Sunday, October 31, 2004

Anatomy of a Right Wing Argument

We've been having an interesting discussion with our friends at "The Dead Hand" blog about my assertions that Democratic administrations have a far superior record for economic growth than Republicans. Here's the record that's facing them:

That's right. EVERY Republican administration since World War II experienced lower growth than the previous one. EVERY Democratic administration experienced higher growth than the previous one. The same pattern holds true for jobs, as referenced in a previous post.

Faced with this in-your-face evidence, the right winger can only protest that it's all a coincidence. Expect to hear things like (1) correlation is not causation, or (2) every Democrat enjoyed the fruits of the previous Republican stewardship, and when all of that fails (3) governments can't affect economies that much no how. The alternative, as I'll explain below is to be forced to acknowledge that Republicans really aren't able to or interested in economic growth and they don't have any ethical problems lying to you about it.

To his credit, Jason Williscroft
massaged all of the above three points in a statistical argument so airtight, the only problems with it were the basic assumptions, which were totally bogus. So instead of anything meaningful, he's left with a fully illustrated case study of GIGO. That of course, will definitely get you published in a variety of right wing think tanks Jason, so press on dude!
Here's where our intrepid Dead Hander went wrong. In describing the differences between his numbers and mine he says:

"Then there's the choice of metric. Torgerson is talking about year-to-year delta, whereas I am talking about deviation from the mean. Why would I do that? Well, it's a basic difference in perspective. Torgerson's choice of metric suggests that the government is principally responsible for the performance of the economy. Mine suggests that the economy mostly takes care of itself, and that the government mostly affects it on the margin."

There's a couple of points here. First off, I am NOT talking about year-to-year changes. I am measuring the growth over an entire administration (four or eight years) and describing that growth in terms of average annual change so that different administrations can be compared. You see, that's a much closer measure of actual reality. For example, in his first year in office, Bill Clinton spent much of it passing his tax and budget program, which by the way was a five year plan. The fact that that first year showed a different pattern of growth than the subsequent two years after the plan was implemented is not realistically significant when measuring Clinton's economic performance, BUT, if you are merely measuring statistical patterns, then you would be measuring some 'noise' in that first year which the statistician would consider significant.

Further, the longer time period you look at, the less "noise" from the ordinary business cycle will obscure the results. Looking at each year as an isolated data point assures that any longer term effects from governmental policy will be drowned out.

Further, he admits his basic difference in perspective. He denies that the government has a principal impact on the economy, and designs a model that reflects that belief. Not surprisingly, he finds little but the statistical noise he sets himself up to find.

Thirdly, Jason goes and does it again when he says: "Torgerson has left his implicit assumption unidentified and unchallenged. Take your pick" . Just because he did not notice my "implicit assumptions" he assumes they aren't there. Let's help out Jason with a link to a recent post which
specifically explains why Democratic administrations do better economically. In that post I said:

"Basically, expenditures targeting low to middle income people grow the economy short term far more than expenditures targeted to affluent people. For example, committing more funds to extending unemployment benefits adds $1.74 to GDP for every $1.00 spent. By contrast, reducing taxes on stock dividends only adds 9 cents to GDP per dollar of taxes reduced. So doing a little math here, if you repeal the dividend tax cut, and take the estimated $36 billion in revenues split evenly between increased benefits to the unemployed and to reducing the budget deficit, that action would increase GDP by $28 billion in the first year alone (about a 0.3% increase in growth.) You'd lose $3.24 billion in GDP growth from repealing the dividend tax reduction, (.09 X $36 billion) and gain $31 billion in GDP from extending unemployment benefits, (1.74 X $18 billion).Paying more money in unemployment benefits to reduce unemployment seems to be counter-intuitive. But, if you think it through, it makes sense. An unemployed person receiving unemployment benefits is the person most likely to spend those benefits quickly in ways that keep the money recycling through the domestic economy: food, rent, bus fare, utility bills etc., which are all provided courtesy of employed workers, very few of whom could possibly be outsourced to India."

The specific GDP effects of the policies cited above come from an
Executive Summary of a paper produced by, the folks behind the Dismal Scientist.

