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Home Publications Blogs Beat the Press Yet More Frat Boy Budget Reporting at the Washington Post

Yet More Frat Boy Budget Reporting at the Washington Post

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Monday, 14 July 2014 10:25

Some folks might think that a newspapers job is to convey information to its readers: not the Washington Post. At least when it comes to budget reporting the Post firmly believes in the frat boy ritual of throwing out really big numbers that will be almost meaningless to virtually all of its readers.

It gave us one such ritualistic piece on Saturday that discussed new budget projections from the Office of Management and Budget (OMB). Among other things the piece told readers:

"The White House said Friday that the federal budget deficit will fall to $583 billion this year, the smallest deficit of President Obama’s tenure and the first to dip below $600 billion since the Great Recession took hold in 2008. ...

"The White House predicts that the nation’s finances will deteriorate markedly over the next decade, with deficits rising nearly $600 billion above previous projections. ...

"When Obama took office in 2009, the economy was in free fall and the budget deficit was soaring toward $1.4 trillion, the first of four consecutive trillion-dollar deficits that drove the national debt to the highest level as a percentage of the economy since the end of World War II. ...

"Democrats hailed Friday’s White House deficit forecast, which came on the same day as a Treasury Department announcement that the government recorded a surplus of $71 billion for the month of June. ....

"Republicans, meanwhile, noted that the long-term outlook remains gloomy, with the national debt forecast to rise to more than $25 trillion by 2024 if Obama’s policies are enacted.

"On Friday, the debt stood at $17.6 trillion."

Feel well informed? The amazing part of this story is that the reporter did not even herself have to wade through the long arduous process of dividing the numbers by GDP to make them somewhat meaningful to readers. This information was actually contained in the blogpost by OMB director Brian Deese to which the piece links.

She could have told readers that the new projections show a deficit of 3.4 percent of GDP for fiscal 2014, which is projected to fall to 3.0 percent of GDP in 2015. The size of the deficit is projected to continue to fall, hitting 2.1 percent of GDP in 2024.

While the Post piece implies that the debt situation is bad news ("remains gloomy) by just giving dollar numbers without any context, in fact it is projected to edge down slightly. The ratio of total debt (including money owed to the Social Security trust fund) to GDP is currently just over 100 percent. The latest OMB numbers project the debt to GDP ratio falls to 94.1 percent of GDP in 2024. In short, for deficit hawks the reality is the opposite of what the Post article asserts.

In addition to its frat boy use of numbers, it is also worth elaborating slightly on the pieces reference to "painful but historic spending cuts." The budget cuts were painful to millions of people who were denied work since the government was reducing demand in a badly depressed economy, therefore leaving more people without jobs. They were also painful to tens of millions of workers who were unable to secure a share of the gains from economic growth in higher wages because the weak labor market left them with little bargaining power.

The cuts probably were not painful to most business owners or highly paid professionals. The former have seen profits hit a record share of GDP, likely in part due to the fact that wages are low. The latter have benefited from being able to hire cheap help, since workers have few choices in a labor market that has been kept weak by budget cuts.

Addendum:

It is worth noting that the burden of the debt is measured by the amount of debt service, not the size of the debt. The latest OMB reports a net interest burden in 2024 of 3.0 percent of GDP. This is slightly less than its early 1990s levels. Thanks to Robert Salzberg for reminding me about this point.

 

Note: Type corrected, thanks to Rodrigo.

 

Comments (10)Add Comment
...
written by Dryly 41, July 14, 2014 2:58
The WaPo reporter stated that President Obama has presided over the most rapid decrease in deficits since WW II and concluded that the Federal Debt was $17.6 trillion without setting forth the per cent of GDP that it represents.

Here is some context. In 1946 the Gross Federal Debt amounted to 118.9% of GDP. The Truman administration reduced it to 69.5%; Eisenhower to 53.4%; Kennedy/Johnson to 37.2%; Nixon/Ford to 34.8%; and, Carter to 31.7% of GDP.

The greatest deficit reduction occurred in the Truman, Eisenhower, and, Kennedy/Johnson administrations because of strong economic growth with higher progressive tax rates.

Then came Ronald Reagan who implemented "supply Side" tax cuts primarily for the wealthiest. His budget director stated "supply side" was merely a "Trojan Horse" to get the top rates down. Budget deficits in each of the eight years of the Reagan administration increased the Gross Federal Debt to 51.5% of GDP. Four more years of deficits in the Bush I years increased it further to 64.0%.

Clinton raised taxes which led to 4% unemployment without inflation, balanced budgets, and, decreased the Gross Federal Debt to 54.6% of GDP.

The Bush II-Cheney administration implemented two rounds of "supply side" deficits in 2001 and, 2003 which led to eight years of deficits increasing the Gross Federal Debt from 54.6% to 82.4% of GDP, and, left a crippled economy.

George Washington was sworn in on April 30, 1789 and Ronald Reagan on January 20, 1981. In the intervening 192 years no president of ANY party implemented the radical policy of "supply side" tax cuts.

Nor were these deficits incurred for any great national purpose such as the Revolutionary War, the Civil War, WW I, or, WW II. "Supply side" tax cuts for the wealthiest Americans most able to pay taxes.

