The US government and Western media enjoy accusing China of producing unreliable numbers, but it is widely recognised that there are no national economic statistics in the world as deliberately unreliable and misleading as those of the US. Yet one more feature of the Great Transformation was the US government’s innovativeness in fabricating statistics that raised economic misinformation to an art form.
- Unemployment is more than twice as high as officially stated,
- inflation more than three times, and
- GDP less than two-thirds of the published numbers.
- The same is true with statistics on wages, housing, and more.
Many researchers have published studies demonstrating that the official US economic statistics in nearly all areas are badly distorted to paint a positive picture widely divergent from reality.
As one commenter noted,
“The jobs numbers are fraudulent, the unemployment rate is deceptive, the inflation measures are understated, and the GDP growth rate is overstated. Americans live in a matrix of lies.”
With the compliant media controlling the narrative, few Americans have any idea of the true state of their economy or the personal consequences of these statistical manipulations.
You don’t have to be an economist to appreciate the difficulties in comparing national GDP rates nor the opportunities for deceit in their compilation.
As an example, if our two countries and economies are identical but yours has a higher divorce rate, the legal fees and other costs of the divorce process will be added to your nation’s economic output and your country will have a higher GDP. That doesn’t mean your people are richer, nor does it mean your country is a better place to live. Similarly, if your country is as rabidly litigious as is the US, all those billions in legal fees from lawsuits will be added to your GDP. But again, that doesn’t mean your people are richer. In fact, except for the lawyers, they are all poorer, and it almost certainly isn’t a better place to live.
Education and health care are similar. If my country has a government-sponsored healthcare system and public schools and universities, these will be recorded in my GDP calculations at their low cost. If your country, like the US, has privately-owned and profit-driven health care and educational systems, the much higher costs will be recorded in your GDP statistics as a reflection of a much higher economic output. But that does not mean your people are richer than mine, and in fact they are much poorer because they must spend a high percentage of their incomes for health care and education.
If your country like the US spends more than $1 trillion on its military each year, these expenditures will be included in your national statistics and this alone would make it almost impossible for us to compete on the basis of GDP. But all that military expense does not make your people rich; instead, it impoverishes them, and all that killing does not make your country a better place than mine, even if you’re doing it to make the world safe for democracy.
From the above examples, it should be apparent there are many categories of transactions that serve to greatly inflate GDP numbers but that do not indicate wealth in a nation, and may in fact be indications of poverty.
It should be apparent that some sectors of a nation’s GDP serve to enrich only a very few individuals while the vast majority of the population are left more poor. Health care is an obvious example, where the owners of insurance and pharma companies, profit-driven hospitals and clinics, are indeed richer for the experience, while virtually all of the population is poorer. The military is another clear example, with only weapons manufacturers and bankers being richer after a war while the impoverished population may be paying the cost for generations.
Also, it should also be obvious that a nation like the US that has privatised most physical and social infrastructure will produce a higher GDP than a country like China where the basic infrastructure is owned by the government.
The US prison system is a good example of a service that cost the taxpayers $20 billion before privatisation and $80 billion after. That served to increase the GDP by $60 billion, but only a few people were enriched by the process while millions were impoverished and society not measurably better off.
The US GDP will be inflated by all the airports, highways, railways, electricity generating stations, schools and universities, and much more, that have all been sold to investors in the private sector. But the enlarged GDP is actually an accurate indicator of increasing poverty among the population since the precise amount of that increased GDP must be extracted from the pockets of the population.
Basic accounting tells us that if someone receives money, someone else must have paid it, because money really doesn’t grow on trees. In the case of privatisation, all people must pay much higher fees and charges to the private firms than they paid before to the government, and it is precisely those increased fees and charges bled from every citizen’s bank account that create the increase in the GDP.
It should also be obvious that if China were to sell off its hospitals and its High-Speed rail system to private investors (as the Americans want so badly for China to do), China’s GDP, poverty rate, and income disparity would all rise measurably. When Kunming sold off its best children’s hospital to private owners, the fees charged to patients are already on their way to doubling; those hugely increased costs will increase China’s GDP, but many thousands of families in Kunming will now be poorer.
