June 28, 2004

The Lion's Share, National Review Style (Why Us? Department)

Crossing my desk this morning. We really do need a much better press corps. All I can say is that we must all have been very, very, very bad in a previous life to have to suffer this in our current one...

It is, however, at one level, quite funny:


Sadly, No! takes a look at David Frum's analysis of the Canadian economy:

David Frum: Between 1993 and 2003, Canada’s total gross domestic product – the value of all Canadian-made goods and Canadian-provided services – rose by two-thirds. [...] Where did that extra production go? That’s the question answered by the second number, 45%. The lion’s share of Canadian economic growth in the 1990s was pocketed by government, especially the federal government. Between 1993 and 2003, federal revenues rose by 45%, or almost $60 billion....

And Sadly, No! calls for backup. Sadly, No! criticizes Frum by performing a reducto ad absurdum, pointing out that Frum's "methodology" could be applied to critique the Reagan years in the United States as a time when big government grabbed the "lion's share" of growth for itself.

Let me take on the swamp of misinformation here in the pages of National Review more directly. Let's start with some basic numbers underlying Frum's "calculations". Canada's annual GDP today is CAN$1.23 trillion (about $1 trillion U.S.). Growing by 2/3 since 1993, it was some CAN$0.74 trillion in 1993: it is now some CAN$0.49 trillion higher than it was in 1993. Between 1993 and 2003, Canadian federal revenues did rise by 45%, or CAN$60 billion. That means that Canadian federal revenues were CAN$133 billion in 1993, and CAN$193 billion in 2003, which IIRC is indeed in the ballpark.

Frum claims that increased federal revenues took up "the lion’s share of Canadian economic growth in the 1990s." The point seems to be that the growth of revenues--45%--is big relative to the growth of GDP--67%.

But in actual fact, the Canadian economy grew by CAN$0.49 trillion. Canadian federal revenues rose by CAN$0.06 trillion. David Frum is indeed correct--if 1/8 can be called the "lion's share." But most of us would conclude from this not that the Canadian federal government is devouring the economy, but that the lions seen near National Review's offices are very strange milquetoast beasts indeed.

To put it another way, Frum's numbers imply that Canadian federal revenues were 18% of GDP in 1993, and are only 16% of GDP today. If politicians Frum liked had been in power over those years, he would now be ferociously and loudly roaring about the conservative policies that have successfully shrunk the relative size of government.

Why does Frum think--as he appears to--that increases in the government have consumed 2/3 of economic growth--45 as a share of 67--rather than 1/8 of economic growth--60 as a share of 490? As a Harvard man, I cannot shrink from the necessary and inevitable conclusion: Yale must be in some way responsible.

Posted by DeLong at June 28, 2004 12:36 PM | TrackBack | | Other weblogs commenting on this post
Comments

As a Harvard man, I cannot shrink from the necessary and inevitable conclusion: Yale must be in some way responsible.

That might be unfair. I'm not sure they teach arithmetic at Yale.

Posted by: alkali on June 28, 2004 12:43 PM

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OT:
For more astonishing right-wing stupidity, check out this Instapundit post:

http://www.instapundit.com/archives/016247.php

He basically tries to smear France's human rights record by citing an article in... THE NEW STATESMEN! Yes, the same magazine that regularly gives voice to John Pilger and claimed that Americans were not entirely undeserving of the 9-11 attacks now meets Reynolds' criteria for quality journalism.

I wouldn't be surprised if a future Instapundit post read something like this:

Writing in his Mein Kampf book, Adolf Hitler had some choice words to say about the French:

"They have oppressed the German people for years, denying us the proper living space and crippling us with their unfair demands!"

Indeed. Read the whole thing.

(Note: I don't know what Hitler had to say about France in his autobiography, if anything at all. But I imagine he wasn't very kind to them, unless Napoleon was involved.)

Posted by: Brad Reed on June 28, 2004 12:43 PM

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Reminds me of the story of the Harvard student who transferred to Yale and raised the average quality at both schools in the process.

Posted by: Gwailo on June 28, 2004 01:11 PM

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Damn. If I were a conservative, I'd be an economics journalist! I am quite capable of making erroneous calculations on the backs of envelopes.

Posted by: zizka / John Emerson on June 28, 2004 01:13 PM

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On an only slightly related subject -- didn't "lion's share" once upon a time mean "the whole thing" on the notion that the lion gets whatever the lion wants?

Posted by: kharris on June 28, 2004 01:41 PM

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The problem is that Frum will be on Hardball, but Chris Matthews won't ask him why he is an idiot. Heck, all the work is done for him above. He will pander to him. This is just egghead stuff to television producers. Who cares about getting it right. What matters is how well the headline reads. Does it grab your attention? This all relates to the thread about punditism and who to attack and who to lay off of on the way up the pundit food chain.

Posted by: cal on June 28, 2004 01:46 PM

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On an only slightly related subject -- didn't "lion's share" once upon a time mean "the whole thing" on the notion that the lion gets whatever the lion wants?

I think it means "everything but the leavings" on the theory that the lion gets everything it wants, and leaves the rest for everyone else to fight over after the lion is full.

