Memo To Trump Post-BLS Head Firing: 'Unquestioned Disaster' When Nations Fudge Employment Numbers

Key Concepts

• Bureau of Labor Statistics (BLS) Commissioner Firing
• CPI Inflation Index Quirks (Data Collection vs. Estimation)
• US-India Trade Dispute (Russian Oil Purchases)
• Data Manipulation and its consequences
• Realpolitik

1. Trump Fires BLS Commissioner

• Main Point: President Trump fired Dr. Erica McTarfer, a civil servant serving on the BLS, after a soft jobs report.
• Details:
  • McTarfer's job was a "very nonpartisan, very bland statistical reporting job."
  • Trump's rationale was the increasing size of revisions to the BLS data in recent months/years.
• Argument: Trump might have good intentions of protecting data integrity, but his motives might be "nefarious" since the firing happened after downward revisions.
• Counterpoint: Trump likely wouldn't have fired her if the revisions were positive.
• Second-Order Effect: Concern that Trump's handpicked replacement will be pressured to "massage" or "tweak" data to show a more positive economic outlook.
• Precedent: There is essentially no precedence for this in the United States of nonpartisan data becoming just so clouded by partisanship and by clear motives to make something appear like what it's not.

2. Dangers of Manipulating Economic Data

• Main Point: History shows that countries that manipulate employment, inflation, or GDP data ultimately face negative consequences.
• Examples:
  • Argentina (Mid-2010s): Fired those reporting true inflation data during an inflation crisis. Led to distrust, higher bond yields, and contracts with inflation kicker not being trusted by private sector.
  • Egypt: Underreported inflation, causing those on retirement plans on pensions to collect less than they really should have. Led to a recession due to decreased purchasing power.
  • China: Overreported GDP growth and underreported debt growth, leading to a major property crisis. Developers and banks made decisions based on inaccurate data.
• Argument: The private sector is smart and will see through the lies, punishing the government with higher borrowing costs, lower economic growth, and reduced investment.

3. Quirks in Government CPI Inflation Index

• Main Point: The BLS is increasingly relying on estimations rather than pure data collection for the CPI inflation report.
• Details:
  • Data collection went from 95% pure data collection and 5% estimation to 66% actual data collection and 33% estimates.
  • One-third of inflation measurement is now based on estimations.
• Argument: This is not an accurate way of measuring CPI.
• Anecdotal Evidence: The speaker doesn't see how inflation is 2.5% because his costs are rising significantly higher than that. He asks the audience to comment on their personal inflation experiences, indicating that most people he talks to are experiencing between 5 and 10% annual inflation.

4. US-India Trade Dispute

• Main Point: Trump is threatening more tariffs on India due to their purchase of Russian oil, which he sees as supporting Russia's war machine.
• Argument: While the speaker agrees with Trump that Russia shouldn't be funded, he believes tariffs are a "blunt tool" that could harm the US-India relationship.
• Alternative Solutions: More targeted measures should be used to address the Russian oil issue directly, rather than broad tariffs.
• Strategic Importance of India: India is a critical country that hasn't decisively picked a side in the "Cold War 2.0" between the US and China. Pushing India towards China would be a "massive loss."
• Realpolitik: The US should practice "realpolitik" (Henry Kissinger's term) by considering practical realities and avoiding excessively punishing India, an important potential ally.
• Example: Apple is setting up shops in India to produce their iPhones in the event that China invades Taiwan and they will no longer be allowed to produce those iPhones in China.

5. Conclusion

• The episode covers three significant economic and geopolitical issues: the firing of the BLS commissioner and the potential for data manipulation, the increasing reliance on estimations in CPI data collection, and the trade dispute with India over Russian oil purchases.
• The speaker argues that while the intentions behind some of these actions might be valid, the methods used are often misguided and could lead to negative consequences, especially the risk of losing India as a strategic partner.
• The importance of accurate data reporting and the potential dangers of manipulating economic statistics are emphasized, drawing on historical examples.