Latest / Trumponomics / What Happens When US Economic Data Can’t Be Trusted?

Transcript

What Happens When US Economic Data Can’t Be Trusted? · Trumponomics

0:02
Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
0:08
Speaker 2: Some of the presidents Alex advisors have suggested that you
0:11
Speaker 2: should resign.
0:12
Speaker 1: If he asked you to leave, would you go? No?
0:17
Speaker 3: Can you follow up on it?
0:19
Speaker 1: Do you think that legally you're not required to leave?
0:23
Speaker 2: No.
0:33
Speaker 3: I'm Stephanie Flanders, head of Government and Economics at Bloomberg.
0:37
Speaker 3: Welcome to Trumpanomics, the podcast that looks at the economic
0:40
Speaker 3: world of Donald Trump, how he's already shaped the global
0:43
Speaker 3: economy and what on earth is going to happen next?
0:46
Speaker 3: And it's that what's going to happen next part that
0:49
Speaker 3: we're focusing on this week. There's so many presidents being
0:53
Speaker 3: broken in Washington these days, it's easy to miss a few.
0:57
Speaker 3: Last week, well, most were focused on deportation, court orders,
1:01
Speaker 3: flights to El Salvador. Something happened that we at Trumpanomics
1:04
Speaker 3: think should have got more attention. Two commissioners on the
1:08
Speaker 3: Federal Trade Commission got fired for being Democrats. Now you
1:13
Speaker 3: might say, so, what, who isn't being fired in the
1:16
Speaker 3: nation's capital these days? Except it's not really supposed to
1:20
Speaker 3: happen at an independent agency like the FTC. And if
1:23
Speaker 3: it can happen to officials there. It raises questions about
1:27
Speaker 3: whether folks at other independent agencies, even senior ones, could
1:31
Speaker 3: be fired too. Fed share J Powell, for example, who
1:35
Speaker 3: you heard voicing a rather different opinion at the start
1:38
Speaker 3: of the show. It also made us think about some
1:41
Speaker 3: other seemingly minor developments in other corners of DC that
1:45
Speaker 3: could raise red flags about the independence and oversight of
1:49
Speaker 3: not only the agencies that implement America's economic and regulatory policies,
1:55
Speaker 3: but even potentially the economic data on which every judgment
1:59
Speaker 3: about the US economy is based. Now, of course we
2:02
Speaker 3: might be overdoing it. I hope we're overdoing it. Some
2:05
Speaker 3: of these risks may well not materialize, but when it
2:08
Speaker 3: comes to the independence of monetary policy and economic statistics, well,
2:13
Speaker 3: we at Bloomberg get nervous fairly easily. David Wilcox has
2:17
Speaker 3: spent his entire career overseeing and analyzing US economic data
2:21
Speaker 3: and policy, first as Assistant Secretary for Economic Policy at
2:24
Speaker 3: the US Treasury under President Clinton. He was then many
2:28
Speaker 3: years until twenty eighteen, leading the Research and Statistics Division
2:31
Speaker 3: for the US Federal Reserve. Acted as a senior advisor
2:35
Speaker 3: to three Federal Reserve chairs, including Jay Powell happily for us,
2:40
Speaker 3: he's now reached the pinnacle of his career as the
2:43
Speaker 3: director of US economic research for Bloomberg Economics. David, thank
2:47
Speaker 3: you very much for joining us and for being the
2:49
Speaker 3: one really to sound the alarm about a lot of
2:51
Speaker 3: these things.
2:51
Speaker 1: It's good to be here.
2:53
Speaker 3: Well, I know you do have a lot of thoughts
2:54
Speaker 3: and concerns about this, based on your experience on the
2:57
Speaker 3: inside of these agencies and decisions. But I also wanted
3:01
Speaker 3: to get a bit of the reporter perspective from Molly Smith,
3:04
Speaker 3: who's a US economics editor for Bloomberg in New York
3:08
Speaker 3: and has been writing up quite a lot of what's
3:10
Speaker 3: been happening at the statistical agencies and other parts of
3:14
Speaker 3: DC that collate US economic data in recent months. Molly,
3:18
Speaker 3: welcome to Trumponomics.
3:20
Speaker 2: Thanks for having me.
