Unemployment Figures Stir Controversy
Government Modifies Data Resources Statistics
The Reagan administration altered statistics compiled by a Lexington consulting firms headed by Otto Eckstein, Warburg Professor of Economics, and then used the revised figures to justify $111 billion in educations in Social Security benefits over the next five years, spokesmen for the government and the private firm said yesterday.
But the officials added that similar modifications of information received from independent consulting companies take place regularly when the administration uses outside economic models but substitutes its own data on employment, inflation and production.
The incident received national attention when the St. Louis Post-Dispatch reported Sunday that Robert J. Myers, deputy commissioner of Social Security, had said the administration "changed" unemployment projections submitted in January by Eckstein's firm, Data Resources, Inc., to paint a more somber picture of the Social Security system's future.
Saying that the Post-Dispatch "is making something out of nothing as if we altered the books," Myers yesterday denied that the administration had ever attributed the figures directly to Data Resources.
"We said that some of our assumptions were based on [Data Resources] information, but we did not credit them with the final statistics," Myers added.
Data Resources officials agreed that there was nothing unethical in modifying outside projections, but they expressed skepticism over the administration's use of one particular set of figures released six months ago and revised, by Data Resources, several times since then.
"To take an extremely pessimistic and also somewhat obsolete projection and then offer that as a best guess is really foolish," Eckstein said, according to the Post- Dispatch report. Eckstein could not be reached for comment yesterday.
Data Resources had projected 7.9 percent unemployment in 1981, 7.5 per cent in 1982 and 7.1 per cent in 1983 in its "optimistic" outlook released in January. A "pessimistic" projection had unemployment rising to 9 per cent by 1983.
The modified projections used by Social Security in its efforts to get Congressional approval for President Reagan's package of cuts were 8.3 per cent for 1981, 8.7 per cent for 1982 and 9.7 per cent for 1983.
High unemployment reduces government revenues for the Social Security fund and increases the number of people eligible for federal aid.
"You generally don't have people going back and picking one monthly forecast and using that as a definitive prediction," Douglas Lee, an economist in Data Resources' Washington office, said.
Lee added that the government frequently borrows outside economic models but uses its own predictions. "In that case, it's a government forecast, not a Data Resources forecast," he said.
Martin Duffy, vice president for consumer economics in the firm's Lexington headquarters, said Data Resources "tries not to get involved in internecing wars between the government and press," but he added, "Once we have done a macroeconomic study, we expect the figures to be used as they are, not crossed out and changed."