Archive for predictions

MarketWatch’s Rex Nutting On Obama Spending (Infographic)

It’s been going around Facebook and the Twitters.

It’s been rated “mostly true” by Politifact.

It is the MarketWatch piece on how Obama hasn’t really increased spending all that much.

And I’m damn tired of picking it apart 140 characters at a time, so I put together this sarcastic infographic showing exactly how sloppy this piece really is.

(Correction: An earlier version of this infographic incorrectly identified the $3.8 Trillion 2013 as a CBO projection. That is the spending request from President Obama 2013 budget.)

UPDATED (05/24/12, 3PM):

There are three things in this infographic that should be called out more explicitly.

First, much of the debate here centers around who exactly should catch the blame for FY 2009 spending. This is actually a very tricky question and I think compelling cases can be made for both sides of this debate.

My personal position is that it’s really complicated. But one thing is for certain: in hindsight the CBO January 2009 estimate is so obviously wrong that using it should be called out and mocked.

The January 2009 CBO estimate might have been a “best estimate of what Obama inherited”, but only in January 2009 when spending data was *very* hard to predict. January 2009 marked the worst part of the recession and the uncertainty was very high. Only a few months later, Obama’s budget estimated 2009 spending would be $400 billion higher than the CBO estimate.

But now we can look at the data, not the estimates. And we should. The spending data ended up $20 billion lower than the CBO estimate… and that included the stimulus spending (which Nutting says was $140 billion, but I’m still trying to track that number down). If that is the case, the high-end estimate for Bush’s fiscal year is  $3.38 trillion. If we compare that to Obama’s 2013 budget proposal ($3.80 trillion), that’s an increase of 12.5% (3.1% annualized). Which isn’t that high, but it’s also using a baseline that is still filled with a lot of what were supposed to be 1 time expenses (TARP, Cash for Clunkers, the auto bailout, the housing credit, etc).

Second, Nutting uses the CBO baseline in place of Obama’s spending. This is easily verified and I can’t think of a serious economic pundit who would say this is OK. I can think of two reasons for doing this: Either a) Nutting is a monstrously biased ass who (rightly) figured no one in the liberal world would fact check him so he could use whatever the hell number he wanted to use or b) Nutting had no idea that the CBO baseline isn’t a budget proposal. I’m actually leaning toward the second explanation. Nutting uses so many disparate sources it seems clear he doesn’t know his way around federal finance.

Congrats, Mr. Nutting. I don’t think you’re a huge jerk, only that you’re hilariously unqualified for your job.

Finally, my biggest goal here was to point out the inconsistencies in the analysis. Nutting wants to use the 2009 CBO estimates, but only one column (only for attacking Bush on spending). He wants to compare estimates from one year to actual spending from other years to the CBO baseline from this year. And, as if he is a magical cherry-picking elf, he manages to pick just the right numbers to give him just the right data. This could be an accident. Stranger things have happened. But it seems more likely that he intended to squash a talking point by any means necessary and he went looking for the best data to do that.

I will be accused of massaging the data by people who don’t understand what I’m doing here. I’m pointing out the data massaging on Nutting’s side and calling him on it. I’m saying “If you’re going to use the CBO estimate, use the f***ing CBO estimate!” Don’t use just the part you want and then pretend like the rest of it doesn’t exist. Commit yourself to the data you’re using and follow it, even if it doesn’t go where you want it to go.

OK… references:

Bush requested $3.107 trillion, but the final budget of $3.52 trillion was passed by the Democratic Congress and signed by President Obama on March 12, 2009.

For actual spending, I used the monthly Treasury Reports, which have spending and revenue for every month since 1981 in an Excel file.

For the CBO fiscal year 2009 estimates.

The CBO baseline (which was referenced by Nutting for the $3.58 trillion number) is found here.

President Obama’s actual 2013 budget

And just for kicks, here is the CBO analysis of the President’s Budget which pegs Obama’s 2013 spending at $3.717 trillion.