3:28
Speaker 3: So, David, let's start with that first thing. I mentioned,
3:30
Speaker 3: the firing of two commissioners, which definitely did get a
3:33
Speaker 3: little bit lost in the enormous amount of other news
3:35
Speaker 3: that's happening on a daily basis in Washington. Why did
3:39
Speaker 3: you immediately pick up the phone to tell us this
3:42
Speaker 3: was something to worry about.
3:43
Speaker 1: Well, the historical parallel is just echoes very loudly. Nearly
3:48
Speaker 1: one hundred years ago, President Franklin Dello and Or Roosevelt
3:52
Speaker 1: also tried to fire an FTC commissioner named William Humphrey.
3:57
Speaker 1: Humphrey initially had been appointed to the FTC by President
4:02
Speaker 1: Calvin Coolidge in nineteen twenty five, and was reappointed to
4:05
Speaker 1: a second term by President Herbert Hoover. When FDR came
4:10
Speaker 1: into office, he correctly identified Humphrey as somebody who held
4:14
Speaker 1: different policy views than FDR did, and so he asked
4:19
Speaker 1: Humphrey twice in letters to resign, but Humphrey refused, so
4:25
Speaker 1: FDR fired him. And that came despite the fact that
4:30
Speaker 1: there was language in the FTC Act saying that the
4:35
Speaker 1: President could fire members of the Commission only for inefficiency,
4:39
Speaker 1: neglected duty, or malfeasance in office, and Roosevelt didn't allege
4:44
Speaker 1: that any of those applied in the case of William Humphrey.
4:48
Speaker 1: Humphrey refused to go. He sued for back wages, the
4:53
Speaker 1: wages that he hadn't been paid after he'd been terminated.
4:57
Speaker 1: Then he suffered the misfortune of before the case found
5:02
Speaker 1: completion through the court system, which then as now the
5:06
Speaker 1: wheels of justice turned rather slowly, but Humphrey's executor, the
5:11
Speaker 1: executor of his estate, took up the legal cause and
5:16
Speaker 1: maintained the lawsuit, and ultimately, in nineteen thirty five, the
5:19
Speaker 1: Supreme Court ruled in Humphrey's favor and awarded those back
5:24
Speaker 1: wages to his estate. That the case is incredibly important
5:28
Speaker 1: today because it's that legal foundation, that nineteen thirty five
5:34
Speaker 1: Supreme Court decision on which rests the employment security such
5:40
Speaker 1: as it is that Federal Reserve governors also enjoy. The
5:44
Speaker 1: language in the Federal Reserve Act is a little different,
5:46
Speaker 1: but the legal principle is exactly the same.
5:50
Speaker 3: And to be clear, the firings in this case were
5:53
Speaker 3: in a sense similar to the FDR ones because it
5:56
Speaker 3: was not based on bad behavior, and there was no
5:58
Speaker 3: claim it was based on bad behavior. It is the
6:00
Speaker 3: fact that they potentially disagreed with the administration the continued
6:04
Speaker 3: service on the FTC. The statement said, the explanation from
6:07
Speaker 3: the White House was is inconsistent with my administration's.
6:10
Speaker 1: Priorities, exactly right. And I think what we're likely to
6:15
Speaker 1: see here can't say with certainty, but likely, I think
6:19
Speaker 1: is that this case involving the two FTC commissioners will
6:23
Speaker 1: work reasonably rapidly through the court system and will get
6:27
Speaker 1: a decision ultimately, probably from the Supreme Court. An extra
6:33
Speaker 1: reason for concern is that the Supreme Court has been
6:36
Speaker 1: chipping away at that nineteen thirty five decision Humphrey's Executor
6:41
Speaker 1: versus the United States. Twenty twenty, for example, they limited
6:46
Speaker 1: the reach of Humphrey's Executor so that it no longer
6:50
Speaker 1: applies to single headed agencies like the Consumer Financial Protection Bureau.
6:55
Speaker 1: They said it did still apply as of twenty twenty
6:59
Speaker 1: to multi head agencies like the Federal Reserve Board. But
7:03
Speaker 1: I think there's a lot of opinion in legal community
7:07
Speaker 1: among legal scholars that Humphrey's Executor hangs by a thread,
7:12
Speaker 1: and with it the independence of the Federal Reserve, its
7:16
Speaker 1: ability to set monetary policy without fear of being second
7:20
Speaker 1: guest by political authorities.
