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

Why Spending/GDP is a Terrible, Horrible, No Good, Very Bad Metric For Judging Obama’s Performance

A post like this really shouldn’t be necessary, but part of the right wing canard that Obama has been a profligate spender is based on spending as a percentage of GDP.

It looks like this – Graph 1.

Graph 1.  Fed Expenditures/GDP

Sure enough, by the end of Clinton’s term the ratio had fallen from Reagan’s high of 24% to a modern low of 19%.  But note that the 19% value wasn’t typical.  It was the end point of a decade-long decline.  And, yep, there’s Obama with an all-time-high approaching 26%.

What otherwise intelligent, and sometimes even famous people seem to ignore though, is that every ratio has not only a numerator but also that ol’ devil denominator.   Let’s have a look at both of them.  Graph 2 shows GDP and Expenditures since 1980, expressed in $ Billions.  I’ve also added a line representing 5* Expenditures, since 20% of GDP is a reasonable rough estimate for the post WW II era.

Graph 2.  Expenditures and GDP Compared

Actually, the 5x Expenditures line runs pretty consistently above the GDP line, telling us two things that we should have already known from looking at Graph 1.  First, Expenditures greater than 20% of GDP have been the norm since before 1980, and 2) Clinton’s final number is not representative of anything other than a single year.  Using it as a comparator is cherry-picking and fundamentally dishonest.

The 5x line also emphasizes that the majority of the spending increase under Obama unavoidably occurred during the officially designated recession.  The GDP line shows that, post recession, GDP growth has not recovered to the pre-recession trend line.  In fact, growth has established a new trend line with a lower slope.  This is unprecedented in the scope of FRED historical data.  My guess is that insufficient Federal spending has been a big drag on this recovery.  But it’s also true that GDP growth has been in secular decline since the Reagan administration.  Note that skewing the denominator down will automatically skew the ratio up.  This is what Bill Clinton calls “arithmetic.”

Slicing across this a different way, Graph 3 gives us year-over-year percentage growth in Expenditures and GDP, dating back to the Eisenhower administration.

Graph 3.  YoY % Change in Expenditures and GDP

A few simple observations:
– The spending increase during the recent recession was modest by any standard, and dwarfed by earlier surges.
– That increase, coupled with the most severe GDP decline since the other Great Depression gave our beloved ratio a terrible, horrible, no good, very bad double whammy.
– GDP growth during this recovery is only marginally better than it was during the 2001-2 low, and far below Clinton era levels.
– Clinton was the most consistently frugal president of the post WW II era – until now.
– Since the recession was declared over, B. Hoover Obama has been miserly.

One can legitimately argue that Obama’s approach to the economy has been excessively conservative.  Krugman has made this point repeatedly.  I often say that Clinton governed to the right of Eisenhower – who was a genuine deficit hawk – and that Obama is to the right of Clinton. That is intended to be slightly hyperbolic, but using this data as the benchmark, it’s dead on.

Any questions?

Cross posted at Retirement Blues

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A Quick Look at Federal Spending

Over at Plain Blog, an anonymous wing nut made this off-topic comment.

Now, yes, Bill Clinton and his 2000 federal spending level of 18% of GDP doesn’t put him on the fringe, which makes it surprising that you lefties are celebrating him, even as you hysterically condemn anybody who resists the Left’s current massive spending levels, which are nearly 50% greater than Clinton’s and are spending the nation into debt obvlivion.

This once again raises the regressive canard that Obama has been a profligate and fiscally irresponsible spender.

Let’s have a look.

Here is a graph of current expenditures that took place in the years of the current century.

First observation is that anon’s math isn’t very good.  Current expenditures are roughly 100% greater than when Clinton left office, not a mere 50%.

Second observation is that the vast majority of that increase – from about $1900 billion to about $3200 billion – took place under the previous administration.

Third observation is that the bulk of the Obama increase occurred during the recession – as it should – from a bit under $3200 billion to a bit under $3600 billion.  Since then it’s crept up to about $3800 billion, and has recently flat-lined.

