In public debates about economic policy, it can be hard to separate real insights from political posturing. But a few simple rules of thumb can help.
Start with information you can count on. Crucial economic statistics — like the unemployment rate, inflation or gross domestic product — are generally produced free of political influence.
Partly this is because statistical agencies are structured to minimize political interference. The actual numbers crunching is done by career professionals who prize their independence.
Partly it’s the nature of the work. These statistics are generated according to strict rules that leave no room for political judgment. Because the numbers reflect the work of dozens of people, it would take a breathtakingly complex conspiracy to change them.
Even then, fudging the numbers would be difficult, because the best statistical agencies show their work. If the fix were in, it would be easy to find.
Government statistics can also be checked against independent private-sector numbers. For instance, the Billion Prices Project provides an independent reading of inflation by tracking large databases of online prices. Likewise the estimate of employment growth by ADP, a large payroll-processing firm, largely confirms official reports of nonfarm payrolls.
Nearly every economist believes that the official numbers, while imperfect, are free of direct political influence. Yet the broader public remains suspicious. An April public opinion poll showed that, to at least some degree, roughly two-fifths of Americans distrusted the economic data produced by the federal government.
That distrust makes for political fodder. During his election campaign, President Trump frequently described the jobs numbers as “totally fiction,” “a complete fraud” and “phony numbers.” But after assuming office, amid reports showing strength in the economy, Mr. Trump said, “They may have been phony in the past, but it’s very real now,” according to an account by Sean Spicer, the former White House press secretary.
Mr. Trump’s shift points to the importance of considering the incentives of those interpreting economic data. The government statistical agencies typically offer only a dry recitation of the numbers. But for people with a partisan perspective, the latest economic numbers often signal the beginning of a new spin cycle.
Each new report contains dozens of statistics on different sectors of the economy, creating plenty of scope to cherry-pick the figures that best fit a particular narrative. The main constraint on political spin appears to be avoiding untruths likely to earn the ire of fact-checkers. Mr. Trump’s evident propensity to repeat outright falsehoods may make him an exception to this rule.
Because the state of the economy usually evolves slowly, and its effect is seen across a range of indicators, a good rule is to discount any narrative built on the latest monthly number. Far better to look for persistent trends across many data sources.
Much of the best interpretation of economic conditions comes from financial firms that bet millions based on their own assessments. The profit motive appears to be keeping them honest. Their analyses — which are collected in the Federal Reserve Bank of Philadelphia’s Survey of Professional Forecasters — provide a useful crosscheck on government forecasts. These private-sector forecasters expect medium-run economic growth of around 2 percent, even as the president’s budget is premised on 3 percent growth.
But even private-sector forecasters are no match for hundreds of economists employed by the Federal Reserve. While all economic forecasts are — to be generous — imperfect, historical analyses show the Fed’s forecasts have been less imperfect than the rest.
Many economic debates center on the consequences of new policies, like repealing Obamacare, rewriting the tax code or changing priorities for spending.
The Congressional Budget Office is an important institution at such moments, both because it is insulated from political pressures and because it has deep expertise. It’s a nonpartisan scorekeeper whose job is to advise Congress about the likely effects of its proposals. The director is appointed by Congress, but beyond that, staff members are career numbers crunchers. (I serve on the C.B.O.’s Panel of Economic Advisers, a board of outside experts.)
A typical C.B.O. “score” is based on a combination of judgment and mathematical models that embody the consensus views among the broader community of economists. The Congressional Budget Office may not get the right answer, but its analysis is honest and required by law to be transparent.
The chief critic of the Congressional Budget Office is Mick Mulvaney, the White House budget director. This tension is understandable because the office was established in 1974 to serve as an independent counter to the politically inflected analyses coming from the White House and, in particular, the Office of Management and Budget, which Mr. Mulvaney now heads.
The Congressional Budget Office is responsible for analyzing spending initiatives, while tax proposals are analyzed by its sister organization, the Joint Committee on Taxation. The Joint Committee is also largely politically independent, a fact recently underscored when it found that the Senate Republican tax cut would increase government debt by perhaps $1 trillion.
The reputation of these agencies is such that Senator Charles E. Grassley, the Iowa Republican, once said: “Do you question the work of the Congressional Budget Office and the Joint Committee on Taxation? Well, you shouldn’t, because they’re like God around here.”
Beyond the official scorekeepers, a small industry of think tanks analyzes tax and spending proposals. Their reliability varies, with some providing deep expertise, while others are more partisan.
There is an easy way to check whether an economic idea gets support from mainstream economists. Check the IGM Economic Experts Panel, run by the Initiative on Global Markets at the University of Chicago. The panel includes Nobel laureates, Clark medalists, and former advisers to both Democratic and Republican administrations. It is selected to provide diversity across geography, age, specialty and partisan leaning.
In a survey this year, the panel was asked whether “the C.B.O. has historically issued credible forecasts of the effects of both Democratic and Republican legislative proposals.” It yielded a robust vote of confidence, with 24 economists agreeing, 11 strongly agreeing and none disagreeing.
In reality, there is much that economists agree on. For instance, Treasury Secretary Steven Mnuchin has repeatedly claimed that the Trump administration’s tax cut would pay for itself. Yet every member of the expert panel who responded to another survey said it would increase government debt as a share of the economy over the next decade. (One respondent initially said he was uncertain, but later confessed that he had misread the question and that he agreed with the rest of the panel.)
The idea that political actors color their economic analyses to favor preferred policies is hardly new. But the tendency may be getting much worse. Larry Summers, a Harvard professor who served as Treasury secretary in the Clinton administration, recently said of Mr. Mnuchin’s claims: “I’m not aware of so irresponsible an estimate coming from a Treasury secretary in the last 50 years.”