Ryan v Obama: Some Chart Porn
UPDATE DEUX: Heritage has now revised its numbers — see post above at 18:13 Eastern.
UPDATE: Apparently, in one document that can be found here, Heritage has simply disappeared the line item in which the unemployment rate falls to 2.8 percent by 2021. The document states: ”Updated as of April 6, 2011 at 11:04 a.m. EST,” which update was presumably the removal of the unemployment rate projections. At this moment (13:30 Eastern), it still appears — for now – in this document (which I have saved in multiple spots). It is, frankly, remarkable to me that they would take such an action. Apparently when one’s analysis does not stand up to even the most cursory examination, the solution is simple: Delete the offending data.
Invictus here, folks. Filling in a bit for our traveling host with a side-by-side glimpse of our competing budget plans.
Paul Krugman has very recently written here and here about some improbable aspects of the Ryan budget proposal. In that vein, I thought it might be instructive to take a look at some of the similarities and differences of forecasts in Obama’s forecasts projections versus those being offered by Ryan.
What I have done in each case is as follows: I downloaded the appropriate series from the St. Louis Fed (or in one case BEA.gov), always on an annual basis. In almost all cases I made what I believe is a reasonable assumption for 2011 to bridge me from known 2010 (and prior) historical data to 2012 and beyond forecasts. Those assumptions are noted. I then simply took forecast numbers from the Heritage Foundation’s analysis of the two plans (the forecasts are in Appendix 3). Any input errors in creating the charts below are solely my fault, though I endeavored — under my noon deadline — to enter everything as accurately as possible. Please note any errors in comments.
(Click through any image for larger.)
First up, Real GDP. (FRED Series identifiers appear on most charts.)
Moving on to the Unemployment Rate:
So the proposed Ryan budget is going to reduce the unemployment rate to a historic — at least on an annual basis — low of 2.8 percent by 2021. And although that would have to be considered full employment and a taut labor market by just about anyone’s standards, we will see little or no impact on wages and/or inflation (beyond what Obama forecasts). In fact, the Ryan and Obama forecasts are almost literally on top of each other when it comes to inflation — but then Obama is not forecasting a 2.8 percent unemployment rate. In fact, his forecast is for almost twice that (5.2 percent at best). Honestly, is it possible to take seriously a projection that we are going to get the unemployment rate down to 2.8 percent by 2021 (or, actually, any time, for that matter)?
You literally cannot see Obama’s inflation forecast because Ryan’s sits atop it.
So let’s move on to jobs. How much more robust will the jobs market (private payrolls) be under Ryan’s numbers than Obama’s?
So the Ryan plan will produce about 2.5MM more private payroll jobs — about 21,000/month above Obama – over the next 10 years. I’m not sure how that translates into a 2.8 percent unemployment rate. (In the spirit of current sentiment, I assume not a single government worker will be hired in the next 10 years, at least, and therefore will not look at overall non-farm payrolls.)
Here are private sector wages and salaries followed by real disposable income. I would have thought a 2.8 percent unemployment rate would produce some discernable wage inflation beyond what we see below:
Unfortunately, it does not appear that the Ryan plan does anything meaningful on the one line item that matters most to the vast majority of Americans — Real Disposable Income – again, the lines are virtually on top of each other.
Presumably because this is a much more serious proposal that will get our house in order, Ryan’s plan forecasts lower rates on the 10-year note than Obama’s. The bond vigilantes will be held at bay as some $6 trillion is cut from the budget, or something like that.
The Heritage analysis contains comparisons on many more metrics than I’ve presented above; I simply chose a few that I thought might be of most interest. I may make further comparisons as time permits.
In wrapping this up, let me state for the record that I think virutally all forecasting beyond about 24 months — in almost any discipline – is generally an exercise in futility (of course there are exceptions). That said, the integrity and viability of what’s put before us always warrants some scrutiny and should be at least given the sniff test.
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April 6th, 2011 at 12:20 pm
Looking at the Ryan numbers, President Heritage must be doing cartwheels in his grave.
April 6th, 2011 at 12:32 pm
Mish has a good analysis on Ryan’s and Heritages’s bogus number and agrees entirely about dubious projections years out. All our politicians are snake-oil salesman. Simply put, gdp growth will never be high enough to create enough jobs or deal with the debt. As Dylan said, “you don’t need a weatherman to know which way the winds blowin.” The major haircut will be here sooner than you think.
April 6th, 2011 at 12:36 pm
So what you are saying is reducing the deficit $6.2 trillion has no, or rather minimal, effect compared to not reducing by $6.2 trillion? Does that pass a simple sniff test to anyone else?
