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How Government Statistics Lie

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07/02/2003

Richard Benson explains in this piece -- Government Statistics: Lessons in Cooking and Spinning -- how most government statistics are fabricated, padded, tweaked, or otherwised pushed and squeezed to come out more favorably than what the data shows.  One example is that in the CPI, inflation is made to look lower by replacing house prices, which are inflating, with owner-equivalent rent.  Rents are falling, in part because of the housing bubble.  But when calculating personal savings, home price appreciation is counted as saving.  Besides being completely wrong from an economic standpoint (increases in the price of an asset that someone owns do not constitute savings), these adjustments make inflation look lower and savings look higher.

Our economic statistics could now fit in great works of fiction like Animal Farm, Brave New World, 1984, Fahrenheit 451, etc.  Because the government has “fixed a CPI problem” that wasn’t a problem we can lose jobs every month, and shrink the real economy, yet show real GDP growth and solid productivity gains.  Dishonesty or spin in government continues:  The US has economic and productivity growth that is guaranteed -  by definition; the US has 15% of GDP and Personal Income that is made up, “imputed”; and, a definition of savings that makes savings positive only because of the housing bubble.

 

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