Imagine a Fortune 500 company trying to plot its strategy based on significantly inflated sales figures. Do you think its CEO would be able to make sound decisions about what is working well and what needs to change? Of course not. Yet that is exactly the position federal policymakers are in when they look at U.S. manufacturing: They are seeing a picture that is far rosier than reality. That is because the Department of Commerce is using a badly flawed methodology to report manufacturing output.