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Oscar Wilde said that "the one duty we owe to history is to rewrite it," and that is precisely what agencies such as the U.S. Bureau of Labor Statistics do as a matter of course. In 1999 the BLS made another in its series of major revisions to the consumer price index. The CPI is the key to calculating Social Security cost-of-living increases and adjusting federal income taxes to prevent "bracket creep," the problem that arises when taxpayers are pushed into a higher bracket because of inflation. Such revisions, of course, don't result in retroactive benefits, but they do change our perception of the past in meaningful ways.
The new CPI, adjusted retroactively to 1977, takes into account the cumulative effect of many small improvements in methodology made over the past two decades. For instance, it compensates for the rise in the durability of automobiles, which, it is assumed, partially offsets price increases. The new CPI also takes into account the substitution of generic for name-brand drugs as the patents of the latter expire. None of these improvements alone is important, but cumulatively they are significant, as illustrated in the chart comparing the old and revised CPI.
This article was originally published with the title Rewriting History.