Don’t let politics pollute official data

Trustworthy data is indispensable for sound economic policy and stable financial markets. Assuring the integrity of official statistics is among the government’s most important jobs. Unfortunately, the current administration’s commitment to this principle seems to be wavering.

A case in point: Commerce Secretary Howard Lutnick recently said he intends to change the way gross domestic product is reported. As he told Fox News, “You know that governments historically have messed with GDP. They count government spending as part of GDP. So I’m going to separate those two and make it transparent.”

He seems to be following the advice of Elon Musk, the administration’s efficiency czar, who’d previously posted: “A more accurate measure of GDP would exclude government spending. Otherwise, you can scale GDP artificially high by spending money on things that don’t make people’s lives better.”

Debates over what should be included in measures of output are as old as national statistics and may never be settled. Counting the government’s contribution is especially tricky.

The value provided by most civil servants, for instance, is measured by their earnings. Pay federal workers more, and GDP goes up (in the first instance) even if they’re supplying no additional services. Conversely, the more Musk succeeds in pruning government payrolls, the bigger the hit to reported GDP, even if nothing else changes.

Official statistics are replete with similar puzzles and anomalies. The benefits delivered by countless goods and services are unavoidably mismeasured or ignored altogether. Unpaid work adds nothing to GDP, for example.

Many digital services are enormously valuable yet free to users; identifying the relevant metrics to capture their worth is far from easy. In many such cases, there’s no one right answer.

Precisely how GDP should be calculated, then, is a legitimate question. Yet simply excluding the government’s contribution would be absurd: It implies that the correct value to impute to public services is zero.

Many analysts, no doubt, are interested in the narrower measure of private-sector output that Lutnick and Musk prefer to highlight. But those numbers are easily available and don’t require making a destabilizing change to official indicators.

What matters is whether the government can be trusted when reporting its statistics. Blithely declaring that GDP minus government spending is the one true measure of output inspires no such confidence. Nor does the context for this abrupt proposal.

Just days before Lutnick’s comments, the Commerce Department shut down two key statistical advisory committees, saying in effect that their work was done. That will only make life harder for the Bureau of Economic Analysis — the independent agency that calculates GDP, among other crucial statistics — by depriving it of expert methodological advice.

A broader attack on official metrics could be disastrous. Many of the federal agencies responsible for collecting and publishing official data had already been under budget and staffing pressure. That includes the Bureau of Labor Statistics, whose releases — such as inflation and employment figures — guide policymakers and move markets around the world. Slashing funds for these agencies or meddling with their methodologies could severely undercut their hard-earned legitimacy.

Making public data as accurate as possible is vital. It’s a job for dutiful technicians, acting in good faith. Ceding this mission to partisan zealots seeking a short-term political advantage would be a serious mistake — and possibly an unfixable one.

Editorial Board, Bloomberg, Courtesy Bloomberg