The old adage that ‘figures don’t lie, but liars can figure’ is never more true than when economic problems dominate our nation’s politics. That is why the Internet could improve the level of political discourse in our nation, if only people would use it. There are a lot of uninformed rants on the Web, but there also are reliable sources of statistical information about the U.S. economy.
Last week I got queries from readers who had followed an exchange of letters to the editor about federal budget deficits and the national debt. One letter writer had asserted, among other things, that “President Bush expanded the federal debt through 2008 by $700 billion.” The readers who contacted me thought that was too low.
Fortunately, the Internet has very accessible sources of accurate information on this and other issues. The Economic Report of the President (gpoaccess.gov/eop) issued each year by the President’s Council of Economic Advisors is a particularly useful resource.
Each year the report itself focuses on some theme connected with the president’s agenda. The 2010 report, which came out in February, is the first for the Obama administration. It examines how to “rescue, rebalance and rebuild” the U.S. economy. Past reports have dealt with reforming Social Security and energy policy
But for most people, economists as well as the general public, the downloadable statistical tables that compose the second half of the report are the most valuable. All of the information they contain is available from the agencies that tabulate it — the Census Bureau, the Bureau of Labor Statistics, the Treasury, the Federal Reserve, etc.. But the ERP assembles this data in coherent tables that nearly anyone can use.
The 112 tables cover topics such as national output and income, population, industrial production, employment, agriculture and international trade. The section of 12 tables under “Government Finance” has reliable official data on government tax revenues and spending and resulting deficits or surpluses and the national debt.
So readers who wanted to know the true sum of deficits under the preceding administration could consult Table B-78 and see that the gross debt had increased by $4.2 trillion at the end of fiscal year 2008 compared to FY2001, the last budget year for the Clinton Administration. This is six times the amount asserted by the letter writer.
In such issues of government finance, a few details are important. Federal fiscal years start in October of the preceding calendar year, i.e., FY 2010 started on Oct. 1, 2009. So when a new president is inaugurated, his first eight months in office are under a budget presented to Congress and ultimately signed into law by his predecessor. Thus Bill Clinton was the president most responsible for FY 2001 and George W. Bush for FY 2009.
Yes, a new president can ask Congress for quick changes, particularly in taxes, that if implemented immediately can affect the current fiscal year. The FY 2009 budget, the last one prepared by the Bush administration, ended up with a $1.9 trillion deficit. According to the Congressional Budget Office, $280 billion of that was due to changes made by the Obama administration. In the same way, the first tax cuts by George W. Bush contributed about one-fifth of the $160 billion deficit in 2001. The rest came from taxes and spending approved by Clinton.
It is also important to understand the lags between when Congress decides to spend money and when it is actually disbursed. For example, in 2009, the Obama administration asked Congress for a stimulus package and got one that added up to $787 billion. Yet the Congressional Budget Office attributed only $280 billion of that fiscal year’s deficit to the new administration. How can this be?
The answer lies in the distinction between “appropriations” and “outlays.” Appropriations are spending amounts passed by Congress and signed by the president. But appropriated money is not spent immediately. Only a fraction of the $787 billion appropriated in 2009 legislation was disbursed by Sept. 30. Indeed, the lag in spending due to the lack of “shovel-ready” projects was an often-voiced criticism of the bill. Most of the money actually is being spent this fiscal year, and some will not be paid out by the Treasury until FY 2011.
The same was true for the Bush Administration’s $700 billion Troubled Asset Relief Program requested on bended knee by Treasury Secretary Henry Paulson in 2008. None of those funds were disbursed before FY 2009. The TARP is the biggest single reason the deficit was so large that year, just as the 2009 Obama stimulus bill is the largest single component in the FY 2010 deficit.
There is a saying that everyone is entitled to their own opinion but not to their own facts. The ongoing debate about government finance in our country would be a lot more productive if everyone would use the same facts readily available from authoritative sources now more easily accessible than ever because of the Internet.
© 2010 Edward Lotterman
Chanarambie Consulting, Inc.