The much-increased charges by the private companies will increase the GDP while that same amount is squeezed from the purchasing power of every citizen and concentrated in only a few hands. This is Grade Three arithmetic. It cannot be any other way.
Similarly, the US economy is so highly financialised that nearly half of the stated GDP consists merely of book entries transferring money from one account to another, not in any way comparable to the real production of manufacturing or the provision of real services. When we remove the financialisation aspects from the accounts, the US real GDP is reduced by nearly 50% and the national per-capita income falls to about $15,000.
From the above, you can see that the size of a nation’s GDP can be largely irrelevant to the wealth and prosperity of that nation, and that comparing nations on GDP is fraught with difficulties and arguments. GDP used to be a simple measure of goods and services produced in a nation, and was probably an accurate indicator at some point in the past, but it gradually became a way to record the score in a game of ‘mine is bigger than yours’. So, in addition to the real issues outlined above, we also have the US constantly trying to move the goalposts to increase its score by finding ever more creative ways to boost the GDP numbers.
One clever trick by the US government is something called “imputed rent”, which means that if you own a house the government adds to the GDP the amount you would have had to pay in rent (but didn’t), on the mind-twisting basis that if you didn’t own that house you would have had to pay this rent. This one item alone added about $1.6 trillion, or 15% to the US GDP. Also, GDP is adjusted (downward) for inflation so, as you will see in a moment, the US badly understates its annual inflation rate which automatically inflates its GDP by about another $2.3 trillion, or about 20%. These two items alone mean the US GDP is falsely and artificially inflated by about 35%.
Under the imputed rent scheme above, you as a homeowner living in your home are treated as two people, one a tenant, who pays an “imputed” (fairytale) rent, and the other a landlord running a small business owning and renting the house. You as tenant pay a pretend rent which goes into the pretend GDP, and you as landlord have a pretend rental income which goes into the pretend per-capita National Income of the country. US economists claim that this “theory of imputed rent may seem more natural if one imagines the extreme case of a society where everyone raises their own food and builds their own houses; without imputation the GDP would be zero”. US government economists have produced other longer and more confusing explanations as to why this imputed rent is appropriate and realistic. If this were true, the nation’s GDP and National Income should be also increased by the fact that your house is a restaurant and you a customer, and also when you have sex with your wife instead of going to a brothel.
Per Capita Income
The figure we see most often for average US per capita income is around $47,000, a figure that comes straight from fantasyland. First, the ‘imputed rent’ I mentioned above is entered not only in the GDP but also in the figures for average national income, meaning that the income of every homeowner is inflated by his non-existent ‘rental income’. Removing this single fictitious amount lowers the real US per-capita income to about $30,000, or approximately the same level as Greece or Slovenia, a level that has been steadily decreasing since 2008. Other fictious amounts reduce it further.
As one intelligent internet poster wrote,
“Like so much else about America, the nation’s wealth and high annual incomes are just another myth, and suddenly so much of the dissonant information we receive about the US begins to make sense – the documented stories of rampant poverty across the nation, middle-class households having to live on credit to maintain their deteriorating standard of living, deferred retirements, bankruptcies.”
Exactly correct. An increasingly small minority of the US population is indeed doing well, while an increasingly large majority is living in poverty and slums, are going bankrupt, cannot find a job, cannot afford to retire, are dependent for their daily survival on government handouts, and can no longer afford to go to the doctor. But the propaganda machine persists in promulgating a false image of a shining mansion on a hill.
One author noted that
“If inflation in America were calculated today by the same statistical methods used prior to the 1980s, the true rate would be almost 10% higher than that stated by the US government today.”
And that’s correct, but this serious mis-calculation of the CPI is fraudulent on more than one level. First, it seriously deceives Americans as to the state of the economy, deflecting blame from the FED and the government to the people. After unleashing the massive economic destruction in the early 1980s, the FED didn’t want the public to know how badly they’d been trashed and plundered, and so immediately implemented the production of increasingly fraudulent economic statistics with lies that have increased by the year.
