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

More Right Wing Lies – Now As In The Roaring 20’s

Amity Shlaes, the disinformation bunny, is still going.  In the latest issue of Imprimus, a publication of Hillsdale College, is a transcript adapted from a recent talk she gave there during a conference on the Income Tax, sponsored by Hillsdale’s own Center for Constructive Alternatives and the Ludwig von Mises Lecture Series.  Right away, you know this is going to be good.  The Title of her contribution is Calvin Coolidge and the Moral Case for Economy.  Of course, by economy, she means austerity.

There is so much wrong here it’s both impressive and depressing.  Rather than give her the full FJM treatment, which would take more time and energy than she deserves, I’ll just hit on a couple of the lowlights.  Here is her opening paragraph.

With the Federal debt spiraling out of control, many Americans sense an urgent need to find a political leader who is able to say “no” to spending.

Here we go. Her first sentence is an exercise in made-up right-wing talking point mythology.  I’ve already exploded the ‘Obama is a profligate spender” myth, here, here, and here. Further, we have just lived through three years when federal spending was close to flat line, as Graph 1 shows.  

 Graph 1 – Flat Federal Spending Under Obama 

There is only one comparable period in post WW II history, 1953-56, during Eisenhower’s first term, as shown in Graph 2.   Still, over Ike’s full term, spending grew by about 30%.

 Graph 2  Not So Flat Spending Growth Under Eisenhower (’53-’60)

To suggest that federal dept is now  “spiraling out of control” due to excessive spending is not merely disingenuous.  It is a sign that either Shlaes has no earthly idea what she’s talking about, which in an alleged journalist, is unforgivable, or it’s a bare-faced lie, which is unforgivable for anybody.  And if many Americans are feeling the urgent need to curtail government spending, it’s because they have been lied to so repeatedly and often that they have no idea what the truth is.  As Krugman recently put it: “And I have to say, it’s extremely telling that conservative Republicans don’t seem able to make their case without resorting, right from the beginning, to obviously dumb fallacies.”  The truth is that if we have a debt problem, it is due to a shortfall in revenues.

Yet they fear that finding such a leader is impossible.

Its not clear who made Shlaes the spokesperson for this sorry, disenfranchised segment of the population, nor that this is indeed what they fear.  Perhaps we should introduce Shlaes and the rest of these Real Americans to the real President B. Hoover Obama.

Conservatives long for another Ronald Reagan.

This is probably correct, though as Shlaes goes on to demonstrate, conservatives in this way – and, alas, right-wingers almost always – are rather badly disconnected from reality.

He was of course a tax cutter, reducing the top marginal rate from 70 to 28 percent.  But his tax cuts – which vindicated supply side economics by vastly increasing federal revenue – were bought partly through a bargain with Democrats who were eager to spend that revenue.

Wrong again.  The reality is that Revenue growth under Reagan was the worst of any 20th century President, post Eisenhower, except for the unfortunate Bush, Sr. under who’s recession plagued regime Reagan’s buzzards came home to roost. And was it really the Democrats who spent that anemic revenue stream, or did it go to Reagan’s Star Wars fantasy?

Reagan was no budget cutter.  In fact, the federal budget grew over a third during his administration.

Here, she finally gets something right, if by “federal budget” she means Total Outlays, and by “over a third” she means over 80%  [as measured from 1980 to 1988.]

Things get really egregious further on in the section titled “The Purpose of Tax Cuts.”  She informs us that President Coolidge and Treasury Secretary Andrew Mellon campaigned to lower top rates from the 50’s to the 20’s.

Mellon and Coolidge did not win all they sought.  The top rate of the final law was in the forties.  But even this reduction yielded results – more money flowing into the treasury – suggesting that “scientific taxation” worked.  By 1926, Coolidge was able to sign legislation that brought the top marginal rate down to 25%, and do so retroactively.

I was surprised to learn that Coolidge and Mellon had anticipated the Laffer curve by 6 decades.  Let’s have a look at how more money flowed into the treasury. In 1922 and ’23, with a top marginal rate of 56%, tax revenues were $2.23 and 1.69 billion respectively. [Per FRED, 1923 was a recession year]  In 1924, with a top rate of 46%, total revenues were $1.79 billion.  This is what Shleas calls “more money flowing into the treasury.”  Here’s a bigger picture look.  In 1920, when the top marginal rate was 73%, receipts were slightly over $4 billion.  In 1925, when the top marginal rate was 25%, receipts were $1.7 billion, less than half of the 1920 value, and by 1929 had only increased to 2.23 billion.  Graph 3 shows revenues per year [Coolidge’s term highlighted in red,] and belies Shlaes’ assertion.

