Hard numbers: The economy is worse than you know

[flvegan]

By Kevin Phillips, Harper's Magazine
Published Friday, April 25, 2008 5:40 PM

Ever since the 1960s, Washington has gulled its citizens and creditors by debasing official statistics, the vital instruments with which the vigor and muscle of the American economy are measured.

The effect has been to create a false sense of economic achievement and rectitude, allowing us to maintain artificially low interest rates, massive government borrowing, and a dangerous reliance on mortgage and financial debt even as real economic growth has been slower than claimed.

The corruption has tainted the very measures that most shape public perception of the economy:

• The monthly Consumer Price Index (CPI), which serves as the chief bellwether of inflation;

• The quarterly Gross Domestic Product (GDP), which tracks the U.S. economy's overall growth;

• The monthly unemployment figure, which for the general public is perhaps the most vivid indicator of economic health or infirmity.

Not only do governments, businesses and individuals use these yardsticks in their decisionmaking, but minor revisions in the data can mean major changes in household circumstances — inflation measurements help determine interest rates, federal interest payments on the national debt, and cost-of-living increases for wages, pensions and Social Security benefits.

And, of course, our statistics have political consequences too. An administration is helped when it can mouth banalities about price levels being "anchored" as food and energy costs begin to soar.

The truth, though it would not exactly set Americans free, would at least open a window to wider economic and political understanding. 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).

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Interesting read. Couldn't find a link at Harper's, so:

http://www.tampabay.com/news/article473596.ece

I need to reread the article, but I was intrigued by the "Pollyanna Creep"

[mainegreen]

1. Shadow Government statistics baby

http://www.shadowstats.com/alternate_data

Scary shit.

[mac2]

3. Cute.

Does this baby count by blocks yet?

[mac2]

2. The real unemployment numbers are higher than reported

since they don't count the discouraged job hunters, not covered by unemployment benefits, and the "under employed".

The cost of living index has been altered by removing food and gas...housing increases. This is the index which determines wage and benefit increases. It has been tampered with since Bush.

There would be soup kitchen lines but because of welfare and food stamps there are none like years ago. If it get worse those programs may fail. Charity groups are complaining they don't have enough food to feed the demand right now.

http://images.google.com/images?hl=en&q=Soup+kitchen+lines+photo&um=1&ie=UTF-8

This is unacceptable in the richest country in the world. Billionares thrive while others go hungry (they get rich on workers and tax payers). That is not democracy at it's finest.

[unblock]

5. unemployment benefits are not relevant to the unemployment numbers

but your other points are correct. unemployment number are done by survey and whether or not you qualify for or are receiving unemployment benefits does not influence the numbers in any way. it is correct, though, that employment/unemployment doesn't fully capture the variety of employment, e.g., multiple jobs, part-time vs. full-time, etc.

[mac2]

8. If you don't get the benefit of unemployment insurance

you can't collect unemployment when being laid off for 26 weeks or whatever time is law at that time. Sometimes it is extended in times of high unemployment. The numbers count the unemployment insurance collected not the number of unemployed. They wouldn't have a way of knowing otherwise.

[unblock]

9. nope. this is a common myth, but it's wrong. unemployment numbers are done by survey.

http://www.bls.gov/cps/cps_htgm.htm

Some people think that to get these figures on unemployment the Government uses the number of persons filing claims for unemployment insurance (UI) benefits under State or Federal Government programs. But some people are still jobless when their benefits run out, and many more are not eligible at all or delay or never apply for benefits. So, quite clearly, UI information cannot be used as a source for complete information on the number of unemployed.

Other people think that the Government counts every unemployed person each month. To do this, every home in the country would have to be contacted--just as in the population census every 10 years. This procedure would cost way too much and take far too long. Besides, people would soon grow tired of having a census taker come to their homes every month, year after year, to ask about job-related activities.

Because unemployment insurance records relate only to persons who have applied for such benefits, and since it is impractical to actually count every unemployed person each month, the Government conducts a monthly sample survey called the Current Population Survey (CPS) to measure the extent of unemployment in the country. The CPS has been conducted in the United States every month since 1940 when it began as a Work Projects Administration project. It has been expanded and modified several times since then. As explained later, the CPS estimates, beginning in 1994, reflect the results of a major redesign of the survey.

There are about 60,000 households in the sample for this survey. The sample is selected so as to be representative of the entire population of the United States. In order to select the sample, first, the 3,141 counties and county-equivalent cities in the country are grouped into 1,973 geographic areas. The Bureau of the Census then designs and selects a sample consisting of 754 of these geographic areas to represent each State and the District of Columbia. The sample is a State-based design and reflects urban and rural areas, different types of industrial and farming areas, and the major geographic divisions of each State.

[unblock]

6. unemployment benefits are not relevant to the unemployment numbers

but your other points are correct. unemployment number are done by survey and whether or not you qualify for or are receiving unemployment benefits does not influence the numbers in any way. it is correct, though, that employment/unemployment doesn't fully capture the variety of employment, e.g., multiple jobs, part-time vs. full-time, etc.

[unblock]

7. unemployment benefits are not relevant to the unemployment numbers

but your other points are correct. unemployment number are done by survey and whether or not you qualify for or are receiving unemployment benefits does not influence the numbers in any way. it is correct, though, that employment/unemployment doesn't fully capture the variety of employment, e.g., multiple jobs, part-time vs. full-time, etc.

[MiniMe]

10. I was surprised to check this on snopes and found that you are correct

I still think the government is cooking the stats though.

[unblock]

11. you betcha they are.

don't mistake my picking of one nit as disagreeing with the primary point.

the figures are distorted, just not in that particular way.

[stubtoe]

4. The true numbers Phillips provides sound a lot more like it.

Phillips is one of the few Republicans I have come to respect. Probably because so few Republicans actually tell the truth.