Editore"s Note
Tilting at Windmills

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July 28, 2008
By: Kevin Drum

TO THE STOCKS!....John McCain is going to prevent oil companies from pocketing the proceeds of his gas tax holiday by publicly shaming them into passing the savings along to consumers? You betcha. I guess he came up with that idea because it's worked so well with other huge industrial corporations in the past.

And while we're on the general subject this morning of economic malpractice, here's a pretty good example: the headline on Jonathan Weisman's budget article in today's Washington Post. The Bush administration's budget accounting has always been an exercise in smoke and mirrors, but that still doesn't justify calling next year's deficit a "record." It's not even close when adjusted for inflation, which is the only reasonable way to do it — as anyone even faintly familiar with budget reporting knows. Reporting the truth is bad enough. There's no need to spice it up.

Kevin Drum 12:12 PM Permalink | Trackbacks | Comments (38)

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Comments

weisman is a joke, but actually, kevin, what we should be discussing is the general fund deficit as a percentage of gdp, and in that context, this is pretty close to the record (when reagan set the records, the amount of social security prepayment was pretty inconsequential).

Posted by: howard on July 28, 2008 at 12:18 PM | PERMALINK

When you factor in the costs of the Iraq and Afghani wars, Which are excluded as "off-budget expenses", then it comes awfully close to the record, and has to represent a record for any 4-year period.

Posted by: MeLoseBrain? on July 28, 2008 at 12:21 PM | PERMALINK

I don't think reporters need to adjust the figure for inflation before declaring that it is a record. Adjusting for inflation is "spin." $490 billion is the record.

Posted by: Jim on July 28, 2008 at 12:23 PM | PERMALINK

Jim, i have to disagree with you: adjusting for inflation isn't "spin." it's how we understand dollar values at different periods of time.

you want to eliminate correcting for inflation and you start to believe that households have held a swinging time under bush: now that's spin!

Posted by: howard on July 28, 2008 at 12:26 PM | PERMALINK

Yeah, oil company executives really respond to shame. "Largest profits ever by any company ever in history while gas prices were at their highest at the pump" somehow just didn't shame them enough.


Posted by: riffle on July 28, 2008 at 12:27 PM | PERMALINK

As bad as the deficit is, just imagine how bad it would be if the rich folks hadn't gotten their tax cuts.

Posted by: AJB on July 28, 2008 at 12:32 PM | PERMALINK

As mentioned above, the deficit is not based on the off-the-books illegal Iraq occupation AND it doesn't (yet) include the bailing out of rich bankers and rich shareholders for their criminal book cooking...and it also doesn't include the cost of covering a bunch of people's actual mortgages.

Posted by: Praedor Atrebates on July 28, 2008 at 12:35 PM | PERMALINK

McCain is just going to sit those oil execs down and tell them to cut out the bullsh*t!

Posted by: BarryG on July 28, 2008 at 12:38 PM | PERMALINK

I wonder if the "no adjustment for inflation" comes in part from all the similar coverage of movies? No one ever adjusts for inflation there before announcing records.

For instance, "The Dark Knight," winner of the "Greatest One Day Totals" didn't even beat "Spiderman III" adjusted for inflation.

Posted by: BrianInAtlanta on July 28, 2008 at 12:52 PM | PERMALINK

just to clarify: iraq is "off the books" in the sense that all iraqi funding has been supplemental and not part of the official "budget," but iraq is not "off the books" when it comes to the deficit.

Posted by: howard on July 28, 2008 at 12:53 PM | PERMALINK

McCain's statement is one of the most clueless things I've ever heard. Oil company executives work for their shareholders, not for consumers. As long as the stock value goes up, they're fine. They don't need consumer goodwill. What a moron.

Posted by: The Fabulous Mr. Toad on July 28, 2008 at 1:18 PM | PERMALINK

It would make the analysis better if the reporter compared this deficit to past deficits in inflation-adjusted dollars, but that does not change the fact that $490 billion would be the record.

Posted by: Jim on July 28, 2008 at 1:34 PM | PERMALINK

Public shame works! It's how we brought AQ Khan to justice!

...his national humiliation is justice for what he did[.] I think it is. He's nationally humiliated.
--Condi Rice
http://www.dawn.com/2004/10/04/top3.htm

Posted by: springfielder on July 28, 2008 at 1:37 PM | PERMALINK

WSJ front page story today on how state's hiway funds are way down because people are driving less, using less gas and so, less gas tax money for the state hiway funds.

So the gas tax holiday is the opposite of what is needed. WSJ story.

Posted by: lilybart on July 28, 2008 at 2:16 PM | PERMALINK

"Records" are often stated out of context. Look at box office "records." Am I the only one who thinks $50 million opening is meaningless because it doesn't factor in inflation of ticket prices? Maybe overall ticket sales should be reported instead. Anyway, that's my Andy Rooney comment for today. Back to economics.

Posted by: RollaMO on July 28, 2008 at 2:41 PM | PERMALINK

Slightly off topic, I'm just amazed that McCain comes across as a clueless, doddering fool and yet the polls say he is actually gaining on Obama in some states. How is this remotely possible? It seems like Obama should be ahead by 20 or 30 points. Aren't people terrified at the prospect of McCain becoming president? If he was sharp as a tack we'd still oppose his policies and positions but I could understand some people being swayed to support him. As it is, how do you even know where he stands. He keeps changing his positions from week to week. I guess that's why we have the corporate media, to make these things clear for us.

Posted by: JohnK on July 28, 2008 at 2:55 PM | PERMALINK

Bullshit, Kevin. The media has reported BushCo's lies as truths for years. No need to soft-pedal a nearly half-trillion dollar deficit.

