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national politics & policies responsibility

Book-​Cooking with Extra Salsa

Lately, governments have sought to seem more fiscally responsible by re-​confabulating how they calculate a measure of economy-​wide economic strength called Gross Domestic Product. (The principle involved is ancient. It’s been denominated “fudging.”)

One of the crassest number-​jugglers is the Italian government.

Italy wants to comply with a European Union demand that it limit debt to 2.6% of GDP. If the country’s GDP is statistically fattened by using looser rules for calculating it, then debt as percentage of GDP becomes magically “lower” — as a statistical percentage. Italian politicians can lurch to waste more money while still fetching EU handouts.

A year ago, the American fedgov was guilty of similar fudging when it statistically padded our GDP by $500 billion.

Statistical aggregates like GDP entail much guesswork and many dubious assumptions to begin with. For one thing, why is government spending — including that huge portion that dampens or destroys economic production — included in a calculation supposedly measuring economic value?  (A better indicator of general economic strength, Gross Output, hasn’t quite caught on yet. And I don’t expect those highest up in government to push it.)

The purpose of the number-​tweaking by Italy, the U.S. and other governments is hardly to improve or amend or salvage whatever is conceivably salvageable in the original number-​crunching. The purpose is to disguise bad policies.

But jiggering with how the impact of awful policies is guesstimated in order to better to hide their consequences won’t erase the awfulness of those policies. And curtailing or ending awful policies can be done entirely without peering into statistic-​stoked crystal balls.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets national politics & policies too much government

Big Government Bigger Than All Else

No sooner had the president signed the new debt limit, and then up went federal debt — to $14.58 trillion. 

Brave new world, that has such numbers in it.

What’s so amazing about this number is that it is larger than last year’s GDP of $14.53 trillion. 

I know, Gross Domestic Product figures are a mess, and don’t measure exactly what we think they measure. But they are the most popular form of national income accounting, and indicate, in a very rough sense, “the size of the economy” for a given year.

And, boy, for our federal government to owe the amount of the whole economy it rules, and more — what a milestone!

The last time debt was more than GDP? The late 1940s.

Recovery happened swiftly, then. This should give us hope: There is a way out.

But remember: World War II didn’t bring us out of the Great Depression, the end of the war did.

And remember, further: Most of the big names in economics — by then, Keynesians all — had predicted a huge economic downturn as government spending plummeted and wartime regulations (chiefly wage and price controls) hit the dustbin. 

Bad prediction. The economy soon took off.

Why? Less government spending, less regulation.

Alas, I don’t see that happening, today or tomorrow. With the budget deal, overall spending is now set to rise still further. The medical industry — a huge growth sector for government spending as well as private spending — is set for increasing regulation.

Brace yourself.

This is Common Sense. I’m Paul Jacob.