IS—Lancaster Fanning, Saturday, November 24,1979 Practicing “advocacy economics”
BY CURT HARLER
WASHINGTON, D.C,
The USDA’s prediction that
net farm income for 1980
may drop by 20 percent has
raised some eyebrows
among numerous farm
forecasters.
While a number of private
predictions set the figure
much lower, there is some
indication USDA technicians
came up with a much higher
figure—one which showed
nearly a one-third drop in
expected farm mcome.
Those figures eventually
were released at the 20
percent level.
What bothers some
Washington observers is not
so much the change as the
way they suspect it came
about. And any fudging of
the forecast in one area
naturally raises questions in
other areas.
As reported last week m
LANCASTER FARMING,
USDA said net farm mcome
could decline sharply in 1980.
USDA said any forecast at
present is “very tentative”
but said small gams in gross
farm receipts coupled with
another big rise in
production expenses could
mean a substantial decline
in net mcome—perhaps by a
fifth.
That one-fifth figure was
questioned by the respected
Kiplinger Agricultural
Letter.
As Kiplinger reported last
Friday they went around and
asked USDA technicians
about the forecast.
“Answer was a shocker,
implied the forecast was
actually sweetened from
earlier estimates, which
came m around 30 percent
down.. .almost a third.
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Does USDA fudge economic outlooks?
“This alarmed top
bureaucrats in USDA, who
sent the technicians
scurrying to their
calculators with orders to
‘improve’ the figures.
Hence...2o percent,”
Kiphnger reported.
“All this suggests
manipulation,” Kiphnger
Editor William Senior said.
USDA economics officials
demed any manipulation and
said the situation was not
quite the way it seemed.
Senior later told LAN
CASTER FARMING that
perhaps the problem is not
manipulation as much as it
is meptness.
But, he said, people m
former administrations have
admitted shading numbers
to make it them look more
pro-administration.
He said this had happened
during the Lyndon Johnson
administration.
“Is there politics behind
this?” Kiplinger asked.
“Can’t nail that down, but
food prices may be mvolved,
food inflation. Government
estimates on food prices m
1980 are being pegged at a
nse of between 7 percent and
11 percent.
“These estimates may be
deliberately on the low side,
some experts think. If
higher, consumers might
react...the voters.
Thus...bad politics,”
Kiplinger said.
“Or farm mcome may
‘unprove’ next year...drop of
less than 20 percent when
USDA makes its next
forecast, making it appear
that the government has
mysteriously helped out
farmers. ‘Good politics’ for
Mr. Carter,” Kiplinger said.
But USDA’s Branch Chief
of Economic Indicators sees
it differently.
George Hoffman said
USDA comes up with a range
of figures based on normal
weather both in the United
States and abroad.
He admits that the range
of figures generated by
USDA technicians goes
higher than the 20 percent
released by USDA. And, it
goes lower.
Most likely, he said, the
percentage will drop, be
lower than the 20 percent
released to farmers.
Hoffman admitted the 30
percent figure could come
true under certain conditions
such as a drop in U.S. output.
“There is a lot of un
certainty in the predic
tions,” he added.
He denied that the figures
were sent back to the
technicians.
“I was a part of the
process,” Hoffman said.
“Politics was not a part of
it.”
He maintains the figures
were all a part of the range.
He said a large drop was less
likely than the smaller drop,
and added that the drop
could be even less than the 20
percent figure.
“What would we have to
gain by fudging the
figures?” he asked.
He also said other output
figures would not be tam
pered with.
He said it would be more
difficult to tamper with crop
yield figures because there
is not a lot of flexibility in
generating those numbers.
He said the only two
numbers they use in com or
soybean output figures
would be acreage and yield.
But, Hoffman said, there
are literally hundreds of
variables in all areas m the
farm mcome numbers. Plus
there are all the variables in
the cost estimates which are
cranked into the process.
A one percent error in
farm prices will change the
farm mcome by $1.5 billion,
he said That’s how sensitive
the figures are
And, he added, a five
percent error in the forecast
would not be at all
unreasonable
“But we did not sweeten
the forecast,” Hoffman said.
He offered no explanation
of how USDA arrived at the
figure it eventually released.
Most Washingtonians
seem to agree the figures
themselves are solid The
problem arises with the
ranges.
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It’s the interpretation of
the ranges that leads to
questions And the in
terpretation could,
plausibly, be made to suit an
incumbent administration.
Meanwhile, both the hog
and cattle figures were
upgraded slightly from the
original outlook conference
figures.
While USDA could have
received new figures or last
minute data, no explanation
was offered.
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Even USDA’s economists
admit their income
projection figures, at best,
are educated guesses.
Many private forecasters
tend to ignore the USDA
results.
The bottom line seems to
be the USDA bureaucrats do
honestly compile figures.
Whether those numbers
are interpreted by higher
ups to meet their own needs
for advocacy economics
remains a distinct
possibility.
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