Good Numbers Are Worth A Good Deal
What use is an Information Age if the information is bad? That's what we may get if Washington cuts the budget of the Bureau of Economic Analysis, which collects a lot of America's statistics. At the moment, the BEA's budget is slated to be cut from $48.1 million in fiscal 1995 to $40 million in 1996.
Bad idea. The government's number-crunchers are trying to overhaul the statistics on output and price. They are at the early stages of arriving at a better reading of what is happening in the economically vital, but statistically murky, service- and information-dominated parts of the economy. Right now, we don't know whether gross domestic product rose at a 0.5% annual rate in the second quarter, as reported, declined at a 0.2% pace, as the BEA's admittedly incomplete revisions of GDP suggests, or was a different growth rate altogether. If the BEA doesn't get more money to finish improving the statistics, we won't know if productivity is growing at the 2% annual rate previously calculated, is rising at a mere 1.3%, as new numbers suggest, or some other number.
The answers are of interest to more than the fraternity of forecasters. Economic statistics affect how business invests billions of dollars in new plant and equipment, how stock and bond traders allocate the trillions they control, and how the Federal Reserve Board conducts monetary policy. Misinformation is dangerous in an information economy.