The House Republicans’ insistence on keeping the government closed means [0] that it is likely that we will be conducting macroeconomic policymaking with increasingly sparse or mismeasured data. If one doesn’t believe in expertise and information, then this is not a problem. If one believes that knowledge should inform decisionmaking, it is.
So far, we have missed the employment situation, the international trade, wholesale trade, and import/export prices releases. As of Friday, we will have missed the PPI, retail sales, and business inventories releases. We got this week’s petroleum status and natural gas reports, but by Friday EIA will be out of funds. [1] Assuming the shutdown continues through Wednesday (Monday is a holiday), the CPI and Treasury International Capital figures will be missed.
The Longer the Shutdown Goes on, the Blinder We Will Be
It’s well known that we don’t have a read on the September figures, although the underlying statistics are sitting in computers at the BLS. What is less well known is that surveys regarding the October employment situation begin the week of October 13. If the current trajectory is for sustained closure of the Federal government, then these surveys will be delayed, so as to distort the resulting output. [2]
Now let me pre-empt the arguments that the private sector will spontaneously generate the requisite statistics. Economic information is a public good, and even when private sector generates the data, because the returns cannot be completely captured by the producers, typically there will be underprovision (this is basic microeconomics). And in any case, how do you compare newly generated private series to established (and well documented) government series?
Figure 1: Private nonfarm payroll employment, from BLS (August release) (blue), and from ADP (red). Source: BLS and ADP via FRED.
Now, it might be that the intent behind the government closure is to hobble information gathering, so that people can make the craziest statements (I can already hear “inflation is soaring – we just don’t know it!”). But I remain hopeful that ignorance is not the objective, and that the current data blackout is merely collateral damage.
(h/t to Robin Harding at FT from whom I stole this metaphor.)
Oh come on, Professor Chinn – this is silly. 1) Government data is subject to frequent revision. 2) We are talking weeks or a couple of months max. 3) One can believe in expertise and information and simply not believe that the current DC crowd possess either.
Obama, Reid, Cruz, Biden, Pelosi, Cantor and so on – they work on economic information? Data? Apart from the polls? Puhleeze…
Isn’t the truth that the commentariat are experiencing data withdrawal symptoms? Bit like piles. The rest of the country are laughing or cursing the DC clowns.
c Thomson: I was thinking about the Fed primarily. I think they pay attention to NFP and CPI; don’t you?
Look at the bright side. Now we won’t have all those downward revisions………”unexpectedly.”
All of this missing source data also means that the advance estimate of third-quarter GDP due sometime near the end of the month will be delayed. That is one statistic the Fed watches very closely as a guide to policy. The inflation measures that are byproducts of the GDP estimates are also closely followed by the Fed. Output measures for nonfarm productivity also come from BEA.
It’s not clear how long it will take to prepare the GDP estimates once the government reopens. BEA collects very little source data on its own (mostly FDI income) and relies almost entirely on data collected by other agencies. Lags in compiling those statistics will further delay GDP.
If a tree falls in the forest and there is no one there, does it make a sound?
As a first consequence, my gran (along with most of the rest of the over-65 population) won’t know the size of her OASI COLA on the usual schedule. Of course, give it a few more days and she may be missing a check. That’ll really help the economy.
Why on earth is basic economic data collection not considered as essential as the House gym?
Yes the fed scrutinizes data in order to make miniscule adjustments to policy, that no one can predict. The world will clearly come to and end.
They might be forced to use ouji boards.
If subtle effects on the quality of Fed decisions is the worst effect of this, why aren’t we shutdown all the time.
This is supposed to be far worse than the sequester and as best as I can tell the worst damage is that the Park Service is actually spending more money to shut things down then the cost when open.
Dr. Chinn,
Thanks for highlighting this important issue.
Now let me pre-empt the arguments that the private sector will spontaneously generate the requisite statistics
There would also be a fee.
This raises an interesting question. Why don’t we move all the government managed data collection to the FED? They can fund it with their own profits.
Regarding the politics, the Senate refused to fund the government. The House passed a bill with the stipulation that the individual mandate be delayed and that staffers enroll in Obamacare.
Obama has unilaterally made far more consequential changes himself, so the House proposal was very reasonable relative to all the changes Obama made to the law by presidential edict.
Regarding the “Law of the Land” arguement – Democrats used every trick in the book to pass the law. Why shouldn’t Republicans use every trick in the book to change the unpopular law?
The right to carry a gun is the “Law of the Land”, yet Liberals are constantly trying to repeal it.
