February 28, 2003

Why Nobody Should Listen to Martin Anderson

I read this morning that ABC News's "The Note" is giving Martin Anderson space to trash Greg Mankiw: "Martin Anderson... complain[s] of [Mankiw's Textbook], '"It's stupid; it's simply not what a good economist writes."'

About a decade ago I took a look at Martin Anderson's writings, and found them very, very unimpressive: in the bottom quintile of Republican hack-work, in fact. One of our big problems is that most economic journalists are very bad at figuring out when they are giving space to a charlatan or a crank: a friendly manner, a willingness to return calls, and a willingness to say exciting things get you quoted many, many more times than actually knowing what you are talking about. Greg Mankiw is a very, very good economist indeed. Martin Anderson is a Republican hack. For Anderson to say that Greg is not a good economist is the silliest thing I've read this week.

Here's a draft from the files giving reasons for my view of Anderson:


June 17, 1993

MEMORANDUM FOR ASSISTANT SECRETARY OF THE TREASURY ALICIA MUNNELL

From: J. Bradford DeLong, Deputy Assistant Secretary
Subject: Origin of the Deficit: "Presidential" or "Congressional"?

SUMMARY: The overwhelming proportion of the deficits of the last decade [i.e., the 1980s] were already proposed in President Reagan's and President Bush's original budget submission. There was no explosion of federal spending over and above what the presidents had asked for. More than four-fifths of the 1980s deficits were "presidential." Less than one-fifth were "congressional."

DISCUSSION: For ten years the United States government has run annual budget deficits of more than two-hundred billion dollars a year. These deficits have placed a substantial burden on and slowed the growth of the American economy: had the budget been balanced over the past twelve years, and had the money that the government has borrowed to finance the deficit instead been invested in the United States, average American workers would have seen their incomes grow faster over the past decade, and their incomes would now be higher by an extra $3,000 or so.

If you listen to Republicans, you might think that the Republican administrations of the past twelve years have played little role in the deficit. They claim that high deficits exist because Congressional Democrats have spent the past decade funding new programs and busting agreed-upon spending limitations. A typical version of this claim comes from former Reagan staffer Martin Anderson, who writes:

[W]e don’t [have a balanced budget] because those with the real power to decide… have consciously and deliberately decided to unbalance the federal budget.…[T]he real culprit in federal spending is the Congress.…The president may propose the… budget…but it is the Congress that disposes.…Time and time again [the] president…sent budgets to the U.S. Congress to limit and control federal spending. Time and time again, the Congress has rebuffed those plans, and substituted levels of spending they, and they alone, considered appropriate...

In the world Anderson lives in, sober and realistic executive-branch Republicans who send realistic budgets to Capitol Hill are powerless in the face of a Congress that knows no restraint:

Under current arrangements, the president must submit his budget proposals to the Congress, which can then add or delete as it wishes. What it deletes cannot be put back by the president, but deletions are rare these days. The Congress is much better at adding…

Are Martin Anderson and company telling the truth? No.

To see that Anderson's claims are false, compare the cost of the spending plan first proposed by the president in his annual budget submission to the actual level of spending from the appropriations bills that Congress actually passes. Assign to congress this part of the deficit--this "congressional" deficit. The remainder--the difference between tax revenues and the spending level the president had proposed in his budget submission--is the "presidential" deficit. Figure 1 shows both the actual deficit and this "presidential" deficit. Both are scaled by the total size of the economy: they are measured as percentages of Gross Domestic Product (GDP)--the market value of all goods and services produced within America’s boundaries.

Figure 1: "Presidential" and Total Deficits as Shares of GDP

In figure 1 the "presidential" and actual deficits are almost the same. Had the Congress been a rubber stamp and taken no action to change the president’s budget at all, the 1982–91 years would have seen total budget deficits more than ninety percent as large as actual deficits. Figure 1 shows us that the federal government has not run large budget deficits over the past decade because "Congress…rebuffed" presidential plans to control federal spending. Instead, the large deficits have been there from the beginning in presidential spending plans.

