Donald Trump’s cuts to US government raise worries over economic data quality

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The Trump administration’s deep cuts to the federal workforce and research funding threaten to erode the quality and credibility of “gold standard” US statistics, economists have warned.

US data, from the jobs report to inflation indices, can swing Wall Street’s $105tn stock and bond market in milliseconds, and underpin policies that influence the trajectory of the world’s biggest economy.

But economists are increasingly worried efforts by Elon Musk’s so-called Department of Government Efficiency (Doge) to radically slim down the government will undermine officials’ ability to collect, analyse and research statistics on the US economy.

“All of the cuts in federal funding and some of the ones you’ve seen come out of Doge . . . they’re often a death blow to already very stretched survey operations,” said Ricardo Reis, a London School of Economics professor, who is a consultant at the Richmond Federal Reserve.

He added: “The things that go behind [the consumer price index, GDP] and others — all those surveys I think of as possible casualties.”

The US’s sprawling statistics operation is decentralised, with more than a dozen agencies and units collating data across several departments, including commerce, labour and agriculture. These agencies produce flagship reports such as the consumer price index and non-farm payrolls, which are closely scrutinised on Wall Street, along with a trove of lower-profile data that helps inform policy debates and academic research.

“Having the absolute highest standards of data quality, which the United States government statistical agencies have, is absolutely crucial,” Austan Goolsbee, president of the Chicago Fed, told the Financial Times this week. “The data could not be more important. It should be in everyone’s interest to make sure the numbers are as accurate as they can be.”

Commerce secretary Howard Lutnick’s suggestion that his department produce a measure of GDP that strips out government spending, in contrast to international norms, has also raised alarm on whether political officials will seek to influence economic reporting.

“The US has always been the gold standard on data, especially on things like GDP, the labour force, prices,” said Steve Cecchetti, an economist at Brandeis University and former head of the economic and monetary department at the Bank for International Settlements. “It’s been the gold standard because the society and the government supported and believed in measuring things as accurately as possible.”

Lutnick’s move to close the Federal Economic Statistics Advisory Committee, a body that advised statistics agencies, sparked concern among economists polled by the University of Chicago’s Booth School of Business and the FT earlier this month.

David Wilcox, who chaired the committee before it was shut in February, said the move was “a shame, because the council’s work came at almost no cost to the taxpayer and its closure will lead to a lower quality of statistics”.

More than 90 per cent of the respondents to the FT-Chicago Booth poll said they were either “a little” or “very” worried about a decline in the quality of US economic data, in part due to FESAC’s closure.

Economists are also concerned that Doge’s attempts to rein in spending will lead to statisticians with a high degree of specialised knowledge leaving the government — something that they warn can end up costing the US taxpayer more than it will save in the longer term.

Matthew Shapiro, a University of Michigan economist who is a former chair of FESAC, said: “The [push for federal staff to take] early retirements might lead to a lot of highly expert human capital walking out the door.”

Shapiro also believes an executive order from President Donald Trump to eliminate “information silos” that would force agencies to share data with officials designated by the president is also expected to lead to declines in response rates for polls, such as the labour force survey.

The research networks that play a critical role in developing and maintaining standards, such as the National Bureau of Economic Research, are also under pressure from billions of dollars’ worth of cuts to research funding.

NBER receives about half of its funding from the National Institutes of Health, the National Science Foundation and the US Social Security Administration — all organisations that are now exposed to Trump’s attempts to rein in research spending.

Jim Poterba, NBER president, said current and proposed cuts in funding would lead his organisation to scale back activity and lower costs. While some of the funds could be recouped from private sector funding sources, it was unlikely to be enough to match the loss to government funding, he said.

“The pipeline of researchers is going to become smaller,” Poterba said, adding that the likely impact would be poorer policy decisions.