These false statistics also involve a massive financial fraud, the theft of countless billions of dollars from the American people by their own government. The reason is that all Social Security payments, welfare and food support, and other items are linked to the rate of inflation and are legislated to increase each year to cover the actual increases in the cost of living. But since the US government deliberately understates the inflation rate by approximately 10%, all Social Security benefits have been underestimated and underpaid by this amount, compounded annually, and so Social Security, many pensions, and other payments should be about 70% higher than they are today.
In the calculation of inflation and the consumer price index (CPI), Americans have been so innovative they’ve had to create separate categories to contain all their fraudulent calculations. Here are a few:
US officials realised the easiest way to lower the quoted CPI was to just leave stuff out, so they invented a measure they called “core inflation”. That should mean the central or most important portions of price increases, those most critical to consumers, but no. The US definition excludes precisely these critical items like food and fuel, eliminating the most important items from the inflation statistics, thereby creating a totally false picture. Measuring inflation without food and energy is almost the same as measuring inflation after you subtract all the inflation.
Then, the Americans found another way to leave stuff out, having imagined what they termed a “substitution effect”, meaning that when beef prices rise the public will cease purchasing beef and buy chicken instead. That part is true, but the cleverness is their conclusion that since we are no longer buying beef they can remove it from the inflation calculations. So now, when the price of something rises, the US Labor Department just eliminates it from the calculations and substitutes something cheaper. Voilà, no inflation. But of course it’s all a big lie. The US Farm Bureau measures the increasing prices of the identical basket of goods and the difference is large: From 2007 to 2008, the Labor Department reported inflation of only 4.1%, while the real inflation reported by the FB was 11.3%.
(3) Geometric Weighting:
Another clever trick is to arbitrarily reduce the severity of price increases when some prices are increasing rapidly, as oil prices often do. The government ruled that if an item’s price rises “too quickly”, people will use less of it, so with any rapid price increase, the US government reduces its weighting in the CPI calculation. For example, health care is about 17% of GDP but it was given a weighting of only 6% because real health costs are rising. This alone reduces the US CPI by several percentage points. For both of the above, it should be clear that the US government is not recording actual price increases – in other words, real inflation – but is instead recording fictitious consumer behavior in the face of strong price increases.
This machination makes arbitrary adjustments for assumed quality improvements in goods and services. As an example, a home appliance may have been priced at $400 but experienced a minor improvement in a subsequent model year. Officials arbitrarily assumed the improvement was worth $150 and the basic appliance was now only $250, and then used that figure in calculating the CPI, showing a 40% decrease in appliance prices while in fact the price was unchanged. This kind of adjustment is now applied to almost 50% of all items contained in the calculation of the US CPI.
In July of 2013, Mortimer Zuckerman wrote a thoughtful and informed article for the WSJ titled “The Full-Time Scandal of Part-Time America” (1) in which he, a little too gently, devastated the US government’s unemployment statistics by pointing out that the almost 300,000 ‘new jobs’ created in June of that year were mostly smoke, in that full-time jobs plunged by well over 500,000 while part-time labor increased by about 800,000, a distinction the Labor Bureau found unworthy of mention. Low-paying jobs now account for almost half of all employment growth and even with that, less than 60% of Americans have a job of any kind. In one month, the US government listed a large number of new jobs in retail trade, but that was clearly impossible when major retailers like J.C. Penny, Macy’s, Sears, and the dollar store chains were all in trouble and closing stores, and shopping centers were so desperate for tenants they were renting space by the day or the hour. Zuckerman noted that, after Obama’s health care act mandated the provision of health insurance to all those working more than 30 hours per week, companies immediately cut workers’ hours to less than 30, often dividing one full-time job into two part-time jobs, to avoid that benefit cost.
Dave Kranzler wrote that “The US employment report is probably the most deceptively fraudulent report produced by the Government”. (2) The US government has gone through contortions every month since 2008, attempting to delude the population about a non-existent ‘recovery’ that it falsely claims occurred in 2009. In spite of all the hype, the truth is that the US economy is still sitting on the bottom pretty much where it was in 2008, with no recovery of any kind and no net new jobs created. The publicity about the creation of ‘service jobs’ and ‘health-care jobs’ is disguising low-paid employment for retail clerks and home-care for the elderly, and the unemployment statistics have suffered the same kind of creativity as has the CPI – if a category proves troublesome or embarrassing, the government simply omits it from the calculations.
