As requested, I will discuss three topics today: (1) the need for and advantages of more frequent updating of the CPI expenditure weights, (2) the nature of the work we are currently doing with regard to the CPI, and (3) BLS’ coverage of CPI improvement efforts in its strategic plan and fiscal year 1999 annual performance plan. My comments on the need for and advantages of more frequent updating of the CPI expenditure weights are based largely on our October report and will provide information on (1) the views of individuals knowledgeable about the CPI on the issue of updating the expenditure weights between major revisions to the CPI, (2) the updating practices of other industrial countries, (3) the cost to update the expenditure weights, (4) the possible effect on the federal budget of more frequent updates, and (5) BLS’ response to our recommendation that it should update the expenditure weights more frequently. for improving CPI quality or how BLS will ensure that information it uses to assess actual performance against CPI improvement goals is accurate, complete, and consistent. However, BLS’ performance plan does not fully portray how BLS’ strategies and resources will help achieve the BLS performance goals. Overall, we found linkages between BLS’ performance goals and indicators relating to improving the CPI and three Boskin commission recommendations (see app. BLS told us that both it and the Department of Labor question the usefulness of discussing recommendations contained in particular reports, such as the Boskin commission report, in long-range planning documents, including BLS’ strategic plan and fiscal year 1999 annual performance plan. However, given the high degree of interest that Members of Congress, the Federal Reserve, and others who are concerned about the accuracy of the CPI have shown in the Boskin commission’s report and recommendations, we believe that a discussion of the relationship of the goals in BLS’ performance plan for fiscal year 2000 to the Boskin commission recommendations, or an explanation of the absence of such relationship, would add to the plan’s credibility and usefulness to CPI stakeholders.
Why GAO Did This Study

GAO discussed whether the Consumer Price Index (CPI) published by the Bureau of Labor Statistics (BLS) accurately reflects consumer spending, focusing on the: (1) need for and advantages of more frequent updating of the CPI expenditure weights; (2) nature of the work GAO is doing with regard to the CPI; and (3) BLS' coverage of CPI improvement efforts in its strategic plan and fiscal year (FY) 1999 annual performance plan.

What GAO Found

GAO noted that: (1) BLS uses expenditure weights to aggregate market basket items into the overall index number; (2) the preponderance of evidence GAO obtained pointed to the need for and advantages of more frequent updates; (3) this evidence included the: (a) views of professionals knowledgeable about the CPI; (b) practices of other countries; (c) results of research that show that the age of expenditure weights affects the CPI; and (d) the sizable effect more frequent updates could have on the federal budget in comparison to the relatively small costs associated with updates; (4) BLS has said it agrees with GAO's recommendation for more frequent updates and is considering the appropriate update frequency; (5) in examining BLS' FY 1999 performance plan, GAO found that it was partially successful in providing a picture of BLS' intended performance to improve the CPI's quality; (6) further, the plan did not fully portray how BLS' strategies and resources would help achieve the performance goals for improving CPI quality or how BLS would ensure that the data it uses to assess its performance are credible; (7) GAO found linkages between some, but not all, of the commission's recommendations and the plan's performance goals and indicators; (8) neither BLS' strategic plan nor its FY 1999 performance plan discusses such linkages or the lack of them; (9) BLS and the Department of Labor question the usefulness of discussing recommendations contained in particular reports, such as the Boskin commission report, in long-range planning documents; and (10) however, GAO believes such a discussion would enhance the plans' usefulness and credibility to CPI stakeholders given the great interest shown in the Boskin commission recommendations by Congress and others.