Lies, Damned Lies and the Government?

My mother used to tell me that you must never get into any sort of bad habit, as they are very difficult to break.  One that I learned very early on is that it is always better to tell the truth, as it is so difficult to remember a lie.

Unless you’re the government.  You see, the government’s answer is that whatever they are saying is the truth.  So, if the government reports that unemployment is 7.6%, it doesn’t matter that there are fewer people in the US today who are working then were working 5 years ago, despite the fact that the population has grown by perhaps 15 million people.

The government – in that case the Bureau of Labor Statistics – has chosen to re-define unemployment and when they finish assembling their selected statistics and making their calculations: presto!  7.6% unemployment

(How many people who want a job don’t have a job in the US today?  It is hard to get a precise number, but most analysts agree it is probably near 10%.  Add in those who have some part-time work but are looking for a full time job and the number climbs to nearly 12%.)

Or inflation.  The esteemed Mr. Bernanke, Chairman of the 4^th Branch of Government, the one not found in the Constitution, was so bold as to announce two weeks ago that ‘Inflation is too low,’ and that he was going to continue to ‘ease the money supply.’  (If you think that translates into ‘print more money’ you are essentially correct.)

According to Mr. Bernanke the inflation rate is just a tad over 1%.  And that is too low.  (That he could actually say that ‘inflation is too low’ irrespective of what the particulars are is the subject of another article, but it is a comment that shouldn’t be ignored.)  Now, the interesting thing is that if you include such things as the price of gasoline and energy, as well as food, in the Consumer Price Index (the handy, government generated number that is used to track inflation), you come out with a number besides 1%.  In fact, if you use the formulas used in the 1980s and 1990s, the current inflation rate is somewhere between 5.5% and 8% and has been (actually higher than that) for the last 4 years.

But, the Fed didn’t like the numbers – or kowtowed to others who did not – and the formula was changed.  So, we are now at a tad over 1% inflation.

And then there is the debt.  The national debt is approaching $17 trillion.  We are accruing debt at a rate of almost $30 billion per month (about $.7 billion per day).  But, on May 17^th (70 days ago), the US debt hit $16,699,396,000,000.00 - and there is sits to this day.

Now, let’s imagine you run a company, a publicly traded company.  Publicly traded companies need to provide regular estimates and regular reports of their activities.  Failure to do so can result in a great deal of difficulty for the senior management.  Even more egregious would be ‘playing with’ the numbers in a report so that they ‘work out just right.’

But that isn’t a problem for the Government.  You see, the US debt ($16,699,396,000,000.00) was too close to the legal limit Congress had imposed on the debt. (In fact, the debt was just $25 million short of the legal limit; $25 million is the amount the federal government spends every 4 minutes, and the amount of debt the government is currently accruing every 18 minutes). What was needed was that the Executive Branch – usually the Secretary of the Treasury - go back to Congress and ask for an increase.  But, that was inconvenient and would have precipitated a political knife fight in Washington.  So, instead of doing what it would seem is required of law, the Secretary of Treasury (Mr. Lew) sent a letter to the Speaker of the House saying that the Treasury would implement “the standard set of extraordinary measures” that allow the Treasury to continue to borrow money after it has hit the legal debt limit, that is – after it has legally passed the amount of money it is allowed to have borrowed.

So, the Secretary of Treasury rigs the books, keeps borrowing (debt in fact climbed more than $52 billion in the 70 day period) and then, in the final poke in the eye to the people ultimately responsible for paying the debt – that would be you and me – they reported for 70 straight days that the national debt remained unchanged.

Imagine if you will what would happen if Exxon played with its books in such a way.  There would be cries for the heads of all the executives.  But in the government it’s literally business as usual.

So, to recap: the unemployment number the government uses isn’t the real unemployment number, the inflation number the government uses isn’t the real inflation number, and the debt number the government uses isn’t the real debt number.