A more subtle point is that spending, like many time series data sets, increases exponentially over time, following population growth.  So, saying that a value at time B is some percentage greater than the value at time A communicates essentially zero information.  Context matters.

Let’s look at expenditures in terms of year over year increase.

Yep, there was a big increase in 2009 and 2010, as social safety net programs kicked in.

Since then, expenditure growth fell precipitously and now has actually gone negative.  The last time that happened was in the Eisenhower administration.  Clearly, Obama has not been profligate.  Would it be an exaggeration to say he’s been miserly?

Bill Clinton did a great job of exposing Republican lies in his speech at the Democratic convention last night.  But really, it’s easy.  All you have to do to refute a regressive is have a quick look at facts and data.

Cross-posted at Retirement Blues.

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Clinton derangement syndrome

rdan

Joe Conason of Salon gets this one right.

Here was an effort that exemplified the best of America — a society that values the lives of its citizens enough to send a former head of state, with all the power of government behind him, to the aid of two women in distress. Here was a happy reunion, bringing wives home to their husbands and a mother back to her little girl, that surely uplifted the spirit of anyone who actually believes in family values. Here was a moment of pride and joy.

But not for Gordon Liddy, the demented felon and radio bigot who cackled about “Ling Ling and Wee Wee being locked up for nine hours in an airplane with Bill Clinton.” Not for Rush Limbaugh, the obsessive guttersnipe who wondered aloud whether Clinton “hit on those two female journalists on the long flight home.” Not for Andrea Peyser, the curdled tabloid columnist who insisted that “the whole shebang was nakedly scripted and staged as a device to help rehabilitate the image of former President Bill Clinton”(and who neglected to mention that Clinton did not speak to the eagerly waiting press corps and has given not a single interview on the North Korea mission). Not for Times columnist Maureen Dowd, who predictably seized on Clinton’s mission as an opportunity for gratuitous and ugly insults to his wife, weirdly imagining that the prisoner release was “some clever North Korean revenge plot, giving the limelight to Daddy to punish Mommy.” And not for the editors of the Huffington Post, who posted a very strange headline — “Bill Upstages Hillary … Once Again” — on an Associated Press story that didn’t mention her at all.

Of course the visit was scripted-it probably took a lot of negotiation. Such ex-presidential forays into particular situations has precedent for those who negotiate. But crude innuendo at the expense of these two women and their families is wrong. And to be thinking that the visit was done without Department of State input and approval strikes me as stupid. Let it be folks, your ratings are okay.

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Welfare Reform not a Disaster, Interlude; or What Do We Mean When We Say Aid

Those of you who want to argue that something being “just symbolism” are invited to consider the fate of “Aid to Families with Dependent Children.”

AFDC is clear and precise. It tells us that we are helping a specific set of people: Families with Dependent Children. Not just the father and the mother, but the next generation of human capital as well. The people who are supposed to be the cogs in the engine of capitalism.

A funny thing happened on the way out of “welfare reform” (discussed by Robert here and here): the program got renamed to “Temporary Assistance for Needy Families.” Note that the emphasis is now on the transience of the assistance, and the families are described as “needy” before they are families. No mention of children at all; might well be great-grandma and a bunch of septagenerians living on their Social Security checks and whatever they stuffed under the mattress in the manner of John Updike’s father.*

Another “funny” thing that happens on the way through welfare reform is that state block grants lead to strange allocations.

There is a version of this in international development; let’s call it the Easterly Paradox.** Generally, what you do is look at the aid a country officially received over the past X number of years (X generally >20) and declared with a Harumph! that, if the people had been given that money directly, they would have $XX,XXX each.

What you don’t bother mentioning is that 85-90% of that money—75% if the country is extremely lucky—went to domestic supppliers of “intellectual property.” That is, it went to U.S. management consulting teams (generally at full retail) who “taught” people their method of irrigation or record-keeping or something else that was essential.***

Short version: our foreign aid budget subsidizes domestic firms significantly more than it produces actual foreign aid.

