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So Serious : So Silly

When you consider the deadpan seriousness with which most Washington politicos approach their jobs-Yes, they really do think they are …

When you consider the deadpan seriousness with which most Washington politicos approach their jobs-Yes, they really do think they are important!-you’d expect that they’d get it right once in a while. And that’s just about how often that the caring folks in Washington do succeed-once in a while.

That’s why each of the tax code changes during the past decade-1981, 1982, 1986, 1990, and we’ll probably see another this year, was followed by so-called “technical adjustments.” That’s why the Treasury issues not one, but three reports each quarter on the gross national product (GNP)-a report, an adjusted report, and a final report. And sometimes all of them are wrong. That’s why the $180 billion a year that taxpayers spend fighting poverty seems to have no effect on poverty. That’s why we’re saddled with multi-billion-dollar government boondoggles like the toxic waste “Superfund.” That’s why one congressional staff study-for the Joint Tax Committee, of all groups-actually predicted a few years ago that government revenues would increase if America‘s “wealthy” were taxed at a rate of 100 percent.

SKEWED STATS

Despite a payroll of 37,000 to serve the Congress-including the staffs of the Congressional Budget Office, General Accounting Office, Congressional Research Service and Office of Technology Assessment-and more than two million people grinding away in the federal bureaucracy, official Washington seems to have no idea where it has been or where it is going. In short, things are much worse in our mixed-up capitol than even the most hardened cynic probably has imagined.

Consider just a few examples.

  • The GNP: The Commerce Department in late April 1991 estimated that the GNP dipped 2.8 percent during the first quarter of last year. A month later, on May 29, Commerce revised its April estimate, saying the economy shrank just 2.6 percent. And a month later, in June, it revised the number a third time. This is the way it is routinely done-we get the same set of numbers three times. While such differences may appear minor to the general public, a fraction of a percent, as any CEO knows, can be quite significant. In the case of the national GNP, it can mean tens of billions of dollars. More important, the government’s data-the GNP figures, unemployment figures, balance of trade figures, and inflation figures-trip other fiscal wires, from stock and bond prices to cost-of-living increases for retirees. The effect and severity of such faulty data is overwhelming.
  • The trade deficit: Official U.S. balance of trade figures historically have missed the mark by a wide margin. Why? Because when government numbercrunchers collect trade data they ignore the sale of U.S. services to overseas markets. Thus, the U.S. and Canadian governments, for example, publish widely differing statistics on U.S.-Canadian trade-our data omitting the service industries, theirs including this information.
  • The Census Bureau’s annual report on poverty: On September 26, 1991, the Census Bureau reported that the number of people living below the official poverty threshold ($12,675 for a family of four in 1989) increased to more than 13 percent. Liberal editorialists went ballistic, blaming the increase on everything from “uncaring” politicians, to Pentagon spending, to Ronald Reagan. Make no mistake: Hard-core poverty is a tragedy of great human proportion, and it is very real to millions of Americans. But for more than a generation, since Lyndon Johnson’s “War on Poverty” began in 1964, the U.S. has been investing huge sums of money and manpower to combat this problem. Last year alone, U.S. taxpayers invested an estimated $184 billion in anti-poverty programs, and yet the Census Bureau report indicated that the tragic problem of poverty got worse, not better. What’s going on here? Why aren’t these programs helping?

We may never know, because the Census Bureau’s poverty statistics are skewed. In making its “income” calculations, for example, the Census Bureau does not count non-cash income such as food stamps, housing vouchers, and various other subsidies. It’s as if these programs didn’t exist. But if you’ve ever stood in line at a supermarket, you know darn well that food stamps exist. Indeed, as social scientist Robert Rector has observed, another set of government reports indicates that low-income households spend $1.94 for every $1.00 in income they claim. Because the Census Bureau poverty report ignores this and other data, we don’t even know how much of the $184 billion a year is reaching the poor, and how much is being siphoned off by the formidable welfare bureaucracy. But without this information, how can we ever hope to solve this tragic problem? Continuing blindly down the same old path certainly won’t get us anywhere.

  • Budget deficits: Office of Management and Budget Director Richard Darman and other architects of the fall 1990 budget deal promised that the deficits would be reduced in 1991 and subsequent years: a total of $500 billion over five years. In February of 1991, Darman estimated a fiscal year 1992 deficit of $281 billion. In July, less than six months later, Darman upped his deficit prediction by $67.4 billion, nearly a 30 percent increase, attributing the change to “technical re-estimate.”

Detroit News economics analyst Warren Brookes has kept careful tabs of everything OMB has said about the deficit. In one 18-month period, Brookes noted, OMB’s official five-year deficit forecast crept up from $62.3 billion to $1.09 trillion, a 1,644 percent increase! Yet, throughout 1991, with the economy stalled, senior White House officials and congressional leaders continued to defend the 1990 budget agreement. It wasn’t until October that any real momentum for a tax cut appeared-and even then, some of the people most responsible for the budget fiasco insisted that a tax cut would harm more than help And, believe me, they had the numbers to “prove” it.

Of course, the numbers once again were bad. The reason: When assessing the effects of tax rates on government revenues, the Congressional Budget Office uses “static” economic models that assume individuals don’t change their behavior in response to tax incentives. These same models were dead wrong when they predicted that the 1981 Reagan tax cut would cause higher inflation and slower economic growth, just as they were wrong to predict that tax revenues would increase if the top marginal rate was set at 100 percent. (I don’t know about you, but a 100 percent tax rate would cause me to find a long stretch of beach where I could spend my days not worrying about anything except keeping the sun off the sand.)

FUN WITH NUMBERS

Skewing statistics is nothing new to the bureaucrats and pols who inhabit our nation’s capitol. They are adept at twisting and perverting data for their own purposes. Anyone who has had the misfortune to read the studies, reports, and analyses that are put out every day by the hordes of committees, commissions, and agencies who are charged with formulating and recommending policy can attest to the fact that the entire process is mired in obfuscation. The cynics among us might even suspect that this is just the way that the bureaucrats and pols like it. There’s really not much point in making things too clear. And of course they would never want to be so lax as to be up front with the folks back home about just what in the world is really going on in Washington. That would only lead to indignant letters and phone calls from outraged constituents who for some reason just don’t appreciate the necessity of all the pork barrels, boondoggles, and other wacky capers that make a job in the upper echelons of the federal government more fun than a barrel of monkeys. Clearly, job security demands as many smoke screens and wild goose chases as the system can provide.

BUSINESS AS UN-USUAL

If any of you tried to run your businesses the way Washington runs this country, you’d either be standing in an unemployment line today or entertaining visitors at Lewisburg Federal Penitentiary. Literally, it can’t be done. With all of the resources at Washington‘s disposal, it’s absurd that it takes an outside watchdog such as Robert Rector to provide a thorough analysis of the Census Bureau data.

Or that Congress passes multi-billion-dollar schemes like the environmental “Superfund” because news headlines stampeded them into “doing something” about a largely nonexistent problem. And it is equally pitiful that many business executives and their lobbyists meekly sit on the sidelines of policy making while all of this faulty data is used to justify the rules, regulations, laws, and advisories that are the business of the people we send to Washington.


Edwin J. Feulner, Ph.D., is president of The Heritage Foundation, a Washington, D.C.-based public policy research institution. He also serves on the board of several other foundations and research institutes. Dr. Feulner is the author of Conservatives Stalk The House.

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