Fraudulent Advocacy For Government Growth

I have already had two posts (here and here) on the preposterous new Census report on incomes and poverty released two weeks ago.  And then yesterday the New York Times has again given the lead position in its print edition (upper right hand corner of the front page) to a story substantially relying on figures from this same Census report.  I'll give you all three tiers of headlines:  "WITH PAY RISING, MILLIONS CLIMB OUT OF POVERTY / ECONOMIC TIPPING POINT / More and Better Jobs -- Blacks and Hispanics Gain the Most."  That's certainly good news for Hillary on the day of the first presidential debate!  And just in case you don't think that this Census report is planned as the linchpin of Hillary's campaign on issues relating to the economy, I remind you that some of its key "findings" were front and center in her personally-signed op-ed in Pravda on September 21 ("My Plan For Helping America's Poor").  

So is there any reality to the numbers in this Report, or is it all just a scam put out by the government and regurgitated by Pravda to put their collective thumb on the scale of the election?

The answer as to the government is that it is clearly a scam.  With Pravda, as usual, you are left scratching your head as to whether they are part of the fraud, or have been taken in by the government's fraud.  I'll let you decide that -- not that either alternative is good for them.

How do we know that this is a scam as respects the government?  Easy -- we just compare what they say to what we can prove that they know.  What they say is the list of principal statistics appearing at the top of the Summary in the Report:

  • Real median household income increased 5.2 percent between 2014 and 2015.1 This is the first annual increase in median house- hold income since 2007.

  • The number of full-time, year- round workers increased by 2.4 million in 2015.

  • The official poverty rate decreased by 1.2 percentage points between 2014 and 2015.

  • The number of people in poverty fell by 3.5 million between 2014 and 2015. 

Now, do you detect any hint there that the lion's share of these favorable year-over-year changes may have resulted from a methodological change rather from real increases in incomes or declines in poverty?  I've done my best to look through the Report itself to find some disclosure of that.  Admittedly, there are lots of links in the Report for those interested in learning more about the methodology, and life is not long enough for me to follow all of those.  Believe me, they are also relying on most to all journalists having constraints on their time that will prevent them from getting to the bottom of this.  But then there's John Crudele of the New York Post, who had an article on September 20 titled "Census income figures are a joke -- if not fraud."  Crudele's article then had a link to this 2015 Census paper describing the details of changes to methodology that they planned to implement fully in their next report on incomes and poverty.

So let's take a look at that paper.  This is what they know.  The paper's subject is proposed changes to methodology in the surveys that generate Census's main reports on income and poverty.  And why are they undertaking these changes?

Previous research shows the ASEC [Annual Social and Economic Supplement to the Current Population Survey] suffers from misclassification of certain types of income, general underreporting of income, and historically under-reported enrollment in means-tested government programs (Meyer et al., 2009) 

Yes, the whole idea is to correct for prior "general underreporting of income."  And by the way, there's no doubt that there is massive underreporting of income on these surveys.  For starters, there's almost no chance that anybody gives them much if any honest information on underground economic activity, which is estimated at around 10% of the economy (and far more than that among those reported to be in the lower quintiles of the income distribution).  So what are they now going to do about it?  The answer is, they propose a modest re-design of the survey, with about half a dozen changes that include follow up questions for people who refuse to answer or leave blank the answers to questions about their income, and specific follow-up questions designed to elicit more information about income from retirement accounts and from government programs.  (By the way, even with those changes, it's abundantly clear that incomes are still massively underreported, but probably a little less so.)

Now, will all of those things make a quantitative difference?  Actually, as part of this paper, they report on results of a quantitive evaluation of giving the new and old surveys to a large sample to see what difference it makes.  And the answer?  It's in Table 1!  Using the new survey form causes reported "real median income" to increase by 3.0%.

Wait a minute!  Does this mean that they absolutely know that the supposed 5.2% increase in real median incomes reported in the most recent report is actually 2.2% in real change and 3.0% in methodology change?  That's sure the way that I read it.  Of course, the difference between 5.2% growth in incomes and 2.2% is the difference between robust growth on the one hand and barely-above-stagnation on the other.

And clearly the purpose of this game is to create an appearance that disastrous government programs that in fact keep incomes down and poverty up have now suddenly worked, just in time to elect Hillary.  Don't believe me?  Let's go back to the Pravda article from yesterday:  

Government programs — like Social Security, the earned-income tax credit and food stamps — have kept tens of millions from sinking into poverty year after year. But a main driver behind the impressive 1.2 percentage point decline in the poverty rate, the largest annual drop since 1999, was that the economy finally hit a tipping point after years of steady, if lukewarm, improvement. . . .  About 43 million Americans, more than 14 million of them children, are still officially classified as poor, and countless others up and down the income ladder remain worried about their families’ financial security. But the Census Bureau’s report found that 2015 was the first year since 2008, when the economic downturn began, that the poverty rate fell significantly and incomes for most American households rose. 

Really, is it even possible to be this appallingly ignorant?  If you know anything at all about government statistics on "poverty," you know that the earned-income tax credit and food stamps do not count in the measure of poverty.  With one hundred percent certainty, those two programs have not kept one single person out of poverty, at least as measured and reported by the Census Bureau.  Pravda thinks these programs have kept "tens of millions from sinking into poverty."  Good grief!

And then, of course, Pravda takes the methodological change to mean that suddenly "pay [is] rising" and "millions [are] climb[ing] out of poverty."  All fake.  The closest thing we have to a real number (not in this report) is that GDP rose in 2015 by 2.4%.  It's above total stagnation, but barely.

More generally, we can see that we have a bureaucracy that understands its core mission to be producing numbers that support the continuation of woefully failed government programs and the ongoing growth of useless bureaucracies to run those programs.  In the off years they produce wildly underreported income numbers and inflated poverty numbers to guilt the people into supporting bigger budgets to address the problems; and then in the election years they tweak the methodology in secret to generate numbers that falsely show some sudden progress against the problems so that the candidates known to support the bureaucracy can have talking points for their campaigns.  Is it any wonder that most Americans have complete disgust with their government?