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December 22, 2006

Why Facts Don't Matter

A disturbing trend in modern political discourse is the substitution of beliefs for facts. Today's case in point, hilzoy's argument that Democrats are fiscally responsible while Republicans are terrible spendthrifts. In order to back up this argument, which is, to judge from the commenters over there, absolute dogma among Democrats, she posts the following graph, which tracks the deficit over the past 40 years.


Deficit_gdp

So: Republicans (Nixon, Reagan/Bush) massively increase the deficits. We (Carter, Clinton) come in and bring the deficit under control again. (Various details about how this happened under Clinton are here.) Republicans then regain power and spend uncontrollably again. And so the cycle continues.
So, if we take hilzoy at her word, this graph shows a clear cycle. But a closer review of the data raises some significant questions about hilzoy's interpretation of the data. In Fiscal 1965, the federal government ran a deficit of $1.4 billion. (All deficit numbers are based on the combined budget, meaning they include Social Security numbers.) By Fiscal 1969, the government was running a surplus of $3.2 billion. Thus far, this seems to support hilzoy's thesis, until you look at the numbers in between. In Fiscal 1968, the deficit was a whopping $25.1 billion. Why did the deficit become a surplus under President Johnson's final budget? A massive tax increase: tax receipts jumped from $128 billion in Fiscal 1968 to $157.9 trillion in Fiscal 1969, a 23% increase thanks to Johnson's tax increase in 1968. Contra hilzoy, who claims that Democrats got their reputation for raising taxes because they had to in order to counter Republican profligacy, a government wholly controlled by the Democrats raised taxes to solve a problem they had created.

Under President Nixon it is true that the deficit spiked to a high of $23.3 billion in Fiscal 1972. But it then scaled back to $6.1 billion in Fiscal 1974. In Fiscal 1975, the last budget President Nixon would influence, it skyrocketed
to $53.2 billion, and under President Ford it got even worse, reaching $73.7 billion in Fiscal 1976. So maybe hilzoy's right: under Republican Presidents, deficits grew at a horrific rate (although this picture is more muddled than it seems at first, since the deficit was almost eliminated under Nixon before his final year in office). Maybe we should see if anything else might affect those numbers, though. Let's see, what else happened in 1974? Well, obviously President Nixon resigned in August of that year, so his ability to affect the budget was already somewhat limited, and President Ford wasn't in very good position having assumed the Presidency without ever having been elected to the Vice Presidency. And, in one of his last acts to try to hold onto his job, President Nixon had signed the 1974 Budget Control Act, which "strengthen[ed] the congressional role in the making of the budget by beefing up and centralizing its budgetary capacity". And who controlled Congress in 1974? Hmmm...the Democrats, who would gain even better control in the 1974 elections as the Republicans reaped their richly-deserved gains for President Nixon's crimes. So, when the Democrats gained greater control over the budget, the deficit skyrocketed, and while it did drop as low as $40.7 billion under the combination of President Carter and a Democratic Congress, Carter's last budget set a new deficit record of $73.8 billion. Hilzoy's claim that President Carter got the deficit 'under control' is, to be charitable, an interesting interpretation.

Her claim re: President Reagan is dead on, as President Carter's record was a fond memory after eight years of President Reagan, whose final budget deficit was $152.6 billion, which was down almost $70 billion from his record of $221.2 billion in Fiscal 1986. And that mark fell to President Bush in Fiscal 1992 at $290.3 billion. Of course, these marks all came while at least the House, and for most of the time the Congress, were controlled by Democrats, so blaming Republicans alone is an interesting interpretation of the facts, if it doesn't fit your preconceived notions to begin with.

President Clinton did, indeed, balance the budget, with a peak surplus of $236.2 billion in Fiscal 2000 and a healthy $128.2 surplus in Fiscal 2001. Of course, these surpluses didn't begin until Fiscal 1998, President Clinton's fifth budget, and one that came four years after Republicans took the Congress. So, was fiscal responsibility under President Clinton a result of Democratic fiscal rectitude, or divided government? I know what hilzoy is claiming, but I find it difficult to believe that even the most die hard Democratic partisan believes that President Clinton's health care plan would have been free. Since that was the prime driver of President Clinton's early Presidency and remains a favorite ideal of Democrats, the idea fiscal responsibility is a driving force of the Democratic Party strikes me as decidedly questionable.

I'll grant that hilzoy is correct that Republicans have a terrible record of deficits. But her notion that the Democrats are constantly fixing the problems Republicans create is based in what she wants to believe, not what the facts will support. Not that it matters. As Eric Scheie notes, people don't care about facts. They already know what they believe. They'll find facts to fit.

