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More on Debt to GDP Ratios

It seems my ire should have been directed towards Edward Lazear:

Will the tax cuts pay for themselves? As a general rule, we do not think tax cuts pay for themselves. Certainly, the data presented above do not support this claim. Tax revenues in 2006 appear to have recovered to the level seen at this point in previous business cycles, but this does not make up for the lost revenue during 2003, 2004, and 2005 … It is also worth noting that because our revenues are growing at such high rates right now relative to spending, the ratio of the publicly-held debt to GDP, which most economists view as the best indicator of the sustainability of our current budget situation, is expected to decline this year. Not only is our debt-to-GDP ratio improving as a result of our high economic growth and enhanced revenues, but it is very close to our 40-year historical average, and lower than at any point in the 1990s. As a result, our debt situation is favorable relative to both its past and to the debt situation of other major industrialized countries (Figure 5). This should not be taken as a reason to be complacent. Indeed the opposite is true. If we do not control our spending, both on the discretionary and entitlement sides of the budget, the pattern that we are seeing in the current year could easily reverse, and we could find ourselves in a debt situation that requires higher and higher interest payments relative to our GDP in the future. This is not a burden that we want to pass on to our children and grandchildren.

Lazear is suggesting the reduction in tax revenues was only temporary, which is simply not true. OK, nominal tax revenues in 2005 were 9.4% higher than they were in 2000 but prices were 12.7% higher. Taxes as a share of GDP were 20.9% in 2000 but only 18.0% in 2005. Lazear is also spinning the free lunch supply-side nonsense that real GDP growth has never been better. Excuse me but the average annual growth rate over the past 5.5 years has been a paltry 2.6%. And perhaps Dr. Lazear can explain to us how reducing national savings is good for long-term growth – once he wrestles control of his pen away from Karl Rove.

CalculatedRisk might take exception to “the ratio of the publicly-held debt to GDP, which most economists view as the best indicator of the sustainability of our current budget situation”, which gives me an excuse to graph the ratios of Federal debt held by the public (DHP) and total Federal debt (TD) relative to GDP over the period from 1985 to 2007 (projected) – both taken from Table B.79 of that Economic Report of the President, which was prepared by Dr. Lazear and his staff. The distance between the two series represents the Federal bonds held by those Trust Funds – which include the Social Security Trust Fund. The ratio of total Federal debt to GDP peaked in 1996 at around 67% before the Clinton era of fiscal responsibility reversed the escalation. Alas, the the Clinton era of fiscal responsibility ended with all those tax cuts pushed by George W. Bush and by next year, the ratio of total Federal debt to GDP will again pass 67% and is not projected to stop climbing.

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Friday Night Beer Blogging

Mark Thoma asks something that I never got either:

I’ll admit I haven’t quite figured out what ‘Friday cat blogging’ is all about

As best I can tell, it’s when one of those East Coast liberal bloggers (or Kevin Drum down south of my LA address) decides to hang it up for the workweek of blogging. But I own a dog. Of course – as I explain in the comment box, Mark is up there in Oregon where some of the best microbrews in the world are located, but we Californians have a few decent microbrews as well.

I’m not sure anyone else has started Friday Night Beer Blogging as a tradition, so let me suggest one of my favorite brews – Anchor Steam brewed up there in San Francisco. Have a cold one on me!

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Ayman al-Zawahiri’s Gift to the GOP

The CNN headline is:

Al Qaeda No. 2: Bush a liar, ‘spiller of Muslim blood’

Meanwhile George W. Bush attacks critics of that stupid decision on 3/19/2003:

President Bush asserted Friday that critics who claim the Iraq war has made America less safe embrace “the enemy’s propaganda.”

And check out the Fox News interview with Dennis Hastert:

ASMAN: But again “coddling terrorists.” You say democrats are doing that. That’s really tough language.
HASTERT: I’m saying what they’re doing is they’re not allowing us to prosecute these people. They’re not allowing us to – the 130 most treacherous people, probably in the world, and they want to put them and release them out in the public eventually.

Notice in particular the background picture of Ayman al-Zawahiri. You know – Osama bin Laden and Karl Rove are getting really good at coordinating these things.

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Is Greg Mankiw Recommending a Backdoor Employment Tax Increase?

Greg Mankiw commits an intellectual foul in my view as he graphs the ratio of the Federal government debt held by the public to GDP as if our payroll contributions to prefunding our Social Security benefits are really employment tax increases designed to pay for that tax cut for Bill Gates et al. I have written on this several times including this post:

Bush’s Social Security proposal cuts the benefits of young workers drastically but does not reduce the payroll tax rate. In other words, it is a backdoor tax increase on young workers. The Bush fiscal agenda does appear to be tax cuts for rich older people paid for by deferred employment tax increases on young workers.

