OMB asks: What consumer inflation measure should be used to annually adjust the Census Official Poverty Measure?

Question

Nancy Potok, the Chief Statistician in the U.S. Office of Management and Budget, announces that "OMB is seeking comment on the differences among the various consumer price indexes produced by the Bureau of Labor Statistics (BLS) and the Bureau of Economic Analysis (BEA), and in particular how those differences might influence the estimation of the Official Poverty Measure (OPM) and other income measures produced by the Census Bureau. Based on the comments received and internal discussions with experts, OMB will consider the need to update the specific inflation measure used to adjust the OPM, as well as the need for guidance to Federal agencies to communicate the strengths, weaknesses, and best practices for selecting and using the different indexes."

"OMB is seeking comment about how the relative strengths and weakness of the measures might affect the estimation of the OPM and other income measures produced by the Census Bureau. OMB will also consider the need for guidance to Federal agencies on the differences among the indexes."

In particular, "OMB is seeking public comment on the strengths, weaknesses, and best practices for the application of the following consumer inflation measures: The Consumer Price Index for All Urban Consumers (CPI-U), the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), the Chained Consumer Price Index for All Urban Consumers (C-CPI-U), the Consumer Price Index Research Series (CPI-U-RS), and the experimental Consumer Price Index for Urban Elderly Consumers (CPI-E), all produced by BLS, and the Personal Consumption Expenditures Price Index (PCEPI) produced by BEA."

Comments must be received by Friday, June 21, 2019. Dr. Potok's announcement can be read in full here: https://www.federalregister.gov/documents/2019/05/07/2019-09106/request-for-comment-on-the-consumer-inflation-measures-produced-by-federal-statistical-agencies

Answer 1

Due to the characteristics of the price index, you should include an index of a few inferior goods as well as of a few normal goods. Regarding durable goods, a second-hand market of cars and rented houses would be great for inferior goods, washers or kitchen tools would be great for normal goods. Regarding consumable goods you should include low-costing markets in clothing or food as inferior goods as well as normal goods as drugs, fast food(it could be included in inferior goods) and other common goods as groceries or a few clothes of popular trademarks. Sounds weird, but tobacco, alcohol or other illegal drugs can be, in some cases, a expenditure very big in a low wage range.

Here it's my opinion. I'm sorry if my English is not perfect.