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The Trump Admin yesterday doubled its economic impact estimate re: the shutdown. The nature of the change disconcerts me on a few fronts.
- Politicization of the BEA's output
The shutdown and the corresponding initial economic impact estimate necessarily pertained to the macroeconomic short-run, which is very accurately estimable; moreover, ubiquitously known when the estimate was formed were Trump's "my way or the highway" stance, as well as Dems' "no wall money" stance, regarding the political nexus of wall funding and government operations. Nonetheless, the BEA nixed issuing as their projection the estimate given yesterday, despite germane and handily extant information perfection.
Full on doublings/halvings of estimates in a span of weeks just isn't supposed to happen with short-run estimates made by people of the level of expertise and professionalism for which BEA economists are known. People of that sort don't make sophomoric mistakes, which is what, absent the hand of politics, the short time frame suggests transpired. Such a mistake is tantamount to a doctor looking at an x-ray of a broken joint and stating one's injury is a strain it rather than a fracture.
Blatantly applied information insouciance of that nature is unwonted among economists; however, it's archetypal among politicians and marketers. Omissions and obfuscations of that nature suggest political exigencies factored into the nature of the initial estimate. Though one expects a measure of "lean" from certain private sector economic analysis organizations, seeing signs of it from the government suggests we may be facing Trumpian mortification of verity and reliability of economic information and analysis our government produces. Such a suggestion, furthermore, gives one pause regarding other governmentally calculated and reported figures.
Such a prospect's verisimility is particularly disturbing, particularly because literally everyone relies on government data, no news organization is going to hold anyone to account for BEA "oopses" (because the story is "bigly" geeky), and very few people realize the nature and extent to which private sector organizations use BEA data.
Most troubling, however, is that because the BEA (and other economic units) are the sole sources of certain analysis/data, there's nothing one can do about it if that agency has become subject to politicization. People will just use the data/analysis because it's "the only game in town." That means that sooner or later "****'s going to hit the fan" when folks realize they've been using errant information. The concern now is whether more than just the most recent estimates reflect political shaping. Has Trump been "crying wolf" because he's been "putting his finger" on the proverbial information scale? Ruefully, one must consider that he has given his rampant lying and chaos causing behavior, to say nothing of having to factor in the prospect that the man may be a Russian asset. - GDP I
There's nominal GDP and there's GDP growth. While we may desire more GDP growth than we observe, GDP growth of any extent means the economy is growing, which is a good thing, even if the growth is small. What's not good by any measure is GDP shrinking, an actual reduction in the extent of output the country produced in a given period.
Ian Shepherdson has noted, "If the shutdown were to last through the whole quarter, we would look for an outright decline in first quarter GDP." That's a drop in nominal GDP, i.e., no GDP growth at all. There is no reason, given Trump's "this could last for months or years" remark, to think the shutdown won't persist through the first quarter.
Some folks may not know it, but the US' real might accrues from its economic influence, not its military influence. What did Reagan do to bring down the USSR? He orchestrated a sequence of events that led it to overspend militarily and, in turn, drive its domestic economy into the dirt. Simply put, military spending, like wall spending, don't contribute to the greater polity's productivity and financial growth because such spending, though it filters through some parts of an economy, has an endpoint. The only way to keep the "filtering" happening is to spend more because the classified nature of much military innovation prohibits it from disseminating into the greater economy. - GDP II
The risk of accepting as a reality, while holding out for the wall, declining GDP suggests Trump really doesn't give a damn about the macroeconomic sagacity of building the wall and that he's willing to sacrifice the US economy, writ large, for his wall. I don't know about you, but that's not acceptable to me.