Is Greg Mankiw recommending this backdoor employment tax increase? If he is, his graph makes sense. Otherwise, the comment from Greg’s reader Karl Smith is exactly the point I would raise.

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Economic Expansion and the Angry Bears

Was Greg Kaza talking about us?

Throughout 2002 and 2003, partisan critics of the Bush tax cuts repeatedly attacked this fiscal stimulus, and suggested that economic calamity would follow the mild, eight-month-long recession which greeted the new millennium. Such pessimism, typically reduced to a sound bite or a slogan, was 180 degrees off the mark.

Kaza must not have read WHY Angrybear began this blog. AB (like most economists) would tell you that recessions are typically followed by recoveries – with or without fiscal stimulus especially when monetary policy aggressively lowers interest rates to stimulate investment demand. The monetary expansion did encourage residential investment, but alas investment demand was slow to reverse its slide.

Had Kaza been paying any attention to what AB, Kash, and I have been writing is that we have been surprised at how long it has taken the economy to recover. One clear problem area was the weak export demand. And my thesis has typically been (pardon me for sounding like Robert Rubin) that the backwards nature of the fiscal policy – short on short-term stimulus and long on long-term fiscal irresponsibility – has short of spooked Wall Street.

If Kaza wants to use the name of our blog – could he at least have the courtesy of not misrepresenting what we Angrybears have been saying?

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Record Dow?

Alexandra Twin of CNN/Money writes:

The 30-share Dow (up 19.85 to 11,689.24, Charts) added 0.2 percent, closing roughly 34 points short of its record closing high of 11,722.98, hit on Jan. 14, 2000. The record trading high is 11,750.28.

The general price-level today is about 16.7% higher than its was in early 2000. That circa 11,723 close back on 1/14/2000 would translate into an inflation-adjusted Dow of 13,681 in today’s dollars.

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Farm Policy

It’s a rare day when I praise something from the National Review, but Daniel Griswold has a point:

Fewer than two percent of Americans farm for a living, and only a third of those farmers receive subsidies. Yet the interests of subsidized and protected farmers dominate every farm bill discussion in Washington. The broader interests of the United States and the other 98 percent of Americans are systematically ignored. The biggest losers from U.S. farm policy are taxpayers. From 2000 to 2005, Congress spent an average of $17 billion a year in direct payments to farmers. That’s real money, even in Washington. Most of those payments did not go to small “family farms,” but to large operations and agribusinesses, including some Fortune 500 companies. Indeed, according to the Environmental Working Group, the top 10 percent of recipients collected two-thirds of the payments on offer, and the top 5 percent collected and 55 percent. Trade barriers and domestic price supports also force tens of millions of families to pay higher food prices. According to the Organization for Economic Cooperation and Development, U.S. farm programs transferred an average of $10.5 billion a year from U.S. food consumers to producers from 2003 through 2005. That amounts to an annual food tax of $140 for a family of four – a regressive tax that falls most heavily on poor families that spend a larger share of their budgets on food … Abroad, U.S. farm programs drive down global commodity prices by blocking imports and promoting overproduction, hurting some of the world’s poorest farmers, perpetuating poverty, and needlessly creating ill will toward the United States. They have also proven to be a stumbling block in World Trade Organization negotiations, complicating the task of opening global markets not only to U.S. farm exports but also to manufacturing and service-industry exports.

Update: Note to self – read DailyKos more often as OrangeClouds 115 has an interesting take on why at least some version of farm policies – as in price stabilization – might make economic sense.

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Tony Snow Knows Jihadists

President Bush’s press secretary has been trying to convince us that more jihadists translates into the proposition that we are winning the Global War on Terrorism. One of his arguments is:

Just because somebody says they joined the movement does not necessarily mean that they are prepared to strap on a vest and blow somebody up. So that’s the distinction to make.

Let’s see if I can explain what he means by this. Someone suggested that before that stupid decision on March 19, 2003 to invade Iraq, there were 20,000 jihadists and now there are 50,000 jihadists. Osama bin Laden’s main weapon seems to be the willingness of jihadists to commit suicide as they kill innocent people. So let’s make a couple of assumptions. Let’s say that four years ago, 80% of that 20,000 were willing to commit suicide for bin Laden (16,000 such fanatics) but now 70% of the 50,000 have joined the cause just to impress chics. If that is so, then the number of fanatics is down to 15,000. I’m glad Tony Snow sees things so clearly!