You would think, though, that the same thing would not happen domestically. But it appears you would be wrong.

Using the recently-released Statistical Abstract data, following are graphic displays of the amount of money allocated to TANF that was actually spent as aid from 2003 to 2006. (Click individual graphics to enlarge.)

Note: The following graphic is accurate. The state of Mississippi in 2004 spent a negative US$7MM on TANF aid.

In summary, for the four years of most recent data, the U.S. has averaged spending less than 50% of the monies allocated to TANF on providing actual Assistance to Needy Families.

The next time someone tells you we spend too much money on helping people, point out that most of that money goes to people who are employed as administrators, counselor, and finance officers.

*Let’s ignore the anecdotal evidence that, if there was one reason that Naderites kept citing for their opposition to Gore, it was “welfare reform.”

**Pause while three people get the joke.

***See Paul O’Neill’s exasperation in Ron Susskind’s The Price of Loyalty when he tried to explain that transporting water to a village on a small scale would cost $25,000, not the $25MM-ish that Arthur Andersen had told the local leaders.

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Everything Old is New Again (Space Science Edition)

An article in Wired reminds us that space science can (and should) be relevant to terrestrial issues (*):

There is a new challenge, however, that could ensure NASA remains relevant over its next 50 years: global environmental change, primarily human-induced global warming.

Jonathan Trent of the NASA Ames Green Team, a research group trying to bring NASA’s expertise to bear on energy and environmental problems on Earth, put it poetically.

“We are the crew of a spaceship we don’t understand,” Ames [sic] said. “The radical technology we need is not just for us, but the life forms on Earth with us.”

This seemed oddly familiar. To the way-back machine NYT archives!

WHEN President Bush outlined his vision of America’s future in space last week, Mars and the Moon outshone another initiative that the President said was critical to the space program: a 25-year effort using a new network of satellites to understand how the Earth’s atmosphere, seas and living creatures function as a global system.

Yes, that’s President George H. W. Bush, and the story appeared on July 25, 1989. This was called “Mission to Planet Earth” at the time, though in the Clinton era it became the très-New Democrat “Earth Science Enterprise” and what did those diabolical Clintonistas do? Let’s jump ahead to 1998:

The craft’s surveillance target is not some distant world, but rather the home planet of those who built it. AM-1 is to be the flagship of a new generation of earth satellites called the Earth Observing System, or EOS, which in turn is the centerpiece of what until recently has been called Mission to Planet Earth: a 15-year effort to subject the interlinked workings of the atmosphere, oceans and land surfaces to detailed scrutiny from space.

It should be easy to guess at the gestational difficulties for the project:

As conceived at the start of the 1990’s, EOS was to consist of an elaborate array of six 15-ton satellites, each carrying 12 sensing instruments… to be launched over a 12-year period beginning in 1998. A complementary series of smaller satellites was to be sent into orbit starting somewhat earlier. The cost of the program, including operational expenses, was projected at $17 billion by 2000 and $30 billion by 2020.

But the project never found solid support. When Mr. Goldin became the NASA Administrator, he set out to make the space agency’s programs ”smaller, cheaper, faster, better,” and EOS was a prime target of his intended reforms…

[T]he program came under attack from Congressional Republicans who charged that its purpose was to push a global-warming agenda.

EOS survived that challenge, but was redesigned in accordance with Mr. Goldin’s philosophy.

Then comes the other George Bush:

The two-year study by the National Academy of Sciences, released yesterday, determined that NASA’s earth science budget has declined 30 percent since 2000. It stands to fall further as funding shifts to plans for a manned mission to the moon and Mars. The National Oceanic and Atmospheric Administration, meanwhile, has experienced enormous cost overruns and schedule delays with its premier weather and climate mission.

