On the Budget Debate People Are Saying “All We Want Are the Facts”

This graph from my Friday Wall Street Journal article simply presented basic facts about the second Obama budget and compared it with the first Obama budget and with the House budget.

So why did it attract so much attention here and here and other places? I think it’s a sign that people are tired of rhetoric and demagoguery. They want to understand each side’s factual position in the debate. “All we want are the facts, ma’am,” as Joe Friday would say. My guess is that people would like it if President Obama or Members of Congress took one or two charts to the town hall meetings or to the Sunday morning talk shows. Sometimes you hear the excuse that charts are too technical, but that certainly doesn’t apply to the techies at the Facebook town hall last Wednesday.

Still some have asked good questions about how to interpret my chart. Some thought it is misleading to plot government spending as a percent of GDP. But that’s not unique to my chart, and in fact it’s pretty conventional. CBO and OMB regularly report spending this way. For example this recent CBO report on the first 2012 Obama budget measures outlays as a share of GDP (See Table 1-2 on page 4). Regarding recent history Table E-2 of this CBO historical data set presents the history of outlays as a share of GDP both before and after the recession. The point of my article is that there was a spending binge and that the binge would continue with the Administration budgets, and I think the chart showed that accurately.

Here is what my chart looks like if you do not divide spending by GDP. It reminds us that the under the House budget spending continues to grow, but less rapidly than the two Obama budgets. You can still see the spending binge of the past few years but the upward trend makes it harder to visualize.

Another question is why I did not include zero percent of GDP in scale of the chart. I teach Economics 1 students at Stanford to look at the scale of axes carefully, but I do not think it is misleading to choose the scale I did. If you are interested in what is happening to the stock market in the past few months, you do not plot the S&P 500 with a chart that includes zero. If you did you would not see much of anything on a day to day basis. For the record here is a version of my budget chart which includes zero. The story is the same, but the ups and downs are scaled down and are harder to see.

About John B. Taylor 117 Articles

Affiliation: Stanford University

John B. Taylor is the Mary and Robert Raymond Professor of Economics at Stanford University and the Bowen H. and Janice Arthur McCoy Senior Fellow at the Hoover Institution. He formerly served as the director of the Stanford Institute for Economic Policy Research, where he is now a senior fellow, and he was founding director of Stanford's Introductory Economics Center.

Taylor’s academic fields of expertise are macroeconomics, monetary economics, and international economics. He is known for his research on the foundations of modern monetary theory and policy, which has been applied by central banks and financial market analysts around the world. He has an active interest in public policy. Taylor is currently a member of the California Governor's Council of Economic Advisors, where he also previously served from 1996 to 1998. In the past, he served as senior economist on the President's Council of Economic Advisers from 1976 to 1977, as a member of the President's Council of Economic Advisers from 1989 to 1991. He was also a member of the Congressional Budget Office's Panel of Economic Advisers from 1995 to 2001.

For four years from 2001 to 2005, Taylor served as Under Secretary of Treasury for International Affairs where he was responsible for U.S. policies in international finance, which includes currency markets, trade in financial services, foreign investment, international debt and development, and oversight of the International Monetary Fund and the World Bank. He was also responsible for coordinating financial policy with the G-7 countries, was chair of the working party on international macroeconomics at the OECD, and was a member of the Board of the Overseas Private Investment Corporation. His book Global Financial Warriors: The Untold Story of International Finance in the Post-9/11 World chronicles his years as head of the international division at Treasury.

Taylor was awarded the Alexander Hamilton Award for his overall leadership in international finance at the U.S. Treasury. He was also awarded the Treasury Distinguished Service Award for designing and implementing the currency reforms in Iraq, and the Medal of the Republic of Uruguay for his work in resolving the 2002 financial crisis. In 2005, he was awarded the George P. Shultz Distinguished Public Service Award. Taylor has also won many teaching awards; he was awarded the Hoagland Prize for excellence in undergraduate teaching and the Rhodes Prize for his high teaching ratings in Stanford's introductory economics course. He also received a Guggenheim Fellowship for his research, and he is a fellow of the American Academy of Arts and Sciences and the Econometric Society; he formerly served as vice president of the American Economic Association.

Before joining the Stanford faculty in 1984, Taylor held positions as professor of economics at Princeton University and Columbia University. Taylor received a B.A. in economics summa cum laude from Princeton University in 1968 and a Ph.D. in economics from Stanford University in 1973.

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