Government is cooking the books on jobs and inflation

For years, government figures on economic growth (or lack thereof) have mystified me as being so far out of whack with reality as to bear little or no resemblance to it. This is true for figures on economic growth, job creation and inflation. In 2005 I wrote:

"I've racked my brain trying to reconcile Labor Department reports of inflation running in the 2-3 percent range, while watching as housing, food, clothing, and transportation costs rise by double digits each quarter. Is the government hiding something?"

Three years later I'm thinking the answer is clearly "yes" since not only has inflation gotten worse, but two much more savvy figures than myself have made the case for government economic deceit. Taken together they agree that the government cooks economic figures until they mimic limp linguine upon release.

This does not appear to be due to any pointed conspiracy on the part of the Bush administration (although its practiced deception in other areas makes it a juicy target for book-cooking in the economic arena) but rather to a series of "adjustments" to government economic figures made by successive administrations over time.

In a 2003 op-ed piece for the New York Times, economics professor Austan Goolsbee, who is now senior economics adviser to Sen. Barack Obama's presidential campaign wrote about artificially depressed unemployment numbers.

The rate, he said, " ... has been low (during the recession of 2001-02) only because government programs, especially Social Security disability, have effectively been buying people off the unemploy- ment rolls and reclassifying them as 'not in the labor force.' ... It has been a more subtle manipulation than the one during the Reagan administration, when people serving in the military were reclassified from 'not in the labor force' to 'employed' in order to reduce the unemployment rate. Nonetheless, the impact has been the same."

In the May issue of Harper's Magazine, author and former Nixon appointee Kevin Phillips compiles a long list of government manipulation of economic data. Each recalculation, he reports, was made to falsely boost economic indicators. These manipulations date back to the Kennedy administration.

Most notably, Phillips explains that President Johnson masked deficits, that President Nixon hid inflation by excluding "volatile" food and energy costs from the Consumer Price Index, and that the Clinton administration expunged many long-term so-called "discouraged" unemployed Americans from the unemployment rate, by only counting persons who'd been seeking jobs for a year or less.