When the President fired the Bureau of Labor Statistics commissioner on my birthday, it awakened some long dormant memories of my short time as a statistical economist.
First, let me state what would be obvious to anyone with a rudimentary understanding of the BLS process. Former Treasurer Secretary Larry Summers hit the nail on the head when he called the President’s accusation that the jobs report numbers were manipulated “a preposterous charge” on “This Week” speaking with George Stephanopoulos. “These numbers are put together by teams of literally hundreds of people following detailed procedures that are in manuals. There’s no conceivable way that the head of the BLS could have manipulated this number,” Summers said.
To someone who studied economics a lifetime ago (the 60s and 70s), our current President’s whining about the Federal Reserve and the BLS are eerily reminiscent of President Nixon’s pressuring of then Fed Chairman Arthur Burns: “You see to it: no recession.” Burns lowered interest rates despite rising inflation pressures and this was an important contribution to the infamous “stagflation” of the 1970s. “Here we go again,” as President Reagan might say.
Reagan himself, with his “fool’s errand” mad-hatter supply side policy (originally called “voodoo economics” by George H.W. Bush) started our long ascent into deficit mania by promoting the large tax cuts without corresponding spending cuts that led to large federal deficits in the 1980s. The ill-advised supply side theory was developed by one of my old teaching assistants when I was at Stanford, Art Laffer. It originated as a doodle on the back of a napkin in the Two Continents restaurant at the Hotel Washington in Washington, D.C. The napkin now resides in the National Museum of American History. It’s rather incredulous what little you need to do to make a contribution to our country’s history. Our current President’s Big Beautiful Bill is a redux of those heady days.
There is no doubt that the arcane physiology of statistics can be misused. When I was getting my Masters in Statistics, I recall a book How To Lie With Statistics by Darrell Huff that made the rounds among the students and led to several tongue in cheek wisecracks, but never did anyone who seriously studied econometrics hypothesize that the numbers purported to measure U.S. economic performance were intentionally falsified. Errors and imperfections inevitably occur, and that is why we have the dreaded revisions that so viscerally upset Donald “Antoinette” Trump and caused him to lash out in such a childish way.
Our National Income Accounts and the related numbers we use to gauge our economic performance were developed in the 1930s by Simon Kuznets who won a Nobel Prize for his efforts. There has always been a love-hate relationship between those economists who compile the numbers and the politicians who have to live with them. Never the less, the BLS data is considered the gold standard around the world among those who depend on accurate economic data to run their businesses and manage their economies. Sadly that may change depending on who takes over the job now that the current commissioner has been fired. Given that we have a drunk in charge of the defense department, a vaccine skeptic in charge of the nation’s health, and conspiracy theorists in charge of the FBI and the Director of National Intelligence, one wonders if we will soon have a mathmatically dyslexic BLS commissioner. Cuts in funding to the BLS have already increased the percentage of prices “imputed” rather than collected in actual surveys. Kill the messenger and cut the funding is not a recipe for accurate results. However, you and I will “feel” and “see” the results for ourselves at the grocery store and in the workplace. You can fool some of the people all of the time and all of the people some of the time but you can’t fool all of the people all of the time.
The Commerce Department eliminated two advisory committees on economic statistics gathering (see Marketplace). BLS received some additional funds in March as part of a continuing resolution; however the Trump budget proposal includes an 8% reduction in budget in nominal terms. The BLS, tasked with compiling the CPI as well as other labor market indicators (employment, wages) has been already stretched by stagnant funding colliding with escalating costs. Recently, this has affected compilation of the CPI. More and more prices are imputed. (Source: Financial Times) The graph shows the percentage of prices “imputed” in the CPI index.
I remember a movement in the 1960s known as “cliometrics” (also called the “new economic history” movement) that combined economic theory, quantitative methods, and historical data to uncover patterns and test hypotheses about historical economic processes. I wrote my senior thesis (lags in the effects of monetary theory) under Professor Robert Gallman, a visiting professor from UNC who was at the forefront of cliometrics. I learned then how important honest and accurate data is to guide economic policy and to assist businesses.
“Kill the messenger” is a bad practice because it punishes truth-telling, discourages honest communication, and leads to poor decision-making often with serious consequences for organizations, leaders, and societies. It is a practice rooted in denial and rage, not rationality. Leaders become isolated from reality. A culture of fear discourages people from speaking truth to power. It shifts attention away from real issues and encourages scapegoating rather than responsibility. It destroys trust, erodes morale and weakens long-term effectiveness.
A wise leader rewards candor and listens to inconvenient truths even when it hurts. Winston Churchill put it clearly: “The truth is incontrovertible. Panic may resent it, ignorance may deride it, malice may distort it, but there it is.”
It may have been Benjamin Disraeli who said: “There are three kinds of lies: lies, damned lies, and statistics.” Our economy will run better to the extent that we stick to the statistics prepared by the most competent organization possible. Anything less is a lie or a damned lie and it will not serve us well.