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Where Have You Gone, Joe McCarthy?

“Our nation turns its lonely eyes to you.” Not really… but I wonder what the Senator would say if he found out the U.S. government may be taking a page out of the Soviet playbook when it comes to suppressing information from the American public. No, this isn’t conspiracy mumbo jumbo. On March 1, 2008, the federal government will be shutting down the Economic and Statistics Administration’s website EconomicIndicators.gov, due to “budgetary constraints.” Forbes awarded the site a “Best Of The Web” designation and said:

If you don’t want to pay the fees for The Dismal Scientist, this is your next best bet for up-to-date U.S. economic data. This site is maintained by the Economics and Statistics Administration and combines data collected by the Bureau of Economic Analysis, like GDP and net imports and exports, and the Census Bureau, like retail sales and durable goods shipments. The site simply links to the relevant department’s Web site. This might not seem like a big deal, but doing it yourself–say, trying to find retail sales data on the Census Bureau’s site– is such an exercise in futility that it will convince you why this portal is necessary. Site may soon offer data delivery to wireless devices.

Then again, maybe it won’t. So, why would Uncle Sam want to close down this website? Last Wednesday, the blog Think Progress had this to say:

The U.S. economy is faltering. Family debt is on the rise, benefits are disappearing, the deficit is skyrocketing, and the mortgage crisis has worsened. Conservatives have attempted to deflect attention from the crisis, by blaming the media’s negative coverage and insisting the United States is not headed toward a recession, despite what economists are predicting… The Bush administration’s latest move is to simply hide the data…

In its e-mail announcement on the closing of Economic Indicators, the Department of Commerce acknowledged the “inconvenience” and offered “a free quarterly subscription to STATUSA ®/Internet™” instead. Once this temporary subscription runs out, however, the public will be forced to pay a fee. So not only will economic data be more hidden, it will also cost money.

It’s ironic that the Economic and Statistics Administration is facing “budgetary contraints,” considering Bush recently submitted a record $3.1 trillion budget to Congress for FY ‘09.

Lee Russ at Watching The Watchers added the following on the same day:

Budgetary restraints. Before you laugh yourself to death, think about the fact that the site only presents data already being collected by the BEA and Census. And that data will continue to be collected. Without the web site, however, it will be much harder for entities like newspapers to ferret out troubling data, i.e., data that makes it harder for the public to swallow the “all is good” pabulum doled out by the freight car-full.

Steve Benen at The Carpetbagger Report also picked up on this story, and took it a few steps further. He wrote last Wednesday:

How expensive could it be for the Economics and Statistics Administration to keep a website online? Probably not much, but the political costs of making embarrassing data easily accessible to the public is probably quite high.

As long-time readers may recall, I started keeping track of instances in which the Bush administration would hide inconvenient data quite a while ago. Some of my favorite examples include:

* In March, the administration announced it would no longer produce the Census Bureau’s Survey of Income and Program Participation, which identifies which programs best assist low-income families, while also tracking health insurance coverage and child support.
* In 2005, after a government report showed an increase in terrorism around the world, the administration announced it would stop publishing its annual report on international terrorism.
* After the Bureau of Labor Statistics uncovered discouraging data about factory closings in the U.S., the administration announced it would stop publishing information about factory closings.
* When an annual report called “Budget Information for States” showed the federal government shortchanging states in the midst of fiscal crises, Bush’s Office of Management and Budget announced it was discontinuing the report, which some said was the only source for comprehensive data on state funding from the federal government.
* When Bush’s Department of Education found that charter schools were underperforming, the administration said it would sharply cut back on the information it collects about charter schools.

Benen concluded that:

When public information conflicts with the White House’s agenda, the Bush gang has a choice — deal with the problem or hide the information. Guess which course they prefer?

For me, perhaps the most significant example of the U.S. government not wanting to share economic data was the discontinuation of the M3 monetary aggregate by the Board of Governors of the Federal Reserve System in March 2006. Back on March 31, 2006, Jim Jubak at MSN Money wrote, “Fed kills a key inflation gauge,” and said that that the death of M3, the most-inclusive measure of U.S. money supply growth, deserved “headline treatment.” Why? According to Jubak:

Because inflation (unless you’re a strict monetarist) has two causes:

Cause 1: Prices go up when demand exceeds supply. This is the kind of inflation the Federal Reserve under Alan Greenspan and Ben Bernanke has targeted and is working to control with interest-rate increases that are intended to reduce demand in the economy to non-inflationary levels.

Cause 2: Growth in the money supply produces inflation as the price of money itself fluctuates with changes in the supply and demand for money.

Therefore, increase the supply of dollars, then each dollar is worth less, and more are required to buy the same amount of goods as before.

Jubak added:

This monetarist view of the link between growth in the money supply and growth in inflation was once part of mainstream thinking at the U.S. Federal Reserve. The great monetarist economist Milton Friedman said, “Inflation is always and everywhere a monetary phenomenon.” That view was echoed in policy at the U.S. Fed when then-chairman Paul Volcker starved the inflation of the late 1970s by tightening the money supply.

But the Fed — under Greenspan, and so far under Bernanke — has behaved as if money supply growth didn’t matter and as if price inflation were all that mattered. Even as they have raised interest rates in an effort to slow the economy and reduce demand, they’ve continued to let money supply grow at close to double-digit rates.

That was March 2006. Where is M3 at today? Thankfully, economist John Williams has reconstructed M3, and his data reveals a 15%-plus level of annual growth in his ongoing estimate of M3, which he displays in a chart on his Shadow Government Statistics website. Whoaaa! Take one look at that chart, and you’ll see why the government wanted M3 discontinued.

Like I said before, I’m not one for conspiracies. Neither is Jubak. He said:

I’m not generally a believer in Federal Reserve conspiracy theories. But in this instance, the conspiracy theorists make an intriguing point. The Federal Reserve decided to kill off M3, they argue, because it is the measure that shows the fastest growth in the money supply… Certainly, getting rid of M3 makes it harder to argue that the short-term inflation fighters at the Federal Reserve are actually very soft on long-term inflation. Maybe so soft that you could say they love long-term inflation…

So, why would the Fed want to hide money supply data? Jubak explained:

Although the Federal Reserve may be correct when it argues that there isn’t a tight connection between inflation and growth in the money supply over the short-run, the data does argue, convincingly in my opinion, for a connection in the long run. In the long run, countries with faster-growing money supplies experience higher inflation.

And even worse, if the money supply grows fast enough, it provides the liquidity required for the runaway growth of asset bubbles, like the stock market in 2000. And, some would argue, like the U.S. real-estate or credit markets now.

Come March 1, don’t expect any headlines about the demise of EconomicIndicators.gov. Don’t look for any press conferences either— unless the “reporters” are federal employees. Do, however, be prepared to play hide-and-go-seek if you want to get a clearer picture of the U.S. economy.