 Graph 3 Income Tax Revenues, 1915-1930

Graph 4 shows a scatter plot of this same data, with revenues as a function of top marginal rate, Coolidge years are again highlighted in red.

Graph 4 Top Marginal Rate and Tax Revenues, 1915-1930

A best fit straight line is included.  There’s lots of scatter, for a variety of reasons, but the upward trend – the exact opposite of Shleas’ assertion, is obvious.

So here’s the reality.  A decade of tax cutting and deregulation led us into the Great Depression, the worst economic collapse of the 20th century. [You might note that the following decades of high tax rates and robust regulation were free of these horrible events.]  And what happened most recently?  A decade of tax cuts and deregulation – the end game of three decades of this supply-side approach – led to the greatest economic collapse since the Great Depression.  Significantly, the major deregulations of big finance, including the repeal of Glass-Steagall came at the end of Clinton’s term, less than a decade prior to the financial melt down.  Last Friday on his radio show, Thom Hartmann pointed out that prior to the regulations put in place in the 30’s, the U.S. had never gone for more than 15 years without a major financial collapse.  So this result should have been expected.

The extraordinary thing isn’t that right wingers lie.  The simple reality is that they can’t make their case without lying, because it has no merit.  The extraordinary thing is that their lies are so easily rooted out and refuted, in the era of free and easily accessible information, but so few people will take the required few minutes to go ahead and do it. Sadly, whenever the truth comes up against a cascade of lies, the liars have a significant tactical advantage

Shlaes’ presentation is just one more manifestation of the right wing ploy of denying reality.   Sadly, it works, because you really can fool a lot of the people a lot of the time.

Tags: , , , , , , , Comments (34) | |

You Can Fool Most of the People Most of the Time

At least on certain issues.

I’m not inherently a great pessimist, but with few exceptions each passing month for over a decade now has seen my optimism whither, at least a little.  So I can’t help but see the manure-colored lining in this otherwise rosy, fluffy cloud.

Steve Benen reports that according to the new NBC/WSJ poll, Americans trust Democrats more than Republicans on domestic issues, sometimes by large margins.  Here is a graph.  (As always, click to embiggen.)

Graph 1   Who Do You Trust?

But the causes of my pessimism are four-fold.  First, as Benen goes on to note, the same polling reveals that in the popular mind “Republicans have an advantage on the (sic) reducing the deficit, ‘controlling’ government spending, and national defense.”  Well, there’s three reasons for pessimism right there.  A) Reducing the deficit is an issue of exactly zero urgency, and attacking it now will certainly cause economic hardship, especially for those at the bottom. Further, Republicans have been huge debt increasers for decades, while Dems have not.  B) We absolutely do not have a spending problem.  We absolutely do have a revenue problem, as graph 2 plainly indicates.  I think the Republicans have become convinced of their own lies.

Graph 2   Federal Gov Current Recpts by GDP

C) From FDR through LBJ to BHO, Dems have been every bit as war-mongerish as their Rep counterparts; BHO has continued his predecessors war initiatives almost seamlessly;  and 9/11 happened on W’s watch.  This just makes me want to cry.

But I have a bigger list.  Second, a look a graph 1 reveals some disturbing details.  A)  Joe BeerCan must not connect “Looking out for the middle class,” Medicare,” “Health Care,” “Medicare,’ or “Social Security” with “Economy” or the results for those categories would line up better.  B) Considering Paul Ryan and the never-ending series of Republican contrived cliffs, scoring Dems only marginally better than Repubs on the economy is, all by itself, cause for despair.  C) As is the close call on taxes.

Third, and I’ve already alluded to this, there is almost no daylight between the two parties on foreign policy issues.  Still I have to give a slight nod to the Dems, based on practicality, because: John Bolton.

And last, though I firmly believe to the bottom of my heart that the Dems are superior on absolutely every issue, problem and question that might rise, they still aren’t that damned good.  Case in point: the new head of the Michigan Democratic party is a venture capitalist.  As Bill Maher sagely put it, while the Democrats have moved to the right, the Republicans have moved to the insane asylum.  They demonstrate this anew, almost every single day

The lessons of history and even a casual observation of the current failures of European austerity show that progressive policies are the clear and present necessity.  But even if we had strong Dem majorities, we still have Reaganite B. Hoover Obama in the White House, and a genuine progressive movement in congress the exact size and shape of Bernie Sanders. 

