Deficit Part III: Looking Forward

This is my third and final post (for now at least) on the deficit.  Here you can read my first and second posts.

Today’s post looks at Democratic and Republican plans going forward, with the assumption that Mitt Romney will be the Republican candidate.  Unlike my first two posts, I haven’t done a lot of independent research for this post, instead I’ve relied on the analysis of The Committee for a Responsible Federal Budget.  The CRFB is a bi-partisan, non-profit focused on budget and deficit issues.  Some of these types of organizations are “bi-partisan” in name only, but this one really is — take a look at the composition of their Board, which includes, for example, numerous former Republican politicians.

The CRFB analyzed the long-term impact on the deficit of Obama’s 2013 budget, and Romney’s proposed budgetary policies (the report analyzes all of the Republican candidates’ budget plans; the last two pages discuss Romney’s).  To be fair, the CRFB wasn’t thrilled with either budget, but the long-term deficit is much better under Obama’s budget than under Romney’s.

Here are the numbers.  Under Obama’s 2013 budget, debt held by the public would be 76.5% of GDP by 2022.  Under Romney’s old plan, debt held by the public would be 86% of GDP by 2022.

On February 22, however, Romney revised his plan to include a 20% across-the-board cut on individual tax rates.  His campaign has said that these cuts will have no impact on the deficit because he intends to broaden the tax base, but so far, he has not released any specifics about how the tax base would be broadened.  According to the CRFB, it is likely that, for the deficit not to grow as a result of the significant reduction in revenues resulting from his tax cuts, Romney will have to reduce or eliminate current tax deductions for mortgage interest, charitable giving, employer provided health care, and/or state and local taxes.  Is it realistic for a politician to claim, in this political environment, that he will eliminate long-time sacred cows of tax deductions?

If Romney doesn’t or can’t broaden the tax base, by 2022, debt will be 96% of GDP, significantly higher than under Obama’s budget.

Thoughts on Peyton Manning

With the possibility that the Broncos might get Manning, I was curious as to how long great quarterbacks generally play, and how they perform late in their careers.  (Of course, the most important determinant of Manning’s future prospects is whether he can come back from his injury, but that’s very individualized and not really susceptible to data analysis, at least not with any data that I can access).

I looked at the retirement age of eight quality recent quarterbacks.  I also compared their average QB rating during the first 13 years of their career with their rating during the remainder of their career (for those who played more than 13 years).  Here are the data:

	Marino	Elway	Favre	Montana	Young	Kelly	Fouts	Aikman
Retirement Age	38	38	41	38	37	36	36	35
QB rating 1st 13 years	89.1	76.5	80.5	94.2	95.9		78.3
QB rating after 13 years	79	89.9	84.3	85.5	81		70.7
% change in rating at end of career	-11.3	17.6	4.6	-9.2	-15.5		-9.7

Couple of observations.

First, 7 out of 8 of these Qbs retired by age 38.  Manning will be 36 on Mar. 24th, and so the Broncos should recognize that Manning may only play a couple of more seasons.

Second, 4 out of the 6 quarterbacks’ performance deteriorate after playing 14+ years (Kelly and Aikman retired before they had played 14 years).  Hardly surprising.  My opinion on Elway’s success is he had a great running back and offensive line during his final years, which gave him more time to pass, and freed up his receivers.

Not sure how this plays out with Manning.  We’ve got a good offensive line, but no standout RB, so defensive lines can focus on pass rush, which may not work out well.

Glass Houses and Stones Part Two: Revenues

This is the second post in a 3-post series on the deficit, teeing off of two editorial pieces in the Wall Street Journal criticizing Obama for the current state of the deficit.  My first post addressed the myth that Democratic Presidents increase federal spending more than Republican Presidents.  This post will address federal revenues, which obviously affect the deficit because, all else being equal, more revenues equal a smaller deficit.