Slavery was the “Law of the Land”. Democrats were pro-slavery. Was it wrong for Republicans to challenge that view? http://www.pbs.org/wnet/jimcrow/stories_org_democratic.html
Why the double standard on Obamacare?
I’ve sometimes wondered if Ted Cruz is secretly on the payroll of the Democratic National Committee.
Charles Krauthammer: Where is Ted Cruz now?
http://www.politico.com/story/2013/10/charles-krauthammer-ted-cruz-obamacare-98144.html?hp=l2
“I mean his sidekick, Sen. [Mike] Lee said, ‘Oh, we’re past Obamacare. We moved on.’ These are the generals who lead people into the Battle of [the] Little Bighorn and then go home and have lunch and leave the troops out there? Where are they? Where are the generals? What’s their strategy to get abolition of Obamacare?” Krauthammer said.
Krauthammer did emphasize while he is on the ideological side of repealing Obamacare, there was no strategy laid out by Cruz.
“I argued [to repeal Obamacare] in ’09 and ’10. I argued it every week in my writing, on television … all of us were in the trenches. Cruz arrives on the scene and pretends he’s just begun the fight against Obamacare,” Krauthammer said.
He continued, “I’ve been calling this the ‘kamikaze brigade’… ‘the suicide caucus.’ I’m all for charging the barricades, but you’ve got to show me how to penetrate them. … And people are saying Republicans are in retreat. They’re not in retreat, there never was a way to abolish Obamacare now,” Krauthammer said.
Oh dear! The Fed is deprived of data!
We all know that given its usual diet of perfect data the Fed makes perfect decisions.
The Fed’s decisions are much better – many std. deviations better – than those that would be made by John Q. Citizen armed with: a) freedom from political BS b) a piece of paper and c) the WSJ.
Discuss – with reference to Nate Silver.
tj: Now, you are truly in an alternate universe. Has, or has not, the Senate repeatedly passed a “clean” continuing resolution?
Very delightful comments, especially Thomson and Drew..
“Flying Blind” or “Dead Blind Walking”
Funny how well the truly blind manage their daily lives.
Funny how well we do without the bureaucraticstines..
We lost close to 80,ooo cows in last week’s winter storm in South Dakota…No Barrock, No FEMA, No MSM, after all it’s the Dakota where stats are buried under 30 inches of snow..
Menzie
Now, you are truly in an alternate universe. Has, or has not, the Senate repeatedly passed a “clean” continuing resolution?
I never said the Senate didn’t offer a bill. I claimed the House bill was reasonable, given the precedent that Obama set by making unilateral (and some say illegal) changes to Obamacare.
Your arguement boils down to – Blame the House, becasue if Obama wants, then Obama gets.
My dear Hans,
Maybe cows die every winter? I think the river floods, too. But those no Barrock no FEMA self sufficient North Dakotan’s still know how to apply for money.
http://www.fema.gov/news-release/2013/04/26/president-declares-emergency-north-dakota
They did it back in 2009, too.
http://www.whitehouse.gov/the_press_office/President-Obama-Signs-Major-Disaster-Declaration-For-North-Dakota
Oh wait…here’s one for snow storms.
On November 21, 2005, 22 counties and one reservation received a Presidential disaster declaration for severe winter storms and near record snow. The counties of Benson, billings, Bottineau, Bowman, Burke, Dunn, Golden Valley, McHenry, McKenzie, McLean, Mercer, Oliver, Pierce, Renville, Rolette, Sheridan, Stark, Towner, Ward, and the Fort Berthold Reservation were all declared for Public Assistance.
In fact, plenty of federal disaster money makes it’s way to hardy self sufficient NDak pretty much every year.
http://www.lssnd.org/community-outreach/disaster-response/past-disasters.html
Regards.
tj: I was wondering how long it would take you to equate “slavery” with the Affordable Care Act…And now we know.
The main users of govt. data are private companies, from the obvious financial firms to a variety of companies whose products, sales or advising rely on this data.
I don’t understand the weird notion govt. is some separate entity because it’s deeply part of commerce.
The house Republicans closed the gov’t? They passed a budget – it was the others who didn’t accept and closed down. It’s dangerous to try to revise such recent history.
Dems send gift basket to Ted Cruz: ‘Thanks for making Obamacare popular, GOP less so’
http://washingtonexaminer.com/dems-send-gift-basket-to-cruz-thanks-for-making-obamacare-popular-gop-less-so/article/2537145
Smokey Jose: The Senate also passed a budget. For months, the House refused to send delegates to the conference committee during regular order (they only offered to send delegates to a conference committee on the continuing resolution a few days ago).
So who is revising history?
A clear sign that one side of an argument doesn’t have substance on its side is when it starts with “Oh, come on!” and then resorts to belittlement and denigration.