As one of my college professors put it long ago:  Booze is the only answer.

Tags: , , , , , Comments (6) | |

Thus Spake the Rube

For the hundredth time the foreign-born Muslim commie Nazi extends an olive branch across the aisle, and for the hundredth time it’s dashed to the floor, stomped on and set ablaze – along with the latest spokes-liars trousers.   It became a conflagration that the infamous water-stop could not staunch.

Early in Marco Rubio’s alleged rebuttal to B. Hoover Obama’s latest exercise in political theater it became painfully obvious that his pants were on fire.  This was even before it became obvious that his diatribe was utterly incoherent.  Steve Benen explains.

By any sensible measure, Rubio’s entire pitch was incoherent gibberish. He thinks President Obama is hostile to free enterprise and wants to increase the deficit, neither of which makes any sense. Rubio thinks the housing crisis was caused by big government, which is simply idiotic. Rubio celebrates his family’s history of dependence on government social programs like student loans and Medicare, while articulating a policy agenda that guts government social programs like student loans and Medicare.
Forget ideology, subjectivity, and areas of opinion — the fact is Marco Rubio’s speech was filled with a series of claims with no meaningful connection to reality. The senator even thinks combating the climate crisis means asking government to “control the weather,” which is just genuinely dumb.

Part way through I started taking notes, and discovered an unappetizing platter of rewarmed left-overs [or more accurately: right-overs] of Romney’s failed presidential campaign, where lying and incoherence were the norm.  It was deja vu all over again. Viz:

Obama’s obsession with raising taxes
Solyndra [God help us – I am not making this up]
We should open Federal lands to energy exploration
Grow Energy industry [but not renewables]
Lower Corp tax rate [Highest in the world, don’t cha know]
Incentivise school districts
Schools of choice
Solve the debt problem [As if BHO ignored it – or, more importantly – as if it were a real problem]
Obama created the debt with excessive spending  [my personal favorite]
Need a balanced budget amendment  [the ignorance – it burns, too]
Obama’s in favor of leaving Medicare just the way it is [though he clearly stated otherwise]
He also wants to unconstitutionally undermine 2nd amendment rights
The President’s devastating cuts to our military [Seriously — WTH?!?]
Moral breakdown in society – need more faith
Economic liberty

That’s what I was able to capture as Rubio’s litany of [mostly] decades old Republican clap-trap spewed forth almost faster than I could record it.

One of the MSNBC commentators pointed out that this nonsense wasn’t directed to the American public, who I hope are beginning to see through the smoke screen, but to the hard-core right-wing base.  As such, it’s Rubio’s first gambit in his run for the 2016 presidential nomination.

I don’t know if I should laugh, cry, or drink myself into a stupor.

Tags: , , , , , Comments (14) | |

Another look at Spending and Revenues

This is more or less relevant to Beverly’s post from earlier today.

How many times have you heard Boehner, McConnell, Ryan or one of the legion of right-wing talking heads say, “We don’t have a revenue problem, we have a spending problem?”  I refuted that lie repeatedly in this AB post and at the included links.   But this is one of those zombie ideas that simply will not stay in the grave.  

Therefore, some prominent voices have found it necessary to sing out again against the lie. I will add my humble quavery baritone to the chorus.

Here in Graph 1 is Kevin Drum demonstrating how Real Government Expenditures per Capita have changed under the last three presidents.

What we have isn’t a spending problem. That’s under control. What we have is a problem with Republicans not wanting to pay the bills they themselves were largely responsible for running up.

 Graph 1, Real Government Expenditures per Capita

By using real [inflation adjusted] and per capita numbers, Drum has introduced a couple of denominators.  Real expenses per cap is a rational way to display the data, but not the only way. So lest someone cry out about that ol’ devil denominator, let’s have a different look.

Via Paul Krugman we get Graph 2 and Graph 3, from FRED, showing total Government expenditures and Federal Government expenditures, respectively, on log scales.

Graph 2. Government Total Expenditures
Graph 3, Federal Government Total Expenditures

Yes, you can argue that spending was growing too fast under Bush, although it’s funny how few deficit scolds saw fit to mention that at the time. Or you can say that you just want less spending, although as always people who say this tend to be short on specifics. But the narrative that says that spending has surged under Obama is just wrong – what we’ve actually seen is a slowdown at exactly the time when, for macroeconomic reasons, we should have been spending more.