One never hears the true cause of the Debt from any member of the press. You do hear a lot about "entitlements" from the likes of Pete Peterson, Erskine Bowles, Alan Simpson, the "Fix the Debt" boys, and, the Socialist/Republican GE CEO Comrade Jeff Imelt, who, when GE Capital became insolvent in the financial crisis went to the Socialist/Republican Bush II-Cheney administration for a handout, you know, free stuff. He got the handout.

Social security payroll taxes were increased in 1983 by Reagan such that there is a $2.6 trillion dollar surplus in the Social Security Trust Fund. Social Security did not contribute one thin dime to the $17.6 trillion Debt.

Budgets should be used by the Federal Government to ameliorate the effects of an economic downturn. Economic downturns, such as occurred in 2008 which result from the financial collapse are fundamentally different from the other ten recessions. The Republican banker from Utah Marriner Eccles testifies in 1932 that monetary policy could not overcome the loss of aggregate demand from the loss of paychecks of 25% of the workforce.

The slow recovery is a result of the "austerity by sequestration" imposed in 2011 and continuing. None of this gets in the "mainstream" press.
Who the Bezos Cares?
written by Larry Signor, July 14, 2014 2:58
From 7/10/2014 thru 7/11/2014 Jeff Bezos wealth increased more than $1.5 billion...that's %4.76 for the Frat boys out there. There certainly seems to be something besides good journalism at play here. [and they have the unmitigated gall to charge for this tripe].
Dear Dean,
written by ron, July 14, 2014 3:17
I am a big fan of BTP but I am concerned that you are dwelling on secondary issues and ignoring a major point.

Do you not agree that the US employs a sovereign, fiat currency and therefore has a bottomless pit of money at its disposal? Do you not agree that the US does not need to borrow to spend, that the US could spend our way to full employment? That we need only slow down spending once we near full employment?

If you agree, why aren't you saying so loudly and clearly, instead of talking about deficits like they matter? And if you disagree, I would love to hear your reasons.

Ron
...
written by skeptonomist, July 14, 2014 3:55
Ten-year projections of either GDP or deficits are completely worthless - the media just waste paper or electrons reporting them. In fact taxpayers' money is wasted having bureaucrats turn them out.
Nooo - not percentages
written by Downpuppy, July 14, 2014 6:13
Reporters using percentages are like toddlers with firearms. Read the bargraph at this LA Times article on Kansas and feel you brain shut down - [url=http://www.latimes.com/business/hiltzik/la-fi-mh-kansas-a-smoking-ruin-20140709-column.html[img=http://s298.photobucket.com/user/downpuppy/media/la-fi-mh-kansas-a-smoking-ruin-20140709-002_zps8547f0ed.jpg.html?filters[user]=68092246&filters[recent]=1&sort=1&o=0]]http://www.latimes.com/business/hiltzik/la-fi-mh-kansas-a-smoking-ruin-20140709-column.html[img=http://s298.photobucket.com/user/downpuppy/media/la-fi-mh-kansas-a-smoking-ruin-20140709-002_zps8547f0ed.jpg.html?filters[user]=68092246&filters[recent]=1&sort=1&o=0]
Gone live patent pending
written by Dave, July 14, 2014 7:21
We've gone live again, in patent pending form...

www.rationalconversation.com

It'll get you thinkin!

Re Downpuppy and percentages
written by John Wright, July 15, 2014 12:23
I looked at the bar graph and it shows clearly that taxes were raised 1.3 percent on the lowest 20%, lowered 0.1% for the second 20%, lowered 0.5% on the middle 20%, lowered 0.8% on the fourth 20%, lowered 1.3% on the next 15%, lowered 1.7% on the next 4% and lowered -2.2% on the top 1%.

It was a good graph to show the regressive effects of the tax increases on the lowest incomes and monotonically greater tax decreases as income rose.

The image location on the LA Times website is:
http://www.trbimg.com/img-53bdd8cd/turbine/la-fi-mh-kansas-a-smoking-ruin-20140709-002/650/16x9
for those who want to access it there.

Does my textual explanation explain it more clearly?

I prefer the graph.
Word Police
written by Rodrigo, July 15, 2014 2:25
Last sentence before Addendum: Ninth word should be "hire", not "higher." Great post, but wrong word, yo.
...
written by dax, July 15, 2014 8:17
"The ratio of total debt (including money owed to the Social Security trust fund) to GDP is currently just over 100 percent."

Kudos to Dean for using the total debt figure, rather than the one subtracting the amount owed the SS trust fund. This is the best figure to use when talking about American government debt - but unfortunately many economists don't use it.
If I pay $100 in tax...
written by Downpuppy, July 15, 2014 10:19
A 1.3% increase is $1.30 more, no? But in Kansas, 1.3% could be a doubling - or something. I couldn't tell what the actual effect on taxes was. And the 2% cut was actually more like a 1/3 cut in the tax bill.

Mixing percentages with rates tends to be either ambiguous or actively misleading.

I'm glad somebody made it past my epic HTML fail.

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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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