The Importance of Economic Census Data for Federal Policy

Katharine G. AbrahamMember, Council of Economic Advisers

Hi-Beams for the Economic Road AheadWashington, DC

September 26, 2011

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Outline

• Economic Census data critical to the reliability of economic accounts and business survey data

• Federal policy makers use data from economic accounts and business surveys to. . .

Understand the state of the economy and forecast future economic conditions

Allocate federal funds to state and local governments

Make informed policy choices and implement existing policy

Economic Accounts and Business Surveys Rest on the Economic Census

• National economic accounts benchmarked every 5 years to Economic Census data National output (Gross Domestic Product) Disaggregated measures of output by industry and region Input-output tables that show linkages across sectors

• Sample frames and weights for business surveys conducted by the Census Bureau rest on information collected during the Economic Census Large number of monthly, quarterly and annual surveys

• Roughly 40 percent of firms included in the Economic Census were not in business five years earlier

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Dynamism of the U.S. Economy Makes the Economic Census Especially Important

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Dynamism of the U.S. Economy Makes the Economic Census Especially Important (cont’d)

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Outline

• Economic Census data critical to the reliability of economic accounts and business survey data

• Federal policy makers use data from economic accounts and business surveys to. . .

Understand the state of the economy and forecast future economic conditions

Allocate federal funds to state and local governments

Make informed policy choices and implement existing policy

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Understanding the State of the Economy and Forecasting Future Economic Conditions

• U.S. macroeconomic policymakers rely on information about Gross Domestic Product (GDP) and its components

The White House, the Treasury, and the Congressional Budget Office use GDP data to prepare the federal budget and to project federal spending and tax receipts.

An error of ½ percentage point in the forecast of trend real GDP growth would cause the federal deficit forecast to be off by a cumulative $1.6 trillion over the standard ten-year window.

The Federal Reserve System relies on GDP data to formulate sound monetary policy

Effect of ½ Percentage Point Lower Trend GDP Growth on Federal Budget Deficit Projection

8Source. Analytical Perspectives, table 3-1 (Office of Management and Budget), adjusted by CEA. Revision assumes that real GDP growth is ½ percentage point lower than baseline for each year 2011-2021, with no change in the unemployment rate.

2011 2012 2013 2014 2015 2016 2011 - 2016 2017 - 2021

$7.3 $24.3 $42.1 $68.9 $98.5 $130.3 $371.0 $1,238.0

Revision to the Federal Budget DeficitFiscal year; billions of dollars

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Outline

• Economic Census data critical to the reliability of economic accounts and business survey data

• Federal policy makers use data from economic accounts and business surveys to. . .

Understand the state of the economy and forecast future economic conditions

Allocate federal funds to state and local governments

Make informed policy choices and implement existing policy

Allocation of Federal Funds• Data from BEA Regional Income and Product Accounts used to

distribute $327 billion in federal funds in FY2010

10Source: BEA. Figures in billions of dollars.

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Outline

• Economic Census data critical to the reliability of economic accounts and business survey data

• Federal policy makers use data from economic accounts and business surveys to. . .

Understand the state of the economy and forecast future economic conditions

Allocate federal funds to state and local governments

Make informed policy choices and implement existing policy

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Example: Estimating the Impact of Policy Choices on Jobs and Output

• Important for DOD planners to assess the economic impact of military base closures on communities

Analyses make use of BEA regional input-output modeling system

• Broad interest in the impact of infrastructure spending on jobs

DOT uses BEA industry input-output tables to estimate the impact of specific transportation projects on jobs

CEA and CBO have used GDP data and BEA industry input-output tables to estimate the effects of infrastructure spending on jobs

• GDP and input-output estimates rest on the Economic Census

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Example: Forecasting the Demand for Transportation Infrastructure and Equipment

• The Department of Transportation prepares periodic forecasts of the demand for transportation infrastructure

• In developing its forecasts, the Department relies on data from the Commodity Flow Survey

In Economic Census years, this survey collects detailed information about establishments’ shipments, including value, commodity type, weight, destination, and mode of transportation

• Data from the Economic Census are used to stratify the sample by industry, size and location and to compute weights for aggregate estimates

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Example: Determining the Small Employer Premium Tax Credit for the Affordable Care Act

• The Department of Health and Human Services is responsible for determining the premium tax credit that small employers will receive under the Affordable Care Act

Determination requires data on the average premium in the employer’s state

• Data for this purpose obtained from the Medical Expenditure Panel Survey—Insurance Component (MEPS-IC)

Survey collects data on health insurance plans offered by private and public employers and measures the cost of employer-provided health insurance

• Sample for the MEPS-IC rests on the Economic Census