US Economic Statistics: “Unreliable Numbers”
By Larry
Romanoff, November 10,
2019
The US government and Western media enjoy accusing
China of producing unreliable numbers, but it is widely recognised that there
are no national economic statistics in the world as deliberately unreliable and
misleading as those of the US. Yet one more feature of the Great Transformation
was the US government’s innovativeness in fabricating statistics that raised
economic misinformation to an art form.
§ Unemployment is more than twice as high as officially
stated,
§ inflation more than three times, and
§ GDP less than two-thirds of the published numbers.
§ The same is true with statistics on wages, housing,
and more.
Many researchers have published studies demonstrating
that the official US economic statistics in nearly all areas are badly
distorted to paint a positive picture widely divergent from reality.
As one commenter noted,
“The jobs numbers are fraudulent, the unemployment
rate is deceptive, the inflation measures are understated, and the GDP growth
rate is overstated. Americans live in a matrix of lies.”
With the compliant media controlling the narrative,
few Americans have any idea of the true state of their economy or the personal
consequences of these statistical manipulations.
GDP
You don’t have to be an economist to appreciate the
difficulties in comparing national GDP rates nor the opportunities for deceit
in their compilation.
As an example, if our two countries and economies are
identical but yours has a higher divorce rate, the legal fees and other costs
of the divorce process will be added to your nation’s economic output and your
country will have a higher GDP. That doesn’t mean your people are richer, nor
does it mean your country is a better place to live. Similarly, if your country
is as rabidly litigious as is the US, all those billions in legal fees from
lawsuits will be added to your GDP. But again, that doesn’t mean your people
are richer. In fact, except for the lawyers, they are all poorer, and it almost
certainly isn’t a better place to live.
Education and health care are similar. If my country
has a government-sponsored healthcare system and public schools and
universities, these will be recorded in my GDP calculations at their low cost.
If your country, like the US, has privately-owned and profit-driven health care
and educational systems, the much higher costs will be recorded in your GDP
statistics as a reflection of a much higher economic output. But that does not
mean your people are richer than mine, and in fact they are much poorer because
they must spend a high percentage of their incomes for health care and
education.
If your country like the US spends more than $1
trillion on its military each year, these expenditures will be included in your
national statistics and this alone would make it almost impossible for us to
compete on the basis of GDP. But all that military expense does not make your
people rich; instead, it impoverishes them, and all that killing does not make
your country a better place than mine, even if you’re doing it to make the
world safe for democracy.
From the above examples, it should be apparent there
are many categories of transactions that serve to greatly inflate GDP numbers
but that do not indicate wealth in a nation, and may in fact be indications of
poverty.
It should be apparent that some sectors of a nation’s
GDP serve to enrich only a very few individuals while the vast majority of the
population are left more poor. Health care is an obvious example, where the
owners of insurance and pharma companies, profit-driven hospitals and clinics,
are indeed richer for the experience, while virtually all of the population is
poorer. The military is another clear example, with only weapons manufacturers
and bankers being richer after a war while the impoverished population may be
paying the cost for generations.
Also, it should also be obvious that a nation like the
US that has privatised most physical and social infrastructure will produce a
higher GDP than a country like China where the basic infrastructure is owned by
the government.
The US prison system is a good example of a service
that cost the taxpayers $20 billion before privatisation and $80 billion after.
That served to increase the GDP by $60 billion, but only a few people were
enriched by the process while millions were impoverished and society not measurably
better off.
The US GDP will be inflated by all the airports,
highways, railways, electricity generating stations, schools and universities,
and much more, that have all been sold to investors in the private sector. But
the enlarged GDP is actually an accurate indicator of increasing poverty among
the population since the precise amount of that increased GDP must be extracted
from the pockets of the population.
Basic accounting tells us that if someone receives money, someone else must have paid it, because money really doesn’t grow on trees. In the case of privatisation, all people must pay much higher fees and charges to the private firms than they paid before to the government, and it is precisely those increased fees and charges bled from every citizen’s bank account that create the increase in the GDP.
It should also be obvious that if China were to sell
off its hospitals and its High-Speed rail system to private investors (as the
Americans want so badly for China to do), China’s GDP, poverty rate, and income
disparity would all rise measurably. When Kunming sold off its best children’s
hospital to private owners, the fees charged to patients are already on their
way to doubling; those hugely increased costs will increase China’s GDP, but
many thousands of families in Kunming will now be poorer.
The much-increased charges by the private companies
will increase the GDP while that same amount is squeezed from the purchasing
power of every citizen and concentrated in only a few hands. This is Grade Three
arithmetic. It cannot be any other way.