Fed policy is made based on data. More specifically, Fed policy is based on projections based on data. The Fed adjusts its outlook when the data diverge from that outlook. Anyone who knows anything about Fed policy making is aware of this. (Anyone not aware of this should be quiet and listen while the grown-ups talk.) It’s true that data are often revised, but revisions often largely cancel out and leave the trend little changed. So the fact that there are revisions, while important, is not a reason to ignore data trends and data trends can’t exist without data. So nice try, but “data are revised” is really kind of an empty argument. Or desperate. Take your pick. In addition, people who actually pay attention to what the Fed does understand that they look at a wide range of data and compare across series – just like any intelligent person would do. Consistency across data series means that we can have more confidence than we have in looking at data series individually. Again, if there is no new data, then there is no opportunity to compare across data series.
Oh, and for those still clinging to “data are revised” – how do you know? Oh, yeah, because revisions are published in subsequent releases of data! Without new releases, we don’t get revisions.
So, in conclusion, “Oh come on”, try to at least make serious points if you want to be part of the discussion.
tj, are you really unaware of the difference between changing a law directly by winning a majority of votes in the national lawmaking body, as intended by the framers of the Constitution, and threats of economic and financial damage to undo the law of the land without changing the law directly? ‘Cause what happened with slavery and what campaigners to limit access to guns are attempting to do involve changing laws directly, as the framers intended. It is also how Obamacare became the law of the land. The effort to get rid of Obamacare involves blackmail – not what the framers intended.
I am willing to believe that you can’t understand the difference. Just say the word and I will forever more take for granted that distinctions even that simple go right over your head.
If you do understand the difference and are simply pretending it isn’t there, I am equally willing to believe what that implies about you. Just say the word and I will forever more take for granted that you care less (nothing?) about the truth than about supporting positions you hold dear but can’t find a legitimate way to defend.
Those strike me as the only two explanations for what you’ve written. Either way it goes, keep it out of here. It’s an embarrassment.
Smokey Jose What have you been smoking? The Democrats passed a budget of $1.058T. The House wanted $0.986T. Basically the Democrats reluctantly agreed to swallow hard and accept the $0.986T number. And having accepted that number, now the GOP wants to move the goal posts. The fact is that Boehner and the GOP leadership reneged on a previous deal in which the GOP got 99% of what they wanted. Boehner reneged on the budget deal for the same reason he reneged on his agreement with Obama and Reid during the 2011 crisis. The agreement fell apart after Sen. Cruz whipped up the crazies and promised what he could not deliver.
tj Sounds like you’ve been reading those Dr. Carson talking points. I’m sure Dr. Carson is a wonderful surgeon, but that doesn’t mean he knows anything about healthcare economics.
If you want to compare something to slavery, how about compelling government workers to go to work without getting paid? Under the Pay Our Military Act (POMA) the Secretary of Defense has the authority to order civilian workers to report to work even though those workers will not get paid. Contrary to what you might have heard on Fox Noise, essential government workers recalled from furlough are not getting paid. I don’t know what your definition of “slavery” is, but in my book being compelled to work without pay fits the definition a lot better than the ACA.
Also, you got this wrong: The House passed a bill with the stipulation that the individual mandate be delayed and that staffers enroll in Obamacare.
What actually happened was that Sen. Grassley was too cute by half. Years ago he inserted a provision in the law that required members of Congress and staffers to be covered under Obamacare. He thought this would weaken
Democratic support. But what has happened is that those staffers lost employer contributions. Obama pushed to have the government continue with those contributions for staffers who got their insurance through the exchanges.
http://politicalticker.blogs.cnn.com/2013/09/25/fact-check-congress-staff-are-exempt-from-obamacare/
I’ll ask again. Why is Obamacare your personal Moby Dick? Has it made you worse off?
In a practical sense, the Fed needs no new information at all for months. The Fed is now, and can remain for a time, on autopilot with ZIRP and QE3 simply ongoing. This is precisely what is going to transpire anyway. In fact, this shutdown sheds new light on the necessity for much of the government data mill. ADP has a good handle on overall employment. Other private sector firms could rapidly fill any gap. There’s a plethora of private sector data on autos, retail sales, housing, manufacturing, and trade. Coincident and leading indicators abound in the private sector. Inventories and overall GDP would be the weakness. Along with the decennial census. It would certainly be possible for the private sector to take over most functions. Only a core department or bureau need remain to put all the private sector contributions together and set standards for quality. The outcome would be a transition year in data, and an end product superior in terms of cost to the public, efficiency, quality, and credence in the eyes of the public who poll after poll say they no longer trust government as they once did. Would this mean change? Yes. But entrepreneurial spirit and change is what America is noted for.
