What would happen if the United States started data falsification? This is a lesson learned from Greece and Argentina

For a country, the consequences of falsifying economic data are severe.

This month, after disappointing non-farm payroll data was released, Trump fired the head of the U.S. Bureau of Labor Statistics, Erika McEntarfer, and accused her of manipulating the report for "political purposes" without evidence. Although the White House claimed that this move aimed to enhance the rigor and accuracy of the data, former Federal Reserve Vice Chairman Alan Blinder told the media: "Trump has just taken a very negative step on a slippery slope, and the next concern will be data manipulation."

While there are currently no signs that U.S. economic data has been or will be manipulated, the Trump administration's nomination of a partisan figure to lead the government economic data agency is enough to raise global concerns that the U.S. may follow in the footsteps of Greece and Argentina. This issue affects the health of the global economy, impacting everyone from Americans in Manhattan skyscrapers to scavengers in slums in developing countries.

Greece and Argentina - Cautionary Tales of Data Falsification

It is well known that Greece joined the EU through fraudulent means, and Argentina is still mired in legal disputes due to its false data.

In 2004, Greece admitted to falsifying national deficit and debt data to meet the criteria for joining the Eurozone in 2001, and thereafter continued down the path of data falsification. It wasn't until 2010 that economist Andreas Georgiou was appointed head of the Greek statistical agency and made a bold decision: to publish the true deficit data. He subsequently faced years of legal disputes and was prosecuted for allegedly exaggerating the national deficit data.

Greece's data falsification significantly amplified the impact of the 2008 global financial crisis on the country. Lenders were uneasy about Greece's actual public finance situation and were unwilling to hold Greek bonds unless they could obtain increasingly higher interest rates. The austerity measures demanded by the World Bank and the International Monetary Fund to save Greece angered ordinary citizens, leading to frequent street riots.

Argentina's situation is similarly grim. Despite having abundant natural resources, unreliable inflation and economic growth data allegations have plagued this third-largest economy in Latin America for decades, scaring off investors. In 2007, then-President Néstor Kirchner demoted an official for accurately reporting soaring prices. For years, both ordinary citizens and global investors have been skeptical of Argentina's official inflation data.

This has led to Argentina's credit rating remaining at junk status for years, with investors demanding higher interest rates when lending to the country (in Argentina's case, previous sovereign debt defaults were also a major factor).

Is U.S. Data Being Falsified?

Robert Shapiro, former Deputy Under Secretary for Economic Affairs at the Department of Commerce and chairman of the economic consulting firm Sonecon, pointed out that the U.S. is far from replicating the situations in Greece and Argentina. When the data from these two countries was revealed to be falsified, their economies were already in dire straits.

"The market can no longer rely on data having a smaller impact because the market is already moving away from investment and employment," Shapiro said. In contrast, the U.S. economy is growing, achieving a relatively strong annualized growth rate of 3% in the second quarter Moreover, the economic scale of over $30 trillion in the United States is far from comparable to that of Greece and Argentina.

Michael Heydt, a sovereign analyst at the rating agency Morningstar DBRS, stated that the United States is "a global leader in providing high-quality data," and the Bureau of Labor Statistics, in particular, is a "world-class agency" that has long been the "gold standard" for data.

William Beach, former director of the Bureau of Labor Statistics during the Trump administration, told the media that McEntarfer or anyone else "could not" manipulate the data. "When the director sees these numbers, they are all prepared and locked in the computer system; the director cannot intervene personally at all."

If there is no data falsification, why are the non-farm payroll data revisions so outrageous?

Although the quality of U.S. data is globally recognized, the significant revisions to the Bureau of Labor Statistics data have indeed raised concerns. For example, the July non-farm report revised down the number of new jobs added in the previous two months by nearly 260,000, while a preliminary annual revision from August last year showed that the U.S. added 818,000 fewer jobs in the past year than previously reported.

Kathryn Rooney Vera, chief market strategist and chief economist at financial services firm StoneX, told the media: "Several economists and research teams I personally interacted with had flagged these as structural issues with the data long before Trump intervened or fired the director of the Bureau of Labor Statistics."

Shapiro also pointed out another issue: budget cuts. The Bureau of Labor Statistics has indicated that due to staff reductions, it will cut back on some data collection. This, in turn, means that obtaining the final numbers for data releases will take longer, leading to subsequent revisions.

However, the United States has other public and private sector data sources that can provide a more comprehensive economic picture. Shapiro highlighted the importance of the Census Bureau and the Bureau of Economic Analysis: "These agencies are almost 100% composed of statisticians and economists, and their work is completely non-political."

If the United States truly steps into the dangerous territory of data falsification, the consequences would far exceed the experiences of Greece and Argentina. As the world's largest economy and financial center, the reliability of U.S. economic data is crucial for global economic stability and has far-reaching implications for decision-making from policymakers to ordinary investors. The current signs of political interference have raised significant alarm among markets and economists