August 01, 2003

Why Is Our Press Corps So Bad? Part CCCXIV

Excuse me while I go bang my head against the wall in despair at the quantitative illiteracy--the innumeracy--of those who feel appointed to try to contribute to the debate on economic policy.

What is it this time? This time it is that Andrew Sullivan thinks that federal spending jumped by 25 percent between the first and the second quarters of 2003:

www.AndrewSullivan.com - Daily Dish: HEY, BIG SPENDER: In one quarter, federal spending jumped 25 percent. As often, wars are good for economies...

Of course it did not. U.S. federal spending is currently running at $500 billion a quarter. It did not suddenly jump to $625 billion a quarter.

What happened instead was that federal government purchases of goods and services (a much smaller total, running at $180 billion a quarter or so) grew at a 25 percent per year annual rate--which means that in a quarter it grows at a hair over 6 percent.

25% of $500 billion is $125 billion. 6% of 180 billion is about $11 billion. What does the difference mean? The first is enough spending to put about 10 million people to work for three months (to put this in perspective, note that total U.S. employment around 130 million). The second is enough spending to put about 900,000 people to work for three months. To get something wrong by a factor of ten--that's genuinely hard to do.*

Why oh why do people who cannot read a NIPA release think that they are qualified to comment on the economy? This--appalling--degree of quantitative illiteracy from people who cannot be bothered to count is a major factor lowering the quality of debate on economic policy.


*Sullivan can plead that he was led astray by the New York Times--that he just took a paragraph from an article by Kenneth Gilpin and rotely summarized it without thinking at all about whether the paragraph made sense. Gilpin wrote: "The increase in military expenditures was a big reason why federal spending rose by 25.1 percent during the [quarter]..." I'm inclined to give Gipin a pass on the "25.1 percent" because it comes late in the story, and a mildly attentive reader will recognize that "annual rate" is assumed: you have to try hard to be stupid to misinterpret it. But "federal spending" rather than "federal purchases"--the thing that is nearly $2 trillion a year instead of the thing that is $700 billion a year--is a definite no-no on Gilpin's part: you have to remember where transfer payments show up in the National Income and Product Accounts in order to replace what he says with what he should have said.

Posted by DeLong at August 1, 2003 09:53 AM | TrackBack

Comments

No doubt Andrew will soon post a retraction.

As we know, he's hell on mistakes by the BBC and the NYT, and I'm sure he'll apply that same standard to his own work.

Posted by: Ted on August 1, 2003 09:59 AM

"Why oh why do people who cannot read a NIPA release think that they are qualified to comment on the economy? This--appalling--degree of quantitative illiteracy from people who cannot be bothered to count is a major factor lowering the quality of debate on economic policy."

My aren't we feeling a little full of ourselves....

Posted by: pills on August 1, 2003 10:12 AM

As the old joke goes, there's three kinds of people - those who understand math, and those who don't.

Posted by: Joe on August 1, 2003 10:35 AM

http://www.wws.princeton.edu/~pkrugman/hyperbol.html

ECONOMIC HYPERBOLE (8/1/03)
Paul Krugman

Is there a memo I didn't get? Over the last couple of weeks there have been breathless headlines all over the news. Durable goods orders, said several papers, "soared" in June; GDP, according to today's USA Today, "rocketed" in the second quarter.

Here's a picture of those "soaring" durable goods orders: ----


----

I think these speak for themselves. Growth has definitely picked up; maybe, just maybe, 2nd half growth will be fast enough to keep up with rising productivity and a growing labor force. (I doubt it.) But the rhetoric has outrun the reality, wouldn't you say?

Posted by: anne on August 1, 2003 10:37 AM

As usual, Brad DeLong gets the numbers right (and my apologies for reading the productivity calculation wrong by missing 'shrank' with many thanks to Bakho's kind reminder). But I'm reading the BEA release and it used this 25.1% figure in reference to government purchases. BEA typically takes the percentage increase in a spending level over the 90-day period and multiplies it by 4 to "annualize" as if purchases would increase by 6.25% each quarter. Of course, any sane reader should step back and ask themselves - is it plausible that we see 6.25% increases each and every quarter for a year?

Incidentally, Stephen Moore over at NRO is advocating we remove government purchases from GDP accounts.