7:22
Speaker 3: And it should be said it would put the administration
7:26
Speaker 3: in direct opposition to the way that j. Powell himself
7:29
Speaker 3: said he saw the situation. In the first press conference
7:32
Speaker 3: after the election, he was asked, can you be fired?
7:35
Speaker 3: Are you worried about being fired by the president, and
7:37
Speaker 3: said no, in a very kind of this is not
7:40
Speaker 3: a questioned way. Was that your understanding, David, when you
7:43
Speaker 3: were inside the FED that it was just there was
7:44
Speaker 3: just not an issue about whether or not the President
7:46
Speaker 3: could fire at FED chair.
7:48
Speaker 1: Well, as in many things in the legal world, it's
7:51
Speaker 1: a little complicated. There are two positions that Jay Powell holds.
7:56
Speaker 1: One is that he's a member of the Board of
7:58
Speaker 1: Governors and they're The Federal Reserve Act language is quite
8:02
Speaker 1: clear the President may terminate members of the Federal Reserve
8:06
Speaker 1: Board for cause. The other position to which he also
8:11
Speaker 1: needs to be confirmed, is as Chair of the Federal
8:15
Speaker 1: Reserve Board, and there the drafting of the language, unfortunately
8:19
Speaker 1: was rather awkward and leaves ambiguous the question about whether
8:23
Speaker 1: the President can demote the chair from his elevated status
8:28
Speaker 1: to that of a mere member of the Board of Governors.
8:31
Speaker 1: That question has never been litigated. No president has ever
8:34
Speaker 1: tried to demote a Federal Reserve chair before. I think
8:39
Speaker 1: it's possible that we may see that question resolved here
8:43
Speaker 1: in the future.
8:44
Speaker 3: But the broader concern which I mentioned at the start,
8:48
Speaker 3: was around something which one thinks of as even more
8:52
Speaker 3: of a kind of bedrock for US economic policy, and
8:55
Speaker 3: that's just economic data, Molly, what's happened in the last
9:00
Speaker 3: few weeks, as Doge and other parts of the administration
9:04
Speaker 3: have been sort of cutting a sway through Washington, what's
9:07
Speaker 3: happened that has raised concerns around statistics.
9:10
Speaker 2: So the biggest thing that I could point to so
9:12
Speaker 2: far has been the administration terminating these statistical advisory committees.
9:18
Speaker 2: And this was part of a broader executive order aimed
9:22
Speaker 2: at reducing the scope of the federal government and eliminating
9:25
Speaker 2: these committees wherever they were deemed unnecessary. And the thing
9:30
Speaker 2: is about these committees, though at least for the statistical agencies,
9:34
Speaker 2: is that they're made up of all volunteers. David can
9:37
Speaker 2: speak to this also, he is chair of one of
9:40
Speaker 2: these committees, so he knows this all too well. They're
9:43
Speaker 2: all on a volunteer basis. They are not paid, they
9:46
Speaker 2: are not employees of the federal government. And they generally
9:50
Speaker 2: a lot of these committees met maybe two to four
9:53
Speaker 2: times a year. And since COVID, it's all been virtual
9:56
Speaker 2: for the most part, so they really had just about
9:58
Speaker 2: zero cost to the government. I think the biggest budget
10:02
Speaker 2: of any of them was maybe one hundred thousand dollars,
10:04
Speaker 2: so this is certainly not or does is going to
10:07
Speaker 2: be zeroing in on for the big for the big
10:10
Speaker 2: bucks in terms of savings here. And it's really, if anything,
10:15
Speaker 2: you know, these committees were there to advise the statistical
10:19
Speaker 2: agencies about a whole range of things, whether it was
10:22
Speaker 2: really how to keep up to date with our economy
10:24
Speaker 2: which is ever evolving, and to make sure that the
10:27
Speaker 2: data was commensurate with that and reflecting these new trends.
