[Joint House and Senate Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
S. Hrg. 112-516
THE ECONOMIC IMPACT OF ENDING OR REDUCING FUNDING FOR THE AMERICAN
COMMUNITY SURVEY AND OTHER GOVERNMENT STATISTICS
=======================================================================
HEARING
before the
JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
__________
JUNE 19, 2012
__________
Printed for the use of the Joint Economic Committee
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JOINT ECONOMIC COMMITTEE
[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]
SENATE HOUSE OF REPRESENTATIVES
Robert P. Casey, Jr., Pennsylvania, Kevin Brady, Texas, Vice Chairman
Chairman Michael C. Burgess, M.D., Texas
Jeff Bingaman, New Mexico John Campbell, California
Amy Klobuchar, Minnesota Sean P. Duffy, Wisconsin
Jim Webb, Virginia Justin Amash, Michigan
Mark R. Warner, Virginia Mick Mulvaney, South Carolina
Bernard Sanders, Vermont Maurice D. Hinchey, New York
Jim DeMint, South Carolina Carolyn B. Maloney, New York
Daniel Coats, Indiana Loretta Sanchez, California
Mike Lee, Utah Elijah E. Cummings, Maryland
Pat Toomey, Pennsylvania
William E. Hansen, Executive Director
Robert P. O'Quinn, Republican Staff Director
C O N T E N T S
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Opening Statements of Members
Hon. Carolyn B. Maloney, a U.S. Representative from New York..... 1
Hon. Kevin Brady, Vice Chairman, a U.S. Representative from Texas 3
Witnesses
Kenneth D. Simonson, Chief Economist, Associated General
Contractors of America, Vice President, National Association
for Business Economics, Washington, DC......................... 6
Andrew Reamer, Research Professor, George Washington University
Institute of Public Policy, Washington, DC..................... 8
Hon. Keith Hall, Senior Research Fellow, Mercatus Center, George
Mason University, Former Commissioner, Bureau of Labor
Statistics, Arlington, VA...................................... 10
Hon. Grant D. Aldonas, Principal Managing Director, Split Rock
International, Washington, DC.................................. 12
Submissions for the Record
Prepared statement of Hon. Carolyn B. Maloney.................... 28
Prepared statement of Vice Chairman Kevin Brady.................. 29
Prepared statement of Mr. Kenneth D. Simonson.................... 31
Prepared statement of Dr. Andrew Reamer.......................... 38
Prepared statement of Hon. Keith Hall............................ 52
Prepared statement of Hon. Grant D. Aldonas...................... 56
Prepared statement of Hon. Vincent P. Barabba.................... 67
Letter dated October 27, 2011, to Hon. Frank Wolf............ 70
THE ECONOMIC IMPACT OF ENDING OR REDUCING FUNDING FOR THE AMERICAN
COMMUNITY SURVEY AND OTHER GOVERNMENT STATISTICS
----------
TUESDAY, JUNE 19, 2012
Congress of the United States,
Joint Economic Committee,
Washington, DC.
The committee met, pursuant to call, at 2:30 p.m., in Room
210, Cannon House Office Building, Hon. Carolyn B. Maloney
presiding.
Representatives present: Maloney, Brady, Burgess, Campbell,
Duffy, Mulvaney, and Cummings.
Staff present: Conor Carroll, Gail Cohen, Colleen Healy,
Patrick Miller, Robert O'Quinn, and Christina Forsberg.
OPENING STATEMENT OF HON. CAROLYN B. MALONEY, A U.S.
REPRESENTATIVE FROM NEW YORK
Representative Maloney. The meeting will come to order.
I am Congresswoman Carolyn Maloney, and I want to thank
Chairman Casey for working with me to hold today's hearing. I
wish we were having a hearing on job creation. Instead, we are
having one on why the House voted to strip job creators of the
tools they need to grow the Nation's economy, expand exports,
and hold us in the government accountable for how well the
country is doing.
Right now there is a concerted effort to cut funds for the
Census Bureau and eliminate several of the vital surveys they
conduct, or weaken them, by telling our nation that certain
crucially important surveys should not be required for all of
its citizens.
In studying this issue, I remember reading about what
Representative James Madison said when he served in this House.
He wrote, and I quote, ``This kind of information all
legislators and legislatures had wished for, but this kind of
information had never been obtained in any country. If the plan
were pursued in taking every future census, it would give
Congress an opportunity of marking the progress of the society
and distinguishing the growth of every interest,'' end quote.
This is not a fight about the funds for these surveys or
the best return on the taxpayer investment--because I think we
will hear today that it is. It is a fight over ideology. This
is a slippery slope where ideological bullies threaten the
trust, confidence, and independence of our nation's most
critical statistics.
As we continue to compete in a world economy, it is
imperative that we know how we are doing relative to other
global economies. In our current economic times, it makes no
sense to stop collecting such invaluable information that
guides economic recovery and growth.
Let me be clear. The surveys that the House voted to
eliminate are the best measurement of our nation's progress.
The information from the American Community Survey and the
Economic Census allow both the private and public sectors of
our economy to be more efficient. And because we are more
efficient, they allow us to be better able to compete globally
and maintain our standard of living. It is that simple. Doing
away with these surveys or weakening some by making them
voluntary hurts the Nation and takes away a competitive
advantage.
The American Community Survey is unique for its ability to
produce annual economic and social data for the Nation down to
the smallest geographic areas. Policymakers and Federal
agencies use census information to distribute more than $450
billion in Federal funds to State and local governments based
in whole or in part on ACS data. Local governments use ACS
information to decide where to build new roads, schools, and
hospitals. But it is not just government that uses this
information. The private sector, the business community, the
job creators use it to make assessments about local labor
force, new markets, and customer needs.
The Economic Census also is under threat with funding cuts,
meaning the 2012 effort would be halted even as the Bureau is
ramping up to distribute the survey to thousands of businesses
in the coming months. The Economic Census is the fundamental
building block of the gross domestic product and national
income and product accounts and is essential to accurately
measuring industrial productivity, changes in price indexes,
and annual and quarterly indicators of business activity.
In a letter this fall to the House and Senate
appropriators, six former bipartisan Census Bureau directors
noted that absent the 2012 Economic Census, public and private
decision-makers would have to use a 2007 model of our country's
economy until 2022. The former directors, who collectively led
the Bureau for four decades, serving six Presidents from both
political parties, stated, and I quote, ``Going without a 2012
Economic Census in the midst of the worst recession in half a
century is akin to turning off the country's economic GPS at
the very moment that it is critically needed,'' end quote.
This is deja vu all over again. We had this debate when we
were a new nation, and Madison and Jefferson strongly urged
Congresses to put questions about age, gender, citizenship,
occupation, manufacturing, and industry on census forms over 2
centuries ago. We had it again during the Eisenhower
administration when Congress failed to fund the Economic
Census, and the outcry gave us the 1954 act that mandated an
Economic Census every 5 years. We had it again on the eve of
the 1970 census, when Senator Ervin held 3 days of hearings
about the long form.
Each time, Congresses came to their senses and turned to
the census experts to professionally design the surveys and
questions needed by the Nation in a manner that put the least
burden on the public. This time it is different, as the House
has effectively defunded both the American Community Survey and
the Economic Census without so much as a witness, let alone a
hearing or a meaningful debate. This Congress should not be the
first in history to deny itself the executive State and local
governments and the Nation's business communities information
that the Founders and every Congress since have judged
essential for a growing, prosperous nation.
Today, we are trying to remedy that by hearing from some
experts on the impacts of this stunning negative decision. My
hope is that this hearing causes the Congress to reconsider its
impulsive decision and that we act quickly to fully restore
funding to these programs and give the job creators the tools
we promised them and that we have provided as a nation for two
centuries.
I yield back. And it is now my pleasure to recognize my
good friend and colleague, Vice Chairman Brady, for up to 5
minutes or as much time as he may need.
[The prepared statement of Representative Maloney appears
in the Submissions for the Record on page 28.]
OPENING STATEMENT OF HON. KEVIN BRADY, VICE CHAIRMAN, A U.S.
REPRESENTATIVE FROM TEXAS
Representative Brady. Great.
And I join with Chairwoman Maloney in welcoming and
thanking our witnesses for appearing today.
The Joint Economic Committee has a long history of interest
in the accuracy, the relevance, and the timeliness of U.S.
economic statistics. Washington relies upon these statistics to
make policy decisions, and American job creators use these
statistics to make employment and investment decisions.
I wish this hearing had been called to make a broader
inquiry into the accuracy, relevance, and timeliness of all
U.S. economic statistics instead of focusing merely on the
American Community Survey. But since this committee is unlikely
to have another opportunity during this Congress to explore how
to rectify the deficiencies in U.S. economic statistics,
Republican members of this committee will not confine our
inquiry to solely the American Community Survey. Instead, the
witnesses invited by our side of the aisle--Mr. Grant Aldonas,
Dr. Keith Hall--will broadly explore how Congress and U.S.
statistical agencies can work together to improve the quality
of economic statistics for the benefit of the American people.
