Trump strengthens economic control, drawing inspiration from China's practices
In a move that has significant implications for the reliability and integrity of economic data in the United States, President Trump's actions, particularly the firing of Bureau of Labor Statistics (BLS) Commissioner Erika McEntarfer, are causing concern among economists and policymakers.
Impact on the Bureau of Labor Statistics
The firing of McEntarfer, a Biden appointee, has been seen as an attempt to politicize the BLS, potentially undermining its independence and objectivity. This move could lead to a loss of trust in the agency's data among businesses and policymakers. Moreover, by firing a commissioner after a jobs report showed a slowdown in hiring, Trump may create a chilling effect within the agency. This could lead to concerns among career professionals about the safety of their jobs if they release data that might be unfavorable to the administration.
Impact on Economic Data Reliability
Reliable data are crucial for economic decision-making by governments, businesses, and consumers. Trump's actions risk eroding trust in federal data, which could have far-reaching consequences for economic stability and policy formulation. Without trustworthy data, decision-makers may make ill-informed choices, which could exacerbate economic issues. This includes tightening credit, affecting borrowing costs, and destabilizing investment strategies.
The credibility of U.S. economic data is also important internationally. If data integrity is compromised, it could impact global economic assessments and policies.
Economic and Political Context
Trump's economic policies, including tariffs and changes in data collection, have been criticized for contributing to economic instability. The firing of the BLS commissioner is seen as part of a broader pattern of actions that prioritize political outcomes over objective data analysis.
President Donald Trump has appointed EJ Antoni, a MAGA loyalist with little experience in data collection or labor economics, as the head of the BLS. The idea of suspending the monthly jobs report, if implemented, could make it difficult for business leaders and economists to understand the state of the $30 trillion US economy.
The August jobs report, coming out three weeks from now, will be digested in the context of Trump's reaction. A rosy jobs report will raise questions on the left about whether the BLS is placating President Trump. On the other hand, a gloomy jobs report will be seen on the right as a proof of a plot to undermine President Trump's economic agenda.
The situation echoes the case of Argentina, where several elected officials spent years trying to trick the public, saying inflation was lower than it was, after firing the statistician in charge of its inflation report. This manipulation of data led to investors losing trust and pulling their money out of Argentine bonds.
In the context of the ongoing global economic uncertainties, the reliability of economic data is more critical than ever. Economist Aaron Sojourner stated that suppressing this data would be like gouging out our eyes, as it hurts our ability to understand what's happening around us and forces us into making worse decisions.
[1] Wall Street Journal columnist Greg Ip wrote that capitalism in America is starting to look like China's model of state capitalism. [2] Several economists, both right-leaning and left-leaning, have spoken out against Antoni's nomination, citing his clear political bent and lack of experience. [3] Antoni, in an interview before his nomination, suggested suspending the monthly jobs report. [4] The US is not yet at the level of China or other "milder practitioners of state capitalism" in terms of state involvement in private businesses. [5] In 2007, Argentina fired the statistician in charge of its inflation report after she projected a big increase in consumer prices. [6] Borrowing rates skyrocketed in Argentina as a result of the manipulation of inflation data.
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