GDP estimates have been refined for decades and are arguably the most complex data aggregation effort in the world. But they have their limits, as discussed already, and they have their critics. One criticism is that GDP leaves out much of what’s going on in the nation—with health care, the environment, the family, energy use, and so on. One challenge to GDP as the primary indicator of national progress is coming from a nonprofit group that has developed a Web site to bring together hundreds of indicators. The idea is to help Americans assess the progress of the United States by using quality data selected by experts.
First, a little background. In 2003, a team at the U.S. Government Accountability Office, the investigative arm of Congress, was looking for alternatives to GDP to assess national progress. The team became an independent nonprofit agency in 2007 and took the name “The State of the USA." With startup funding from the Gates, Hewlett, MacArthur, and Rockefeller foundations, the group set out to identify data that would amount to a report card on how the country is doing in specific areas—such as health care, education, the environment, safety, energy, transportation, the economy, the family, and so forth. The goal is to help citizens and leaders assess what progress has been made and where we need to improve.
The effort got a big boost from a small provision in the massive 2010 health care bill that requires Congress to help finance and oversee a “key national indicator system.” State of the USA will become that system, overseen by the National Academy of Sciences, a group of preeminent scholars established by Abraham Lincoln in 1863 to “investigate, examine, experiment, and report upon any subject of science or art" whenever called upon to do so by any department of the government (half the 20 economists in the National Academy are Nobel laureates). Along with the federal authorization came federal funding totaling $70 million between 2010 and 2018.
The objective is not so much to replace GDP as the primary measure of economic performance, but to broaden the conversation and the debate by including many more data series. Instead of just having one gauge on the dashboard, GDP, there would be many gauges. The State of the USA Web site went live in 2010, and is accessible for free. Eventually, The State of the USA plans to offer about 300 indicators. Rather than develop original data, the site compiles and displays data gathered by others. Despite the number of data series, the group says the site will be selective, not encyclopedic. For example, in health care alone the government collects about 1,000 different measures. The State of the USA offers what they claim are the 20 most crucial health care measures. The group says its objective is not to interpret the data but to disseminate it in a strictly nonpartisan manner.
The U.S. economy is one of the most dynamic in the world, marked by rapid technological change. The Bureau of Labor Statistics (BLS), the government agency that calculates the CPI each month, employs dozens of economists to analyze the impact of any quality changes to products in the CPI market basket. Each month 400 data collectors visit stores to record about 85,000 prices for 211 item categories in the CPI basket. About a week before the CPI is released, the BLS office is locked down with bright red “restricted area" signs on all the doors. A total of 90 people, including product specialists and the other economists working on the CPI, compute the basic indexes in each category. Results are released at 8:30 a.m., Eastern Time, about two weeks after the end of the month in question. This release is a big deal.
Most price adjustments are straightforward. For example, if a candy bar shrinks 10 percent but still sells for the same price, the CPI shows this as a 10 percent price increase. But sometimes a product changed in a more complicated way. Economists at BLS specialize in particular products, such as televisions, automobiles, kitchen appliances, and so on. One of their greatest challenges is to identify substitutes for products that are no longer available on the market. For example, data collectors find the model of TV they priced the previous month is missing about one-fifth of the time. When a particular product is missing, a four-page checklist of features such as screen size and the type of remote control guides the data collector to the nearest comparable model. That price is reported and the product specialist in Washington must then decide whether it’s an acceptable substitute.