I bring this up because it is, quite frankly, depressing. Hilzoy is a smart person, and I'd stake quite a bit on her honesty. I am quite certain she makes the claim the Democrats are fiscally responsible because she believes it, and she believes that the facts she cites demonstrate that fact. And yet the evidence simply doesn't support that conclusion. Which is a depressing reminder of just how easy it is to allow your beliefs overcome reality, and it would be foolish for me, or anyone, to believe that we're immune to it.


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Posted at December 22, 2006 09:58 PM

Andrew Olmsted

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Comments

A few minor points: first, I said in my post that we had spent the last 30 years being fiscally responsible. When I wrote that, I did the math in my head, because I wanted to start with Carter. (The first economics lesson I ever got came sometime around '67 or '68, when tiny me heard my Dad say that there was inflation because Johnson was trying to pay for the war by printing money, and since it had never occurred to me that anyone could just print money legally, I asked why that was such a bad thing. There followed a story about what would happen if Dad had a candy bar and I had a dime; and then how the situation would be changed if I found another dime. I don't really want to point to LBJ as a model of fiscal rectitude, though he looks pretty tame now.)

I am trying to track down the reason why our takes on Carter are so different. I think it has to do with differences in the figures, and my current suspicion is that this involves real vs. nominal measures of the deficit. (I was using constant $.) Certainly Carter's deficits are not record-breaking as a percentage of GDP (that was easy to find, since I linked to it in my post), but I need to figure out exactly where I found deficit figures measured in constant dollars when I wrote the post. In any case, I may retract my praise for Carter (or not), depending on how the stats pan out.

About Clinton: no, health care would not have been free. Judging by the rest of his record, I assume he would have paid for it by raising taxes or cutting other spending; judging by their records, I also assume that the Republicans in Congress would have pilloried him for it. Perhaps I am wrong in this; it's hard to say what would have happened in an alternate world that never had a chance to unfold. Still, he did do such very unpopular things as raise taxers, and his record on fiscal stuff seems to me quite clear, as are my vivid memories of supporting his efforts to reduce the deficits while finding it immensely frustrating.

Posted by: Hilary Bok [TypeKey Profile Page] at December 22, 2006 10:31 PM

So there I went, scurrying all over the web, and the figures were in the GAO report you linked. I feel dumb. Anyways: as I read Carter, he brought down the deficits pretty sharply for three years, and then they went back up in '80, though not (in constant dollars) to the level they had been at before. (In constant $, it's over $50billion below '75.)

You're absolutely right that it was Ford, not Nixon, who raised the deficit. My bad.

I'm now wondering what exactly happened in 1980 -- that year's spending is way high compared to the three years that came before. (It is spending, not reduced tax revenues, that's driving it.) More fun with stats.

Posted by: Hilary Bok [TypeKey Profile Page] at December 22, 2006 11:06 PM

Yet you continue to insist that Congress has no effect on the budget, and you take no interest whatsoever in any possible external activities regarding the budget. Surely, despite your desire to 'prove' the Democrats superior to Republicans in all things (a low bar to clear in any case), you aren't going to pretend that who owns Congress has no effect on the budget or that, for example, President Clinton got the benefit of being able to slash defense spending in order to appear fiscally responsible?

Posted by: Andrew [TypeKey Profile Page] at December 23, 2006 08:08 AM

Also, just out of curiosity, does President Bush get any credit with you for agreeing to raise taxes as part of the deal he made with the Democrats in 1990? The one they quickly reneged on, refusing to match the tax increase with spending cuts? Given your insistence that Republicans are profligate and Democrats are the souls of fiscal responsibility, how do you rationalize that?

Posted by: Andrew [TypeKey Profile Page] at December 23, 2006 08:25 AM

It's difficult to analyze the issue statistically, since there are too many variables to consider. Reagan had a Democratic Congress that wasn't interested in reducing domestic spending while Reagan increased defense spending and cut taxes. Clinton was the beneficiary of a drubbing in 1994 and a fiscally-conservative House GOP. He would not be viewed as a fiscal hawk had Hillary's health care passed. The Vietnam and Iraq Wars distort those statistics as well.

One thing is true: there are few fiscal conservatives in either party. Much government spending is attributable to social security, medicare and medicaid. Add defense spending and interest on the debt to the equation, and approximately 90% of the federal budget is accounted for. Neither party has the political will to face voters and cut these domestic programs. Dems are willing to cut defense spending; Reps are willing to cut taxes. And that's about it. We have a quasi socialist/capitalist model- but most politicians don't acknowledge it.

Posted by: ckreiz [TypeKey Profile Page] at December 23, 2006 07:26 PM

Andrew: I completely give GHWBush credit for raising taxes. I thought he was a bit sleazy for promising never to raise them, since I assumed he knew perfectly well he'd have to; but I thought he was absolutely right to break his promise, given that he'd made it.

I don't think that the COngress has no influence. On the other hand, when I look at the figures, the President seems to have more.

