Summary: Between December 1996, when the Boskin Commission issued its final report estimating that the Consumer Price Index (CPI) overestimates the cost-of-living by 1.1 percentage points annually, and June 1999, when GAO began this review, the Bureau of Labor Statistics (BLS) made seven methodological changes that affected the calculation of the CPI. BLS also announced three methodological changes that it planned to implement. Four former members of the Boskin Commission said that the seven methodological changes have reduced some of the bias in the CPI, although they had different views on the extent of the remaining bias. Their estimates of the remaining bias ranged from 0.73 to 0.9 percentage points annually. The former Boskin Commission members believe that most of the remaining bias is due to "new products/quality change bias." According to the Commission, this type of bias occurs when new products are not included in the CPI or when they are included after a long delay, which results in the CPI not capturing price decreases that often occur after a product's introduction in the marketplace. New products/quality change bias also occurs when the CPI does not adequately measure the portion of a price increase that is due to an improvement in the quality of a product or service instead of to a rise in the cost of living.
