May 31, 2013

Phony numbers, screaming headline


An enormous error in a report by the Canadian Federation of Independent Business (CFIB) led to a screaming headline in Wednesday’s Vancouver Sun suggesting spending by local governments was out of control.

The CFIB’s report looked at spending in major Canadian cities, including Vancouver, from 2000 to 2011.  It concluded:

From 2000 to 2011, Vancouver’s spending, adjusted for inflation, grew by 50 per cent – a stark contrast to the 15 per cent population growth in the same period.

The Vancouver Sun dutifully photocopied the finding saying in its article:

It found that in Vancouver, spending adjusted for inflation grew by 50 per cent, compared to population growth of 15 per cent over the same time period.

But here’s the problem.  It appears the CFIB report did not adjust the numbers for inflation.

Vancouver keeps its audited financial reports on line going back to the year 2000.  In the year 2000 the city’s consolidated statement of financial activities reports expenditures of $736.2 million.

The 2011 report shows expenditures of $1,294 million.  Subtract from this the impact of amortization, which the CFIB also did, and you get expenditures of $1,122 million.  The increase between 2000 and 2011 was $386 million or 52.4 per cent – not adjusted for inflation.

So what is the impact of inflation over that period?  Between January 2000 and January 2012 the Consumer Price Index in Vancouver rose by 25.3%.  Subtract that from the growth in spending and you get an actual, inflation adjusted growth in spending of 27.1% – roughly half of the “inflation adjusted” number claimed by the CFIB.

Ask yourself this.  If there is one error that big in the CFIB report, just how much of the rest of the report can be trusted?

Not much as it turns out. There were other problems with the CFIB report I will deal with in a subsequent post.

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