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Mickey Kaus on Black Hawk Down

It seems the Corner Kids over at National Review have little substantive to say in regards the information that President Clinton provided to Faux News hack Chris Wallace so they turn their microphone over to Mickey Kaus:

My impression – from Mark Bowden’s book, Black Hawk Down – is that al Qaeda operatives had taught Somali warlord Aideed’s men how to bring down U.S. helicopters with RPGs. (See, e.g., here) Did Clinton misspeak, or does he really not know of this Al Qaeda connection? Or does he have information that Bowden’s claim really is “bull”?

But what did President Clinton say to Chris Wallace?

OK, now let’s look at all the criticisms: Black Hawk down, Somalia. There is not a living soul in the world who thought that Osama bin Laden had anything to do with Black Hawk down or was paying any attention to it or even knew Al Qaida was a growing concern in October of ‘93.

Black Hawk Down was published in 1999. Yes, we learned years later about the role Al Qaeda played, but Clinton was referring to what we knew in late 1993. Now did Mickey Kaus publish something back in 1993 telling us that Al Qaeda was involved? Why does Slate give this hack the right to publish under its name?

Update: Roland Patrick (our Patrick R. Sullivan) displays the same traits of “is it stupidity of mendacity” as Mickey Kaus. Gee – Clinton knew it was Al Qaeda in 1998, but the Q&A had to do with what we knew in late 1993. Are these rightwingers really these stupid – or are they assuming the average America is not incredibly dumb?

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Military Deaths and Competence

I figured I’d take a break from tax issues and talk about the issue of the day… namely the war(s). These days, many are questioning the competence of the civilian leadership, and perhaps even of the military personnel they have elevated to do the day to day running of the war. Its always tough to evaluate military campaigns for a number of reasons, including the fact that much of the information needed to do so is classified, and most of us lack even rudimentary military knowledge.

“The amateur talks about strategy, the professional talks about logistics.”

Recently, I stumbled across a table on “US Active Duty Military Deaths per 100,000 Serving” for the years 1980 through 2004, and I started thinking about Omar Bradlye’s old dictum: “The amateur talks about strategy, the professional talks about logistics.” I started to think – perhaps one difference between amateurs and professionals is that professionals might pay attention to the kinds of things that lead to increased non-combat deaths, whereas amateurs would be unaware of those factors at all.

Let us consider four types of non-combat deaths shown on the table: accident, homicide, illness, and self-inflicted. Arguably, accident and illness are the two forms of death that those in charge could influence most easily. Investing in equipment and training can reduce accidents, and investing in quality medical care and medical training can reduce death by illness. Death by homicide, by contrast, can be due directly to the behavior of non-military personnel. Self-inflicted deaths can also, sometimes, be attributed to stresses of life outside the (military) job.

Below are the death rates per 100,000 for active duty military personnel for these four causes for several non-random years.


It seems that from 1980 to 2000, the accidental death rate dropped precipitously (it would have been nice to see data from before 1980) from 1980 to 2000. Death by illness also shows a similar, although less precipitous drop, perhaps because it was never as high as the accidental death rate to begin with. Homicides tended to drop over time, although not hugely, and self-inflicted deaths didn’t seem to show much of a pattern.

The obvious conclusion is that during the Reagan, GHW Bush, and Clinton administrations, there tended to be competent people in charge of watching out for the men and women in uniform.

The table above is repeated for four additionally non-randomly chosen years.


The accident rate is no longer dropping, and seems to be climbing slightly, as are deaths by illness. Deaths by non-combat homicide continue to drop – perhaps by moving so many military personnel out of the country, their likelihood of being murdered falls. (Also, some percentage of murdered military personnel are the victims of other military personnel – perhaps those few that are potential perpetrators, in a combat situation, find ways of satisfying whatever is in them that do not push up homicide statistics.) Self-inflicted deaths show no pattern. Death by illness appears to be on the rise – by 2003 it was at 1988 levels and climbing.

So what is going on? Perhaps its merely happenstance. Or perhaps accident and illness rates had somehow gone below their “natural” level by the late 1990s, and that the figures are reverting to these natural rates. Or maybe (as is often the case to hear some tell it) this is Clinton’s fault – he underinvested in the military, and somehow the pigeons held off on roosting until he left office. Or it is possible that this just has to do with growing pains – GW has increased the number of military personnel since taking office, but then, so did Reagan, and accident and illness rates dropped under Reagan.

Each of these explanations seems to rely on coincidence. A more likely explanation is that some deaths that might otherwise be attributed to combat are now being attributed to other (currently less unpalatable) causes. Another is that the folks making the decisions are not as competent as their predecessors in the three most recent administrations. Are there any others?

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