Posted by: Hilary Bok [TypeKey Profile Page] at December 23, 2006 08:54 PM

Your analysis seems terribly simplistic. Yes, the figures do show that the deficit goes up more under Republicans than Democrats. Your sample for that is five Republican Presidents and two Democratic Presidents. That's a dismally small sample size. When you add in the fact that the situations were different for each of them, the idea that you can extrapolate from that sample beggars belief. I find it difficult to believe you'd accept a similar assessment that was slanted against your preferred party based on a similar data set. Ultimately, I think this comes down to what you want to believe, not where the facts lead.

Posted by: Andrew [TypeKey Profile Page] at December 23, 2006 10:04 PM

"Your sample for that is five Republican Presidents and two Democratic Presidents. That's a dismally small sample size. When you add in the fact that the situations were different for each of them, the idea that you can extrapolate from that sample beggars belief."

But you make the key point in your next sentence. The fact is that Republicans do claim that Democrats are profligate, and Republicans are trustworthy budget balancers on an even small number of Presidents as a sample size. How to resolve that contradiction?

And the fact is that if one starts talking sample sizes of, say, 20 Presidents, that circumstances will have changed enough over that time span that comparisons tend to be meaningless.

Both narratives simplify, but my query is on what basis is the pro-Republican one more correct than the pro-Democratic one?

Posted by: Gary Farber [TypeKey Profile Page] at December 25, 2006 08:00 PM

Gary,

I'm not sure I understand the question. It seems pretty obvious to me that Republicans have no standing as budget balancers of any stripe, so the contradiction is nonexistent. I consider it of a piece with most claims made by members of one political party about members of the other. Why you seem to think that the pro-Republican narrative must be more correct than the pro-Democratic one based on what I've written is a complete mystery to me. This is not a binary solution set. It's quite possible, and indeed, probable, that neither narrative is correct.

Posted by: Andrew [TypeKey Profile Page] at December 27, 2006 09:18 AM

For a post complaining about "facts," it seems to indulge in avoiding them. I understand your point of attacking what may be inferences by Hilzoy that go beyond the facts (and I think she fairly defines when she is doing that), but the counter-arguments commit that sin to a greater degree.

For the last 30 years, the following is a fact. Under Republican presidents, the US has run massive deficits, while under Democratic presidents, the deficits have been far smaller. Why is that? Are you saying that no reasonable inference can be drawn regarding the two parties based on this?

The following is also a fact. The deficits that were run up by during the years of Republican presidents were a deliberate result of tax cutting while increasing government spending that were Republican policies -- not the policies of the Democrats even if they did hold a majority in some or all of Congress during some of those years. There is zero evidence to support the idea that over Republican objections, the Democrats enacted policies to run up deficits during those years. Democrats were in a holding pattern during the Reagan/Bush I years, and had zero power during the Bush II years.

The only era in which there has been some check put on government growth matched with a fiscal policy to undo the deficit was during the Clinton years (don't know the Carter years well enough to judge them on this question). Bush I efforts were a band-aid. It was clearly a Democratic policy under Clinton -- Reich gets massive credit for that policy. The Clinton administration also had a strong policy of limiting growth of government (I believe running up the best figures on that, though I sadly do not have time to check the figures for all of the 30 years. It is definitely true for Clinton vs. Bush I and II.)

Does the Republican Congress get joint credit for the anti-deficit effort in the 90s? Normally, I would be inclined to say yes, except what happened beginning in 2001 once that same Congress now had a Republican president? It went absolutely crazy -- dumping all fiscal restraint of the 90s.

Whereas it was clearly a Clinton policy, it is therefore very hard to characterize the policy of the 90s as also a policy of Republicans. It seems more like a temporary policy of expediency when a Democrat was in Congress espousing the same policies. It was happily dropped by Republicans in 2001.

The single greatest factor contributing to the balanced budgets in the 90s was the 1993 act which received zero Republican support. The second greatest factor was the recovering economy (which is why it took a 3+ years for the benefits to kick in -- but the economic recovery was not were nearly enough to eliminate the structural Reagan/Bush I deficits without the tax increases).

Republicans falsely claimed that the 1993 act would ruin the economy -- they laughably will repeat those claims as to the pending repeal of the Bush tax cuts.

Ironcially, I came to this post via the Watcher's Council -- it is a sad testament that Andrew's article is cited as an alleged fact check on Hilzoy's. The facts are that the Democrats have for a very long time been far more fiscally responsible than Republicans.

You can claim that Democratic fiscal discipline is still not nearly enough and that it cannot be called "good" -- fine, that is a value judgment that goes beyond the facts. But it is impossible to claim that there is any kind of equivalency between the two parties.

Posted by: dmbeaster [TypeKey Profile Page] at December 31, 2006 05:07 PM

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