You cannot discuss federal revenues under Obama without addressing the 2007 recession, because during a recession, GDP decreases, reducing tax revenues.  The WSJ editorial at least recognizes the importance of the drop in revenues to any discussion of the deficit (“The other part of the fiscal story is that revenues have been in the tank for five years.”), although it doesn’t come close to adequately describing the depth of the 2007 recession, or the impact of that recession on revenues.

Gramm takes an entirely different tack, asserting that the 2007 recession really wasn’t that bad, and arguing that “in fact, the 1981-82 recession was deeper and unemployment was higher.”  The OpEd provides no support for this point, which is a stunning omission because the central theme of the OpEd is that the 2007 recession should not be an “excuse” for a weak economy.

The Gramm OpEd’s assertion that the 1981-82 recession was deeper than the 2007 recession is just plain wrong.  During the 2007 recession, real GDP fell by 5.1%, as compared to a decrease of 2.9% during the 1981-82 recession.

There is some truth to the Gramm OpEd’s assertion that unemployment was worse during the 1981-82 recession, during which the highest unemployment rate was 10.8%, as compared to  9.9% during the 2007 recession.  The overall drop in employment, however, was much worse during the 2007 recession — employment fell by 6.3%, more than twice the decrease of 3.1% during the 1981-82 recession.

In any event, it is widely accepted that the 2007 recession was the worst economic period since WWII, but Gramm doesn’t have to take my word for it — all he has to do is read the newspaper for which he wrote an OpEd.  The WSJ has repeatedly acknowledged that the 2007 recession was the worst in more than 50 years, as set forth here and here, for example.

So how did the 2007 recession affect federal revenues?  In Obama’s first year in office, federal revenues decreased by more than 16%, by far the biggest annual decrease in federal revenues since 1980.*  To put this in perspective, since 1980, federal revenues have on average increased by 5.1% each year, and during Reagan’s first year in office, federal revenues increased by almost 16%.

The recession was not the only factor that impacted federal revenues under Obama.  The amount of each dollar of GDP that goes to the federal government (Revenues/GDP ratio) has decreased from an average of 18.8% during Reagan’s first three years in office, to an average of 15.2% during Obama’s first three years in office.**  Let’s see what would have happened to revenues if the Revenues/GDP ratio had been 18.4% under Obama:

Year	Actual Revenues (billions)	Revenues With 18.8% Revenue/GDP Ratio (billions)	Difference (billions)
2009	2105	2620.5	515.5
2010	2161.7	2699.6	537.9
2011	2302.5	2812.2	509.7
Total:			$1.6 trillion

Source: Budget of the United States Government. Historical Tables. Barack H. Obama. Monday, February 13, 2012, Tables 1.1 & 10.1.

No administration’s economic policy is perfect, and there are legitimate criticisms that can be made of Obama’s policies.  However, if the basis for the criticism is supposedly objective data — as is the case for both the WSJ editorial and the Gramm OpEd — then any fair, believable approach requires the authors to identify and address important relevant facts, even if those facts may cut against or weaken the critique.

Both the WSJ editorial and the Gramm OpEd fail to meet this standard.  They purport to use data to criticize Obama’s deficit policies, and yet they leave out — and sometimes contradict — clearly important and relevant data about federal spending and revenues.  Dog bites man, right?  Big surprise — opinion writers ignore facts that contradict their opinions.  In fact, the more apt analogy is stones and glass houses: what really irked me, and what caused me to get off my butt and do some research, was the contrast between the WSJ’s sanctimonious claim that liberals are “brain dead” and “intellectually exhausted” with its inaccurate and misleading editorial.

* The federal revenue numbers are set forth in Budget of the United States Government. Historical Tables. Barack H. Obama. Monday, February 13, 2012, Table 1.1.

**  Budget of the United States Government. Historical Tables. Barack H. Obama. Monday, February 13, 2012, Table 1.2— Summary of Receipts, Outlays, and Surpluses or Deficits (–) as Percentages of GDP: 1930–2017.

And Now For Something Completely Different . . . TV Ratings When Small Market Teams Are In The Super Bowl

I’ll return in a few days with the next installment in my Deficit series, but first, here’s something for fans of the Broncos (moi), Bills, Vikings, Packers and all other “small market” football teams.

My Broncos have been in the Super Bowl 6 times (winning a depressing 2 times), and during just about every divisional and/or conference championship game, some TV mouthpiece pipes in with how the NFL and the network carrying the Super Bowl must be rooting for the [INSERT BIG MARKET OPPONENT OF THE BRONCOS] because Super Bowl ratings will be so much better with big market teams.  I’ve always thought that was baloney, and that ratings depended on the expected quality and competitiveness of the game more than anything else.

Admittedly this is a small pet peeve, but it is a peeve nonetheless, and one that is susceptible to analysis of data.  And since data analysis is a central theme of my blog, here goes.

I correlated Nielsen ratings and shares,* on the one hand, with the combined population of the cities of the teams in the Super Bowl,** on the other.  Here are the numbers I used (scroll down for the exciting conclusion):***

Super Bowl	Rating	Share	NFC Team	NFC Pop.	AFC Team	AFC Pop.	Combined Pop. (millions)
II	36.8	68	Green Bay	0.158	Oakland	1.6	1.758
III	36	70	Baltimore	2.08	NY Jets	9	11.08
IV	39.4	69	Minnesota	2.03	Kansas City	1.4	3.43
V	39.9	75	Dallas	1.63	Baltimore	2.08	3.71
VI	44.2	74	Dallas	1.63	Miami	1.3	2.93
VII	42.7	72	Washington	3.2	Miami	1.3	4.5
VIII	41.6	73	Minnesota	2.03	Miami	1.3	3.33
IX	42.4	72	Minnesota	2.03	Pittsburgh	2.7	4.73
X	42.3	78	Dallas	2.05	Pittsburgh	2.6	4.65
XI	44.4	73	Minnesota	2.2	Oakland	1.8	4
XII	47.2	67	Dallas	2.05	Denver	1.43	3.48
XIII	47.1	74	Dallas	2.05	Pittsburgh	2.6	4.65
XIV	46.3	67	LA Rams	7.5	Pittsburgh	2.6	10.1
XV	44.4	63	Philadelphia	4.8	Oakland	1.8	6.6
XVI	49.1	73	San Francisco	1.5	Cincinnati	1.5	3
XVII	48.6	69	Washington	3.5	Miami	1.6	5.1
XVIII	46.4	71	Washington	3.5	LA Raiders	7.5	11
XIX	46.4	63	San Francisco	1.5	Miami	1.9	3.4
XX	48.3	70	Chicago	7.4	New England	5.7	13.1
XXI	45.8	66	NY Giants	8.5	Denver	1.6	10.1
XXII	41.9	62	Washington	4.2	Denver	1.6	5.8
XXIII	43.5	68	San Francisco	1.6	Cincinnati	1.5	3.1
XXIV	39	63	San Francisco	1.6	Denver	1.6	3.2
XXV	41.9	63	NY Giants	8.5	Buffalo	1.2	9.7
XXVI	40.3	61	Washington	4.2	Buffalo	1.2	5.4
XXVII	45.1	66	Dallas	2.7	Buffalo	1.2	3.9
XXVIII	45.5	66	Dallas	2.7	Buffalo	1.2	3.9
XXIX	41.3	62	San Francisco	1.7	San Diego	2.8	4.5
XXX	46	68	Dallas	3.52	Pittsburgh	2.4	5.92
XXXI	43.3	65	Green Bay	0.227	New England	6	6.227
XXXII	44.5	67	Green Bay	0.227	Denver	2.1	2.327
XXXIII	40.2	61	Atlanta	4.1	Denver	2.1	6.2
XXXIV	43.3	63	St. Louis	2.6	Tennessee	1.2	3.8
XXXV	40.4	61	NY Giants	9.3	Baltimore	2.6	11.9
XXXVI	40.4	61	St. Louis	2.6	New England	6	8.6
XXXVII	40.7	61	Tampa Bay	2.4	Oakland	2.4	4.8
XXXVIII	41.4	63	Carolina	1.5	New England	6	7.5
XXXIX	41.1	62	Philadelphia	5.1	New England	6	11.1

For those of you who may not be familiar with correlation coefficients, they range from -1 to 1, with 1 representing a perfect linear correlation between two sets of data, and -1 representing a perfect inverse relationship between two sets of data.  The closer the coefficient is to 0, the less correlation exists between the two data sets.

