Don't like how high debt-to-GDP figures are? Revise 'em. Unhappy at the post-'recovery' growth rates? Revise 'em. Disappointed at the pace of economic improvement in the last decade or two compared to the rest of the world? Revise 'em. This week "we are essentially rewriting economic history" as the BEA is set to revise GDP data from as far back as 1929. The 'adjustments' to account for intangibles (that best known of micro- accounting fudge factors) and as we noted previously in great detail, will increase GDP by around $500 billion. Of course, these changes are defended aggressively (just as the hedonic adjustments to inflation calculations 'make perfect sense') as GDP will now reflect spending on research, development, and copyrights as investment - and reflect pension deficits for the first time (think of all that potential future GDP from massive pension deficits now). With Q2 GDP growth estimates set for a dismal 1.1%, expectations are for the short-term economic data to be revised upwards (and with any luck the great recession never happened at all).
US economic history will be rewritten this week, as the most far-reaching methodological changes in years will add the equivalent of a country the size of Belgium to output in the world’s largest economy.
The most important change by the Bureau of Economic Analysis, to be announced on Wednesday, will be to start counting spending on research, development and copyrights as investment, and reflect pension deficits for the first time.
Combined they are expected to add 3 per cent to gross domestic product.
“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,” Brent Moulton, who manages the national accounts at the Bureau of Economic Analysis.
Which brings up an important question: will government spending on R&D on how to fudge GDP result in the most spectacular Excel circular reference ever created?