Economy
January 28th, 2008...
Better Late Than Never
President Bush has issued an Executive Order directing all Federal agencies to ignore any spending earmarks that are not explicitly voted on and made law by Congress:
The White House - January 28th, 2008 This will effectively end the common practice of concealing earmarks in so-called report language instead of placing them in the actual text of the bill. This means earmarks will be subject to votes, which will better expose them to the light of day and help constrain excessive and unjustified spending.
This is good news for both parties, and certainly for the taxpayers.
And, because everything needs to be viewed through the prism of primary politics these days, one has to imagine this will help Senator McCain, who has "owned" the issue of fiscal restraint.
October 19th, 2006...
Return of the "Biggest Deficit" Meme
Unlike animals, bad arguments don't generally become extinct. They do tend to become a bit rarer as they lose credibility, though, leaving pundits (and the pundit-ish, of course) to make a game of spotting them. Call it Intellectual Ornothology.
My latest sighting comes courtesy of the webmaster of Electoral-Vote.com (emphasis added):
"The Votemaster" - October 10th, 2006 My conclusion from this is that the Democrats should simply forget about these voters. It is a lost cause and catering to them just alienates other voters. Instead, they should forget family values and attempt to peel off libertarians from the Republican party. These people are hopping mad at the Republicans for abandoning their long-standing commitment to balanced budgets and for Bush's turning the Clinton surplus he inherited into the biggest budget deficit in history.
Ah, the deficit. The Dodo of bad argument birdwatching. Upon reading the above, I contacted "The Votemaster" via electronic mail to inform him of his rampant mistakenness, helpfully pointing out that the "biggest budget deficit in history" was really no such thing. The number this cheeky fellow is surely referring to is the $411 billion deficit the U.S. ran in 2004.
There are two problems with this claim, each of which is, by itself, reason enough to dismiss it, and which together form the argumentative equivalent of some kind of seismic event.
The first is that calling it the "biggest budget deficit in history" does not take inflation into account. Without this adjustment, you might as well claim that things were better during the Garfield administration because taffy only cost a nickel a pound (as an aside, I do differ vehemently with the Bush administration on the issue of taffy tarrifs).
So, how large is the deficit when inflation is taken into account? Well, the wonderful thing about the Internet is that no matter what subject you're interested in, someone's probably already made a chart on it. And in this instance, that someone is the collective entity known as FactCheck.org, which shows that the deficit, while bigger than anyone should be comfortable with, is not only not the largest ever, but not even the largest in the last 20 years.
The second problem with the claim is that the significance of a country's deficit is entirely dependent on the size of its economy. This is patently obvious to anyone with any sort of budget; if you make more money, you can spend more. The best way to determine how large the deficit really is, then, is to measure it as a percentage of GDP. And by this measure, it's not only not a record, but it's not even especially large. The 2004 deficit was the highest of Bush's tenure thus far, and was still only 2.7% of GDP. A quick, completely un-thorough perusal shows that more than 20 of the last 64 years have seen larger deficits by this measure.
All this is ignoring the most recent deficit numbers, which show a staggering two-year drop of almost 40%, to $247.7 billion (which is just 1.9% of GDP).
Ignore inflation and the size of the economy, and you can claim that just about any economic statistic today constitues a "record," with the notable exception of Pet Rock sales, which are stagnant under any measure.
May 9th, 2005...
I'm Stunned! Wait, No I'm Not
Everyone's talking about last Thursday's report that a surge in tax receipts had resulted in a projected $54 billion Treasury Department surplus in the current quarter. Now, these projections can be quite inaccurate, though the last few years such budget predictions have been largely pessimistic, rather than optimistic, in their miscalculations, so this is likely quite a bit of good news. Here's a quote:
Jonathan Weisman - May 5th, 2005 The Treasury Department this week reported there would be a $54 billion swing from projected deficit to surplus in the April-to-June quarter, after an unanticipated gush of tax payments poured into the Treasury before the April 15 deadline. That prompted private forecasters to lower their deficit projections for the fiscal year that ends in September.
Naturally, with all the talk of a mounting national debt and massive deficits, this news is (I'm told) very surprising. It shouldn't be, though, to anyone who's been paying attention, or whose last name happens to be Laffer, as I reported back in mid-March. Yes, I'm tooting my own horn, but only because the louder horns have little to toot about in light of this news.
Best of all is that this news is virtually unspinnable. The only response consistent with the anti-tax cut ethos is that it's simply one small step in the right direction. It's more than that, though: it's a real-world example of the fundamental economic truth that lower taxes can still result in higher tax revenues. It's also the latest in a series of vindications for the current administration's tax policies; vindications which are bordering on downright empirical.
April 28th, 2005...
The Economic Expectations Game
It's hard to get good ink on the economy. Putting up good numbers is only half the battle; the other half is putting up numbers that meet or exceed expectations.
Case in point; today's GDP report on the first quarter of 2005 is being described as the "slowest pace in two years." Here's a quote:
Jeannine Aversa - April 28th, 2005 WASHINGTON (AP) -- Buffeted by rising energy prices and weakened consumer and business spending, the economy grew at an annual rate of just 3.1 percent in the first quarter. The slowest pace of expansion since in two years was evidence of a new "soft patch."
Now, there are a number of ways to describe an annualized GDP growth rate of 3.1%. One way to describe it would be "exactly at the thirty-year average." Another way to describe it would be as "just below the average throughout the 1990s (3.26%)." The problem with these options, I presume, is that the former is neutral and the latter is (gasp!) positive.
