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Home Publications Blogs Beat the Press Budget Arithmetic: Can NPR Reporters Learn It?

Budget Arithmetic: Can NPR Reporters Learn It?

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Tuesday, 16 November 2010 19:54

That's the question that listeners to All Things Considered must be asking after hearing Mara Liasson tell them:

"If you sit down with the numbers and look at what the government actually does and how it pays for it, it's obvious that there is no simple solution."

Actually, anyone who bothered to sit down and look at the numbers would see that there was not a big deficit problem by any realistic measure until the housing bubble collapsed. If NPR could find a reporter who could read a simple chart (to paraphrase Senator Simpson in one of his famous e-mails) they would quickly recognize that the debt to GDP ratio rose only modestly over the last business cycle, even with the huge increase in defense spending associated with the wars in Iraq and Afghanistan.

The real run-up in the deficits and the debt began in 2008. That's right folks, it was the collapse of the housing bubble (which NPR never talked about) that led to the big deficits. While NPR is telling its listeners that the deficits are a problem, the deficits are giving people jobs. If we either cut spending or raised taxes we would be pulling money out of the economy and throwing people out of work.

In this sense, people who want lower deficits in the current slump want more people to lose their jobs. This is the same as people who want fish to live out of water effectively want them to die. It is possible that people who push for lower deficits do not know that this would mean throwing people out of work, just like it is possible that some people don't know that fish cannot live out of water, but neither group of people should be working as a reporter for a serious news outlet.

The longer term deficit is also very simple. It is a problem of exploding health care costs. We currently spend more than twice as much per person for health care as the average for the countries that enjoy longer life expectancies than the United States. The long-term budget projections assume that this ratio will rise to three or four to one. If the United States spends four times as much per person on its health care as Germany, Canada and everyone else, then it will face enormous economic problems. One of these problems is a serious budget deficit, since more than half of health care in the United States is paid by the government.

However, honest people would talk about the problem of health care costs, since nothing about the situation is helped if the government saves money by just cutting back its spending without fixing the system. In that case we would just be left with a situation in which tens or perhaps hundreds of millions of people could not afford decent health care.

So contrary to what NPR told its listeners, there is a very simple solution: fix health care.

Comments (5)Add Comment
shoot...wish we could have kept that housing bubble brewing....
written by pete, November 16, 2010 8:33
Is that the answer??? In 2002, when Dean and Robert Shiller were warning that we WERE IN A HOUSING BUBBLE, Krugman asks for a housing bubble....wow...got a big one...total disaster. Now Dean says if only it had stayed in that bubble all would be fine. I really don't even understand what that means. Had to pop....that's what a bubble means. Sorry. Sustaining the bubble is really not a good policy. And now Bernanke and Krugman are asking for another bubble...when will they ever learn...when will they ever learn...

Or that old tune...I'm forever blowing bubbles...

Wow....what solutions. When in doubt, blow bubbles.
Long live King David! (the people's choice)
written by diesel, November 16, 2010 10:41
Dean, I can't believe my eyes! Graphs! You have the nerve to direct our attention to graphs and charts?! This after what David Brooks has just preached! And here you are with more numbers and other liberal "mechanical" dogma.

Well I for one am not just a "rational, utility maximizing cog" in a "big machine" and you can't predict my behavior "with quantitative macroeconomic models" even if "These models can be used to make highly specific projections". While you may believe that "Everything is rigorous. Everything is science", "Conservatives", know that "If the government borrows trillions of dollars, this will increase public anxiety and uncertainty".

Of course you as a "liberal technician(s) brush aside this soft-headed mush" and claim that "These psychological concerns are mythological" and so much "gaseous blathering from those who lack quantitative rigor." But I agree with those "Other people (who) get moralistic. "This country is already too profligate, It already shops too much and borrows too much. How can we solve our problems by borrowing and spending more?" And you as one of "The liberal technicians brush this away, too".

According to your type, "Economics is a rational activity detached from morality. Hardheaded policy makers have to have the courage to flout conventional morality — to borrow even when the country is sick of borrowing." But I think that you "have amputated those things that can’t be contained in models, like emotional contagions".

We conservatives know that people want emotional contagions and not numbers and charts. And we offer it to them. Fair and balanced. And the only numbers that count are the scores delivered on the sport channels and the poll numbers showing us leading you arrogant pointy headed liberals.

"debt to GDP ratio rose only modestly over the last business cycle"
written by Paul, November 17, 2010 5:17
Even more significant, the interest on the federal debt to GDP ratio is lower now than during the Reagan Administration. Yeah, that's right Cons, our debt service to income ratio, now at 3%, is less than it was during the 80s.

Gee, I wonder why the RepubliCONs never talk about that 3% interest to income ratio? Not scary enough?
The Count from Sesame Street Explains Deficit on NPR
written by izzatzo, November 17, 2010 9:32
"If you sit down with the numbers and look at what the government actually does and how it pays for it, it's obvious that there is no simple solution."


How big is the number ONE, Count?

UMMMM ... not big.

What if it's ONE PENNY, Count?

UMMMM ... not big.

What if it's ONE TRILLION DOLLARS, Count?

AAAARRRRGGGGHHHH!

What if it's BORROWED, Count?

DOUBLE AAAARRRGGGHHH!

What if it's held by a foreign country and subject to hyperinflation that gets worse with more deficit spending and increased money supply, Count?

Calm down Count. Don't get so excited. It's Ok to lie to children for their own good.
...
written by skeptonomist, November 17, 2010 11:10
National debt and deficits are large now and projected to be large mostly because of tax cuts which started in 1965. Debt/GDP started growing at a rapid rate especially after the cuts of 1981. This trend was reversed in the 90's, but that was mostly because of taxes on capital gains from the huge stock-market bubble, the longest in history. Deficits were also reduced because of the end of the cold war. The housing bubble did not directly inflate incomes outside the financial industries, but helped to conceal the basic problem. Federal income exclusive of Social Security (on-budget) as a fraction of GDP is now lower than at any time since WW II:

www.skeptometrics.org/Budget-onoff.png

It is nonsensical to talk about long-term budget issues without addressing the obvious trend of decreasing federal income. Total expenditures on health care, private and government, could certainly be cut drastically if the US had any of the systems which exist in other advanced countries, but this would not reverse the long-term trend of increasing cost for health care. The huge spike in federal outlays in the last couple of years, which is also a post-WW-II record, is because of the housing bubble and financial collapse, as Dean always points out, not because of health care.

Health-care expenses are a major problem and there are in fact simple, though drastic solutions, but this problem is not likely to be taken up again for some years. There is no non-political reason why the problem of decreasing income cannot be taken up now as a long-term matter if not as a matter of immediate tax increases. Why would a liberal want to hold out health-care reform as a possible way to avoid raising taxes on rich people?

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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