When the Commerce Department's Bureau of Economic Analysis issued its revised estimates of corporate profits and economic growth for the past few years, prominent conservative commentators were quick to suggest that the Clinton administration had falsified the bureau's earlier reports for political purposes. A look at the facts, however, shows they're wrong.
BEA reported on July 31 that corporate profits for 1999 and 2000 were substantially lower than it had previously estimated. Since actual data from the Internal Revenue Service is typically not available for about a year and a half after it is filed, forecasters use other publicly available sources to make early estimates of corporate profits (the bureau's methodology is also publicly available). For 1999 and 2000, data from the IRS indicated that corporate profits were much lower than BEA's previous estimates, which had been based on overly optimistic projections. Given that both the data and the method used in calculating the estimates are entirely transparent, however, falsifying them for political purposes is virtually impossible.
Yet some commentators took those revised numbers to mean that the earlier estimates had been intentionally fabricated. Chicago Sun Times columnist and "Crossfire" co-host Robert Novak led the charge with a column on Aug. 8. Novak wrote: "Hidden in the morass of statistics, there is proof that the Clinton administration grossly overestimated the strength of the economy leading up to the 2000 election. Did the federal government join Enron and WorldCom in cooking the books?" Novak suggested later in the piece that "although a political motive for Democratic cooking of the government's books is there, nobody -- including Bush administration officials -- alleges specific wrongdoing ... Nevertheless, such discrepancy in earnings statements by corporate executives today would warrant a congressional subpoena." Novak repeated the charge -- and the insinuation of illegality -- on CNN's "Crossfire" that night, asking, "Was the Clinton administration cooking the books, or was it just incompetent bureaucrats? ... The motive: Claim a fictitiously vibrant economy for Al Gore to run on. Private corporation executives who cooked the books that way are called to account, and may do the perp walk to prison."
Rush Limbaugh also teed off on Clinton in an extended attack (Windows Media only) on his radio show Aug. 8, basing his charges on Novak's column. Alleging that "Kenny Boy and Jeffrey Boy at Enron did nothing compared to Billy Boy and Al Gore," Limbaugh suggested that "the state of the economy leading up to the election of 2000 was overstated by 30 percent by the Clinton-Gore campaign -- they lied by 30 percent how strong the economy was." Claiming that the data was intentionally falsified, Limbaugh suggested Clinton and Gore were "trying to steal control of the country by misreporting, out-and-out lying about the state of the economy going into the 2000 election cycle."
Others also picked up the thread. While claiming that "I don't believe in conspiracies," Martin Hutchinson of United Press International wrote:"If this was a conspiracy, the liberal Democrat staffers in the [Bureau of Labor Statistics], the liberal Democrat staffers in the BEA, and Greenspan, heavily influenced by his liberal Democrat wife, would have engineered the statistics and monetary policy to make it seem like a fantastic and unprecedented boom had occurred in the late 1990s, ending around the time Bush was elected in November 2000 ... But isn't it strange that the above economic scenario appears to be exactly what's happening. Must be a coincidence, of course ..."
A Washington Times editorial on Aug. 12 used the same line, insinuating a conspiracy: "There is no evidence that Clintonistas infiltrated the BEA to produce these colossally false profit reports. At the same time, there can be no doubt that the supreme beneficiary of these conveniently timed false profit reports was none other than President Clinton's designated successor: Al Gore." The Times went even further, suggesting: "In hindsight, we now know, the falsely reported surging profits from the second half of 1998 through the first half of 2000 fueled the soaring stock market. This, in turn, generated wealth, which financed greater consumption. It also encouraged the massive over-investment, which, given the rapidly deteriorating economy evidenced by the downwardly revised growth figures for 2000, probably prevented the economy from falling into recession during a presidential election year."
Yet as syndicated columnist Bruce Bartlett pointed out in an Op-Ed that ran in the Washington Times the next day, "Even if [Clinton and Gore] had wanted to do such a thing [falsify profit estimates], the way the data are constructed would have made it impossible to do so. Moreover, the Commerce Department's data on profits have little, if any, impact on stock prices because they come out only with long lags. Also, the data are for the economy as a whole, not individual companies."
Had Novak only researched the numbers before drawing his conclusions, this latest phony political conspiracy might have been avoided entirely.
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