Threats to Economic Statistics

The federal statistical system costs less than one-tenth of one percent of the federal budget. The return on that investment for the taxpayer is  enormous : Government statistical agencies provide invaluable information that informs millions of decisions made by Americans every day. Social Security payments are tied to changes in the measured inflation. Retail stores decisions about what items to put on which shelves rely on government data describing local area demographics. The Federal Reserve and private-sector investors use government data to understand current economic conditions and the economic outlook, shaping global capital flows. But despite its importance, the federal statistical system (FSS) faces major threats. From an important new paper by David S. Johnson, a Brookings economist: Since the founding of the country, the nation’s economic statistical system has produced timely, accurate, and relevant statistics that are used by policymakers and the public to make critical decisions. However, in recent years, the nation’s economic statistical agencies have been increasingly threatened by political and technical challenges. Having dealt with continually falling budgets, staff shortages, and increasing pressures to modernize their statistical infrastructure, these agencies are now experiencing a period of unprecedented staff reductions, budget cuts, and criticisms of their statistical credibility. This social and political environment has put federal statistical agencies into a state of crisis, furthering distrust of government statistics among the American people and reducing the availability of statistics on various aspects of the nation’s economy, people, and well-being. The specific threats to the Federal Statistical System (FSS) can be placed into two broad categories. First, some threats are internal within the FSS, including declining survey response rates, changing technology, and the use of blended data. Second, other threats arise from external factors or political structures, including declining public trust, political interference, falling agency budgets, and staffing limits. Johnson’s paper is part of Brookings’ Economic Indicators Initiative (EII) , of which I’m a part and which has just released a series of papers with the mission of highlighting risks to the FSS and strengthening the production of economic statistics.  Johnson provides an overview of the internal and external threats facing the FSS, and highlights the importance of keeping agency staff motivated. And: After reviewing the structure of the FSS and headline economic indicators (or Principal Federal Economic Indicators), the paper focuses on the internal threats of falling response rates and difficulties in innovation and the external threats of decreasing budgets, staff, trust, and increasing political interference. This analysis shows that falling response rates are a concern if they bias the statistics, demonstrates the challenges faced by agencies in modernizing their statistics, highlights the recent reductions in staff, and discusses the implications of decreasing financial resources over the past 15 years. The conclusion examines whether attempts to limit the independence of the agencies could harm the statistics. Check out Johnson’s full paper here . The post Threats to Economic Statistics appeared first on American Enterprise Institute - AEI .