Also Victor Canto basically argued that the only reason why interest rates are rising is the strong economy. After all he claims, fiscal stimulus cannot have anything to do with the rise in interest rates. I think it's time Dr. DeLong write another review of NRO economics.

Posted by: Hal McClure on August 1, 2003 11:22 AM

Increasingly, I am coming to believe that the rise in interest rates since June 13, has been based on the Fed letting it be known there would be no purchase of long term bonds to bolster growth. Rates began to rise and options positions came undone and the rise continued. We had a bubble in bonds. The rise is the 10 year treasury yield was dramatic, and may become a problem for the economy, but I do not think institutions suddenly saw low inflation coming to an end.

Posted by: anne on August 1, 2003 11:36 AM

What's amusing to me is the eventual spin the next time new numbers emerge. Sullivan will probably claim that the economy has collapsed when the military spending retreats, despite it only contributing 5% to the total GDP numbers.

Posted by: Reed on August 1, 2003 11:38 AM

This sort of thing has been a huge gripe for me as well; it also used to perplex me when journalists or columnists would refer to "$1 trillion" tax cut packages, "$15 billion" spending packages etc. without mentioning how many years the expense was distributed over.

Posted by: tennin on August 1, 2003 11:48 AM

This sort of thing has been a huge gripe for me as well; it also used to perplex me when journalists or columnists would refer to "$1 trillion" tax cut packages, "$15 billion" spending packages etc. without mentioning how many years the expense was distributed over.

They seem to use numbers like shamanistic tokens without really caring what they mean.

Posted by: tennin on August 1, 2003 11:52 AM

I don't see what the big deal is. Most people I know are horrible with numbers, particularly statistics. I always assume people's numbers are off a bit anyway.

Posted by: Businesspundit on August 1, 2003 12:20 PM

Maybe he is just distracted over the issue of whether or not gays are welcome in the GOP?

http://www.washtimes.com/op-ed/20030731-081958-5839r.htm

Posted by: bakho on August 1, 2003 01:11 PM

It's not an example of innumeracy so much as it is an example of being unfamiliar with economic jargon.

A person could be terrible at Math but have all the economic terms memorized, or a person could be brilliant at Math and be unfamiliar with the jargon used by economists.

Sullivan might be better at Math than you are!

It's really more of a vocabulary thing I think.

Posted by: Graham Lester on August 1, 2003 01:46 PM

>>I don't see what the big deal is. Most people I know are horrible with numbers, particularly statistics.<<

Well, do the numbers mean anything? Or are they just decorations to hang on an argument, with positive numbers meaning "Yay for the economy! Paul Krugman is a dweed!" and negative numbers meaning "Boo for the government!"?

Posted by: Brad DeLong on August 1, 2003 01:50 PM

Ah yes. That ooooold academic tradition in which numbers correspond to actual stuff.

Rain Man would have been very good at the blogging game. When I give speeches about the national debt, I hold up my wallet, and proudly anounce that I made $40,000 last year. Then pull out my credit card, and say: "And I have $23,000 in debt." [big smile].

6.7 trillion, 25% increase in aggregate spending, 8 billion deficit, etc. etc. Without context they're absolutely meaningless. $23,000 on credit - every person that I have ever said this to understands how painful credit card debt is. They understand the choices. The interest. Whamo! Economics becomes very vivid.

Posted by: Saam Barrager on August 1, 2003 02:42 PM

So if the government is spending enough to put almost one million people to work for 3 months and the economy is shedding 10s of thousands of jobs, then the employment picture cannot be very good. Ford wants to cut 20% of its blue collar mfg jobs. These are 21,000 union wage jobs that are difficult to replace.

Yes the numbers mean something but understanding requires learning and learning requires effort. It is a lot less effort to shoot the messenger (Krugman) than it is to intellectually address the problems. Is it unfair to say that Krugman wants a recession and then bash him for it? Yes. The straw man tactic has been commonly used in political discourse. Fiscal policy is an area where politics and economics intersect. The political attacks need to be recognized for what they are and rebutted politically.

The only option is to fight back and hard. Is Sullivan merely stupid? did he make an editorial mistake or is he deliberately trying to mislead his readers? A consistent chorus of complaint about bad and misleading reporting is the only way to clean it up. If it is in a major newspaper, write the ombudsman and demand a correction. It works.