It seems that the Bush administration's economic policy is, ironically, the victim of its own success. It grew at a robust 4.4% rate over the previous 21 months, an unreasonable pace to sustain indefinitely. Hit a mark above the standard, and it becomes the new standard. In other words, good is good, unless it comes right after great. The goalposts keep moving, and eventually it's seen as a failure to miss a 70-yard field goal.
Of course, it should be noted that as many as two revisions are on their way, and that most GDP revisions over the last two years have shown growth levels higher than originally reported. Just last quarter, for example, we were given the same estimate: 3.1%. It was eventually revised up to 3.8%, making the interpretation of the data not only slanted, but premature, as well.
UPDATE: Jayson at PoliPundit has some similar thoughts.
April 15th, 2005...
There's One For You, Nineteen For Me
Well, I sent in my tax return about two hours ago, and I've never wanted to vote for Steve Forbes so much in all my life.
The Beatles - "Tax Man" If you drive a car-car I'll tax the street
If you try to sit-sit I'll tax your seat
If you get too cold I'll tax the heat
If you take a walk I'll tax your feet
Catchy tune, or dead-on social commentary? I ramble, you decide.
April 13th, 2005...
Hey, Look! A Big Number
Something funny happens when a number has too many zeroes after it: people stop counting. Somewhere around, say, 2,000,000,000, your average man on the street (and, sadly, average Congressman) simply registers it as "really big number," and then moves on. Understandable, perhaps, but the result is a complete lack of perspective when comparing one big number to another.
This is from today's Los Angeles Times:
Janet Hook - April 15th, 2005 "We're approaching this in the deepest deficit our country has ever been in," Pomeroy said. "Under that circumstance, making the estate tax go away for 99.7% of people represents a pretty substantial achievement."
This is, simply put, nonsense. The deficit is only the "deepest" we've ever been in if you do two very silly things: ignore inflation, and fail to measure the deficit against the size of the economy.
This is where the "really big number" problem comes into play. In January, CBO projected a $477 billion budget deficit for the year. Setting aside the fact that CBO has overshot their estimates significantly the last two years, the only sensible way to measure the deficit is against the size of the economy.
Think of it in terms of personal finance: if I were to give you someone's American Express bill, would you be able to tell me whether or not they were living within their means? No, of course not; you'd need to see their income statements. And as it so happens, the United States has a pretty sizable income; we live in an $11-trillion-a-year economy.
Do the math, and that comes out to about 4.3% of GDP. Twelve of the last 63 years have seen higher deficits relative to the size of the economy. And if CBO ends up overshooting to the tune of a bit under $80 billion (which has happened before), the percentage drops to 3.6%, dropping it another three slots.
But again, it's easier to see the big number and recoil in horror. Historical perspective requires effort, after all.
April 7th, 2005...
Are Tax Increases Inevitable?
I hate to cite Andrew Sullivan three times in a single morning, but he leaves me no choice by posting things like this:
Andrew Sullivan - April 6th, 2005 BUSH'S TAX INCREASES: They're inevitable. This president, who knows how to duck personal responsibility, may not have to preside over them. But his successor will be forced to. The Medicare explosion and Social Security crunch mean something obvious to anyone with eyes to see
Why are they inevitable? Because of Social Security and Medicare. But everyone knew the Social Security crunch was coming long before Bush took office, and Bush's prescription drug benefit increase will probably end up looking like a drop in the bucket when all's said and done. His tax cuts have increased tax receipts, and the Democratic leadership blanches when he submits a budget with any significant cuts in it.
I don't see a way to pin this particular tail on this particular elephant.
March 15th, 2005...
Somewhere, Laffer is Laughing
Talking Points Memo echoes an oft-repeated, but more or less discredited, Democratic meme:
Jonathan Chait - March 14th, 2005 The Bush plan is to allow workers to divert some percentage of their payroll taxes into private accounts. This is essentially a tax cut: instead of sending your money to the government to be spent on current Social Security recipients, you get to keep it, albeit for an earmarked purpose. Tax cuts don’t make deficits smaller, they make them larger.
Oh? Then how is it that tax receipts increased after the second phase of Bush's tax cut went into effect in late May of 2003? Taxes were lower, yet the government collected more of them...hmmm...could it be that The Laffer Curve actually works? Nah...
Deficits, it's true, haven't improved yet as a result, but that speaks more to government spending levels than the effect of the cuts themselves, which demonstrably increased, despite the cuts.
March 4th, 2005...
Payrolls Rise 262,000 in February
While there's still something to be said in the whole household survey-versus-payroll survey argument, gains in the payroll survey remain universally positive on both sides of the aisle.
Enter today's jobs report, which showed a gain of 262,000 in February. It's the best total in four months. Oh, and the stock market hit a 3 1/2 year high, up over 107 points on the day.
February 28th, 2005...
New Personal Income Report
From Reuters, via Yahoo! News:
Reuters - February 28th, 2005 U.S. consumer spending was unchanged in January, below expectations for a small rise, as purchases of motor vehicles and parts declined sharply, a government report showed on Monday.
The Commerce Department said personal income fell 2.3 percent in January after hitting a record in December on a big dividend payout by Microsoft Corp. Excluding that one-time dividend impact and other factors, personal income rose 0.5 percent in January compared with a 0.6 percent gain in December, the department said.
Emphasis added, because it's quite pertinent given that this piece was linked from Yahoo's home page this morning with a title along the lines of "Personal income drops," or some such thing.
This is why it's so easy for so many people to have a warped view of the economy; you can tout numbers, but you can undercut good ones simply because they weren't as good as the month before (regardless of how atypical that month had been), or simply because they weren't as good as analysts had expected. Thus, if we expect great and get good, the news is labeled disappointing, and those who skim the headlines get a negative impression where one does not belong.
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