Invictus: Don’t shoot the messenger — I simply took two sets of numbers analyzed by Heritage and put them side by side. Hey, it does get the unemployment rate to a record 2.8 percent and keeps a lid on the 10-year yield.
April 6th, 2011 at 12:50 pm
Most of these spending cuts are not cuts in spending but simply a shift of responsibilities from the federal government to the state governments. The states will then have to reduce benefits and increase taxes to fund these “cuts” in federal spending. The fact that expenses for helping the poor, sick and children are shifted from a progressive federal tax system to a regressive state tax system will ensure that not only the poor but also the middle class will be shafted. Pathetically enough they are not even trying to use the savings to fix the national debt, most will go straight into the pockets of rich corporations and rich individuals with another round of irresponsible cut of federal tax rates for high income earners. As if we needed the investor class to have even more money to use to speculate in commodities and drive up prices for the things regular people need.
April 6th, 2011 at 12:56 pm
Good analysis, Invictus, DeDude…
April 6th, 2011 at 12:59 pm
There are no cuts in Ryan’s package. There is simply a slowing of the projected rate of increase from over 4% percent a year to over 2% such that our yearly deficits will be about 500 billion in 2021. Only in DC do they call smaller increases a cut in spending.
Fear not, absolutely notting will be done. Using Japan as a guide we probably can continue this kabuki theatre another 30-50 years. Sit back and chill–there is nothing you can do about it. There is no one you can elect to change this outcome. Critical mass was reached years ago.
April 6th, 2011 at 12:59 pm
I presume you calculated the unemployment rate since I don’t see it in the Appendix 3 PDF:
http://thf_media.s3.amazonaws.com/2011/pdf/wp-Appendix-3.pdf
Did you use “Employment–Total Non-Farm Payrolls” or “Employment–Private Non-Farm Payrolls” to do so?
Does an extra 2.1 to 2.4 million jobs really translate into a 2.3% difference in the unemployment rate in 2021?
Can you specify and publish the population projection series you are using for the calculation?
April 6th, 2011 at 1:00 pm
@frodo1314
“So what you are saying is reducing the deficit $6.2 trillion has no, or rather minimal, effect compared to not reducing by $6.2 trillion?”
Why not reduce the budget by $10 trillion? Wouldn’t that have an even better effect?
Ryan’s numbers are garbage, which makes Ryan, along with Hoover and Heritage, the guardian of the flame of Voodoo Economics.
April 6th, 2011 at 1:07 pm
frodo1314, the 6.2 trillion are budget cuts not deficit cuts. Most of the cuts are going to be used to reduce taxes on the rich. So the actual numbers for national debt and budget deficits are not much different between the Obama and the Ryan plan. This even before a credible independent institution rips out all the unrealistic assumptions and apply some facts to the plan.
April 6th, 2011 at 1:21 pm
Barry, for the love of God, please go on television and call shenanigans on this BS.
April 6th, 2011 at 1:25 pm
Heritage already has doctored their report eliminating the line on unemployment dropping down to 2.8% (which the Fed would never permit to happen because it would be so inflationary). I don’t know what this means for Ryan’s assumptions since he’s banking on this sudden burst of getting everyone a job (even MickyD could not hire these many workers). See Krugman’s latest post for the two Heritage charts. Maybe the finally woke up and realized they had been drinking something funny.
April 6th, 2011 at 1:26 pm
Memory Hole Alert
Making that embarrassing unemployment forecast disappear?
http://krugman.blogs.nytimes.com/2011/04/06/memory-hole-alert/?smid=tw-NytimesKrugman&seid=auto
April 6th, 2011 at 1:27 pm
Our current problem is an EXCESS of investment capital – there is no sensible way to invest money into increased production because the consumer class is not able to purchase any more products (and neither are consumers anywhere else in the world). Because of that, the current excess of investment capital is used to blow speculative bubbles in commodities (leading to higher gas and food prices, further damaging the consumers consumption of products). We need higher taxes on the rich to get rid of this damaging excess of investment capital and we should use the income from those higher taxes to pay down the national debt and rebuilt our infrastructure. The tax-rates of the Clinton era worked perfectly well – lets get back to them now.
April 6th, 2011 at 1:48 pm
As Ryan himself told reporters (http://tinyurl.com/3qjs9kp), “This isn’t a budget, this a cause.” Ryan’s numbers inevitably suffer in comparison to a pragmatic (politically feasible) and fiscally realistic budget like Obama’s but that isn’t Ryan’s real point: He just laid out the fiscal outcomes if Republican’s were to take their own rhetoric seriously and therefore what a tea party dominated congress ought to be doing.
