Flaw in US Data Overstates Growth, Productivity

[Celebration]

http://www.cnbc.com/id/33786428

(crossposted from Economy)

NY Times

A widening gap between data and reality is distorting the government’s picture of the country’s economic health, overstating growth and productivity in ways that could affect the political debate on issues like trade, wages and job creation.

The shortcomings of the data-gathering system came through loud and clear here Friday and Saturday at a first-of-its-kind gathering of economists from academia and government determined to come up with a more accurate statistical picture.

The fundamental shortcoming is in the way imports are accounted for. A carburetor bought for $50 in China as a component of an American-made car, for example, more often than not shows up in the statistics as if it were the American-made version valued at, say, $100. The failure to distinguish adequately between what is made in America and what is made abroad falsely inflates the gross domestic product, which sums up all value added within the country.

American workers lose their jobs when carburetors they once made are imported instead. The federal data notices the decline in employment but fails to revalue the carburetors or even pinpoint that they are foreign-made. Because it seems as if $100 carburetors are being produced but fewer workers are needed to do so, productivity falsely rises — in the national statistics.

[Barack_America]

1. K&R.

This is an eye-opening article, to say the least.

[Barack_America]

2. Kicking again.

Was this already on GD? I have a hard time thinking something so important would get so little recognition otherwise.

:shrug:

[AllentownJake]

3. People don't like reality on here some days

K&R

[Barack_America]

4. This woke me up more than my second cup of coffee.

:wow:

[AllentownJake]

8. Nothing really new

The government has been manipulating GDP statistics for years to show growth. Just like they have been manipulating unemployment statistics.

[Barack_America]

21. I'm sad to admit it, but it's new to me.

Counting imports and downsizing as a PLUS to the GDP and Productivity? And not even having the tools to separate true domestic production from this mess?

It's really no wonder at all why our manufacturing sector has taken such a hit. Downsizing makes money for the corporations on both ends, the bottom line and the stock market (both in the company stock specifically and overall market growth).

[annabanana]

30. I suspect that it seems like a "bloodless" issue to people who

don't value statistics, understand finance, or realize they have a dog in the fight.

[lildreamer316]

40. Everyone has a dog in this fight.

Anyone who doesn't realize that is really not paying attention..but we knew that already; I believe.

[Barack_America]

5. Summary: the US counts imports as part of its GDP.

And, therefore, foreign labor as part of our "productivity".

The importation of goods and labor is propping our country up.

I'm no economics whiz, but that's a problem.

[Celebration]

6. it sorta made me

LOL, but not in a good way.

[Barack_America]

7. Lol in a, "whoo boy, we are fucked" kind of way?

Yeah, me too.

[joeycola]

9. Whow. thanks for the post.

[akwapez]

10. K&R

[Brickbat]

11. This helps explain the complete and utter chasm in perception between office-sitting economists who

give papers and the rest of us who are trying to make a living down here.

[peace13]

12. I can't remember the last time we were given an accurate accounting from the feds.

My guess, it has been at least ten years.

[annabanana]

31. When did they start diddling with the COLA figures? You know,

. . when they decided that the cost of telephone service was a better indicator than, say food and utilities?

[Wapsie B]

13. Ok, stupid question time here.

Those in charge of putting out these statistics and their underlings actually gathering this data are not uneducated people. I'm sure some have gotten past at least the 8th grade. Shouldn't they of all people know that the books are cooked no matter if you're talking about the GDP or unemployment stats for any given period?
Or are they given the end result desired by their political bosses and frame the data to support those political needs?

[AllentownJake]

14. It has been a slow fraud cooking over many years

They constantly change the way they make these statistics. If you look at the way it was done in 1980 compared to the way it is done in 2009 you'd see a drastic change.

The reason is simple, they start seeing trends they don't like so they change the rules to make it so the trends don't make it to the report.

They do this with every statistic. Kind of like Soviet Russia and both political parties are involved in it.

[rucky]

17. Not a stupid question at all.

Probably the most courageous question we can ask about this issue. I think there's been an undercurrent from the powers that be who fear that if the public knew the whole truth, they'd be out in the streets en masse. And they're probably right.

[Romulox]

20. They leverage our inflated GDP to borrow more money to funnel back to the corps. (e.g. TARP). nt

[Sinti]

15. K&R n/t

[seemunkee]

16. My father worked on computing GDP numbers for the Commerce Dept

This was back in the 70s but I remember him talking about having to alter his figures for various reasons that had nothing to do with his research. Other peoples bad estimates, policy decisions etc. It pissed him off but that was the way it was.

[Mari333]

18. in other words, we are being bullshitted again

people on main street already knew that.

