NetNews Usenet Archive 1992 #26/NN_1992_26.iso/spool/misc/activism/progress/8228

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From: [e-mail] (Brad Pierce)
Subject: Bush team said to skew latest economic-growth data
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Reprinted *without* permission from the Christian Science Monitor,
Monday, Nov. 2, 1992, Page 1

BUSH TEAM SAID TO SKEW LATEST ECONOMIC-GROWTH DATA

By Amy Kaslow
Staff Writer of the Christian Science Monitor

    Suspicion is growing inside and outside the United States
government that the Bush administration manipulated the
government-spending process to produce a brighter picture of
the US economy during the third quarter of 1992.
    Some analysts go further, charging that the numbers were
tampered with.
    Last quarter's 2.7 percent [annual-equivalent] increase
in the gross domestic product -- the nation's output of goods
and services -- was announced by the Commerce Department on
Oct. 27.  The July-to-September GDP rate was the last important
barometer of the country's economic health released before
tomorrow's election.
    From Republican Wall Street financiers to budget analysts
in Congress, skeptics assert that the number was either puffed
up with accelerated government spending or fabricated in a
last-ditch effort to show voters that the economic recovery
is gaining momentum.
    "It's quite likely" that if "they were smart enough to do
it," top White House policymakers fast-forwarded spending to
put the best face on the economy, says a senior administration
official.  "Had they not done it, the numbers would have been
a lot smaller."
    Even at 2.7 percent, the GDP number "is no grounds for
going out and doing handstands," he says.  "What it does show
is that we're in the status quo -- the same slow growth we've
had all year -- and there is still a lot of weakness."
    The GDP is derived from complex calculations that draw
on a wide variety of indicators.  However, statistics on
defense spending and farm output are supplied by the Defense
and Agriculture Departments; they are two sets of numbers that
the Commerce Department's Bureau of Economic Analysis (BEA)
must get from outside sources.  Mistrust of the GDP number
focuses on these two areas, as well as others.
    "The main reason why people think the GDP was fixed is
that we had other economic indicators, including employment
and industrial production, which were so much weaker," says
a leading Wall Street economist who closely monitors the
defense industry.  After the release of the GDP figures,
which exceeded expectations, "we asked ourselves -- what
went wrong?  We started looking at the pieces of the GDP
number, and the defense spending was one area that looked
so out of line.  They fixed it to get the last good bit of
economic news out before the election.  They could have
fixed unemployment, but that would have been obvious.  The
GDP is easier to hide manipulations [in], because it's so
complex."
    ... A senior Senate official ... disputes the GDP
calculation.  ... In mid-September, the Treasury Department
released the final $3 billion from a Gulf-war account. ...
Another $1 billion was approved recently for environmental
cleanup of bases that are closing.  To register in the GDP
calculation, the Senate source says, the government would
have had to spend the entire amount during the final two
weeks of the quarter.  "I'm skeptical that it could all
be spent that fast," he adds.
    The Wall Street economist adds that while "shipments in
defense goods allegedly went up in September, orders dropped
like a stone for the same category of goods."  He calls the
third-quarter $4.4 billion defense figure "very suspicious,"
even after taking September's accelerated spending into
account. ...
    Michael Evans, a prominent Washington economist and a
Republican, claims the GDP books "were cooked."  He says he
doubts that farm inventories could have risen from $1.7
billion to $5.1 billion, given the crop damage from two
hurricanes and the sharp drop in farm income reported by
the Commerce Department during the second quarter.  He says
he thinks the farm numbers are inflated by more than $5
billion for the third quarter, a significant amount when
considering that the GDP grew by just over $31 billion,
according to the BEA.
   ... Anylysts were surprised by the higher growth rate,
yet Wall Street failed to respond positively.  Says a
Washington-based international banker:  "The markets
thought the number was a phony in terms of economic
performance."
    The Wall Street economist agrees:  "The market is a
very Republican environment, but it didn't rally to this
number because the number wasn't believable."
    George Perry, a Brookings Institution economist and a
widely consulted analyst on federal statistics, says,
"We have to distinguish this from election-year pump-
priming, when at least what you record is actually
happening."  But the latest GDP number, he adds, is
"creating a statistic to show that the economy is getting
well, when in fact there is no reality underneath."