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Friday, July 30, 2010

Geithner’s GDP Whopper

FactCheck.org, Geithner’s GDP Whopper:

Treasury Secretary Timothy Geithner made a false claim about the size of government spending being proposed by the Obama administration.

On NBC’s "Meet the Press" July 25, he said the president is proposing spending "as a share of our economy" that is "lower" than it was during the Bush administration and "comparable" to what it was under Ronald Reagan. Neither claim is true.

The administration’s own estimates project spending next year that is higher as a percentage of the economy than in any year since the end of World War II. The average projected by Obama’s budget officials is significantly higher than the average under Reagan or Bush (father or son).

Here’s what Geithner said:

Geithner: [The president has] proposed to freeze discretionary spending, to keep the overall size of the government at a very modest level as a share of our economy. If you look again at what the president’s proposing, he keeps the overall size of government at a very modest level comparable to–lower than what was in the Bush administration, comparable to what President Reagan presided over. That’s very important.

That’s not true, as a glance at this chart shows. It reflects official historical spending figures as a share of the nation’s economic output, as measured by gross domestic product (or GDP), plus the very latest estimates of current and future spending produced by Obama’s own Office of Management and Budget.

http://taxprof.typepad.com/taxprof_blog/2010/07/geithners-.html

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Comments

Republicans were in control of congress 1995-2006... it's not a perfect match to the ups and downs on that graph (and certainly, there were other things going on), but it is interesting that those years have lower spending (as % of GDP) than ALL the other years on the chart. That is, looking at that chart, Republican controlled Congress ALWAYS spent less than Democrat controlled Congress, without a single exception.

Wow, I'm generally not impressed with Republicans at all (I view them as the noticeably lesser of two very evils), but even I am really quite surprised at that.

Posted by: Deoxy | Jul 30, 2010 12:03:06 PM

I would like to point out that in 2009, the Democrats controlled both houses of Congress. Maybe you should add a blue/red horizontal line under the graph indicating which party controlled Congress during that year. Or maybe two lines, one for the House and one for the Senate.

Posted by: David Aitken | Jul 30, 2010 12:16:01 PM

Lies? From the Obama Administration?

Stop the presses!

Oh, wait...the press already stopped.

Nevermind.

Posted by: rvastar | Jul 30, 2010 12:17:18 PM

OK Liberals here's the deal. The banking emergency is over (the banks have paid almost all TARP back PLUS some ROI-- only AIG, GM/Chrysler, deadbeat mortgage borrowers are left outstanding). Let's go back to spending 20% of GDP on the federal budget, as the economy recovers taxes will rise back to 18+% of GDP, then KEEP the deficit spread to 1+% of GDP per year -- that is sustainable. As a fiscal conservative I'd make that deal. Mind you, in order for you Libs to make that deal you have to figure out how how to cut 3% of GDP from Barry O's budget (400+BILLION/year), AND reform entitlements. Entitlements explode the budget way past 20% of GDP in the out years, because Soc sec is a ponzi scheme and the demographic Medicare bomb has gone off. In short, the entitlement promises Congress made to Soc Sec/Medicare/Medicaid recipents were lies that could never be kept. That's what we are talking about here-- the entitlement spending, the false promises that could never be kept.

Posted by: NK | Jul 30, 2010 12:24:49 PM

Geithner speak with forked tongue. So does resigning OMB Director Orzag.

The new White House budget assumes that GDP grows at 4.25% for the next several years. We won't come close to that. The CBO assumes 2.2%, and we may not even hat.

The effect is to show the government % decreasing below 24%, which would still be a post WWII high. Instead it'll stay over 25%, and may come in higher if Healthcare doesn't work as advertised.

Posted by: Ignoramus | Jul 30, 2010 12:27:03 PM

Deoxy, you also have to note that as soon as Clinton left office in 2001, spending started inching back up. That was even before 9/11 and the Afghan and Iraq wars. This suggests it wasn't just the congressional Republicans that brought spending down, but rather the combination of a Republican congress with a "New Democrat" president.

Posted by: kwo | Jul 30, 2010 12:32:02 PM

2009 should be blue; the Democrats in Congress refused to even *consider* Bush's budget proposal, preferring instead to wait in the hope that Obama would be elected. Only after Obama was elected did they lard up their own budget and send it forward for him to sign.

So that skunk is firmly in their tent.

Posted by: waitaminit | Jul 30, 2010 12:43:25 PM

I am not a fan of the Obama administration, but looking at the that chart with some "flexibility" of interpretation, and Geithner is not indisputably deceptive. 2012 and 2013 are close enough to 1982 and 1983 to make his statement accurate enough. Plus, if one uses 2009 as the Bush benchmark - not that someone should, but I can see how they might - then the Obama budgets of 2010, 2012 and 2013 are an improvement. Of course, the Obama estimates for GDP growth are probably optimistic and the reality will push even the declining years closer to the peak.

Posted by: Joshua | Jul 30, 2010 12:44:30 PM

Also keep in mind that the 2009 Annual Budget was actually signed by Obama. Pelosi and Reid sat on it, passing continuing resolutions until Obama was inagurated in order to prevent Bush from setting limits on spending.

In hindsight, they'd probably do that one over again.

Posted by: SaveFarris | Jul 30, 2010 12:45:15 PM

seems the difference is that you are looking at averages for Obama. Geithner was referring to the 2012 budget, which is in fact comprable to the Reagan average, and lower that the high water mark of Bush ("lower than it was in the bush administration [in 2008]"). Not a whopper. Standard political shading of the facts to portray the president's policies in a favorable light.

