Relevant and even prescient commentary on news, politics and the economy.

There’s Nothing Like Data

Tom DeLay says spending is causing the deficit. Is he right? What’s really causing the deficit? War? Recession? Spending? Tax Cuts? Some of each? If the latter, how much of each?

To take a quick look at some of these issues, I grabbed data on Federal Revenue, Spending, and GDP from 1992-2004E. First, the Revenue and Spending Numbers. Note that the Bush budgets and tax plans were in effect from roughly 2002 onward (Spending in 2001 was authored by Clinton; Bush’s 2001 rebate did cut into what 2001 revenue was under Clinton’s budget).

First, in raw numbers (inflation has been modest, so while these are not inflation-adjusted, doing so would only have a minor effect). Under Bush, Federal Spending has skyrocketed. It was $1.86 trillion under Clinton’s last budget but 2.01 trillion under Bush’s first budget. Under Bush’s third budget (authored with a Republican House, Republican Senate, and Republican White House), spending will be $2.27 trillion. That’s a 22% increase over Clinton’s last year, at most 3-5% of which is due to inflation. Now that’s big government. How to pay for all of this?

Certainly not with tax revenue. That’s down from $2 trillion in 2001 to $1.8 trillion in 2004. But that must be the fault of the recession, right? Wrong. Here are the GDP numbers:

2000: $9.7 trillion; 2001: $10 trillion; 2002: $10.34 trillion; 2003: $10.76 trillion; 2004E: $11.3 trillion.

So while slow and accompanied by rising unemployment, growth is still positive, meaning the tax base of national income increased. The only mechanism by which terrorism could affect revenue, as opposed to spending, is by reducing GDP, and that just hasn’t happened. The only explanation is the Bush Tax Cuts. If we’re not paying for the Bush spending now, when do we pay? Later, starting right around when the Baby Boomers retire.

But maybe our ability to pay is also increasing, so that as a percent of GDP, the increased spending and deficit are not so bad? Wrong. Bush increased spending as a percent of GDP from about 18.5% to over 20% (and inflation affects both the numerator and denominator equally and so is not a factor). But he did get the tax burden way down, from over 20% to 16%. But there are no free lunches. If spending is over 20% of GDP and revenue is 16% of GDP, that gap has to be paid at some point. But the bill will come after the 2004 election, and Bush is hoping you are too stupid to realize that (click to enlarge).

Back to the original issue of what caused the deficit, it’s not the recession because the tax base has not fallen. The Wars on Terror and Iraq amount to at most $100b per year, so that without them, spending in 2003 might have been 19.63% of GDP instead of 20.56%–still well above the 18.6% mark in Clinton’s last budget. So at most 20% of the deficit can be tied to terrorism (and that’s just the sort of unforseen need Democrats were referring to when arguing, in vain, against Bush’s tax cut). And that’s perhaps generous, since it increasingly appears that the War on Iraq was discretionary spending by the Bush administration, rather than anti-terrorism spending. Of the 80% of the deficit not related to terrorism, roughly 1/3 of the blame goes to increased spending and 2/3 to the Bush tax cuts, resulting in this approximate allocation of responsibility (click to enlarge):

AB

Data Sources:

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DeLay Speaks

On the giant Bush deficits, House Majority Leader Tom DeLay (R-Texas) says the deficit is “a spending-driven deficit.” DeLay is actually partly right here–spending increased somewhere around 9% over the last two years, but that’s only around $100 billion. The other $400 billion of projected deficits must have come from somewhere… massive tax cuts for the wealthy–cuts that do little to stimulate the economy. And, throughout that time, the Republicans controlled the House and White House and now control the Senate as well. Yet still, they will blame the spending on the Democrats. The same story has another amusing bit of information: back in April of 2001 when BUsh was pushing his first tax cut the White House projected a surplus of $242 billion for 2003. They were off by over $600 billion!

DeLay on appropriating Homeland Security resources to help his now-faltering Texas redistricting efforts:

“The IG report went and pointed out exactly what we did. We asked for publicly available information. In fact, I think the report pointed out that in order to answer our questions, they went to the Internet to get the answers quicker than they could going through their own processes.”

Of course, the IG report also said that non-public information was used. Also, staff in the Dept. of Homeland Security were gathering that public and non-public information on DeLay’s behalf instead of, say, protecting the country from terrorism.

AB

UPDATE: typo corrected to read “$400 billion”. Thanks RW.

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Unintelligent Design?

I’m a bit late on this topic (see Not Geniuses and Jesse), but this is hillarious. And, as far as I can tell, it’s really, really, not a parody site like whitehouse.org.

However, Not Geniuses and Pandagon failed to mention the prize the winners receive: authoring the next Biology textbook for the great state of Texas.

AB

UPDATE: On the other hand, the site does reference “Landover Baptist”, which is, or was a hoax site. Still, it’s funny.

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Gary Hart on The Daily Show

Hart runs off a laundry list of things that have gone south (employment, federal budget, slow economic growth, tax equity, national security, foreign relations,…), concluding that “This guy ought to be thrown out.” Stewart then quips, “If it goes like this, Sharpton may win.” Then they go into a discussion of whether substance or image and money will prevail in the 2004 election:

Hart: Now, you put your finger on part of the problem. He [Bush] will spend a quarter of a billion dollars to be reelected when he’s leading by 20% in the polls. There’s a lot of talk about scandal in American politics. If this isn’t a scandal, I don’t know what is. It’s an outrageous corruption of the American political system. It has to stop.

Stewart: Are you going to run?