Unreal -- I guess they pay Frum for this kind of stuff, which is sad. I consider myself weak on macroeconomic theory, monetary policy, and so on, but at least I can do basic mathematics.

Posted by: paperwight on June 28, 2004 01:47 PM

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Maybe we should apologize for berating Moore and Kudlow for their many errors. At least they are better than Frum (I think).

Posted by: Harold McClure on June 28, 2004 01:49 PM

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The worst part of this story is that Frum's piece didn't even run in the National Review. He was just excerpting his own piece in The National Post. So one of the major newspapers in Canada is printing complete nonsense about its own country's economy. I guess Brad needs a slight variation on his usual headline: "Why oh why can't Canada have a better press corp?"

Even after reading this a few times, I still can't understand how Frum could have made this mistake, especially since he includes the $60 billion number himself. Could he really think $60 billion was the lion's share of Canadian GDP growth over a decade? How small does he think Canada is?

Posted by: Steve Carr on June 28, 2004 02:07 PM

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It's amazing that From manages to so completely misinterpret the numbers. A moment's thought shows, even without doing the math, that the 45% / 67% numbers naturally point in exactly the opposite direction than where he tries to twist them.

The fact that federal revenues rose 45% while GDP rose 67% means exactly that revenues were rising slower than GDP. And that automatically means that federal revenues were FALLING as a fraction of the economy. And yet he tries to say the exact opposite. It's amazing, really.

Posted by: Jonathan Dursi on June 28, 2004 02:15 PM

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Gwailo writes:
>
> Reminds me of the story of the Harvard student who
> transferred to Yale and raised the average quality at both
> schools in the process.

Ah, but who got the lion's share of the gain?

Uh, wait a minute...

Posted by: Jonathan King on June 28, 2004 02:17 PM

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Are you sure that's not a parody site,
or maybe NR has been hacked?

Because NOBODY could be that stupid in public.

Could they?

Posted by: Bob O on June 28, 2004 02:19 PM

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Brad, Frum is not being stupid. He is simply lying. David Frum's bread-and-butter is savaging his former country''s economic policies with whatever means necessary - including simple mistruth - to sell them to the neoconservative media sources in the United States.

Perhaps Frum is just bitter that his name has become synonymous with "right-wing nincompoop" in Canada, or that Canada still tends to view the word "conservative" with the same distrust that America views the word "liberal". But taking David Frum's word about anything Canadian at face value is in any case a mistake.

Posted by: Bird on June 28, 2004 02:22 PM

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Frum isn't a liar, it's just that the point he tried to make was extremely tempting for someone with that political orientation. If your basic arithmetic is impaired, and intro economics little more than fog, it makes it that much easier. But then one might wonder what knowledge does David Frum have that qualifies his political commentary. Clearly not macroeconomics, as demonstrated.

I don't read David Frum. Does he usually do his homework, or is it more an ideological 'filling in'?

Posted by: Shai on June 28, 2004 03:25 PM

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This is gross extravagance! Whatever they pay Frum to make egregious errors, I offer to save his sponsers money by making them for 22% more.

Posted by: For Sale Cheap on June 28, 2004 03:42 PM

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Any slam at Canadian policy, political or economic, that appears in the National Post is usually as dumb and skewed at this. The real conservative paper is the Globe and Mail. NP is the wannabe neo-con paper, launched specifically to bring down the Liberal Party of Canada.

Isn't David Frum the clown who invented that dangerous phrase, "axis of evil?" So what do you expect?

Posted by: sm on June 28, 2004 04:35 PM

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As someone at Sadly, No pointed out, a fact that may not be known to many Americans, the Liberal Party for all their lack of principles and sometimes out and out corruption, have balanced the budget in Canada and indeed brought it into surplus for a number of years in a row. Whether that will be good enough to get them re-elected we shall see tonight.

Posted by: sm on June 28, 2004 04:38 PM

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"Frum claims that increased federal revenues took up 'the lionís share of Canadian economic growth in the 1990s.'"

No, he didn't. He said:

"The lionís share of Canadian economic growth in the 1990s was pocketed ***by government***, especially the federal government." [my ***]

We don't appear to have enough information to judge if he is correct. What isn't quoted by Prof. DeLong is: "Between 1993 and 2003, disposable after-tax income rose by only 31% per person in Canada." Which is less than half the rise in GDP, and less than 70% of the federal govt's 45%.

What happened to local and provincial revenues?

Posted by: Patrick R. Sullivan on June 28, 2004 04:47 PM

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Frum once claimed on a televised CBC debate that Canada's zero-inflation policy was necessary to avoid "hyperinflation" along Weimar lines.

This was in the early 1990s, a period of structural adjustment following Canada's accession to the FTA when unemployment rose to around 9%.

Posted by: trevelyan on June 28, 2004 05:44 PM

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"What happened to local and provincial revenues?"

Well, funny you should ask. Provincial revenues also declined as a percentage of GDP, from about 18.5 % in 1993 to about 17% in 2003.

http://www.fin.gc.ca/facts/fbcfacts6_e.html

So, for Frum's thesis to be correct, local governments must have been on a real rampage.