Similarly, the US economy is so highly financialised
that nearly half of the stated GDP consists merely of book entries transferring
money from one account to another, not in any way comparable to the real
production of manufacturing or the provision of real services. When we remove
the financialisation aspects from the accounts, the US real GDP is reduced by
nearly 50% and the national per-capita income falls to about $15,000.
From the above, you can see that the size of a
nation’s GDP can be largely irrelevant to the wealth and prosperity of that
nation, and that comparing nations on GDP is fraught with difficulties and
arguments. GDP used to be a simple measure of goods and services produced in a
nation, and was probably an accurate indicator at some point in the past, but
it gradually became a way to record the score in a game of ‘mine is bigger than
yours’. So, in addition to the real issues outlined above, we also have the US
constantly trying to move the goalposts to increase its score by finding ever
more creative ways to boost the GDP numbers.
One clever trick by the US government is something
called “imputed rent”, which means that if you own a house the government adds
to the GDP the amount you would have had to pay in rent (but didn’t), on the
mind-twisting basis that if you didn’t own that house you would have had to pay
this rent. This one item alone added about $1.6 trillion, or 15% to the US GDP.
Also, GDP is adjusted (downward) for inflation so, as you will see in a moment,
the US badly understates its annual inflation rate which automatically inflates
its GDP by about another $2.3 trillion, or about 20%. These two items alone
mean the US GDP is falsely and artificially inflated by about 35%.
Under the imputed rent scheme above, you as a
homeowner living in your home are treated as two people, one a tenant, who pays
an “imputed” (fairytale) rent, and the other a landlord running a small
business owning and renting the house. You as tenant pay a pretend rent which
goes into the pretend GDP, and you as landlord have a pretend rental income
which goes into the pretend per-capita National Income of the country. US
economists claim that this “theory of imputed rent may seem more natural if one
imagines the extreme case of a society where everyone raises their own food and
builds their own houses; without imputation the GDP would be zero”. US
government economists have produced other longer and more confusing
explanations as to why this imputed rent is appropriate and realistic. If this
were true, the nation’s GDP and National Income should be also increased by the
fact that your house is a restaurant and you a customer, and also when you have
sex with your wife instead of going to a brothel.
Per Capita Income
The figure we see most often for average US per capita
income is around $47,000, a figure that comes straight from fantasyland. First,
the ‘imputed rent’ I mentioned above is entered not only in the GDP but also in
the figures for average national income, meaning that the income of every
homeowner is inflated by his non-existent ‘rental income’. Removing this single
fictitious amount lowers the real US per-capita income to about $30,000, or
approximately the same level as Greece or Slovenia, a level that has been
steadily decreasing since 2008. Other fictious amounts reduce it further.
As one intelligent internet poster wrote,
“Like so much else about America, the nation’s wealth
and high annual incomes are just another myth, and suddenly so much of the dissonant
information we receive about the US begins to make sense – the documented
stories of rampant poverty across the nation, middle-class households having to
live on credit to maintain their deteriorating standard of living, deferred
retirements, bankruptcies.”
Exactly correct. An increasingly small minority of the
US population is indeed doing well, while an increasingly large majority is
living in poverty and slums, are going bankrupt, cannot find a job, cannot
afford to retire, are dependent for their daily survival on government
handouts, and can no longer afford to go to the doctor. But the propaganda
machine persists in promulgating a false image of a shining mansion on a hill.77
Inflation Rate
One author noted that
“If
inflation in America were calculated today by the same statistical methods used
prior to the 1980s, the true rate would be almost 10% higher than that stated
by the US government today.”
And that’s correct, but this serious mis-calculation
of the CPI is fraudulent on more than one level. First, it seriously deceives
Americans as to the state of the economy, deflecting blame from the FED and the
government to the people. After unleashing the massive economic destruction in
the early 1980s, the FED didn’t want the public to know how badly they’d been
trashed and plundered, and so immediately implemented the production of
increasingly fraudulent economic statistics with lies that have increased by
the year.
These false statistics also involve a massive
financial fraud, the theft of countless billions of dollars from the American
people by their own government. The reason is that all Social Security
payments, welfare and food support, and other items are linked to the rate of
inflation and are legislated to increase each year to cover the actual
increases in the cost of living. But since the US government
deliberately understates the inflation rate by approximately 10%, all
Social Security benefits have been underestimated and underpaid by this amount,
compounded annually, and so Social Security, many pensions, and other payments
should be about 70% higher than they are today.