10:31
Speaker 2: And it was really just a huge benefit to them
10:34
Speaker 2: to have people on these committees that maybe were formerly
10:38
Speaker 2: on these agencies themselves that maybe now work in academia
10:41
Speaker 2: or our business economists work on Wall Street, in all
10:45
Speaker 2: different real corners of economics and providing this free advice.
10:50
Speaker 2: So if anything, now maybe you'd think, oh, well, not
10:53
Speaker 2: that the government is going to be spending money on this,
10:56
Speaker 2: but if they were to want a value of that back,
11:00
Speaker 2: it would be through hiring consultants. But these people did
11:02
Speaker 2: it for free. So committees. The committees that were terminated
11:07
Speaker 2: include one to the Bureau of Economic Analysis, that's the
11:10
Speaker 2: agency that pulls together the GDP report as well as
11:14
Speaker 2: the Fed's preferred inflation gauge, the personal consumptions expenditures price index.
11:19
Speaker 2: So the BA advisory committee was one. Another was the
11:23
Speaker 2: one that David shared, which advised across the BA as
11:27
Speaker 2: well as Bureau of Labor Statistics and Census. And I
11:30
Speaker 2: also just learned that in the past week two of
11:33
Speaker 2: the advisory committees to the BLS were also terminated, effective
11:37
Speaker 2: actually a month ago, but those people only just found
11:39
Speaker 2: out last week.
11:40
Speaker 3: So just to tease this out, and it's just to
11:43
Speaker 3: demonstrate how all over this story, David Wilcox is you
11:47
Speaker 3: were personally, as Molly mentioned, you were personally running one
11:50
Speaker 3: of these committees. Briefly, in terms of the value of
11:54
Speaker 3: these organizations. I mean, it sounds like you were giving
11:57
Speaker 3: them advice on improvements in the data, but I guess
12:00
Speaker 3: there was also a little bit of an informal oversight
12:03
Speaker 3: by the academic and sort of stakeholder community of changes
12:07
Speaker 3: that were being considered by these bureaus.
12:09
Speaker 1: Is that right, Yeah, that's right. It's important to note
12:13
Speaker 1: that for all of these committees, the word advisory was
12:16
Speaker 1: right in their title. We had no decision making power,
12:20
Speaker 1: but we were populated by people who were at the
12:23
Speaker 1: top of their fields with incredible expertise on the committee
12:27
Speaker 1: that I was privileged to serve as chair for. One
12:31
Speaker 1: of our members was Droona Jimoglu. You may have heard
12:35
Speaker 1: his name because he's a recent recipient of the Nobel
12:38
Speaker 1: Prize in economics. He was the only Nobel Prize winner.
12:42
Speaker 1: But the committee was chock full of members.
12:47
Speaker 3: Who were free. As Molly has underlie, they were getting
12:50
Speaker 3: a value for money.
12:51
Speaker 1: They were getting nothing in the way of an honorarium.
12:54
Speaker 1: They were serving for the purpose of advancing the public good.
12:59
Speaker 1: They came from a range of different areas of subspecialty.
13:04
Speaker 1: What they had in common were two things. One was
13:07
Speaker 1: a conviction that economic measurement is difficult, ever changing, and
13:12
Speaker 1: super important for decision makers across society. And secondly, they
13:18
Speaker 1: had the conviction that what they were doing had a
13:21
Speaker 1: risk of making a difference if they said something smart.
13:25
Speaker 1: The agency heads were in the room, the subject area
13:29
Speaker 1: experts were in the room, and there was a risk,
13:32
Speaker 1: just a risk, that the agency might change direction as
13:36
Speaker 1: a result of their advice.
13:39
Speaker 3: So I guess you have to wonder a little bit
13:41
Speaker 3: why you wouldn't want a free and very well founded,
13:44
Speaker 3: deeply researched views by members of that broader community that
13:48
Speaker 3: uses economic statistics. But if you were making a change,
13:52
Speaker 3: for example, I don't know. We've heard the COMMA Secretary
13:55
Speaker 3: Howard Lutnik suggest take the government's share of the economy
14:00
Speaker 3: out of GDP. Would that be something that the Advisory
14:02
Speaker 3: Committee would have had views on?
14:04
Speaker 1: Do you think, David, absolutely, we would have had views.
