Numbers may seem like hard facts. But they are rigorously flexible in the right hands. The game often involves framing. Politicians and bureaucrats are masters of it.
Here’s a typical example: “Our no child goes to sleep hungry program has reduced hunger by 10 percent.”
Sounds great, right? But what if hunger was at an all-time high just before the policy was enacted? A 10 percent drop from a massive peak might still mean hunger is higher than it was five years ago.
This is called “cherry-picking” the timeline. By choosing a specific start date, they can paint a rosier picture than reality. As an aside, the charts and figures included in mutual fund brochures cherry-pick timelines to perfection.
Another favorite trick is using different metrics. A politician might boast about “record-low unemployment.” But what if that’s because many people have simply given up looking for work and are no longer counted in the official numbers?
They’re technically not “unemployed,” but they’re also not working. The statistic is technically correct. Yet it hides a more complex, less favorable story about the economy.
There’s also the art of misleading comparisons. “Our state’s schools are 20 percent better than the national average.” Impressive! But what if the national average includes a bunch of smaller, underfunded rural districts, while your state is full of wealthy suburbs?
The comparison is technically valid, but it doesn’t give a fair representation of the quality of education.
Of course, economic statistics that attempt to aggregate an aspect of the economy and distill it into a single figure are ripe for manipulation. Gross domestic product, for example, is supposed to be a measurement of the size and health of a national economy. But when the figure is repeatedly boosted by out-of-control deficit spending, it becomes a measurement of debt accumulation rather than economic growth.
You’re Fired!
President Trump understands how government statistics can work for or against his administration. As the president, he wants the numbers to show that he’s doing a good job, that his policies are moving the economy in the right direction. Namely, he wants low unemployment, low inflation, and strong GDP growth.
This recently came to a head with the publication of the July employment report by the Bureau of Labor Statistics. The report showed the U.S. economy added only 73,000 jobs in July. Moreover, it revised the total jobs created in May and June downward by 258,000, from 291,000 to 33,000.
Trump didn’t like these numbers. He felt they were ‘rigged’ for political purposes. So, he abruptly fired BLS commissioner Erika McEntarfer. Here’s an excerpt of the reasoning he posted on Truth Social:
“I was just informed that our Country’s “Jobs Numbers” are being produced by a Biden Appointee, Dr. Erika McEntarfer, the Commissioner of Labor Statistics, who faked the Jobs Numbers before the Election to try and boost Kamala’s chances of Victory. This is the same Bureau of Labor Statistics that overstated the Jobs Growth in March 2024 by approximately 818,000 and, then again, right before the 2024 Presidential Election, in August and September, by 112,000. These were Records — No one can be that wrong? We need accurate Jobs Numbers. I have directed my Team to fire this Biden Political Appointee, IMMEDIATELY.”
Later, in this same post, Trump said Federal Reserve Chair Jerome Powell “should also be put ‘out to pasture.’”
Did Dr. McEntarfer really manipulate the employment report for political reasons? Or was the timing of these great big ugly mistakes just a coincidence?
Depending on Bogus Data
Larry Summers, the former Treasury Secretary and a man who always pretends to be smarter than he is, shared his opinion – and faux outrage – on the matter. Summers said:
“These numbers are put together by teams of literally hundreds of people following detailed procedures that are in manuals. There’s no conceivable way that the head of the BLS could have manipulated this number.
“The numbers are in line with what we’re seeing from all kinds of private sector sources. This is the stuff of democracies giving way to authoritarianism. It – firing statisticians goes with threatening the heads of newspapers. It goes with launching assaults on universities. It goes with launching assaults on law firms that defend clients that the elected boss finds uncongenial. This is really scary stuff.”
McEntarfer’s predecessor at the BLS, William Beech, said “there’s no way” McEntarfer rigged the numbers. Maybe so. But the magnitude of the revisions shines a light on the idiocy of trying to aggregate the economy into a series of numbers and figures, and the extreme uselessness of bungling government bean counters.
If the jobs reported in May and June can suddenly be adjusted from 291,000 to 33,000 then what good are the numbers to begin with? To add insult, these bogus numbers are then used by central planners to plan the economy.
Fed Chair Powell, for example, is data dependent on his federal funds rate decision. Aside from the rate of consumer price inflation, employment data is one of the top metrics the Fed uses.
The recent FOMC meeting statement cited solid labor market conditions as rationale for not cutting rates. Two days later the BLS report was published, with downward revisions for May and June. These downward revisions showed the labor market is less than solid. Thus, Powell based his decision to hold rates on erroneous information.
The Fed, in essence, is setting monetary policy by throwing darts in a blizzard. Its dependency on fake data is guiding it to make foolish guesses.
How Fed Dependence on Fake Data Invites Disaster
Obviously, we don’t know any better than Powell or Trump what the federal funds rate should be. But we believe decisions on the overnight rate should be left to the banks, as they lend and borrow from each other to meet reserve requirements.
The banks that are engaged in interbank lending are closest to the action and are best informed to determine and agree on what the overnight rate should be. This is important because the price of credit, the rate of interest, is the economy’s most fundamental element. Putting the ‘price fixing’ of credit in the hands of a committee of unelected bureaucrats is inviting disaster.
The Fed’s track record over many decades shows it’s unable to get interest rate policy right. In fact, over just the last 30 years Fed policies have orchestrated three massive boom and bust cycles. And as the current boom turns to bust the Fed will make the same mistakes all over again.
Certainly, booms and busts are a normal part of the business cycle. But the Fed’s attempts to moderate them by pushing and pulling on the supply of money and credit, make the ups and downs more extreme.
As the effects of trade tariffs ripple through the economy over the coming months, Powell or his successor will panic and cut rates. The Fed may also restart quantitative easing, where it creates credit out of thin air and uses it to buy Treasuries and mortgages.
The supposed intent will be to cushion the fall and to keep credit flowing for the big banks. The real intent will be to engineer another bubble.
As day follows night, a new set of price distortions will bubble up. There will be a small set of winners and a large set of losers. What this means is another cross section of the American populace will be left behind once again.
These are the dirty games being played with bogus numbers and commandeered interest rates.
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Sincerely,
MN Gordon
for Economic Prism
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