Hart: Well I looked at it, and I …

Stewart: Not interested in joining an outrageous political scandal?

Hart: I did that once.

AB

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Tax Cuts in Action

This just in:

The White House is expected Tuesday to forecast record budget deficits in excess of $400 billion this fiscal year and next with little hope of a turnaround anytime soon.

The simultaneous operations in Afghanistan and Iraq are running around $60b per year, so we can forgive the administration that. On the other hand, income and GDP are actually rising, so it’s hard to blame the economy for the deficit. Sure, unemployment is up, but that’s a burden that falls disproportionately on the poor, who as Republicans love to remind us, pay little or no income taxes. (Of course they pay payroll taxes, which the Administration has busted out of the lockbox and comingled with general revenue).

What does this mean for you? Higher taxes and reduced services in the future, higher interest rates, and increases in the Federal Government’s cost of debt service.

But surely, as a percentage of GDP, this is not so bad? So says incoming OMB Director Josh Bolten”

“Furthermore, the current deficit — as a percentage of GDP — is not large by historical standards and manageable within the overall context of our economy.”

The CBO projects next year’s GDP at $11.7 trillion, meaning that a $450 billion dollar deficit would represent 3.85% of GDP. Bolten is right that 3.8% is not high by historical standards, as long as you use the right history: the Reagan and Bush I years. On the other hand, Clinton inherited a deficit at 4% and got it down to 3% within a year. So perhaps Bolten should say that the deficit is not large by Republican historical standards. Just to make things clear, I’ve bracketed the years under budgets written by Clinton (1994-2001) in blue:

AB

UPDATE: The projected deficits for 2003 and beyond in the graph are, of course, way too low now–they should look roughly like the Bush I deficits.

UPDATE: It doesn’t happen often, and I had to be awake at 4:30 in the morning to do it, but I beat Atrios on this subject by almost two hours. But he’s got a better graph.

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Not Quite Rootin’ Tootin’…

…but U.S. intelligence on Iraq was “darn good”, says President Bush.

And there’s more; Bush also said “When I gave the speech, the line was relevant.” Relevant! But was it acccurate?

And there’s that word again, the one rarely heard before the war, but now mandatory in every statement:

“And I [President Bush] am absolutely confident today, like I was when I gave the speeches, that Saddam Hussein developed a program of weapons of mass destruction.”

And on his final day, White House Spokesman Ari Fleischer was in top form, declaring that “the bottom line has been gotten to.” I think that after 2.5 year of making nothing but vacuous statements, Fleischer is simply incapable of speaking in the active voice.

AB

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Must See: Bush Writing the SOTU

Via Atrios, who got the story from Media Whores Online, who in turn got the story from the White House web page: action photos with captions of President Bush drafting, editing, and pondering the State of the Union speech. The photos are good, but I like the captions even more. For example, this one:

“President Bush gives his speechwriting team a few points [sic] after revising the State of the Union Address in the Oval Office Jan. 23, 2003.”

The typo admits two explanations. One is that Bush himself also wrote the photo captions, and he meant to write “pointers”. A second theory is that the speechwriters were in a contest in which Bush allocated “points” for each insertion of a specious yet technically true (1/2 point for an almost technically true phrase) allegation or insinuation of a nuclear armed Saddam Hussein.

AB

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Huh?

I know North Korea is in the Axis of Evil and all, but explain this:

Finnish officials were at a loss to explain an allegation made on Thursday by a U.S. official that North Korea has been caught trying to sell pornography in the small Nordic country…

…U.S. Ambassador to Australia Tom Schieffer made the comments earlier on Thursday to the National Press Club in Canberra, saying North Korea was using a “mafia-like” business model to make up a revenue shortfall when the Soviet Union collapsed in the early 1990s.

“(North Korea has) been caught trying to sell pornography in Finland and prohibited animal products, like rhinoceros horn, in Africa, counterfeiting in Kuwait and trafficking heroin in Australia,” Schieffer said.

Wondering how a nutjob like this could become an ambassador, I went to Schieffer’s State Department Bio. There, I learned that his brother is Bob Schieffer, host of CBS’s Face the Nation. That must explain it–Bob used his media power and influence to get Tom the ambassadorship. Or maybe not; there is another nugget in the bio:

In 1989, he [Tom Schieffer] was an investor in the partnership led by George W. Bush and Edward W. (Rusty) Rose that bought the Texas Rangers Baseball Club.

Now it all makes sense.

AB

P.S. I was tempted to title this either “Porn of Mass Destruction” or “Weapons of Mass Porn”, but I couldn’t decide, so I went with my gut reaction when I read the story: “Huh?”.

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On the Lighter Side

I came across googlism.com, a site that uses google search results to capture the essense of a person, place, or thing. I must say that I like the Googlism’s for “Angry Bear”:

angry bear is a dangerous bear

angry bear is the last thing they want to run into

angry bear is something even worse

angry bear is in control

angry bear is een site voor leerlingen met oa verwijzingen naar vakkensites [angry bear is a site for pupils, with references to websites].

angry bear is to educate yourself

angry bear is a rich moment

angry bear is a useful response; it helps prepare you to do what needs to be done

angry bear is een site met relevante links [angry bear is a site with relevant links]

angry bear is running in a straight line toward his car at a speed of 4 m/s

angry bear is best given a very wide berth

angry bear is the internet and it’s on a path straight for you

angry bear is the garrett 310

angry bear is running in a straight line toward his car at a speed of 4

angry bear is close behind us

angry bear is martin campbell

angry bear is hopping mad at the outrageous p/e for ebay

But who is Martin Campell?

AB

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