Count The Wrong Beans, You Get The Wrong Policies

Accountants working for companies provide a valuable service. They compile numbers about various aspects of a company’s operations that management can use as guides to improve performance.

But there are caveats. If the counting doesn’t include all important factors, if it seems to emphasis one factor above another in an incorrect way, or if management uncritically uses numbers that accountants provide as its guide, the business suffers.

Economists serve roughly the same function for government policy-makers as accountants do for business executives. If these economists don’t include all important factors in their own advice, if information provided doesn’t appropriately weight the importance of factors actually provided, or if government policy-makers aren’t wise enough to realize their own customers’ (i.e. constituents’) tastes aren’t served by some of the numbers economists provide, lousy policies result.

Which of course is the big problem with the Wall Street-friendly, Main Street oblivious, number-linked advice that economists have been doling out for years to leaders of both parties.

What numbers have been getting emphasized and acted upon in recent years? For starters, the numbers about whether we are in or out of a recession. Economist generated numbers say the recession ended in the summer of 2009. Government policies based on the subsequent “recovery” that supposedly followed have pleased few on Main Street but delighted those on Wall Street.

The GDP is a primary policy-making guide provided by economists. It grew an anemic .4 percent in the first quarter of this year, an improved 1.3 percent in the second, and a still weak but much improved 2.5 percent in the third quarter. This progression suggests real economic improvement to economists and policy-makers who look to the GDP for serious policy guidance.

Virtually all such growth in GDP in recent years, however, has only added to the wealth of the richest Americans, and done hardly anything for anyone else. Indeed, after being adjusted for inflation, consumers’ (i.e. Main Street’s) income fell another 0.1 percent in October, the third straight month of declines.

Some other numbers favored by economists in their evaluation of our economy’s well-being are also looking up. The stock market, long claimed to be a good indicator of an economy’s health, is very healthy for yet another year. The Dow has soared past 12,000 in recent days, and the more broadly based S&P Index this October is having its best month since 1974. These upticks are largely the result of solid earnings from big, publicly traded corporations.

A booming stock market and big earnings of big companies are certainly good for Wall Street. But since they are in large measure made possible by layoffs, reductions in worker benefits, labor reducing automation, and shifting production abroad, they don’t do much for Main Street — In many ways, they actually run counter to the interests of those living on Main Street.

We know the numbers that have gotten Washington policy-makers’ attention. And their sad consequences. What are the numbers that have been largely overlooked or not acted upon in time?

Unemployment is an example of a not-acted-upon-in-time number. It was pretty much ignored as a persistent problem that needed immediate attention for more than a year after the summer of 2009. Why? Because the official, economist-generated numbers showed the recession had ended, a recovery had begun, and unemployment was just a “lagging indicator” that would get better naturally as that recovery took hold.

It didn’t, of course. But that didn’t keep big profits from rolling into the coffers of big banks on Wall Street while middle America’s Main Streeters felt a growth economic panic.

And there are those other numbers, different from the ones too long used to set national policies, that might be used instead to set policies with a far more beneficial effect on the forgotten 99 percenters.

Wealth has increased by a huge amount for the top 1 percent and other top earners in recent decades, and not at all on an inflation-adjusted basis for everyone else. Tax and other policies that do NOT diminish the wealth at the top, but simply allocate national wealth more evenly in the future, could reverse that trend — were policies aimed at a less skewed distribution of wealth given greater weight.

We have numbers on how many people are falling into official poverty. How many are getting their daily bread at food banks and with food stamps. How many are seeing their prime personal asset, a home, decline in value. There are a slew of important numbers out there that could become the basis of new American economic policy setting — a basis that doesn’t continue to make the government’s Job One doing right by Wall Street and big corporate CEOs.

The mantra of accountants, bean counters of business, is: “What gets counted gets done.” Our national bean counters, economists, are counting the wrong beans, and the wrong policies are getting done.

As a result, faith in the policy makers who take advice from these bean counters is at a record low. While on Main Street, the pain grows and grows and…

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