It’s Time For A Transparency-In-Government-Statistics Law

Question: When does a government agency chartered with collecting and disseminating economic data morph into a propaganda ministry?

Answer: When it allows unaccountable bureaucrats answerable only to the politicians who appoint them to make arbitrary “adjustments” that obscure the reporting of the underlying trends the data are supposed to show.

There once was a time when people tended to take Uncle Sam’s pronouncements regarding unemployment, housing starts, inflation, and countless other economic figures at face value. In the days before the blogosphere we simply didn’t have much choice. If the government said something was so and a tight circle of leading newspaper and TV news editors concurred, it was treated as gospel. Rarely did anyone dig further, even if they were so inclined.

Thanks to the Internet and the citizen-journalists it empowered, those groupthink days are gone. Unfortunately, also gone—ironically, for the same reason—is any distinction between campaigning and governing. While there is nothing new about the party in power trying to spin the news, the propaganda tools used by incumbents to gain political advantage have grown enormously. Ensconced officeholders have learned that even if their heavily massaged data is ultimately dissected by critics, it is still valuable to control the narrative promoted by the old media sycophants that drive the news cycle because that’s all the low-information voter ever sees.

Nowadays, a vast and sprawling bean-counting apparatus operates in service to the executive branch. By last count, no fewer than 106 federal agencies are tasked with gathering statistics, the most important being the Bureau of Labor Statistics, Bureau of Economic Analysis, Census Bureau, U.S. Treasury, Internal Revenue Services, Office of Management and Budget, and Economics and Statistics Administration.

The problem in all this? An increasingly noticeable gap has opened up between the headlines and the data, which often get readjusted, revised down, and cleansed of telltale distortions long after their potential for impact on the news cycle has passed.

This gap is caused precisely by these myriad adjustments, which are exquisitely sensitive to the proclivities of the adjustor. For an example, take a look at the graph below, courtesy of Zero Hedge, which compares “seasonally adjusted” housing data against unadjusted raw data. Note what a different headline story each graph suggests. Note, also, that this kind of fudging does not constitute outright fabrication, leaving administrators plenty of plausible deniability when accused of playing politics.

Using seasonal adjustments and discretionary estimates for missing or late-reported data is not a rare occurrence. The State of California now appears to be making a habit of late-reporting its unemployment stats, giving the Bureau of Labor Statistics a free hand to simply make up numbers. If you go to Zero Hedge and search for the term “seasonally adjusted,” you get a litany of similar stories. Critics are quick to respond, “Zero Hedge is not a credible source!” Fine. You don’t have to like the disgruntled quants that write under the pseudonym Tyler Durden, or share their snarky conclusions. But the data are the data and should be subject to independent scrutiny.

Politics aside, once confidence is lost it cannot easily be regained. That is why all government statistical agencies should be required by law to make their raw data available to third party analysts and journalists in machine-readable form as soon as it becomes available. Interpretations, adjustments, hedonic deflators, chain-weighted substitutions, and every other form of discretionary massaging should be left to others operating in the unfettered marketplace of ideas. It’s not like there is a shortage of analysts, think tanks, and advocates that are eager to get their hands on this stuff to make their case. By allowing every political tribe equal access, rather than granting a monopoly to the tribe that happens to be in power, partisans can keep each other honest without worry that some unidentified bureaucrat has tipped the scales to appease his political bosses.

The only thing worse than flying blind is crashing into a cliff because you are following a bogus map. Let Washington’s gnomes collect all the data they want, but demand that they remain silent and let the unadorned data speak.

Bill Frezza is a fellow at the Competitive Enterprise Institute and a Boston-based venture capitalist. You can find all of his columns, TV, and radio interviews here.  If you would like to have his columns delivered to you by email, click here or follow him on Twitter @BillFrezza.