[Romulox]

19. Ever notice that none of DU's "economists" will ever comment on a thread like this?

That's really odd. :shrug:

[Dreamer Tatum]

23. Anyone who thinks NIPA is straightforward and not subject to any sort of interpretation

should give it a try sometime. Counting the total value of goods and services in the biggest, most complex economy in the world is a little more difficult than counting marbles.

[Romulox]

24. The article wasn't about computational errors, it was about a flawed metric.

At any rate, it becomes obvious is that the only thing that is ever "certain" in the world of economics is that multinational corporations must have more taxpayer money, else there will be ARMAGEDDON! After this prediction, the prognosticative powers of the economist are spent, and everything becomes "subject to interpretation." :shrug:

[Dreamer Tatum]

26. Not the point, but nevermind nt

[Romulox]

27. That's because "economics is hard" isn't much of a point. Try a better subject-changer.

This is the "economist" who's come to defend this pseudo-science? :shrug:

[Dreamer Tatum]

35. I said "nevermind" because you have an agenda. Agendas are immune to reason.

So, nevermind.

A fruitful discussion can be had about things like sampling error, double counting, methods of accounting for exchange rate fluctuations, discounting, and so forth, but there is no fruitful discussion to be had here in general, and with you in particular.

[Romulox]

39. Everybody has an agenda. It's silly to pretend otherwise.

And I am sure that we are all the poorer for the fact that you can't be bothered to make any point on the subject set out in the OP. :silly:

[markbark]

22. Further proof that most economists have no idea what the real world looks like

Further proof that most economists have no idea what the real world looks like
Quote - "A carburetor bought for $50 in China as a component of an American-made car, for example, more often than not shows up in the statistics as if it were the American-made version valued at, say, $100."
There hasn't been a carburetor installed in a new car in the last fifteen years. Perhaps if they were talking about computer controlled fuel injection systems they would have a little more credibility.
The US manufacturing base started its die off in the 80's under Reagan and Bush I and shuffled off its mortal coil under Dubya.
To avoid imports one must first have a manufacturing base, no?
That's not to say that things are not made in America any more.
Unfortunately the thing that we're making the most these days is "shit up"

--MAB

PS re-reading this before posting. If you detect snarkyness/anger, please take that as directed against the NY times, NOT Celebration, thx.

[surrealAmerican]

25. It's sad because accurate statistics could be useful ...

... but instead we get propaganda designed to encourage foreign investment. It's good to see the Times publishing this, but I don't have much hope that anything will be done about it. The stakes are just too high.

[Barack_America]

28. What sticks out at me is that this is a deliberate flaw, the the American govt.

...That is intended to stack the numbers against the American worker.

It is both infuriating and saddening.

[orwell]

29. The data has been fundamentally flawed...

...for 3 decades.

Not only that, the basic notion that numbers can model the well being of a society is flawed as well.

Economics has devolved into a pseudo-science.

[redqueen]

32. "Economics has devolved into a pseudo-science."

Pretty much.

K&R

[Romulox]

34. I don't think economics was ever anything but...the only difference is that modern

commentators tried in earnest to elevate economics to the level of science seemingly by sheer power of will alone.

Unfortunately, aside from the fact that they do not employ the scientific method in any meaningful way, mainstream economists do no better at predicting the movements of markets than anybody else (mere chance?). Which further erodes any claim that what is taught in economics departments is "science". It's basically just the justifications of the "haves"--the modern version of "I'm successful because god wills it!"

[Ron Green]

33. (Cross posted from elsewhere) - We've been sold an unsustainable LIFESTYLE.

Even a "modest" middle-class level of consumption, by American standards, is good for only a few decades, and then only on the backs of subsistence workers (slaves, sharecroppers, migrants, now foreign factory workers) and the depletion of non-renewable resources.

They cooked the books long enough to fool two or three GENERATIONS of Americans into thinking this is all normal.

[Jim__]

36. The GDP value added is that the importer paid China $50 ...

... then turned around and re-sold the carburetors for $150. Our value added is $100. :smoke:

[Barack_America]

37. If only American workers saw any of that money.

:(

[girl gone mad]

38. This is precisely the point I try to convey..

whenever someone pulls up the export/import data to support free trade. The numbers are highly flawed because we often count the total price of a product finished in the U.S. toward exports, even if all of the components that make up this product were manufactured outside of the U.S. As a result, we have a very skewed picture of the current state of domestic manufacturing.

[Barack_America]

41. Does use of the dollar as oil currency contribute to this?

Just curious. You seem to know a lot about this topic.

[leveymg]

42. This may explain a lot about why the US auto industry is failing - apparently, American cars still

use carburetors.

Carburetors?