14:06
Speaker 1: Whether they would have come and asked us, I think
14:09
Speaker 1: that's open to question. It's such a basic question. It's
14:13
Speaker 1: been long settled. It was debated fifty sixty years ago
14:17
Speaker 1: when the whole concept of national income and product accounts
14:21
Speaker 1: was being invented. But that's been resolved literally for decades.
14:27
Speaker 1: It is now a matter of both national norms and
14:31
Speaker 1: international standards that government demand is included in the field
14:38
Speaker 1: of activity that's taken into account for purposes of tallying
14:42
Speaker 1: gross domestic product or what we all know as GDP.
14:46
Speaker 3: And of course it's true. It makes reporters immediately think,
14:48
Speaker 3: oh my god, and economists think, how could you possibly
14:51
Speaker 3: start comparing countries if you suddenly had a totally new series.
14:54
Speaker 2: You know, David and I have spoken about this extensively
14:57
Speaker 2: as well, and something that when I about this a
15:01
Speaker 2: couple of weeks ago, that really stood out to me
15:03
Speaker 2: that he said was there's this one idea of like
15:07
Speaker 2: maybe Lutnik was just floating the idea of how the
15:10
Speaker 2: data is presented, as in, maybe the government spending figure
15:15
Speaker 2: is still there in the GDP report, but they publish
15:17
Speaker 2: let's call it, like a maybe so called core GDP
15:20
Speaker 2: that excludes it, so that you can still see it.
15:23
Speaker 2: You can add it back in if that's how you
15:25
Speaker 2: choose to calculate it, which is the still standard way.
15:27
Speaker 2: That's one thing, not great, but you would still have
15:31
Speaker 2: the data there. It's not like it's been eliminated that
15:34
Speaker 2: you could calculate it yourself. The real concern, which I
15:37
Speaker 2: don't know that this is what Lutnik was implying, but
15:40
Speaker 2: certainly you could make this inference, was that what if
15:44
Speaker 2: the GDP report just did not publish government spending it
15:47
Speaker 2: all anymore? What if that data just simply was not
15:49
Speaker 2: collected anymore, and that calculation then could not be made
15:53
Speaker 2: the same way. That's more the concern when I talk
15:56
Speaker 2: to people who are at the statistical agencies in the
16:00
Speaker 2: let's call it the alumni community of the agencies, that
16:03
Speaker 2: they're really worried looking from the outside in and I know.
16:07
Speaker 3: For various reasons, Molly, You've been sort of calling around,
16:11
Speaker 3: particularly in the last few weeks, people who work at
16:13
Speaker 3: these agencies insofar as you know them, and also people
16:17
Speaker 3: who've formerly worked there. I mean, how nervous are they
16:20
Speaker 3: specifically around this question of the statistical agencies? What are
16:24
Speaker 3: you picking up.
16:26
Speaker 2: The thing that the biggest thing is to what extent
16:28
Speaker 2: can the government interfere with statistics? And I don't want
16:32
Speaker 2: to be here fear mongering, because I think that's you know,
16:35
Speaker 2: a lot of what has happened in the last two
16:37
Speaker 2: months is really, of course, as Trump is really pushing
16:40
Speaker 2: the boundaries of what the executive branch can do, and
16:44
Speaker 2: it's created a lot of questions of, oh, if he
16:46
Speaker 2: did X, can he do why? Or does X then
16:48
Speaker 2: apply to something else? And I certainly don't want to
16:51
Speaker 2: be out here raising concerns that are unfounded. But these
16:54
Speaker 2: are just questions that people have and are very much
16:58
Speaker 2: spoken about in this community of people who I talk to.
17:01
Speaker 2: So one of them is definitely seeing political interference in
17:05
Speaker 2: the numbers. And one of the reasons why US economic
17:08
Speaker 2: data is considered among the gold standard for the rest
17:11
Speaker 2: of the world is because it's largely impartial that the
17:15
Speaker 2: people who produce these numbers are mostly civil servants. They
17:19
Speaker 2: are not political appointees. Certainly the heads of the agencies are,
17:24
Speaker 2: but everyone is there with just a real commitment to
17:27
Speaker 2: producing a public good. And as David was saying, you
17:30
Speaker 2: know that the value of these numbers for making decisions
17:33
Speaker 2: across all levels of decision making and policy making, that's
17:37
Speaker 2: really what the core of the mission is all about.