Surprise! Democrats are far more likely to favor policies, like unemployment benefits, tax cuts for the less well off etc. that happen to have a more stimulative effect on the economy than the Republican's favorite goodies for their constituencies, like capital gains tax cuts, corporate breaks etc.. Therefore, it should come as no surprise whatsoever that applying more stimulative policies to the economy, you get... more stimulus to the economy!! Just so my friends at the Dead Hand can keep up, this is what is known as "causation".

Now, if this whole line of reasoning holds up, what you would see is a significant difference between the overall economic growth patterns under Democratic government control versus Republican control. And, of course, that is exactly what you see.

You see, this is all basic policywonk-craft in Washington. It is not rocket science, governments have been priming the pump as needed for decades. It works. The implication here is when a George W. Bush pushes economic and tax policies that direct benefits towards the rich, then he darn well knows that such policies won't be very effective in growing the economy, because they have never worked very well. So when he looks into the camera and says with a straight face that his tax cuts should reinvigorate the economy, he is lying to you. And, if he is too dense to understand that he's lying to you, he's got 10,000 policy wonk clerks that work for him scurrying to implement his program who know full well they are committing a fraud.

So right wingers HAVE to hide the evidence of their very own eyes amongst as many layers of bogus assumptions and statistical massaging necessary to protect them from the hard cold reality of the dishonesty of their fearless leaders.

Wednesday, October 27, 2004

November 2nd: The 1.3 Trillion Dollar Question

OK what's it going to take? The few people who have yet to make up their minds between Bush and Kerry, apparently the starkest differences on every major political issue aren't enough to sort it all out and make your Presidential choice clear. So I've got an offer for you.

How about some Cold Hard Cash? How about $1.3 Trillion Bucks?

In previous blogs, I've shown how
job growth is accelerated under Democratic administrations, how economic growth is accelerated under Democratic administrations, how Federal budget deficits are smaller under Democratic administrations and how Federal spending as a % of GDP actually shrinks under Democratic administrations. I've also laid down my argument as to why that is here and here. These posts used data stretching back either 50 to 100 years and shows common patterns trends regardless of which Presidential administration you look at. There is a real difference between the basic economic philosophy of the parties, and one philosophy, the Democrats, works far better in actual experience in all of these areas.

So what does it mean here? It is reasonable to assume that trends that have held up for decades will continue to hold in the next administration. If a Democratic administration and a Democratic Congress are elected next week we can expect one set of economic outcomes, while the reverse is also true.. We know that since WWII,
economic growth under Democratic leadership was on average about 4.5% per year (inflation adjusted.) We know also that economic growth under Republican control stood at less than half of this, at 2.1% per year.

This means that four years under Democratic growth plans will see a Gross Domestic Product that would stand over $1.3 trillion higher than under Republican 'stewardship'. $1.3 trillion. That's a lot of jobs. That's a lot of cash. That's about $4,500 for every American citizen. (Doing the math:
Latest GDP figures suggest that by inauguration day 2005 GDP will stand at about $11.8 trillion. 4.5% growth for four years brings that to over 14.1 trillion. 2.1% growth over four years brings that to 12.8 trillion.)

Note inserted 11/6/06: The above predicted figures are in constant, or inflation adjusted, dollars. The comparable inflation adjusted figure for GDP as of Nov. 2006 is $12.36 trillion, a bit higher than my forecasted 2.1% growth, which would have produced about $12.17 trillion at this point. Latest growth rate announced for GDP is an anemic 1.6% per year moving forward, meaning my prediction is basically on track.)

So for all those STILL on the fence for this election, think very carefully. Do you want $1.3 trillion MORE cash floating about the U.S. economy, or $1.3 trillion LESS? Let's break it down for you: based on the entire economic experience of the country since World War II, with a President Kerry and a Democratic Congress we are likely to have $1.3 trillion more in the American economy in four years than what we would have under a President Bush and a Republican Congress. That would be $1.3 trillion more to pay for new jobs, college tuitions, environmental cleanup, homeland security, home ownership for citizens, health care for all, decent schools for children, and have plenty left over for good old reckless spending on gidgets and goo gaws.

Is it clear now which way you have to go?