-- Posted Friday, 1 March 2013 | | Disqus
By Tim Iacono
Wow! Talk about torturing data and providing a deceitful narrative to defend federal government spending.
In yesterday’s Austerity Kills Government Jobs as Cuts to Budgets Loom, the chart below is provided in support of the claim that government austerity is already here:
Click for a bigger, sharper image
At first this looks like a compelling graphic showing how the federal government has been tightening its belt lately, offered up in support of the idea that we should just let Washington keep doing what it’s been doing.
But, upon further inspection, there’s a lot more to it than meets the eye as detailed below.
First, while the accompanying article is clearly about the federal government sequester spending cuts that go into effect today, the chart above cleverly mixes federal, state, and local government spending and investment. It says so right there in the description above the chart, but you have to read it carefully as the roles of state and local governments are thrown in there at the end, almost as an insignificant afterthought.
They are not.
The other thing that’s important is the description of what’s being depicted as indicated in the left portion of the chart – “Two-year change by quarter, in constant 2005 dollars”.
This too is pretty important.
Here’s why.
Using Commerce Department data and a simple two-year average of the percent change for government consumption and investment (technically, Table 1.1.1. Percent Change From Preceding Period in Real Gross Domestic Product from the Bureau of Economic Analysis’ GDP and Personal Income data), one can easily duplicate what’s shown above.
It’s not a perfect match for the upper right portion of the NY Times graphic and the scale is off a bit due to the simplified calculation, but it’s close enough to have confidence that the same source data is being used and that the calculations produce the same trends.
But, going a step further to break down the data into its constituent parts tells a very different story than the one the New York Times probably wanted its readers to believe.
As most people know, state and local governments have slashed spending in recent years, due largely to the Great Recession and, unlike the federal government, the need to balance their budget. Here’s what the data looks like with just the state and local government components:
Note that the spending and investment cutbacks at the state and local levels are significant and that, when measured this way, they extend back a full two years (that’s kind of important).
The same chart with the federal government only is shown below and, as you may have already guessed by now, it’s not nearly as bad with cuts coming only recently.
Obviously, reduced outlays by state and local governments are more than just a footnote to this data, contrary to the impression that is made when reading the description of the New York Times chart.
In fact, by this measure, federal government spending was positive in 2011 and didn’t go negative until the fourth quarter of that year – just over a year ago – which goes a long way in explaining why the calculation chosen was a “Two-year change by quarter” that also included state and local governments.
Moreover, the sharp 2012 fourth quarter decline for the federal government shown above was due largely to the Defense Department slashing spending late last year when they thought the sequestration cuts would go into effect on January 1st rather than today.
So, to some extent, this data already reflects the sequestration cuts, though you wouldn’t find that important detail in either the text or the graphics from the New York Times.
To be sure, federal government spending and investment has declined over the last two years as shown below using the raw data from the Commerce Department, but it’s easy to see how big of an impact the fourth quarter defense spending cuts had.
All told, after federal government consumption and investment increased at an annual rate of about six percent per year for three years (from 2008 to 2010), it decreased by less than half that amount over the last two years (2011 and 2012), yet readers are led to believe that “Austerity is Already Here”.
One could argue that case for state and local governments, but it’s pretty silly (and dishonest) to make that same claim when it comes to the federal government.
Tim Iacono
http://iaconoresearch.com/
-- Posted Friday, 1 March 2013 | Digg This Article
| Source: GoldSeek.com
