How To Make Things Look Better When They Aren’t

Yesterday the Financial Times posted an article explaining that Brent Moulton, who manages the Bureau of Economic Analysis, has told the Financial Times that in July, government statistics will be updated to include such things as royalties and spending on research and development. Including those things will increase the size of the United States economy by 3 percent–making it appear that the economy has grown.

The article states:

“We are carrying these major changes all the way back in time – which for us means to 1929 – so we are essentially rewriting economic history,” said Mr Moulton.

This move represents a new international standard for Gross Domestic Product accounting. Considering the state of the world’s finances in general, I can’t help but wonder if this is simply a step into denial of the fiscal collapse that surrounds us at the present moment.

There is one aspect of the changes being made that I think is positive. The article reports that deficits in pension plans will also have to be included–what is promised will be measured as well as what is paid. These unfunded liabilities are something that federal, state, and local governments have kept below the radar for years–it will be good to see them brought out into the open.

The changes coming in July move us closer to worldwide accounting practices. I have very mixed emotions about that. The changes in July will also lull the low-information voters in America into believing the economy is growing at at least 3 percent. Believing that should be a stretch for anyone.

Please follow the link above to read the entire article. It is an interesting read.

 

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