Why Jefferson Is Rolling In His Grave

Posted In: CPI, Economic Indicators, Economy, Inflation, Politicians, President Bush, Social Security, U.S. Government

Information is the currency of democracy.

-Thomas Jefferson (3rd President of the United States. 1743-1826)

I’m not aware of the context in which Thomas Jefferson said this. However, the governing body which Mr. Jefferson helped establish should take a cue from this statement. Mark Lieberman, senior economist for the FOX Business Network, wrote earlier today:

The government has come up with a novel solution to the steady drumbeat of bad economic news: Reduce funding for the agencies which produce and publish the data.

According to the economist, the Bureau of Labor Statistics has been forced to terminate all hours and earnings data reported for local areas, as well as payroll employment for 65 small metro areas. In addition to wiping out some local data, the Bush Administration’s 2009 budget proposal that was submitted to Congress in February ignores a request for funding to update samples for the housing portion of the consumer price index (CPI). Housing represents about 40% of the CPI, which, among other things, is used to determine the annual cost of living increase for Social Security recipients. Lieberman said that the BLS, which compiles CPI, uses a housing sample based on the 1990 census, and will continue to do so as the result of budget constraints.

So, why should you care? The former manager of economic analysis and research at Washington Mutual wrote:

There could be an ulterior motive to the funding cuts, according to Dean Baker, an economist and co-director of the Center for Economic Policy Research, who suggested the updated CPI sample would show more rapid inflation.

… and that Social Security recipients may be getting stiffed on their cost of living increases.

According to the BLS website:

The quality and quantity of some BLS data will be diminished, as fewer resources are available to collect and review data or to perform data analysis. This will result in lowered response rates, fewer published estimates, and a loss of detail in many data series.

The National Association for Business Economics (NABE) added:

With the economy in or on the brink of recession, everyone from Wall Street to Main Street is focused on reports of current economic indicators. Just when reliable and timely indicators are needed most, resources devoted to their production at our federal statistical agencies have been cut, requiring the termination of data series or a reduction in sample sizes used to produce the data.

As I noted back on February 17, this doesn’t appear to be the first time the government is trying to hide bad economic data. As Lieberman concluded: