Brad DeLong's Semi-Daily Journal (2004)

Yes but our current press corps does read blogs. They wouldn't have looked the number up on their own, but will notice it (at least if atrios links to it)

Please understand that spending for defense and home security have risen significantly, while spending for other programs has not risen by more than a trifle. The Heritage Foundation has misled journalists to believing that spending is out of control, but that is not so. The problem is not increased spending on defense, home security, or especially social benefit programs. The problem is falling government revenue.

Why are smart economists peddling Heritage Foundation misleads about government spending being the problem in government accounts?

http://www.cbpp.org/

President's Budget Contains Larger Cuts In Domestic Discretionary Programs than Has Been Reported - 2/5/04

The budget books the Administration released this week omit information on the President's proposed funding levels for programs in years after 2005, but the OMB documents that — underlie the budget show the Administration is proposing cuts in domestic discretionary programs that reach $50 billion a year by 2009.

http://www.cbpp.org/1-7-04bud.htm

While federal spending has risen in the past few years, it remains far below peak levels. The standard measure used to examine changes in federal spending over extended periods of time is to measure spending as a share of the economy. Federal spending equaled 19.9 percent of the economy (i.e., of the Gross Domestic Product) in fiscal year 2003. This was lower than in every year from 1975 through 1996.

Nearly two-thirds of the increase in spending in 2003 that has resulted from actions that federal policymakers have taken since January 2001 occurred in the areas of defense, homeland security, and international affairs (which includes expenditures in Iraq and Afghanistan).

Furthermore, Congress and the White House substantially slowed the growth of funds for domestic appropriated programs outside homeland security once budget surpluses disappeared and deficits returned.

Total appropriations for all discretionary programs — including defense and homeland security programs — will rise 3.4 percent in fiscal year 2004 before adjusting for inflation, and just 1.7 percent after adjusting for inflation.

http://www.cbpp.org/1-26-04bud.htm

On the revenue side:

CBO projects that revenues will fall to 15.8 percent of the economy in 2004. This is the lowest level since 1950.

CBO projects that income tax revenues (including both the individual and corporate income tax) will equal 8.0 percent of the economy in 2004. This is the lowest level since 1942.

Without the tax cuts enacted in recent years — which will reduce revenues by $264 billion in 2004, according to Joint Committee on Taxation estimates — revenues as a share of the economy would not be close to a historically low level.

On the spending side:

CBO estimates that spending will constitute 20.0 percent of the economy in 2004, a lower level than in any year from 1975 through 1996.

If the nation were devoting the same share of the economy to government expenditures in 2004 as it has, on average, since 1980, expenditures would be $120 billion higher this year.

The large majority of the spending increases that have resulted from legislation enacted since the beginning of 2001 have come in the areas of defense and homeland security.

http://www.cbpp.org/1-26-04bud.htm

Key Facts That Emerge from the CBO Data

In 2004, as a share of the economy:

Federal revenues will fall to their lowest level since 1950, during the Truman Administration.

Federal spending will be lower than in every year from 1975 through 1996 (and thus will be lower than throughout the administrations of Presidents Carter and Reagan and the first President Bush).

In explaining the shift from a large surplus in 2000 to a large deficit in 2004, the drop in revenues since 2000 accounts for more than three times as much of the fiscal deterioration as the increase in expenditures.

Radical-conservatives are making a false case for George Bush as a government spender because these folks wish to slash social benefit spending to ribbons.

http://www.cbpp.org/2-1-04bud.htm

Measured as a share of the economy, funding for domestic discretionary programs outside homeland security has barely budged.

Funding for these programs equaled 3.4 percent of the Gross Domestic Product (the basic measure of the size of the economy) in 2001; funding for these programs still equals 3.4 percent of GDP in 2004.

By contrast, funding for defense, homeland security, and international affairs has jumped from 3.4 percent of GDP in 2001 to 4.7 percent of GDP in 2004.

Thus, virtually all of the increase in appropriations since 2001, measured as a share of the economy, has occurred in appropriations for defense, homeland security, and international affairs.

While you smart folks discuss the numbers, read what the NY Review of Books had to say about the press:

http://www.nybooks.com/articles/16922

Not a pretty sight, it concludes.

