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Lies, Damn Lies and Statistics

James Surowiecki writes in the New Yorker that Bush is manipulating government statistics for political gain.

He begins by telling how Simon Kuznets invented the national income accounts:

Though crude by modern standards, it was the first reliable measure of national economic performance in American history. Within a few years, the Commerce Department had invented the gross national product and had started analyzing the economy by industry and region…

He then claims that this increase in economic number gathering has been remarkably beneficial:

…the economy depends on these numbers; they make business smoother and policy smarter. (Recessions after the Second World War, for instance, have lasted about half as long as recessions before it.)

The claim about milder recessions is true. And it’s not just recessions. Economic fluctuation is dramatically milder over the last fifty years than over the previous fifty. But I’m skeptical about the claim that this improvement in economic performance is due to better data. I’ve always believed it to be due to a better understanding of the role of the central bank in a modern economy and I give Milton Friedman (with help from Anna Schwartz) a lot of the credit. That may not be right. But I don’t see how the immense number-gathering army of the government has played a positive role. It has been good, generally for economists. It gives us some grist for our mills. And it’s hard to improve the performance of the economy if you don’t have any idea of how it’s doing. But I think a persuasive case could be made that government statistics have hampered economic performance. One example is the trade deficit. The focus on the trade deficit hampers good economic policy.

Surowiecki then goes on to give examples of Bush’s malfeasance:

Statistical expediency and fiscal obfuscation have become hallmarks of this White House. In the past three years, the Bush Administration has had the Bureau of Labor Statistics stop reporting mass layoffs. It shortened the traditional span of budget projections from ten years to five, which allowed it to hide the long-term costs of its tax cuts. It commissioned a report on the aging of the baby boomers, then quashed it because it projected deficits as far as the eye could see. The Administration declined to offer cost estimates or to budget money for the wars in Afghanistan and Iraq. A recent report from the White House’s Council of Economic Advisers included an unaccountably optimistic job-growth forecast, evidently guided by the Administration’s desire to claim that it will have created jobs.

I really like James Surowiecki. He is one of the top two or three journalists writing on economics. He is consistently interesting and educational. He has a book coming out, The Wisdom of Crowds, that I suspect I will like a great deal. But this indictment of the Bush Administration is disappointing. I was expecting to read that Bush had leaned on the bureaucrats to redefine unemployment or some such measure in order to look good in November. But except for the BLS example, Surowiecki’s examples are examples of where the Administration has made inaccurate forecasts that led to more palatable political results. That’s a good reason to ignore most forecasts but it doesn’t threaten our macroeconomic well-being. Pardon my cynicism, but “statistical expediency and fiscal obfuscation” are a bipartisan perennial problem with every administration. Surowiecki admits as much, but I don’t see much evidence of the expediency part being worse these days than in the past. If anything, those CEA forecasts will haunt the President politically if they don’t come true.

As for the BLS not reporting mass layoffs, the implication is that the data are being censored or no longer being collected. Nope. Here they are. Maybe they just don’t issue them with as much fanfare.


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