Remember, a log scale represents constant growth as a straight line, and zero growth as a horizontal line.  So, in pure dollar numbers, spending hasn’t quite declined, but it has stagnated to almost zero growth.  Hence Drum’s decline in inflation adjusted, per capita terms.

In Graph 4, we get one more longer range look, using Krugman’s data series, this time on a linear scale.  Also presented is the difference between the two, which is the amount of spending by state and local governments.

 Graph 4, Government Spending at Different Levels

 The red line is total spending at all levels of governemnt, the blue line is federal only, and the green line is the difference, state and local spending.  Note that the green line flattens early in the recession

To bring things full circle, Graph 5 shows Federal Government current receipts.  Look at this and tell me we don’t have a revenue problem.

Graph 5, Federal Government Current Receipts

To drive this point home, Graph 6 shows Federal Receipts as a fraction of GDP.  The purpose of the ratio is to provide context, using GDP as a proxy for the size of the economy.

Graph 6, Federal Receipts as a fraction of GDP

As you can see, revenues/GDP are in a historically low range.

Conclusions:
– Federal spending is flat in nominal dollar terms.
– Federal spending is declining when adjusted for inflation and population growth.
– Federal revenues are far below trend lines based on any historical reference you chose.
– Federal revenues as a fraction of GDP are historically low.
– The Republican claim that we have a spending problem not a revenue problem is simply a lie, on both counts.
– Disproportional spending growth has only occurred under two presidents: Republicans Ronald Reagan and George W. Bush. 

The simple fact is we have a revenue problem, not a spending problem.

Why do Republicans lie?

The truth is hostile to their agenda.  PK Explains.

Cross posted at Retirement Blues

Tags: , , , , , Comments (6) | |

Strategic Lying as Political Art

If you listen to Randi Rhodes, you know she is still livid over Romney being declared the “winner” in last week’s – we’ll call it a “debate” for the nonce.

Alas, though, the reason he won is that poll numbers have moved in his favor.  Whether that bounce is robust remains to be seen.  But it did gain Romney some sort of advantage, at least in the near term.

Randi’s objection is that Romney lied, repeatedly, and about almost everything.  In the process, he flatly repudiated some of the major planks in his platform – the destruction of Medicare as we know it, the $5 Trillion dollar tax cut, the reduction of tax share paid by high income people, and an insurance plan not covering pre-existing conditions stand out in that regard.   And these are but a few of the 27  debate lies that can easily be recognized and refuted.

Indeed, the one rare moment of lucid candor came when he eagerly, gleefully announced that he would send Big Bird to the unemployment line in order to avoid borrowing money from China.  Big NPR whoop!  To put this in perspective, for CY 2012, the Federal Government, via the Corp. for Public Broadcasting, is contributing $26.65 million in support of PBS, or 0.0007% of total Federal expenditures ($3.77 Trillion) for 2012.    In fact, the entire Federal contribution to CPB is $445.2 million, or 0.0118% of total expenditures. That’s sure going to help balance $5 Trillion in tax cuts over ten years. (CPB data from Wikipedia, current expenditure data from the St. Louis Fed.)   Romney isn’t lying about our creditor position with China, but he was certainly misleading.  According to Fox News (!) “China, it turns out, holds less than 8 percent of the money our government has borrowed over the years.”

OK, I get where Randi is coming from – to have a totally unprincipled opportunist in charge of running the world’s greatest super power is not a recipe for any kind of enduring success, either for the U.S.A. specifically, or for the world at large.  There are many historical examples one could cite, but we really needn’t go back any further than the “compassionate conservatism” of unprosecuted war criminal and would-be social security privatizer George W. Bush to make the point.

But what Randi refuses to acknowledge is that what we witnessed last week was not a debate, by any recognizable definition of the term.  Lying will get you disqualified in a real debate – right?  This was political theater – and what is theater but staged fiction? 

And there is nothing unusual here.  I’ve been saying for years that all Republicans do is lie, and then lie about their lies. (I might have gotten that phrase from Randi – the memory is foggy.)  Here is a four-year-old exposé of some of Romney’s shape shifting.  (H/T to Dave Brockington at LGM.)

A more insidious kind of lie is simply denying reality, as characterized by birtherism, New Deal and global warming denialism, and Friday’s epidemic of conspiracy theories surrounding the latest favorable jobs report.   But I digress.

Here is my point.  Brad Delong points us to a 1984 Fay Joyce article in the N. Y. Times uncovered by Michael Moore.  It turns out that lying during a debate is a time honored Republican strategy.  Even 28 years ago, when there was some chance of the main stream media doing actual journalism, they were confident in their lying strategy.

