There’s a famous Aaron Levenstein quote:
Statistics are like bikinis. What they reveal is interesting. What they conceal is vital.
I’m reminded of that quote after seeing Marc Chandler’s “Chart of the Day” at Credit Writedowns. The chart shown displays that Federal spending has increased at the slowest rate under Obama than any other administration since 1980. Chandler uses this to conclude that the problem during the Obama Administration has been too little government spending.
While I’ll assume the figures in the chart are technically true, they are certainly extraordinarily misleading. This harkens back to an attempt by Nancy Pelosi to make a similar point; Snopes called her out on it.
So what’s the flaw with the chart in Chandler’s blog? There are actually a few issues, but the three most obvious:
(1) It counts 2009 as Bush’s spending. This is the most noticeable flaw. In 2009, Barack Obama pushed for the American Recovery and Reinvestment Act, which you might know as “the stimulus.” This was the highest year of government spending on record, and was largely spearheaded by Obama initiatives, but the author’s decided that 2009 counted as “Bush’s year”. This is very important, because spending skyrocketed during 2009, but has grown at a much slower pace since then. Hence, it’s highly misleading to claim Obama’s spending increases have been small and then starting with 2010 to make the point.
(2) It does not take inflation into account. For instance, in 1981, the US had CPI inflation of 8.3%. In contrast, the rate of CPI inflation in 2009 was 2.6%. All things being equal, we should expect spending to increase more when inflation rises more. Indeed, as a result of the housing downturn, we’ve experienced some of the weakest inflation numbers ever during the Obama administration, whereas the Reagan Administration was still dealing with the remnants of inflation created from 1970’s policies.
(3) The base has increased. In the late 1980’s, Microsoft’s revenues were growing rapidly. I don’t have precise numbers, but I’m willing to wager they experienced 20%+ revenue growth. In 2012, Microsoft has about 6% revenue growth. We can, of course, debate whether Microsoft is being run as well today as it was in the late 1980’s, but the bigger point is that Microsoft had more room to grow in the 80’s, whereas today, it dominates large parts of the market, and many of its products have difficulty growing much faster than inflation as a result.
We can see this same phenomenon in government spending. If government spending increases from 2% of GDP to 4% of GDP, and GDP stays the same, then that’s an increase of 100% in government spending. If government spending increases from 25% to 27% and GDP stays the same, then it only increases 8%. Yet, in both cases, spending increased by the same amount: 2% of GDP. The reason the second scenario has a lower growth rate is because it has a higher base. Hence, we should not be surprised that the rate of growth of government spending under Obama has dropped, because the Federal government has grown so much over the past several decades already.
There are lies, lies, damned lies, and statistics. We can certainly see that here. It’s not that Obama is being more fiscally conservative than past Presidents; using most metrics, Obama has increased spending more dramatically than any President since World War II. It’s that it’s easy to manipulate data to say what you want it to say if you have an agenda.