Frankly, this hearing is being held, as Carolyn Maloney
pointed out, because the House of Representatives agreed to two
amendments in the appropriations bills for fiscal year 2013
that cover the Census Bureau. One would prevent the Census
Bureau from using funds to compel Americans to fill out the
American Community Survey; the other would defund it
altogether.
Compulsory participation in the American Community Survey
is the number-one objection that lawmakers, and my constituents
frankly, hear. In my opinion, this objection swayed the
majority of the House on these two amendments concerning the
Census Bureau.
Recognizing the importance of the statistics generated by
the American Community Survey to economic decision-making by
both governmental and private entities, I believe that there is
a way forward. As former Commissioner Hall will testify,
participation in the monthly Current Population Survey that
generates the unemployment rate and other unemployment
statistics is voluntary. The Bureau of Labor Statistics and the
Census Bureau jointly designed the Current Population Survey in
such a way as to generate accurate statistics on a voluntary
basis.
If the Census Bureau were to make participation in the
American Community Survey voluntary as well, rather than
compulsory, I think most public opposition would disappear. The
Bureau of Labor Statistics and the Census Bureau can jointly
use a voluntary survey to obtain the necessary data from the
Current Population Survey to generate accurate employment
statistics, so why can't the able statisticians at the Census
Bureau design a voluntary survey for the American Community
Survey that would do the same?
Now, let me turn to other issues. I have long been
concerned about the quality of our statistics measuring
international trade and investment flows in the output of the
services sector. For example, we cannot accurately count the
number of jobs created by exports by sales for American goods
and services. Moreover, we rely on outdated rules of origin
that ignore the global supply chains of today, and we
attribute, for example, all the value of an iPhone assembled in
China as a Chinese export even though final assembly accounts
for only 8 percent of that iPhone's total value.
From his experience as both Under Secretary for
International Trade at the Department of Commerce and chief
international trade counsel at the Senate Finance Committee,
Mr. Aldonas will outline what steps Congress and the
statistical agencies should take together to improve the
quality of U.S. international trade and investment statistics.
Many statistical issues involve the price indices that are
used to deflate gross service revenues into real services
output. As a former commissioner of the Bureau of Labor
Statistics, Dr. Hall will offer his suggestions on how to
improve not only the quality of labor statistics but also the
quality of price indices affecting the measurement of
international trade and the real output of the services sector
as well.
U.S. statistical agencies have a proud tradition of
reporting economic data objectively regardless of the political
ramifications for the incumbent administration. In the Green
Jobs Act, however, Democrat leadership in Congress inserted an
ill-defined and ill-conceived mandate for the Bureau of Labor
Statistics to count green jobs.
This green jobs mandate, which I believe is a thinly
disguised attempt to create a metric to support a policy
agenda, reeks of politics. Something is not quite right when,
as I understand it, green jobs include EPA bureaucrats and
attorneys that are suing to block the construction of Keystone
pipeline, a project that would create up to 20,000 jobs here in
America and reduce our nation's dependence on unfriendly oil
sources in the Middle East and Venezuela.
Is there any economically meaningful definition of a green
job? As the official formerly charged with executing this
mandate, Dr. Hall, I am eager to hear your opinion.
With that, Madam Chairwoman, I look forward to the
testimony of today's witnesses.
Representative Maloney. I thank the gentleman for his
statement.
[The prepared statement of Representative Brady appears in
the Submissions for the Record on page 29.]
Representative Maloney. And I want to thank all the
panelists for being here. And I would like to introduce them.
Mr. Kenneth Simonson is the chief economist for the
Associated General Contractors of America. He is responsible
for analyzing economic data and trends to advise the AGC's
member companies about possible future effects on the
nonresidential construction market. In addition, he is
currently serving as vice president of the National Association
for Business Economists. Prior to joining AGC, Mr. Simonson
worked for 3 years as the senior economic advisor in the Office
of Advocacy for the U.S. Small Business Administration and
earlier as vice president and chief economist of the American
Trucking Association. He is also cofounder of the Tax Economist
Forum and has served on the board of the National Tax
Association.
Dr. Andrew Reamer is research professor at George
Washington University Institute of Public Policy. He focuses on
policies that promote U.S. competitiveness, including economic
statistics. He was previously a fellow at the Brookings
Institute Metropolitan Policy Program and deputy director of
its Urban Markets Initiative. He founded the Federal Data
Project, which sought to improve the availability and
accessibility of Federal socio and economic data for States,
metropolitan areas, and cities. He also co-authored the policy
brief that served as the basis for the Regional Innovation
Program authorized by Congress in 2010. He currently is a
nonresident senior fellow at Brookings.
The Honorable Keith Hall--and it is very good to see him
again; I have sat through many presentations from Dr. Hall--he
is a senior research fellow now at the George Mason University.
He was previously the commissioner of labor statistics for the
U.S. Department of Labor and was a frequent witness before this
committee. Dr. Hall also served as chief economist for the
White House Council of Economic Advisors for 2 years under
President George W. Bush. Prior to that, he was chief economist
for the U.S. Department of Commerce. Dr. Hall also spent 10
years at the U.S. International Trade Commission.
And the Honorable Grant Aldonas is the principal managing
director of Split Rock International, a Washington-based
consulting and investment advisory firm that he founded in
2006. He also serves as a senior advisor in international
relations at the Center for Strategic and International
Studies, a bipartisan nonprofit organization that conducts
research and analysis and develops policy initiatives. Before
founding Split Rock, Dr. Aldonas worked for the government,
serving as the U.S. Under Secretary of Commerce for
International Trade and as the chief international trade
counsel for the Senate Finance Committee.
I welcome all of the panelists. And I look forward to the
testimony, starting with Mr. Simonson.
STATEMENT OF MR. KENNETH D. SIMONSON, CHIEF ECONOMIST,
ASSOCIATED GENERAL CONTRACTORS OF AMERICA, VICE PRESIDENT,
NATIONAL ASSOCIATION FOR BUSINESS ECONOMICS, WASHINGTON, DC
Mr. Simonson. Thank you very much, Madam Chair and Vice
Chair Brady. I commend you for holding this hearing on a very
important topic that is not very glamorous but affects all of
our lives and businesses.
I am Ken Simonson. I am the chief economist for the
Associated General Contractors of America, the leading
construction trade association. And our members perform every
kind of construction other than single-family-home building. So
they are intensely interested in the state of local and
national economic conditions, demand from different sectors for
different types of construction.
I am going to be testifying today principally in my other
role as vice president of the National Association for Business
Economics. That is a 2,500-member professional organization not
just for people with ``economist'' in their title or their
degree but anyone who is using economic information in the
workplace. And I would like to illustrate the breadth of users
of the American Community Survey and the Economic Census and
speak a little bit about the effect that has already occurred
from cuts in other census programs.
I also serve as a member of the Data Users Advisory
Committee for the Bureau of Labor Statistics and have seen many
presentations and discussions, sometimes quite vigorous, over
what is the proper role of the statistical agencies, how can
they best use their resources in order to achieve timely,
useful information without undue cost or intrusiveness.
And I think that the Census Bureau is achieving those goals
in large part in the way that it conducts the American
Community Survey. As you know, that replaced the long form on
the census, which asked many of the same questions but only
once a decade to a much larger number of people. And by having
a continuous, small but scientifically chosen random sample--
and those words do go together; they are not in conflict--the
American Community Survey does deliver very timely information
that is used by an extremely wide variety of users.
In the case of my association, for instance, we use
information from both the ACS and the Economic Census, either
directly or filtered through other government statistical
products, to identify the role of construction in each State's
economy and the impact that a billion dollars invested in
nonresidential construction would have in terms of generating
construction jobs, indirect jobs from supplier industries, such
as mining, manufacturing, and a variety of services, and then
induce jobs throughout the economy as the workers and the
owners in the construction and supplying businesses spend their
additional wages and profits. Other trade associations use
these two data products in a variety of ways to track the role
that their industries are playing in the economy.
The ACS is also used by many of the 5,000 economic
development agencies and organizations throughout the U.S. to
answer inquiries from businesses that are considering locating
here versus other parts of the world. For instance, Patrick
Jankowski of the Greater Houston Partnership testified to
Congress in March that Japanese companies looking to open a
plant in the Houston area want to know the size of the Asian
community, in order to have assurance that expatriate workers
that they assign to Houston will be comfortable there. When a
European company wants to open a research and development
facility in Houston, they ask about the number of engineers and
scientists that live in the region.
I don't think there is any other data source that could get
into that kind of detail and timeliness to help make that sale.
And they have repeatedly made that sale, not just in the
Houston area but throughout communities across America.
The National Association for Business Economics had a
conference just 2 weeks ago on the comeback of manufacturing in
Cleveland, which is seeing a big revival of manufacturing. And
having the information that we get from the ACS on a continuous
basis and what we could garner from an Economic Census if it is
conducted and processed and reported timely in the next 2 years
will help that process.
Consultants also use the ACS for a variety of purposes. I
heard from John Knox, an independent socioeconomic research
consultant in Hawaii, about looking at ways of evaluating the
success of science research programs in recruiting students or
other personnel from under-represented minority groups in
Hawaii. And other researchers and institutes around the country
likewise use that kind of socio-demographic information for
their own communities and for identifying the most effective
ways to put in place programs of assistance.