As a result, the panel said, the United States will not have the scientific information it needs in the years ahead to analyze severe storms and changes in Earth’s climate unless programs are restored and funding made available.

“NASA’s budget has taken a major hit at the same time that NOAA’s program has fallen off the rails,” said panel co-chairman Berrien Moore III of the University of New Hampshire. “This combination is very, very disturbing, and it’s coming at the very time that we need the information most.”

After all, it isn’t as if the Bush Administration has ever sought to suppress politically inconvenient information.

(*) Not that there’s anything wrong with space science for its own sake.

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Experiment: How would you advise Sen. Clinton?

Twice now in this political session we have had the opportunity to move beyond the Carl Rove/Frank Luntz school and system of communication. The first was Sen. Obama’s speech on race. The second is this current statement discussed in PGL’s post.

I understand the current structure of our MSM and their strategy to earning viewers and thus money; stir the crap. Even Olberman had one guest ask if the public was smart enough to understand Sen Obama’s speech on race as oppose to running after the handoff of the baton of: Or, at this moment, in this election, we can come together and say, “Not this time.” This time we want to talk…

That was it. The biggest opportunity to step out from the focus on the word or words and into the focus on the message the person speaking was attempting to relay. Less emphysis on one’s interpretation of the words used and more focus on the interpretation used by the one you are communicating with for the sole purpose and desire to fully commune.

This current statement by Obama is now the second opportunity for the US to step away with no penalty of loss of honor from the inward focus on the word/words into the outward focus on the message.

I’m not really expecting the MSM to make the change. Would be nice, but it will not happen until our elected ones make the change. That Sen. Clinton did not and has not recognized these two opportunities and run with them is evidence of the lie of her political prowess. She has failed to sense that the common thread in all of the “change” dialog regarding political change evolving into policy change is the cessation of the focusing on the word/words for the sake of winning the argument. Such a focus is a selfish life approach.

Our loss of respect in the world, our feelings of distrust, our decline of a sense of comfort, even the bank issue, the war, all of it began with shift to an approach of dialog of word/words. Our dialog has been dominated for 3 decades by a style of communication that manifests out of selfishness. It is the “lazy” in the presentation of the fat American, the me generation, the welfare queen, the illegal immigrant.

It’s easier to focus on the word. Every word has an emotional response and every emotional response has a physical response. It is physiology. Thus it is simple to generate a belief in one’s self that you are what I say you are and to feel good and confident in your righteousness. It is the style of dialog one becomes engaged in when holding a conversation with another who is drunk or stoned, or high or manic, or schizophrenic or panicked or shocked. It is the irony of the framing of Bush as being capable of relating because you could sit and have a beer with him. You can. You just won’t be able to communicate to any point of resolution. With no ability to truly comprehend the message of the one you’re talking to, you have no ability to trust that person. Consequently you have no ability to commune with that person. In terms of economics, no ability to trade.

Sen. Clinton has shown twice now that she either: 1. does not understand this most basic of lessons of communication or 2. does understand, but for selfish intent will use it against those she professes a desire to serve or 3. does understand, but has little faith or trust in those she professes a desire to serve.

With that, how would you advice Sen. Clinton to respond to Sen. Obama’s statements knowing that he put the following out there: Or, at this moment, in this election, we can come together and say, “Not this time.” This time we want to talk…
END

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Ain’t been no progressiveness since 1980

In this post, Bruno commented and posted this link to reference this statement:

In 2005, the top 1 percent of tax returns paid 39.4 percent of all federal individual income taxes and earned 21.2 percent of adjusted gross income, both of which are significantly higher than 2004 when the top 1 percent earned 19 percent of AGI and paid 36.9 percent of federal individual income taxes.

I assume that the purpose of reporting the data in this way is to invoke a natural sense of fairness to people. That being that one’s share of B should reflect their share of A. That B became “significantly higher” suggests some unfairness. Oh for the humanity of it.

