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Dead Calm In The Eye Of The Cpi Storm


In Business This Week: HEADLINER: KATHARINE ABRAHAM

DEAD CALM IN THE EYE OF THE CPI STORM

Katharine Abraham has $190 billion on the line. Economists recently found that the consumer price index overstates inflation by 1.1 percentage points a year--costing billions in extra cost-of-living outlays. As Bureau of Labor Statistics commissioner, Abraham must make the CPI more accurate.

Abraham, 42, is unperturbed. The BLS was first to recognize the CPI's weaknesses, she says, and BLS will fix them without worring about political or budgetary effects. "Our job is to produce the best possible CPI," she says. Indeed, Abraham has "weathered this storm by treating it as a professional issue, not personal criticism," says Labor Secretary Robert Reich, who tapped the Harvard-trained economist to head the BLS in 1993.

Abraham's ace in the hole: Since Richard Nixon got burned for trying to hush up unemployment numbers, politicians don't dare tamper with the BLS. So Congress and the Administration won't risk telling the BLS how to figure a new CPI. With such protection, Abraham's calm will remain unshaken.EDITED BY KEITH H. HAMMONDS By Mike McNameeReturn to top

SADDAM IS BACK IN CRUDE. SO WHAT?

THE MAIN THING SPOOKING oil markets during the past few years? The prospect of a flood of Iraqi exports setting off a price collapse. Now, six years after the U.N. imposed strict sanctions on Iraq, an oil-for-food deal between Baghdad and the U.N. has finally put Saddam Hussein back in crude production. But don't expect bargains at the pump. Although prices dropped somewhat when Saddam turned on the pipeline out of northern Iraq on Dec. 10, oil is still running $5 a barrel more than a year ago. The reason: Demand is high because of cold weather in Europe and the U.S. Also, the U.N. will cap Iraqi exports at around 500,000 barrels a day, less than 20% of capacity.EDITED BY KEITH H. HAMMONDSReturn to top

LOPEZ FACES GERMAN CHARGES

VOLKSWAGEN'S BYZANTINE misadventure with former purchasing chief Jose Ignacio Lopez de Arriortua a took a downward turn. As expected, German prosecutors on Dec. 11 charged Lopez with embezzlement and stealing secret General Motors documents. Lopez' lawyers say their client is innocent and will ask the Darmstadt court to dismiss the case. vw says Lopez' being indicted alone proves there was no conspiracy involving other officials. Still, the German proceedings fuel GM's continuing civil suit in the U.S., where the company is expected to seek $4 billion in damages. vw officials admit they are extremely concerned about the action, which CEO Ferdinand Piech has sought to settle out of court. So far, GM hasn't budged.EDITED BY KEITH H. HAMMONDSReturn to top

SUN WAKES UP AND SMELLS THE JAVA

IS MICROSOFT ABOUT TO hijack Sun Microsystems' hot Java software? Not if Sun can help it. Microsoft, a licensee of the software for creating Internet programs, has been adding its own wrinkles to Java, making it run faster--but only on its Windows operating software. On Dec. 11, Sun drew a line in the sand. It announced plans to test and certify Java programs so they're sure to run on any hardware or software, not just Windows. The move is backed by IBM, Netscape Communications, Apple Computer, Oracle, and some 100 others--but not Microsoft. It says there's nothing wrong with its efforts to make Java work better with Windows.EDITED BY KEITH H. HAMMONDSReturn to top


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