Thursday, July 26, 2018

Vox Popoli: No one knows anything (G edition) - (on reporting of economic statistics)

The core problem with macroeconomics is that it is an abstraction piled upon fiction which is then used to set policies with material consequences. As I addressed in no little detail in The Return of the Great Depression, the margin of error observably involved in the reporting of economic statistics is greater than that required to know something as basic as if the economy is growing or contracting. That is why it matters very much indeed that over half of the government's spending data is wrong:

A new bipartisan Senate report revealed more than half of the government's public data on federal spending is wrong, as the website is riddled with errors.

The Permanent Subcommittee on Investigations, led by chairman Rob Portman (R., Ohio) and ranking member Tom Carper (D., Del.), released a report Tuesday finding nearly every agency is failing to accurately report its spending as required by federal law.

The subcommittee reviewed over two dozen inspector general reports and determined 55 percent of the spending data submitted to was inaccurate. The errors accounted for $240 billion in spending during the second quarter of 2017, according to the report.

The Digital Accountability and Transparency Act of 2014, or DATA Act, required federal spending to be easily accessible to the public through a searchable website, which became The website was revamped earlier this year, but agencies are not meeting their requirements to submit accurate, consistent, and reliable data on its spending.

The agency in charge of—the Treasury Department—is among the worst culprits, as 96 percent of its own data is inaccurate.

To put this in perspective, $240 billion amounts to 1.3 percent of the $18.6 trillion US GDP. Since it was reported that GDP grew 3.1 percent in the first quarter of 2018 compared to the previous quarter, that means that actual GDP growth was either 4.4 or 1.8 percent that quarter, depending upon which way the error lies.

And since the last two quarters growth are reported at 0.7 and 0.5 percent, these government spending errors may mean that the US economy is already in a statistically hidden recession.