7 Nasty Liberal Lies about 8 Nasty Conservative Lies

This is a response to the Alternet article 8 Nasty Conservative Lies About the Democrats and Obama That Must Be Debunked Before the Election which is about as unbiased as one would expect from the title.

Oh, this is so boring. But smart people I know have been suckered in by it, so I suppose it needs to be rebutted. How tedious.

1) President Obama actually reduced the deficit since George Bush’s last deficit was $1.416 trillion.

In a sleight of hand worthy of a 7-year-old magician wannabe, he notes that, since Bush signed the 2009 budget, he is therefore responsible for all the debt in 2009, which was $1.416 trillion. He does not, however, explain that the stimulus was passed that year and added drastically to the deficit for 2009. Why is there no mention this? Because the author is interested only in political point-scoring, not the truth.

2) Obama actually cut taxes

This one is actually true. President Obama did cut taxes as a part of the stimulus. But apparently those tax cuts had no effect on the deficit described above, being replaced by money from the happiness rainbow tree that the author believes Obama keeps in the back yard. It is entertaining that the author says these tax cuts were “wasted” since he will soon cite the CBO report on the stimulus, which claims that the tax cuts helped stimulate growth. Consistency is apparently not as much fun as throwing poo.

3) President Obama didn’t bail out the banks, George Bush did.

True, but Obama did vote for the bailout, as did John McCain. Perhaps he is claiming that Senators aren’t important and shouldn’t be held responsible for their own actions and that Congress has virtually nothing to do with governing the nation, in which case the whole article seems irrelevant since it’s not a presidential election and changing Congress won’t actually have an effect on anything. It’s hard to tell, he’s short on details.

4) The stimulus totally worked

He cites the CBO report on the stimulus. Whoop-de-do. The CBO report is an estimate based on an algorithm. When the Obama administration went to the CBO before the stimulus, the CBO plugged the numbers into a computer and said “If you spend X money, you will get Y jobs”. Nearly 2 years later, the Obama administration asked the CBO to plug the numbers in again and – surprise! – they got the same result. It is not based on any actual measurement of the job market, it’s based on a model.

A better way of determining if the stimulus worked would be to ask “Did we follow the unemployment curve the administration said we would?” The answer is “hell no”. Unemployment is far worse than the administration predicted with the stimulus. This is a point which the author explains at length. I’m just kidding; he totally ignores it, perhaps imagining that he had addressed it but could no longer make out the words from behind the spittle covering his laptop screen.

5) Businesses don’t hire based on tax cuts

Young, small businesses hire more than big businesses. They will usually work the people they have as much as possible until it becomes clear that they cannot pull in any more business without new people. Fewer taxes means more money. More money could simply mean more profit (as it has recently with larger companies), or it could mean more growth, more employees, even more money. It varies from business to business. But saying “it’s complicated” does not give the author the intellectual political anger management outlet he clearly needs, so I guess we should be glad he’s not biting anyone’s fingers off.

6) Health care reform reduces gov’t deficits

Here, he cites an article from before the health care reform bill was passed. Since then, the estimate has jumped up as things like the 21% cut in Medicare reimbursement was postponed, then postponed again and large companies like McDonald’s got permission to ignore the law when they told the government that they would drop coverage for their employees if they didn’t get a waiver.

Thus, the various cost-savings of the bill have been shown implausible or manipulative (which is exactly what I said would happen to those absurd estimates nearly a year ago). They were nothing but projection manipulation devices and anyone who wasn’t drunk could see that was the case.

7) Social Security is fine. It’s not a Ponzi scheme.

Yes, Social Security has run a surplus… up to this year when it ran a decifit. Projections have it pushing back into surplus for a couple years until, in 2016, it dips back into deficit forever. “No problem,” the increasingly dense author of the article says, “There’s a trust fund”. Yeah… a trust fund held in US debt. The SS trust fund buys up US debt, which the government pays back regularly, so it’s a pretty safe asset. That trust fund should last for a while, but eventually we will be paying Social Security returns to older investors (the elderly) from their own money or money paid by newer investors (the younger generation).