Posted by: Kuas on June 28, 2004 05:56 PM

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Frum is saying, then, that if I get a ten percent raise at work, and my cable bill goes up ten percent, it follows that my cable bill has swallowed up all my raise?

Posted by: Jeffrey Kramer on June 28, 2004 06:11 PM

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Here's some more figures showing total tax revenues for Canada over time:

http://www.oecd.org/dataoecd/6/63/1962227.pdf

Data only goes to 2001, but support for Patrick's theory is noticeably absent. 35.9% in 1990, 35.2% in 2001.

Posted by: Kuas on June 28, 2004 06:20 PM

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>>Data only goes to 2001, but support for Patrick's theory is noticeably absent.
>>

Correct me if I'm wrong, as I'm just a casual observer here, but this seems to be a common trend.

When does Frum go on Hardball?

Posted by: Abhishiktananda on June 28, 2004 08:44 PM

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Frum is saying, then, that if I get a ten percent raise at work, and my cable bill goes up ten percent, it follows that my cable bill has swallowed up all my raise?

Pretty much.

Posted by: Sadly, No! on June 29, 2004 01:51 AM

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Patrick's theory is that the numbers don't add up. For instance, 60 billion is NOT 45% of .74 trillion, but about 8%.

IF, GDP is actually up by 67%, where did it go? Canada's statistics appear to be presented in a way that obscures that:

http://www.statcan.ca/english/Pgdb/econom.htm

Posted by: Patrick R. Sullivan on June 29, 2004 07:16 AM

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Actually, if (a big if) Patrick were a scrupulous reader, he would have noted the phrase "especially by the federal gov't." Since we already know that the Fed's share was quite small (and shrinking), and we are told by Frum that their share was bigger than other gov'ts ("especially"), we know from internal evidence that Fed + Prov + Local /= Lion's Share.

Posted by: JRoth on June 29, 2004 07:18 AM

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The obvious follow-up questions to Patrick Sullivan's note about per-Canadian-capita income are: how much of the GDP was paid to investors outside Canada and how would per-capita income be affected if most of that rise in GDP went into a small number of Canadian pockets?

Posted by: Bob Webber on June 29, 2004 07:38 AM

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Patrick has invented a new accounting identity, which says GDP = disposable income + tax revenues. Perhaps he is collaborating with Tom Nugent.

Posted by: Kuas on June 29, 2004 09:38 AM

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>Perhaps he is collaborating with Tom Nugent.

More likely Ted Nugent.

Posted by: a different chris on June 29, 2004 04:49 PM

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As a Yalie, I think the problem with Frum was the three years he spent at Harvard Law. Harvard sucks, you know.

Posted by: Scott on June 29, 2004 06:15 PM

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As someone who went to neither Harvard nor Yale, might I just point out that "the lion's share" most likely originated from Aesop's Fables? And, while it was indeed the largest share, it was not the entire thing.

Posted by: PaulB on June 29, 2004 09:07 PM

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The simple sad reality is that David Frum is a shill that pretends to be a hack pretending to be a competent person. He is excellent at spinning and twisting reality so that it consistently follows the belief structure of his ideological brethren. Anyone that takes what this man says at face value is only setting themselves up for a fall.

I expect his mother has been spinning in her grave so much at her son's blatant manipulation and deceptions in the media that one could use the energy created to power a small country. Barbara Frum was one of Canada's most respected journalists, and a stickler for accuracy. If she were interviewing him, he would not be able to get away with all the nonsense he does, and she would have been able to do that not because she was his mother, but because she was excellent at forcing interviwers to answer questions without appearing as a bully, and did her homework on her subject beforehand. Her son has brought much shame to her name.

Oh yes, he was responsible in part for "axis of evil", though as he had concieved it, it was "axis of hatred" and someone else changed hatred to evil, or so the story goes.

Posted by: Scotian on June 29, 2004 09:44 PM

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Sounds like a lot of abuse being heaped on poor David Frum from guys who no doubt support a party that thinks it can increase American prosperity by raising the minimum wage. Don't act like we conservatives have a monopoly on economic ignorance - it is in fact a very fragmented market!

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Posted by: drug war vigil memorial group on July 1, 2004 01:21 PM

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Hmm. I did a search and found some statistics showing how Canadian GDP per capita, personal income per capita, and disposable income per capita changed between 1993 and 2003:
http://www.bcstats.gov.bc.ca/data/bus_stat/bcea/tab1.htm

If I'm interpreting these stats correctly, between 1993 to 2003, real GDP per capita increased by 28% (27,000 to 34,600); personal income per capita increased by 13% (23,300 to 26,400); disposable income per capita increased by 12% (18,200 to 20,400).

Does this mean that a big chunk of the increase in GDP per capita went to business income, rather than personal income or taxes? I'll see if I can find some stats on business income.

If there's a discrepancy between Statistics Canada's numbers and the Fraser Institute's numbers, I would put much more reliance on Statistics Canada's numbers.

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