The Trump administration’s budget proposal for fiscal year 2026 has raised concerns among economists and statisticians regarding the reliability of key economic indicators, particularly the Consumer Price Index (CPI). The proposal includes a similar 8% attack on funding and staffing for the Bureau of Labor Statistics (BLS). This agency is integral to the work of producing the federal Consumer Price Index (CPI). This reduction can have a huge effect on economic data being produced with their information. Consequently, Americans will pay the price in lost purchasing power and broader economic applications.
The CPI serves as a critical gauge for inflation and is used widely to influence decisions related to monthly mortgage payments, Social Security checks, financial aid packages, business contracts, and wage negotiations. Economists warn that with the proposed cutbacks, the BLS may face challenges in collecting comprehensive data, leading to less reliable economic readings.
Yet over recent months, the proportion of imputed prices in the CPI has exploded to a concerning degree. As UBS senior economist Alan Detmeister recently noted, March saw a 15% jump in this share. It recently hit its highest point since the economy first started to experience major disruptions from COVID-19 in April 2020. For April, it rocketed 29% more. Such an extreme rise calls into question the index’s reliability, particularly when exact inflation calculations are needed most.
The new Department of Government Efficiency was created specifically to cut the federal government’s red tape. It’s already had a hugely chilling effect by forcing the closing of federal websites and making critical data far less accessible. As the BLS faces staffing and funding constraints, concerns mount over its ability to maintain the quality and timeliness of economic indicators such as the CPI.
Those would be Gregory Daco, chief economist at EY-Parthenon, and his warnings earlier this fall on what exactly these cutbacks could mean. He stated that “the BLS’s need to infer more data points due to personnel and funding constraints is deeply concerning” and raised “legitimate questions about the reliability and timeliness of critical economic indicators.” Daco further elaborated that such reductions “degrade the foundational data used for policymaking, market analysis and business planning.”
Detmeister voiced concern with this practice pointing out that using too few observations increases variability into the data. He stated, “Any time you’re using fewer observations, it creates a bit of an issue. The real concern is if these types of surprises continue to occur.” Additionally, he insisted on the need to carefully analyze price data on a month-to-month basis to determine any effects from tariffs.
Second, economists are debating how these proposed cuts will impact inflation readings and the integrity of our economic data in general. The May CPI report is scheduled to be released next week. Analysts are keeping a careful eye for any changes that will come as a product of these budgetary expansions.
Detmeister had some sobering words about what increased challenges due to less sampling work means for her field. “Their statement said that this will have little impact on the aggregate index, which is quite possible, but up to this point, they have not put out enough information that we would need to really evaluate,” he noted. He added that “what it does mean is that since they’re using fewer observations, there’s likely to be a little bit more noise in the monthly CPI data.”
The proposed budget cuts not only threaten the BLS’s operational capacity but underscore a broader issue regarding federal investment in vital economic measures during turbulent times. As economists closely monitor upcoming CPI releases and other economic indicators, many remain uncertain about how much variability these cuts may introduce into critical financial assessments.