The associations also produce snapshots of their local
housing markets. The National Association of Home Builders, for
instance, does that for hundreds of housing markets around the
country. And the use of the American Community Survey provides
really the only source of data that can be used to provide
housing and demographic data for individual congressional
districts, as NAHB and other associations, other NABE members
pointed out to me.
In addition to these products, the Census Bureau has had to
discontinue a couple of other valuable series. In the case of
my industry, the Survey of Residential Alterations and Repairs
was something that contributed to a measure of how much
construction activity is happening at any one time. In fact,
the best guess the Census can make now is that residential
improvements, as they call it, has been the biggest piece of
residential construction and bigger than any single
nonresidential segment for several years.
Representative Maloney. If you could please sum up. You are
already over your 5-minute limit, and we can read it in the
record. But if you could sum up now quickly.
Mr. Simonson. Yes, absolutely.
I believe that the ACS and the Economic Census are
indispensable and there is no adequate replacement for them in
the private sector or by making them voluntary.
Representative Maloney. Thank you.
[The prepared statement of Mr. Kenneth D. Simonson appears
in the Submissions for the Record on page 31.]
Representative Maloney. Dr. Reamer.
STATEMENT OF DR. ANDREW REAMER, RESEARCH PROFESSOR, GEORGE
WASHINGTON UNIVERSITY INSTITUTE OF PUBLIC POLICY, WASHINGTON,
DC
Dr. Reamer. Congresswoman Maloney, Vice Chairman Brady, and
members of the committee, I appreciate the opportunity to speak
to you today about the economic impacts of insufficient funding
for Federal economic statistics, including the American
Community Survey and the 2012 Economic Census.
By way of background, in the first 20 years of my
professional career I founded and managed two regional economic
development consulting organizations. We worked with public-
and private-sector leaders in cities and States across the
U.S., including the States represented by most members of this
committee, to help them understand their region's economic
competitiveness, its strengths and weaknesses, and develop
collaborative strategies to boost their area's competitive
position. It was clear from that work over 2 decades that
current accurate statistics are critical to economic
development and job creation, because you need to understand
what economic performance is, what economic structure is, and
what the economic resources are that drive that performance and
make that structure competitive.
From my experience, I know that the Federal Government is
essentially an irreplaceable provider of such statistics. I
will tell you why, very briefly.
A month ago, I hosted a 2-day data fair at the George
Washington University called Innovative Data Sources for
Regional Economic Analysis. We had 50 exhibitors from the
Federal sector, the private sector, such as Google, Amazon,
Microsoft, S&P, Moody's, and academia and nonprofits like
Brookings--50 exhibitors, over 200 participants. Given the
incredible recent expansion of information technology capacity
and advances in statistical methodologies, the idea was to have
people get acquainted with the different new types of data sets
that are available, make connections across sectors, and start
a conversation about what the proper allocation of roles are
between the Federal Government and the private sector regarding
economic statistics.
As one result, people were very happy with the fair and a
number of collaborative efforts developed between Federal
agencies and some of the private organizations that I mentioned
to pursue projects in common.
In conversations with the non-Federal organizations, they
readily admit that they could not and do not want to collect
the data that the Federal Government does. Rather, they see
opportunities to add value to Federal data, sell their unique
data to the Federal Government, integrate--and that is actually
happening now--and enhance access to Federal data through Web-
based data platforms.
The Federal Government has an essential role to play in the
production of statistics that lead to better decisions
regarding the economy and competitiveness because data are a
classic, what economists call, public good; that they are under
produced because they are freely available and it is often the
case that the private sector cannot get the full price that the
societal benefits of data access would suggest.
As full data are necessary for the efficient operation of
markets, so the Federal Government has a role in addressing
information market failure. Only the Federal Government has the
financial resources, the authority, and the motivation to
produce data that are objective, reliable, and relevant to
policy needs consistent over space and time and freely
available to multiple users. And they are critical for helping
the public hold their political elected officials accountable.
The total cost of the economic statistics budget is less
than $2 billion a year to cover a $14 trillion economy--the
cost of about four F-22 jets. And so the Federal statistical
system is a very effective, adaptable mechanism for addressing
information market failure at low cost and with economic and
fiscal returns orders of magnitude greater than taxpayer
investment. The private sector does not have the capability to
produce data of similar reliability and usefulness.
Vice Chair Brady, I am pleased to hear your interest in the
broader array of economic statistics. In my testimony, there
are two stories about unreliable GDP data and unreliable
current employment statistics data at the State level because
of the unwillingness of Congress to provide 8 million bucks to
the Census Bureau to capture regular data on the services
industries regarding GDP and the flat-lining of Federal Monies
going to State partners in labor market information, resulting
in the diminution of skills at the State level and causing
problems with the current employment statistics system of the
like that we just saw in the Wisconsin recall election. You
might be familiar with the difference of opinion between
Wisconsin Republicans and Democrats regarding that state's
economic performance in 2011.
With regard to the American Community Survey, each of you
has a packet that I put together with data on your district
from the American Community Survey. As Congresswoman Maloney
said, the notion of collecting data beyond bare enumeration has
been with us since James Madison, the father of the
Constitution, proposed it in the first Congress, Thomas
Jefferson for the second census, and then Presidents and
Congresses from there on. President Grant complained about 1870
census data being out of date by 1875.
More than a century later, the American Community Survey
came into being to provide annually updated data as proposed by
President Bush. ACS data, and the long-form data before them,
are essential ingredients for the functioning of the public and
the private sectors in the U.S. economy. They are the building
blocks for Federal statistical and population estimates, the
boundaries of metropolitan areas, State and local per capita
income. They are the building blocks for State restraints on
taxes and spending. Half the States have restraints on tax and
spending that are based on data from the ACS. They are
essential for----
Representative Maloney. Will the gentleman sum up? He is 2
minutes over.
Dr. Reamer. Sure. They are essential for legislative
redistricting and business decision-making. Medicaid
reimbursement, quarter of a trillion dollars a year, is
dependent on the ACS.
A voluntary ACS is not viable, it won't produce reliable
data. There are ways to address the issues raised by the House
without making the ACS voluntary; I would be pleased to talk
about them.
Regarding the Economic Census, I would echo Congresswoman
Maloney's point that it is essential for developing accurate
quarterly and annual economic statistics for the Nation and the
States. And without the 2012 Economic Census, we would be in
the dark about the true state of our economy until the
beginning of the next decade.
Representative Maloney. Thank you.
[The prepared statement of Dr. Andrew Reamer appears in the
Submissions for the Record on page 38.]
Representative Maloney. Dr. Hall.
STATEMENT OF THE HON. KEITH HALL, SENIOR RESEARCH FELLOW,
MERCATUS CENTER, GEORGE MASON UNIVERSITY, FORMER COMMISSIONER,
BUREAU OF LABOR STATISTICS, ARLINGTON, VA
Dr. Hall. Congresswoman Maloney, Vice Chairman Brady, and
members of the committee, thank you for the chance to discuss
the economic statistics produced by the Federal statistical
system. In my testimony, I will talk briefly about some of the
challenges that the current system is struggling to meet and
then mention a handful of specific inadequacies in data
coverage.
Federal economic statistics are important for both
policymakers and the public. The reason is simple: Good
information allows good decisions. Relevant, accurate, and
credible economic data plays much the same infrastructure role
for the economy as physical infrastructure like a highway
system.
The challenges facing Federal statistical agencies are
significant and many. Like physical infrastructure, statistical
systems become obsolete over time as the nature and scope of
economic activities by businesses and households are becoming
increasingly complex. While this is a great challenge,
especially in times of tight budgets, it is also a great
opportunity. Federal statistical agencies need to recognize
this opportunity and take advantage of the changes brought
about by technology. This can not only lead to improved
economic data but a significant reduction in the burdens that
they impose upon the survey respondents.
First, agencies need to modernize their data collection to
better reflect how households and businesses store and use
information. This is, to a large degree, simply taking
advantage of data that is already collected. This can be done
in a number of ways. They need to continue to find and use
existing administrative records whenever possible. For example,
the Current Employment Statistics program at the Bureau of
Labor Statistics takes advantage of unemployment insurance
records that companies are required to maintain.
Agencies also need to find more ways to use existing
electronic records already kept by private companies. For
example, the Consumer Price Index Program is researching the
use of electronic price information held by corporations. This
could potentially replace the use of data collectors that still
today walk into a store, pick up an item for sale, and write
down its price.
Agencies need to make a serious effort to match businesses
across different data surveys so that survey responses can be
shared. This could significantly reduce redundancy in surveys.
Agencies need to coordinate the data collection from large
corporations. Just two-tenths of 1 percent of firms employ 40
percent of the private-sector workers in the United States.
Agencies could get together, identify a core set of measurable
objectives, and negotiate with a relatively small number of
firms to get data into a single survey. And agencies could
begin to replace personal visits to both companies and
households with online interviews so we reduce the agency
travel costs.
