In the increasingly polarized political environment in the United States, it is hard to imagine policy-making becoming even more ideological and subjective. This is the main concern of two associate professors from Columbia University Emi Nakamura and Jon Steinsson and assistant professor Nicolas Vincent from HEC Montreal in a recent Bloomberg View op-ed.
Sparked by recent legislation passed in the U.S. House of Representatives in early May, the trio outlines a dangerous trend of conservative governments all over the world (Argentina, Greece, and Canada) playing politics with data collection that serves as objective voice in policy-making. Most notably, Greece's misreporting of budget deficit statistics that resulted in an criminal investigation as the country faced total economic collapse.
According to the authors, "It’s hard to overstate how dangerous the destruction of high-quality, objective statistical information would be." The three main statistical agencies in the United States - the Census Bureau, the Bureau of Economic Analysis and the Bureau of Labor Statistics - "account for less than 0.05 percent of President Barack Obama’s $3.7 trillion proposed budget."
This issue is being played out in the media as the budget deficit and economy is the main concern on the minds of voters heading into the upcoming national elections. Increasing awareness and educating the public about the importance of collecting reliable demographic data could swayvoters as they head to the polls this November.
In Polls Regarding Policy, Words Can Be Deciding Factor
In his blog post detailing the likely public response to President Obama's new jobs proposal, Nate Silver pointed out an important variable in the polling data we often take as fact: the wording of questions. He asks, "Are Americans going to be tolerant of proposals for new spending after having spent six months hearing about deficit reduction?" His answer? "Well, it depends on how you ask them."According to Silver,"when the issue is framed as one of jobs against deficits, jobs win." He writes: "On average, those polls that ask Americans to prioritize 'creating jobs' or 'reducing unemployment' against 'cutting spending' or 'reducing the deficit' have had 57 percent of respondents coming out on the jobs side, against 36 percent who prioritize the deficit."
But wording can make all the difference. "The answer changes, however, when the conflict is instead framed as stimulus or recovery spending against deficits. In polls that employ the term 'spend' or 'spending' in describing the additional stimulus, its support drops to an average of 44 percent, with 50 percent saying that deficit reduction is the higher priority."
It appears President Obama has taken notice. Silver found "that in his speech on Thursday night, Mr. Obama used the term 'job' or 'jobs' 39 times, often preceded by 'create' — but never uttered the word 'stimulus.'" And when he used to word 'spend' or 'spending', he was typically referring to his efforts to reduce spending--not plans to spend more. Nor did "Obama specify the cost of his program."
Silver anticipates more "semantic scrum" to follow in the coming weeks of partisan policy debate. And he has a suggestion for pollsters and readers: "I would advise [pollsters] to use multiple question variants where possible, taking a larger sample and splitting it into halves or thirds, and I would advise readers to be suspicious of articles that cherry-pick one or two polls without discussing the broader context."
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Do We Need to Raise Taxes?
At the New York Times Economix blog, Princeton Professor Uwe E. Reinhardt argues that higher taxes are necessary to restore the United States to fiscal health. He begins with a chart from the Brookings Institution showing that the federal budget deficit for the next ten years is almost exclusively a result of the 2001 and 2003 tax cuts and the lost revenue and increased demand for social services that resulted from the 2008 recession. He sees the 2001 and 2003 tax cuts as symptoms of a long-term willingness on the part of the American people to embrace tax cuts and new spending programs (Reinhardt notes the trillion-dollar Medicare prescription drug plan as an example of the later).As a solution, he echoes the former conservative chair of the federal reserve Alan Greenspan who argues that to afford the government that most Americans now expect requires returning to 1990s-era tax rates, which would mean increasing taxes on all who pay income taxes. Such a solution is politically problematic as it violates President Obama's campaign promise not to raise income taxes on low and middle-income Americans and Republicans opposition to any tax increases.
Finally, Reinhardt notes that the United
States is currently a low-tax nation by the standards of developed nations. The average nation in the Organization for Economic Co-operation and Development (OECD) collects 44.8% of GDP as tax revenue; the United States collects just 26.1% (although it must be admitted that in other wealthy countries, the government pays for healthcare and higher education: large expenses for most Americans). Finally he confronts the idea that higher taxes impede economic growth, charting economic growth by noting that over the past ten years, there has been little evidence for that idea suggested by a transnational comparison of wealthy countries (although there are many problems with using this as any sort of definitive proof of the relationship between tax rates and growth).ZM cf
Think-Tanks Tackle Budget Deficit
The deficit hawk Peter G. Peterson Foundation, created to tackle budget issues in 2008 by Nixon-administration Commerce Secretary and investment banking billionare Peter G. Peterson, enlisted six think-tanks to come up with their solutions to the budget deficit. The Peterson Foundation funded think-tanks from the right-wing (Heritage Foundation and center-right American Enterprise Institute) to the centrist (Bipartisan Policy Center) to the left-wing (center-left Center for American Progress and Roosevelt Institution and the left-wing Economic Policy Institute) to solve a deficit projected to be severe in coming decades. Currently the Congressional Budget Office predicts that in 2035 the US government will spend about 35% of GDP and take in about 19% of GDP as revenue, and those numbers are based on the optimistic assumptions that all of the Bush tax cuts expire and that health-care cost growth slows. The six plans rectify that gap in different ways. Proposals suggest a nearly balanced budget spending anywhere from 18% of GDP under the Heritage Foundation plan to 28% of GDP under the Economic Policy Institute plan. The Wall Street Journal points out that the six plans -- which mimic plans presented by politicians (the Heritage Institution speaks for Paul Ryan, the Center for American Progress for Barack Obama and the Bipartisan Policy Center for the Simpson-Bowes Deficit Commission) -- struggle to find the common ground that Peter Peterson may have wished for. It is difficult to imagine conservatives agreeing to the tax increases proposed by the left or liberals to the spending cuts proposed by the right.
In addition to differences on total levels of spending, the think-tanks differ in their evaluation of the appropriate distribution of federal spending and federal taxation. On taxes, all of the groups want to close tax expenditures: loopholes whereby the government subsidizes through tax-breaks something they might similarly subsidize through direct spending. Four of the six -- including the right-leaning American Enterprise Institute -- want to institute a carbon tax, raising revenue while simultaneously tackling the problem of global climate change. All agree something must be done to control the cost of healthcare. But the agreements end there. In general left-wing groups would raise corporate taxes and taxes on high-income individuals while right-wing groups would not. On the spending side, right-wing groups squeeze spending cuts out of domestic programs while left-wing groups prefer to cut military spending.
Read the full reports for a more detailed breakdown of the numbers here.
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Read the full reports for a more detailed breakdown of the numbers here.
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Improve Your Budget I.Q.
With a government shutdown looking more and more likely, one might begin to wonder what could be taking Republicans and Democrats so long to reach a consensus on the federal budget. However, making budget cuts isn't ever politically easy - especially when the American public seems to believe the government spends much more than it actually does on unpopular programs. According to a recent CNN poll, while Americans surveyed correctly estimated the amount the government spends on more politically popular programs like Social Security, they tended to overestimate the amount spent on less popular spending programs. For example, as the table below shows, Americans estimated that 10% of the federal budget is spent on foreign aid, while in reality, it makes up less than 1% of it. This presents a problem to politicians, as there is little public support for cutting programs like Social Security, but cutting unpopular programs like foreign aid and public broadcasting would make much less of a dent in the deficit than the American public believes. 
Want to see how much you would reduce the deficit if you made budget cuts? The Committee for a Responsible Federal Budget has created an online simulator in whcih you can choose among budget choices to try to try to "stabilize the U.S. debt":
