Posts tagged Government spending

George Washington Shrugged Again

9
1 month ago
by Michael Weiss in

A few weeks ago, I pub­lished “George Wash­ing­ton Shrugged”, in which I com­pared the tax/​spend ratio of each state to its Cook Par­ti­san Vot­ing Index (PVI). But the com­par­i­son cov­ered only two indi­vid­ual years, and did so against the states’ cur­rent PVI scores. In the analy­sis, there was a strong cor­re­la­tion in 2005, but not in 2010, between the states’ PVI scores and the tax/​spend ratio.

It was pointed out that the Tax Foun­da­tion data cov­ered the years 1981 to 2005, which would per­mit a more gran­u­lar and thor­ough exam­i­na­tion of the results. What would hap­pen if we looked at the full spec­trum of years from 1981 to 2005?  (more…)

George Washington Shrugged

27
2 months ago
by Michael Weiss in

There have been a hand­ful of arti­cles pub­lished about the rela­tion­ships among states between the taxes paid to the fed­eral gov­ern­ment and the money flow­ing back to the states from the fed­eral gov­ern­ment. In par­tic­u­lar, the typ­i­cal gen­er­al­iza­tion is that blue states pay more than they receive, while red states pay less than they receive.

How true is this? The answer depends on the details of the ques­tion. First of all, only two stud­ies have been widely dis­sem­i­nated on the sub­ject. The first, pub­lished in 2007 by the Tax Foun­da­tion, was based on 2005 data. The sec­ond was pub­lished by Talk­ing Points Memo in 2012, and looked at 2010 data. Let’s look at both of them, and exam­ine their rel­a­tive significance.

I’ll start with the later study, since it’s based on more recent data.  (more…)

Keynes Enabled?

52
3 months ago
by Michael Weiss in

John May­nard Keynes

Last week, the Bureau of Eco­nomic Analy­sis pub­lished a report indi­cat­ing that the gross domes­tic prod­uct decreased by an annu­al­ized 0.1 per­cent in the fourth quar­ter of 2012. Every­one (at least in pol­i­tics) reacted as if the GDP drop was a bad thing. Democ­rats blamed Con­gres­sional Repub­li­cans. Most Repub­li­cans blamed Con­gres­sional Democ­rats (though some blamed Pres­i­dent Obama). But was the report really that bad?

As with so many eco­nomic ques­tions, the answer depends on one’s perspective.

Part of the prob­lem here is that we typ­i­cally point to changes in GDP as the indi­ca­tor of the econ­omy. It’s not that GDP is a bad met­ric, but, like all eco­nomic met­rics, it needs to be viewed in con­text. The pri­vate sec­tor grew in the fourth quar­ter. Again. And this hap­pened despite draw­downs in pri­vate sec­tor inven­tory.  (more…)

Laffer’s Mistake Regarding Stimulus

94
8 months ago
by Reed Davis in

Arthur Laf­fer isn’t a fan of Key­ne­sian stimulus

On August 5th, The Wall Street Jour­nal ran an edi­to­r­ial titled “Arthur Laf­fer: The Real ‘Stim­u­lus’ Record”. The author, Arthur Laf­fer, is an Amer­i­can econ­o­mist best known for the Laf­fer Curve. The edi­to­r­ial begins as follows:

Pol­icy mak­ers in Wash­ing­ton and other cap­i­tals around the world are debat­ing whether to imple­ment another round of stim­u­lus spend­ing to com­bat high unem­ploy­ment and sput­ter­ing growth rates. But before they leap, they should take a good hard look at how that worked the first time around.

It worked mis­er­ably, as indi­cated by the table nearby, which shows increases in gov­ern­ment spend­ing from 2007 to 2009 and sub­se­quent changes in GDP growth rates. Of the 34 Orga­ni­za­tion for Eco­nomic Coöper­a­tion and Devel­op­ment nations, those with the largest spend­ing spurts from 2007 to 2009 saw the least growth in GDP rates before and after the stim­u­lus.