Posted by: John McCain: More of the same on July 28, 2008 at 3:00 PM | PERMALINK

John McCain has learned you catch more flies with honey than you do with vinegar. In contrast to his gas tax holiday/publicly shaming 1-2, McC's wooing oilers support by calling for offshore drilling brought a near quadrupling of contributions from them in June:
http://www.washingtonpost.com/wp-dyn/content/article/2008/07/26/AR2008072601891.html (h/t - BarbinMD @ TGOS)

Posted by: MaryCh on July 28, 2008 at 3:06 PM | PERMALINK

Lilybart, the state-by-state highway construction job losses of a gas tax holiday would be in the 10,000s.... not good in a recession.

Posted by: SocraticGadfly on July 28, 2008 at 3:07 PM | PERMALINK

How is AQ Kahn humiliated? He might have sold nuke knowledge to countries that hate the Great Satan as much as they do??

Posted by: lilybart on July 28, 2008 at 3:36 PM | PERMALINK

BrianinAtlanta - sorry, didn't see your post. I call for truth in box office reporting!

Posted by: RollaMO on July 28, 2008 at 3:43 PM | PERMALINK

Publicly Shaming Big Oil.

Is that possible? I don't think so.

Posted by: Independent Perspective on July 28, 2008 at 3:57 PM | PERMALINK

Praedor Atrabates is right and howard is wrong. The $490 billion projection does NOT include the cost of the two wars, which are funded through supplemental appropriations. It also does NOT include the FNMA/FHLMC bailout or the second economic stimulus, which is being proposed by both political parties.

In addition, keep in mind that you are looking at the projected UNIFIED budget deficit for the United States. This means that the surplus in Social Security masks the true operating budget deficit. As a result, the real operating deficit is probably going to be closer to $1 TRILLION DOLLARS next fiscal year! I am disappointed that you are so matter-of-fact about this fiscal train wreck we are watching unfold, Kevin.

The United States is bankrupt - and the sooner we all get our minds around that fact, the sooner we can begin to take the appropriate actions, like convening a new Constitutional Convention and the imprisonment of a large number of politicians, Democrat and Republican, who have been accessories to this crime. This country is done. Kaput.

Posted by: The Conservative Deflator on July 28, 2008 at 6:01 PM | PERMALINK

Actually, adjusting for inflation is only the best way to compare the raw amount of the deficits across years.

To really understand the size and seriousness of the defecit, you need to report it as a percentage of GDP. That accounts for inflation automatically, and it also accounts for larger raw numbers that are less serious because of a bigger tax base.

Posted by: skeptic on July 28, 2008 at 6:39 PM | PERMALINK

conservative deflator, you read me too quickly (ok, i could have phrased it better): yes, the projection (which i called the "budget") does not include the war.

it is also nothing but a projection, and could be wrong in all kinds of ways.

but what i said was that the "deficit" includes the war costs: it doesn't stay off budget once it's spent.

i was simply trying to clarify that fine point, not deny that the projection doesn't include the war.

Posted by: howard on July 28, 2008 at 7:39 PM | PERMALINK

howard:

Sorry to jump you prematurely on that. Actually, on my drive home from work tonight, I heard on NPR that the $490 projected deficit includes the "bridge" funding that was passed of $70 billion. However, if you assume that we will continue to spend about $10-12 billion per month on these two wars (occupations, actually), the projected deficit still doesn't include from $30-$74 billion of what it will likely cost us.

So, we were both not totally accurate. Peace out,

TCD

Posted by: The Conservative Deflator on July 28, 2008 at 10:53 PM | PERMALINK

TCD, i forgot about the "bridge" funding myself, to tell ya the truth.

my underlying point, though, is that there is no telling what the deficit will be: who knows how the economic slowdown will affect tax receipts? who knows whether we'll have another stimulus package? who knows whether we'll have to exercise the new authority to buy fannie and freddie stock?

so the war is only one missing - or quasi-missing - element in the assessment, and we can all agree that the bush administration's track record on these projections is horrible.

Posted by: howard on July 28, 2008 at 11:55 PM | PERMALINK

Hey, it's almost as good as the WIN button!

Posted by: Kevin Carson on July 29, 2008 at 4:24 AM | PERMALINK

howard:

I absolutely agree.

TCD

Posted by: The Conservative Deflator on July 29, 2008 at 6:06 AM | PERMALINK

The federal deficit is still reported on a modified cash basis.

The federal government does report an accrual basis financial statement annually, which shows a consistently much higher deficit.

In fact, more comparable to the worst deficits of the Bush Sr years.

Accrual basis is what corporations must report, the increase in net assets over a time period, not the increase in cash.

And even the accrual basis financial statements do not include the effects of social security and medicare directly in their computations (they are described in footnotes), nor an estimate for implied federal liabilities (environmental, emergency, indirect obligations like the "promise" to shore up fannie mae, etc.)

Posted by: Richard Witty on July 29, 2008 at 7:14 AM | PERMALINK

Yeah inflate the dollar to worthlessness thru idiotic spending and Greenspan's even stupider extra-low interest rates and your deficit is no longer so bad looking.

Posted by: doesn't matter on July 29, 2008 at 8:26 AM | PERMALINK

This gas tax holiday thing aint gonna fly when they are expecting a shortage on highway funding because of high fuel prices.

There is a bill for some infrastructure bank

http://www.awwa.org/Publications/BreakingNewsDetail.cfm?ItemNumber=

Which is pretty much the same one Obama has talked about. 60 billion I think.

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