I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.- Thomas Jefferson.

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Thursday, November 17, 2011

My Life in the BLS

[October 24, 2000]
The Washington Post recently reported that the nation's largest statistical organization, the United States Bureau of Labor Statistics (BLS), has been miscalculating the consumer price index for over a year. Their headline read "Inflation Higher than Reported."
My first reaction was to think, "And this is news?" I then began to bring back memories of the two years I spent in Washington, DC, working for the BLS as an economist. At least they called me an economist. I was actually a glorified trainer, training newly hired "field economists" (read data collectors) to collect wage and benefit information. Part of my job also included coordinating various conferences for the office. Recalling those days, I am reminded of several lessons I learned during my tenure there.
The best thing about my experience with the BLS is exactly that it is in the past. However, while there I did gain valuable knowledge from the inside regarding the nature of government-generated statistics and bureaucracy. Life with statistics is not as glamorous as Al Gore makes it sound.
While working at the BLS, it was affirmed again and again how government statistics are practically useless at best and downright destructive at worst. I quickly learned that what I was doing at the bureau had nothing to do with economics, my major field, and frankly had little importance whatsoever.
During my first training trip, I was sent to Philadelphia where I bought and began to read Ludwig von Mises's The Ultimate Foundation of Economic Science. What Mises wrote about the uselessness of statistics for solving economic problems was demonstrated again and again. With the exception of the OSHA statistics (with which I had nothing to do), the BLS surveys are voluntary and rely on the goodwill of businesses to participate.
One thing the bureau could offer in return was a copy of the bulletin featuring the published results of the survey. The bulletin, however, turned out not to be such a hot item, because so much time passed between the market conditions that the survey described and those that existed by the time the bulletin was actually published and sent to the participants. It was common, for instance, for industry-wage survey bulletins to be sent to participants a full year after the survey was completed. With business environments changing as fast as they do, year-old wage data is useless to an entrepreneur who is trying to figure out what he should pay his workers now, as opposed to what he should have paid them a year ago.
Although taking money from citizens to produce useless information is bad enough, in fact, government-generated statistics are used to destroy our liberties on a daily basis. It turns out that government statistics are useless for almost everything except to expand the power of the state. The BLS has an entire survey, the Service Contract Act survey, devoted to establishing "prevailing wages" that entrepreneurs must pay their employees if they do business with the federal government.
For instance, fast-food-restaurant owners on military bases cannot pay below the wages set by government based on BLS data. If the market wage happens to be below the mandated wage, then that's just too bad for the restaurant. The usefulness of government statistics for promoting state aggrandizement was blatantly illustrated by the recent campaign to get everyone to fill out their census forms. The government tried to sell the census by giving the public a laundry list of income-redistribution schemes the recipients of which are determined in large part by census numbers. In this way, government statistics can run cover for the state's wealth-confiscation and redistribution activities.
"It turns out that government statistics are useless for almost everything except to expand the power of the state."
Beyond what I learned about government statistics, my time at the BLS was a two-year course in the theory and practice of bureaucracy. A friend of mine from college once told me that clichés become clichés because they are true. My time at the BLS affirmed my friend's observation. The bureaucracy really is terribly wasteful, corrupting, and a killer of souls.
Upon arrival at my new job I immediately saw that everything that I'd heard about the evils of big government was not only true but it was even worse than I imagined. When word of the BLS's recent mistake calculating the CPI made it to the Dismal Scientist, a website devoted to economic statistics, a commentator there said that to make sure this never happens again the BLS needs more money.
What are they thinking? As it is, tax dollars flow into and out of the bureaucracy like blood from a stuck pig. This is due primarily to the BLS and the bureaucracy in general not having to make a profit. As Mises writes in his work Bureaucracy, which I also read during my stay inside the Beltway, "In public administration there is no connection between revenue and expenditures." And how!
The word was, "If money is in the budget, spend it." It took me a while to learn this. Being raised by a frugal mother in Iowa, I very diligently saved every meal receipt during my first taxpayer-funded trip and asked to be reimbursed for only the amounts that I actually spent on food. I was quickly instructed by my superior to simply declare the entire maximum allowance for food for each day, because it was easier for our people in accounting to make sense of the travel vouchers. Cheating by declaring false taxi fares was commonplace.
As a coordinator of various conferences, one of the smoke-and-mirror games I was told to play was financially justifying having the prestigious conferences wherever the associate commissioner wanted to go. In an effort to make it appear that the BLS was economizing on its conference expenditures, we were required to do a three-city comparison to demonstrate that we were holding the conference in the most economical spot.
Of course, this was pure skullduggery. If the BLS really wanted to save on meeting costs, they would hold every national conference in Kansas City, where the government hotel rates are among the cheapest, the food per diem is the lowest, and, being a central location, air fares are lower. In reality, I was told where the bureau was having the conference and it was up to me to find two other cities where it would be even more expensive for comparison. With New York City and Los Angeles as foils, I could justify any other location my superiors wanted.
Beyond the financial dishonesty, of course, is the taxpayer money wasted on a bloated staff allowed to be ineffectual due to the tenure system. When I was hired by the BLS, I was told that I was on probation for a year, during which the bureau could fire me for almost any reason they wanted. However, after one year, I received tenure and would have to do something pretty bad in their eyes for them to force me out. Inevitably, some employees who should be let go within that first year make it to the tenure stage.
