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Trump team fosters fears he'll adopt alternative economic facts

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(Bloomberg) — President Donald Trump complains regularly about what he calls “fake news.” What’s got some statisticians worried, though, is the risk of doctored economic data coming from the administration itself.

While there are government directives in place to prevent that from happening, the number crunchers worry that the president’s occasionally cavalier comments on the economy and economic statistics, and his apparent disdain for economists in general, could mean trouble ahead.

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One month into his presidency, Trump has yet to nominate anyone to the Council of Economic Advisers, established in 1946 to provide presidents with objective economic analysis and advice. Indeed, staffers at the council complain that the White House seems to be giving short shrift to the regular reports they produce on the economy, a person familiar with the matter said on condition of anonymity.

There are rules that “protect the statistics from direct manipulation, but don’t address all my concerns about independence,” Brent Moulton, who retired in December after 32 years at the Bureau of Labor Statistics and the Commerce Department’s Bureau of Economic Analysis, wrote in a Jan. 24 blog post.

“For example, a Cabinet secretary could still order the statistical agency to drop certain statistics or to change methodologies in ways that seem politically expedient,” he added in the piece, titled “Why I’m Concerned About the Independence of U.S. Statistical Agencies.”

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Track the progress of the Trump economy

In what may be a sign that is happening, the Wall Street Journal on Sunday reported that the Trump administration is considering changes that would make the U.S. trade deficit look bigger than currently reported. Citing unidentified people involved in the discussions, the newspaper said the new calculations could be presented to Congress, but that it wasn’t clear if they would be included in official government data on the economy.

Trump has repeatedly accused past administrations of failing to protect America’s interests on the trade front. Figures showing larger deficits would serve to buttress that argument and support the president’s calls for retaliatory action against China and other U.S. trading partners.

See also: This is why China now drives the global economy

The fears about data manipulation also arise from the nontraditional approach the Trump administration has taken to interpreting economic data. The president himself has repeatedly cast the “real” unemployment rate as far above the official rate, using figures that incorporate all those of working age who aren’t employed.

“Don’t believe these phony numbers,” Trump told supporters of the jobless rate in early 2016. “The number is probably 28, 29, as high as 35 [percent]. In fact, I even heard recently 42 percent.”

While this captures a broader swath of those without a job than the more well-known 4.8 percent jobless rate, it’s misleading because it includes those who choose to be out of work for reasons including school, parenting, care for a family member, or retirement. In 2015 Trump said the U.S. had 93 million people out of work.

Statistical agency veterans also worry that budget cutbacks could threaten the integrity of the economic data. (Photo: iStock)Statistical agency veterans also worry that budget cutbacks could threaten the integrity of the economic data. (Photo: iStock)

Treasury Secretary Steven Mnuchin reinforced the skepticism during his Senate confirmation hearing, stating outright that the “unemployment rate is not real” — a view backed days later by White House Press Secretary Sean Spicer, in a briefing with reporters.

“My biggest concern right now is about the unemployment statistics, just because the White House has been attacking them, and I know how demoralizing that can be to employees when your statistics are being attacked and when you don’t have anyone at the agency level who can speak up for you and defend you,” Moulton said in a telephone interview last month.

“I could view a situation, if that were to persist, where you could get employees leaving, finding other jobs and that sort of thing just because they find it demoralizing,” he added.

Repeated questioning of an agency’s credibility could hamper an already tough recruitment process, especially of younger workers who’ll be especially needed as more baby boomers in the federal government leave the workforce.

Statistical agency veterans also worry that budget cutbacks could threaten the integrity of the economic data.

With Republicans promising big tax cuts coupled with fiscal prudence, the chances are increasing that they’ll take the ax to budgets of various government agencies, including those involved in compiling economic data. Trump signed an executive memorandum on Jan. 23 to impose a hiring freeze on federal government agencies.

“I think we have in place, if someone’s doing something that’s inappropriate — pressured to fudge numbers or something like that, whatever it is — there’s recourse to that for the career and civil servant, or someone who notices it and says something bad is going on,” former Commerce Secretary Penny Pritzker said in a Jan. 13 interview in her Washington office during the final days of President Barack Obama’s administration.

Ensuring reliability

“What I worry about is funding to make sure that we have money to actually gather the data, and make sure that it’s reliable and durable,” she said.

In a sign that concern is not limited to one side of the political spectrum, the conservative-leaning American Enterprise Institute and liberal-leaning Brookings Institution are co-sponsoring a conference in Washington March 2 on the “Vital role of Government Statistics: Strengthening Research, Governance, and Innovation.”

“The modern economy is more reliant on data than ever before,” the think-tanks said in an e-mail announcing the conference, with speakers that include economist Martin Feldstein, a former CEA chairman. “Without reliable information about the economic and social environment, making sensible choices that produce positive outcomes in commerce, research, and governance is impossible.”

University of Oregon professor Mark Thoma said he’s worried that the Trump administration’s championing of “alternative facts” could spread to the economic data if the economy turns sour.

“The worst thing he could do — and I see this as a real danger — would be to politicize the agencies that produce government economic data, to put people in place that will skew the numbers in his favor,” Thoma said in a Jan. 24 commentary for CBS MoneyWatch. “If that happens, the data will be useless, and we’ll essentially be flying blind when it comes to the true state of the economy.”

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