The Republicans are unabashed in their discussion of their ability to use the television medium. “You can say anything you want during a debate and 80 million people hear it,” observed Peter Teeley, press secretary to Vice President Bush. If reporters then document that a candidate spoke untruthfully, ”so what?”

”Maybe 200 people read it or 2,000 or 20,000,” he said.

Now, they have honed it into an art form.  And it’s worth remembering the one reason that always accounts for every person’s lie: their agenda is not compatible with the truth.

Tags: , , , , , Comments (11) | |

Ok class, let’s review before the exam (election)

I’m sure you are all feeling kind of blah. You have this final exam for this session and I can tell by your performances on the quizzes that you are still confused. The problem solving portions of the quizzes have been very telling. So lets review.
 
You’re taxes are not too high. It’s your income that is too low! Remember this and you will be able to solve enough of the problems to obtain a passing grade and graduate. And class, no one running today for president gets this. It is why President Obama looked like such a dufus in the debate. Romney took a step to his left… right into Obama’s policy space. Where does one go to gain more space when they have walled up the door to the left of them as President Obama has?
 
Let’s get something real clear from the beginning. Unless you are acquiring the majority of your money from money YOU ARE NOT A CAPITALIST 
 
 
Second: A MARKET IS NOT AN ECONOMY.

Tags: , , , , , , , , , Comments (23) | |

What is the Economic Middle Class?

My lovely wife shared this link with me on Facebook.  I got into a discussion in comments there with a right winger who suggested that $250,000 was a very reasonable estimate for median income in Boston.

As it turns out, median household income in Boston is $51,914, close to the national average, and way below the Mass. State average of $67,950.  But right wingers live in a data-free world, so this is no surprise.

Another contention in comments at that site is that the middle class is undefined and undefinable. Not so.  I define middle class household income as the middle quintile.  This range includes the median and a band around it wide enough to hold 20 percent of the population.  You might wish to concoct your own definition with a wider spread, but you’d better not be asymmetric around the median.  Feel free to use the middle three quintiles, if that is your preference.  But if your of concept of middle class gets very far beyond 50% of the population, you really ought to give more thought to what the word “middle” actually means.

Thinking about all this prompted a look at the various income quintiles.  The data, through 2009, is available at the Census Bureau web site, table 694.  This table provides historical data from 1967 through 2009 on the top income limit for the bottom 4 quintiles, and the bottom income limit for the top 5%, expressed in constant 2009 dollars.

Graph 1 presents this data.  The 3rd quintile – my definition of the middle class – is between the orange line and the yellow line.

In 1967, the threshold for the middle quintile was $32, 848.  By 2009, it had increased by 17% to $38,550.  This is a compounded annual growth rate of 0.38%

In 1967, the top limit for the middle (and threshold to the 4th) quintile was $46, 621.  By 2009, it had increased by 33% to $61,801. This is a compounded annual growth rate of 0.68%.

The threshold value for the fifth quintile increased from $66,481 in 1967 by 80% to exactly $100,000 in 2009.  This is a compounded annual growth rate of 0.98%.

To reach the top 5% required an income of 106,684 in 1967.  By 2009, this had increased by 69% to $180, 001.   This is a compounded annual growth rate of 1.25%.

So my comment sparring partner and the current presidential challenger he seems to support are a bit off base.  $250,000 in household income puts a family well above the 95th percentile.  In fact, that is just enough household income to crack the top 2%.

My ongoing hobby of debunking right wing nonsense aside, the point of this post is mainly to inform.
There are two main observations:
1) While the bottom two quintiles haven’t changed much over the decades, entry to the third quintile has crept up a bit; and into higher categories it’s moved up a lot.  We recognize this as stagnation in the bottom half and growing inequality in the top half, skewed powerfully to the top.
2) This data set stops in ’09, so Obama is outside the discussion.  But we can see that all the way up to the 95th percentile, income growth was dead flat during the Bush administration.  No wonder the 95% percentile feels so poor.

But — surely, some wealth was generated during those 8 years.  GDP growth was positive at least some of the time.  I wonder where it all went?

Cross posted at Retirement Blues.

Tags: , , , , Comments (35) | |

Yes, The Right Wing Lies When They Say Obama is a Profligate Spender

Part III – How to think about time series data.

