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Establishment economists think John Williams' numbers are off. But then, most of them also thought the economy was healthy.
John Williams lives in a one-bedroom Oakland apartment just a few blocks behind the Grand Lake Theater. He doesn't like to talk about politics, and he certainly doesn't like to talk about the stock market. He's sixty years old and has a two-man operation: a webmaster and himself. But in the obscure corners of the Internet, he's an unlikely legend, an economist who publishes a newsletter that purports to tell the real truth about the state of the nation's health. His thesis is both simple and surprisingly complex: over the course of thirty years, Washington politicians have pressured federal economists to tweak the methods by which they assess key metrics of the economy, to inflate the numbers and protect the incumbents from voters who would surely rise up in anger, if only they knew the truth.
And the truth, Williams claims, is that the economy has always performed much more poorly than the federal numbers indicate. Prices are higher, fewer people are working, and the economy is growing at a much slower pace. Even now, when the nation faces its greatest crisis since the Great Depression, the real dimensions of the disaster are still being obscured by gimmicks. It's a message that has earned him an odd bit of notoriety, to the clear frustration of some of the country's most prominent economists, who claim that Williams has built a career misrepresenting complex mathematical models and spreading panic.
Take February, for example. What does Williams think was the true state of the economy? The official unemployment rate was listed at 9.7 percent, but according to Williams' models, the real number, including part-time employees and workers who have just given up in despair, is closer to a staggering 21.6 percent. The official February inflation rate was 2.1 percent; Williams argues that it's really around 5.5 percent. And GDP for the fourth quarter of 2009 was not 5.9 percent, as the government claims, but 2.9 percent.
Williams says he's just using math to tell you what you already know — that your economic life, and that of your friends, is much worse than the government's numbers say. Everywhere you go, you can feel it. The NUMMI plant shutting down. Foreclosed homes rotting on your block, or being auctioned off on the courthouse steps. The anxiety in the eyes of passers-by. Times are tough.
"Take the unemployment rate," Williams said. "You ask the average person whether he or she is unemployed, you'll get an immediate response. They don't have to think about it. Yet if you were to count all the people who consider themselves unemployed, you'd get a higher rate than what the government reports. Because the government has a different definition of employment"