Maybe the numbers are wrong

There’s a widespread impression that the United States economy is less competitive than it used to be — notably in manufacturing — or suffering deeply from losses driven by trade. But you can’t find much evidence for any of that in the numbers. Well, Michael Mandel says in this draft paper (pdf), maybe that’s because the numbers are wrong:

The economic data themselves provide plenty of circumstantial evidence that something is wrong. I’ve assembled a chartbook (pdf) of figures which taken together, tell an implausible story about the U.S. and global economy. After looking at the full set of charts, it’s hard to avoid the conclusion that something big is wrong with the data.

The problems with the data are not harmless. Right now the misleading data ties up even the smartest thinkers and the most thoughtful politicians in knots. Anecdotal evidence directly fights the official numbers, and policy is paralyzed. It’s difficult to ring the alarm bell for change if there’s no apparent fire and the smoke is explained away as a dust cloud.

The situation is unpleasantly reminiscent of the lead-up to the financial crisis, when the data kept flashing green even as the banking system was approaching collapse. In early 2008, just before Bear Stearns collapsed, Fed Chairman Ben Bernanke assured Congress that “the banking system has been highly profitable in recent years and entered this episode with strong capital positions.” And indeed, the bank data did show strong capital ratios. But these figures, while technically right, were missing the mountain of obligations that the banks were building up.

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