Cooking the Books on Economic Indicators

Michael Boskin tore into the Obama administration for the way they distort figures to lie to the public. Socialists and communists use and have used the same tricks, as if touting fake statistics will make the people feel a little less miserable.

Wall Street Journal: Politicians and scientists who don’t like what their data show lately have simply taken to changing the numbers. They believe that their end—socialism, global climate regulation, health-care legislation, repudiating debt commitments, la gloire française—justifies throwing out even minimum standards of accuracy. It appears that no numbers are immune: not GDP, not inflation, not budget, not job or cost estimates, and certainly not temperature. A CEO or CFO issuing such massaged numbers would land in jail.

The late economist Paul Samuelson called the national income accounts that measure real GDP and inflation “one of the greatest achievements of the twentieth century.” Yet politicians from Europe to South America are now clamoring for alternatives that make them look better.

A commission appointed by French President Nicolas Sarkozy suggests heavily weighting “stability” indicators such as “security” and “equality” when calculating GDP. And voilà!—France outperforms the U.S., despite the fact that its per capita income is 30% lower. Nobel laureate Ed Prescott called this disparity the difference between “prosperity and depression” in a 2002 paper—and attributed it entirely to France’s higher taxes.

With Venezuela in recession by conventional GDP measures, President Hugo Chávez declared the GDP to be a capitalist plot. He wants a new, socialist-friendly way to measure the economy. Maybe East Germans were better off than their cousins in the West when the Berlin Wall fell; starving North Koreans are really better off than their relatives in South Korea; the 300 million Chinese lifted out of abject poverty in the last three decades were better off under Mao; and all those Cubans risking their lives fleeing to Florida on dinky boats are loco.

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America has not been immune from this dangerous numbers game. Every president is guilty of spinning unpleasant statistics. President Richard Nixon even thought there was a conspiracy against him at the Bureau of Labor Statistics. But President Barack Obama has taken it to a new level. His laudable attempt at transparency in counting the number of jobs “created or saved” by the stimulus bill has degenerated into farce and was just junked this week.

The administration has introduced the new notion of “jobs saved” to take credit where none was ever taken before. It seems continually to confuse gross and net numbers. For example, it misses the jobs lost or diverted by the fiscal stimulus. And along with the congressional leadership it hypes the number of “green jobs” likely to be created from the explosion of spending, subsidies, loans and mandates, while ignoring the job losses caused by its taxes, debt, regulations and diktats.

The president and his advisers—their credibility already reeling from exaggeration (the stimulus bill will limit unemployment to 8%) and reneged campaign promises (we’ll go through the budget “line-by-line”)—consistently imply that their new proposed regulation is a free lunch. When the radical attempt to regulate energy and the environment with the deeply flawed cap-and-trade bill is confronted with economic reality, instead of honestly debating the trade-offs they confidently pronounce that it boosts the economy. They refuse to admit that it simply boosts favored sectors and firms at the expense of everyone else.

Rabid environmentalists have descended into a separate reality where only green counts. It’s gotten so bad that the head of the California Air Resources Board, Mary Nichols, announced this past fall that costly new carbon regulations would boost the economy shortly after she was told by eight of the state’s most respected economists that they were certain these new rules would damage the economy. The next day, her own economic consultant, Harvard’s Robert Stavis, denounced her statement as a blatant distortion.

Read the entire article, if you can stomach it. In his mind, Obama probably feels perfectly justified in lying to the American people on a daily basis. The ends (socialism) justifies the means. And as we all know there’s nothing he won’t do to ram through his radical agenda and fundamentally transform America.