Lost Pages: Eroding our confidence in public data
The effects of a recent executive order purging advisory boards working with federal agencies include dismantling the Bureau of Labor Statistics’ Technical Advisory Council, and Data Users Advisory Committee. Boards advising Census and the Bureau of Economic Analysis were also dismissed.
These advisors are experts in their fields, with broad understanding of the BLS’s different series, and their strengths and idiosyncrasies. They have significant experience in sample design, modeling, analysis and interpretation of large structured and unstructured data sets, formulating survey questions, and accessibility. In addition, they advise on technicalities, and on changes in what data users need, and on new series that would be more relevant in our changing economy, and less relevant series that could be trimmed, especially important as the BLS is chronically underfunded. The TAC specifically excludes anyone subject to federal registration requirements covering lobbyists. Terms generally last two years, and board members provide their expertise and guidance for free.
We cribbed some of that text from the BLS’s page on the committees yesterday. Today that page is gone.
Of course, accurate data is critical both to policy makers striving for rational outcomes in our disjointed economy, and to investors. Neil Dutta recently highlighted the importance of our federal data, calling it the gold standard, and wondering what a glitch in one of our major economic reports would do to global markets. He’s far from the first analyst to do so.
In an interview with Politico’s Weekly Shift, former BLS commissioner Erica Groshen points out that if senior BLS leadership were to be suddenly serving at the “pleasure of the president,” that might make BLS statisticians afraid to point out data points they consider statistically unsound. And we’ll add that if it became known that the BLS had been politicized, that itself might rattle confidence, built as it is on a fragile structure.
There are always complaints, especially when the actual release throws egg on your forecast’s face. (Don’t tell anyone, but we’ll admit to guiltily checking the birth/death model on such mornings.) In the last decades the tenor of those complaints has become increasingly alarming, including accusations of outright fraud. When asked if the public would have a way of knowing if there were erroneous data, Dr. Groshen, with her usual candor, responded that in addition to ensuring that “every tax dollar is well spent,” by advising on most appropriate technologies, and allowing data users themselves to have a voice, the advisory boards provide transparency. “…if there were attempts to manipulate BLS in some way that was unprecedented, illegal [or] something inappropriate, it would be more obvious in the context of the give and take of an advisory committee than in many other ways.”
Over the years, to address legitimate complaints, say about lagged data, Dr. Groshen has promoted ways to restructure our statistical sources to provide more timely and granular data. Her widely supported suggestions include funding the Department of Labor to reframe the weekly UI claims reports to function as an economic indicator instead of the administrative record those reports were built to be, and to publish the full data set based on UI data, the Quarterly Census of Employment and Wages, with a shorter lag. Despite the complaints, apparently there’s no money for that.
According to Dr. Groshen, in disbanding the TAC, we “lose one more means to counteract baseless accusations…one more means to communicate exactly what you did and why,” and to clarify questions. “I would say that if an administration wanted to try to manipulate data, then they would not want to have these advisory committees around.”
Business owners in the Capitol region are hiring uprooted federal workers, and offering perks, like free yoga classes, discounted degree programs, and medical care for their pets, acknowledging that the “federal workforce is a wildly important part of our economy.”
There will be no free yoga classes or any other form of enlightened self-interest that will offset the damage caused by the degradation of our public data sources. Come to think of it, on the first Friday of the month, instead of fielding calls from clients who suspect the employment report has been manipulated, we may all be wondering about that ourselves.
Tariffs over time—in words and pictures
As we were wrapping up this issue, the president-elect announced the creation of an “External Revenue Service” (ERS). It will, as he put it, demonstrating his idiosyncratic understanding of trade, “collect our Tariffs, Duties, and all Revenue that come from Foreign sources. We will begin charging those that make money off of us with Trade….” Almost no one aside from him and his circle of advisers thinks that foreigners, rather than US consumers, pay tariffs, but let’s set that aside for now.
Instead, let’s look at tariffs over the long sweep of history. According to a useful factsheet from the Congressional Research Service, tariffs were an easy way to collect revenues in the early history of the country, which didn’t have a developed administrative structure. There were only so many ships sailing to unload goods in so many harbors, so taxing those goods was not much of a technical challenge. The government was small and didn’t need that much revenue anyway.
The tariff and revenue histories are illustrated in a quartet of graphs below. From 1792 to 1930, federal revenue averaged less than 3% of GDP. (Obviously those old GDP figures are guesses, but let’s take them as a decent approximation of reality.) From 1792 to the eve of the Civil War, 1860, tariffs provided an average of 86% of total federal revenue. (There were some bumps before the Civil War, notably the War of 1812, which juiced expenditures and savaged imports.) Besides borrowing heavily, the federal government increased excise taxes, reducing dependence on tariffs and leaving them accounting for just over half of federal revenues in the last third of the 19th century. With the introduction of the personal income tax (PIT) in 1913, tariffs receded in importance; since 1945, the PIT has accounted for 45% of federal revenues.
(Speaking of federal revenues, the popular notion that taxation has been growing like Topsy can’t survive fact-checking. As the graph shows, federal revenue as a share of GDP has been nearly flat for the last seven decades; in fact, the 2024 share, 17.1%, is below the 1951 share, 18.4%.)
With the growth of the PIT, and federal revenues generally, tariffs (or customs duties, to use the technical term) have largely disappeared as source of federal revenue. (In the graph on the lower left, you can see a spike around 1930, the time of the infamous Smoot-Hawley Tariff, which many, though not all, economists believe contributed to the Great Depression.) Customs receipts barely cracked 1% of total revenue in the 1990s and 2000s. With the tariffs imposed during the first Trump administration, and preserved by Biden, that share doubled to 2% in 2019–2022, but they’ve eased back to 1.6% in 2024. That looks poised to change
Since Trump has floated the idea of replacing the PIT with tariffs—switching from “taxing our Great People using the Internal Revenue Service,” as he said in the Truth Social announcement of the ERS—it’s interesting to experiment with how large those tariffs would have to be to plug the revenue gap. In the first three quarters of 2024, goods imports were $3.3 trillion at an annual rate, and the PIT brought in $2.5 trillion. Matching that would require a tariff rate of 70%. The effective tariff rate last year—revenues divided by the value of goods imports—was under 3%. Obviously a 70% tariff would decimate imports, but we’re not even considering that.
It all seems like a stretch.