Fake Maths

Tom Traill - 01 March 2017

Reportedly 70% of the ‘facts’ that President Trump presents turn out to be inaccurate. There are worrying reports that his habit of misrepresenting the facts could start to become misrecording or institutional misreporting of the national statistics. Never has the maxim ‘Lies, Damn Lies and Statistics’ been so appropriate.

The website FiveThirtyEight reports the Trump Administration is apparently looking into changing the way that the government calculates the trade deficit. The idea seems to be to alter the treatment of re-exports and count them as imports, but not as exports. Economically this makes no sense. The underlying plan would appear to be to justify protectionist trade policies by exaggerating the US trade deficit. But could this actually happen? Will the appropriate records still exist in order to allow a consistent series? And could it be that other data series are in the firing line?

Trump and his appointee Gary Cohn have questioned the measurement of the unemployment rate, calling it one of the biggest hoaxes in politics. They claim an actual rate somewhere between 18% and 42%, as against a little under 5% on the official U3 score. Some statistical agencies have legal protection and other safeguards to ensure their independence, but much of their behaviour is dictated by convention rather than law. Laws (theoretically) need to be repealed, but conventions can be lent upon. But perhaps the easiest way to start influencing the statistical agencies is through budget cuts. Reportedly several of the statistical agencies have struggled with budgets for the past decade, and deeper cuts are likely to leave the agencies unable to perform as needed. Could the BLS be next in the firing line? Trump seems to be trying to save money where he can, and the BLS costs over half a billion dollars each year (the Census Bureau costs just over a billion dollars, and the BEA costs around $100m).

So much financial market activity revolves around the publication of trusted statistical information. When this trust is undermined, as in China, then alternative versions of economic data proliferate, spreading confusion.

But is it as important as it seems? China has long been accused of fiddling its GDP figures and there is still plenty of appetite to invest in China. If Trump wants 3.5% GDP growth to tweet about then let him have it, but bear in mind that it’s not likely to be 3.5% GDP growth as we know it now. What would be disturbing is a situation where only the rich can obtain accurate data – either buying it, or calculating their own. Perhaps it’s time that we all start paying attention to the statistical small print coming out of America.

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