In the calculation of inflation and the consumer price
index (CPI), Americans have been so innovative they’ve had to create separate
categories to contain all their fraudulent calculations. Here are a few:
(1) Exclusions:
US officials realised the easiest way to lower the
quoted CPI was to just leave stuff out, so they invented a measure they called
“core inflation”. That should mean the central or most important portions of
price increases, those most critical to consumers, but no. The US definition excludes precisely these critical items like food and
fuel, eliminating the most important items from the inflation statistics,
thereby creating a totally false picture. Measuring inflation without food
and energy is almost the same as measuring inflation after you subtract all the
inflation.
(2) Substitution:
Then, the Americans found another way to leave stuff
out, having imagined what they termed a “substitution effect”, meaning that
when beef prices rise the public will cease purchasing beef and buy chicken
instead. That part is true, but the cleverness is their conclusion that since
we are no longer buying beef they can remove it from the inflation
calculations. So now, when the price of something rises, the US Labor
Department just eliminates it from the calculations and substitutes something
cheaper. Voilà, no inflation. But of course it’s all a big lie. The US Farm
Bureau measures the increasing prices of the identical basket of goods and the
difference is large: From 2007 to 2008,
the Labor Department reported inflation of only 4.1%, while the real inflation
reported by the FB was 11.3%.
(3) Geometric Weighting:
Another clever trick is to arbitrarily reduce the
severity of price increases when some prices are increasing rapidly, as oil
prices often do. The government ruled that if an item’s price rises “too
quickly”, people will use less of it, so with any rapid price increase, the US
government reduces its weighting in the CPI calculation. For example, health
care is about 17% of GDP but it was given a weighting of only 6% because real
health costs are rising. This alone reduces the US CPI by several percentage
points. For both of the above, it should be clear that the US government is not
recording actual price increases – in other words, real inflation – but is instead recording fictitious
consumer behavior in the face of strong price increases.
(3) Hedonics:
This
machination makes arbitrary adjustments for assumed quality improvements in
goods and services. As
an example, a home appliance may have been priced at $400 but experienced a
minor improvement in a subsequent model year. Officials arbitrarily assumed the
improvement was worth $150 and the basic appliance was now only $250, and then
used that figure in calculating the CPI, showing a 40% decrease in appliance
prices while in fact the price was unchanged. This kind of adjustment is now applied to almost 50% of all items
contained in the calculation of the US CPI.
Unemployment
In July of 2013, Mortimer
Zuckerman wrote a thoughtful and informed article for the WSJ titled “The Full-Time Scandal of Part-Time America” (1) in which he, a
little too gently, devastated the US government’s unemployment statistics by
pointing out that the almost 300,000 ‘new jobs’ created in June of that year
were mostly smoke, in that full-time jobs plunged by well over 500,000 while
part-time labor increased by about 800,000, a distinction the Labor Bureau
found unworthy of mention. Low-paying jobs now account for almost half of all
employment growth and even with that, less
than 60% of Americans have a job of any kind. In one month, the US
government listed a large number of new jobs in retail trade, but that was
clearly impossible when major retailers like J.C. Penny, Macy’s, Sears, and the dollar store chains were all in
trouble and closing stores, and shopping centers were so desperate for tenants
they were renting space by the day or the hour. Zuckerman noted that, after
Obama’s health care act mandated the provision of health insurance to all those
working more than 30 hours per week, companies
immediately cut workers’ hours to less than 30, often dividing one full-time
job into two part-time jobs, to avoid that benefit cost.
Dave
Kranzler wrote that “The US employment report is probably the
most deceptively fraudulent report produced by the Government”. (2) The US
government has gone through contortions every month since 2008, attempting to
delude the population about a non-existent ‘recovery’ that it falsely claims
occurred in 2009. In spite of all the hype, the truth is that the US economy is still sitting on the bottom
pretty much where it was in 2008, with no recovery of any kind and no net new
jobs created. The publicity about the creation of ‘service jobs’ and
‘health-care jobs’ is disguising low-paid employment for retail clerks and
home-care for the elderly, and the unemployment statistics have suffered the
same kind of creativity as has the CPI – if a category proves troublesome or
embarrassing, the government simply omits it from the calculations.