As Matthew Yglesias argues here at http://tinyurl.com/3grnqjg, “[T]he decision by Paul Ryan to produce an ideological extremist budget document rather than a real legislative negotiating position is eccentric, but it actually deserves a response and not just criticism.”
So if Republicans want ‘smaller government’ via further reduction in tax rates on the top 1% and corporations largely financed by moderately higher taxes for the middle class and deep cuts in services, particularly for the poor and/or the unlucky, then is there a liberal with the stones to project a pie-in-the-sky budget in response, with say: a financial order tax, defense cuts, revenue positive carbon pricing, progressive income tax reform, full federalization of Medicaid and a ‘public option’ for a fully implemented health care reform act, etc.
Might actually have a real argument and a sense of contrasting choice instead of all the political mushmouth. Could be refreshing …or at least clarifying.
April 6th, 2011 at 1:49 pm
Looks like Heritage/Ryan put their best minds on this endeavor.
It’s well known that, in the future, we will all wear shiny unitards and be matched with dream jobs perfectly suited to our abilities. Everything will be better in the future. Mmmmm… bubble cars…
April 6th, 2011 at 1:58 pm
RW; agree. I think the Dems should outdo the GOPs and propose to dial time all the way back to 1999 with same spending (inflation adjusted) and tax-rates. It would far outpace deficit reduction of the Ryan proposal.
April 6th, 2011 at 2:01 pm
@RW:
Wow, that’s some weak shit right there. So people get to float nonsense budgets that are somehow worthy of serious consideration and discussion? My little brain just can’t handle the cognitive dissonance.
Why don’t we do this: I’ll set out a half dozen paper plates in my back yard with finger paint on them. I’ll unroll a giant sheet of grid paper which I’ll mark with X and Y axes. Then I’ll have my dog walk on the paper plates and then walk on the giant graph. The resulting graph will represent not so much anything based in data or “reality” as the desire to have a serious bipartisan discussion about the federal budget.
Is that what you’re getting at… something like “Economic-forecasting-as-performance-art”?
Wow. Deep, man. Real deep.
April 6th, 2011 at 2:18 pm
@RW: Sorry if in your comment you weren’t justifying Ryan’s uber-flawed budget proposal. If I misunderstood you, please consider my sarcasm directed at Ryan, Yglesias and Heritage.
April 6th, 2011 at 2:27 pm
@Transor — yea, I think you misread RW. That was actually a good comment. If I understood: would someone on the left do something similar so there’s a contrast? And I agree — by posting such an extreme, Republicans gets the conversation moving in their direction and could end up with more of what they want. Risky, but worth the shot.
@DeDude — good comments – especially regarding excess capital.
@Invictus – ty for posting.
April 6th, 2011 at 2:35 pm
What Darmah said [grin]
April 6th, 2011 at 2:40 pm
@zitidiamond – so then we can as well run the deficit up higher and higher with no repurcussions?
April 6th, 2011 at 3:13 pm
But you’ve forgotten the most important determining factor: Paul Ryan is a young, attractive guy with a political philosophy that appears to be in opposition of Obama’s. The truth behind the numbers is almost meaningless to the American voter (assuming the average citizen could even understand the numbers).
“There is no truth. There is only perception.” Gustave Flaubert
“One of the penalties for refusing to participate in politics is that you end up being governed by your inferiors. ” ~ Plato
For this reason, I look at politics as entertainment and shrug in amusement at the entire charade. Stephen Colbert and Jon Stewart have the proper perspective…
April 6th, 2011 at 3:30 pm
I think it is important that we don’t get a debate between the extreme right Ryan plan and a right of center Obama plan. You always end up with some kind of in-between compromise in the end; and when Obama (as usual) move half way towards them before negotiations, you end up with most of the right wing agenda implemented. We need a shared sacrifice plan where we all have to accept tax-rates of the Bush/Clinton 90’ies and cuts in spending on military and all other discretionary items to levels from that same period (inflation adjusted). It’s not shared sacrifice to cut help to the poor and give huge tax-cuts to the rich; lets develop a plan around shared sacrifice and “back to the good old 90’ies” when we didn’t run deficits and taxes were a little higher but not unreasonable.
April 6th, 2011 at 3:33 pm
Do we expect politicians to have “real” numbers? Outside the Unemployment graph list above (2.9 % does seem very rosy) both seem somewhat consistent.
I just hope this gets both sides talking about how to handle the situation. As far as I am concerned both left and right have caused this.
