A Misleading and Dishonest Claim by the New York Times that Federal Government “Austerity Is Already Here”
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.
7 Responses to A Misleading and Dishonest Claim by the New York Times that Federal Government “Austerity Is Already Here”
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Nice catch! “Figures lie and liars figure!”
The article contains a confusing mix of references to federal and non-federal issues. The overall tone of the article seems to be directed at the federal government but, whenever the author wants to argue that austerity is occurring, he carefully adds non-federal spending to the mix.
It’s pretty carefully written to keep the references correct so you can’t say it’s actually wrong, but the graph reveals a strong confirmation bias: Austerity is Here!
Also, the author seems to have a strong bias against military spending but only supports his inference that such spending is less stimulative with the vague “Studies suggest” language.
He ends with Yellen arguing that government needs to do MORE borrowing and spending to “help” the economy. But, frankly, the last couple of paragraphs are so poorly written that it’s pretty hard to make that connection and I wonder if most readers would even understand what she’s arguing.
In my mind, she’s clearly hoping for BB’s job. If she gets it, she’ll continue and possibly expand on BB’s endless money printing. There’s really no end in sight short of a crash, IMHO.
If you think you’re getting unbiased data from the NY Times, you’re sadly mistaken. In fact, I almost never read truly balanced reporting from ANY major news outlet. EVERYONE has become polarized and not objective with an agenda to push; it’s getting old.
That’s why I (and many many others) surf the web every day looking for sites such as this one where we can find honest efforts to discuss and dissect the financial news of the day!
While not very surprising, as you detailed, this is a pretty extreme example of cherry-picking the data - formulating the conclusion first and then finding the right data presented in the right way to support that conclusion.
Austerity is only here for the nearly one million of us who through no fault of our own (thank you Mr. President and members of Congress) will be taking a 20 percent pay cut - courtesy of sequestration.
For any of you who think “Sequestration - what’s the big deal?” or are big sequestration proponents - please join the Fun, share with your fellow citizens and take a 20 percent pay cut yourselves.
Having fun yet?
Mark
Millions of non-government workers have already lost their jobs and taken a 100% pay cut and have been on unemployment for years until it finally ran out THROUGH NO FAULT OF THEIR OWN.
You seem to be living in a dream world where economic reality doesn’t apply to you and you should NEVER experience “austerity” or even the threat of austerity simply because you work for a governmental unit.
Governments get money by taking it with the threat of force from citizens or by simply making it out of thin air, which debases the entire currency. In the end, it’s just another form of taxation. Without the private sector workers and the threat of force, governments have no income from which to pay your precious salary.
Stop whining. Wake up and smell the coffee and be thankful you even HAVE a damn job. It’s VERY possible you and your ilk will soon join the ranks of the UNEMPLOYED. Start planning.
Having fun yet?
I take issue with this argument that governments get money “by threat of force”. It harkens back to the day when the King’s henchmen would threaten to beat you up if you didn’t hand over your cash or crops.
We elected representatives. They passed laws that levied taxes. By participating in society, you agree to pay those taxes. This is not unlike how participation in society means that theft and murder can be punished “by threat of force”. If you have a problem with the law, elect someone to change it.
As far as debasing the currency, that depends on whether you think wealth can truly be created or destroyed. If so, then printing money *may* debase the currency, but it is not guaranteed. But consider that if there are more things of value in the world, but the money supply is constant, then the value of those things will go down because there is less money chasing more goods. If, as wealth is created, money is printed which precisely compensates for the created wealth, then you will have more money chasing more goods, and the value of goods should stay the same.
As a disclaimer, just because I think it’s possible to “print the output gap” (so to speak), it doesn’t mean I think that our current financial overlords are succeeding.
At my house, taxes are taken ONLY due to threat of force. I did NOT vote for these morons in charge of government. For example, I voted for Ron Paul every chance I had. I do NOT agree to pay those taxes and I do NOT agree that my taxes can be used for wars, for example. Don’t say “we” so lightly.
Maybe YOU voted for this mess, but I’ve been voting against it for DECADES. The argument you’re making is that, even though I’m in the minority forever in this bass-ackwards society, I’m supposed to shut up and take it or leave. I don’t get to point out that I don’t agree and I would NOT support this system with my tax dollars unless I were FORCED to do so under threat of imprisonment.
I’ll let time show which of us has the better argument on currency debasement…
DCX2, Wealth is only created by individuals but easily destroyed by statist governments, such as ours. Governments create nothing. Although I vote in every election, I am not represented in government. Whether you like to admit it or not, we do in fact live in a post constitutional America. For more detail, please see Mark Levin.