Poor statistics plague economic planners

April 19, 1992|By Bill Hendrick | Bill Hendrick,Cox News Service

Washington -- Because the nation's chief enemy these days is red ink, President Bush has called on Congress to raise a bigger army of number-crunchers to keep closer tabs on the money you spend.

While demanding massive cuts from the Pentagon to battle mushrooming budget deficits, Mr. Bush wants to spend $200 million to find out more about you, your income and what you spend it on.

Uncle Sam also wants to know more -- and more quickly -- about wholesale and retail prices, factory production, inventories, trade and how, why and when businesses make hiring, firing and spending decisions.

Why? Because economic statistics are flawed, which makes forecasting harder. And unless they are improved, experts say, neither the captains of industry nor the president's

lieutenants can hope to rally the economy.

Mr. Bush's five-year Economics Statistics Initiative is aimed at righting wrongs caused by former President Ronald Reagan's raids on the coffers of statistical agencies to pay for his Strategic Defense Initiative.

Budgets for the biggest statistics mills -- the Bureau of Labor Statistics, the Census Bureau and the Bureau of Economic Analysis -- were cut 15 percent in the 1980s as the number of businesses, households and working people was exploding.

Although Washington's army of economists and statisticians still is 21,000 strong, as many as 1,000 lost their jobs.

"There were hiring freezes, people were encouraged to retire early, and programs were discontinued," said economist Larry Moran of the Bureau of Economic Analysis, which is housed in a creaky old building with elevators so slow that top officials routinely walk up and down three flights of steps.

The loss of so many experts, along with cutbacks that forced agencies to make do with outmoded technology, inflicted a heavy toll on the quality of data. Also, said Thomas J. Plewes, associate commissioner of the Bureau of Labor Statistics, the "shrinking resources came at a period when the economy was changing rapidly in terms of its structure."

The result -- fewer people to examine more data -- was like telling air controllers to track twice as many planes through a thickening fog. Experts say the agencies need more people and tools on a par with those the Pentagon used to drop bombs on Iraq.

It's a constant war to keep the economy moving, said Michael J. Boskin, chairman of the president's Council of Economic Advisers, and it can't be won without better weapons.

Unfortunately, many experts say today's economic radar is incapable of tracking very much. Economists who use the data for forecasts might as well be "shooting in the dark," said Joseph W. Duncan of Dun & Bradstreet Corp., formerly the government's chief statistician.

"If you have wrong information, you're going to have wrong policy," Mr. Duncan said. "People will make bad decisions."

Bad decisions by policy-makers may have caused the latest slump, Mr. Boskin said.

"Virtually none of us a year in advance saw the economy flattening out in 1991," he said. "Virtually everyone had the economy improving."

But it didn't. And, although the recession may have "technically" ended last spring, Mr. Boskin said, growth ever since has been so weak that most people can't see much improvement. Faulty data may be partly to blame.

"We found out the Labor Department had under-counted the unemployed by 650,000 in the first quarter of '91," Mr. Boskin said. "If we had known that, it might have led the Federal Reserve to be more aggressive sooner" in cutting interest rates to boost the economy. "It's vitally important that we have better economic intelligence."

In short, had the Fed known last spring what it found out in the fall, thousands of people who lost jobs last year might not have become casualties of the recession, consumer confidence might not be as low as it is, and the economy might be charging ahead.

Forecasting is "imprecise," Mr. Boskin said, and such mistakes as under-counting the unemployed -- which has never been explained -- make it even more difficult to diagnose the economy's ills.

That is why the Bush administration is pushing its plan to build a better statistics machine, even in the face of huge budget deficits. Over the next five years, the administration wants to hire more statisticians, devise new methods to measure a service-dominated economy and conduct more statistically valid surveys.

The goal, Mr. Boskin said, is to "improve the timeliness and the accuracy and the methodology and conceptual foundation of everything from better measurements of service-sector productivity to more timely measures of unemployment and employment, and more accurate measures of our international position."

That is a huge task, but the program is supported by Democrats as well as Republicans.

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