BLS DAILY REPORT, WEDNESDAY, MARCH 5, 1997 The Bureau of Labor Statistics will likely begin publishing an experimental cost-of-living measure as an alternative to the CPI before April 15, says BLS economist Patrick Jackman at a National Association of Business Economists' seminar. Jackman, who works with consumer prices, said BLS will begin publishing a geometric mean experimental index alongside the CPI ....BLS Commissioner Katharine Abraham has said BLS will not automatically switch to a geometric mean index without first testing to see if it is more accurate than the index currently used. The BLS now uses an index that does not allow for item substitution. A geometric mean index allows for those substitutions, which Abraham has said is appropriate in some, but not all cases ....Rep. Jim Saxton (R-NJ), the chairman of the JEC, is the latest legislator to address the controversy. Saxton warned that a reduction in the CPI along the lines of the Boskin Commission recommendations would result in a "dramatic" middle-class tax increase ....according to a JEC report ....(Daniel J. Roy, Daily Labor Report, page A-7). __Fed Chairman Alan Greenspan yesterday strongly supported creation of a presidentially appointed commission to set the size of annual cost-of-living adjustments in Social Security, other federal benefits, and income taxes, an idea that appears to be gaining political momentum. Greenspan was testifying before the House Budget Committee ....Greenspan suggested that former members of the Fed Board and the CEA would be appropriate members of a commission. The members should have the "technical expertise" to make judgments regarding issues of measuring prices and constructing price indexes. On the other hand, he said he did not intend for the commission to do original research but to use research that has been done to come up with a number that more closely reflects changes in the cost of living ....BLS Commissioner Katharine G. Abraham and other economists have criticized some of the Boskin group's conclusions, particularly concerning quality changes. Abraham has said that there is no conclusive evidence that the CPI, which already incorporates large adjustments for quality changes, has an upward bias in this regard ....(John M. Berry, Washington Post, page A1). __The Clinton Administration and Congress continued today to dance around one of the most sensitive issues they fact this year -- whether to reduce cost-of-living adjustments for Social Security. Alan Greenspan urged the House Banking Committee to tackle the issue head on by appointing a commission that would provide a better estimate of increases in the cost-of-living than the CPI ....(Richard W. Stevenson, New York Times, page A17). __Under unusually hostile fire from a fellow free-market Republican, Greenspan defended his recent blunt cautions about the stock market's record rise ....The exchange came amid a hearing on the accuracy of the CPI ....Greenspan said a commission should be made up of experts ....BLS would continue to be responsible for the price index, he said. But, because it would take years for the bureau to revise the measure, the expert panel could decide each year what downward revision would make the index more truly reflect the cost of living ....Meanwhile, BLS said it plans to release an experimental CPI before April 15. The new index will address complaints that the current index doesn't account for consumers' ability to substitute cheaper items -- to switch to chicken, say, when beef prices rise ....(Jackie Calmes, Wall Street Journal, A2). David S. Broder discusses on the op-ed page of the Washington Post the plan of The Coalition, also called the Blue Dogs, a group of 22 moderate and conservative House Democrats, to balance the budget ....Part of their plan is to adjust the inflation index for both tax rates and retirement benefits by a bit less than one percent to extend the life of the Social Security and Medicare trust funds and reduce the deficit ....They say that adjustment of 8/10ths of one percent should be taken now, while the experts try to figure out a more accurate index .... __The Conference Board reports that the index of leading economic indicators rose 0.3 percent in January, the largest monthly increase since a 0.3 percent advance in May 1996 ....(Daily Labor Report, page D-1; New York Times, page B4)_____The advance exceeded expectations of about 0.1 percent growth and was another suggestion that economic growth may be too robust for inflation to remain tame ....(Washington Post, page C11). New home sales in January surged 8.6 percent to a nearly 11-year high, a Commerce Department report showed, but economists weren't sure what to make of it because of a data-collection change. The department said its field agents started collecting sales data with laptop computers, rather than with paper and pencil. It said that more accurate method likely resulted in "some upward bias" to the number, but it used statistical methods to dampen erratic fluctuations (Washington Post, page C13)____Private analysts reacted with caution, suggesting that several factors, including the negative effect of the blizzard in the Northeast a year earlier, might have skewed the figures ....(New York Times, page B4) New-home sales soared in January, and the index of leading indicators rose. Despite the measures' flukey natures, the fact that they clearly signal growth only sharpens the picture of a robust economy ....The Commerce Department tacked a "fat paragraph onto its home-sales report cautioning that techniques for collecting the data have changed and as a result the numbers are skewed ....The bureau didn't have enough money to thoroughly analyze the old and new ways" ....(Wall Street Journal, page A2). While the managed-care revolution held down last year's increase in health care costs to the lowest level in three decades, experts predict sharper climbs lie ahead as cuts in the managed-care system become harder to achieve ....Analysts see health care costs increasing by 3 percent to 5 percent this year with larger jumps in 1998, perhaps as high as 10 percent ....While a return to the days of unchecked increases is highly unlikely, health industry experts agree that these factors are nudging costs upward: Managed care already has achieved most of the easiest cost savings; enrollment in health maintenance organizations ... appears to have peaked; prescription costs have never been controlled; a backlash against managed care has resulted in longer hospital stays for childbirth and some other procedures and higher costs; and patients are demanding the latest technologies and drug treatments, which often are the most costly ....(Washington Post, page C10).