Here, the correlation coefficient between Ratings, and the combined population of the metropolitan areas of the teams competing in the Super Bowl, is .0042.  The correlation coefficient between Share, and the combined population of the metropolitan areas of the teams competing in the Super Bowl, is -.245.  Bottom line: the mouthpieces should shut up.  There is virtually no correlation between ratings or share, and the size of the metropolitan areas of the Super Bowl teams.

* The Nielsen rating is the percentage of all households with a TV (regardless of whether their TV is on) that are watching a particular program, while a share is the percentage of households with a TV turned on that are watching a program.
** The metropolitan census figures can be found here.  I used the census figure closest in time to the date of the Super Bowl, and stopped at the February 2005 Super Bowl because the census information I had ended in 2000.
*** I didn’t use Super Bowl I because it was shown on two networks.

The Myth That Democratic Presidents Are Big Spenders.

Several of my first blog posts will address the deficit, particularly in response to two recent opinion pieces in the Wall Street Journal, one an editorial, and the other an OpEd by Phil Gramm (yes, that Phil Gramm) and Mike Solon.  In these pieces, the authors castigate Obama for presiding over an “explosion” in federal spending resulting in the “four highest years in spending and deficits as a share of the economy since Harry Truman sat in the Oval Office.”*  As we shall see, to support these conclusions, the authors skew some facts, ignore others, and get some just plain wrong.

I suppose it is understandable that Mr. Gramm, who has been somewhat defensive over accusations that he played a significant role in causing the recession by championing deregulation of the financial services industry, would play a bit fast and loose with the facts in an attempt to shift the blame for the recession to others.

The WSJ editorial board, however, claims to hold itself to a higher standard.  Indeed, one member of that board, James Taranto, only a few months ago wrote an article entitled “The Brain Dead Left,” in which he complained about the “intellectual exhaustion” of the “liberal media” such as the “Puffington” Post (very clever, James).  In particular, he took the left to task for its lack of “critical thinking skills.”   Given this pointed criticism, one would expect that Mr. Taranto and his compatriots on the WSJ editorial board would take pains to exercise a bit of intellectual rigor in their own exercise of critical thinking skills.  Unfortunately, this was not the case.

Today’s post focuses on government spending, specifically:

WHICH PARTY IS THE BIG SPENDER?

The WSJ editorial suggests that federal spending under Obama has increased much more significantly than under other administrations, and Gramm claims it has “exploded.”  Let’s look at the data using two measures of spending: The percentage that it has increased; and How spending compares to GDP.

The Total Percentage Increase In Federal Spending Has Been Better Under Obama Than Under Any Recent Republican.

The WSJ editorial points out that during Obama’s first three years in office, federal spending has increased by a total of 20.6%.  In isolation, this doesn’t tell us much, and one would expect that an editorial board that apparently prides itself on its intellectual heft and critical thinking skills would give us some comparators to put this spending increase in perspective.  Could it be that comparable data undercut the premise of the editorial?  Let’s take a look.

President	Federal Spending When They Took Office (Billions)	Federal Spending at the End of Their Third Year in Office (Billions)	Increase in Fed. Spending over First 3 Years in Office
Reagan	590.9	808.4	36.8%
Bush 1	1064.4	1324.2	24.4%
Bush 2	1789	2159.9	20.7%
Obama	2982.5	3598	20.6%

Source: Cong. Budget Office Table F-5, “Historical Budget Data”; Dept. of the Treasury. Financial Mgt. Serv., Nov. 30, 2011 letter.