Posted by: chevelus | Jul 30, 2010 12:55:28 PM

The really sad thing is that these people feel completely comfortable and emboldened to make up anything that sounds good and just say it because they know noone except us political junkies will ever bother to check on it. I get tired of watching these grifters playing Calvinball with our money and feeling that most of America doesn't know or care.

Posted by: submandave | Jul 30, 2010 1:07:23 PM

> Geithner was referring to the 2012 budget

In what universe is Obama's 2012 budget going to be a significantly smaller fraction of the economy than his 2011 budget?

The proposed decrease from 2011 to 2012 is about twice the biggest decrease in the years listed (1983 to 1984) and that drop is itself an outlier.

2012 is going to be fairly close to 2011.

Posted by: Andy Freeman | Jul 30, 2010 1:17:52 PM

"Deoxy, you also have to note that as soon as Clinton left office in 2001, spending started inching back up."

Democrats took the Senate that year.

This suggests it wasn't just the congressional Republicans" ... correct, and if you remember Daschle pushed throw a big porkey Farm Bill at that time.

It's ALSO the case that the "class of 1994" GOP Congress under Gingrich and Armey was more fiscally conservative than the later Hastert/Delay combo. we wet from budget cutters to earmarkers.

BUT ... all that was small bear compared to the $3 trillion in extra spending and deficits the Democrats have imposed since they started running everything. It's mind-boggling how fiscally irresponsible the Democrats are.

Posted by: Patrick | Jul 30, 2010 1:26:30 PM

"but looking at the that chart "

This factcheck chart itself is deceptive. The Congress didnt even PASS a budget. The budget numbers are not going to be that rosy, unless real, not fake, fiscal hawks do the budget.

Consider this chart that goes further out, and accounts for ALL of Obama's agenda, including Obamacare, which is not really included the factcheck chart... 26% of GDP in hte out years, higher than at any time in our history.

http://www.heritage.org/Research/Reports/2010/06/~/media/Images/Reports/2010/bg2423/b2423_chart4_1.ashx?w=600&h=418&as=1


Posted by: Patrick | Jul 30, 2010 1:42:00 PM

Joshua:

So we we use the AVERAGE of the Obama administration, including PROJECTIONS for future years including projected future spending cuts (you know how well this works in Washington), we can find ONE year of the Bush administration that is higher. So this makes the current administration spending LOWER than the Bush administration.

And this passes for a Non-Whopper?

Posted by: David Jay | Jul 30, 2010 1:42:28 PM

As someone else noted, Bush never signed a 2009 budget, Obama did. Also Congress appropriates the money. And if I recall correctly Obama voted for every major spending initiative (TARP and the little remembered 2008 stimulus).

Posted by: Ken | Jul 30, 2010 1:44:00 PM

Congress sets the budget, of course, though Presidents have some influence. Remember in 1994 how Newt shut down the government? (Ah, good times. I bet the public would ask them to keep it closed today.)

It's really too bad this doesn't go back far enough to show LBJ, though.

Posted by: TallDave | Jul 30, 2010 2:45:55 PM

Also, those OMB 2011 and 2012 estimates are probably way off. I think they assumed 5.5% GDP growth or something, and if spending as % of GDP falls it will only be because the GOP controls Congress.

Posted by: TallDave | Jul 30, 2010 2:50:22 PM

Professor,

What Geitner was probably doing was extrapolating on that awful Keynesian GDP measure: C + I + G. Thus any increase in G (government) is an increase in GDP. Now, GDP is an AWFUL way to measure economic output or well-being, for a variety of reasons, not the least of which is that is so easily malleable.

He's a bald-faced liar (shocked, I know!!!) nonetheless, but he CAN make the [as Keynesian economics is akin to Ptolemaic astronomy!!] case in that sense.

Posted by: Rob Mandel | Jul 30, 2010 6:41:43 PM

seems to me that is exactly what the chart does show. the blue bars in years three and four are shorter than the red bar in the last year of the bush administration, and about the same height as the red bars in the first two years of reagan. what am i missing?

Posted by: r. | Jul 30, 2010 7:11:50 PM

I read the same krugman article that the wh read.
They are going with 25% of gdp.

Still waiting for krugman to tell them how to get it, when everyone else has been stuck with 19% of gdp.

He's probably working on that plan he was going to give to make social security solvent. very glad that he isn't saying that paul ryan's plan is consitent with any economic vision he holds. It's a good sign.

Posted by: mark l. | Jul 30, 2010 9:03:42 PM

I love this site. I am a mere pedestrian CPA with a micro practice working through life's issues as we all are. I enjoyed economics (a little) but sadly was not a good big picture kind of a guy. All of you posters as well as Prof Caron help me stay focused on some hard issues we are facing in our nation with good intellect and dialogue. Thanks and keep it up.

Posted by: deductionseeker | Jul 31, 2010 6:12:26 AM

The 2009 bar is unquestionably on Obama/Pelosi/Reid. Recall the $800 billion stimulus? That wasn't GWB's program. Bush was way too free spending for my taste, but he was a piker compared to Obama. And those 2011 and 2012 bars are fantasy. No one has any idea how they will come out. How about let's cap federal expenditure to 15% of GDP normalized over a business cycle? Between that and ditching misguided environmental/energy policies (such as refusing to drill for domestic resources) we could be the most competitive developed economy in the world.

Posted by: Dark Helmet | Jul 31, 2010 7:14:28 AM