Alternatives for Modifying the Indexation of Federal Programs

Some means of limiting the present indexing system is absolutely essential. Explicitly indexed programs now account for about 30 percent of the budget. To exclude from consideration the issue of indexation would unnecessarily limit the options available to Congress as it seeks ways to constrain the budget. In the fight against inflation, to continue to insulate those recieving indexed benefits would be inequitable and would increase the sacrifices required by the rest of the American people. The indexation of entitlement programs has been a major factor in the growth of that portion of the budget which is uncontrollable in the short run. There are three basic options available for constraining the indexation process: (1) give the President authority to modify the amount of the index through the budget process; (2) limit the annual adjustment to the average increase in worker pay or the Consumer Price Index, whichever is less; or (3) correct present deficiencies in the Consumer Price Index or choose another index which avoids those deficiencies and defines more adequately the degree of protection against inflation which Congress wishes to provide to Federal program beneficiaries. These options are not mutually exclusive but could be combined or modified. GAO prefers using the option of giving the President authority to implement an alternative plan or plans for adjusting benefits through the budget process.