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Lies, damn lies and economic stats

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April 17, 2008

For years, government figures on economic growth (or lack thereof) have mystified me as being so far out of whack with reality as to bare little or no resemblance to it. This is true for figures on economic growth, job creation and inflation. In 2005 I wrote:

“I’ve racked my brain trying to reconcile Labor Department reports of inflation running in the 2-3 percent range, while watching as housing, food, clothing, and transportation costs rise by double digits each quarter. Is the government hiding something?”

Three years later I’m thinking the answer is clearly “yes” since not only has inflation gotten worse, but two much more savvy figures than myself have made the case for government economic deceit. Taken together they agree that the government cooks economic figures until they mimic limp linguine upon release.

This does not appear to be due to any pointed conspiracy on the part of the Bush administration (although its practiced deception in other areas makes it a juicy target for book-cooking in the economic arena) but rather to a series of “adjustments” to government economic figures made by successive administrations over time.

In a 2003 Op-Ed piece for the New York Times, economics professor Austan Goolsbee, who is now senior economics adviser to Sen. Barack Obama’s presidential campaign wrote about artificially depressed unemployment numbers.

The rate, he said, “…has been low (during the recession of 2001-2002) only because government programs, especially Social Security disability, have effectively been buying people off the unemployment rolls and reclassifying them as ‘not in the labor force.’…It has been a more subtle manipulation than the one during the Reagan administration, when people serving in the military were reclassified from ‘not in the labor force’ to ‘employed’ in order to reduce the unemployment rate. Nonetheless, the impact has been the same.”

In the May issue of Harper’s Magazine, author and former Nixon appointee Kevin Phillips compiles a long list of government manipulation of economic data. Each re-calculation, he reports, was made to falsely boost economic indicators. These manipulations date back to the Kennedy Administration.

Most notably, Phillips explains that President Johnson masked deficits, that President Nixon hid inflation by excluding “volatile” food and energy costs from the Consumer Price Index, and that the Clinton Administration expunged many long-term so-called “discouraged” unemployed Americans from the unemployment rate, by only counting persons who’d been seeking jobs for a year or less.

My personal favorite example of government fiddling comes in the arena of job growth. The Labor department Website this past December defined new jobs as: “the total number of persons on establishment payrolls employed full or part time who received pay for any part of the pay period that includes the 12th day of the month. Temporary and intermittent employees are included, as are any workers who are on paid sick leave, on paid holiday, or who work during only part of the specified pay period.”

If someone “temps” as a receptionist for a day, that is counted as a new job. Short-term or hourly work certainly doesn’t fit most Americans’ idea of what constitutes a job. We think of jobs as full-time employment with benefits — or at least some benefits and a guarantee of future employment for a period of time, even if it’s just two weeks notice. Ever since coming upon this definition, I have found myself in amazement each time “new jobs” figures were released. Counting temporary or part-time positions as employment is sad to the point of pathetic.

By Phillips’ calculations, realistic government data would reveal the unemployment rate to be between 9 and 12 percent, inflation at “7 or even 10 percent” and growth since the 2001 recession modest at best with recession already upon us once again.

Phillips cites a Gallup Poll released late in 2007 showing public faith in the federal government sinking “below even post-Watergate levels. Whether statistical deceit played any direct role is unclear.”

With all due deference to Phillips, what’s driving lack of faith in Uncle Sam is quite clear from where I sit. I’m sick of being lied to. I think we should all agree we’re not going to take it anymore. We want honest economic data, period, no matter how bad it is.

Anything less assumes us to be a public of idiots. Nothing less will suffice.

(Bonnie Erbe is a TV host and columnist. E-mail bonnieerbe(at)CompuServe.com.)

4 Responses to Lies, damn lies and economic stats

  1. Ardie

    April 18, 2008 at 2:56 pm

    The biggest lie of all is that free trade works. Kevin Philips is aware of this too. We have only to look at the phony Bush/Clinton/Bush economy for starters.

    Kevin Phillips has observed that the vested interest in behalf of free trade was “obviously beneficial to perhaps 10 to 15 percent of the population, detrimental to some 30 to 50 percent.” Joe Sixpack, the blue-collar worker with a high school education or less, worried about the destructive impact of low-cost import competition on jobs and living standards. [Opening America’s Market: U. S. Foreign Trade Policy since 1776 by Alfred E. Eckes Jr, 283.]

    But this problem was noticed much earlier.

    Sidgwick, a prominent political economist at Cambridge University, voiced concern in the 1880s that under a system of free trade dislocated manufacturing workers might experience difficulty finding employment at home “nearly as remunerative as that in which they were previously engaged.” Concern about free trade-related dislocations revived interest in a speech Karl Marx presented in 1848. He openly endorsed free trade because it would hasten the global social revolution. Said Marx: “the protective system of our day is conservative, while the free trade system is destructive. It breaks up old nationalities and pushes the antagonism of the proletariat and the bourgeoisie to the extreme point. In a word, the free trade system hastens the social revolution. It is in this revolutionary sense alone. . . . that I vote in favor of free trade.” [Opening America’s Market: U. S. Foreign Trade Policy since 1776 by Alfred E. Eckes Jr, 283.]

    Yep dear reader you read it right. As opposed to the American System of Hamiliton, Clay, etc. which protected American jobs and industries, Marx said free trade is destructive. It will hasten social revolution.

    So who are really the Communists in our midst?

  2. geb353

    April 17, 2008 at 10:54 am

    Thanks for this; these ‘figures’ have been a government fantasy since the ’60s.
    Well done.

  3. griff

    April 17, 2008 at 1:34 pm

  4. jarrodlombardo

    April 17, 2008 at 3:26 pm

    Grrrr… pissing off your audience in the first paragraph makes it harder for us to concentrate on the point of the article.
    http://www.wsu.edu/~brians/errors/bare.html
    –Jarrod