Cooking the Books

I have in the past lamented the fact that our government is getting creative when it comes to reporting economic and employment numbers … see: Funny Numbers.

Now we have another instance of culinary accounting when it comes to Gross Domestic Product (GDP) reportage. It seems that the Commerce Department has moved something like $40 billion of Personal Consumption Expenditures (PCE, a large piece of GDP) from the first quarter of calendar 2014 into the third quarter. This PCE “adjustment” is also a bit of an anomaly in that it represents U.S. citizens’ spending on Obamacare. This adjustment in turn caused the first quarter of the year to look pathetic … basically 0% growth … and the third, to appear gangbusters (that +5% figure that gave us all a warm holiday glow) … see: Powerline Blog.

I think that some of our government’s numbers chefs might have misread their recipe  instructions this time around … lest why didn’t they put this $40 billion PCE “adjustment” into second quarter results where it would have done the most good politically … right before November’s national elections. 

I for one used mostly to trust what our government reported. Now we all need to rethink such trust … particularly under the current administration. The real problem is that, in trying to fool the American public, this administration may well end up fooling itself … with dire consequences.

Voodoo Economics

If the long-established rules of accounting are a hindrance to your political ends … just change the rules.  Apparently economists around the world have decided that Gross Domestic Product (GDP) statistics have been understating the size of countries’s economic output … so it is time to redefine expenses (such as Research and Development, “artistic originals,” and unfunded pension liabilities) as revenue!  Wow … what backward logic has brought about this voodoo twisting of accounting rules?  What’s next … depreciation and good-will write-offs will also be classified as economic output?  To view what is behind this financial insanity see: Financial Times Site (you might need to go through the Drudge Report to this Financial Times Site to view it … otherwise you may need to subscribe for viewing). 

Now, one has to concede that there is one element of rationality to this irrationality … in that this change will cause the restatement of national GDP figures going back to 1929.  However, what do you want to bet that many countries will neglect to use these restatements when reporting their next year-on-year change?  And so … suddenly what were once reliable government statistics will now be suspect.  The Obama administration has already pulled this trick with unemployment data (see: Fishy) … so what do you think will happen with this new GDP revision?  Perhaps the U.S. government will sacrifice a goat first to make things all OK?