I like anne's posts -and thank her for the links here. And I agree with her that using statistics from weirdo groups like the Heritage Foundation or Cato Institute is a bad idea. It seems like a nice device because it can be used to say "see even right wingnuts agree." But their analyses are so often looney, or so hilariously wrong upon futher inspection, or twisted to push their bizarre agendas, that it is just not worth it.

I do agree that it is disappointing that these very famous and VERY HIGHLY PAID journalists seem to know absolutely nothing and you can mislead and lie about anything of substance in front of them and they let it slide. How could anyone spend even an hour preparing for a show like this and let that howler go by?

Of course, if Russert found a clip of Bush saying "might not" and another of him saying "may not" regarding some inside baseball horse-race type campaign or Washington-gaffe thingee, that would be worth ten minutes and a inquistion style grilling. With maybe clips of Bush sayig "might not" and "may not" played ten times.

I also listened to Meet the Nation, or Press the Face, or the whatever it's called CBS talk show. The whole show was spent grilling Dean on worthless horse race style campaing junk. I noticed that the only quotes from that show that made the news later were things Dean interjected, apparently to keep the appearance from being a complete waste. Dean has laid out his decision making about staying or leaving the primaries pretty clearly. So, hey! what better thing for the interviewers to do than parse and analyze and play ultra-minute getcha-gotcha games on nano-isses of his last two weeks on the campaign?

The mainstream political press in this country are worthless, or worse than that. There must be thousands of undergad college students that could do better. Why not let some of the interns have a crack at a few of those shows?

I watched a repeat of the interview after reading this comment. Given that so many not normally given to criticizing Dubya were disappointed with his showing, it may turn out to be a good thing that Russert was so easy on the Prez since the Bushies can't get out of it simply by blaming Russert for somehow being unfair.

If you go to the latest budget document here:

http://www.whitehouse.gov/omb/budget/fy2005/pdf/hist.pdf

you can find more of the discretionary outlays on Table 8.7. To continue Kash's table:

2003: $826 bn, +12.5% change
2004: $908.2 bn, +10% change
2005: $914 bn, +1% change

There are estimated numbers beyond that, some numbers even dropping, but frankly, IMO, both the White House and the CBO pull those numbers out of their asses. I wouldn't even bet the farm on the 2005 numbers at this point. Congress has yet to chew that budget up and spit it out. Still, there is hope that we can turn it around.

Subtracting out defense spending from discretionary makes the numbers look a little better, but the 2002 rise was still 12.3 percent, and 2003 9.2 percent, a lot higher than the 4-6 percent rises during the latter part of the '90s in non-defense discretionary spending.

As a percentage of GDP the numbers also look a bit better. Table 8 of the CBO reference

http://www.cbo.gov/showdoc.cfm?index=1821&sequence=0#table8

shows that the 2003 level of 7.6% is historically low, although the level from 1995-2002 was lower.

Not much comfort to those who are looking for smaller government, though.

err aren't those figures you've used current dollars not constant dollars?

If a first grade student made that sort of mistake you'd call him what? An idiot?
The better comaprison is that, at a comparable stage in the business cycle, 1992, spending was a full percentage of GDP point higher.

Anne's right about the revenue side. For example, corporate tax receipts (in current dollars) peaked in FY 2000 at $207 billion, but in FY '03 had slumped down to $132BB -- the lowest amount since 1993. (Table 2.1 at http://www.whitehouse.gov/omb/budget/fy2005/pdf/hist.pdf) Table 2.2 shows that the corporate income tax accounted for 7.4% of Federal receipts in FY '03 -- over the last 60 years only 1983 came in lower.

One also wonders about the effect on capital spending if the 50% "bonus" depreciation allowance actually expires at the end of this year as scheduled. By coincidence, that's right after the election.

Even looking at the real dollar figures is misleading since this does not take into account economic growth, which determines the governments ability to fund spending and the stage of the business cycle; in recessions discretionary needs increase and discretionary fiscal spending is a normal and accepted policy to stimulate the economy. So lets look at discretionary spending over the last business cycle:

1990 8.7
1991 9.0
1992 8.6
1993 8.2
1994 7.8
1995 7.4
1996 6.9
1997 6.7
1998 6.4
1999 6.3
2000 6.3
2001 6.5
2002 7.1
2003 7.6

The figures show that spending in the current year is lower than that in 1994, and considerably lower than in 1992-3 which is the comparable point in the earlier upswing and so the appropriate point to make a comparison. So is Bush fiscally reckless? Only if you're reckless with your figures.

