Things some “know” are really false.



Yes, some liberals called President Bush “Hitler” and I was open about saying that was patently ridiculous. If any US President was like Hitler and you were openly critical of them, well, there wouldn’t be any more “you”, would there?

“Surge in Government Spending”
No, not relative to “potential GDP”. Why this is the correct measure:

The crucial thing to understand here is that you do need to take the state of the business cycle into account; it’s not enough simply to do what Nate Silver, for example, does, and look at spending as a share of GDP — a calculation that can be deeply misleading in the aftermath of a severe recession followed by a slow recovery.

Why does this matter? First, if the economy is depressed — if GDP is low relative to potential — the share of spending in GDP will correspondingly look high. Suppose that you have commitments to defense, to Social Security, to Medicare that are growing at rates consistent with the long-run growth in the economy; if the economy plunges and then takes a long time to get back to trend, those spending programs will temporarily account for a larger share of GDP, even if there hasn’t been any acceleration in their growth.

Second, there are some programs — unemployment benefits, food stamps, to some extent Medicaid — that tend to spend more when the economy is depressed and more people are in distress. And rightly so! You don’t want to take a temporary spike in UI payments after a deep slump as a sign of runaway spending.

So how can we get a better picture? First, express spending as a share of potential rather than actual GDP; we can use the CBO estimates of potential for that purpose. Second, keep your eye on the business cycle — and, in particular, on how spending is evolving now that a gradual recovery is underway.

Surf to the article to see the graph; it might surprise you.


January 23, 2013 - Posted by | Barack Obama, political/social, politics | ,

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