That is the definition of a Ponzi scheme.

8 ) Government spending is good for the economy

Here the author talks about how the government spends so much on infrastructure, roads, airports, schools (in an ideal world these things are all good for the economy) but only a “small part of the government’s budget” is for welfare and foreign aid. I’m kind of funny inasmuch as I think that 60% of our budget is not a “small part”. (I’m counting SS, Medicare/Medicaid, Health and Human Services, Housing and Urban Development, and “other” mandatory programs. But not interest on the debt.)

Roads and schools? (Transportation and Education) They account for 3.3% of the budget. Since welfare and foreign aid are such a “small part” of the budget, the author won’t mind if we get rid of it. I’d be delighted if we reduced the other parts of the budget so that Transportation and Education made the bulk of it.

Overall, the author targets builds up conservative strawmen of “lies” and then uses liberal strawmen (and selective data) to “prove” them wrong. This article is nothing more than red meat for people who already agree and don’t have time to do the research themselves. It’s sloppy, lazy, angry and impotent. And, worst of all, it spreads disinformation. Hopefully this post is something of an antidote.

(Note: There are few links here because this data is so easily available and I’m in a crunch time at work.)

Long Slow Recovery vs. Double Dip Recession

Interesting NYT Economix piece from Casey Mulligan on if we’re seeing long slow recovery out of the 08-09 recession or the beginning of a double dip recession. One thing he does is predict that national employment and work hours will be “a couple of percentage points higher at the end of 2010 than they are now.”

I think he’s kind of crazy, but I wanted to put it on the record so that we can look back at it at the end of the year.

First of all, the guidelines: Mulligan says that national employment will be “a couple of percentage points” higher. I’m going to assume that this means employment-population ratio as defined by the BLS which, as of this writing, is 58.7%. It is up .5% from its nadir at 58.2% last December. Let’s say that “a couple percentage points” means an increase of 1.0% in the employment-population ratio. This gives him quite the benefit of the doubt, I think.

Based on my very rough calculations, that would mean we’re looking at an increase of about 3.06 million jobs in the next couple of months, averaging 437,000 job increase per month. Keep in mind, this still puts us way below the height of the employment-population ratio of 64.7% in 2000 and nearly a full percentage below the employment ratio in place a year and a half ago.

No. Freaking. Way. Not happening. Honestly, I would be surprised if we saw another .5% increase (which is what we’ve seen in the last 6 months). I’ll stake my claim there, even though I have a feeling that we might not even make that number… I see this recovery being even flatter than that.

In any case, here’s a view of the predictions. We’ll revisit in a half a year. Or possibly in October or November when if it looks like one of us is on track.

Employment-Population Ratio 2006 – Present

image

What Happens to Unemployment Tomorrow?

Just thought I’d post this. I’ve always been a little fascinated by the number of people needed to pull off something as huge as a the census. And next month we should see the peak of the census employment burst. Observe:

This was done in about 20 minutes, so it might need some explanation.

Basically, I start with with the June before the census and mark that number (somewhat arbitrarily) as my base federal employment point. Then I checked the employment numbers moving forward from that point as a percentage of that number.

As you can see, if this census year follows the path of the last census year (which it seems to be doing so far) the May employment number coming out tomorrow should add around 300-350 thousand jobs due to the census alone.

How big is a 300-350 thousand job increase? Well, the increase in employment as a whole between March and April was about 250 thousand. So, if the recovery continues as it has been, we should see an increase of something along the lines of 500-600 thousand jobs tomorrow.

Take note, I’m doing really simple guesswork here. I’m pretty sure that geoff over at Innocent Bystanders will have more intelligent things to say on the matter tomorrow.

President Obama, I Fixed Your Chart For You

You may have recently seen the new chart put out by the Obama administration pushing the idea that the President’s policies are responsible for the decrease in newly unemployed. It looks something exactly like this:

Now… as a piece of visual political propaganda, this is brilliant. The colors draw sharp contrast, the symmetry is appealing. And the numbers are right.

