The Skeptical Optimist

FQ.07.49: Favorite Quote for This Week

Just as highly accurate long-range forecasting of the weather will always be impossible, so too will highly accurate long-range forecasting of the economy.
—Eric Beinhocker, The Origin of Wealth
 

Jobs and Job Quality, Nov 2007 vs Year Ago

Our economy created more high-paying jobs than it lost in the last 12 months.  (Either that, or we imported more high-paying jobs than we exported, which would mean we have a trade surplus in jobs.  Presumably, that's great news to Lou Dobbs and John Edwards, so we should be hearing them cheer up any time now, one would think.) 

It's creative destruction.  The charts below show both aspects of that formula.  The first chart summarizes jobs lost and gained, using the average wage rate of jobs lost as a cutoff.  (Today's numbers from the Bureau of Labor Statistics were used for both charts.)

Click to enlarge.

The second chart breaks the job categories out into more detail.  Note that the categories of retail trade and professional/business services created more higher paying jobs than the ones that were lost in manufacturing and construction. 

Fun with Deficits

Whether you're left of center or right of center (...or you don't care to be measured relative to whatever "center" means), today's budget deficit of 1.2% GDP is a non-issue. 

That is, unless you're one of those on the left or right who likes to play political games with deficits.  A few politicians and concerned citizens disliked the idea of deficits so much they formed an organization, in the '80s I think, called The Concord Coalition.  (I wrote them a letter nine years ago, but haven't yet received an answer.  I'm starting to think someone lost it at the bottom of her inbox, or buried it in Concord's too-hard-to-do file.  Too bad; back then we still had three years left to shift our priorities before 9/11/01 arrived.) 

Recently, I've noticed left-leaners having some rhetorical fun with the deficit.  Their typical assertion:

"No wonder the administration touts the 'unified budget deficit'; it looks really small.  Why don't we ever hear about the deficit that really matters, the dreaded, bloated General Fund deficit?  It's a sinister plot to keep you uninformed about the tragic raid of the social insurance trust fund surpluses." 

Yes, and I'm sure Karl Rove was behind that plot, too. 

Well, now it's my turn to have some fun with deficits.  First, let's review what has happened in the last fiscal decade (i.e., ten years ending October 2007).  The federal government's receipts and outlays net out to the surpluses and deficits shown in the far right column below:

The bottom right corner, $1.1 trillion, is the ten-year increase in publicly-held debt -- which most economists (...those who refuse to let politics get in the way of economics, anyway) say is the most important of several measures of federal debt.  Here's an excerpt from a summary page at the US Treasury website:

Debt held by the public is the most meaningful of these concepts and measures the cumulative amount outstanding that the government has borrowed to finance deficits.

So, let's see what the deficits look like under three different accounting scenarios.  The first is the way the feds actually chose to account for the receipts (because it's the law).  Here's what the deficits look like; the orange star is the additional amount that was borrowed from the public. 

Now for the fun part.  Let's "shore up" the General Fund, just by assuming the law mandated accounting for the receipts a little differently.  (Note: same total receipts, same total outlays, nobody's social security check changes by even a penny.)  All we do in Scenario 2 is call all social insurance receipts by a different name: "General Fund supplemental taxes." 

Note that there's no change in the amount borrowed from the public (see orange star); we just changed which government pocket owes government-backed money to the other government pocket. 

Now let's assume the law mandated that all trust fund surpluses be classified as "General Fund supplemental receipts."  (Again, same total receipts, same total outlays, nobody's social security check changes by even a penny.  Again, we just changed how much one government pocket owes government-backed money to the other government pocket.  Again, no change in the amount borrowed from the public.)

Bottom line: Because the unified budget deficit is the change in publicly-held debt, that is the important deficit number to track.  It is currently 1.2% GDP; it's small.  When you hear anyone assert that the general fund deficit is a more important number, start suspecting a political agenda attempting to masquerade as economics. 

The never-mentioned way to keep the publicly-held debt to a comfortable percentage of GDP is to grow GDP at least as fast as the debt grows.   Because sufficient growth makes debt a non-issue, I wonder which candidates have some positive ideas about how to enhance the growth of the economy.  [A few Republicans do (...not all); but I'm having trouble remembering any specific growth proposals from any Democrats.  Maybe I haven't been listening enough; help me out if you know of some.]      

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End note:
If you know anyone who asserts that the above analysis is invalid because it "steals from the trust funds"—including your Senators or Congressman or Congresswoman, ask them how they'd answer the following brain teaser:

If you were in charge of financial management for the federal government's social insurance trust funds, and the trust funds ran a surplus, would you:
(a) hoard the US-government-backed cash; or
(b) exchange it for interest-earning US-government-backed bonds? 

If they picked (a), ask them why they'd choose not to earn interest on their multi-trillion dollar financial asset.  If they picked (b), congratulate them for choosing the method by which trust fund surpluses are already being managed. 

Tom Tancredo, Al Gore, and the internet

"I've been a conservative all my life, since long before Al Gore even invented the internet," Tancredo quipped.

I guess we were supposed to yuk it up over that so-called quip.  But I'm a bit confused as to which part Tom Tancredo intended me to chuckle at.  It had to be either the part about his being a "conservative," or the time span of that conservatism (i.e., all his life).  Reason: The part about Al Gore inventing the internet isn't funny; it's essentially true. 

In 1991, Senator Al Gore cosponsored the legislation that funded the creation of the internet.  Gore saw its importance, surmised it could be a big part of our future, and understood it would happen more quickly and effectively with government sponsorship (aka, "government spending").  So he took the initiative, and sponsored "An Act to provide for a coordinated Federal program to ensure continued United States leadership in high-performance computing, and for other purposes."  Subsequently, after his legislation became law, Gore was a leading proponent of privatizing the internet—another good idea. 

If Tom Tancredo had been a member of Congress in 1991, my guess is he would have voted against Al Gore's legislation, after labeling it "more government spending we can't afford," or maybe just "pork."  But he wasn't yet in Congress in 1991; at that time, he was heading up a regional office of the Education Department—firing 2/3 of its staff, presumably under the assumption that "government spending" is always a waste of money.  [Oversimplifications like that are indiscriminate, and block government from investing in our future.  I think Gore's sponsorship of the creation of the internet is one of many good examples of good, growth-friendly investments by the federal government.  It would be nice to hear more investment ideas from our politicians, wouldn't it?  I wonder if Tom Tancredo has any of those—or if he's pretty much just a cost-cutter.] 

Anyway, help me out here: which part of Tancredo's "quip" was the part I'm supposed to think is funny? 

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End note:  Those  interested in a more detailed history of the Al Gore internet story should read this article by Richard Wiggins. 

FQ.07.48: Favorite Quote for This Week

Politics is the art of looking for trouble, finding it, misdiagnosing it, and then misapplying the wrong remedies.
—Groucho Marx