April 6th, 2011 at 3:41 pm
Nice to see the Heritage Foundation holding up the proud tradition of the Cato Institute (Project for Social Security Privitization) and the American Enterprise Institute (Financial Deregulation Project). If you pretend it was never there, then it never happened, right?
April 6th, 2011 at 3:41 pm
“This isn’t a budget, this a fairytale.”
April 6th, 2011 at 3:43 pm
isn’t the simple sollution – and to follow suit – declare we can’t pay the bills (deficit) – clear it away with a pen
we’ve got the biggest military (bigger than all others combined) – who is gonna get mad (really)
then with the same stroke of the pen go “PayGo” on everyone – who is gonna get mad (really)
April 6th, 2011 at 3:43 pm
The underlying assumptions of these two analyses are delusional.
70% of our economy is consumer spending. Real wages have not increased in the past decade. The only increases in consumer spending have come from personal household borrowing. Yet the first chart shows GDP shooting upward like a howitzer. In what fantasy?
Similarly, the chart for Wages & Salaries predicts wages increasing far faster than the historical trend line. Perhaps this chart is assuming hyperinflation but otherwise there’s absolutely no basis to think that inflation-adjusted wages will go from being stagnant to increasing 67% ($5500B to $9200B) in a decade.
In the next chart for Real Disposable Income, again we see an increase far above the historical trend line with no basis in reality. In fact, with government expenditures increasing so quickly, disposable income will decrease even if all other things stay the same. Oh wait, maybe these “economists” are assuming that the federal government will simply print money to pay its bills and taxes won’t actually increase, and that the TBTF banks will be able to shift all their bad loans the government and the government will simply make up the losses on those CDOs by printing more money. Someone please enlighten me on the financial mechanics.
April 6th, 2011 at 3:46 pm
Ryan plan does nothing to rein in health care costs which is the real problem with Medicare/Medicaid. As far as the budget process goes, it’s just a shot across the bow, not a real attempt at reaching consensus.
The only people taking Ryan’s proposal seriously are the TV talking heads who sport wood whenever someone suggests either screwing over the poor and middle-class or giving the Top 1% a happy ending at tax time.
April 6th, 2011 at 3:49 pm
DeDude, yes, and it is not just the constant compromising between center-right and far-right positions that is causing problems, it is the way that approach promotes a specific and limiting frame WRT problem statements themselves.
The way a problem is described determines what kinds of solutions appear most viable. So what we are getting now is mess of problem statements that not only assume the answer — some form of austerity — but also attempt to exclude some segment of the population from the consequences of that answer.
April 6th, 2011 at 4:02 pm
Rather than rely on “experts”, I just read the Ryan proposal for myself to find out what I hated about it.
1. Replaces the onerous “one size fits all” Medicaid system with block grants that give the states flexibility. Hmm. Why would I hate that?
Federalism is competition for better government. Fifty laboratories finding best solutions vs. one central planning commission. Makes sense to me.
2. Cutting $6.2 trillion in government spending. Nice!
3. Banning earmarks. Liking it more and more.
4. Eliminating hundreds of duplicative programs. I hate that idea.
5. Simplified tax code. Wonderful!!
6. Paying off debt. Did this myself and my life has never been better.
7. More spending to combat fraud abuse in Medicare and Medicaid. Sounds like a good idea.
8. Adopts many of the proposals of the President’s Fiscal Commission, which has so far been ignored. What’s wrong with this? Erskin had some great ideas and Ryan is trying to use some of them.
9. Reducing the Federal Auto fleet. Why do we even have one?
10. Ending the corporate welfare and taxpayer bailouts in housing finance.
11. Reducing farming welfare.
These are just a few, but reading his actual proposal I commend the guy for taking the time to put some new ideas on the table. Isn’t that what good debate is all about?
April 6th, 2011 at 4:23 pm
@Irwin Fletcher
Federalism is competition for better government. Fifty laboratories finding best solutions vs. one central planning commission. Makes sense to me.
Texas might be able to get its labor costs down by repealing child labor laws. The code word here is ‘nullification.’
April 6th, 2011 at 4:25 pm
12. Mother and apple pie ?
When all you say is non-specific BS statements of great popularity it is not that hard. Start telling people about the specific sacrifices and it starts looking a lot different. I personally would love to see a Ryan proposal with details and I am sure I would actually find something there to agree with. Problem is that military spending is half of the discretionary spending so without cutting there it is just a joke.
April 6th, 2011 at 4:34 pm
13. Ponies. Everyone gets a pony.
April 6th, 2011 at 4:40 pm
DeDude: I agree about seeing details.
I would love to see details from either perspective.
