Dangers of a Fact-Free America

@TBPInvictus here:

When did America lose interest in reality?

There was a time that economic releases from government agencies – Bureau of Labor Statistics, Bureau of Economic Analysis, Census Bureau, Department of Labor, etc., etc. – were deemed reliable. They were reliable because they were derived using credible collection methodologies and statistical analysis by folks who were devoted to trying their best to get it right. But no more.

There have always been challenges to  the way models were created and maintained, but discussing the plusses and minuses of various approaches to econometric modeling is a very different debate. Now, we are warming up to the concept of denying objective reality. Sure, the crazies made wild claims, but they were always debunked, as was fringe sites like ShadowStats and ZeroHedge.

Recall GE CEO Jack Welch – himself known for his expertise in faking GE’s quarterly earnings using the squishy accounting of GE Capital. He teed it all up with this tweet on a monthly jobs report:

You’ll note the date on that Tweet – October 5, 2012 – was one month before Obama’s reelection, and Mr. Welch was clearly among the opposition.

More recently, Trump repeatedly asserted that the unemployment rate is far higher than the official statistics would have us believe. Here’s Fortune in August of this year:

This isn’t the first time that Trump has questioned the validity of the official unemployment rate, or what economists at the Bureau of Labor Statistics have labeled the U-3 rate. But Trump has rarely talked about the unemployment rate in such strong terms, characterizing the employment situation report as simple propaganda meant to trick the public into believing that the economy is in better shape than it’s in.

Trump hasn’t offered any evidence for this assertion, and over the course of his campaign has claimed that the “real” unemployment rate is anywhere from 18% to 42%. Therefore, it’s evident that Trump’s talk about labor market isn’t rooted in careful analysis of government surveys.

Of course, Jack Welch is no strange to fabricated data; during his nearly 2 decades as CEO of General Electric, he learned a thing or two about how to cook the books.

But reality matters. Under Welch, the GE Capital financial helped GE manipulate its earnings every quarter. Welch’s successor had to settle accounting fraud accusations with the Securities and Exchange Commission for what was done during Welch’s tenure — all of which made his assertion the government cooked its books laughably of self-awareness.

Catherine Rampell wrote an excellent piece in the Washington Post about the virtual impossibility of running a democracy if the facts don’t matter:

“You know those unemployment rates, inflation numbers, household spending figures, health insurance coverage rates, gross domestic product growth and other stats that companies and consumers rely on when making financial decisions? Nearly half of Americans, and a supermajority of Trump voters, believe the books are cooked.”

What’s interesting here is that it seems folks are all too eager to distrust and dismiss Obama-friendly numbers (job creation, the unemployment rate), but apparently have no problem whatsoever believing the Obama-unfriendly numbers (the low labor force participation rate, the low home ownership rate). So, apparently, the agencies are cooking some numbers, but not others, which is absolutely fascinating.

So, there’s the macro of the situation. Now for a look at how that macro filters down to the micro.

I happened to come across this comment on Facebook:

screen-shot-2016-11-11-at-6-19-05-pm

Safe to say I took that with a grain of salt and set about verifying it. After all, it’s easy to see how folks living in that economic environment would be longing for the type of change Trump claims he’s going to provide. So, off to BLS.gov I went to see exactly what’s going on in Longmont, CO.

Here’s what I found:

longmont-unrate

So, Ms. Fitzgerald likely took herself to her local polling place and cast a vote for Mr. Trump, who’s surely going to do something about the 8.8% unemployment rate that is, in reality, 3.3%.

Trump is already making America great again — and all he had to do was stop lying about its economic state!

Multiply Ms. Fitzgerald by tens of millions who know what they know notwithstanding the facts and, well, we now know how the story ends.

Once again to Ms. Rampell:

“The problem with elevating yourself by tearing down the existing authoritative institutions is that once you succeed, you’ve established a road map for others to tear you down, too. There will always be someone waiting in the wings with an even juicier conspiracy theory, an even zanier hidden truth, an even more intricate data-unskewing method — and there’s no longer any authority left to debunk any of it.

This is how a democracy crumbles: not with a bang, but with data trutherism.”

We have crossed the rubicon.

~~~

 

BR here:

Let me point out one small psychological addition:

Now that the election is over, expect the GOP to start seeing how fantastic the economy has become; to a somewhat lesser extent (no false equivalency here), the Democrats will start seeing more of its weaknesses:

 

imrs

Source: Washington Post

 

As Rebecca Sinderbrand, Deputy national political editor at the Washington Post noted on November 15: “that must’ve been some weekend.”

 

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  1. Slow and Steady | Vestact's – Quirk with quark commented on Nov 22

    […] Barry Ritholtz takes a look at physiological biases/errors we make. It is human nature to find and see things that correlate with the way we see the world, the example used in the blog is how voters viewed economic data leading up to the US election – Dangers of a Fact-Free America […]

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