The Skeptical Optimist

Mar 2006: Latest US GDP Growth

Here are the latest facts about the growth of the US economy, followed by my assessment of those facts.

[UPDATE: Click here for a brief, explicit summary of the math.]

I still say that the two-quarter trend is probably a more accurate estimate of our current growth.  I explained why eleven months ago, and I haven’t seen any new evidence to the contrary since then; in fact, the subsequent quarterly results have only strengthened the hypothesis that a two-quarter trend yields a better estimate of true GDP growth.   

Bottom line:  I’m sticking with the “alternate” method; it says that our real growth rate is 2.9%, and our nominal growth rate is 6.4%.  That’s a lot better than the official numbers of 1.7% and 5.2%, respectively. 

Yet another reason to be optimistic.

Mar 2006 International Debt Thermometer

Canada: This one’s for you. 

It’s spring cleaning time, and I presume that my Canadian friends will appreciate the changes I’ve made to the National Debt Thermometer. 

First, it now has a new name: The International Debt Thermometer.  Second, the data sources are now more explicit.  Third, I have added a second graphic that shows selected OECD countries, with “Net Debt” on the left, and “Gross Debt” on the right.  Canada’s Net Debt is lower than the USA’s, according to the OECD. 

Here is the first graphic.  The monthly %GDP calculation I make (on the left side) is now separated from the CIA World Factbook’s numbers (on the right side).  On the left, I’ve also added the “Publicly Held Debt” portion of the USA’s total debt. 

Next is the new graphic showing OECD data only.  Note that Canada’s “Net Debt” is lower than the USA’s, and also that Australia’s Net Debt is negative.  (FYI, Norway’s Net Debt, not shown, is -141%.  Yes, it's minus one hundred forty-one percent.) 

The OECD includes state and local debt in its “Gross Debt” numbers, which makes it apples-and-oranges if compared to our Bureau of Public Debt’s “Total Debt” number.  That’s why I added the OECD-only graphic. 

For anyone interested in researching the details, here are some links:

•  BEA GDP announcement and data
•  Bureau of Public Debt, latest debt numbers (Total and Publicly-held)
•  OECD page linking to Gross and Net Debt tables
•  CIA World Factbook list of “Public Debt” by country
•  CIA World Factbook glossary entry for “Public Debt”
•  Form for asking the CIA a question (...lotsa luck; I tried)

FQ.06.12: Favorite Quote for This Week

With public sentiment, nothing can fail; without it, nothing can succeed. 
—Abraham Lincoln

Some good entertainment

While I'm working on restructuring several features of this blog, I thought you might be able to use a little entertainment: Choreographed juggling.  Watch the video; it's good.

Interest on the Debt: A plain-talk definition

For the past week I’ve been restructuring several charts I’ll publish monthly in this blog.  (It’s taking some time, by the way, but they’re just about ready.)  One of those charts, which I’ve already been publishing for a while, will take on a new, simpler name: Interest Burden Watch. 

One thing that’s been subconsciously nagging at me, for more than two decades now, is the negative public perception of the phrase “Interest on the Debt.”  Whenever it comes up, I detect an undercurrent of goes-without-saying negativity.  It’s used in headlines all the time, presumably to set the tone for some kind of subliminal political message in the article to come.  It’s also used by politicians all the time; in case you hadn’t noticed, they’re masters of the techniques of persuasion—and the number one motivating emotion is fear (...it’s just ahead of the number two motivator, greed).  I think it was irreversibly wired into our brain stems a few billion years ago, back when we were clumsily struggling out of the ocean onto the beaches, to escape the predator-denizens of the deep. 

Anyway, even though it is undeniably possible for a person, business, or government to have too much debt—and the unbearable interest burden it generates—that’s not the case in the USA now, and it won’t become the case if we keep inflation in check and keep the economy growing at least as fast as the debt.  (Anyone who has read this blog before is probably thinking I sound like a broken record just about now.)

As a result, when I was updating the Interest Burden Watch chart, I decided to attempt making a dent in that false negative perception.  I added a sidebar: a plain-talk definition of “Interest on the Debt.”  Then I decided it deserved a post all by itself.  This is it.

So, here it is in two different formats: a graphic image, followed by the plain text version, of the plain-talk definition of "Interest on the Debt."  Feel free to copy either the graphic or the plain text, and post it wherever you think it might do some good in the struggle between reason and emotion. 

Here’s the graphic:

And here’s the plain text:
----------------------------

Plain-talk definition of
"Interest on the Debt": 

Rent paid by Uncle Sam on money borrowed from willing lenders like you and me. 

By borrowing our money, Uncle Sam was able to buy more stuff—without having to raise everybody's tax rates to pay for it.  In return, we got some interest-bearing Treasury notes for our safe deposit boxes.  An even-steven deal.

