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Fun with Budget Statistics

An entry on Radio Free Blogistan earlier this week:

Like father, like son This Reuters graphic published in Yahoo! News - Politics yesterday speaks volumes:

I commented on this entry, leading to the following exchange:

This graph is about as useful as saying that "The Mummy Returns" was more popular than "Gone With the Wind" because the former made $418 million and the latter only $390 million. Inflation-adjusted, of "Gone With the Wind" made $1.187 billion, which makes it still the top-grossing film of all time.

A chart of deficit growth as a percentage of GDP would be far more useful.
Frank Boosman [frank@boosman.com]

I invite you to create such a chart and edify us. I think even if you plot these graphs on a logarithmic scale it's still clear when the numbers are in the black and when they are in the red. xian [saloniki@radiofreeblogistan.com]
If I do create such a chart, drawn from the same CBO data as the Reuters chart, and place it on my blog, will you blog it here to provide both sides of the story?

[By the way, I'm not a supporter of the current administration. My only motivation in this is to avoid misleading statistics.]
Frank Boosman [frank@boosman.com]

Sure, of course. I never turn down free content!

to me the salient point is not the "record"-ness of the 2003 deficit (which is project, btw, and could easily turn out to be larger), but the overall direction of the curve, so I believe your deficit as percentage of GDP approach would serve my propaganda needs just as well (MUAHAHAHA)... You can even adjust for inflation if you like (but if you do, be sure to adjust both the numerator and the denominator).
xian [goblogyourself@freeblogistan.com]

Interestingly, I couldn't find a ready-made chart of this data. I had to use the raw data provided by the Congressional Budget Office and prepare it myself. I used CBO historical data as well as CBO projections. Here's the result:

The point here is not that President Bush isn't running deficits (he is), nor that budget deficits aren't a bad thing (I happen to believe they are). The point is that this chart looks quite different from the Reuters chart. Both are accurate, but the GDP-based chart is more useful and relevant.

An Office of Management and Budget file that can be found here (PDF, 2.25 MB) contains GDP-based budget data going back to 1930. I didn't take the time to chart it as well, but I found it interesting that during the Depression years 1932-1936, President Roosevelt ran deficits in the range of 4.0 to 5.9 percent of GDP, and during the war years 1942-1945, he ran deficits in the range of 14.2 to 30.3 percent of GDP. Though I agree neither with President Bush's specific tax-cutting plans nor his plans for real increases in military spending, I can see why he and his economic team believe their projected budget deficits to be reasonable. From their viewpoint, they're fighting two wars (against terror and Iraq) while suffering through a serious economic slowdown, making the deficits justifiable when viewed in a historical context. I disagree with this, but I understand it.


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