The Numbers Racket
Polls have regularly found that large segments of the public believe that the two biggest components of the federal budget are welfare and foreign aid. In reality, both make up less than 1 percent of federal spending. (In fact the biggest are Social Security and defense, at 21.2 and 20.4 percent of federal spending, respectively.)
At least part of this misunderstanding results from the way budget items are conventionally reported by the news media — namely, in terms of dollars: hundreds of millions, billions, or tens of billions of dollars. For example, articles on welfare spending might report the annual appropriation as being approximately $16 billion a year.
For the vast majority of people, $16 billion is simply a very large number. It would also be a very large number if a zero were added ($160 billion). Outside of any context, any one of those numbers is just as meaningless as the other.
The confusion is made even worse when budget numbers are expressed as five-year or ten-year totals, often without even making this fact clear. Only a small group of policy wonks would have any clear way to understand ten-year spending and revenue projections. Most of the public would not.
Reporters and editors can help. Here’s how: simply express budget and tax items as a share of total spending or taxes over the relevant time frame. For example, the $16 billion appropriation for welfare can be expressed as 0.6 percent of projected federal spending.
Sometimes, the total budget is not the best denominator — we may want to know defense spending or public spending on health care as a share of the gross domestic product, to know how the expenditure has changed over time or compares with spending in other countries. Deficits, too, can be more helpfully expressed as a share of GDP. Few people can assess the significance of a $440 billion annual deficit. Even fewer can assess the significance of deficit projections over the infinite future, an increasingly popular method of accounting among some policy analysts. Typically, projections for programs like Social Security and Medicare run into the tens of trillions. The projected shortfall in the Social Security program over an infinite horizon — $10.4 trillion — can more usefully be described as being equal to 1.2 percent of future GDP.
There are other informative ways to express budget numbers. Spending on education can be broken down as spending per student; spending on helping the homeless can be expressed as dollars per homeless person.
The goal in using numbers in news articles should be to inform readers. In budget reporting, it would almost certainly be more informative to express items as relative to the whole budget rather than as isolated dollar amounts. If this simple calculation became the standard practice in news stories, the public might have a much better understanding of where their tax dollars go.
Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer (www.conservativenannystate.org). He also has a blog, "Beat the Press," where he discusses the media's coverage of economic issues. You can find it at the American Prospect's web site.