That Was Fast: David Brooks Calms Down; PLUS: A GRAPH!

David Brooks feels better this morning

David Brooks feels better this morning

Yesterday I wrote about David Brooks’ slide into hysteria over the gluttonous ruin threatening to swallow all that is good and right about America. I (and the incisive commentators to my post) were not the only people to feel umbrage at Brooks’ portents.

In his column today, Brooks summarizes his conversations with senior members of the Obama Administration, who responded to allegations he made Tuesday of irresponsible, big government spending. Some highlights:

[Administration officials] see themselves as pragmatists who inherited a government and an economy that have been thrown out of whack. … They’re trying to restore balance: nurture an economy so that productivity gains are shared by the middle class and correct the irresponsible habits that developed during the Bush era.


[T]he Obama administration will not usher in an era of big government. Federal spending over the last generation has been about 20 percent of G.D.P. This year, it has surged to about 27 percent. But they aim to bring spending down to 22 percent of G.D.P. in a few years. And most of the increase, they insist, is caused by the aging of the population and the rise of mandatory entitlement spending. It’s not caused by big increases in the welfare state.

He goes on to relate the administration seeks to lower nondefense discretionary spending [NDDS] to 3.1% of GDP by 2019. Since 1969, annual NDDS averages 3.8% of GDP. Of course, this year, it is much higher (4.7%), but the budget priorities Obama has laid out puts the country on a path to lower NDDS to a point never reached since data collection began in 1962. This means a Democratic administration is ready to shrink government to a size smaller than that of any Republican presidency.

Brooks likes to point out the “Obamatons” are adopting critical components of Republican plans. For instance, “[t]he Medicare reform represents a big cut in entitlement spending. It amounts to means-testing the system. It introduces more competition and cuts corporate welfare.” Further,

Over the long run, Obama has insisted that health care reform will be deficit-neutral. Many experts believe this will force Democrats to reduce the tax exemption for employee insurance benefits in order to raise revenue. This idea is at the core of most conservative reform proposals.

The latter might be true, but if it does happen, it will be when a system is in place that has expanded coverage to the currently uninsured and that has lowered overall health-care costs. McCain’s, ergo the Republican, health-care plan eliminated the tax exemption and sent workers into the free market, where private insurers would then be falling over themselves to cover people with high blood pressure or with special-needs children or with some other seemingly benign pre-existing condition that makes them high-risk on an actuarial table.

Regarding the former, the implication that liberals can’t cut spending is, as shown in the NDDS forecasts, ridiculous. That Republicans have some sort of monopoly on efficiency and fiscal responsibility is similarly ludicrous.

Ultimately, the ludes kick in, and Brooks concludes:

[T]he White House made a case that was sophisticated and fact-based. These people know how to lead a discussion and set a tone of friendly cooperation. I’m more optimistic that if Senate moderates can get their act together and come up with their own proactive plan, they can help shape a budget that allays their anxieties while meeting the president’s goals.

As promised, a GRAPH! (after the jump)

Unrelated to Brooks, specifically, but certainly related to Republican delusions of grandeur, I screwed around with some data this week, wanting to know if tax cuts are related to increases in GDP. Based on Republican rhetoric, tax cuts seem to be the only way to grow an economy. Truth is, cuts to the top marginal tax rate — the one that supposedly makes the biggest difference, because it affects the people would invest their huge tax savings in the economy — aren’t correlated with GDP.

(I know I talked about correlation earlier in the week, saying how ridiculous it was to base the entire derivatives market on a correlation function, but when we want to look for general relationships, correlation is useful. We aren’t looking for causation, we simply want to know if a relationship exists.)

The graph below plots real GDP (in 2000 dollars) for the period 1970-2008 and the top marginal tax rates for this post-AMT period.

Click to enlarge

Click to enlarge

Visually, there isn’t much connection between the two. GDP wildly fluctuates until about 1987, when Greenspan took over the Fed. The tax-rate plot is very different, with long plateaus and steep adjustments reflecting tax policies of the different administrations. Nonetheless, let’s see if a relationship does exist:

Correlation of change in GDP to top marginal tax rate (1970-2008) = 0.03

There is basically zero correlation between changes in GDP and the top marginal tax rate. What’s more, during the period of 1992-2008 a stronger positive correlation arises:

Correlation of change in GDP to top marginal tax rate (1992-2008) = 0.27

A positive correlation means when the top marginal tax rate is relatively high, GDP grows. If Republicans were correct, the relationship should be negative: Taxes go down, GDP goes up.

A raison d’etre ought to be able to weather an examination about as rigorous as one performed in a high-school statistics class. In this case, Republicans are in trouble: A relationship between GDP and taxes does not exist in either size or direction as preached by the Right.


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