Email Sullivan about his idiotic remarks about Krugman @

andrew@andrewsullivan.com

Complain about Luskin and Moore idiocies @

nronline@nationalreview.com

Write or call:
National Review
215 Lexington Avenue
New York, New York 10016
212-679-7330

Luskin you can write directly @

I wrote to tell Luskin he is an idiot once and he responded in a timely fashion.

Posted by: bakho on August 1, 2003 03:02 PM

People make mistakes outside their special little realm of experience, that's all.

I've seen journalists who don't know math make many bad mistakes with numbers. I've seen economists who know math make many bad mistakes regarding the real world. Everybody does it.

We should all realize it can always happen to us, and not get *too* worked up about it.

Posted by: Jim Glass on August 1, 2003 03:10 PM

I don't accept that Jim. Not in the case of Sullivan.

If you are going to constantly attack Krugman (as he once again does in the post Brad links to) you should make sure you have "some" inkling what you are talking about. Otherwise you simply reveal yourslef as a fool. As Sullivan once again has done.

Same goes for Luskin.

At least Kaus has the good sense not to comment on economics most of the time.

Posted by: GT on August 1, 2003 06:57 PM

What you need to do to inspire the rest of us, who are not macroeconomics geeks, is to turn much more of this into English. I think I know what you're getting at but until it's tranlated I can't be certain.

Write outside the box.

Posted by: anita jensen on August 2, 2003 12:09 AM

What you need to do to inspire the rest of us, who are not macroeconomics geeks, is to turn much more of this into English. I think I know what you're getting at but until it's tranlated I can't be certain.

Write outside the box.

Posted by: anita jensen on August 2, 2003 12:10 AM

Fascinating. I've just flipped here from Jane Galt's website -- specifically, her Aug. 1, 6:42 AM thread on "The Economist" -- in which Jim Glass flays Krugman alive for supposedly making an outrageous mistake on the subject of Social Security, sneers that "he doesn't have his usual excuse of not knowing what he is talking about", and says that "What with all the lather from his mouth that's blown up into his eyes apparently having done permanent damage as far as his ability to see simple facts, maybe he should have been fitted for a seeing eye dog too." Now we find him murmuring that it's unfair to flay Sullivan for making an outrageous mistake during an attack on Krugman because "People make mistakes outside their special little realm of experience, that's all" -- although, where Krugman is concerned, Sullivan and lather are very well acquainted (remember him accusing Krugman of being a pawn of Enron?) Can you say "double standard", Jim?

(That being said, I'm also interested in seeing DeLong's response to Glass' actual accusation about Krugman's apparent Social Security howler.)

Posted by: Bruce Moomaw on August 2, 2003 06:36 AM

Shouldn't it be possible to release the NIPA data
as a spreadsheet or hypertext document where the underlying formulae and base data are there for all to see? Wouldn't that reduce misunderstandings?

Posted by: rdb on August 2, 2003 07:39 AM

Please what is the supposed howling mistake made by Paul Krugman on Social Security? I sure never noticed such a mistake.

Posted by: jd on August 2, 2003 09:24 AM

To "jd": Here's the relevant quotes from Glass' explosions at Krugman in Jane Galt's "Asymmetrical Information" blogsite ( www.janegalt.com , Aug. 1, 6:42 AM entry):

"Krugman... said the entire future Medicare and Social Security shortfall is *less* than, and therefore *caused by* the Bush tax cuts!

" 'The present value of the revenue that will be lost because of the Bush tax cuts ... would have been more than enough to "top up" Social Security and Medicare, allowing them to operate without benefit cuts for the next 75 years..' ( http://www.pkarchive.org/column/032103.html )

"That in spite of the fact that GAO, Gale, etc. say Medicare and SS spending will grow by about 10 pts of GDP just by 2040 and keep accelerating upward from there, while the Bush tax cuts at most would amount to a tad over 2% of GDP total...

"Before Bush was elected (and his tax cuts passed, of course) GAO's estimates of the annual deficits to come from Medicare and SS on current law ended around 2040 because they exceeded the entire size of government today. And *everybody* knew of that general problem...

"In 2000 GAO estimated that on current law the annual deficit would be *20 pts* of GDP by around 2045, after which it stopped counting because it said that was too much to be plausible (e.g. http://www.gao.gov/new.items/d01385t.pdf , figure 2).

