The unknowability of everything about government bookkeeping

On Thursday, I posted a short piece linking to a slightly longer piece by reporter Rex Nutting of MarketWatch which indicated, based on the way Nutting analyzed, that federal spending has risen at a slower rate under President Obama than under any president since the 1970s. In fact, it indicated that the two Democrats — Obama and Bill Clinton – presided over a slower rate of growth of federal spending than any of the three Republicans – Ronald Reagan or Bush I or Bush II.

I used the piece as an example of how partisan stereotypes can be misleading.  According to the stereotypes, Republicans are more fiscally conservative than Democrats. Here’s an example of some numbers that suggest the opposite. I confess, other than noting that Nutting claimed to be relying on CBO data, I didn’t do much to check his methodology, and that may have been an example of what one might call selective skepticism or, in this case, selective lack of skepticism.

A good discussion thread attacked and defended the Nutting numbers and disputed the correct understanding of federal taxing, spending, deficit, debt and whom to blame for what. I recommend the thread to those who never click through to them. It’s mostly smart, reasonably civil and informative in a twisted way that leaves you more confused than you started.

But let’s stipulate that in many instances, more-confused-than-you-started is an important step on the road to wisdom and quasi-understanding.

Before I get any more existential than that, I’ll give you a shortcut. Politifact has reviewed the Nutting piece and ruled it “mostly true,” their second highest rating, although they followed up with a second essay on the issues raised without attaching a rating, but the tone of which suggests some regret about the earlier “mostly true.” And the Washington Post’s excellent “Fact Checker”  Glenn Kessler gave Nutting a rating of three Pinocchios out of a possible four. Ezra Klein, editor of the Post’s “Wonkblog” put out one of the smartest pieces, because it basically acknowledged that the multiple vagaries surrounding the comparative spending data greatly reduce the reliability of any conclusion.

Having read all these and more pieces, let me catalogue only a few of the more-obvious problems:

Presidents aren’t czars. The spending that occurs during their term is the result of (among other complications) their interactions with Congress. Yes, it’s true, Obama wanted more stimulus than he was able to get once the Repubs took control of the House in 2010. You could argue that Obama shouldn’t get credit for a spending “restraint” that was imposed on him by Republicans over his objections.

Presidents inherit much from their predecessors. Among the things for which Obama was spending from 2009 until now was the war in Iraq, which he had opposed from the outset. Does it make ultimate sense to count the hundreds of billions spent to wind down that war on Obama’s spending tab? He also inherited the very expensive Medicare Part D drug benefit for seniors, which President Bush (II) pushed through Congress without providing a means of paying for it. Of course, you could go back to George Washington to find the origins of things that are still costing money in the Obama era. This point might ultimately morph into the unknowable question of whether a president, who inherits a bad economy, can reasonably (morally, politically, etc.) be held accountable for the state of the economy.

Spending rises automatically with the cost of living and the rising population but rises especially in a bad economy. A lot of federal programs – especially those that constitute the famed “safety net” — cost much more when people lose their jobs and need unemployment benefits or fall below the poverty line and need food stamps and many other variations on that theme. A president who inherits a prosperous economy will look like he is cutting spending just because people are getting jobs and rising out of poverty. And vice versa. Social Security and Medicare spending rises automatically, especially in a period when  an unusually large generation (Baby Boomers anyone?) reaches the age of eligibility.

Much depends on the adjustments you choose. For example, the apparent relative profligacy of the presidents changes quite a bit if you adjust them for inflation or measure them as a percentage of the GDP. Nutting didn’t do either, which made the first Reagan term look like the most profligate of the last eight terms. But Reagan inherited a very high inflation rate from the Carter administration, and actually had good success in bringing that rate down (by forcing a recession, some would say). Nonetheless, it doesn’t make much sense to make Reagan look like a profligate spender in his first-term because of the inflation rate he inherited. On the other if you express total spending as a percentage of GDP (Kessler included those numbers in his fact-check piece), you make a president who inherited a growing economy look like a smaller spender and you make one who inherited a shrinking or stagnant economy (as Obama did) look worse.