Second, agencies need to improve their use of technology by
sharing computer information systems. Large statistical
agencies have a number of independent statistical programs,
each with its own budget and each with its own independent IT
system, for data collection and processing. This creates a
significant amount of redundancy and raises their overhead
costs. Similar redundancy exists between smaller agencies that
each have their own information system and do not share a
common IT platform with each other.
And third, statistical agencies need to modernize the data
dissemination. Often, agencies don't seem to realize that the
data they collect and analyze belongs to the taxpayers that
footed the bill. They need to make sure that their information
is available to everyone and that that information is in an
understandable and usable form. In general, they need to
improve their Web sites and pool data with other agencies at
online data warehouses. Agencies also need to encourage and
coordinate more with the private sector in the creation of
tools like Google's Public Data Explorer.
In addition to the challenges faced by most statistical
agencies, there remain a great many inadequacies in the
coverage and quality of statistical data. I discussed a few in
my written testimony, and I will mention just two here.
First, there is a significant gap in the level of detail
available in data-owning services. For decades, the statistical
system focused primarily on goods, yet the service sector is
now responsible for over 80 percent of total U.S. employment
and for the past several decades 100 percent of job growth. And
for the first time ever, more than half of the job loss in the
recession, in the great recession, was in services.
Lastly, I want to mention difficulties with the
unemployment rate. The unemployment rate primarily serves as a
measure of labor market slack--that is, it should indicate how
much current employment falls short of the supply of labor.
However, the U.S., like most other countries, has a very narrow
definition of the unemployed. Only those completely without
work and actively seeking employment are counted. It is often
the case during recessions that many of the jobless become
discouraged and don't actively look for work. Because of this
inactivity, they are not considered unemployed, and the
accuracy of the unemployment rate as a measure of labor market
slack declines.
The problem with the unemployment rate has never been worse
than it is now. To give you some idea of the problem, a simple
calculation can be done. If we had 63 percent of the population
in the labor force, as before the recession, and all those
people were counted as part of the labor supply, there would be
an additional 5 million people counted as unemployed. This
would raise the unemployment rate a full 3 percentage points to
about 11.3 percent, and that would be the highest unemployment
rate ever recorded by the Bureau of Labor Statistics.
Thank you.
Representative Maloney. Thank you. That is startling. Thank
you.
[The prepared statement of Hon. Keith Hall appears in the
Submissions for the Record on page 52.]
Representative Maloney. Mr. Aldonas.
STATEMENT OF THE HON. GRANT D. ALDONAS, PRINCIPAL MANAGING
DIRECTOR, SPLIT ROCK INTERNATIONAL, WASHINGTON, DC
Mr. Aldonas. Thank you, Congresswoman Maloney and thank
you, Vice Chairman Brady. I would ask that my full statement be
entered into the record. I will summarize it here.
My mother always said to me when I was a kid that the
surest way to get the wrong answer was to ask the wrong
question. And what I feel we have been doing is asking the
wrong question.
Both when I was on the Finance Committee as the chief
international trade counsel and when I was Under Secretary of
Commerce, what I realized was, although I depended on a lot of
the great work that Keith did in the Bureau of Economic
Analysis, that in the part of the world that we were
responsible for in terms of trade statistics, we had learned
how to calculate the static effect of a tariff change to four
or five decimal points in a world where the pace of economic
change was accelerating and the dynamics were what mattered. In
other words, we had perfected the technique right when it was
no longer needed.
The reality is, in the world of international trade we live
in today, time to market is far more important than the static
effect of tariff changes, but it is not something we measure.
And to give you a sense of what that implies is that, while we
are discussing the two surveys, even accepting what the other
witnesses have said, it pales by comparison to the idea that we
are undercounting our services exports by 30 percent. It would
offer a totally different perspective about trade policy,
international income accounts, in terms of what drives job
creation, if we had that information.
If you looked hard at how we create value in this country
and how value is created in the global economy, it would
fundamentally alter the way you thought about our tax code, the
question of tax reform, what we would do in terms of trying to
encourage job creation, and create the right kind of
environment at this point. None of those questions are actually
answered or addressed by the surveys that we have in hand. But
they are far larger in terms of their actual implications for
whether Americans can create their own economic future than
anything in the existing surveys at this point.
What I really would like to focus on is what we should
measure. And here I just want to come back to the chairwoman's
fundamental question. There are two great values in American
society. One is individual liberty; the other is equality of
opportunity. The sad reality is that we don't have a measure of
either. If, in fact, you are serious about what you want to do,
then I think this is the time to use the opportunity that the
House bill has created to have a serious discussion about how
we do measure individual freedom and how we do measure our
progress toward equality of opportunity. What I would suggest
is that knowing the average commuting time of a white male over
55 in a one-ton pickup is not going to inform our judgment
about either of those two values or our progress toward those
great American goals.
Turning to the specifics of the surveys, I just want to
make couple of points, which really are, I think, fairly
straightforward. The census does a great job, in my estimation,
of every time they look at a survey and, every time they look
at the census, they ask themselves hard questions. And I think
they need to do that with you, with the committee, and with the
Congress. You are the representatives of the people; they
certainly are trying to carry out your will. But in doing that,
it is time for a fundamental rethink. And I think that is true
both because of the questions we need to answer in the economic
challenges we face, but also because of the cost implicit in
collecting the data and the cost imposed on individuals who
have to respond.
So, what I would suggest is a simple three-part test.
First, I think both you and the Census should explore whether
there are alternatives available that would eliminate the need
for the surveys in whole or in part.
Second, where there is no alternative to the government
collecting the data, along the lines Keith was suggesting,
explore whether government could acquire such information by
other less costly means.
A good example is that many of the questions in the
personal survey in the ACS relate to your veterans disability
benefits. The reality is the Department of Veterans Affairs has
that information. There is no need to be asking that as a part
of the survey. The same thing happens with the IRS. There is
even a question that asks you your opinion about value of your
home, rather than actually looking at prices in the market for
which they are sold. There really is no need for that question,
to be honest. It doesn't actually inform either economic
policymakers, or, as I certainly can attest from my own
experience in business, does it actually inform the judgment of
an economic actor in the marketplace.
The last point, I would say, is that you should ask the
Census to reassess the reasons for asking certain information,
with a view to limiting the cost and burden of reporting in
those instances where there is no other alternative to a survey
either from public or private sources.
So my point is not to suggest that the ACS and the Economic
Census don't provide data of considerable value. Rather, it is
to suggest that there are certain instances where the juice
certainly isn't worth the squeeze in terms of the information
those surveys provide. The fact of the matter is, what we ought
to be doing is trying to reduce the impact on the average
American citizen in trying to cut the budget at the same time
as we are trying to accomplish the data needs that you have to
have as policymakers.
Thank you.
Representative Maloney. Thank you.
[The prepared statement of Hon. Grant D. Aldonas appears in
the Submissions for the Record on page 56.]
Representative Maloney. I want to thank all the panelists
for their statement.
And before we begin, I would like to ask for unanimous
consent to include Mr. Barabba's testimony in the record. Due
to a medical emergency, he was unable to attend today's
hearing. And also the letter from the prior census directors.
[The prepared statement of Hon. Vincent P. Barabba appears
in the Submissions for the Record on page 67.]
[Letter dated October 27, 2011, to Hon. Frank Wolf appears
in the Submissions for the Record on page 70.]
Representative Maloney. I would first like to question
Professor Andrew Reamer of the George Washington Institute of
Public Policy.
In your personal testimony, in your prepared testimony on
page 9, I would like to quote: ``Further and quite importantly,
the termination of the ACS would cheer our nation's economic
competitors, including China and India, who know full well that
without the ACS, U.S.-based businesses would be flying blind,''
end quote.
Could you elaborate on this? And are you saying that if the
Congress did end the ACS or make it voluntary, that we would be
helping economic competitors like China and India and others?
Dr. Reamer. Yes.
China is in a difficult place because it has basically
funded our deficit for the last decade, so it doesn't want us
to do too badly because it needs to get paid back.
U.S. businesses use the American Community Survey to site
locations of business operations on the basis of the
characteristics of the workforce--educational attainment,
languages spoken, age, the type of degree somebody has--and the
commute times, the relationship between where people live and
where they work. Businesses that compete internationally,
whether U.S.-based corporations or international corporations,
and are looking to build a plant here, rely on the ACS data for
site location and site comparison.
So the ability of the U.S. to attract and keep businesses
that are competitive internationally would be harmed by the
absence of the ACS.
Representative Maloney. And when the amendment to defund
the ACS or make it voluntary was debated, many of my colleagues
stated that the ACS was unconstitutional. In your opinion, is
that correct?
Dr. Reamer. I am not a constitutional lawyer, but it sounds
like the Members of the House who said they are substituting
their opinion for that of James Madison, who is known as the
father of the Constitution.
Representative Maloney. And Jefferson.
Dr. Reamer. And Jefferson as the father of the Declaration
of Independence, who both--from the get-go, you have
Congressman Madison on the floor of the House in February of
1790 saying, we need to go beyond bare enumeration to collect
information that can help us understand the needs of the
population and economic conditions and so guide public policy.
