Meaningless Economic Data

Periodic reports about a good many economic things actually reveal very little.

For example, the unemployment rate, even though it is sky high, obscures how truly terrible the nation's employment situation actually is. It takes into account only the unemployed who are seeking work. It totally ignores those who have given up on trying to find jobs as well as those who are working only part time and those who are underemployed. People in these categories are not taken into account at all in calculating what is said to be the unemployment rate.

Inflation number provide another illustration of useless and even misleading information. The government issues data on the core inflation rate, which omits the costs of energy and food. What do they think ordinary Americans need to, and do buy on a regular basis? Duh ! ! ! ! Somehow though, this ends up avoiding increases in the amounts paid out as Social Security retirement benefits but, SURPRISE, results in hefty pay increases for members of Congress and their staffs.

Another less than useful statistic is the GDP -- the gross domestic product numbers that reflect the size of the nation's economy and whether it is growing, unchanged, or shrinking. But it really doesn't mean anything insofar as how well the nation's population is doing. To understand why this is so, assume two countries, each of which has an annual GDP of $1,000. Suppose nation A has 1,000 people, meaning that its GDP per capital is $1 a year, while nation B has 100 people, giving it an annual per capita GD of $10.

This explains why people in a good many countries with small populations and a GDP far smaller than that of the U.S. -- such as Switzerland, Luxembourg and the Scandinavian nations, for example -- enjoy a substantially better standard of living than do Americans. 

The fact is that population growth in the U.S. has surpassed the growth of the nation's GDP for a good many years, and we therefore are worse off financially than we were in the recent past.

At least two other factors have to be taken into account to determine how well the nation's people are doing economically. One of these is the distribution of the GDP's benefits among the nation's population and the other is how much disposable income individuals actually have.

Let's go back again to Country B, which enjoys a per capita income of $10. Suppose that one of its 100 people is able to glom onto $999 of its GDP, leaving $1 to be divided by the remaining 99 people -- just about one cent per person. The trend toward disproportionate distribution of the America's GDP has in recent years been exacerbating its failure to grow on a per capita basis.

So does that mean if the GDP is evenly distributed in Country A, its people actually are better off than those in Country B.

Well, maybe . . . but not necessarily.  The second factor, per capita disposable income still has to be considered.

Suppose the various levels of government in Country A impose (i) aggregate taxes of 50 cents a year on each of its citizens and (ii) rules and regulations that dictate how each of them must spend the remaining 50 cents, leaving every one of them with nothing. Here again, this currently is the trend in the U.S.

So, to reflect how well the economy is doing insofar as the nation's people are concerned, we need but lack meaningful data -- data on the actual net discretionary disposable income of ordinary citizens.

Why do you suppose our government doesn't produce that data?