Tax expenditures don’t count as expenditures, but they should. As Suzanne Mettler’s work on the “submerged state” demonstrates, a great deal of what the government does is invisible to the general public, and a big chunk of that is the rewards, incentives and loopholes of the tax code. Some of those who wanted to dispute Obama’s good score on the Nutting numbers brought up the very significant growth of the national debt over the past three years. Whatever else is happening, Obama must be spending to make the debt go up like that. But a big chunk of that debt increase represents not direct spending but foregone tax revenue attributable to the Bush tax cuts. If you look at the graphic on top of Klein’s piece, which purports to break down the “cost of Bush policies” and the “cost of Obama policies,” the biggest chunk by far is the “cost” of the Bush tax cuts. But those aren’t counted in any exercise, including Nutting’s, that focus only on direct expenditures by the federal government.

Assigning responsibility for spending during a presidential transition is a whole other mess. As Klein emphasizes, the federal fiscal year runs from Oct. 1- Sept. 30. So when the presidency changes hands, you get a fiscal year that is four months under the old president and eight months under the new. In the most recent instance, that transition included the peak of the financial meltdown and the huge, costly efforts to deal with it. But the budget for that fiscal year is created during the term of the outgoing president. Nutting assigned a portion of the spending in that year to Obama, but his (and Obama’s critics) say he didn’t assign enough. There are some reasonable facts to support either side of that argument, but at this point perhaps you agree with me that there is no right answer.

And that’s too bad, because it frees everyone  –  even the relative few who care about facts and try to look at both sides of an argument  –  to continue believing what makes them happy.

Comments (10)

  1. Submitted by James Hamilton on 05/30/2012 - 10:52 am.

    There is no room for nuance any more.

    Because life is so much simply in single syllables.

  2. Submitted by Dennis Tester on 05/30/2012 - 11:04 am.

    Re: The “cost of Bush tax cuts”

    Government’s failure to confiscate your wealth does not equal government spending.

    • Submitted by Paul Brandon on 05/30/2012 - 03:39 pm.

      Money for nothing

      So Bush’s wars were free; paid for (as he promised) by Iraqi oil money.

    • Submitted by Neal Rovick on 05/31/2012 - 07:50 am.

      For those who are SO concerned with debt and deficit, it is a historical fact that the biggest concern of the Fed at the end of the Clinton administration was that the US would pay off all of it’s debt by 2011. The Bush era tax cuts were justified by eliminating that horrific possibility.

      Mission accomplished!!

      ========

      From 1/27/2001

      (quote)

      More so than even a year ago, he said, the government faces the real possibility that a wave of surpluses will wipe out the $3.4 trillion national debt held by the public within a decade and then leave Washington with hundreds of billions of dollars a year in excess revenue on its hands.

      Mr. Greenspan said he particularly feared that if taxes were not cut, the government would end up using the surplus to buy stocks and bonds, a prospect at odds with his philosophy that the government should play a minimal role in private enterprise.

      ”I never expected to see the day where I would be talking about anything other than reducing the debt,” Mr. Greenspan told the Senate Budget Committee on Thursday. ”I am running into the tyranny of zero, which is where you can’t reduce it any more. And so, have my views changed? Yes, they’ve changed; they have to change.”

      Republicans and their supporters knew immediately that Mr. Greenspan had vastly improved the odds of passing a tax cut of the scale proposed by Mr. Bush, $1.6 trillion over 10 years. Mr. Bush’s plan would reduce all income tax rates, double the child credit, give a break to two-income couples and repeal the federal estate tax.

      http://www.nytimes.com/2001/01/27/business/down-into-the-fray.html?scp=4&sq=Greenspan+pay+off+debt&st=nyt

      (end quote)

  3. Submitted by Ray Schoch on 05/30/2012 - 12:52 pm.

    Fiscal years have always seemed to me – especially in their governmental form – very odd creatures, indeed. Never having been a high-level policy aide in Washington, D. C., I can’t help wondering why the federal fiscal year runs from October 1 to September 30. From what I can tell, the starting and ending dates don’t correspond to any hugely important financial events. Going from June 1 to May 31 would provide for individual and corporate tax collection, which usually is April 15, but it also puts you halfway through the calendar year. Still, that’s better than starting in October.

    The school district I worked for in another state ran a fiscal year from July 1 to June 30. Part of that was because school was no longer in session, so they could devote more time and attention to those kinds of fiscal affairs, and part of it had to do with the timing of state aid to the district. Once they knew what the numbers were likely to be from the state, the district could plug in its own numbers where appropriate and make budgetary decisions from there.