Representative Maloney. And, also, could you respond to my
dear friend and colleague's statement that this should be
voluntary? What is your response, Dr. Reamer and Mr. Simonson?
Dr. Reamer. Regarding voluntary, about 10 years ago
Congress, I think it was actually the House, asked the Census
Bureau to look at what the impacts on cost and data reliability
would be if the ACS went from mandatory to voluntary, and it
got back results. The results were updated in a memo the Census
Bureau published last July. In that it said the response rate
would fall by 20 percentage points, and as a result, to get the
same level of reliability, the Census Bureau would have to
expand the sample significantly and/or do more household
nonresponse follow-up.
I know one of the complaints of constituents is that they
don't like the Census Bureau calling them and knocking on their
door. Well, with a fall in 20 percentage points in response,
there would be more of that. And the cost of this extra effort
would be millions of dollars.
If nothing is done, then the reliability of the data are
destroyed. Essentially, they would be useless. So Congress and
taxpayers would have spent billions of dollars over more than a
decade on the ACS, and that data would be useless. You could no
longer do time series. Unlike the long form, which gives
neighborhood data for 1 year, the ACS neighborhood data is 5-
year average. If you lose a year, you can't do the averages.
Representative Maloney. Mr. Simonson, would you like to
comment?
Mr. Simonson. I agree with everything Dr. Reamer said about
that, that making it voluntary would drive up the cost, and
even then you would not have the same quality of data. And I
think the additional burden on those who are asked to respond
would be greater than through the process that we have now.
Representative Maloney. Okay. Thank you.
Mr. Brady.
Representative Brady. Good points.
I think the American Community Survey is important. I think
it can be even more accurate. And with a little work, we could
remove the objections of compulsory compliance as we do with
the Current Population Survey, designed where it receives
almost a 93 percent response rate. It is accurate. We use it to
rely upon both national and State and from data and the
information, as well as critical data for our 12 largest
metropolitan areas--all done voluntarily.
So I think, thank goodness the Census Bureau wasn't
listening to this advice we hear today, because they actually
came together, working with Congress and together, to develop a
survey that works for everybody.
I want to follow up a point. Dr. Hall made a great point.
Good information creates good decisions. And Mr. Aldonas
followed up with that, as well.
My frustration has been that, in this ever-changing world,
as hard as they have tried, we have not been able to stay up to
date in the data of this world. My frustration--and Dr. Hall
has heard me say before, it is frustrating that we can follow a
job created at the local pub but not one created through
international trade, which is a huge part of our economy. And
Mr. Aldonas has heard me whine that we continue, policymakers
continue to get information on whoever shipped the last product
to us rather than the global supply chain that created that
product, which may have started in a small town in Iowa, you
know, moved through several countries, only added value at the
last stop, and will come back with 80 percent of U.S. content.
U.S. lawmakers and policymakers are in the dark about that.
So I want to follow up with that point. You made the point,
30 percent of our services sector is consistently undercounted.
Yet the exports from China--the current trade statistics
overestimate the value of manufactured goods from China. You
have made the point that the current trade statistics don't
capture the shift to date, the global supply chain and the
growing share of trade in your immediate goods.
And so I guess my point to you, a broader one, is it looks
like we have a lot of work to remedy the outdated and flawed
assumptions at the core of some of our economic data. What
approach would you take in order to correct these assumptions?
What approach would you recommend we take to work with these
agencies to come up with the data that actually inform, as Dr.
Hall has said, good decisions?
Mr. Aldonas. Thank you very much for the question.
One thing I would like to pick up from what Keith said is
that there is a wealth of information that companies do provide
to you--tax returns, security filings, and a variety of
databases that can be used to develop some of the information
asked for in the survey. But the other thing is to actually
look harder at how you measure transaction costs, which we
don't do well. We don't actually do a very good job of
measuring the information barriers that prevent a small
business from trying to find a buyer, whether that buyer is a
company in the United States that is going to pull them through
into global markets or whether it is through an export sale at
arm's length. So trying to get a better grasp on what the real
barriers are from the perspective of trade would be the most
important thing to start out with.
Second, I am surprised by the comments from some of the
other folks on the panel, Vice Chairman Brady, about how
businesses make decisions. I have to say, honestly, I would
prefer to see that there was more information available about
the things that actually drive business decisions. Those things
are generally price and what the local market is. But, I have
advised investors over a lifetime, and the reality is I have
never used the ACS, to be honest with you, to advise an
investor. I have never had an investor actually use the ACS to
determine whether they were going to make an investment. What
that says to me is that we are not actually feeding decisions
of the economic actors in the market place.
On the international side, if I said we needed to know more
about a market, my interest would be to say, what are the
points of access into that market? That means trying to find
out from American companies what their approach is in terms of
their sales. Is it a sale to, at arm's length? Or is it a sale
through--as my great friend Jim Zawacki in Grand Rapids said,
he would never export to Japan; he exports to a country called
Toyota Land. If that is the route, we need to know more about
the barriers to reaching the market through Toyota, not simply
counting the stuff that is crossing the border when it comes to
customs.
Representative Brady. Good. Thank you.
And, Dr. Hall, would you comment broadly, advice to us to
try to more accurately capture the global supply chain in the
economic activity?
Dr. Hall. Well, sure. One of the big challenges on services
in general--certainly it is with trade--is pricing, trying to
price services. And services has particular problems with
pricing, the BLS has particular challenges with it. There has
been some progress, but there is still a lot of progress that
needs to be done.
I can tell you, for example, that import prices that are
collected by the Bureau of Labor Statistics, the BLS, in fact,
has had reductions in budgets, so in fact the coverage of
services has now actually declined over the last number of
years, and a lot of detail in that has been lost. I think that
is significant. Just pricing even domestically for services I
think is a real challenge.
Let me point out another thing, too. This focus on
services, it is sort of an unrelated issue, but we are all used
to thinking about trade deficits. The U.S. has a trade deficit.
In services, the U.S. has a surplus and has had a surplus for
years. The U.S. is widely recognized as having a comparative
advantage in services. And services remain the most protected
worldwide--goods and services--that is where all the future
trade globalization comes, is in services, not in goods.
Representative Brady. Thank you, sir.
Madam Chairman.
Representative Maloney. And, Dr. Burgess, nice to see you
again.
Representative Burgess. I want to thank our witnesses for
being here.
I just have to share with you, I was home in my district
last week doing town-halls. Had my obligatory meeting with my
county medical society. Of course, you might imagine what they
were all exercised about. But one fellow came up to me, stuck
the American Community Survey under my nose, and said, how dare
you require this type of information from me under penalty of,
I guess, fine. Is that right? Somebody gets fined if they don't
do this? Do we know what the fine is for not filling this thing
out? I am told by staff it is $5,000.
Dr. Reamer. Yes, up to $5,000. And it has not been enforced
for half a century. I mean, it has not been--there has not been
a case brought to court in half a century.
Mr. Aldonas. Although a misstatement of information on that
form is a Federal felony.
Representative Burgess. And a $10,000 fine.
Mr. Aldonas. Yes.
Representative Burgess. So that is a pretty hefty load for
someone to carry. And yet you look at the information, I could
see why this doctor was upset. I mean, there is a lot of
personal information. You get name, you got address, you got
age, you got birth date, all the family members' or household
members' names, ages, and birth dates, telephone number. I
mean, a passably good identity thief would be able to construct
a fairly good alter ego of this person just with the
information that is being disclosed on the government form.
So, I mean, people are nervous about drones looking in
their backyard on their cattle herd. I can well understand why
someone is concerned about--at the point of government
intrusion, having to give up this information.
So I share with Mr. Brady the observation that there may
well be a way to get this information, the information may be
important. But, certainly, the way we are going about it has
got people rocked back on their heels, and they are resisting.
Look, we have an approval rating of 8 percent in the United
States Congress. No one trusts us to do anything anyway. Why
are they going to trust us with this type of information? And
the whole concept of mistrust of government is something that
has been obviously generated over some time, but this doesn't
help.
Dr. Hall, we just had a big hearing in our Oversight
Investigations Subcommittee on Energy and Commerce this
morning, all morning long, on green jobs. Can you tell us what
a green job is?
Dr. Hall. Sure. I can tell you what the Bureau of Labor
Statistics did in defining a green job.
One of the things that BLS encountered is that there are
lots and lots of definitions of green jobs, and there is not
very much agreement as to what should be green and what should
not be green. But the approach that was taken in the Green
Goods and Services survey, which identifies output that is
green and counts the number of jobs that are associated with
it--let me just say, most occupations in those industries are
normal occupations. You know, there is nothing special about
them. Somebody who works pouring concrete in a windmill and
somebody who works pouring concrete in a foundation, that is
the same sort of job. There is nothing special about green jobs
in that way.
My concern a little bit with green jobs comes with putting
my economist hat on. When BLS designed this program, the
biggest reservation I had personally, as an economist, was how
this data was going to be used. I don't think the data should
be used as a count of green jobs. It doesn't really mean much
to come up with a definition of green jobs and just count it.
