Underhanded Economists

The F-35 fiasco should serve as a cautionary tale: beware of politicians who claim to be economists. For, Andrew Coyne writes, -- even as the Harperites peg the cost of those jets at $45.8 billion -- they still can't bring themselves to tell the truth:

Now, this increase in the reported price does not mean the cost of the planes has “skyrocketed” or “ballooned” or whatever other word you might have read. I mean, it has — from $75 million per plane to $88 million, with further increases likely to follow. But acquisition costs are only a fraction of the total: just $9 billion, a figure that has not changed even after this 20 per cent increase in unit price. The rest, almost all of it, is for sustainment and operations.

The new line, as expressed in government documents and repeated by the defence minister, Peter MacKay, is that the planes will cost $45.8 billion “over 42 years.” Not 20 years, or 30 years, but 42 years. And then the spin: it was a billion dollars a year before, it’s pretty much a billion dollars a years now. So you see? Nothing’s changed. 

How does the government get 42 years? By adding in 12 years for “development and acquisition,” from the decision to acquire the planes in 2010 to the delivery of the last plane in 2022. No previous estimate included development costs. And indeed they add next to nothing to the total: just $565-million. But by tacking on another 12 years, they allow the government to spread the cost over a much longer time frame, and make the annual cost of the planes seem much lower than it is.

Harry Truman once quipped that he wished he had a one handed economist on his staff. He complained that, when economists made an argument, they would conclude with the phrase, "on the other hand." Unfortunately, Harry offered no advice on what to do about underhanded economists. But one imagines that, if he were around to watch the Harper government in action, he'd be far from complimentary.