American institutions continue their slide into being a clown car with the firing of the director of the Bureau of Labor Statistics (BLS). Although the stock line appears to be that this is a dangerous step in a bad direction, that’s been true since before the inauguration. Nevertheless I would be more concerned by the continuous slide in data quality due to budget cuts and the secular decline in survey response rates. Data gathering is in a crisis even without this sacking.
Given that the President has now referred to drug price cuts of more than 1000% more than once, we do not need a lot of statistical voodoo to keep him happy. All the BLS needs to do is print the lede “The HOT US ECONOMY has created eleventy kabillion jobs in the past month! President TRUMP is WINNING in the economy in the exact same way as he does on the golf course!” and otherwise leave the guts of the report unchanged. Nobody in the White House would have the quantitative skills to notice that the employment sub-aggregates do not in fact add up to eleventy kabillion.
OK, that might be a slight exaggeration, but the people at the top are dumber than a sack of rocks. A few politically sensitive reports might get mangled, but it is entirely possible that one could read between the lines by cross-referencing to other data sources that nobody in politics or the right wing media cares about. The main plausible risk is that somebody asks a chatbot to generate all economic data reports, in which case all data would be just a jumble of random numbers. (If Elon Musk were still in good graces with the White House, it is a safe bet that would have happened before year end.) That outcome would force analysts to go to private sector data sources — although those too would likely by corrupted if they get too prominent.
This is a disaster if you are a believer in neoclassical economics, and think that the central bank is a benevolent central planner that keeps the economy on an optimal economic trajectory as it follows an inflation target. However, if you think capitalist economies largely stumble along fairly well until whacked by a recession or a policy error, then the loss of credible data will mainly be a problem for economic historians.
During an expansion, the financial sector is too complacent and complicit to care about the quality of most data. The exception might be the CPI: indexation on contracts is typically based on the CPI, and so a lot of people (like oldsters) may have kittens if too much damage has been done to the credibility of the report. The belief that the CPI is fake is already widespread in the right wing population (courtesy of various cranks), so it would not take much to generate outrage over attempts to lower CPI. Other data are fair game, particularly as good growth data will own the libs.
The finance sector might care more about general data quality if people get bushwhacked by an inflation spike or depression that had no warning signs in the official data. However, that is a crisis for the future.
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(c) Brian Romanchuk 2024