In fact, I have problems with the idea that regulation
might be viewed as a jobs program. What is important about
green is the output, not the jobs. It is somewhat ridiculous to
view it as a jobs program. And if it is worth doing, if green
regulation is worth doing, it is because of the output, you are
getting an output that is valuable, not because it is a hiring
program.
Representative Burgess. If I could just stop you there, we
heard testimony this morning from an economist named Dr. Green,
ironically, that the tradeoff for green jobs in various
economies looked at across the world--in Italy, two jobs were
given up, two regular jobs were given up for every green job
created--no, I beg your pardon, that was Spain. Italy, it was
seven jobs lost for every green job created. In England, I
think it was 3\1/2\. So there is actually a toll on jobs by
taking the money from the private sector and putting it into
these activities.
I mean, you ended up your testimony--I got to admit, you
woke me up. You said unemployment is never worse than it is
now, but if it were accurately reported it would be 3
percentage points higher? Is that what you said?
Dr. Hall. If we had a better measure of labor supply, I
think it would probably be up in that range, yes.
Representative Burgess. I mean, that is pretty startling
information. So, part of our activity is killing the very
activity that we want to enhance. It makes no sense to continue
doing it.
Dr. Hall. Well, that is true. And you have touched upon my
other problem with counting green jobs, is that it is only
counting half the story.
Representative Maloney. The gentleman's time has expired.
Mr. Mulvaney.
Representative Mulvaney. Thank you, Madam Chair.
I want to explore two different things, things that have
been touched on by the previous Members, but I want to explore
it a little bit. Because the questions that I wanted to start
with have already been asked, which is, why isn't it voluntary?
I don't think anybody is making the argument here today
that this is part of our constitutional obligation. The
American Community Survey goes beyond what is required of
Congress in Article I, section 2.3, where we have to count
everybody for purposes of doing representative government. So I
think everybody recognizes the fact that this is not part of
our constitutional obligation but that we do it because it has
a certain value.
And I think, Dr. Reamer, it was you who said that the
reason it can't be voluntary is that the response rate would
drop 20 percent and that the quality of the data might go down,
the cost would go up. And I think that was the result of a
congressional inquiry or a congressional study. So, really,
what we have it boiled down to is it is not voluntary because
it would be more expensive if it were voluntary. Is that fair?
And the data might not be as helpful.
And I am just wondering, gentlemen, if you are aware of the
ramifications of taking that particular position. And once you
start to say, look, we want to make the American people do
something because it will be cheaper for us to run the
government if we make them do something, then tell me how we
are supposed to run the government and have a society like we
have had for the last couple years, or last couple centuries? I
mean, it would be cheaper for Medicare if we made everybody
exercise. It would. It would be cheaper to do national defense
if we made everybody serve in the Army or the Navy. It might be
cheaper for law enforcement if we made everybody register their
guns and their bullets. But we don't do that.
So tell me, Dr. Reamer, why is data so much more important
than health? And why is it a felony to lie on this report but
not a felony to eat a Big Mac?
Dr. Reamer. Let's see. So, several things. One is that the
mandatory nature of the American Community Survey you can
directly trace back to the mandatory nature of the census since
1790. Congressman Webster's soundbite regarding his pleasure at
the House vote was that it saved the country $2.4 billion over
10 years. So Mr. Webster was making the case that it was about
saving money. He didn't really talk about the uses of the ACS.
I am glad that you are. It----
Representative Mulvaney. Well, we will get to that in a
second, but I was trying to explore that part of it first.
Dr. Reamer. Sure, sure.
It is certainly up to Congress to make a decision--it is
Congress that passed the law and has kept the law for 2
centuries about the mandatory response. Congress can change the
law and make it voluntary and be prepared to spend the extra
money.
The amount of money involved in economic statistics is so
teeny, it is dust on the Federal budget. So we are not talking
much money here. But Congress is very reluctant to spend, you
know, seven figures for data and is willing to tolerate waste
in many, many other areas. So----
Representative Mulvaney. But you are making the argument it
is actually cheaper to leave it voluntary. And I am just trying
to----
Dr. Reamer. No. No. It is not cheaper----
Representative Mulvaney. Excuse me, that it is cheaper to
leave it as mandatory.
Dr. Reamer. The point is that the amount of money involved
is so teeny that we are talking nickels here at a Federal
level. So it is up to Congress, if it wants to make the survey
voluntary and spend the extra hundred million bucks a year, to
design a survey that has the same reliability.
Now, I will take issue with the vice chairman's point that
because the CPS is voluntary we can make the ACS voluntary. The
CPS sample is what, 60,000 households? The American Community
Survey sample is 3.5 million a year, okay? Sixty thousand
versus 3 million. You can have a lot of leeway with a survey
where you are asking 60,000 households around a nation of 314
million people to get data for the Nation and for some big
States.
The purpose of the ACS is to produce data at the
neighborhood level. And, therefore, to get decent information
on the characteristics of the constituents of your district, of
your district, you need a large enough sample and reliable data
to make that happen.
Representative Mulvaney. I understand how statistics work,
and I hope we do get a chance to do a second round. But what I
am hearing is that you have no philosophical objection to
voluntary participation; it is just a question of cost. But we
will return to that in a second round.
Dr. Reamer. Yes. So I am interested in the ends; I am very
open to the means. I think this is an issue for oversight
rather than appropriations, and that there are ways to reduce
the public angst about the ACS other than making it voluntary.
And I am happy to discuss those if you want to ask me that
question.
Representative Mulvaney. I can't because I am out of time.
Dr. Reamer. Okay. But somebody can.
Representative Maloney. Thank you for your testimony.
And, Dr. Hall, if the ACS and the Economic Census were not
funded, would or could the private sector step in to fill the
void? What is your opinion?
Dr. Hall. Yes, I think the private sector would have a
difficult time stepping in to fill the void. That is true.
Representative Maloney. And would the private sector
provide information uniformly across the country, including the
rural area of the country? Would businesses and policymakers be
able to compare the information in different geographic areas?
Dr. Hall. No, it is certainly true, that is a real value of
government statistics, is that you know the government has no
agenda----
Representative Maloney. Uh-huh.
Dr. Hall [continuing]. And you know that there is a
standard of quality in the government data.
Representative Maloney. I would like to ask all the panel
members two questions, with a yes-or-no answer.
Do you think that Congress eliminating the ACS is a good
idea?
Mr. Simonson. No.
Dr. Reamer. No.
Dr. Hall. No.
Mr. Aldonas. Yes and no.
Representative Maloney. Okay.
And the second question is, do you believe that the
Economic Census should be funded? Yes or no.
Mr. Simonson. Yes.
Dr. Reamer. Yes.
Dr. Hall. Yes.
Mr. Aldonas. Up to a point.
Representative Maloney. And what happens--I would like to
ask Dr. Hall, but if anybody else would like to comment, fine--
what happens when we eliminate a statistical program? If a
program is eliminated, can we make up the lost months and years
of data? Or are the investments we have already made in these
programs made useless?
Dr. Hall. Yes, destruction of data is a real problem
because a lot of the use of data is not just seeing a data
point but seeing how it has changed over time.
Representative Maloney. And we are still in the middle of a
debate on health care. And do you believe that the data that we
have at this moment gives the accurate assessment of the number
of un- and under-insured?
Again, Dr. Hall, since you have worked in this area for so
many years, and then anyone else who would like to comment.
Dr. Hall. Well, I believe probably the most complete data
is through government provision of health insurance. And that
is collected, actually, at the Bureau of Labor Statistics.
Representative Maloney. And how does the data collection
collected by the ACS help medical research?
Mr. Simonson or Dr. Reamer.
Dr. Reamer. Help medical research, let me think about that
one.
Well, it certainly, back to the issue--so I will think
about that as I am talking--back to the issue of health
insurance, the CPS--again, those data are very high levels of
geography. And the value of the ACS is that we can tell how
many people in each of your districts do not have health
insurance and what kind of health insurance they have if they
do. So that, I think, is, again, very valuable to understand at
a very small geographic level how people are doing in terms of
health insurance coverage.
On the question about medical research, there is a question
on the ACS that has been there since 1850 in various forms
about disability. And so there are, I guess, opportunities for
clinical trials--I am making this up because I have no idea if
medical researchers do this. But different populations, there
are certain concentrations of certain kinds of medical problems
in certain locations. And they may be looking for a community
that has a certain kind of problem.
Representative Maloney. And how does the information
collected by the Economic Census affect statistics on how the
economy is faring? And will we have accurate statistics on
output if we can't benchmark the economy every 5 years?
Mr. Simonson. No. I think that we have seen many examples
of rapid shifts in the economy that the statistical agencies
haven't been able to keep up with because there is isn't a
benchmark survey. Ideally, we would want the level of detail
that is gathered from the Economic Census more frequently than
every 5 years. And it would be a big blow to have that go away
for a 10-year period or until 2020 or beyond. So I think that
is essential.
