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The Effect of Errors in the CPI on Social Security Finances

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  • Duggan, James E
  • Gillingham, Robert

Abstract

This article provides detailed estimates of the effects of measurement bias in the Consumer Price Index (CPI) on the Social Security trust funds. Not including the effect of the housing error in the CPI, the estimated overpayment of benefits in 1997 was $26 billion, and, taking interest into account, the total drain on the Old-Age, Survivor and Disability Insurance (OASDI) Trust Funds was $55 billion. At the end of 1997, the present value of the entire effect of the error through 2044) was $965 billion. Combining the overpayments from the housing error with the biases considered in this article, the cumulative effect on the OASDI Trust Fund was $763 billion at the end of 1997, with an additional present value of $519 billion in overpayments to come through 2040.

Suggested Citation

  • Duggan, James E & Gillingham, Robert, 1999. "The Effect of Errors in the CPI on Social Security Finances," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(2), pages 161-169, April.
    • Handle: RePEc:bes:jnlbes:v:17:y:1999:i:2:p:161-69
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    Cited by:

    1. James E Duggan & Robert Gillingham & John S Greenlees, 2008. "Mortality and Lifetime Income: Evidence from U.S. Social Security Records," IMF Staff Papers, Palgrave Macmillan, vol. 55(4), pages 566-594, December.
    2. Ignazio Drudi, 2002. "The treatment of substitution bias in consumer price index: An alternative approach," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 11(3), pages 395-404, October.

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