How our government lies with statistics

I read an informative article in Harper's Magazine this month. "Numbers Racket" by Kevin Phillips details how the U.S. government distorts official statistics to fool the American public into thinking economic conditions are better than they really are. Herewith, some excerpts:

"...the use of deceptive statistics has played its own vital role in convincing many Americans that the US economy is stronger, fairer, more productive, more dominant, and richer with opportunity than it actually is.

The corruption has tainted... the monthly Consumer Price Index (CPI)... the quarterly Gross Domestic Product (GDP)... and the monthly unemployment figure...

...minor revisions in the data can mean major changes in household circumstances - inflation measurements help determine interest rates... and cost-of-living increases for wages, pensions, and Social Security benefits. And, of course, our statistics have political consequences too. Readers should ask themselves how much angrier the electorate might be if the media, over the past five years, had been citing 8 percent unemployment (instead of 5 percent), 5 percent inflation (instead of 2 percent), and average annual growth in the 1 percent range (instead of the 3–4 percent range)...

Let me stipulate: the deception arose gradually, at no stage stemming from any concerted or cynical scheme. There was no grand conspiracy, just accumulating opportunisms. As we will see, the political blame for the slow, piecemeal distortion is bipartisan—both Democratic and Republican administrations...

...starts after the inauguration of John F. Kennedy in 1961, when high jobless numbers marred the image of Camelot-on-the-Potomac and the new administration appointed a committee to weigh changes. The result, implemented a few years later, was that out-of-work Americans who had stopped looking for jobs—even if this was because none could he found—were labeled "discouraged workers" and excluded from the ranks of the unemployed, where many, if not most, of them had been previously classified...

Lyndon Johnson had orchestrated a "unified budget" that combined Social Security with the rest of the federal outlays. This innovation allowed the surplus receipts in the former to mask the emerging deficit in the latter...

(Richard Nixon) asked his second Federal Reserve chairman, Arthur Burns, to develop what became an ultimately famous division between "core" inflation and headline inflation. It the Consumer Price Index was calculated by tracking a bundle of prices, so-called core inflation would simply exclude, because of "volatility," categories that happened to he troublesome: at that time, food and energy.

The Clintonites also extended the Pollyanna Creep of the nation's employment figures. Although expunged from the ranks of the unemployed, discouraged workers had nevertheless been counted in the larger workforce. But in 1994, the Bureau of Labor Statistics redefined the workforce to include only that small percentage of the discouraged who had been seeking work for less than a year. The longer-term discouraged—some 4 million U.S. adults—fell out of the main monthly tally...

"All in all," Williams points out, "if you were to peel back changes that were made in the CPI going back to the Carter years, you'd see that the CPI would now be 3.5 percent to 4 percent higher"—meaning that, because of lost CPI increases, Social Security checks would be 70 percent greater than they currently are...

The real numbers, to most economically minded Americans, would be a face full of cold water. Based on the criteria in place a quarter century ago, today's U.S. unemployment rate is somewhere between 9 percent and 12 percent; the inflation rate is as high as 7 or even 10 percent...

Undermeasurement of inflation, in particular, hangs over our heads like a guillotine. To acknowledge it would send interest rates climbing, and thereby would endanger the viability of the massive buildup of public and private debt (from less than $11 trillion in 1987 to $49 trillion last year) that props up the American economy. Moreover, the rising cost of pensions, benefits, borrowing, and interest payments—all indexed or related to inflation—could join with the cost of financial bailouts to overwhelm the federal budget..."

Let me reemphasize what the author said above. This is not an indictment of the current Bush administration; the statistical fiddling goes back for decades and includes both Democrats and Republicans. It's not a conspiratorial plot - it's just the pandering of politicians. Overall the content of the article is rather scary, even for someone as jaded and cynical as I am. If you want to read more, go to the Harper's link above for a pdf file, or to THIS LINK for an easy to read transcription. Or don't. You might sleep better not knowing.