The Mary Mapes School of Economics

The federal budget was "fake but accurate" before "fake but accurate" was cool.

I loved this post over at Cafe Hayek. Naturally it displays what we all know to be true (if you actually pay attention), that government accounting of its own books is a fraud. This particular example is Balance Sheet focused, but national Income Statements are equally useless, which leads to a point I make as point #1 whenever I discuss out federal budget deficit with anybody: the US annual federal budget accounting is a sham, so why use it as a starting point in debates about fiscal policy? In any other sphere of endeavor, people don't begin with demonstrably faulty data and proceed with discussion, so we should not look to the phony, meaningless federal budget deficit as the sine qua non of economic signposts. There are numerous other measures that we can focus on to measure and analyze fiscal policy. Here is one example (scroll down). Like any other area of economics, journalists generally don't have more than a cursory understanding of federal budget analysis, but cite the federal budget deficit/surplus deliberately to infuse a story with the supposed legitimacy when it suits their purpose. They loved Bill Clinton's surpluses even though they were not nearly as indicative of economic health as they purported, and they hate George Bush's deficits even though they are not nearly as indicative of economic malaise as they hope. Last week was about the best week one could have hoped for in terms of economic numbers - employment is high and going higher, output is humming and inflation is tame if not totally contained - and the stock market and dollar reacted accordingly, because they know this.