Economic Statistical Hackery

2010 December 19 by Frank Monaldo.

Economies are gigantic beasts, growing, shrinking and wreathing in sometimes unexpected ways. Government policies can have a profound effect on employment and growth, but the best policies can be thwarted by external effects or the natural business cycle. Similarly, the winds of growth can mask even the poorest steering of the ship of state. Part of the skill of political operatives is to spin economic statistics to make political opponents look foolish and political allies appear wise. The creative use of economic statistics is often internally inconsistent and often unintentionally humorous.

A comparison of the Democratic rhetoric during the President Bush and President Obama Administrations is illustrative. The graph below shows the actual non-farm payroll from the tail end of the 1990’s to the present.

A equitable description these data was that strong economic growth during the Clinton years drove employment numbers steadily upward. This growth was buttressed by the Internet “Dot Com’’ boom. This boom collapsed at the end of Clinton’s term. During the early months of the Bush Administration, a recession began. The recession was exacerbated by the uncertainty following the 9/11 attacks. Whether because of the Bush tax cuts or not, a couple of years later employment, a lagging economic indicator began a steep rise. This rise continued unabated until 2008. The severe financial crisis associated with collapse of the housing market and credit default swaps initiated the steep decline we are in now. When President Obama came into office we were still in a steep decline. The employment numbers stopped their drop, but there has yet to be significant increase. Whether Obama’s policies accelerated or abated this decline is not directly answered by the graph.

Judging presidents by the change in economic conditions as measured from the moment they entered office is usually not fair. Most times the earliest time a president can directly impact an economy is his first year budget, which will not go in effect until October following inauguration in January. New tax law usually does no go into effect until the following January. The consequences of the policy will take some time to be felt through the economy. Even though Barack Obama had his stimulus package enacted in February after inauguration as an emergency measure, one would still expect there to be some lag time before effects are observed.

In light if the graph above, it is interesting to return to 2003 to see what Democrats were saying about Bush’s economic policies. According to the Democratic Senate Staff Budget Committee:

“Under the Bush administration, we are seeing the slowest economic growth of any administration in 50 years. Economic growth has averaged an anemic 1.6% since the President took office.’’

Measuring, as the Senate Staff Budget Committee did, from the beginning of the Obama Administration as the Democratic Senate Committee, we could note that the Obama Administration achieved even slower growth average of 1.3%.

That same committee wrote in 2003:

“Disturbingly, 3.1 million private sector jobs have been lost since January 2001, and more than 300,000 jobs have been lost in five consecutive months of decline from January 2003 to June 2003. Between January 2001 and June 2003, the unemployment rate has climbed by 2.3 percentage points. The Bush administration is on track to be the first administration in 70 years – since Herbert Hoover during the Great Depression – to experience a decline in private sector jobs over its term in office.”

If we were to indulge in similar hackery we could accurately write that: Under Obama, the unemployment rate as climbed to a high of 2.4% above what is was when he entered office and remains 2.1% above what he inherited. A total of 3.9 million jobs have been lost (more if we count only the private sector). The US will have to experience extraordinary economic growth for the Obama Administration to achieve a net increase in jobs over this term.

Perhaps it is unfair to pick on the Democrats in this regard, except for the fact that they often generate the factoids that are picked up uncritically by the press. The Democratic Senate Staff Budget Committee was certainly aware that they were deliberately spinning the facts in an unfair way. There is no excuse for such hackery for either party.

Posted in Politics, Economics | Print | No Comments »