The
US government has no qualms about massaging and rearranging numbers and
categories to produce results, however inaccurate and dishonest, that place the
US in the lead. In November of
2014, Glenn Kessler reported in the
Washington Post Obama’s claim before Congressional leaders that “As I travel to Asia for the G-20 Summit, I’m
going to be able to say that we’ve actually created more jobs here in the
United States than every other advanced country combined”, a claim that was
of course false. (3) His definition of advanced nations omitted all those that
were actually growing instead of retracting, nations like China, Russia, Brazil, India, Indonesia and Mexico. Perhaps his
most dishonest position was to omit the fact that professional and middle-class full-time employment for educated people
have disappeared at an alarming rate, with only unappealing part-time
minimum-wage clerking positions being created, on which families cannot survive
without welfare and food stamps. Kessler noted that his claim of the US having
created 6 million “new” jobs compares to China alone having created more than
50 million new jobs since 2010. He ended his article with the comment that “One
has to marvel at the clever economists in the White House who managed to slice
and dice the numbers to come up with (these ‘facts’).”
Jim
Clifton, the CEO of Gallup, in
an interview on CNBC, called the US government’s unemployment figures “a big lie”, explaining that
“If
you perform a minimum of one hour of work in a week and are paid at least $20 …
you’re not officially counted as unemployed. If you have a degree in chemistry
or math and are working 10 hours part time because it is all you can find… the
government doesn’t count you.”
To further emphasise the perilous state of the US
economy and labor picture today, only 60% of employable workers in the US have
jobs. According to the government’s own statistics, a full 40% of all
working-age citizens have no employment, but officials still claim an
unemployment rate of only 6%. To add to the labor catastrophe, it has been reported that the
fastest-growing segment of the US workforce is those aged 65-75, people who
should be retired but who cannot live on their meager pensions and unaffordable
health care and must sacrifice their retirement years and return to the
workforce in order to survive.
I suppose this commentary wouldn’t be complete without
reference to China’s numbers, at least from the American point of view. For any
country, but especially China, economic statistics are acceptable if the
Americans like the numbers, otherwise they are “unreliable”, the accusation
substituting as proof.
While Vietnam, Laos and Cambodia claim more than 5
million deaths during the Vietnam war, the Americans allow for only one million
since “Vietnamese statistics are notoriously unreliable”. We have the same
problem with China’s economic statistics: the Americans don’t like the numbers
and so dismiss China’s statisticians as “untrained” and their statistics as
“unreliable”, the accusations once again substituting as proof. Let’s note here
that the US FED (and other notable economists) conducted their own analysis of
China’s economic statistics and confirmed that the country’s actual growth was
in line with the official numbers.
China’s statisticians produce their numbers for the
Chinese, not for the Americans, so they don’t bother explaining their
methodology and thus leaving the Americans in the dark, craving many juicy
details of China’s economy that cannot be easily derived from the gross
statistical numbers. And when the Americans call, nobody will respond to their
questions so they accuse the Chinese of being “unreliable”, of fudging the
numbers, of exaggerating, of maybe having “two sets of books” so the government
can know “what is really going on” with the economy. According to Mark Magnier of the Wall Street Journal (where else?), a new
set of good numbers “raised fresh doubt about the trustworthiness of China’s
own statistics”, with Citibank helpfully chiming in with “Growth Likely
Overstated”, and some unbiased Western ‘researchers’ claiming the numbers were
inflated by nearly 100%. Again, accusations equivalent to proof.
But the real purpose of these attacks was illuminated
by an economics professor at the Hong Kong University of Science and
Technology, Carsten Holz, a man who
even wrote a paper on “the quality” of China’s GDP statistics, who said Chinese
statistics suffer from “an atrocious lack of transparency”. That statement would translate loosely as
“We want to know more, but they won’t tell us because (1) they believe it is
none of our damned business and (2) they think we will find ways to use their
numbers against them.” Correct on both counts.
*
Mr. Romanoff’s writing has been translated into 32 languages and his articles
posted on more than 150 foreign-language news and politics websites in more
than 30 countries, as well as more than 100 English language platforms. Larry
Romanoff is a retired management consultant and businessman. He has held senior
executive positions in international consulting firms, and owned an
international import-export business. He has been a visiting professor at
Shanghai’s Fudan University, presenting case studies in international affairs to
senior EMBA classes. Mr. Romanoff lives in Shanghai and is currently writing a
series of ten books generally related to China and the West. He is one of the
contributing authors to Cynthia McKinney’s new anthology ‘When China Sneezes’. (Chapt. 2 — Dealing with Demons). His full archive can be seen at https://www.moonofshanghai.com/ and http://www.bluemoonofshanghai.com/
He can be contacted at: 2186604556@qq.com
Copyright © Larry Romanoff, Moon of Shanghai, Blue Moon of Shanghai, 2021
