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Jack Welch: Washington’s Emperor Has No Clothes

Posted by Larry Doyle on October 10, 2012 10:03 AM |

Love him or hate him, Jack Welch did America a real public service last Friday. With his tweet minutes after the release of the seemingly incredulous employment report, Welch embraced a virtue long ago appreciated but now too easily dismissed, especially by those within the media.

What virtue is this?

QUESTION AUTHORITY!!

Some may think Welch was more making a statement rather than posing a question. I would view that as a matter of semantics. 

Regardless of how one may view Welch’s bombshell, the simple fact is it echoes the aforementioned slogan made famous in our nation decades ago.

Having seriously questioned the integrity and authority (or lack thereof) in so much that has emanated from Washington since launching this blog in early 2009, I appreciate Welch’s raising a ruckus last Friday and further hammering the point in this morning’s Wall Street Journal. Let’s navigate as Welch asserts,

Imagine a country where challenging the ruling authorities—questioning, say, a piece of data released by central headquarters—would result in mobs of administration sympathizers claiming you should feel “embarrassed” and labeling you a fool, or worse.

Soviet Russia perhaps? Communist China? Nope, that would be the United States right now . . .

While Welch may be the most public individual to suspect that all may not be on the up and up when it comes to goings on in Washington, he is not alone on this front. Who joins him? Perhaps the single most respected economist in the world today, Kenneth Rogoff. Really? Let’s step back and revisit my commentary earlier this year,

I am well aware that many others in the blogosphere share my cynicism but who else finds it easy to be cynical about our government? The esteemed Mr. Rogoff and his colleague Carmen Reinhart. As the FT attests,

Game theory is also helpful in understanding how governments are likely to behave during a debt crisis. The key, Rogoff argues, is to ignore everything that governments say and instead to concentrate on the incentives that drive their behaviour. “One of the reasons that Carmen Reinhart and I hit it off, is that we are both incredibly cynical about governments.” 

What do those along Pennsylvania Avenue and atop Capitol Hill have to say about that?

Welch provides greater detail and his own cynicism in writing,

The Obama campaign and its supporters, including bigwigs like David Axelrod and Robert Gibbs, along with several cable TV anchors, would like you to believe that BLS data are handled like the gold in Fort Knox, with gun-carrying guards watching their every move, and highly trained, white-gloved super-agents counting and recounting hourly.

Let’s get real. The unemployment data reported each month are gathered over a one-week period by census workers, by phone in 70% of the cases, and the rest through home visits. In sum, they try to contact 60,000 households, asking a list of questions and recording the responses.

Some questions allow for unambiguous answers, but others less so. For instance, the range for part-time work falls between one hour and 34 hours a week. So, if an out-of-work accountant tells a census worker, “I got one baby-sitting job this week just to cover my kid’s bus fare, but I haven’t been able to find anything else,” that could be recorded as being employed part-time.

The possibility of subjectivity creeping into the process is so pervasive that the BLS’s own “Handbook of Methods” has a full page explaining the limitations of its data, including how non-sampling errors get made, from “misinterpretation of the questions” to “errors made in the estimations of missing data.”

Bottom line: To suggest that the input to the BLS data-collection system is precise and bias-free is—well, let’s just say, overstated.

Apologists for Uncle Sam would like us to dismiss Welch’s rants as pure political bile. Would these same apologists be equally dismissive of the very legitimate questioning of authority in the following cases:

1. Allegations of front running/insider trading within Wall Street’s self-regulatory authority.

2. Allegations of lying in a proxy statement by current head of the SEC and her former colleagues at FINRA.

3. Seemingly perpetual major revisions to prior economic reports. I would especially like to highlight highly suspect developments surrounding the November 2010 report.

4. What about the crocks of $hit put forth in the midst of projections and revisions by the Federal Reserve.

Need I go on?

In summary, what did Welch say last Friday and what is he further stating today? What we have all come to learn over the last few years!!

THE EMPEROR IN WASHINGTON HAS NO CLOTHES!!

Navigate accordingly, and while you are at it, perhaps you may care to share this commentary with friends, family, and colleagues.

Sense on Cents is synonymous with “questioning authority!!

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • Obsvr-1

    um … Believe a perpetually dishonest administration so desperately in need for positives in the last weeks running into the election …. OR

    Jack Welch, one of the top best business managers of all time, leader of a magnificent company GE and highly respected for his values and knowledge.

    I guess the press could go ask Jeff Emelt (Obama’s Job Czar) for
    his opinion — Gag ….

  • Another great column! Best wishes-

  • fred

    LD,

    Jack was spot on, although I suspect that if there was a Republican incumbent, we may not have heard from him.

    I’ll go even further than Jack, I think the Obama administration has been “gaming” the numbers on government reports from the beginning of the administration. They know how the reports are calculated and then adjust their energy and focus to influence the reports to their “ends”.

    Using last weeks report as an example, I think the administration knew that ending long term unemployment benefits, starting in the summer, would

    1) Force people into taking part time jobs to pay the bills.

    2) When the incentive to work “under the table” dissapeared, that people would begin to report that they were working part time jobs.

    Although it might help the Dems in the election, it may end up hurting the economy because people collecting unemployment checks were probably getting paid more money.

    I suspect that after the elections are history, government reports pointing to a recovery in Q3-Q4 will be adjusted lower to instead report that we were really in or approaching recession.

  • Rudy

    Awesome bro!

    It is amazing the amount of revisions these data go through which the market does not pay attention to because it is old data.

    I agree with Jack, such a large drop in the rate does smell like someone was asked to not make as many calls and let the amount of people looking for a job drop markedly, hence the drop in the u-rate.

    Horseshyt close to the election.

  • coe

    Think the most important thing you cited was the fact that many of the reports face revision virtually every month. What should make us think that if the original number needs to be revised that the revised number itself is accurate?

    Shades of the crop report scene in “Trading Places” come to mind!






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