An Analysis of the Effects of Indexing for Inflation on Federal Expenditures

Inflation has become a national preoccupation, and until it is eliminated, methods must be sought to live with it. Indexing is one method of coping with inflation, and this procedure is used to protect the benefits provided by Federal programs from erosion by inflation. The indexing of Federal expenditures is a useful practice, and a large and growing proportion of the Federal budget is indexed. However, indexation appears to contribute to inflationary pressures by automatically increasing Federal expenditures during inflationary periods.