In terms of whether the government should do this and
should it be mandatory, personally I find it much more
intrusive to have private surveyors calling me up every week,
it seems, and putting emails in front of me asking for
information several times a day than a government survey which
I know is going out to a fair distribution of the population
and will be used objectively and will be made publicly
available and not just for the benefit of some client of the
callers taking up my time.
So, like jury duty, I think it is an obligation of being a
citizen in a democracy or being a business that operates under
a system that provides a lot of liberty and protection of
property to give something back in this nature.
Representative Maloney. Thank you very much.
Mr. Brady.
Representative Brady. Two quick points. And I know a lot of
constitutional history has been cited today, but just fact-
check: American Community Survey began in 2005. Unless Thomas
Jefferson figured out a way to text us some real key messages,
this is not a constitutional issue. It is about how best to
actually survey and acquire accurate, timely, reliable data in
a way that the public supports.
I think the vote on the House floor did exactly what I
think it intended to do, which is jump-start a long-overdue
discussion about how we modernize the data so that lawmakers
can make better, not just--both private enterprise and
government lawmakers and legislative lawmakers have the ability
to get the most reliable, accurate data. And I think that is
what, frankly, this hearing has been helpful in discussing.
Dr. Hall, from your perspective, what is the most
economically significant gap in Federal statistical data? In
other words, without having adequate information in a specific
area, obviously decision-making suffers. What would that area
be, in your view?
Dr. Hall. Yes, there are a number of gaps. I still think it
is probably our lack of detail in services.
Representative Brady. On services. Because that is what, 80
percent of our economy, 80 percent of most of the jobs in our
congressional districts, average salary these days of almost
$60,000 a worker, so these are key. And we are very good at it,
when compared to the rest of the world. And your point, that
major part of our economy we are not accurately assessing?
Dr. Hall. Yes, it is not nearly measured nearly as well as
the goods sector. And I think there is a real element here of--
there is an old joke about you lose your contact in the bedroom
but you look for it in the living room because the light is
better there. It is easier to measure goods. It is harder to
measure services. And only in the last 10 years have we started
to close the gap and measure services better, but we are not
there yet.
Representative Brady. Don't you think that is, sort of, a
part of the helpful discussion we are having today, is to raise
the profile of the gaps that we need to be closing in our
economy and in our economic activity?
Dr. Hall. Absolutely.
Representative Brady. Mr. Aldonas, you talked a bit again
about the global supply chain. Can you give some examples of
how, the way the economy and business work today, where
lawmakers miss the data as they are discussing or making key
decisions on trade or other issues?
Mr. Aldonas. Well, sure. And I think you alluded to the
largest one, which really is the idea that we don't know where
value is created and that the trade data that you see and is
reported in our national income accounts doesn't reflect
accurately what is being done in the global economy.
So the best examples are a series of studies at UC-Irvine
that looked at Apple's supply chain and where the value was
created. What those studies reflected, if I pulled out my
iPhone, you would see that about 65 percent of the value is
made in the United States. Much of it is through manufacturing
of the microprocessors, which are the brains behind everything
that Apple does, and some of the glass finishes. But it is
really the high end of what we manufacture and certainly what
they do. Another large share of that remaining 35 percent is
done variously in Southeast Asia or north Asia in Japan,
Taiwan, Singapore, and Malaysia. And roughly 8 percent comes
off the final assembly in China.
And yet, our trade statistics would tell you that my entire
phone is going to be counted as a product of China, because the
rules of origin dictate that the point where ``a new article of
commerce'' was created is going to be associated with the
origin of the country. We keep trade statistics based on the
customs rules of origin, but the customs rules of origin make
absolutely no sense in the world we live in today.
If you take it one step further, Vice Chairman Brady, if
you think about where technology is created today, it doesn't
matter whether the engineer is in the United States, or in
India. You can't locate where that is being created. So the
idea that somehow we are going to have a geographic measure of
the final good and we are going to miss the more fundamental
point--because, remember, it is the innovation and the step
change in technology and the process improvements on the shop
floor that flow from that that drive productivity and drive
economic growth.
So if you understand what I am saying, it is that we are
not measuring how value is created, which is the most important
thing to understand in terms of whether we are gaining
productivity. And there is nothing about the trade statistics,
particularly the endless debate about a trade deficit, that
actually informs your judgment about that.
Representative Brady. Well, I think one of the key benefits
would be--most Members of Congress are eager to create jobs.
Most of them would prefer it happen in their State or district.
When you don't know where that value is being added and you
don't have a good idea of where your companies are selling and
exporting goods or services in a way that can connect it, we
are not going to make good decisions on economic issues.
Mr. Aldonas. And, frankly, even the distinction between
manufacturing and services in jobs is something of a fiction.
You know, we were at the high-water mark of vertical
integration with the Rouge plant in Detroit, where you had coal
and iron going in one end and a Model T coming out the other
end. That has been gone since the 1930s.
The reality is that when, for example, Motorola decides to
turn to FedEx or UPS to handle all of their logistics, all of
their customs processing, those jobs that used to be
manufacturing jobs when they were in Motorola are now services
jobs in the rest of the economy. But the reality is, Motorola
as an enterprise became more competitive as a part of the
process. And that is really what we need to be measuring. Did
they gain their productivity through that? Does that make them
more competitive globally?
Representative Brady. Okay. Thank you.
Representative Maloney. Mr. Mulvaney.
Representative Mulvaney. Thank you very much.
Gentlemen, the lady from New York asked you all a question
a little bit ago about whether or not you thought the private
sector would provide this if the government stopped doing it.
And everybody, I think, said no, or at least I think Dr. Hall
and Dr. Reamer said no.
I know we are not famous in Congress for actually listening
to what you are saying and asking follow-up questions, but I
think it probably merits the follow-up question, why not?
Dr. Reamer.
Dr. Reamer. It depends what kinds of data you are talking
about.
Representative Mulvaney. I think you can anticipate why I
am asking the question. I mean, I used to be in the private
sector. If I wanted data, I went out to pay for it. I didn't
actually even think to call the government up to see if they
had the information that I had needed. I applaud the company
that was going to move to Houston that at least knew to call to
ask about the number of a particular minority within a certain
area, but it never occurred to me to do that. When we built
houses, for example, we actually paid a firm to go out and
count the number of apartments within a certain area or
distance from the project that we were looking at.
Data has value to it. So what is unique about the stuff on
the American Community Survey that you think that no one would
want to actually get into this business?
Dr. Reamer. Okay, so I am going to start a long answer, and
you can cut me off at any time.
Representative Mulvaney. I feel like I have to because you
have 3 minutes and 42 seconds.
Dr. Reamer. Okay.
Representative Mulvaney. We are also not famous for asking
short questions.
Dr. Reamer. Yeah. So, one thing is that the private sector
does not have the capacity to collect the breadth of data in a
consistent way over time and space.
Representative Mulvaney. Well, tell me how that could
possibly be. You just hosted a symposium on new data points and
all the wonderful new technologies that were available within
the data-collection business. I know that Apple knows a lot
more about me, probably, than the government does. I know that
Facebook probably knows more about my wife than the government
ever did.
Tell me how it could possibly be, in this day and age, that
the private sector doesn't have even better information about
us than the government can glean from a survey like the
American Community Survey?
Dr. Reamer. The private sector collects slices of data. It
is actually quite exciting. Mike Horrigan, at BLS, is in charge
of all the price indices. At my data fair was a group called
PriceStats. PriceStats scours the globe using the Web to
collect price information on everything. I think they have a
Big Mac index, you know, with the price of a Big Mac in any
country of the world.
BLS has standards of reliability and accountability that
the private sector doesn't. At the same time, BLS recognizes
that this new spidering technology is allowing the private
sector to do things that the public sector can learn about. So
the folks at BLS are talking to the folks at PriceStats about
how to join forces. And that is a lot of what happened at the--
and so I will make one other point.
Representative Mulvaney. Actually, I am going to cut you
off because I do want to get to--but the reason you saw that
look on my face is that now, in just the last couple minutes, a
member of this panel has said that the government has much
higher standards and deals in a higher quality than the private
sector, which I think is absurd.
And then earlier somebody said that the nice thing about
having the government do this, as opposed to the private
sector, is that the government has no agenda. I can assure you,
gentlemen, we have an agenda. We had--I think Eric Holder was
in front of a committee last week and was talking about a
statement he made earlier that he was being pursued in a
certain fashion because he was pursuing a liberal agenda while
at the Department of Justice. I can assure you that we have
agendas, and it would surprise me if that did not filter down
into the data.
You all send out 3 million of these things. Mr. Simonson
mentioned that there are literally thousands of entities that
use this data. I need a good answer, gentlemen, because we have
a minute before I finish here. Tell me why the private sector
is--I am thinking about doing this after I am out of Congress.
If it is in such great demand, it costs us billions of dollars
to send out 3 million of these things, I think I might be able
to do it better than we do. Tell me why I am wrong on this.
Mr. Simonson. Well, let me mention very quickly two
examples.
The Survey of Residential Alterations and Repairs was
discontinued. Nothing has replaced it, and the quality of those
estimates has gone down, the GDP estimates also.