Giles wrote, "err aren't those figures you've used current dollars not constant dollars?

"If a first grade student made that sort of mistake you'd call him what? An idiot?"

But Bush made no reference to constant dollars. While it's obvious to those of us who are economics-minded that constant dollars should be the *default*, it's simply not so in common parlance. So Brad and the posters here are interpreting what Bush said, not some derivative spin on what Bush *could* have said.

Giles wrote, "in recessions discretionary needs increase and discretionary fiscal spending is a normal and accepted policy to stimulate the economy...spending in the current year is lower than that in 1994, and considerably lower than in 1992-3 ... . So is Bush fiscally reckless? Only if you're reckless with your figures."

Red herring. What's at issue in this discussion is Bush's level of spending, not the derivative issue of whether such spending is appropriate *fiscal* policy.

You also entirely miss the point about Bush's fiscal recklessness: Bush et al. say the focus should be on cutting spending, not rescinding tax cuts, yet he's shown no propensity to really cut spending, nor does he have a real plan to cut spending, even when the economy is likely to be heating up in the out years.

There is a pretty basic semantic problem at work here, more basic than "real vs nominal". Russert says "biggest spender" and Bush answers "not so", citing a slower pace of growth. I know that the debate has for a very long time been about shares of GDP or percent change in outlays, but that is not what passes for "bigger" or "smaller" in the common parlance. One dollar more is bigger. One percent more is bigger. Bush whipped the conversation around to being about the pace of growth, not the size, of spending. Russert stood there with his bat on his shoulder and took a strike.

One thing to take away from the rest of the comments here - budgets are more complex than any one bit of math can reveal. Revenue growth vs spending growth, real vs nominal, discretionary vs non-security discretionary - all important distictions. Playing "gotcha" over whether Bush is the "biggest spender" is a losers game. He will find some way to say "not so", and he has a bigger microphone than anybody. Raise the level of debate just a tad, and see what happens.

Giles: "The figures show that spending in the current year is lower than that in 1994, and considerably lower than in 1992-3 which is the comparable point in the earlier upswing and so the appropriate point to make a comparison."

Even using those figures, I -still- cannot make the following sentence true:

"If you look at the appropriations bills that were passed under my watch, in the last year of President Clinton, discretionary spending was up 15 percent, and ours have steadily declined."

Which means, AFAICT, that what Bush said remains "obviously and verifiably untrue".

Nice argument!

Anne

anarch in 1993 discretionary spending was 8.2% of GDP its now less 7.6% so less.

To the rest the nominal vs real vs % GDP is a not a semantic argument - its a very political argument. Someone saying that anyone who raises real government spending is reckeless is pretty right wing. Someone who calls any rise in nominal spending is pretty much off the scale.

E.g suppose that inflation grew at the fairly pedestrian rate of 3% pa. With no increase in nominal spending that would mean that real spending would halve every 20 odd years. If real gdp grew at 3% over the same period then government spending as a percnetage of GDP would halve every 12 years - to all intents government would diappear in 20-30 years.

Its not just a matter of semantics - the figures you use will have very real implicaitons for what sort of policitcal program you propose.

@jml: "Of course, if Russert found a clip of Bush saying "might not" and another of him saying "may not" regarding some inside baseball horse-race type campaign or Washington-gaffe thingee, that would be worth ten minutes and a inquistion style grilling. With maybe clips of Bush saying "might not" and "may not" played ten times."

I fully agree
Because of this decisive role of television in our democracies I keep argueing that we have to get rid of direct elections and head towards indirect elections before it is to late.

Giles: "anarch in 1993 discretionary spending was 8.2% of GDP its now less 7.6% so less."

So what? I didn't say anything about 1993's discretionary spending; I'm disputing Bush's actual claim, viz:

"If you look at the appropriations bills that were passed under my watch, in the last year of President Clinton, discretionary spending was up 15 percent, and ours have steadily declined."

Let me reiterate: even using your numbers, I cannot parse that sentence in any way that is true.

[I should add that Calpundit has a potential explanation for the discrepancy, but it doesn't strike me as any more plausible than anything here.]

The link didn't go through the first time; here it be:

http://www.calpundit.com/archives/003219.html

can someone explain what is meant by real/nominal budget deficit/surplus? what is the benefits of stating a budget in real terms as compared to nominal?

i would appreciate if you could send your reply to kang_oc@fujioil.com.sg

thank you

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