White House Economist Turns to Alternative Data to Boost Trump
(Bloomberg) -- The Labor Department’s data showed U.S. wages barely budged more than a year into Donald Trump’s presidency, but Kevin Hassett had a ready response.
Hassett, chairman of the White House Council of Economic Advisers, came to a press briefing on Sept. 10 boasting that Trump’s policies had fueled “massive” wage growth and dismissing the government data showing otherwise as “not a very reasonable statistic.”
The CEA -- a Senate-confirmed three-member council of economists established by law to advise the president on policy -- often highlights economic data that bolster the case for the administration’s policies. But Trump’s CEA has increasingly taken aim at official statistics that don’t back up the president’s claims of an economic surge of historic proportions.
On Tuesday, Hassett told CNN that the economics team at Goldman Sachs Group Inc. “almost at times looks like the Democratic opposition” after the bank’s strategists estimated that Trump’s tariffs could hurt corporate earnings next year.
Leslie Shribman, a spokeswoman for New York-based Goldman Sachs, declined to comment.
In the last month alone, CEA has promoted alternative findings on wages, inflation, poverty and deficits at odds with data produced by the Congressional Budget Office, the Bureau of Labor Statistics and the Census Bureau.
Asked last month about a false statistic Trump posted on Twitter comparing U.S. gross domestic product to unemployment, Hassett said he didn’t know how the error was made.
“I’m not the chairman of the Council of Twitter Advisers,” he said.
Hassett, a sunny economist with an easy smile, is becoming the point-man in the White House’s campaign to show a pivot in the economy under Trump from its performance during President Barack Obama’s administration -- an effort that has come under scrutiny for unconventional interpretations of economic data, occasionally erroneous claims and hyperbole.
Hassett takes on the mission with a record of sometimes overenthusiastic optimism. In 1999, he co-authored “Dow 36,000,” an argument that U.S. stocks were highly undervalued and on the verge of a massive upswing. The dot.com bubble burst the following year and the stock index still hasn’t come close to the level he predicted.
His critiques of government data and attempts to provide alternative figures have sparked public and private backlash. Erica Groshen, who led the Bureau of Labor Statistics from 2012 to 2017, said that while constructive criticism is welcome, CEA’s report questioning federal wage data could be used to undermine the non-partisan economists who crunch numbers for the government.
“The staff of BLS are non-partisan and extremely highly skilled and professional,” she said. “It is very important that their work not be undermined by any other parts of government.”
Wage Data Critique
The CEA report on wages Hassett highlighted at the press briefing expressed “concerns about traditional wage measures’’ from the federal government. It asserted that real wages were actually up 1.4 percent over the last year; the Labor Department’s main measure of after-inflation wages, real average hourly earnings, was down 0.1 percent in July versus a year earlier.
The CEA released a series of charts during Hassett’s briefing aimed at showing an economic resurgence after Trump’s election, using unusual 18-month increments in some cases.
“The chart is bad and dumb because the peg to the election, the 6-quarter moving average, and the linear trend don’t seem like they were chosen to help people understand the underlying economic activity,” Kevin Rinz, a former CEA economist during the Obama White House who now works at the Census Bureau, tweeted last month about one of the charts.
Hassett declined to be interviewed. A representative for the CEA said Hassett wasn’t criticizing traditional government measures, but instead offering a better way to account for changes in a dynamic economy. The representative asked not to be named but contacted a former CEA official who spoke in Hassett’s defense.
Phillip Swagel, who worked at CEA during the George W. Bush administration and now teaches economics at the University of Maryland, said current critics of Hassett’s projections are “a direct parallel” to those who claimed the Bush tax cuts would lead to higher interest rates and crowd out investment.
“The critics were wrong,” and made “preposterous” allegations then that the Bush CEA was ignoring standard economics for political purposes, he said.
Corporate Tax Cuts
During the Sept. 10 White House briefing, Hassett also claimed that last year’s corporate tax cut had already “about paid for itself” and asserted that the U.S. was seeing “a massive amount of wage growth right now” compared to earlier projections.
Both claims stirred a public backlash from economists, including some who support Trump. Stephen Moore, an economist at the conservative Heritage Foundation who advised Trump’s campaign, called Hassett’s tax-cut claim “a little premature, because we don’t know how long this boom will last.” Kyle Pomerleau, an economist at the conservative Tax Foundation, and Peter Morici, a conservative economist at the University of Maryland, also said Hassett’s claim went too far.
The CEA representative said Hassett was using updated gross domestic product figures from the Congressional Budget Office to show that government revenues were likely to increase by $1 trillion over the next decade over previous estimates -- a number that the White House attributes to the corporate tax cuts. That economic growth and new revenue will cover the cost of the corporate tax cut, the representative said.
CBO Estimates Unchanged
CBO Director Keith Hall has said that he stands by his earlier estimates, which forecast the tax bill would not pay for itself and would add more than $1.8 trillion to the deficit through 2028.
“So far, I’m not sure we’ve changed much at all,” Hall told the Senate Budget Committee last month. “In fact, our forecast for the deficit this year is pretty much on target.”
Hassett’s claims on wages also received pushback.
His report on wages came less than a month after the Labor Department reported the July drop in inflation-adjusted wages from a year earlier, the worst reading since 2012. Real hourly wages have grown at an average 0.3 percent annual pace under Trump overall, down from 1.1 percent during Obama’s second term.
To reach its own figure for wages, CEA included non-cash benefits such as paid leave and added the impact of tax cuts. It also used an alternative, lower measure for inflation and an adjustment for newer workers.
Taken together, the changes produced better wage figures for Trump. But even the customized data showed no major jump in wages since Trump took office because it also raised earnings under Obama. Last year, Hassett predicted Trump’s tax cuts would spark an “an immediate jump in wage growth.”
The Census Bureau released data in September showing no statistically significant change in the number of Americans in poverty during Trump’s first year in office. CEA released a statement calling the Census’s approach “flawed” and said the figures understated progress under Trump. CEA said that the a more accurate poverty rate is closer to 3 percent, not the official rate of 12.3 percent.
The CEA representative said economists from across the ideological spectrum have raised concerns about traditional poverty measures and sought improvements in recent years.
Representatives for the BLS, CBO and Census declined to comment for this article.
Previous administrations have also questioned the accuracy of some traditional data measures. In 2015, Obama’s CEA offered an alternative approach to measuring gross domestic product.
Erroneous data from Trump’s White House has undermined CEA’s credibility in the eyes of some economists.
In August, White House Press Secretary Sarah Huckabee Sanders said that Trump had tripled Obama’s eight-year job creation record for black workers in just 18 months, quoting numbers that were not accurate.
She later issued a correction. Hassett claimed responsibility for the flawed figures during the Sept. 10 briefing.
“I gave Sarah a bad number,” he said. “It was 100 percent my fault.”
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