17:40
Speaker 2: And you know, people have raised ideas of seeing how
17:43
Speaker 2: in other countries that have more authoritarian regimes, where the
17:47
Speaker 2: numbers can be politically influenced, like in Russia, like Argentina
17:52
Speaker 2: has had a past with this during the Greek debt crisis.
17:55
Speaker 2: There have been other examples where politicians have found the
17:59
Speaker 2: way to somehow insert themselves in the data to varying extents,
18:04
Speaker 2: and that seems to be the real concern here or
18:08
Speaker 2: something else that people raise too is especially now as
18:11
Speaker 2: we're starting to get a better idea of how tariffs
18:14
Speaker 2: would impact the economy, namely through slower growth and faster
18:19
Speaker 2: or at least more elevated inflation. The idea of what
18:22
Speaker 2: if Trump's he's a report that he doesn't like and
18:25
Speaker 2: could would the agencies just simply not report it that one.
18:29
Speaker 2: I don't know if that really has a material risk
18:32
Speaker 2: of happening.
18:33
Speaker 3: Probably more than most places. We're very sort of hardwired
18:35
Speaker 3: for the time and date of the release of these
18:38
Speaker 3: numbers exactly all hell would break. Well, well, maybe we'll
18:41
Speaker 3: find out, but I mean we should say none of
18:43
Speaker 3: these things have happened yet. And I guess you know,
18:46
Speaker 3: one further thing to mention to you, Molly, is you
18:49
Speaker 3: know it's true you can talk about the Argentina examples
18:52
Speaker 3: and the Russia examples, but we know that governments are
18:54
Speaker 3: perfectly capable of sort of distorting and messing up economic statistics,
18:58
Speaker 3: not through any kind of ideological agenda, but just by
19:01
Speaker 3: not giving these agencies enough money and enough people. I
19:04
Speaker 3: noticed that. I mean, the UK has been getting itself
19:07
Speaker 3: into trouble recently on this, both on its labor statistics,
19:09
Speaker 3: which have been endlessly questioned, and they've had massive issues
19:13
Speaker 3: with the surveys. Just this week, I think they've announced
19:15
Speaker 3: that the main producer price index in the UK is
19:18
Speaker 3: going to be suspended for a few months because of
19:21
Speaker 3: nothing to do with the politics, but just because of
19:23
Speaker 3: concerns about the surveys. So you did a piece that
19:27
Speaker 3: rather sounded the alarm about this before any of this happened,
19:29
Speaker 3: before the inauguration, just looking at the long standing underfunding
19:34
Speaker 3: of these agencies, which I guess is what would make
19:36
Speaker 3: you a little bit more worried now is because they're
19:39
Speaker 3: not coming into this in fine fettle. They're actually already
19:43
Speaker 3: kind of being quite scrimped and tailed.
19:46
Speaker 2: Yeah, but these agencies have been underfunded for quite some time, and.
19:50
Speaker 3: That by administrations of both parties.
19:52
Speaker 2: Yes, the topic that really got me looking into this
19:55
Speaker 2: issue more broadly was last year when the BLS said
19:59
Speaker 2: it was going to have to cut the sample size
20:01
Speaker 2: of one of the surveys in the Jobs Report, and
20:04
Speaker 2: this is the survey that produces the unemployment rate and
20:07
Speaker 2: the participation rate, among others, and that's still a concern.
20:11
Speaker 2: They were able to stave off that sample size cut
20:14
Speaker 2: temporarily through some short term funding last year, but still
20:18
Speaker 2: TBD going forward. And this is exactly something that was
20:22
Speaker 2: coming up in these Advisory Committee meetings that how can
20:25
Speaker 2: we get that survey to be conducted online versus in person,
20:30
Speaker 2: And that's something the BLS has been trying to do.
20:32
Speaker 2: But guess what it costs money, So you need at
20:35
Speaker 2: least an initial investment before these things will cost less
20:39
Speaker 2: in the long run.
20:40
Speaker 1: Stephanie, I think our listener's list of concerns is probably
20:43
Speaker 1: not long enough, so can I add one more big one?
20:46
Speaker 3: Always?
