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March 18, 2004

Crudele on Why Growth is Not Real

The New York Post's John Crudele weighs in on why the lack of jobs reflects the fact that the growth statistics are wrong. The basic point-- inflation is understated, so growth is overstated:

As faithful readers of this column already know, Washington has dramatically changed the way it calculates inflation over the past decades...

The reason for lowering the inflation statistics - through sleight of hand coupled with reasonable-sounding academic arguments - was to pay out less in cost-of-living adjustments to Social Security recipients and others.

But by squelching the inflation statistics, the government also caused economic activity to look better than it actually was, since the nation's closely watched gross domestic product is calculated after inflation is taken out.

Look around-- housing prices are still zooming, oil prices are shooting up. The only prices dropping are consumer electronics-- and those aren't made in the US. It's pretty easy to believe that it's the inflation measurement that's out of whack, which means growth is weak and explains why job growth is so pathetic.

Posted by Nathan at March 18, 2004 07:59 PM