Menzie Chinn points out a great
Business Week article on the nickel-and-diming of the Census Bureau. It's an incredibly short-sighted place to save what is basically a rounding error.
In 2003 the bureau requested more funding to survey financial, real estate, and other companies on a quarterly basis, rather than wait to take their pulse with its Economic Census, which gathers data on business every five years. Census data are funneled to the Bureau of Economic Analysis, which shares its conclusions with the president’s Council of Economic Advisers, the Federal Reserve Board, and Congress. Every year, Census asked for the extra funds; every year, Congress denied them the money, leaving the Census Bureau largely blind to the health of a sector that made up more than half the total economy.
Finally, in early 2009, after the real estate-fueled financial crisis, Congress gave Census what it had been asking for—an extra $8.1 million. In the view of many, it was too late. “That’s a grand example of how nickel-and-diming statistics agencies can screw up the economy,” says Andrew Reamer, a research professor at the George Washington University Institute of Public Policy and a member of the BEA’s advisory committee. “The government saved $8 million, but how many trillions were lost as a result of not being able to see the crisis coming?”
That extra data, says Reamer, would’ve revealed just how quickly certain parts of the economy were slowing down. For example, in April 2008 the BEA, with no quarterly data to work with, estimated that finance and insurance sector activity fell 0.3 percent in 2007. In July 2011, the BEA recrunched those numbers using quarterly data and showed declines of 2.2 percent, 5.3 percent, and 9.9 percent for those sectors in the last three quarters of 2007.
Most U.S. economic data come from three federal agencies: the Census Bureau, the BEA, and the Bureau of Labor Statistics. They have a combined budget of $1.6 billion, less than 0.05 percent of President Barack Obama’s $3.7 trillion proposed budget. These agencies have always had to fight for more funding. Now they may have to fight just to keep their budgets intact. As part of $19 billion in nondefense discretionary cuts in Paul Ryan’s (R-Wis.) budget—recently passed by the House of Representatives—the agencies are likely to get less funding.
The Senate is unlikely to embrace the Ryan budget in its entirety. Yet specific proposals show what the House has in mind. The House Committee on Appropriations recently proposed cutting the Census budget to $878 million, $10 million below its current budget and $91 million less than the bureau’s request for the next fiscal year. Included in the committee number is a $20 million cut in funding for this year’s Economic Census, considered the foundation of U.S. economic statistics.
Of course, the census is also an invaluable source of data for businesses, which explains this
One of the most vocal critics of the proposed cuts is the U.S. Chamber
of Commerce, a deficit hawk. “The chamber is in favor of getting the
deficit under control, but you’re not going to get there by gutting the
statistics agencies,” says the chamber’s chief economist, Martin
Regalia, who last July signed a letter in favor of fully funding the
BEA. “The total amount of money saved is relatively small compared to
the massive loss of information it would lead to. It’s like trying to
balance your checkbook by buying cheaper checks.”
I'm tempted to go on a rant here about the importance and economic value of research and data collection, but it's late, I'm fighting a cold and pretty much anyone who reads a blog called Observational Epidemiology is already in the pro-research camp. I do, however, want to say something about this part of the article.
Some believe the Census Bureau does too much already. “They waste a share of their budget on studies that no one actually uses,” says Chris Edwards, an economist with the Cato Institute, who cites periodic surveys on such items as the total hog count in the U.S. to prove his point. “A lot of that could be done by the private sector.”
Edwards packs a lot of wrong in here. Working backwards, the private sector has been spending a tremendous amount of money and effort gathering data similar to that gathered by the census. Proprietary data that could be used without the privacy restrictions the government imposes would be worth an incredible amount of money. Despite all that trying, though, no private data source comes close. I realize that the Cato Institute might not like to hear this, but this is one of those cases where the private sector tried to do something the government does and couldn't do it as well.
Then there's the stunning cluelessness of Edwards' example. Can he actually believe that no one uses data on
pork production, one of America's largest agricultural industries (with stocks of 62 million, making us the world's second largest producer) and a major source of protein around the world. Or perhaps he's just so cynical that he assumes the journalists covering the story will be too ignorant of agriculture to spot the absurdity.
Either way, it's a disappointing performance from a spokesman for what is (or, at least, used to be) one of the country's most respected think tanks.
