From: pierce@lanai.cs.ucla.edu (Brad Pierce)
Subject: Bush team said to skew latest economic-growth data
Followup-To: alt.activism.d
Originator: rich@pencil.cs.missouri.edu
Organization: UCLA, Computer Science Department
Distribution: na
Date: Sun, 8 Nov 1992 23:20:42 GMT

Reprinted *without* permission from the Christian Science Monitor,
Monday, Nov. 2, 1992, Page 1

BUSH TEAM SAID TO SKEW LATEST ECONOMIC-GROWTH DATA 

By Amy Kaslow 
Staff Writer of the Christian Science Monitor 

    Suspicion is growing inside and outside the United States 
government that the Bush administration manipulated the 
government-spending process to produce a brighter picture of 
the US economy during the third quarter of 1992. 
    Some analysts go further, charging that the numbers were 
tampered with. 
    Last quarter's 2.7 percent [annual-equivalent] increase 
in the gross domestic product -- the nation's output of goods 
and services -- was announced by the Commerce Department on 
Oct. 27.  The July-to-September GDP rate was the last important 
barometer of the country's economic health released before 
tomorrow's election. 
    From Republican Wall Street financiers to budget analysts 
in Congress, skeptics assert that the number was either puffed 
up with accelerated government spending or fabricated in a 
last-ditch effort to show voters that the economic recovery 
is gaining momentum. 
    "It's quite likely" that if "they were smart enough to do 
it," top White House policymakers fast-forwarded spending to 
put the best face on the economy, says a senior administration 
official.  "Had they not done it, the numbers would have been 
a lot smaller." 
    Even at 2.7 percent, the GDP number "is no grounds for 
going out and doing handstands," he says.  "What it does show 
is that we're in the status quo -- the same slow growth we've 
had all year -- and there is still a lot of weakness." 
    The GDP is derived from complex calculations that draw 
on a wide variety of indicators.  However, statistics on 
defense spending and farm output are supplied by the Defense 
and Agriculture Departments; they are two sets of numbers that 
the Commerce Department's Bureau of Economic Analysis (BEA) 
must get from outside sources.  Mistrust of the GDP number 
focuses on these two areas, as well as others. 
    "The main reason why people think the GDP was fixed is 
that we had other economic indicators, including employment 
and industrial production, which were so much weaker," says 
a leading Wall Street economist who closely monitors the 
defense industry.  After the release of the GDP figures, 
which exceeded expectations, "we asked ourselves -- what 
went wrong?  We started looking at the pieces of the GDP 
number, and the defense spending was one area that looked 
so out of line.  They fixed it to get the last good bit of 
economic news out before the election.  They could have 
fixed unemployment, but that would have been obvious.  The 
GDP is easier to hide manipulations [in], because it's so 
complex." 
    ... A senior Senate official ... disputes the GDP 
calculation.  ... In mid-September, the Treasury Department 
released the final $3 billion from a Gulf-war account. ... 
Another $1 billion was approved recently for environmental 
cleanup of bases that are closing.  To register in the GDP 
calculation, the Senate source says, the government would 
have had to spend the entire amount during the final two 
weeks of the quarter.  "I'm skeptical that it could all 
be spent that fast," he adds. 
    The Wall Street economist adds that while "shipments in 
defense goods allegedly went up in September, orders dropped 
like a stone for the same category of goods."  He calls the 
third-quarter $4.4 billion defense figure "very suspicious," 
even after taking September's accelerated spending into 
account. ... 
    Michael Evans, a prominent Washington economist and a 
Republican, claims the GDP books "were cooked."  He says he 
doubts that farm inventories could have risen from $1.7 
billion to $5.1 billion, given the crop damage from two 
hurricanes and the sharp drop in farm income reported by 
the Commerce Department during the second quarter.  He says 
he thinks the farm numbers are inflated by more than $5 
billion for the third quarter, a significant amount when 
considering that the GDP grew by just over $31 billion, 
according to the BEA. 
   ... Anylysts were surprised by the higher growth rate, 
yet Wall Street failed to respond positively.  Says a 
Washington-based international banker:  "The markets 
thought the number was a phony in terms of economic 
performance." 
    The Wall Street economist agrees:  "The market is a 
very Republican environment, but it didn't rally to this 
number because the number wasn't believable." 
    George Perry, a Brookings Institution economist and a 
widely consulted analyst on federal statistics, says, 
"We have to distinguish this from election-year pump- 
priming, when at least what you record is actually 
happening."  But the latest GDP number, he adds, is 
"creating a statistic to show that the economy is getting 
well, when in fact there is no reality underneath." 


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