How to Lie With Statistics

August 17, 2011

One of the Republican shibboleths in this election cycle is that America doesn’t have a revenue problem. It has a spending problem.

One piece of evidence that conservatives trot out to back this claim up is that government spending as a percentage of GDP has risen from an historical average of about 18 or 19% to a new high of about 25% under President Obama. Hence, all we have to do is cut spending to 18 or 19% of GDP, and America’s budget woes will suddenly go away—or at least get a lot better.

Unfortunately, this is a classic case of lying with statistics. It is absolutely true that spending has increased under Obama. He did enact the auto bailout, the stimulus, and the like, all of which added to the budget deficit. (One can’t reasonably blame Obama for TARP—although many do—or for actually bringing the wars in Iraq and Afghanistan “on book,” meaning that we admit we’re spending money there up front in the budget as opposed to hiding it (as Bush did) But people are doing that, too. Admitting these costs also raised the deficit.)

It turns out, however, that increased spending under Obama is only a small part of the reason that government spending has risen as a percent of GDP. The bigger reason is … math.

If you want to know how much the federal government spends as a percentage of GDP, it’s a really simple equation: take the federal budget and divide it by the GDP. You end up with the percentage of federal spending re: GDP.

Like any division equation, changing either the numerator (federal spending) or the denominator (GDP) will change the answer.

The thing is, conservatives want you to believe that the entire reason that federal spending as a percent of GDP has gone up to 25% is because of increased federal spending under Obama. But this is mathematical twaddle. It ignores the denominator: GDP.

As it happens, GDP declined dramatically in this country due to the Great Recession. Had federal spending remained exactly the same as before the recession, federal spending as a percent of GDP would have gone up dramatically during it. Obama’s spending added to the rise, but it did not account for the whole thing.

Notably, this always happens in recessions: government spending is typically stable, or trends upwards with stimulus packages to counter the recession. So federal spending as a percent of GDP always goes up in even in ordinary recessions—much less several ones like the Great Recession.

And guess what: even if government spending remains exactly what it is now going forward, federal spending as a percent of GDP will go down whenever the economy recovers. The denominator—GDP—will go up, so the relative impact of the numerator—federal spending—will go down.

There is much wrong with our budget politics. But we can at least do basic math: we do not need to slash our current budget because spending as a percent of GDP has grown over the last several years. It will go down, even if we do nothing.

Seriously. It may be a statistic. But it doesn’t mean it matters.

12:00pm | URL: http://tmblr.co/ZPUuPy8Qzi5U

(Notes: 39)