Way back in a former life, I managed stores for the F.W. Woolworth Company. As with many retail operations, managers were compensated handsomely through profit bonuses. In the case of the Woolworth Store that I managed for instance, The company wrote up a contract where by, I was paid 10% of any increase in net profit excluding my salary, beyond a figure that was $10,000 less than when I took the store over. If I kept the same profit, I made a $1000 bonus.
Sometime during July of 1994, I attended a district meeting hosted by our District Manager. During that meeting, our boss informed us of an accounting change that was being made policy by the upper management of the Woolworth Division. The change would make us more profitable, and the nuts and bolts of it were really nothing that we could control or should worry about in any way, save one. Since our stores would be made more profitable due to something that we had nothing to do with, the old contracts were being redone, and new ones to reflect increases in profitability were being sent out, in which the deal was somewhat soured. (As it happens, I was the only manager in the Chicago Region to beat my contract that year.)
The more astute of you may have looked out over our fruited plains recently and realized just now, that they are absent of any Woolworth Stores. According to the legal accountant in Milton, there is a correlation between accounting chicanery and a corporation’s over all health. Whether this is a, “chicken and egg,” argument I couldn’t say, but I have learned something valuable. While I don’t often understand the exact details of them, accounting changes are a sign. If you work for a corporation which institutes one, dust off your resume. If you live in a nation that institutes one, count your fingers, you’re about to be taken to the proverbial cleaners.
From Market Watch, a subsidiary of The Wall Street Journal:
What’s the upshot? The rate of growth hasn’t changed all that much, though there are big shifts in a few time periods. But the level of output is higher — $559.8 billion larger, with $526 billion of that amount due to definitional changes.
The above quote came from a news blurb describing the Commerce Department’s institution of an accounting change in how it measures GDP output and growth. Notice the chart at the top of the page. Magically, the GDP growth rates have remained somewhat constant through the inception of our government’s official measure of this metric, and suddenly taken off from 2007 through the present. I’m sure that this is just a conveniently happy coincidence for our current dear comrade leader, B. Hussein Obama, and not part of some more egregiously deceptive attempt to hide the pathetic real growth of our economy. Personal history however has taught me to be somewhat wary.
For the more masochistic among you, click this link to read the 27 page official government document concerning those accounting changes. It is a downloadable and printable pdf.
In case you’ve missed it, I wrote this yesterday. As you may have guessed, it received some commentary by those who read it. I have reproduced one such comment here, in its entirety.
You won’t get an argument from me about Hillary, but since you’re so fond of facts, maybe the verifiable ones should be right?
Fact: Real GDP grew 2.5% in 2010, 1.8% in 2011, 2.8% in 2012.
Fact: Government spending grew at a rate well over 5% after every recession except the 2008 one. In fact, it grew over 7.5% in 5 out of 8 of Reagan’s years.
Fact: The recession officially ended 4 years ago, not 5.
Fact: Microsoft didn’t write the ORCA software. More than $14 million went to the company of Romney’s Director of Digital. The full version of ORCA was built by IT people and volunteers, who were as competent at that as everything else they did.
Fact One:
Getting to the crux of his argument against my facts, let’s put that quote pulled from the Market Watch article in perspective. The GDP growth rate was revised up from the original figure of $33 Billion, to the more palatable $559 Billion. This accounting change improved the GDP growth rate by 1600%, give or take. So Mr. Mari, get your eggs straight in your basket before you throw them. Now, just to put the exclamation point on all of this, my retort hasn’t even taken into account the wonderful quantitative easing that has been happening non stop since 2009. Your GDP growth rates were doubtless expressed in 2013 dollars, as is government practice these days. Real GDP growth, expressed in pre-quantitative easing dollars would be a far more accurate view of the economy’s actual growth. In short, your comment was so egregiously dishonest, I felt it deserved some exposure to sunlight.
Fact Two:
I know that our government’s usual response to a recession is to increase its spending as an attempt to, “stimulate,” the economy. The fact is that our government should not answer the blind chants of, “do something,” by doing something. Just because Reagan made the deal with Tip O’Neil and agreed to spending now in exchange for spending cuts on Tuesday does not mean that the deal was a good one. If everyone else jumped off of the Brooklyn Bridge, would you follow? As for your contention that Spending has not increased dramatically, and well beyond 5% over the last five years, this is just jaw droppingly absurd. I don’t know where you’ve cherry picked your spending figures from, but this scrubbed version from the accountants of Unicorn City, the Capitol of Obama Green Fairy Land will only ever be accepted by the other moronic citizens who live there with you.
Fact Three:
As for when the recession officially ended, I have this to say, what ever dude. That is hardly important to any point that I was making, which by the way was entirely about not just accepting as Conservatives, that Hillary would be a fait accompli for the White House in 2016.
Fact Four:
Mr. Mari, this last fact of yours needs to be discussed in particular.
About your statement concerning Microsoft not selling Orca to the Romney team, no I have not seen the actual invoice. I did however get to sit through several agonizing conference calls in which Microsoft was identified by Romney’s people as the author of that program. Microsoft programmers identified themselves as representatives of Microsoft on many of those calls, fielded questions, took credit for their work, and boasted about how their spiffy new program would change election day activity for decades to come. So, my question for you, since you’ve cast some aspersions on Mitt Romney, like an actual allegation of him violating FEC rules and all, what evidence do you have to support your claim? It is one thing to get facts wrong, it is another to allege actual criminal behavior. Can you back that up? Have you forwarded you allegations and proof to the proper authorities? If Mitt Romney is guilty of a crime, he should answer for that crime, as should any other American citizen.
One of the reasons I find arguing with liberals so tiring is this. We, the good guys are concerned with trite little things like real life flesh and blood consequences to actual people. Liberals are all about the spin. How can they spin reality to place themselves in a better light. Maybe that’s how they have been so adept recently at winning elections on the national level. I still maintain however that spin will only get them so far. The real life consequences of hunger and power outages will not be received well by Americans at large, no matter how may accounting changes Barack Obama institutes.
Cross Posted from Musings of a Mad Conservative.
UPDATE:
Written by Vern Shotwell.
It’s worth noting that the title of all 8 pages of the linked slide show is:
The new GDP methodology: What you need to know
U.S. economy over $500 billion larger due to new definitions
Think about that for a moment! Nothing has changed, we just decided that knowledge has intrinsic value.
By this strange point of view, Knowledge becomes a capital investment and no longer a cost of producing goods.
But what of failures? Since investment was made, such failures are included as growth.
And what of phenomenal successes? Ideas are occasionally developed that return hundreds, thousands of times the investment! Such items as well go unadjusted: only the raw time and effort is thereby accounted for.
An example of either Socialism or Communism, is it not? Success goes unrewarded for it’s merits ….
“From each according to his abilities, to each according to his needs.” …Karl Marx
Tags: GDP