The report could have reported that the top 1%’s tax burden in dollars was 20% higher, however their share of income was 21.8% higher. Now is this fair? Is this fair of the report to have noted the rise of both income and taxes paid in a manor that makes the top1% look as if they are getting unfair treatment and not show that the bottom 99% ‘s income only went up 6.2% but their dollars paid in income taxes went up 7.9%?

How fair is this? All of it? 1980 to 2005 all? Adjusted incomes all?

Well, it turns out this report had a link to an exel file of their data. Perfect! As a dutiful AB’er I took it as my charge to see what that data was really showing. Turns out since 1980, the messing with the tax rates has had some strange effects. Fairness is missing in all of it, even the vaunted Clinton era.

Look at this chart. Notice how the income for the bottom 99% is continuously falling away from the total income. Of course, you can’t miss the top 1% line. Up, up and away (in my beautiful, my beautiful balloon…)

The next chart is of total taxes paid. Notice the similarity. The rising share of total income that becomes income taxes is certainly a function of one’s rising share of total income.

But, the income going up faster than the rise in taxes paid or the taxes paid rising faster than the income is a function of the rates.

This chart may not be to impressive unless you look real close. Look between 1991 and 2000 at the bottom 99%. Do you see that it is rising? This is a period that we are suppose to be considering a symbol of progressive taxation and yet income taxes paid as a percentage of income is rising for the bottom 99% while it is descending for the top 1%. The actual percentages for the 99%’ers start in 1992 at 10.9 and peaks in 2000 at 12.1%. Where as the top 1% go from 25.05% 1992 to 28.87% 1996 to 27.45 2000.
Update, forgot these 2 paragraphs:
Is this what we are to consider progressive taxation? No it is not. The covers blown. We have not had a progressive tax adjustment since we started playing with the code with Reagan. And it hurt more knowing that it was decidedly unprogressive during a term when the president ran as a progressive. It hurts even more because Clinton’s term is being pointed to as a time to emulate. A rise of share of income to the top 1% of 6 points in 8 years and now we see that the bottom got buffaloed in the income tax department too.

The highest total of income collected as income taxes in this series of data was 1981 at 15.76%. Being that Reagan hadn’t started blowing the budget, this could reasonably be considered the amount of money we have to pay to keep the budget in good shape. (That is assuming all other taxes stay the same as 1981. They didn’t.) But NOOOOOOOOOOO. We see us paying less each year until 1990. Only 23.25% was paid to take care of our house that year. The top 1% paid 25.1% of the house needs out of 14% of the income. The rest of us paid 74.9% of the house needs out of 86% of the income.
By 2000 we are paying 15.26% of our total income for the needs of the house. The top 1% is paying 37.4% of the need out of 20.8% of the income. The rest of us are paying 62.6 % of the needs out of 79.2% of the income. Ok, I guess there was some progressiveness here.
But! In 1992 the income per capita for the top 1% was $152,743 and $11,055 for the rest. By 2000 it’s $343,357 and $15,999 respectively. Now I ask you, is this progressive? A 124.8% increase for the 1%’ers and only a 44.7% increase for the rest of us. Remember, this is during the Clinton years!
Since that time, the house has really been starving for attention. In 2005, the year the top is or is not getting screwed (I think the numbers show they are not) we collectively only paid 12.45% of our income to the house needs. We have never paid so little. Well, except for 2003 when we paid 11.9%. Which just happens to be somewhere between the 1999 and 2000 percentage for the share of income paid by the bottom 99%. Yes folks, currently we are trying to fund the house on the same percentage of income that only the bottom 99% use to pay. Or, put another way, we are funding a 304.2% (BEA table 3.1 1981 to 2005) increase in house needs on only a 234.3% increase in payments to the house while the total source has increased 319.2%. That’s 260.2% (awfully close to the house needs rise) for the bottom 99 and 970.3% for the poor souls burdened with 39% of the house needs.
Let me be blunt: This all sucks. Just plain sick and tired of having my head played sucks.

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