For reference:
Part II  Federal Spending as a Fraction of GDP

Part I  Federal Spending Growth

Some commentors to the previous posts have rightly concluded that I consider spending under Obama in the context of historical trends.  In fact, if you don’t consider historical trends, you are ignoring the most important element of context that is available.  I only mentioned trends briefly in Part II, but the directional changes in the graphs of Parts I and II implicitly suggest them.

Time series data that relate to the size of the population, the government, or the economy generally follow a quasi-exponential growth pattern.  I say quasi- because a perfect exponential growth pattern  results from a continuous constant rate of growth, while real world growth rates vary from year.  Graph 3 of Part II shows how these variations have occurred over several decades.  Usually this does not result in a large or permanent deformation in the shape of a quasi-exponential curve, since the growth rate typically oscillates irregularly around a mean value that only changes slowly over time.

Graph 2 in Part II shows that the spending and GDP growth curves stay close to exponential tracks over long time spans.  It also illustrates that the recent recession was one of those rare times when growth rates deviated substantially.

Human eye-brain coordination doesn’t deal well with exponential curve shapes.  Straight lines are much easier to comprehend and extrapolate.  Graphing quasi-exponential data on a log scale reduces the curve to a quasi-straight line that is much easier to use and understand.

Graph 1 shows Federal Spending and GDP, since 1995, plotted on a log scale.  Constant growth results in a straight line segment, and a higher growth rate causes a steeper slope.  Zero growth shows up as a horizontal line.   I’ve again included a line for 5 times spending, to get a close overlay with the GDP line.

 Graph 1.  Spending and GDP since 1995 (log scale)

There is an upward bend in the spending line in 2000.  This is most easily seen in the blue line.  During the 90’s, we can see that GDP grew faster than spending.  In 2001-2, GDP growth flat-lined, as expected during a recession. Then, from 20002 to 2008, the growth rates for GDP and spending were close to identical.  Both lines twist during the most recent recession.  Curiously, spending growth was flat for a large portion of 2008.

Since the recession, the spending lines are very close to flat, and GDP growth has been anemic.  Here is a close up.

Graph 2.  Spending and GDP since 2007 (log scale)

Graph 3 provides context, all the way back to 1947.  Ponder the inflection points and slope changes at your leisure.

Graph 2.  Spending and GDP since 1947 (log scale)

Note that there are only two flat-ish spots in the spending lines: now, and during the Eisenhower administration. The current administration has, at least temporarily, broken the decades-long trend in continuous spending increases. 

To emphasize the obvious, spending growth is now very close to zero.  In context, this is remarkable.  Saying Obama is a profligate spender is a lie. 

In this post, I am not suggesting that the rate of spending growth under any president is good, bad, appropriate or inappropriate.  I am only pointing out what was and is. 

So, this is how you think about time series data.
0) Forget your preconceived notions.    (Frex:I had no idea that spending growth has essentially stopped until I looked at the data.)
1) Identify trends. The history of time series data provides meaningful context.
2) Identify break points and trend changes.  These are key data points.
3) Note the directions of these changes.
4) Think hard about what these observations are actually telling you, not what you want them to say.
5) Double down on 4) if you are looking at a ratio.  Ponder that denominator.
6) Don’t cherry pick.  It’s dishonest.

There are a lot of ways to look at a data set: linear and log scales, rate of change, etc.  Chose the one that gives the clearest picture of the data you want to analyze, or simplifies the analysis, or makes it easier to understand.  Studying different views can be informative, as can a comparison of different data sets. 

Here is the working page at FRED for the graphs in this post.  I encourage the interested reader to spend some time working with the capabilities of this very powerful tool.

Editorial Comment:
In case it’s not obvious, I’ll tell you that I write these posts because they interest me and I think they generate some knowledge, or at least information, that is worth sharing.  I have virtually no interest in the fool’s errand of convincing anybody that I am right – either the data analysis convinces you or it doesn’t.  So unless you have better data, or can point out some specific flaw in my reasoning [and then tell me specifically and in detail how to get it right] don’t bother arguing with me.

I appreciate rational discourse, and am always willing to engage thoughtful readers. I’m also willing to be proven wrong by a cogent argument.  That said, though, I don’t really care if anyone comments.  At this point, I’d almost rather nobody did.  But if you chose to, please do me the courtesy of having your comment be somewhere in the general vicinity of on-topic.  And – fair warning: naked assertions and unsubstantiated ideologically approved talking points will be scoffed at, so please check that nonsense at the door.

Tags: , , , , , Comments (15) | |

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

Tags: , , , , , , , Comments (54) | |

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.

Tags: , , , , , Comments (21) | |