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Uncle Sam's Phony Economic Numbers

Written By Brian Hicks

Posted May 19, 2008



In case you haven’t noticed lately, there is something of a gigantic disconnect between the realities that consumers face every day and the statistics on inflation that the government is kind enough to provide us with.

Some might call it simply an apples and oranges comparison, but I’d called it more like apples and kangaroos these days— that’s how big the gulf is between the two.

I mean does anyone seriously believe that inflation is checking in at only 2.6% these days? Of course not, because it just doesn’t square with the eyeball test.

Nonetheless, that is exactly the number the government used last month when it calculated the first quarter GDP. The result was that economic growth checked in a paltry 0.6% using the bogus number.

So according to the official government number, a quarter of negative growth was narrowly avoided. Go figure.

But the truth is that the number was as phony as the government that put it out.

That’s because for years now, the government has been skewing key economic numbers to its benefit wherever possible—especially the inflation figures.

In fact, things have gotten so bad now that if we were to actually use the methods that were in place only 25 years ago, inflation would actually be running at 7-10% annually.

That’s not a typo. In fact, if you ask me it is much closer to reality.

But since those truths are too hard for politicians to face, they massage those figures until they get to numbers that are a bit more palatable.

The result is a lie that doesn’t quite jibe reality—-hence the gigantic disconnect.

But there’s more…. a whole lot more….. when it comes to the government and their phony numbers. The fix is in on all them that matter.

Here’s a great, but sobering look at the truth of the matter. I’ve excerpted here, but it should absolutely be read in total.

It’s a piece by Kevin Phillips in Harper’s Magazine entitled: Hard Numbers: The economy is worse than you know.

"Ever since the 1960s, Washington has gulled its citizens and creditors by debasing official statistics, the vital instruments with which the vigor and muscle of the American economy are measured.

The effect has been to create a false sense of economic achievement and rectitude, allowing us to maintain artificially low interest rates, massive government borrowing, and a dangerous reliance on mortgage and financial debt even as real economic growth has been slower than claimed.

The corruption has tainted the very measures that most shape public perception of the economy:

• The monthly Consumer Price Index (CPI), which serves as the chief bellwether of inflation;

• The quarterly Gross Domestic Product (GDP), which tracks the U.S. economy’s overall growth;

• The monthly unemployment figure, which for the general public is perhaps the most vivid indicator of economic health or infirmity.

The truth, though it would not exactly set Americans free, would at least open a window to wider economic and political understanding. Readers should ask themselves how much angrier the electorate might be if the media, over the past five years, had been citing 8 percent unemployment (instead of 5 percent), 5 percent inflation (instead of 2 percent), and average annual growth in the 1 percent range (instead of the 3-4 percent range).

The real numbers, to most economically minded Americans, would be a face full of cold water. Based on the criteria in place a quarter century ago, today’s U.S. unemployment rate is somewhere between 9 percent and 12 percent; the inflation rate is as high as 7 or even 10 percent; economic growth since the recession of 2001 has been mediocre, despite a huge surge in the wealth and incomes of the superrich, and we are falling back into recession."

The cleat of reality is out there folks—just don’t expect to get it from the government.