But keep in mind how carefully I phrased the units being used “decrease in newly unemployed”. This isn’t an increase in jobs or a decrease in unemployment. It just means that we’re losing jobs slower that we were before.

Make no mistake… this is good news. And we can bicker back and forth as to whether President Obama’s policies are responsible for this slowdown in newly lost jobs. He would say yes and point to the stimulus.

But in order to point effectively to the stimulus, we would have to take a look at the expectations of the stimulus. Everyone expected that we would come out of the recession eventually and that job loss would slow. The question was how quickly that would happen.

To help us visualize the expectations of the stimulus against the reality of it, I’ve added that piece of context to the graph. See if you can spot it.

I got these numbers by multiplying the labor force by the expected unemployment rate with the stimulus (per this chart) and then subtracting that number from the labor force times the actual unemployment rate.

One may say that this is unfair. I would actually kind of agree. Economic predictions are pretty hard to make. But the original chart is similarly unfair. Keep in mind that it took a few months to get the stimulus money out the door. In fact, they didn’t even release any data on the stimulus funds for second quarter 2009 (the first stimulus report was for third quarter 2009).

Side Note: This data has actually been scrubbed from the website. They’ve re-compiled the data into new categories. But I’m wary about trusting the data since it looks like, according to the official data, about $12 billion of the stimulus was spent before the stimulus was signed with projects being approved as early as 2000.

So the first several months of decline don’t even reflect the impact of the stimulus. The decline in new job losses seems to be just a happy coincidence that looks good on a chart.

My Dance Of Humility Before Robert Stacy McCain

Back at the beginning of September, Robert Stacy McCain stated that:

The FHA is on the hook for lots of “underwater” loans, taken out by low-income homeowners who got special low down-payment deals and — in case you didn’t notice — unemployment hit a 26-year high in August, with no prospect the 9.7% jobless rate will go down any time this year.

At the time, I wrote a post stating:

If unemployment dips below 9.7% by the end of the year, I will make a point that your enormous confidence in the suckiness of the economy was misplaced.

If it does not, I will write a humble post begging your forgiveness. I’m curious to see how this goes.

Therefore, I take note that Stacy McCain predicted the trajectory of the economy more accurately than I would have. I humbly beg his forgiveness.

I would like to take a moment, though, and explain why I wrote that post in the first place.

I am fascinated by neurology… particularly how the brain forms memories and how those memories interact with reality. The evidence that pretty much everyone has false memories (where we can vividly remember things that didn’t happen) is overwhelming. What I’ve found in the last 10 years of following politics is that this area is particularly vulnerable to people saying things about the past that they totally believe are true but are, in fact, based on a narrative that was established after the fact.

People look back in hindsight and say “Well, of course John Kerry was a terrible candidate.” But they’re only saying that because he lost. If he had won, the narrative would have been established that he was the right guy at the right time who ran a campaign of brilliance with these subtle nuances that connected with the people. We have this certain sense of fate through which we look as if the world we live in was one of inevitability and we realign our perspectives and (frighteningly) our memories to align with reality as it turned out.

That’s why I love the internet and blogs in general. I love to take the feeling understanding of a certain time and place and write it in stone. Looking back at September now, it seems obvious that we weren’t out of the woods at the time. But it didn’t seem obvious to me or to a large chunk of those writing about the economy.

That the unemployment situation was still on the downturn seemed obvious to Stacy McCain and at the time I was struck by how different our expectations were. Some people will look back at his post and say “Well, of course the unemployment rate wasn’t going to decrease. Everyone knew that.” This post is to point out that not everyone knew that and that it wasn’t an obvious thing. We shouldn’t discount those who are right about something because the narrative has made their very gutsy prediction seem obvious.

It’s worth keeping record of our reactions at the time and comparing them to how the world turned out. It’s worth pointing out when someone is able to make an accurate prediction. And Stacy McCain had me on this one.