I do find this amusing. Now rather than making bad policy based on bad data the central planners will make bad policy based on no data. This actually might be better for the country since no data might cause the central planners to accidentally stumble onto some good policy – don’t hold you breath.
This would be a good situation if the central planners would suspend their intrusion while the data is absent but that is simply not their nature. Just like Ben Bernanke and the infamous Henry Paulson admit, the central planners don’t know what they are doing, but they are going to do it with as much gusto as possible. Since the central planners now have no data they will simply run faster to make up for it.
So this post seems to give us two options. We either let a totally absolutely falling-down drunk drive our economy or we let a totally absolutely falling-down drunk blind man drive our economy. Either way there is a high probability of a serious crash (2008 anyone?).
Slug, I’ve been asking tj, ricardo and Rick Stryker the same question multiple times without a response . Perhaps they are the same person?
Do you have health insurance? Why do you not want others to obtain affordable health insurance? Why are you so mean to your fellow American citizens?
If they suddenly found themselves unemployed with per-existing conditions, they would change their minds. Sad really.
This whole brouhaha is because of an ill-advised strategy to defund the ACA… which will not happen. If the Republicans had really wanted a “win,” they would have funded the ACA with the provision that the ACA had to be implemented on its original schedule [no delays for any individuals or organizations] and effective for everyone [no waivers for any individuals or organizations].
This would have been a “win” for two reasons: 1] the economic and social crap would hit the fan for the full year 2014 and become a real voting issue and 2] the Republicans would not have handed the Democrats the 2014 and 2016 real voting issue of the GOP being “obstructionists.”
As it stands now, the Republicans will: 1] not defund the ACA, 2] will be effectively labeled “obstructionists”, and 3] the impact of the ACA will be delayed until after the 2014 elections with many influential organizations given a “pass.”
I’d say we could call the present Republican strategy “Dumb and Dumber 3.”
tj: I was wondering how long it would take you to equate “slavery” with the Affordable Care Act…And now we know.
Posted by: Menzie Chinn at October 11, 2013 11:11 AM
Wrong, I equated it with Democrats double standard. Democrats whine about Republicans challenging a “law of the land” but it’s okay for Democrats to oppose a “law of the land”. I wondered how long it would take for you to resort to your little innuendos. You are entirely predictable. You resort to your little negative innuendos whenever you encounter some facts that get in the way of your Progressive belief system.
If you want to compare something to slavery, how about compelling government workers to go to work without getting paid?
Posted by: 2slugbaits at October 11, 2013 03:33 PM
Oh, for crying out loud, grow up! Comparing the working conditions of public employees to slavery is vulgar and disgusting. It’s borderline racist.
From NBC – “Many furloughed workers are in the process of filing for unemployment; more than 26,000 did so in D.C. and Maryland during the first week of the shutdown. But if the Senate passes a bill to provide back pay, workers would be required to pay back their unemployment.>
Notice the key words there 2lsugs? If the Senate passes a bill to provide back pay.
Obama and his mouthpiece Reed are the ones maximizing pain on Americans.
Slug, I’ve been asking tj, ricardo and Rick Stryker the same question multiple times without a response . Perhaps they are the same person?
Posted by: tj is baffling at October 12, 2013 08:31 AM
Show me the post where you asked me that question and I’ll answer it. Or were you posting under a different alias? You only have a few posts, yet you claim to have asked a question multiple times? What was your old alias before you changed it?
Here’s an interesting bit about the shutdown from the LA Times. Seems the huge recent blizzard killed vast numbers of livestock. The people there voted to shut down the government or, to be accurate, they support their representatives’ actions. And the article notes this:
“These days, Reder passes a federal Farm Services Administration office whose doors are closed. Like most American ranchers, the 47-year-old is a resilient small businessman used to tending to his own problems, with help from neighbors whose families settled this land generations ago.
Still, he’s frustrated and feels that federal lawmakers have turned their backs on the nation’s heartland in a time of need.
“We’re just a bunch of ranchers from South Dakota — it’s hard for our voices to be heard,” he said, sitting at the kitchen table at dawn Friday, drinking coffee, fielding calls from fellow cattlemen. “You see crises across the country, the hurricanes and tornadoes, and officials are right on top of it. But something of this magnitude, that has just about leveled this part of the country, and there’s nothing.”
Many residents in this conservative region had supported the government shutdown as a way to make Washington more fiscally responsible. “But one appropriate role for these guys is to lend a hand after disasters like this,” Christen said, “and they’re not here.””
