends. Measurement of Homeowner Costs in the Consumer Price Index Should Be Changed (PAD-81-12, Apr. A recorded menu will provide information on how to obtain these lists.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed problems with economic statistics, focusing on how they can affect the federal budget as well as the formulation of economic policy.

What GAO Found

GAO found that: (1) many economists believe that several technical problems limit the Consumer Price Index's (CPI) accuracy in measuring inflation; (2) these technical problems could cause CPI to overstate inflation, although complete information on measurement errors is inconclusive; (3) the extent and direction of inflation measurement is important, since slight misstatements could significantly affect government costs; and (4) statistical limitations can affect the policymaking process by increasing policymakers' uncertainty about current economic conditions and the potential effectiveness of economic policies.