“Numbers Racket” is an interesting article by Kevin Phillips, originally published in Harpers. He maintains that the way we measure the deficit, inflation, unemployment and GDP (formerly “GNP”) has changed over the years in kind of a “Pollyanna creep”.
Phillips says that if we measured these things the way we did during the Carter Administration, that we would have a completely different notion of how well our economy is doing today. For example, had economists not changed the way the consumer price index is calculated, Social Security recipients would today receive 77% more in benefits than they do.
Here are some key statistics:
1: The deficit would be $200 billion higher than they admit to. This is due to the fact that they count excess payroll tax collections against general fund debt. Social Security is being used to hide much of the real deficit. This change was made under Lyndon Johnson to hide the true cost of the Vietnam War.
2. Inflation today would be at 12% based on pre-1983 criteria. (That’s more in line with my personal impression as I do our monthly budget.)
3. Unemployment would be at 9% had they not arbitrarily elected to exclude (1) part-time workers who are looking for full time employment, (2) “marginally attached” workers (those not looking for a job but who say they want one), and (3) “discouraged workers – those who could not find work and quit looking. (What would the rate be if they also counted those who joined the military as a last resort?)
4. In 1991 the concept of Gross National Product (GNP) was replaced by Gross Domestic Product (GDP) to eliminate rising U.S. international debt costs, which had become unpalatable. In addition, they “impute” certain aspects of our growth in GDP, such as the rental value of our homes and the value of a free checking account. Imputed income accounts for 15% of GDP. Growth under the old measurement and factoring in higher inflation would be closer to 1% during the Bush years, as opposed to the 3-4% they tout. That’s significant.
The majority of these changes happened under Reagan, Bush I and II, and Bill Clinton. While Phillips says there’s no conspiracy involved, that people from one administration to the next are merely serving their own ends, the net result has been to make things appear to be better than they are and to reinforce policies (and keep politicians in office) that are bad for our general well being.
Piece of Mindful 
Yup, the numbers are all whopperjod.
But at least we have the Misery Index!
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Trotsky: This is just another variation on the old song & dance routine “WE ARE BEING LIED TO!”
So what? People who know how to manage money don’t believe any numbers published by the government or any numbers published by Wall Street or any numbers published by corporations and certified by a hundred accountants. That’s how you lose money—-believing other people’s numbers and making decisions based on them.
What difference does it make to me if I’m told unemployment is 5% or 50%? What would that change in my life, my plans, my money management? What matters is that I have a job. It makes no difference to me if you don’t.
Or what difference does it make to me if I’m told inflation is 4.2% or 42%? What matters is that I can still buy what I need.
The bottom line here is taxes. So long as I am paying the same or less in taxes each year, the government can publish whatever fraudulent or incompetent numbers it likes to justify whatever fraudulent or incompetent programs it’s running. What matters is that I don’t have to pay for it.
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I’d love to play poker with you.
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