Me again. So in other words, the government should be shut but not when they need to help “us”. Or maybe, my needs are “essential” but your needs aren’t. Remember, the same thing happened when tornadoes hit Moore, OK: the same people who voted against Sandy aid insisted the federal government bail them out … and I mean bail them out because they refuse to spend the money to put shelters in schools and refuse to update building codes because they want to keep costs low … but they want us to pick up the pieces. Talk about bleeped in the head.
tj,
So you still don’t understand the difference between “challanging” the law of the land by legislating against it on the one hand and threatening the health of the economy on the other? And you call Democrats hypocrite.
Re: Jonahthan
“Talk about bleeped in the head.”
Christian delusions are driving the GOP insane
Why aren’t Republicans more frightened of a shutdown and a default? Part of the reason is magical thinking
http://www.salon.com/2013/10/10/christian_delusions_are_driving_the_gop_insane/singleton/
Excerpt:
The willingness of Republicans to take the debt ceiling and the federal budget hostage in order to try to extract concessions from Democrats is probably the most lasting gift that the Tea Party has granted the country. More reasonable Republican politicians fear being primaried by Tea Party candidates. A handful of wide-eyed fanatics in Congress have hijacked the party. The Tea Party base and the hard right politicians driving this entire thing seem oblivious to the consequences. It’s no wonder, since so many of them—particularly those in leadership—are fundamentalist Christians whose religions have distorted their worldview until they cannot actually see what they’re doing and what kind of damage it would cause.
c Thomson: You write:
I don’t understand your metaphor. Are you saying the Fed is like a forest? Or is the Fed a tree? Or is the data the tree. Or is the data the forest. Hopefully, you can see my befuddlement, so I would appreciate a more straightforward explanation, as my imagination is apparently too limited to take it all in.
The belief that you’re right and the other guy is wrong usually leads to compromise but if you believe that holding fast to your position will be rewarded, that God will come to your aid – which is inherent in all religion – then you cause disaster. That hold fast belief is one reason why it’s important not to compromise: you not only empower them this time but you reinforce the extremity of their beliefs because, see, it works and all you have to do is insist the other guy back down or else.
My favorite example of this kind of thinking is the true story of Nongqawuse, a teenage Xhosa girl. In 1856, with white men taking more land and Xhosa cattle stricken with disease, she had a vision that God would come to their aid, that God would save them if they essentially gave God no choice. For the Xhosa, that meant eliminating the source of their food and their wealth by killing their own cattle. They did. And God didn’t come to help them. And fully 3/4 of the people starved to death.
We can see the lunacy elsewhere but we can rarely see it in ourselves.
Re: jonathan
I’ve thought for a while that most people (other than myself of course) are going crazy, just at different rates.
In the Salon.com article linked above, the author noted that according to a poll, 20% of Republicans believe that Obama is literally the Antichrist.
I am beginning to suspect that the only way out of the current gridlock is for the dwindling number of moderate Republicans in the House to work with the Democrats to bring a series of discharge petitions to the House floor. Of course, the moderate Republicans will presumably face furious Tea Party challenges in GOP primaries. But on the other hand, there are signs that a GOP backlash is building against what the HBO “Newsroom” program writers referred to as the “American Taliban.”
Another excerpt from the Salon.com article:
My Dear RandomWorker:
I seriously doubt that any or all of the FEMA money went to pay for dead cows..
If this were true, it would require at least $800,ooo,ooo in funds…
Then perhaps the Reggie regime found an NSA list of Demco ranchers…
Hans: USDA regularly pays disaster assistance for livestock loss based on disaster declarations (the Livestock Indemnity Program is one vehicle for this). Unfortunately appropriations authorized for such purposes are currently lapsed (in the absence of either a Farm bill or a CR). I’d link to more info about this but the USDA website is shutdown, sorry.
tj,
still waiting on that answer spanky.
Benamery, thank you for the update, which is what I was guessing in the first place…
JBH: Not sure about a “plethora” of data from the private sector for manufacturing and trade. All foreign trade data (both goods and services) are collected by Dept. of Commerce.
Besides, domestic services now account for about 70 percent of GDP. Nearly all of the source data for domestic services are based on surveys conducted by the Census Bureau.
Also, I’m wondering which private sector entities will provide the price indexes compiled by BLS. Without these, it will not be possible to calculate real (inflation-adjusted) GDP.
OH NOES HOW WILL WE EVER CENTRALLY PLAN THE ECONOMY WITHOUT OUR PRECIOUS DATA????
PS WE’VE BEEN DOING SUCH A GOOD JOB SINCE 1971 TRUST US!!!