Cooking the books: An update

Slowly but surely, awareness is growing that government economic figures are being cooked.

Constant readers will recall the ball got rolling with a Kevin Phillips piece in the May Harper's, and has since been addressed in the New York Times, CNNMoney, and the Christian Science Monitor, with varying degrees of honesty and accuracy.

Now comes the San Francisco Chronicle with an extensive profile of Shadow Government Statistics impresario John Williams.  With his move from New Jersey to Oakland last year, the ShadowStats phenomenon is a local story for the Chronicle.  For the most part, the piece does him justice.  It's also the most serious attempt yet to get the government side of the story without completely dissing Williams as a conspiracy theorist (as NYT columnist David Leonhardt did, albeit not directly).  And since it's the power elite's push-back against those who don't buy the official numbers that interests us the most, it's what we'll address here.

The article points out that Williams has two somewhat interrelated concerns: That the changes made in the statistical measurements over the last several decades have made the numbers rosier than they really are, and that some of this has been politically motivated.

Most experts scoff at his
contention that economic data are grossly inaccurate. And they say his
claim that data are tampered with for political reasons is preposterous.

"The culture of the Bureau of Labor Statistics is so strong that
it's not going to happen," said University of Maryland Professor
Katherine Abraham, who headed the agency that produces employment and
inflation data during the Clinton administration.

Steve Landefeld, director of the
Bureau of Economic Analysis, the Commerce Department agency that
prepares quarterly GDP reports, said in an e-mail that "the bureau
rigorously follows guidelines designed to ensure its work remains
totally transparent and absolutely unbiased."

Um, no one accused the people who work up the numbers of being opaque and biased.  The changes in the statistical criteria that have been made over the years are there for all to see.  All Williams is charging is that those criteria are invalid and over time have distorted the true picture of the economy's health.  But give credit where it's due; some of his critics are capable of moving beyond straw-man arguments.

"All of those methodological
changes were made after academic economists did decades of research and
said they should be done," said UC San Diego economist Valerie Ramey, a
member of the Federal Economic Statistics Advisory Committee.

Still, even those who dismiss Williams concede he makes a few points worth considering.

Abraham rejects most of Williams' arguments. But, she said, "There may be grains of truth in some of what he's saying."

Alas, the grains must be so fine that the reporter didn't think it was worth getting into, so it's hard to pass judgment here.

He accused the current Bush
administration of taking advantage of a switch to monthly instead of
semiannual seasonal adjustment of job creation data to "bring the
number in where they want it," though he admitted he had no evidence.

Bureau officials said they were mystified by accusations that the
agency falsifies data. The 2003 shift to monthly seasonal adjustment of
jobs data "was recognized statistically as a better way," said
Assistant Commissioner Patricia Getz.

In any case, she noted, payroll figures are matched once a year with
tax records to produce an accurate tabulation of the number of jobs in
the economy.

Yes, but those once-a-year numbers aren't what get plastered across the front pages of newspapers and screamed out on CNBC.  And that's the whole idea.  Ditto for the various unemployment measurements.  The government still publishes many of the gloomy ones every month, but the headline number is what gets continually tweaked and twisted.  This is what sleazy government lawyers like to call "plausible deniability."

Anyway, give the Chronicle credit for a very thorough job of calling attention to Williams's work.  We'll put it in the plus column along with the CNNMoney piece and Kevin Phillips's original article in Harper's.

This battle is just getting started.  The more people who become aware, the fewer people who stand to be caught by surprise from the economic super-shocks around the corner.