20:48
Speaker 1: Last week, the IRS was reported to be close to
20:51
Speaker 1: reaching an agreement with Immigrations and Customs Enforcement, and under
20:56
Speaker 1: that agreement, that Customs Enforcement they agency known as ICE,
21:02
Speaker 1: would send names and addresses to the IRS, which is
21:06
Speaker 1: our tax collecting authority in the United States, and the
21:09
Speaker 1: IRS would verify the names and addresses. What on earth
21:14
Speaker 1: does that have to do with economic data. It strikes
21:18
Speaker 1: at the heart of the trust relationship between the government
21:22
Speaker 1: and respondents because when respondents agree to participate in a survey,
21:26
Speaker 1: they are assured in no uncertain terms that their responses
21:30
Speaker 1: will be used quote for statistical purposes only. That's exactly
21:35
Speaker 1: because respondents fear turning over valuable data to the United
21:41
Speaker 1: States government and having it potentially used for an enforcement purpose.
21:45
Speaker 1: They don't want to become criminally liable because they took
21:49
Speaker 1: the public spirited action of participating in an economic survey.
21:54
Speaker 1: So this IRS action risks setting a very damaging that
22:00
Speaker 1: could strike at the heart of the trust foundation of
22:05
Speaker 1: US economic data.
22:06
Speaker 2: And actually to that note, there was a note from
22:09
Speaker 2: Goldman Sachs, I think in the past week saying that
22:12
Speaker 2: the response rate to the Job's Household Survey by foreign
22:16
Speaker 2: born workers has already declined. So I mean, I don't
22:19
Speaker 2: think it would have been because of this already, since
22:21
Speaker 2: the IRS development that David was just talking about only
22:25
Speaker 2: just happened in the past week, but certainly reason to
22:28
Speaker 2: think that foreign born people in this country would have
22:32
Speaker 2: certainly less incentive to reply to government surveys.
22:35
Speaker 3: I mean, I guess we should say, Molly that the
22:37
Speaker 3: heads of these agencies have not been appointed or replaced
22:40
Speaker 3: by Donald Trump yet.
22:42
Speaker 2: That's correct. So the heads of these agencies, those are
22:46
Speaker 2: roles that are politically appointed. The vast majority of people
22:50
Speaker 2: who work in these agencies are civil servants, but the
22:52
Speaker 2: leads are political appointees. And right now there is actually
22:57
Speaker 2: one vacancy the Census direct Rob Santos. He's resigned from
23:02
Speaker 2: his role shortly after Trump was inaugurated, so Trump will
23:06
Speaker 2: have the chance to fill that role. I haven't heard
23:09
Speaker 2: anything yet about where the progress on that stands. But
23:13
Speaker 2: Census is really interesting because that was seems like in
23:16
Speaker 2: his first term, that was the agency that Trump seemed
23:19
Speaker 2: to square in on the most. Trump certainly has done
23:22
Speaker 2: that a lot, has said the jobs numbers are phony
23:25
Speaker 2: and fake. But when he's gone after census, it really
23:28
Speaker 2: has had to deal more with a question about citizenship
23:32
Speaker 2: and whether that should be included in the decential count.
23:35
Speaker 2: And this was an issue that went all the way
23:38
Speaker 2: up to the Supreme Court in his first term, and
23:41
Speaker 2: this is probably something that Trump will want to revisit
23:44
Speaker 2: this time around. The reason why it's so important is
23:47
Speaker 2: because people who respond to the census, this is used
23:51
Speaker 2: to then divvy up federal funding and congressional seats. So
23:56
Speaker 2: he has an interest then to say, if you know,
23:58
Speaker 2: if you're not a citizen, then you should not be
24:00
Speaker 2: included in the census, and then your district then should
24:03
Speaker 2: be not receiving appropriations and congressional seats as a result.
24:07
Speaker 2: So this is probably something that he would have a
24:10
Speaker 2: vested interest in taking on in this term.
24:12
Speaker 3: I'm just trying to step back a little bit as
24:15
Speaker 3: we kind of near the end of this there's a
24:17
Speaker 3: lot of things that people are worried about. Some would say,
24:21
Speaker 3: you know, hysterical about with regard to some of the
24:25
Speaker 3: things that this administration is doing, the kind of concerns
24:28
Speaker 3: that we've been talking about, And I mean, you're correct me, David,
24:31
Speaker 3: but it feels like there's kind of two different things.
