In particular, we distinguish between reporting data and offering projections. Those rejecting the data reports are just fighting the mainstream interpretations accepted by nearly all economists and by the mutual fund managers. Projections are quite different. They come from different sources, and the results vary.
A Reader’s Guide
Here are some typical examples of government information. Our reaction varies dramatically and so should yours.
The Bureau of Labor Statistics (BLS). This is a non-partisan agency. The key professionals have tenure and earn respect from peers and supervisors by doing a good job. A new President cannot fire them nor significantly affect their pay. From their perspective, Presidents come and go but their work goes on. They try to do a good job, and we think that they generally succeed. The methods are subject to great debate before acceptance. Once accepted, they are followed in a rather mechanical fashion. Those suggesting that these reports are subject to partisan politics are just wrong. They simply do not understand how government works.
The Office of Management and Budget is under the control of the current Administration, so it is partisan. This does not mean that forecasts and comments are wrong, but consumers must consider the source. At this time it means that forecasts reflect the Obama perspective. Any forecasts should be carefully tested against outside sources. For an illustration of how OMB can be slanted to a particular perspective, we recommend the Reagan era example of David Stockman. In an interview he admitted a clear bias in forecasts and was “taken to the woodshed” by the President after he spilled the beans. We are not suggesting that Obama is “cooking the books” with current forecasts, but we view them with appropriate skepticism, testing against other sources. We plan to write much more about forecasts from the Administration.
The Congressional Budget Office is a source deserving respect. We call this a bipartisan source, since it must earn and keep the respect of Congress, no matter which party is in power. Initiated in 1975 under the leadership of Alice Rivlin and later Rudolph Penner, the CBO analyses earned the respect of both parties in Congress. Any young professional wanting to do objective policy analysis should see the CBO as a dream job. In the current policy debates the CBO is responsible for evaluating every proposal. This is especially crucial to the health care initiatives and the Congressional agreements concerning PAYGO, where there must be a revenue offset for new initiatives. Here is a great current example.
The mainstream media does not explain these differences nor reflect them in reports. A CNBC anchor recently kept referring to the CBO as the CBOE (an options exchange). A top source at TheStreet.com recently attributed a CBO analysis to the GAO, even using the “old name” for the GAO.
They just don’t get it. The big-time sources do not distinguish between various government sources. They do not provide any background or context. They do not grasp the distinctions.
You can do better! You can start by printing out this article and using it as a handy reference.
Originally published at A Dash of Insight and reproduced here with the author’s permission.