    Offhand, nothing in the fiscal calendar of which I’m aware – and I claim no expertise in this at all – happens in September except the collection of 3rd quarter taxes from those who pay quarterly, so figuring out why the feds operate from October 1 to September 30 is a puzzle all by itself.

    The spending issue(s) create their own universe in the meantime. Like it or not – many don’t – the president has relatively little control over spending. It’s Congress, after all, that appropriates money, or doesn’t, not the president. It’s convenient to blame a particular president (my inclination is to blame Bush 43 for most of the world’s troubles, while others are convinced the downfall of civilization began with Obama’s election, though a subgroup would insist that it’s really Clinton’s fault), but it appears that what most presidents are doing, if you’ll pardon my tortured metaphor, is stepping into a flowing stream (of money). The stream largely continues, though they may change its direction a bit, or make it a little deeper in some areas, more shallow in others.

    Blaming the president for too much spending, or too little, strikes me as an exercise in futility, and one that’s based on the false assumption that the president controls the purse strings. My copy of the Constitution says otherwise.

  4. Submitted by Paul Udstrand on 05/30/2012 - 01:50 pm.

    This is how Democrats lose elections.

    This is a manufactured debate that assumes spending is “bad”. Once again, Democrats are arguing according to Republican ground rules. Rather than defending justified spending that saved the economy, they’re trying argue that they didn’t spend. I was there and I saw what they did, for what it’s worth Reagan and the Bush’s ran up huge deficits and increased rather than decreased spending, there was nothing fiscally responsible about this. Nevertheless, spending vs. no spending isn’t the issue, it’s what they spent on, what kind of results they got, THAT’s the issue. I don’t see anyone talking about that, and it’s the Democrats fault.

    Obama wanted to spend more, and he wanted to pay for it with tax hikes but he failed to do it when he had congress, and after the Republicans took over the house it because impossible. Any argument about whether he spent more or less is simply irrelevant. FDR probably spent more than any president in history between WWII and New Deal, does that make him fiscally irresponsible or a bad president?

    • Submitted by Jon Kingstad on 05/31/2012 - 08:29 am.

      WWII

      ended about twenty years ago. Or call it WWIII, the “Cold War”, same thing. What we know is that spending on things military has not slackened one whit but has increased since then even though there is no nation of earth that comes close to the military prowess and firepower. Another part of the budget is just the interest on the debt which Reagan and Bush I ran up in the 1980’s in war spending. A nontrivial part of the war spending budget is a “black budget” meaning few elected officials know what’s for. I wouldn’t be surprised if there was an entire set of “off budget” books that reflects the actual spending. How can there be any coherent or intelligent discussion about the federal budget or budget while so much is wasted on preparing for war and preparing to attack mythical foes?

      • Submitted by Paul Brandon on 05/31/2012 - 03:36 pm.

        WW 0

        Particularly since most of the spending is preparation for fighting the last war (or maybe WW II, the last war in which heavy aerial bombardment was a major factor). Since then we’ve been fighting guerrilla wars, in which mass bombing serves mainly to strengthen the enemy.

  5. Submitted by Dan Mondor on 06/01/2012 - 12:56 am.

    Always interesting.

    Eric, again, thank you for a thought provoking piece of exceptional journalism. I am always looking forward to your next piece. Sorry I don’t comment to often. But when I do try to form a new comment I find myself struggling for words.
    I know something about finding data on the web. I am, after all, a software test engineer. I should know something about this. Oh, and I am also a serious student of history, so I should know even more about what data to look for. And I have no problem, most of the time, finding the stats I need.
    But, honestly, most people don’t want to know statistics. And I know that. What I hear right now, here in the comments, is the choir speaking to the choir. But why not? Who else is there to speak to? I have worked for the democratic party in Minnesota for more than a few years. You really want to change things? Really? You have to be involved. You have to be willing to go door to door. You have to be willing to put meals together for the full time workers. You need to help.
    There are sooooo many “facts” available on the web. Most people don’t know how to find them. Much less what to do with them when they do find them.
    I know Eric is NOT a “card-caring democrat”. He is a “journalist”, in the old form. And I respect that, and even more, I “expect that”.
    But, people, please, let’s do something rather than just complaining about something. It’s going to be close this time. LET’S DO SOMETHING!

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