Social Europe

politics, economy and employment & labour

  • Themes
    • European digital sphere
    • Recovery and resilience
  • Publications
    • Books
    • Dossiers
    • Occasional Papers
    • Research Essays
    • Brexit Paper Series
  • Podcast
  • Videos
  • Newsletter

“Alternative Facts” And US Economic Policy

Simon Johnson 6th February 2017 2 Comments

Simon Johnson

Simon Johnson

US President Donald Trump has an obvious problem with data that he doesn’t like, as he showed on his first full day in office, by attacking the media for reporting accurately the size of the crowd that attended his inauguration. It should be no less obvious that this same reliance on “alternative facts” poses a severe threat in the realm of economic policymaking.

The number of people who attended the inauguration – far less than Trump wanted to believe – could easily be inferred from the available evidence (including photographs of the National Mall and the number of subway riders). But the discussion has now broadened to the more serious question of whether millions of people voted illegally, as Trump has insisted since the election. He has implicitly conceded that he lost the popular vote by nearly three million votes, but maintained, despite all evidence to the contrary, that massive voter fraud occurred.

Trump is calling for a full investigation, and Democrats should welcome any opportunity to have experts weigh the evidence carefully. But the real danger must be fully appreciated: Trump is not alone in his self-serving disregard for reality. Other prominent Republicans, including in the House of Representatives, have been living in their own world for some time.

The most obvious example is climate change. An overwhelming majority of scientists agree that the climate is changing – and that human activity, including carbon dioxide emissions, plays a role. In any scientific or other investigation, there is always some margin of error or room for reasonable disagreement. But the Republican strategy has long been to claim that the climate is not changing or that any change has nothing to do with people and their cars, factories, and power plants.

Those who believe this now have power in the United States. Exactly what they will do with (or to) the federal Environmental Protection Agency remains to be seen, but the initial signs are that scientific researchers will be muzzled or their activities shut down. Similarly, NASA’s important earth-science initiatives may be shunted off to other government agencies – where they can be defunded and left to die.

This is the strategy that begins to emerge as a form of government: deny there is a problem (despite the facts), cut funding for politically inexpedient research, and claim that all outcomes are rosy.

The first application of this approach to economic policy came quickly, when Trump’s press secretary, Sean Spicer, refused to say what the unemployment rate is – dodging a question that would have required him to state the actual number. The official unemployment rate, as measured by the Bureau of Labor Statistics (BLS), currently stands at 4.7%. But Trump has repeatedly claimed that true unemployment is 42% – a number based on the assumption that everyone who does not have a job, including retired people and students, would like to work.

One can now expect the BLS to face some funding problems along with various kinds of political pressure. Under former President George W. Bush, for example, access to documents in EPA libraries was – at least at one point – restricted. And the Congressional Budget Office has already been instructed by congressional Republicans to change how it calculates the effects of tax cuts, in order to make them appear more beneficial for the economy than government spending programs.

These issues will come to a head when Trump begins to appoint people to the Board of Governors of the Federal Reserve System. There are currently two vacancies on the seven-member board – and more positions may open up soon (the terms of both the chair and vice chair expire early next year).

It seems entirely plausible that Trump will prefer people who think the “true” unemployment rate is 42% to those who share the view that it is 4.7%. This and other strange beliefs could have a major effect on monetary policy – for example, by tending to strengthen the hand of those who want to keep interest rates lower for longer.

The US has had a slow and difficult recovery from the financial crisis of 2008; everyone can agree on that. But do we want a Fed that looks at the facts in deciding when and how much to raise interest rates? Or do we want officials whose “facts” are completely at odds with the actual state of the economy? If the US gets the latter, the result will be high inflation – not a good outcome for most Americans. The last time that happened, in the 1970s, lower-income people bore the brunt of the pain.

If Trump insists on dispensing with fact-based decision-making, a similar outcome can be expected. And many of those who voted for him can expect the worst of it.

Copyright: Project Syndicate 2017 “Alternative Facts” and US Economic Policy

Simon Johnson

Simon Johnson, a former chief economist of the IMF, is a professor at MIT Sloan, a senior fellow at the Peterson Institute for International Economics, and co-founder of a leading economics blog, The Baseline Scenario.

