The “Make-Believe” Economy

Posted In: CPI, Economy, GDP, Inflation, Political Parties, Politicians, U.S. Government, Unemployment

Yesterday, I came across a post by FOX Business’ Elizabeth MacDonald that provides more ammunition to those who claim that the U.S. government manipulates economic data. In “EMac’s Stock Watch,” MacDonald talked about Kevin Phillips, a political and economic commentator for more than three decades, and a onetime Nixon strategist. She noted:

A generation ago Phillips wrote “The Emerging Republican Majority” which Newsweek magazine described as the “political bible of the Nixon administration,” and previously has dissected the fakery in the government deficit numbers- federal, budget, current account and trade deficits- where he says that essentially the country is living on “borrowed prosperity.”

Recently, Phillips released a new work and claims that we are living in a “make-believe” economy. MacDonald wrote:

Phillips, author of “Bad Money: Reckless Finance, Failed Politics and the Global Crisis of American Capitalism,” (Viking, April 2008), says that the government has manipulated economic numbers to create a “make-believe economy” over the last four decades. Phillips says that since the ‘60s, Washington bureaucrats from both sides of the political aisle have pulled the levers behind the scenes to overplay the vitality of the US economy…

Specifically, Phillips targets three of the most closely watched and what he says are highly manipulated economic measures: The consumer price index, which tracks inflation; the gross domestic product, which tracks the economy’s overall growth; and the monthly unemployment figure.

Phillips says that, once you vacuum out the nonsense, inflation is really at 5% (instead of 2%), average annual GDP growth is in the 1% range (instead of the 3% to 4% range), and unemployment is really at 8% (instead of 5%).

MacDonald’s post is a good read. Of particular interest are the parts where she talks in detail about how the federal government has “monkeyed around” with the economic data since the Kennedy administration.