"BTW, I am amazed how little comment this particular Krugman column drew from his critics. It is absolutely his worst of all-time, because (1) the topic is within his own field of purported Nobel-quality expertise -- so he doesn't have his usual excuse of not knowing what he is talking about; and (2) to believe it requires ignorance to the point of wilfullness, or perhaps to put it in Krugman's terminology, 'lying'...

"Oh, it was a mistake all right. Even PK's biggest defenders have admitted it elsewhere, and how he came to do it in their opinion, although PK himself never publishes meaningful corrections...

"Krugman really should have had his membership in the American Economic Association revoked for that one. And what with all the lather from his mouth that's blown up into his eyes apparently having done permanent damage as far as his ability to see simple facts, maybe he should have been fitted for a seeing eye dog too."

As I say, I'm interested in what response DeLong (and Krugman himself) have to this. But then, as I also said, I find it amusing that Glass explodes at Krugman for "lathering", "not seeing simple facts", and shooting off his mouth on subjects on which "he doesn't know what he's talking about" -- and then suddenly turns into Mother Teresa when Sullivan does exactly the same things while attacking Krugman.




Posted by: Bruce Moomaw on August 2, 2003 03:50 PM

With Glass and the other Krugman-bashers I think it's a genetic thing with the brain chemistry. I don't think it would be fruitful to try to figure out their reasons.

The vehemence of the attacks on Krugman makes me think that there are a lot of people (again, perhaps for genetic brain chemistry reasons again) who really don't believe in a free press or a competititive two party system.

For a comparison, take me, for example. I'm at the left wing of the Democratic party, I'm a big advocate of political hardball, and I have temper-control problems. But I don't spend anywhere near the time bashing the right wing media that these guys do on Krugman, nor do I get as vehement. To the extent that I do so, it's usually the likes of Ann Coulter, who is thoroughly dishonest and inaccurate (no, that is NOT a matter of opinion) and semi-fascist too.

To be more specific, no one ever asks to have George Will fired, even though he's hard-core right-wing, lacks Krugman's intellectual gifts, and has a history of ethical problems.

Seemingly dozens of people, big and small, are working on getting Krugman fired. I really think that it's time for someone (besides me) to call the Krugman-bashers on their soft-fascist behavior. Because that's what it is.

Posted by: zizka on August 3, 2003 08:48 PM

I looked up the PK article and then I looked up the GAO report. The PK article talks about SS and Medicare. He says absolutely nothing about Medicaid. Medicare and Medicaid are two entirely separate programs.


The GAO report is focused on all government spending and lumps Medicaid and Medicare into a single category. In other words, these are apples and oranages. PK is correct in the column he wrote. Again this is the right wing straw man argument so often brought into play. Make believe that PK (or other target) said something he did not say. PK said the tax cuts were bigger than SS and Medicare shortfalls. Glass argues that the tax cuts are not larger than the shortfalls in SS and Medicare PLUS MEDICAID. Therefore PK is wrong.

Are these people too stupid to read or are they intentionally making these straw man arguments?

Posted by: bakho on August 4, 2003 01:18 PM


Previously, this notice was sent out to the authoritative websites listed as "humorous" on a major anti-Bush compilation website. It should be self-evident why that would be only sensible.

After some thought, however, it was decided that limiting this notification to only so-called humorous sites was silly. If certain humorous websites can be considered authoritative, then surely certain "serious" websites should also be likewise. So, that's why you're received this notice.

Now then, if you'd like to know what the doofus should've said, please consider clicking on the hyperlink below. warmest regards


Your Friend A Alexander "Bogey" Stella considered the following article
interesting and wanted to send it to you.


''Bring'em on,'' said the doofus bombastically
(Date: 2003-07-28 12:57:42)
Topic: A. Alexander Stella

URL: http://www.bcvoice.com/modules.php?name=News&file=article&sid=130



Posted by: A Allexander Stella on August 6, 2003 08:01 AM

For what it's worth, I have found that when people with whom I've been trying to have an intelligent, polite discussion suddenly get ugly and lash out, it's almost always because I've gotten just a bit too close to the motherload of their own personal sacred bullshit.

Such outbursts should be considered gifts because, without realizing it, they're telegraphing their weak points.

Posted by: Hieronymus Braintree on August 7, 2003 06:19 AM
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