A word to the wise:  As long as Uncle Sam keeps inflation in check and keeps paying the rent on our money, we'll keep lending more to him, at low rates, to buy extra stuff.  If the interest keeps flowing to us from Uncle Sam—as he promised—he'll be able to count on the principal continuing to flow in the other direction.
----------------------------

A plug for Gmail, unsolicited

It’s been almost a year since I switched to Google’s Gmail (web-based email), and it’s been such a quantum leap forward in email functionality for me that I decided to post an unsolicited plug.  Hooray for Google, I hope they keep innovative stuff like this coming.

It is approximately 99.96% effective at trapping spam and keeping it quarantined in an out-of-the-way folder.  Its spam trap is so effective that I stopped disguising my email address a long time ago, everywhere I have it posted on the web, on newsgroups, etc.—which makes it a lot easier for others to send me comments.  Yes, I do get ninety or more spam emails a day (and growing), but what do I care?  I almost never see any of them in my Inbox, because Gmail sends them directly into its Spam box. 

Whenever I feel like wiping them out en masse, I go to the Spam box and zap them all into the bit bucket with two clicks: “Select all” and “Delete forever.”  (In the Spam box you can also designate any email as “not spam”; conversely, in the Inbox, you can designate any email as “spam”.  Gmail remembers those corrections for future incoming emails.)

The other things I like a lot about Gmail:

•  I never delete anything (except spam), I just “archive” old emails to clean up the inbox. 

•  Because all my email is saved forever, on their server, I can use Google’s powerful search functionality to find stuff that was long-since archived.  Just a vaguely remembered word, phrase, or name is all I need to retrieve that email I’d forgotten about for eight months.

•  I’ll never run out of disk space, I bet.  Google seems to keep bumping up my allocation as I accumulate stuff in my archive.  I am currently using 287 MB (11%) of the 2707 MB they “allocate” to me.   

•   I took the time to set up labels—such as “Blog,” “Business,” “Family,” “Friend”—and to set up filters that tell Gmail which label(s) to attach to an incoming email.  That categorization makes for easy archiving and retrieval. 

•  Gmail is web-based, so my emails don’t pile up when I’m on a laptopless vacation.  I can check my email from anyone’s computer, as long as it can get to the web.

I’m a happy customer, can you tell? 

If you don’t already use Gmail, get somebody to invite you.

[Full disclosure:  After a few months of experience with Gmail, I bought a few shares of Google, just so I could say I was one of Google's owners.  I plan to be an owner for as long as Google keeps innovating.]

Growing attention for the shrinking deficit

Will Franklin noticed an interesting bar chart at the OMB, comparing projected deficits to actual deficits.  It's posted to his blog (Willisms) in an article titled Cutting the Deficit in Half.

I'm glad the favorable trend in the deficit is gaining some airtime.  For quite a while I've been wondering when that would start happening.

In the following excerpt from Will's article, he sounds more optimistic I am:

Over the near term, if stronger-than-forecast economic growth continues, it is entirely possible that we could see surpluses before the President leaves office. Yes, even with massive spending increases.

In this excerpt, however, he sounds less optimistic than I am:

Over the longer term, of course, the picture isn't so easy and carefree. We won't be able to simply grow our way out of long-term entitlement-driven budget problems.

[I agree with the first sentence, because the baby boomer demographic bubble will be a big challenge.  But I don't necessarily agree with the second sentence.  Reason: Because of the near-term possibilities—or better yet, probabilities—I mentioned in this October '05 post.]

I'm not surprised there are some differences of opinion about just how good the future can be, but I am happy that the facts about the shrinking deficit are at last beginning to see the light of day.  In blogs, anyway.

FQ.06.11: Favorite Quote for This Week

The prosperity of other nations will not hurt us.  The failure to develop our own human and physical resources will.
—Robert Eisner

If I were an AP editor with a red pen...

...I would have corrected a headline yesterday, and I would have added a clarifying quote somewhere near the top of the story.   Here's a link to the story I'm talking about.

As it is, I am not an AP editor; consequently, the slightly misleading headline and story got out as follows (click to enlarge):

Sounds pretty bad, doesn’t it?  No doubt about it. 

Okay, now here's how I would have changed it, had I been an AP editor in the right place at the right time (click to enlarge):

Now it sounds like there’s some hope on the horizon, doesn’t it?

Oh yes, before I forget: here’s the Bernanke quote from March 25, 2003 I mentioned:

...maintaining public confidence requires that fiscal policy be conducted in such a way that the ratio of national debt to GDP remains stable at a moderate level.

[Presumably, AP hires people who know how fractions work.  Therefore, I assume it would be unnecessary to remind anyone at AP that the ratio Bernanke was talking about would remain stable when GDP grew just as fast as the debt grew.] 

In any case, now all we need is a quantification of the word "moderate."   I'll keep an eye out for that.   

FQ.06.10: Favorite Quote for This Week

Greed is an appetite for unneeded and unearned wealth and power.  The truly greedy seek comfort and security first.  They seek goods and clout they have not earned.  Because the best and safest way to gain unearned pay is to get the state to take it from others, greed leads, as by an invisible hand, toward ever more government action - to socialism, not capitalism. 
—George Gilder