Figure 2: "Presidential," "Congressional," and "S&L" Deficits as Shares of GDP

A different view of the same underlying numbers—a view that leads to the same conclusions—is to graph the "presidential" deficit not against the actual deficit but against the "congressional" and "S & L bailout" deficits. Define the "legislative" deficit to be the difference between the actual level of spending carried out and the level proposed by the president. And define the "S & L bailout" deficit to be the cost of S & L bailout activities. Figure 2 shows that the other two components of the deficit are small relative to the "presidential" component. The "presidential" component varies between two and a half and six percent of GDP. After 1981, the "congressional" deficit never reaches even one percent.

Either way, the conclusion is the same: the U.S. has had large budget deficits over the past decade not because Congress has rejected presidential spending restrictions, but because large budget deficits have been implicit in every single year’s presidential spending plan. Congress has largely played a passive role: delivering by and large the level of spending that the president proposed.

You can fault Congress in the 1980s for many things—for playing this passive role, and playing along with the executive branch. But you cannot fault Congress for creating the deficit: it has not added program after expensive program to fiscally-responsible executive branch proposals, but almost exclusively confined its activities to swapping spending from one category to another.


Originally posted as http://www.j-bradford-delong.net/movable_type/archives/000432.html. Posted by DeLong at February 28, 2003 08:41 AM | TrackBack

Comments

Hmmmm ... charlatans ... cranks ... charlatans ... cranks ... I'll go with "Charlatans for $5,600,000,000,000".

Posted by: RonK, Seattle on February 28, 2003 09:32 AM

While we're on the subject, I think it's interesting to point out that the Columbia University Econ Department, at least, disagrees with Anderson: Mankiw's textbook is the standard textbook used in our intro Principles sections.

Posted by: Mark on February 28, 2003 09:49 AM

Isn't Martin Anderson the guy who had a book where he decided to make fun of academic economists by entertaining his readers with the titles of journal papers, except that one of the titles he decided to thus ridicule was "The Economics of Superstars" -- a classic paper by the brilliant Sherwin Rosen. You'd think Anderson would have at least checked with his Chicago buddies before going into print on that one...

Posted by: P O'Neill on February 28, 2003 10:34 AM

Chicago buddies, hell! Hoover buddies!

In fact, the last time I saw the brilliant, ever-insightful, and most gentlemanly Sherman Rosen was when he was visiting Hoover. He and his wife took a side trip down to Monterey, where we were staying for a week. And there, in an Italian seafood restaurant on Monterey pier, the then Five-Year-Old flung tomato sauce six feet to land on his wife's coat.

Since we were wearing NBER sweatshirts at the time, we couldn't pretend not to be who we were. So we apologized, and then called over the waiter and bought them their deserts and after-dinner drinks

Posted by: Brad DeLong on February 28, 2003 11:04 AM

In a perfect world an objective media would ask someone to explain charts, such as what you presented, if they attempted to make false statements. The sad thing is that in our world, the media would then be accused of bias.

But wearing NBER sweatshirts out in public? That sounds like a desperate plea for help.

Posted by: Dan on February 28, 2003 11:25 AM

Brad, normally I respect your intellectual honesty, but this 1993 piece about Reagan "presidential" deficits is either shockingly naive or intentionally deceptive. It ignores the compounding nature of the "congressional" deficit, and seems to assume that each year Reagan should have submitted a budget that pretended his previously-requested spending cuts had not been ignored. And of course, it does not take the time to explore the real causal factors: entitlement spending, declining inflation, the 1982 recession, the tax cuts, and the defense buildup. Readers interested in the whole story should see:

http://www.ipi.org/ipi/IPIPublications.nsf/PublicationLookupFullTextPDF/4D0C4F5676D56DA1862567F40051B077/$File/reagandf.pdf?OpenElement
http://www.cato.org/pubs/pas/pa-261.html
http://reagan.webteamone.com/reagan_budgets.html

Posted by: Brian Holtz on February 28, 2003 11:32 PM

Brian,

Perhaps you could elaborate but I see no contradiction between your "whole story" and Brad's story. For instance, the first piece states that Congress spent a cumulative $209 billion over the 8 year period 82-89 (inclusive) than what Reagan asked for. That's an average of $26 billion a year less than half a percentage of GDP, which is certainly well in line with what Figure 1 shows. So I don't see what's naive or deceptive about either of those figures.

