The Census Is a Valuable Economic Tool

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Last month, the House Republicans pushed through a bill to eliminate funding for the Economic Census and the American Community Survey - two invaluable tools used by private-sector firms, non-profits, and government in a wide variety of ways. These surveys should absolutely not be eliminated.

The Economic Census provides detailed information on the performance of over 25 million businesses in over 1,000 industries. Its industry and geographic detail help to produce quarterly GDP estimates, and it is used to benchmark many important statistics, including productivity. This census is an invaluable tool for government officials as they try to understand the behavior of businesses and the effects of government policy.

The American Community Survey (ACS) is one of the most important sources of data in the country. Its enormous sample size of 2.9 million housing units and its annual publication enable it to provide extremely detailed and useful statistics down to the neighborhood level, and permit the precise estimation of social and economic trends.

The ACS is used extensively by the government. The Brookings Institution reports that in FY2008, 184 federal agencies used the ACS to determine the distribution of 416 billion dollars - nearly one-third of all federal assistance, much of it used to aid low-income households and to support highway infrastructure. In addition, the ACS guided 389.2 billion dollars of grants, or over two-thirds of all federal grant funding. State governments use ACS data to make funding decisions about roads, highways, schools, hospitals, and other important public works.

Businesses and non-profits also rely heavily on the ACS, as the Census Bureau confirms in video testimonials. Target Corporation uses the unique neighborhood-level ACS data on relationships within a household, household size, and household location to determine what to sell in their stores - urban dwellers who live with roommates want smaller packages and smaller furniture, for example.

Businesses considering setting up shop in Houston want to know about the workforce there. Are Houston workers educated? Are they young or old? The ACS allows the Greater Houston Partnership to answer these questions with remarkable accuracy - a benefit both to Houston and to American business.

What are the year-to-year changes in the well-being of American children? The Annie E. Casey Foundation uses the ACS to answer that question. How many people are working in the high-tech industry in each state? The Population Reference Bureau uses the ACS to provide an answer.

Are our incomes rising? Should I open a business in this neighborhood? Are federal policies to alleviate poverty working? Are educated people leaving my state for a different region of the country? How does water usage vary from county to county in my state? How rapid is the pace of urbanization?

These are just a few of many examples. That the ACS is one of the most helpful products of government is beyond dispute.

Recently, it has also become controversial. "This survey is inappropriate for taxpayer dollars," says Rep. Daniel Webster, Republican of Florida, who is leading the charge against the ACS. "It's the definition of a breach of personal privacy."

Privacy concerns must be taken seriously for both surveys. The Census Bureau is keenly aware that its success depends on the public trust, and it bends over backwards to protect the privacy of individuals and firms which respond to surveys. The data are anonymized in complicated ways, making it very difficult for a breach of privacy to ever happen, even in the restricted-access data that only Census staff have access to. Privacy is always a concern and we should never become complacent - but the current safeguards are working.

Why can't the private sector take over the surveys? Without mandatory compliance, the cost of generating accurate and useful data would soar - it is unlikely that the private sector would invest the resources necessary to produce high-quality social and economic statistics. Even if the private sector were willing to invest the resources, it is not clear that households and businesses would be willing to disclose sensitive information to a consortium of private firms. The government has a strong need for accurate data, and if the private sector took over the surveys then the government would almost surely find itself purchasing a vastly inferior product. Since our nation's founding, the government has conducted the national census every decade - the ACS is designed to replace the long-form component of the decennial census - as is specifically authorized by the U.S. Constitution. The founding fathers didn't leave this function to the private sector, and neither should we.

During a time of trillion-dollar annual budget deficits, the House Republicans are right to look for ways to save taxpayer money. But cutting funding for the Economic Census and the ACS is a terrible idea.

Critics estimate that ending the ACS would save 2.5 billion dollars over the next decade. That's 250 million per year, eighty cents per person per year, less than 0.0017 percent of annual GDP. These surveys are worth their price. That's not an estimate - it's a fact.


Michael R. Strain is a resident scholar at the American Enterprise Institute.  Follow him on Twitter @michaelrstrain.

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