In the aftermath of the financial crisis the US Government’s own projections for economic growth, often given with the latest form of stimulus, have been consistently too high. Here is the famous chart released by the White House in 2009 forecasting an unemployment rate of 5% by now given the first trillion in stimulus.
The Federal Reserve constantly forecasts GDP several years out, and as we can see here, virtually every forecast they have made in recent years has been too high.
This week the Bureau of Economic Analysis is implementing a major change in the way it calculates GDP, adding a whopping 3% to the size of our economy. As reported by the FT:
US economic history will be rewritten this week, as the most far-reaching methodological changes in years will add the equivalent of a country the size of Belgium to output in the world’s largest economy.
The most important change by the Bureau of Economic Analysis, to be announced on Wednesday, will be to start counting spending on research, development and copyrights as investment, and reflect pension deficits for the first time. Combined they are expected to add 3 per cent to gross domestic product.
The practice of changing facts and figures to better fit the governments original forecasts is a practice straight out of George Orwell’s 1984. In fact making such revisions is the protagonists job. Without giving too much of the story away, here is the exact passage where we learn what Winston does:
The Times of the nineteenth of December had published the official forecasts of the output of various classes of consumption goods in the fourth quarter of 1983, which was also the sixth quarter of the Ninth Three-Year Plan. Today’s issue contained a statement of the actual output, from which it appeared that the forecasts were in every instance grossly wrong. Winston’s job was to rectify the original figures by making them agree with the later ones
None of this should be news to those of us that have realized all these numbers are made up and constantly revised and should never be taken seriously. Again, I defer to Mr. Orwell
But actually, he thought as he re-adjusted the Ministry of Plenty’s figures, it was not even forgery. It was merely the substitution of one piece of nonsense for another. Most of the material that you were dealing with had no connexion with anything in the real world, not even the kind of connexion that is contained in a direct lie. Statistics were just as much a fantasy in their original version as in their rectified version