Lack of funding for statistics agencies could hurt economy
Given the scale of the budgetary chaos in Congress, the plight of the federal government's statistical agencies naturally hasn't captured many headlines. Economists inside and outside the government, however, say that Congress's likely failure to approve additional funds for a cluster of Commerce Department data-gathering agencies could cause slow but insidious damage to U.S. economic well-being.
To understand why, consider the big kahuna of national economic performance measures: the gross domestic product (GDP). It is an all-important statistical summary of the U.S. economy. Produced by the department's Bureau of Economic Analysis from data collected chiefly by its sister agency, the Census Bureau, and the Labor Department's Bureau of Labor Statistics, GDP totes up all the goods and services produced nationwide.
GDP and its component parts-known as the national income and product accounts-provide information that the Federal Reserve Board relies on to tinker with interest rates and that Congress and the White House rely on to produce budget and economic forecasts.
Those who labor in these statistical vineyards argue that it's in the national interest that the raw material fermented and bottled as GDP be fresh and of the highest quality. As Commerce Secretary Donald L. Evans told a congressional panel this summer, a mistake in GDP-growth estimates of a mere one-tenth of 1 percent can translate into a $230 billion error in a 10-year budget estimate.
Right now, the Census Bureau is supposed to be getting ready to launch the economic census-a survey of roughly 5 million businesses conducted every five years. It generates most of the raw data from which GDP and the national income and product accounts are devised. But this summer, the Senate Appropriations Committee's Subcommittee on Commerce, Justice, State, and the Judiciary passed a bill keeping the agency's funding flat-actually promising 40 percent less than the $87 million that Commerce had requested for the economic census. And while the House subcommittee with jurisdiction over the Census Bureau has yet to pass a funding bill, Commerce officials note that the panel has $4 billion less, overall, to dole out than its Senate counterpart. And while Congress puts off passage of this and other appropriations measures, it has been keeping the statistical agencies' budgets flat.
Economists say that canceling the economic census would be a serious problem-and an event that hasn't occurred for half a century. It would force the government and economists everywhere to try to gauge the state of the economy over the next five years on the basis of a snapshot taken in 1997 supplemented only by smaller surveys and the educated guesswork of economic modeling. "GDP statistics would become increasingly unreliable," said Barry Bosworth, a senior fellow at the Brookings Institution.
Indeed, so unthinkable is the prospect for the career numbers crunchers at the Census Bureau that they're planning to draw on existing funds to send out their 5 million surveys, beginning in December. They hope additional money will come through before the returned surveys start piling up early next year.
The Census Bureau was also hoping to improve on the smaller surveys used to update GDP in between the economic censuses. As the service sector has grown as a share of economic activity, the Census Bureau has argued for surveying that sector once a quarter rather than just once a year.
The Census Bureau also wants to collect new data on business investment in computers and telecommunications. Government statisticians now believe that the lack of such data is a major culprit in the government's recent misestimates of GDP. Unfortunately, says Elizabeth Gregory, a Commerce Department spokeswoman, the funding levels approved by the Senate Appropriations subcommittee seem likely to hobble those plans as well.
Diane Swonk, chief economist at Chicago-based Bank One and a past president of the National Association for Business Economics and the current head of its Business Statistics Council, argues for more and timelier data: "We could have seen the economic downturn sooner, and economic policy could have been more pre-emptive and more clearly thought out in late 2000." The public might also have been tipped off earlier about just how weak the economy was last year.
Also on the chopping block, say Commerce officials, are plans to help trim the cost and size of the decennial census by shifting a raft of questions off the current "long form" questionnaire and onto shorter and more frequent surveys. These could produce valuable data for state and local policy makers. Appropriators said their hands were tied. A subcommittee spokesman said that to maintain fiscal discipline while boosting funding for homeland security programs at the Justice Department and for the Securities and Exchange Commission required freezing all other spending at last year's levels. But economists and Commerce officials are hoping that lobbying by business economists and heavyweight officials at the Fed will eventually persuade Congress to relent. The extra money required "is peanuts in this game, and the benefits far outweigh the costs," Swonk said.