Tuesday, August 25, 2009

Reporters need to go back to school

and take some calculus classes.

Over the years we've had deficit projections and mis-projections given over and over again: a couple of hundred billion here, four hundred billion there, and even, for the past few years of the Clinton administration, some moderate surpluses here and there.
And we're clearly in the middle of a fiscal, corporate and governmental mess right now. This year, the deficit (finally being accounted for rather more fully than over the past few years --- for example, including current spending on wars in the budget) is on the order of one trillion dollars: numbers that sound large even to a fan of Austin Powers.
But I was surprised over the past day or two to hear that there were worrying projections of deficits of between seven and ten trillion dollars by 2019. Very distressing sounding. Until I actually went and looked at the Office of Management and Budget report in question, and discovered that the figure of nine trillion dollars is {\em cumulative} over a ten year period. Basically it reflects an expectation that things will get a bit worse for the next year or two, and then get a bit better, but probably not toooooo much better. Generally, OMB budgets seem to be this way (things might get a little worse in the short term and then will get better in the medium term -- always better in the medium term, it seems!) so this is really not so surprising.

But for goodness sake, couldn't they report it as "deficits over the next decade will total almost ten trillion" instead of "by 2019 there will be a ten trillion dollar deficit"??? Or better yet, "By 2019, projections show debt rising by another ten trillion dollars".

And as Krugman points out, there are clues in the document for how to avoid such large deficits: one obvious one is to get employment back up, so that people are paying taxes on income, hence increasing the income side of the ledger: and it might be worth trying to do that now at a little greater expense in the short term.

Yours, in praise of an understanding of units,

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