GROG,
First, let me say that I agree with you and Reed that normalizing things relative to GDP is often, though not always, a good way to get a first-order idea of what’s going on.

Second, I don’t see any evidence for the assertion you make:

The more depen­dant an econ­omy is on gov­ern­ment, the more suf­fer­ing
there will be when the econ­omy enters reces­sonary times.

After all, the economy wasn’t at all dependent on government back in the depressions of the 1800’s, or the 1930’s (until later in the period) — yet the suffering then was, by all accounts, far more severe than it is today.

Seems to me that the suffering comes in because in good times the government runs up the deficit — and then in bad times it doesn’t have the flexibility to deal with the downturn.

How when the ecnomomy suf­fers, gov­ern­m­net as a % of GDP auto­mat­i­cally increases because gov­ern­ment does not shrink as the econ­omy shrinks. Gov­ern­ment does the oppo­site of the pri­vate sec­tor dur­ing reces­sion­ary times. While house­holds and busi­nesses react to reces­sions by cut­ting back, con­trol­ling expenses and sav­ing, gov­ern­ment spends more.

Well, yes, of course. That’s the point of countercyclical economics.

The more depen­dant an econ­omy is on gov­ern­ment, the more suf­fer­ing there will be when the econ­omy enters reces­sonary times.

There’s some circular reasoning here. If the economy is entirely dependent on the government, then there aren’t recessions at all. That’s not to say that I’d endorse such an economy; there are plenty of other unpleasant facets of it. If an economy is entirely independent from government, then there’s an awful lot more suffering during recessions, as many more people reach economic states out of which they can never emerge. And such suffering is literally contagious.

“By the way, we have one com­menter here who insists we must com­pare all eco­nomic num­bers to GDP.”

I think if you asked that mystery commenter, he would not insist that ALL economic numbers be compared to GDP. He would probably agree with Reed, that comparison to GDP is prudent over the long run, but not necessrily over the very short run. 

What it does do however, is illustrate the immorality of bloated government.  How when the ecnomomy suffers, governmnet as a % of GDP automatically increases because government does not shrink as the economy shrinks.  Government does the opposite of the private sector during recessionary times. While households and businesses react to recessions by cutting back, controlling expenses and saving, government spends more. 

The more dependant an economy is on government, the more suffering there will be when the economy enters recessonary times.

By the way, we have one commenter here who insists we must compare all economic numbers to GDP. Reed, the article you linked from the Atlantic explains, in very clear terms, what that is not a good idea in at least some cases. If you compare spending to GDP, then when an economy collapses, it’s easy to mistake that economic collapse for a sudden surge in stimulus spending.

I agree that comparing economic numbers to GDP is not the only way and is sometimes not the best way to measure them. It’s often a good way over the long run since it’s a reasonable estimate of an economy’s potential to create revenue. However, it’s sometimes instructive to compare numbers to actual revenues since that also takes into account the level and effectiveness of the tax system. That’s one of the reasons why I compare spending against revenues in the second graph and some of the tables at this link. However, comparing against GDP (or actual revenues) can have the misleading effect that you and the Atlantic describe over the short term. In that case, it’s often good to also measure against some less volatile units such as current dollars, real dollars, or real per-capita dollars. In any case, it’s often good to measure economic numbers in multiple ways just to make sure that one is not missing a dynamic such as the one that the Atlantic article describes.

That’s a great article from Atlantic. Everyone should read it.

Following are some other good critiques of Laffer’s op-ed:

Arthur Laffer you’re embarrassing yourself

Arthur Laffer, Anti-Enlightenment Economist

Why History of Economic Thought Is Important: Whack-a-Mole Wall Street Journal/Arthur Laffer Edition

Poor Spokesmen

Arthur Laffer’s Anti-Stimulus Curve Ball is a Foul

Laffer can’t be defended.

No surprise there!

By the way, we have one commenter here who insists we must compare all economic numbers to GDP. Reed, the article you linked from the Atlantic explains, in very clear terms, what that is not a good idea in at least some cases. If you compare spending to GDP, then when an economy collapses, it’s easy to mistake that economic collapse for a sudden surge in stimulus spending.

If government expenses haven’t changed (in fact, due to increased unemployment insurance and other factors, spending might actually increase), then the numerator of the spending /revenue stays about the same, while the denominator plummets. This isn’t stimulus spending. It’s merely a collapsed economy.

But it’s how right-wingers (it’s unfair to call them “conservatives”) falsely claim “stimulus spending” doesn’t work — by pointing out that the countries with the largest economic collapse coincidentally have the largest deficits, which they dishonestly pretend were due to “stimulus spending.”

“ a very good analy­sis of how incred­i­bly flawed Laffer’s argu­ment is.  ”

See # 4.

Thank you for giving depth to my analysis.

Reed,

That’s a great article from Atlantic. Everyone should read it.

We keep hearing Republicans complain that “President Obama has put more people on food stamps than” etc etc. Backwards causation. In attempting to feed people whom President Bush threw out of work, the safety net programs that were created long before Bush are working.