April 6th, 2011 at 4:44 pm
Lets allow Texas to experiment with mandatory euthanasia for seniors after they have cost the state over $10K in medical expenses. That would quickly force all sick seniors to flee the state and then Texas would spend a lot less. Then all the other states would be loaded up with sick Texans and be forced to do the same and the race to the bottom would be on (death panels anybody?). Fifty laboratories all trying to underbid each other without any “central planning” sounds great (unless you are old and sick). Without rules and standards Federalism quickly becomes a race to the bottom rather than a race to the top. Just look at inner cities vs. suburbs the same mechanisms of walling off from responsibilities can work at the state level as well.
The current system already has lots of state experiments going (TenCare in Tennessee is just one of them). The reason Ryan push Medicaid out of federal and into state responsibility is that it allows him to pretend painless savings by having the federal government harvest the savings and pass the pain to states. Smoke and mirrors but the sheeple are impressed.
April 6th, 2011 at 5:51 pm
What Kent @ 3:13 (and Flaubert and Plato) said.
It’s not about substance – in this political climate that’s irrelevant. It’s all about the marketing, and Ryan even came up with a catchy title. Frankly, I think it’s more about the title and the posturing than actully fixing our budget issues.
April 6th, 2011 at 7:06 pm
This is all kabuki until the bond market administers a beating to the political class and the Fed. Absent a real Crisis within an election cycle, nothing will be done. At this point long-term thinking is well under a year and the truth is unelectable.
I wonder if Ross Perot is more amused or disgusted these days?
April 6th, 2011 at 11:12 pm
I wonder how good these forecasters were in predicting the collapse 2 years ago.
I think it’s safe to say that none of these forecasts will come true.
April 6th, 2011 at 11:55 pm
“They spend billions of dollars every year lobbying–lobbying to get what they want. Well, we know what they want. They want more for themselves and less for everybody else. ”
- George Carlin
http://www.youtube.com/watch?v=rsL6mKxtOlQ
April 7th, 2011 at 1:25 am
Any chance we can get charts of taxes paid by the richest 1%, 5%, and 10% under the two scenarios?
April 7th, 2011 at 3:10 am
[...] – Ryan vs Obama: (US budget) chart porn. [...]
April 7th, 2011 at 8:56 am
BR said: “Apparently when one’s analysis does not stand up to even the most cursory examination, the solution is simple: Delete the offending data.”
How very IPCC of them…… guess no one owns the hockey stick outline….
April 7th, 2011 at 10:10 am
Both of these predictions are overly optimistic. We’re going to see another recession and a corresponding bump in unemployment before the end of the decade. We’ll probably see one before we hit 5% unemployment. The recession ended in June of 09 and ten plus years of uninterrupted expansion is just not going to happen.
April 7th, 2011 at 12:54 pm
Worhtless discussion here.
I give Ryan credit ONLY for trying to open a much needed dialogue. The blistering attack resulting from follhardy Heritage analysis done far too quickly goes to my greatest fear – we do nothing and the point of no return is reached. Poster’s instead of attacking, how about acknowledging? Invictus, instead of ridiculing the obviously fool hardy, why not put out a blue print of your own.
GLA, we are going to need it.
April 7th, 2011 at 3:46 pm
SCTTD; sure my blueprints are simple. Get back to the tax-rates of 1992 for persons, and on corporation adjust such that they contribute the same % of GDP in taxes that they did back then. After those simple changes the deficit is cut more than anything proposed by Ryan or Obama.
April 7th, 2011 at 5:47 pm
This piece gets a D- for not using log graphs. Oh, when will we ever learn?
April 8th, 2011 at 11:57 am
Comments of the day…
…a right of center Obama plan….
…excess of investment capital…higher taxes on the rich to get rid of this damaging excess of investment capital …
That’s the best laugh I have had in days! Ignorance does not discriminate.
Both plans are based on unsustainable assumptions.
Debt been compounding faster than GDP and tax receipts. Raising tax rates has historically never resulted in higher tax receipts. Social Security is cash flow negative as are the other entitlement programs. We are presently spending approximately 10% of GDP to buy 2% to 3% GDP growth. At some point, the cost of raising the marginal dollar to finance this Ponzi scheme will increase. The Fed will certainly intervene.
In the end, math is math and it is not left or right. And it is all about spending. Spending will be slashed on programs coveted by the left and right or the country will implode. There is no free lunch.
Cash flow is the final arbiter of financial truth.
April 19th, 2011 at 6:31 pm
[...] first to question this projection was Krugman. We at TBP made some quick Obama/Ryan comparisons here. (Personally, I find it hard to believe that anyone from Heritage actually looked at — [...]