So the statistic that the WSJ asserts demonstrates the weakness in Obama’s policies actually — when context is provided — proves exactly the opposite: during the worst recession since WWII (more on the recession in a later blog), the percentage increase in federal spending has been less under Obama than under the last three Republican presidents at this point in their administrations.

Democratic Presidents have a much better record on slowing federal spending than Republicans.  Here are the numbers as to annual  growth in federal spending:

Administration	Avg. % Increase in Annual Spending	Compound % Increase in Annual Spending
Republicans	7.08%	Reagan: 7.63% Bush 1: 6.74% Bush 2: 6.6%
Democrats	4.24%	Clinton: 3.28% Obama: 6.45%

So contrary to the Republican myth that Democrats are irresponsible when it comes to spending, every recent Democratic President has done a better job at slowing federal spending than any recent Republican President.

Although Federal Spending As A Percentage Of GDP Is Up Slightly Under Obama, That Is Because GDP Was Sharply Down as a Result of The Recession.

The WSJ editorial correctly asserts that federal spending as a percentage of GDP (“Spending/GDP Ratio”) is up under Obama, but once again it fails to provide any comparables by which to judge this increase.

The Spending/GDP Ratio in 2010 and 2011 was 24.1%, slightly higher than the 1982 and 1983 ratio of 23.1% and 23.5% respectively under Reagan.**  This is a ratio, however, and so the number can increase if the numerator (spending) increases OR if the denominator (GDP) decreases.  The recession inherited by Obama had a profound impact on GDP, which in turn had a profound affect on the Spending/GDP Ratio.  Let’s put some numbers on this.

From 1980 through 2011, the average annual percentage increase in GDP has been 5.68%.  During the year before Obama took office, and during his first year in office — before any of his policies had time to be implemented or take affect — GDP grew at 3.4% and -2.77% respectively. By comparison, Reagan inherited a much healthier economy, with GDP increasing by 8.9% and 12.2% the year before he took office, and his first year in office, respectively.

So how did the contraction caused by the recession affect the Spending/GDP Ratio?  Let’s take a look at what that Ratio would be if during Obama’s first year in office, GDP had increased at merely the average rate over the last 30 years of 5.68% (we’ll use the actual percentage increases during his second and third years in office).

Year	Spending (actual)(Billions)	Percent Increase in GDP	GDP (Billions)	Spending/GDP Ratio
2008	2982.5		14,334	20.8%
2009	3517.7	5.68% (assumed)	15,148	23.22%
2010	3455.8	3.03% (actual)	15,607	22.14%
2011	3598	4.17% (actual)	16,257	22.13%

Thus had Obama inherited even an average economy, with GDP growth significantly less than what Reagan inherited, his Spending/GDP Ratio would have been better than Reagan’s.

I know, lots of boring numbers, but the bottom line is this: Conservatives, and the WSJ in particular, like to portray themselves as dictated by a Spock-like rationality, whose views are supported by objective statistics, while “liberals” have no understanding of economics or even basic mathematical principles. Once you dive into the numbers, however, you realize that conservatives often are what they proclaim to hate – intellectually exhausted and lacking in critical thinking skills.

This is the first in a series of blogs addressing inaccuracies in assertions by conservatives and the WSJ. Hope you don’t go away.

* If you’d like the view of a very smart conservative on the deficit and other issues, please visit my brother-in-law Bruce’s blog at www.brucecrobertson.com.

** The spending and GDP numbers in this section can be found in a variety of sources (they may vary slightly based on, for example, whether they are seasonally adjusted).  I used Budget of the United States Government. Historical Tables. Barack H. Obama. Monday, February 13, 2012, Table 1.2— Summary of Receipts, Outlays, and Surpluses or Deficits (–) as Percentages of GDP: 1930–2017.

Introduction

So welcome to my blog (all three of you).  In my family, you ain’t nothing if you don’t have a blog, so here goes.  I’m an attorney, and one of the best parts of my job is conducting research and analysis.  The theme of my blog will be to try to use data and research to analyze a variety of issues, from politics, to sports, to anything else that momentarily strikes my interest.