24:33
Speaker 3: There's the extent of executive power, which definitely arises in
24:38
Speaker 3: this question around the firing of the commissioners and potentially
24:42
Speaker 3: officials other independent agencies, which as you pointed out, will
24:46
Speaker 3: be litigated, has already been chipped away by the Supreme Court,
24:50
Speaker 3: and they may yet decide that actually the president has
24:54
Speaker 3: a right to pire and fire people at these agencies
24:57
Speaker 3: that are to some extent already implement the administration's policies.
25:03
Speaker 3: That seems to be one set of things which is
25:05
Speaker 3: about the nature of executive power, and you can disagree
25:07
Speaker 3: about that. But there's a whole other set of things
25:10
Speaker 3: that I think relate more to these this question of
25:13
Speaker 3: the statistics and the independence of the statistics, which is
25:16
Speaker 3: around whether there's oversight over the quality of these statistics
25:21
Speaker 3: and whether there could be lasting problems arising from things
25:27
Speaker 3: that administration has done which may not even be intentional.
25:31
Speaker 3: Just on those second set of things, how much do
25:33
Speaker 3: you David see the scope for distorting data or just
25:39
Speaker 3: having it be kind of fundamentally undermined by things that
25:42
Speaker 3: are happening.
25:43
Speaker 1: Well, the tradition in the United States is very strong.
25:48
Speaker 1: The agencies have coded in their DNA that they resist
25:54
Speaker 1: political interference. The most notorious example of this in history
25:59
Speaker 1: occurred in the administration when President Nixon was caught on
26:04
Speaker 1: tape from the Oval Office expressing really venomous views about
26:09
Speaker 1: how he felt that the Bureau of Labor Statistics, the
26:13
Speaker 1: agency that, as Molly mentioned, generates the unemployment rate and
26:17
Speaker 1: other key data, how they were out quote unquote to
26:19
Speaker 1: get him, and he was determined to undermine them.
26:24
Speaker 3: You know what's brilliant is that is not the thing
26:26
Speaker 3: that most people remember about President Nixon, that he was
26:28
Speaker 3: out to undermine the of Labor Stistics, and I did
26:31
Speaker 3: not know it until now. So I think that thank
26:33
Speaker 3: you for that.
26:34
Speaker 1: Absolutely. A through line for both of the issues that
26:39
Speaker 1: you described, Stephanie, is the question of trust, And as
26:43
Speaker 1: in many areas of life, trust in these areas that
26:48
Speaker 1: you were describing is very difficult to accumulate. Building it
26:52
Speaker 1: up is the work of years, decades, if not generations.
26:58
Speaker 1: Destroying trust can happen, and in a jiffy it can
27:02
Speaker 1: trust can be devastated through a single action, and that
27:08
Speaker 1: damage is extremely difficult to repair. So that in this
27:13
Speaker 1: there are a lot of things that keep me up
27:15
Speaker 1: at night in this area, that's the one that keeps
27:19
Speaker 1: me up at night most.
27:21
Speaker 3: I think we decided that if it keeps David Wilcox
27:24
Speaker 3: up at night, given his many years of experience at
27:28
Speaker 3: things that matter very deeply to Trump and Nomics, that
27:31
Speaker 3: was worth an episode. Thank you very much, David, Thank you, Molly.
27:34
Speaker 1: Thank you, Thank you for having us on to discuss
27:37
Speaker 1: these important issues.
27:45
Speaker 3: Thanks for listening to Trump Andomics from Bloomberg. It was
27:48
Speaker 3: hosted by Me Stephanie Flanders. I was joined by David
27:50
Speaker 3: Wilcox and Molly Smith. Trump and Nomics is produced by
27:54
Speaker 3: Samasadi and Moses and with help from Chris Martlu and
27:57
Speaker 3: Amy Keene and sound designed by Blake Maple's Brendan Francis
28:02
Speaker 3: Newnham is our executive producer and to help others find
28:05
Speaker 3: the show, please rate it and review it highly wherever
28:08
Speaker 3: you listen to podcasts