Statistics Corner: Critical Initiatives Need Data Users’ Support

By Maurine Haver
Chair, NABE Statistics Committee

The first critical step in achieving adequate funding for economic statistics is the President’s budget.  The fiscal year 2008 budget released on February 5 proposes funding for two important initiatives that NABE has supported for over 10 years – complete service sector coverage and modernization of the consumer price index.  Despite extremely tight budgets for domestic programs, the Bush administration, with strong leadership from the Council of Economic Advisers, has recognized the importance of these initiatives.  However, as we all know, it is the Congress that appropriates the money.  So much work must be done to educate the Congress about why these programs should receive full requested funding.

Coverage For All 12 Service Sector Industries by 2010

Services have accounted for over 50 percent of gross domestic product for over 20 years, but it was only in 2004 that the Census Bureau obtained funding to begin collection of quarterly data on services.  The Quarterly Services Survey currently covers three service sectors and part of Health Care comprising about 17 percent of GDP.  The proposed $8.1 million in the FY08 budget would permit Census to increase coverage to 30 percent of GDP by September 2008 and 55 percent of GDP two years later.  The 2008 Services Annual Survey (SAS) will be expanded to match coverage in the Economic Census, so we will have much needed information on finance, insurance, real estate, educational services, utilities, and transportation and warehousing industries, which have only been covered every five years in the Economic Census.  Not only does this initiative provide much more timely and detailed data for users tracking the U.S. economy, but it also provides critical source data for the Bureau of Economic Analysis in its calculation of GDP.

Modernization of the CPI

The importance of an accurate CPI is well known.  According to the Congressional Budget Office, a one-percentage point reduction in the rate of growth of the CPI would favorably impact the federal budget by approximately $150 billion by 2015.  Prior to the Boskin Commission study, which highlighted the importance of an accurate CPI to the federal budget, the Bureau of Labor Statistics updated the index about every 10 years.  In 2002 Congress approved funding to begin the process of continuous annual updates but left the housing and geographic area sample updates to be funded in a future proposal. Unfortunately, this funding has never been approved.  Today’s CPI is still based on housing and geographic area samples developed using the 1990 Census.

The President’s budget has requested $10.375 million to institute continuous updating of the geographic areas and the sample of rental units that provide prices for the CPI shelter component, which accounts for nearly 30 percent of the index.  Continuous updating would increase the accuracy of the index by reducing the average age of the housing sample so it more accurately reflects new construction and is more representative of current housing.  It would also restore the sample that has suffered attrition as sample respondents have dropped out over time. 

These are only two of several important programs that need our support, but in the current budget environment, we need to make hard choices and focus our efforts.  These two initiatives were identified by the NABE Statistics Committee as the two we will work on this year.  Letters and talking points will be posted in the Statistics area of NABE.com.  Working together we can secure the funding that is needed to move these projects forward.