The construction spending figures for years have been built
in part on data produced by McGraw-Hill, and there is another
firm--Reed Construction Data also tries to get information on
construction starts. They cover about half of what the
government does and leave some sectors completely untouched.
Current Industrial Reports from the Census that have been
discontinued have not been replaced by a similar quality from
the private sector.
Representative Mulvaney. Thank you, gentlemen. I am out of
time.
Representative Maloney. Our time is up for the use of this
room, so I would like to thank all of our panelists.
The American Community Survey is an important annual survey
which can help us better understand the past and be smart about
the future. Let's make sure that policymakers have the
information we need to do our jobs. But more importantly,
today's panel has made it clear that businesses depend on this
survey to plan their operations and that the loss of this
information will put the United States at a competitive
disadvantage.
I would like to thank all of my colleagues for
participating, and the panelists. This hearing is adjourned.
Thank you.
[Whereupon, at 3:55 p.m., the committee was adjourned.]
SUBMISSIONS FOR THE RECORD
Prepared Statement of Hon. Carolyn Maloney, a U.S. Representative from
New York
I want to thank Chairman Casey for working with me to hold today's
hearing.
I wish we were having a hearing on job creation--instead we're
having one on why the House voted to strip job creators of the tools
they need to grow the nation's economy, expand exports, and hold us in
the government accountable for how well the country is doing. Right now
there is a concerted effort to cut funds for the Census Bureau and
eliminate several of the vital surveys they conduct or weaken them by
telling our nation that certain crucially important surveys should not
be required of all its citizens.
In studying this issue, I remember reading about what
Representative James Madison said when he served in this House, who
wrote and I quote:
``this kind of information all legislatures had wished for, but
this kind of information had never been obtained in any country
. . .
if the plan were pursued in taking every future census, it
would give [Congress] an opportunity of marking the progress of
the society, and distinguishing the growth of every interest.''
This is not a fight about if the funds for these surveys are the
best return on the taxpayer's investment; because I think we will hear
today that it is. It's a fight over ideology. This is a slippery slope,
where ideological bullies threaten the trust, confidence, and
independence of our nation's most critical statistics. As we continue
to compete in a world economy, it's imperative that we know how we're
doing relative to other global economies. In our current economic
times, it makes no sense to stop collecting such invaluable information
that guides economic recovery and growth.
Let me be clear, the surveys that the House voted to eliminate are
the best measurement of our nation's progress. The information from the
American Community Survey and the Economic Census allow both the
private and public sectors of our economy to be more efficient, and
because we are more efficient they allow us to better compete globally
and maintain our standard of living. It is that simple. Doing away with
these surveys or weakening some by making them voluntary hurts the
nation and takes away a competitive advantage.
The American Community Survey is unique for its ability to produce
annual economic and social data for the nation, down to the smallest
geographic areas. Policymakers and federal agencies use census
information to distribute more than $450 billion in federal funds to
state and local governments, based, in whole or in part, on ACS data.
Local governments use ACS information to decide where to build new
roads, schools, and hospitals.
But it is not just government that uses this information; the
private sector, the business community, the ``job creators'' use it to
make assessments about location, local labor force, new markets, and
customer needs.
The Economic Census also is under threat, with funding cuts meaning
the 2012 effort would be halted even as the Bureau is ramping up to
distribute the survey to thousands of businesses in the coming months.
The Economic Census is the fundamental building block of Gross Domestic
Product and national income and product accounts, and essential to
accurately measuring industrial productivity, changes in price indices,
and annual and quarterly indicators of business activity.
In a letter last fall to House and Senate Appropriators, six former
Census Bureau directors noted that absent the 2012 Economic Census,
public and private decision-makers would have to use a 2007 model of
our country's economy until 2022. The former directors--who
collectively led the Bureau for four decades, serving six Presidents
from both political parties--stated that,
``going without a 2012 Economic Census in the midst of the
worst recession in half a century is akin to turning off the
country's economic GPS at the very moment it is critically
needed.''
This is deja vu all over again. We had this debate when we were a
new nation and Madison and Jefferson strongly urged Congresses to put
questions about age, gender, citizenship, occupation, manufacturing,
and industry on census forms two centuries ago. We had it again during
the Eisenhower Administration when Congress failed to fund the Economic
Census and the outcry gave us the 1954 act that mandated an Economic
Census every five years. We had it again on the eve of 1970 census when
Senator Ervin held three days of hearings about the long form. Each
time Congresses came to their senses and turned to the Census experts
to professionally design the surveys and questions needed by the nation
in a manner that put the least burden on the public.
This time is different, as the House has effectively defunded both
the ACS and the Economic Census without so much as a witness, let alone
a hearing or meaningful debate. This Congress should not be the first
in history to deny itself, the executive, state and local governments,
and the nation's business community information that the Founders and
every Congress since have judged essential for a growing, prosperous
nation. Today we are trying to remedy that by hearing from some experts
on the impacts of this stunning decision. My hope is that this hearing
causes the Congress to reconsider its impulsive decision, and that we
act quickly to fully restore funding to these programs and give the job
creators the tools we promised them, and that we have provided as a
nation for two centuries.
__________
Prepared Statement of Representative Kevin Brady, Vice Chairman,
Joint Economic Committee
I thank the witnesses for appearing at today's hearing.
The Joint Economic Committee has a long history of interest in the
accuracy, relevance, and timeliness of U.S. economic statistics.
Washington relies upon these statistics to make policy decisions, and
American job creators use these statistics to make employment and
investment decisions.
I wish this hearing had been called to make a broad inquiry into
the accuracy, relevance, and timeliness of all U.S. economic statistics
instead of focusing narrowly on the American Community Survey. Since
this Committee is unlikely to have another opportunity during this
Congress to explore how to rectify deficiencies in U.S. economic
statistics, the Republican Members of this Committee will not confine
our inquiry to the American Community Survey. Instead, the witnesses
invited by the Republican side of the aisle, Mr. Grant Aldonas and Dr.
Keith Hall, will broadly explore how Congress and U.S. statistical
agencies can work together to improve the quality of economic
statistics for the benefit of the American people.
Frankly, this hearing is being held because the House of
Representatives agreed to two amendments in the appropriations bill for
fiscal year 2013 that covers the Census Bureau. One would prevent the
Census Bureau from using funds to compel Americans to fill out the
American Community Survey; the other would defund it altogether.
Compulsory participation in the American Community Survey is the
number one objection that I hear over and over from my constituents. In
my opinion, this objection swayed the majority of the House on these
two amendments concerning the Census Bureau.
Recognizing the importance of the statistics generated by the
American Community Survey to economic decision-making by both
governmental and private entities, I believe that there is a way
forward. As former Commissioner Hall will testify, participation in the
monthly Current Population Survey that generates the unemployment rate
and other employment statistics is voluntary. The Bureau of Labor
Statistics and the Census Bureau jointly design the Current Population
Survey in such a way as to generate accurate statistics on a voluntary
basis.
If the Census Bureau were to make participation in the American
Community Survey voluntary rather than compulsory, most public
opposition would disappear. The Bureau of Labor Statistics and the
Census Bureau can jointly use a voluntary survey to obtain the
necessary data from the Current Population Survey to generate accurate
employment statistics, so why can't the able statisticians at the
Census Bureau design a voluntary survey for the American Community
Survey that would generate accurate statistics?
Now, let me turn to other issues. I have long been concerned about
the quality of our statistics measuring international trade and
investment flows and the output of the services sectors. For example,
we cannot accurately count the number of jobs created by exports of
American goods and services. Moreover, we rely on outdated rules of
origin that ignore global supply chains and attribute, for example, all
of the value of an i-phone assembled in China as a Chinese export even
though final assembly accounts for only 8% of an i-phone's total value.
From his experience as both Under Secretary for International Trade at
the Department of Commerce and Chief International Trade Counsel at the
Senate Finance Committee, Mr. Aldonas will outline what steps Congress
and the statistical agencies should take together to improve the
quality of U.S. international trade and investment statistics.
Many statistical issues involve the price indices that are used to
deflate gross service revenues into real services output. As a former
Commissioner of the Bureau of Labor Statistics, Dr. Hall will offer his
suggestions on how to improve not only the quality of labor statistics,
but also the quality of price indices affecting the measurement of
international trade and the real output of the services sector as well.
U.S. statistical agencies have a proud tradition of reporting
economic data objectively regardless of the political ramifications for
the incumbent administration. In the Green Jobs Act, however, the
Democratic leadership in Congress inserted an ill-defined and ill-
conceived mandate for the Bureau of Labor Statistics to count ``green
jobs.''
This ``green jobs'' mandate, which is a thinly disguised attempt to
create a metric to support a policy agenda, reeks of politics.
Something is not quite right when, as I understand it, ``green jobs''
include EPA bureaucrats and attorneys that are suing to block the
construction of the Keystone pipeline--a project that would create up
to 20,000 jobs and reduce our nation's dependence on unfriendly oil
sources in the Middle East and Venezuela. Is there any economically
meaningful definition of a ``green job?'' As the official formerly
charged with executing this mandate, Dr. Hall, I would like to hear
your opinion.
I look forward to the testimony of today's witnesses.