Regard­ing this nearby table, mon­e­tary econ­o­mist David Glas­ner says the fol­low­ing in a cri­tique of the Laf­fer edi­to­r­ial:

So how did Laf­fer per­form his cal­cu­la­tion? He doesn’t say. All he does is cite the IMF as the source for his table. Thanks a lot, Art; that was really help­ful, but unfor­tu­nately, not help­ful enough to fig­ure out what you are talk­ing about.

Glas­ner is refer­ring to the fact that the table gives the source of the data sim­ply as “Inter­na­tional Mon­e­tary Fund”. It does seem that many dis­cus­sions in the polit­i­cal arena are ham­strung (per­haps pur­posely) by the fail­ure of the author to give a usable source, much less to explain his cal­cu­la­tions. I’ve there­fore taken the time to do what Laf­fer arguably should have done to begin with. (more…)

November, December, Sequester

9
9 months ago
by dcpetterson in

It’s sim­ple. It’s bad spend­ing if I don’t want it, and good spend­ing if I do want it.

I lis­tened for a while yes­ter­day to a record­ing of Con­gres­sional tes­ti­mony on the expected effects of the upcom­ing seques­tra­tion of defense funds. Tes­ti­fy­ing before the House Armed Ser­vices Com­mit­tee last Tues­day were the CEOs from Lock­heed Mar­tin, Euro­pean Aero­space Defense Sys­tems (EADS), Pratt and Whit­ney, and a small aero­space busi­ness, Williams-​​Pyro.

I was struck pri­mar­ily by the immen­sity of Repub­li­can hypocrisy.

What hap­pened, if you remem­ber, is that last sum­mer, Con­gres­sional Tea Party mem­bers thought they could extort bud­get cuts by refus­ing to raise the debt ceil­ing (which allows the fed­eral gov­ern­ment to pay the bills Con­gress has already approved). An agree­ment finally was reached that the ceil­ing would be raised — but the cost was the Con­gress would appoint a spe­cial super­com­mit­tee (the United States Con­gress Joint Select Com­mit­tee on Deficit Reduc­tion, or NAMBLA) whose job it was to find around $2 tril­lion in deficit reduc­tion. Keep in mind, this was only after Repub­li­cans rejected Pres­i­dent Obama’s pro­posal of $4 tril­lion in deficit reduc­tion.

As incen­tive to actu­ally find $2 tril­lion in deficit reduc­tion, the deal required that around $1 tril­lion in cuts, half to mil­i­tary and half to domes­tic pro­grams, would be auto­mat­i­cally trig­gered begin­ning the first of next year if an agree­ment could not be reached. As it turned out, the super­com­mit­tee super­failed, because Repub­li­cans absolutely pos­i­tively unflinch­ingly refused to com­pro­mise. They wanted only to dic­tate their own terms, and to give up noth­ing.

Repub­li­cans now want to avoid the impend­ing auto­matic cuts — to mil­i­tary spend­ing. They don’t care about the domes­tic cuts (in fact, if the mil­i­tary cuts don’t hap­pen, the whole $1 tril­lion will fall on — and vir­tu­ally gut — domes­tic spend­ing). So the Repub­li­can lead­er­ship in the House is hold­ing hear­ings on how awful and rot­ten it would be if the mil­i­tary cuts actu­ally went into effect as scheduled.

They want to renege on the deal.

They want their intran­si­gence to have no con­se­quences they don’t like. (more…)

Relationships Between Spending and GDP

15
1 year ago
by Michael Weiss in

Nego­ti­at­ing over our eco­nomic future?

Every so often, I like to pull a gen­er­ally accepted eco­nomic tru­ism off the shelf and test it. As you may recall, I looked a cou­ple of times at the rela­tion­ship between tax rates and eco­nomic growth.

With all of this talk of aus­ter­ity I fig­ured that this time I’d look at the other side of the gov­ern­ment equa­tion, namely the rela­tion­ship between gov­ern­ment spend­ing and GDP. In par­tic­u­lar, I wanted to see if increased gov­ern­ment spend­ing reduces GDP. It has often been sug­gested that it does, due to gov­ern­ment crowd­ing out pri­vate industry.

(more…)

Go to Top