Black Helicopters Hover Over Economic Reality: Caroline Baum

Feb. 9 (Bloomberg) -- Maybe it’s inevitable that politics play a role in economic policy. After all, the two disciplines were pretty much intertwined until the 20th century.

Today, political economy has taken on a whole new meaning. Perhaps “politicized economy” would be a more accurate description.

Some of the politicization is natural and understandable: Political philosophies dictate economic preferences and vice versa.

Much of it is over the top. Today, politics infect everything from the analysis of economic reports to the interpretation of Clint Eastwood’s “Halftime in America” Super Bowl commercial for Chrysler. Here are the categories I’ve assigned to reflect the four degrees of politicization:

No. 1: I Think, Therefore I Am

It’s natural for a president to appoint advisers who share his views on government’s role in the economy. For example, if you believe that the cure for a weak economy is more government borrowing and spending -- if you are a Keynesian -- you might be tapped as an economic adviser for President Barack Obama.

Alternatively, if your beliefs run to laissez-faire capitalism (no longer an oxymoron) and market-based solutions, you were probably last employed in the Reagan administration.

Once an economist becomes a top presidential economic adviser, she becomes a political tool, sacrificing both her objectivity and credibility in the process. Berkeley economist Christina Romer, Obama’s first chairman of the Council of Economic Advisers, may be a respected researcher, but to me she will always be Ms. “Jobs Created or Saved.” Romer was trotted out quarterly to justify the cost of the administration’s 2009 fiscal stimulus, currently estimated at $825 billion. Talk about pulling numbers out of a hat.

No. 2: Sour Grapes

If the foregoing reflects the inadvertent politicization of economics, what follows is intentional, pure and simple.

Last Friday, the Bureau of Labor Statistics reported a 243,000 increase in January non-farm jobs (257,000 in the private sector) and a decline in the unemployment rate to a three-year low of 8.3 percent. The internals of the report -- hours worked, wages, breadth of job creation -- were positive, as well.

Republicans, hoping to run in November against Obama’s lousy economic record, would prefer a rising jobless rate to a declining one, which historically has been a good credential for re-election.

“Anemic growth is not growth,” said former House Speaker and Republican presidential hopeful Newt Gingrich, responding to the report. “I believe the economy will begin to recover the day Barack Obama is voted out of office.”

Critiquing the stimulus and other administration initiatives is a legitimate line of inquiry. Even better is outlining your plan to make things better. Denying good news -- in this case, a gradually improving economic trend -- makes Gingrich come across like, um, a space cadet.

No. 3: Yes, But...

House Speaker John Boehner said he saw “flickers of hope” in Friday’s jobs report and welcomed the positive news, but -- you knew that was coming -- “we can do better.”

The jobless rate has been stuck above 8 percent for 36 consecutive months, he said, before reminding the American people of Obama’s promise to cap unemployment at that level if Congress passed his stimulus bill. (Actually, it was Romer’s econometric model that made that promise.)

Boehner did go positive, in a negative sort of way, saying he hoped the news would inspire the Senate to take up the 27 jobs bills sitting in that chamber.

“If the president really wants to get the economy moving again, really wants to improve his own chances of re-election, maybe he’ll pick up the phone, call Senator Reid and ask Senate Democrats to get off their rear ends.”

No. 4: Oh, What a Tangled Web We Weave

At the far end of the politicization spectrum are those who believe the government cooks up the numbers in some dark corner of the Labor Department basement. It’s as if these folks decreed, “There shalt be no good news as long as Obama is president, the federal government is expanding and the Federal Reserve is printing money and debasing the dollar.”

I have a message for them. It’s not the data that are politicized. It’s the interpretation.

Friday’s report inspired an outpouring of accusations of “fraudulent employment statistics” and long screeds on updated population estimates from bloggers (ZeroHedge and the Economic Collapse) and editorial writers (the Washington Times) alike.

The household survey for January incorporated new information from Census 2010. Previous months were unrevised. Simply put, there is a December/January break in all the series that rely on the new estimates.

If the December data had been updated for the population-control effect, the civilian non-institutional population would have increased 175,000 in January, a typical month-to-month change, not the 1.7 million without the adjustment.

The composition of the population changed, as well. Conspiracy theorists seized on the 1.2 million increase in those “not in the labor force.” Adjusted for an apples-to-apples comparison, the number fell by 75,000 in January. That’s because the population increase was concentrated in persons 55 and over and in the 16-24 year-old age bracket: a population less likely to be in the labor force than the general population. (Tables B and C on Page 7 of the Employment Report outline these effects.)

Another hot spot for CTs was the 0.3 percentage-point drop in labor-force participation rate in January, which also reflects a break in the series. Had new population controls been applied to December, the rate would have been 63.7 percent, the same as January.

None of this is to deny the depressed state of the labor market. But before you accuse me of naivete and BLS statisicians, who are not political appointees, of fraud, ask yourself one question. If the government were really fabricating the numbers, why settle for an 8.3 percent unemployment rate when 6.2 percent would better serve its agenda?

(Caroline Baum, author of “Just What I Said,” is a Bloomberg View columnist. The opinions expressed are her own.)

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