Home ・ Politics ・ “Alternative Facts” And US Economic Policy

Most Popular Posts

schools,Sweden,Swedish,voucher,choice Sweden’s schools: Milton Friedman’s wet dreamLisa Pelling
world order,Russia,China,Europe,United States,US The coming world orderMarc Saxer
south working,remote work ‘South working’: the future of remote workAntonio Aloisi and Luisa Corazza
Russia,Putin,assets,oligarchs Seizing the assets of Russian oligarchsBranko Milanovic
Russians,support,war,Ukraine Why do Russians support the war against Ukraine?Svetlana Erpyleva

Most Recent Posts

Big Tech,Big Oil,Big Pharma,agribusiness,wealth,capital,Oxfam,report,inequality,companies Control the vampire companiesJayati Ghosh
Labour,Australia,election,climate,Greens,teal Australian Labor’s climate policyAnna Skarbek and Anna Malos
trade,values,Russia,Ukraine,globalisation Peace and trade—a new perspectiveGustav Horn
biodiversity,COP15,China,climate COP15: negotiations must come out of the shadowsSandrine Maljean-Dubois
reproductive rights,abortion,hungary,eastern europe,united states,us,poland The uneven battlefield of reproductive rightsAndrea Pető

Other Social Europe Publications

The transatlantic relationship
Women and the coronavirus crisis
RE No. 12: Why No Economic Democracy in Sweden?
US election 2020
Corporate taxation in a globalised era

Hans Böckler Stiftung Advertisement

Towards a new Minimum Wage Policy in Germany and Europe: WSI minimum wage report 2022

The past year has seen a much higher political profile for the issue of minimum wages, not only in Germany, which has seen fresh initiatives to tackle low pay, but also in those many other countries in Europe that have embarked on substantial and sustained increases in statutory minimum wages. One key benchmark in determining what should count as an adequate minimum wage is the threshold of 60 per cent of the median wage, a ratio that has also played a role in the European Commission's proposals for an EU-level policy on minimum wages. This year's WSI Minimum Wage Report highlights the feasibility of achieving minimum wages that meet this criterion, given the political will. And with an increase to 12 euro per hour planned for autumn 2022, Germany might now find itself promoted from laggard to minimum-wage trailblazer.


FREE DOWNLOAD

ETUI advertisement

Bilan social / Social policy in the EU: state of play 2021 and perspectives

The new edition of the Bilan social 2021, co-produced by the European Social Observatory (OSE) and the European Trade Union Institute (ETUI), reveals that while EU social policy-making took a blow in 2020, 2021 was guided by the re-emerging social aspirations of the European Commission and the launch of several important initiatives. Against the background of Covid-19, climate change and the debate on the future of Europe, the French presidency of the Council of the EU and the von der Leyen commission must now be closely scrutinised by EU citizens and social stakeholders.


AVAILABLE HERE

Eurofound advertisement

Living and working in Europe 2021

The Covid-19 pandemic continued to be a defining force in 2021, and Eurofound continued its work of examining and recording the many and diverse impacts across the EU. Living and working in Europe 2021 provides a snapshot of the changes to employment, work and living conditions in Europe. It also summarises the agency’s findings on issues such as gender equality in employment, wealth inequality and labour shortages. These will have a significant bearing on recovery from the pandemic, resilience in the face of the war in Ukraine and a successful transition to a green and digital future.


AVAILABLE HERE

Foundation for European Progressive Studies Advertisement

EU Care Atlas: a new interactive data map showing how care deficits affect the gender earnings gap in the EU

Browse through the EU Care Atlas, a new interactive data map to help uncover what the statistics are often hiding: how care deficits directly feed into the gender earnings gap.

While attention is often focused on the gender pay gap (13%), the EU Care Atlas brings to light the more worrisome and complex picture of women’s economic inequalities. The pay gap is just one of three main elements that explain the overall earnings gap, which is estimated at 36.7%. The EU Care Atlas illustrates the urgent need to look beyond the pay gap and understand the interplay between the overall earnings gap and care imbalances.


BROWSE THROUGH THE MAP

About Social Europe

Our Mission

Article Submission

Membership

Advertisements

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641

Social Europe Archives

Search Social Europe

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Follow us on social media

Follow us on Facebook

Follow us on Twitter

Follow us on LinkedIn

Follow us on YouTube