The military spending vs. non-military spending difference between what Reagan requested and what funded Congress is interesting. But Brad was not making claims about anything but the aggregate level of spending. And if Reagan was truly unhappy with the military underfunding or the non-military overfunding, he could have vetoed the budget, but I confess my knowledge of the budget politics of this era is pretty thin since I was more interested in the music of Michael Jackson at the time.

Most of the other stuff in the pieces you posted reach conclusions that, while sounding good in 1996 in terms of Clinton bashing, is pretty much overturned once you take data till 2001 into account.


Posted by: achilles on March 1, 2003 09:21 AM

>>Brad, normally I respect your intellectual honesty, but this 1993 piece about Reagan "presidential" deficits is either shockingly naive or intentionally deceptive. It ignores the compounding nature of the "congressional" deficit, and it seems to assume that each year Reagan should have submitted a budget that pretended his previously-requested spending cuts had not been ignored<<

Yep. If you want to cut spending, propose to cut spending.

If you think (know?) that the Congress will shave $20 billion from your annual defense proposals and add $40 billion to your annual non-defense proposals, take that into account in your original budget submission.

But to say that Reagan really, really, really wanted to cut spending a lot more, and that Reagan's failure to follow his heart and even propose big spending cuts was the fault of the mean ol' Congress somehow--that's just not right.

Posted by: Brad DeLong on March 1, 2003 12:27 PM

There was a great piece on this in the Princeton Alumni Weekly circa 1988, written by (I think) Quandt. The conservative alumni reaction was vitriolic. They just couldn't wrap their heads around the documented fact that the deficits were caused, primarily, by Reagan's own budget.

Posted by: Andrew Lazarus on March 1, 2003 04:28 PM

"Achilles", I know Brad was making very restricted claims; that's my point.

Brad, it remains disingenous to suggest that Reagan could have achieved whatever spending cuts he wanted merely by gaming his budget proposals. Nothing I've read here rebuts the points made by the IPI analysis linked above.

Posted by: Brian Holtz on March 1, 2003 05:46 PM

>>Brad, normally I respect your intellectual honesty, but this 1993 piece about Reagan "presidential" deficits is either shockingly naive or intentionally deceptive. It ignores the compounding nature of the "congressional" deficit, and seems to assume that each year Reagan should have submitted a budget that pretended his previously-requested spending cuts had not been ignored. And of course, it does not take the time to explore the real causal factors: entitlement spending, declining inflation, the 1982 recession, the tax cuts, and the defense buildup. Readers interested in the whole story should see:

http://www.ipi.org/ipi/IPIPublications.nsf/PublicationLookupFullTextPDF/4D0C4F5676D56DA1862567F40051B077/$File/reagandf.pdf?OpenElement

http://www.cato.org/pubs/pas/pa-261.html

http://reagan.webteamone.com/reagan_budgets.html

Posted by Brian Holtz at February 28, 2003 11:32 PM<<

Well, the first piece begins by trying to confuse the reader by presenting numbers that are not adjusted for inflation. The second piece is by Stephen Moore--and I don't have time to waste detailing what's wrong with it. The third piece says what I said: Reagan never proposed the deep spending cuts that would have been required to balance the budget.

It says it with a different spin: it says that if Congress had accepted Reagan's spending figure in 1987 (say), then Reagan would have proposed deeper spending cuts in 1988. But because Congress spent a few tens of billions more in 1987 than Reagan had asked for, it was impossible for Reagan to propose deep spending cuts in 1988.

The underlying unexpressed argument seems to be that Reagan did not propose the kind of deep spending cuts needed to try to balance the budget because in the judgment of his political people they would have been unpopular. While this is true, this is something that the Reagan team should have thought about before they pushed the 1981 tax cut, isn't it?

Posted by: Brad DeLong on March 2, 2003 08:13 AM

The Delong/Holtz debate seems to over the difference between what policians say and what they do. This is basic civics textbook stuff, with a slight twist - what a politician did vs what people say he did. Washington Monthly has recently run a dandy piece on how conservatives are editing Reagan's legacy to suit their own needs (did I first see reference to it here?). See http://www.washingtonmonthly.com/features/2001/0301.green.html

Posted by: K Harris on March 4, 2003 05:25 AM

Brad writes:
> the first piece begins by trying to confuse the reader by presenting
> numbers that are not adjusted for inflation

Its more serious inflation-related sin is to claim that the disinflation caused a "spending windfall", when (as I understand things) its primary fiscal effect was revenue shortfalls due to bracket non-creep.