A management experiment tried by the BLS that also proved to be a boondoggle was TQM, "total quality management." This is a theory of management that supposedly encourages an organization to provide better service if all employees at all levels are involved in setting the goals and making the policies for the entire organization. In reality TQM proved to be another sleight of the managerial hand designed to placate the underlings.
The BLS had a two-tiered bureaucratic culture that featured a mass of dinosaurs simply going through the motions and the associate commissioners and project managers who seemed to find fulfillment only in carving out mini-empires for themselves. These little Napoleons were constantly seeking to conquer and protect their turf.
One supervisor was not, and knew he was not, the best qualified applicant for that position. He was promoted into the job because the associate commissioner trusted him to go to meetings, spy on what other offices were doing, and report back to her. Again the message was clear: if employees played political ball with the associate commissioner, they could go far. If not, well then forget that promotion.
When I related this story to the wife of my college philosophy professor one day, she, being somewhat of a leftist, replied, "Yes, but there are a lot of good people in bureaucracy too." Well. That is not the point. No matter how many good people one finds in the bureaucracy, the result will always tend toward the same end because, as my good friend and mentor at the bureau forlornly told me on several occasions, "We don't have to make a profit."
I later worked for a bank that is similar in organization and had a lot of the same attributes, but it still had to make a profit to continue in business. Consequently, if a person could add value to the bank in a noticeable way, he would get compensated for his efforts and get promoted when appropriate. If he was not adding value, he was ushered out the door.
"Government-generated statistics are used to destroy our liberties on a daily basis."
Beyond the destructive effect bureaucracy has on efficiency is the corruption of the soul that bureaucracy fosters. It is Mises again who points out that the bureaucrat is not ruled by how well he can serve his fellow man, but by the budget allotted him. Additionally, because in a democratic society the bureaucrat is also a voter, he is an employer as well as an employee.
Mises writes, "The bureaucrat as voter is more eager to get a raise than to keep the budget balanced. His main concern is to swell the payroll." During the 1990 budget deal featuring George Bush's "no-new-taxes" betrayal, the true colors of the bureaucracy were shown as the majority of employees became concerned only with keeping as much money as possible in their budget. Some even picketed the summit meetings between the Bush administration and Democratic leaders in Congress, demanding that they should not lose even a penny.
From the bureaucrat's perspective, a vote for constraint is a vote for elimination. The only time that frugality was really emphasized was when the government was in danger of being shut down and we literally did not know how much money we would have for the month. This episode illustrates what most of us instinctively know: the executive branch will spend everything they are given and will then lobby Congress for more. If you are skeptical, listen to the debate over what to do with the "budget surplus."
In the midst of the fight over the budget in 1990 that came close to shutting down the government, Congress passed the Pay Reform Act of 1990. This law was a huge pay increase for all federal workers and was designed to bring federal salaries "in line" with those in the private sector.
I would regularly hear statements like, "I would be making a lot more if I were in the private sector," implying that what was keeping them in the bureau was their public spirit. The fact of the matter is that in the private economy, no one could get paid the dollar amounts bureaucrats were getting paid for doing the type of nonwork they do. Those in the bureau were especially eager for the pay-reform law to pass, because it guaranteed them a job. The BLS would be collecting the data Congress used to see if federal salaries were high enough.
Perhaps the most destructive feature of the bureaucracy is how it kills the human spirit. Upon employment a new hire soon learns that his task is to follow rules, not to do his job particularly well. One of the most frequently used phrases at the bureau was "Good enough for government work."
The primary reason for this lack of drive is the elimination of incentive to do your best. There is no reward for either effort or success. Promotions are not based on the quality of your work, but on how useful you are to the powers that be in building their empires. There is also no penalty for incompetence. Consequently, bureaucrats have little incentive to better themselves through increasing their knowledge base or skill levels. This is because, in government, contrary to conventional wisdom, knowledge is not power. Knowledge is work. Why work hard at learning more and doing your job better when it will only mean more work at the same salary? Any work ethic a person has when he comes to Washington is devoured by a plague of bureaucratic locusts.
Pretty soon, these mid-to-low-level bureaucrats get trapped. They hate their jobs, because they see that rarely does effort or ability count for anything. They find themselves out of the political loop and, hence, cut off from the best route to promotion. They are stuck. They despise their jobs, yet it is too costly for them to leave and forge their way in the private sector. As I read a passage from Mises about the security of the bureaucrat, I was stunned by the truth of his observation.
Government jobs offer no opportunity for the display of personal talents and gifts. Regimentation spells the doom of initiative. The young man has no illusions about his future. He knows what is in store for him. He will get a job with one of the innumerable bureaus, he will be but a cog in a huge machine the working of which is more or less mechanical. The routine of a bureaucratic technique will cripple his mind and tie his hands. He will enjoy security. But this security will be rather of the kind that the convict enjoys within the prison walls. He will never be free to make decisions and to shape his own fate. He will forever be a man taken care of by other people. He will never be a real man relying on his own strength. He shudders at the sight of the huge office buildings in which he will bury himself.

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