Fun With Statistics: Metrics, Distortions, and Outright Lies

By Kevin Meyer

Several letters in today's Wall Street Journal pointed me back to a recent op-ed by Michael Boskin titled "Don't Like the Numbers?  Change 'Em!"  Scary stuff, and therefore it's time for another edition of our Fun With Statistics series.

Politicians and scientists who don't like what their data show lately
have simply taken to changing the numbers. They believe that their
end—socialism, global climate regulation, health-care legislation,
repudiating debt commitments, la gloire française—justifies
throwing out even minimum standards of accuracy. It appears that no
numbers are immune: not GDP, not inflation, not budget, not job or cost
estimates, and certainly not temperature. A CEO or CFO issuing such
massaged numbers would land in jail.

That last sentence is what has really befuddled me recently.  Banks and other financial institutions are thrashed for taking unacceptable risks, yet that risk is dwarfed by the risk taken by the government when bailing out those same banks, auto companies, and making us teeter on the brink of insolvency by assuming previously unimaginable debt.

Where's the accountability?  I know, stupid question.  Of course we may have seen a faint glimmer of it emanating from Massachusetts last week.

Every
president is guilty of spinning unpleasant statistics. President
Richard Nixon even thought there was a conspiracy against him at the
Bureau of Labor Statistics. But President Barack Obama has taken it to
a new level. His laudable attempt at transparency in counting the
number of jobs "created or saved" by the stimulus bill has degenerated
into farce and was just junked this week.

The president and his advisers—their credibility already reeling from
exaggeration (the stimulus bill will limit unemployment to 8%) and
reneged campaign promises (we'll go through the budget
"line-by-line")—consistently imply that their new proposed regulation
is a free lunch. When the radical attempt to regulate energy and the
environment with the deeply flawed cap-and-trade bill is confronted
with economic reality, instead of honestly debating the trade-offs they
confidently pronounce that it boosts the economy. They refuse to admit
that it simply boosts favored sectors and firms at the expense of
everyone else.

Even more blatant is the numbers game being used to justify
health-insurance reform legislation, which claims to greatly expand
coverage, decrease health-insurance costs, and reduce the deficit. That
magic flows easily from counting 10 years of dubious Medicare "savings"
and tax hikes, but only six years of spending; assuming large cuts in
doctor reimbursements that later will be cancelled; and making the
states (other than Sen. Ben Nelson's Nebraska) pay a big share of the
cost by expanding Medicaid eligibility. The Medicare "savings" and
payroll tax hikes are counted twice—first to help pay for expanded
coverage, and then to claim to extend the life of Medicare.

The letters in response to Boskin's op-ed pointed out some other dangers.

Mr. Boskin warns that the administration is squandering Washington's
credibility (an oxymoron) with its creative accounting, but perhaps
that's part of the plan. If no measurement metrics are legitimate, then
any evaluation of results is open to interpretation and spin. And, if a
"fairness" agenda gets more than 50% of voters receiving benefits but
paying no income taxes, then it may very well be possible to fool most
of the voters most of the time.

So if you play with the validity of numbers on the front end, how can you ever expect to measure the true result on the back end?  And we've talked about the enormous danger of the "tax tipping point" several times in the past.  Robbing Peter to pay Paul is always popular with Paul, and if the Pauls are in the majority…

If what Mr. Boskin describes was committed in the private sector, it
would be called "fraud" and prompt a flurry of regulatory activity and
a race among class-action plaintiffs lawyers to see who could garner
the most plaintiffs. It is still "fraud" when committed in government
but it is not actionable because of the immunity all congressmen and
the executive branch enjoy. There are still elections as a remedy.

The proof is in the pudding… or Massachusetts.  Or Virginia.  Or New Jersey.  Perhaps soon in Nevada.

But perhaps my favorite…

Let's hope the contagion does not spread to engineers. If engineers
start basing their designs on the strength they wish their alloys had
rather than the strength they actually measure, we had better start
moving the population out from under the flight paths of airports.

No kidding.  Although I could argue that the oft-hidden and future destruction wrought by an enormous increase in debt and nanny-ism versus self-reliance is far greater than defective airliners.

Now that's scary.