The US government has no qualms about massaging and rearranging numbers and categories to produce results, however inaccurate and dishonest, that place the US in the lead. In November of 2014, Glenn Kessler reported in the Washington Post Obama’s claim before Congressional leaders that “As I travel to Asia for the G-20 Summit, I’m going to be able to say that we’ve actually created more jobs here in the United States than every other advanced country combined”, a claim that was of course false. (3) His definition of advanced nations omitted all those that were actually growing instead of retracting, nations like China, Russia, Brazil, India, Indonesia and Mexico. Perhaps his most dishonest position was to omit the fact that professional and middle-class full-time employment for educated people have disappeared at an alarming rate, with only unappealing part-time minimum-wage clerking positions being created, on which families cannot survive without welfare and food stamps. Kessler noted that his claim of the US having created 6 million “new” jobs compares to China alone having created more than 50 million new jobs since 2010. He ended his article with the comment that “One has to marvel at the clever economists in the White House who managed to slice and dice the numbers to come up with (these ‘facts’).”
Jim Clifton, the CEO of Gallup, in an interview on CNBC, called the US government’s unemployment figures “a big lie”, explaining that
“If you perform a minimum of one hour of work in a week and are paid at least $20 … you’re not officially counted as unemployed. If you have a degree in chemistry or math and are working 10 hours part time because it is all you can find… the government doesn’t count you.”
To further emphasise the perilous state of the US economy and labor picture today, only 60% of employable workers in the US have jobs. According to the government’s own statistics, a full 40% of all working-age citizens have no employment, but officials still claim an unemployment rate of only 6%. To add to the labor catastrophe, it has been reported that the fastest-growing segment of the US workforce is those aged 65-75, people who should be retired but who cannot live on their meager pensions and unaffordable health care and must sacrifice their retirement years and return to the workforce in order to survive.
I suppose this commentary wouldn’t be complete without reference to China’s numbers, at least from the American point of view. For any country, but especially China, economic statistics are acceptable if the Americans like the numbers, otherwise they are “unreliable”, the accusation substituting as proof.
While Vietnam, Laos and Cambodia claim more than 5 million deaths during the Vietnam war, the Americans allow for only one million since “Vietnamese statistics are notoriously unreliable”. We have the same problem with China’s economic statistics: the Americans don’t like the numbers and so dismiss China’s statisticians as “untrained” and their statistics as “unreliable”, the accusations once again substituting as proof. Let’s note here that the US FED (and other notable economists) conducted their own analysis of China’s economic statistics and confirmed that the country’s actual growth was in line with the official numbers.
China’s statisticians produce their numbers for the Chinese, not for the Americans, so they don’t bother explaining their methodology and thus leaving the Americans in the dark, craving many juicy details of China’s economy that cannot be easily derived from the gross statistical numbers. And when the Americans call, nobody will respond to their questions so they accuse the Chinese of being “unreliable”, of fudging the numbers, of exaggerating, of maybe having “two sets of books” so the government can know “what is really going on” with the economy. According to Mark Magnier of the Wall Street Journal (where else?), a new set of good numbers “raised fresh doubt about the trustworthiness of China’s own statistics”, with Citibank helpfully chiming in with “Growth Likely Overstated”, and some unbiased Western ‘researchers’ claiming the numbers were inflated by nearly 100%. Again, accusations equivalent to proof.
But the real purpose of these attacks was illuminated by an economics professor at the Hong Kong University of Science and Technology, Carsten Holz, a man who even wrote a paper on “the quality” of China’s GDP statistics, who said Chinese statistics suffer from “an atrocious lack of transparency”. That statement would translate loosely as “We want to know more, but they won’t tell us because (1) they believe it is none of our damned business and (2) they think we will find ways to use their numbers against them.” Correct on both counts.
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Larry Romanoff is a retired management consultant and businessman. He has held executive positions in international consulting firms, and owned an international import-export business. He lives in Shanghai and is currently writing a series of ten books generally related to China and the West. He can be contacted at: firstname.lastname@example.org
The original source of this article is Global Research