I think your 1993 piece similarly tries to "confuse the reader", by repeating what the IPI analysis calls "the prevailing myth in Washington that Reagan actually requested larger budgets than Congress approved, which is true only if one solely examines appropriated items and excludes entitlement spending. Yet omitting entitlements from the budget picture excludes half of overall federal spending and the very programs whose expenditures have expanded most rapidly since 1980 [..] Congress consistently permitted more spending on entitlements than Reagan requested. The Reagan budgets routinely called for money-saving entitlement reformsin health care, in the huge catalog of welfare programs, in veterans benefits, and so on. Congress killed those reforms by simply ignoring them. In other cases, Congress actually increased benefits and expanded eligibility for entitlements. [..] entitlements, the other half of the budget, were not subject to [appropriations] veto at all."

The Washington Monthly article reinforces the point: "At the start of his administration, with Social Security teetering on the brink of insolvency, Reagan attempted to push through immediate draconian cuts to the program. But the Senate unanimously rebuked his plan, and the GOP lost 26 House seats in the 1982 midterm elections".

> The second piece is by Stephen Moore --and I don't have time to waste
> detailing what's wrong with it.

It's a wide-ranging piece, but its specific treatment of the Reagan deficits -- blamed on defense and disinflation -- seems more balanced than that of your 1993 piece. You can't seriously expect the facts you cite to settle the question of the political responsibility for the 1980s deficits.

> The third piece says what I said: Reagan never proposed the
> deep spending cuts that would have been required to balance the budget.
>
> It says it with a different spin: it says that if Congress had accepted Reagan's
> spending figure in 1987 (say), then Reagan would have proposed deeper
> spending cuts in 1988.

If for FY1982 Congress had accepted a Reagan proposal to cut entitlements or eliminate a program, then he wouldn't have had to re-propose that cut/elimination seven more times for FY1983-1989; it would have been the baseline.

> But because Congress spent a few tens of billions more in 1987 than
> Reagan had asked for, it was impossible for Reagan to propose deep
> spending cuts in 1988.

Not impossible, just significantly harder. (Keep punching that "impossible" straw man; you've got him on the ropes. :-)

> The underlying unexpressed argument seems to be that Reagan did not
> propose the kind of deep spending cuts needed to try to balance the
> budget because in the judgment of his political people they would have
> been unpopular. While this is true, this is something that the Reagan team
> should have thought about before they pushed the 1981 tax cut, isn't it?

In 1981 Reagan pushed not only a tax cut but also spending cuts and entitlement reforms. Congress agreed to (and bid up) the tax cut, but accepted few of the spending cuts and none of the entitlement reforms. See David Stockman's book, pp 181-193.

If you take FY1981 as a constant baseline (I don't know the c1981 outyear projections),
the eight subsequent Reagan fiscal years included:
$766B in extra defense spending
$1132B lost to the 5-10-10 and 10-5-3 tax cuts [Stockman p268]
but also
$359B in extra tax cuts demanded by Congress [Stockman p268]
$839B in increased entitlement spending
$209B in Congressional appropriations beyond Reagan's budget requests

FY1982-89 included $947 in extra deficits beyond the Democrats' FY1981 deficit pace. Even ignoring the compounding nature of the Congress' ignored cuts and extra spending, it seems that much of that extra deficit would not have happened if Congress had done what Reagan wanted.

Reagan was probably willing to cut spending and entitlements enough to not increase the deficit he inherited. The Democrat Congress was probably willing to tax higher earners enough to effectively eliminate the deficit. Neither fact absolves either side from responsibility for the deficit. I'm tempted to say the responsibility is about even, except then I look at what each side bought. In my opinion, Reagan bought increased tax equity and victory in the Cold War, while Congress bought continued incumbency with increased entitlement payoffs to mostly-middle-class mostly-elderly voters. History will record that the great inter-generational crime of late twentieth century America was not the "Reagan" deficits, but the ponzi-style Democrat entitlement schemes that Congressmen of both parties used to purchase almost guaranteed tenure.

Posted by: Brian Holtz on March 6, 2003 12:49 AM
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