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  • Meretricious? Senator Whitehouse Is Projecting

    Credit: Michael Bryant/MCT/Newscom

    Credit: Michael Bryant/MCT/Newscom

    Senator Sheldon Whitehouse (D-RI) spent eight minutes berating me at a Senate Budget Committee hearing yesterday. He disliked the facts I presented on austerity, so he called into question my professional honor and integrity.

    My testimony pointed out that structural reform and well-designed spending cuts are the best policy for stabilizing government spending and promoting economic growth. I told the committee how little austerity has actually occurred since 2007, using the most recent data available from the Organisation for Economic Cooperation and Development (OECD).

    Senator Whitehouse had his own facts, which, over the course of eight minutes, he read into the record without giving context. Had he instead allowed me to peruse the document he was reading for three minutes, we might have had five minutes of useful discussion.

    The most obvious reasons for the discrepancy between Senator Whitehouse’s numbers and mine are that the numbers cover different time periods, in his case relying mostly on projections of future data.

    My data were dated—clearly—as changes from 2007 to 2012. The title of the graphic I used reads, “Most governments have increased spending since 2007.” It says “2007–2012” on each axis. Not subtle.

    Senator Whitehouse’s numbers, which he provided Tuesday evening, are also clearly labeled. In the subtitle, it identifies that the changes are dated “2009–2016.”

    That’s a big difference.

    Between 2007 and 2009, many countries, including the U.S., implemented large temporary deficit spending increases. When dating from a point at which spending was temporarily high, it’s easy to find spending reductions.

    If you see a man taking two steps forward and one step back, do you say he is walking backward? Senator Whitehouse wants to consider only the step back without taking into account the two steps forward that most countries took.

    My method—dating all changes from before the recession—is more reasonable. In fact, if a country engaged in a large deficit spending program in, say, 2009, 2010, and 2011 and was back to normal in 2012, I will record no change at all despite a large Keynesian “stimulus” program.

    Moreover, Senator Whitehouse wants to give the walking man credit for several more steps backward he plans to take in the future. The Senator’s data are from the OECD’s Fiscal Consolidation Survey 2012, and it refers to self-reported “plans” for deficit reduction from OECD members, not data on what has already occurred. The data for 2012–2015 (and 2016 in two cases) are all projections or plans of future changes. In some cases, 2011 data are projections as well.

    The data are reported in an OECD publication from last November. In that volume, the data are broken out by year, so it is possible to re-work Senator Whitehouse’s numbers for only the years with actual data: 2009, 2010, and 2011.

    Of the spending cuts and tax increases Senator Whitehouse referred to as “what took place in Europe,” the vast majority were only projections at the time his data were published. In the median country, 75 percent of the planned spending cuts were still just plans. Senator Whitehouse does not know whether those plans will be faithfully adopted, and either way, those data have little bearing on what occurred over an earlier—historical—time frame.

    Hearings don’t have to be schoolyard. I thank Chairman Patty Murray (D–WA) for her direct questions, respectful disagreement, and allowing me a clear chance to respond. The entire exchange can be viewed online.

    UPDATED: This post originally replicated an error made by the Senator’s staff and thus misstated the percentage of spending cuts that were projections.

    Posted in Economics [slideshow_deploy]

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