Tuesday, July 29, 2008
That Nasty Ol' Deficit
Figures lie and liars figure - My father of blessed memory.
One cute lil' news item flogged all over the dinosaur media yesterday was about the Evil Deficit BushHitler is going to be passing on to the next unfortunate who takes over his job in the Oval Office.
According to the story, the White House is projecting a record deficit for 2009 of between $480 and $490 billion,"a record" according to sources like the New York Times , NPR and the good people at ABC News.
It terms of a dollar amount, they're right. It's by far the largest in history. What they're not telling you is that a dollar figure in this regard is absolutely meaningless.
The real figure to look at, of course, is the deficit amount as a percentage of Gross Domestic Product (GDP), the total amount of what our economy produces. In those terms, even if the deficit dollar amount is correct, the projected 2009 deficit would be about equal to 3.3 percent of GDP. As a comparison, we ran a 6.0 percent deficit in 1983 and survived quite nicely, thank you.
To translate was utter bolshoi this is into everyday terms,let's say you earn a salary of $4,000 per month and your total spending is equal to $1,000...that gives you a debt ratio of 25%.
You get a raise to $6,000 per month and your spending goes up to $1,200 per month - a record, no? Except it isn't because in terms of your income your spending level actually went down to a mere $20%.
Another thing that the bare dollar amount doesn't tell you is how much of that deficit spending constitutes investment in scientific research, infrastructure or tax and fiscal policy actually intended to increase the GDP.
Like my father always told me, figures lie and liars figure.Especially in an election year.