yesterday there was a question about the chart that i used from Reuters that accompanied my retort.
inflation, steve, the reader/commentor said, was not being accounted for in the chart. he repeated this claim in greater detail on his blog.
in the comments of both my post and his, i asked for a link to a more accurate chart. to which he wrote this:
I don’t think you understand the point of the objection. It isn’t the accuracy, but the units of measure. For example, if I say you weigh 150 is that good or bad? Depends on whether I am using pounds or kg. If it is pounds that isn’t that bad. If it is kilograms then it also means you weigh over 330 pounds. This is the inflation part of the objection.
Another problem is the context. If you are 5’4″ tall 150 lbs. might be a bit overweight. If you are 5’10” then that weight is pretty darned good. Further, there are things like muscle mass and so forth. This added “context” is the percentage of GDP.
Now, Tony, if you are still scratching your shaved head (and I don’t know why you are complaining about hot babes…the girl in those pics is pretty darned easy on the eyes), think of it this way. What will inflation do over the next 40 years? Double the prices? If so then a deficit of todays size in those future dollars is going to also be double. But is it really twice as big? No. It is the same size (assuming no economic growth, but economic stagnation). Further if GDP doubles then deficit is actually half as large as a percentage of GDP.
Basically it is all in how you measure things. Didn’t your grandparents ever talk about going to see a movie for $0.50 or something? Why does it cost $8+ no? Is it simply evil movie theater owners jacking up prices? Or is part of it that we have seen inflation causing all prices to increase?
to which someone else, sofla, typed this:
Steve, most everybody on your site here can understand the difference between a ‘nominal’ dollar record and an ‘inflation-adjusted and/or constant’ dollar record, and while they are different, both terms exist, and can be correctly or incorrectly used, on their own terms.
It is entirely correct to call the current budget deficit the record **nominal** deficit, as you well know. And it is obvious from the numbers displayed in the legends on the graph that nominal billions of dollars is the unit used for the y-axis. If the axis were labelled ‘1990 constant dollars’ or something, this graph would be inaccurate.
Since simply changing the heading to include the words ‘nominal’ or ‘current dollar’ before ‘deficit’ is enough to make this chart entirely accurate, what exactly is your beef, which, by the way, is not with this guy tony, but with Reuters?
In fact, just about all the media, including specialized business wires, Business Week, the Economist, etc., routinely call nominal record prices ‘records,’ and then mention how they stack up in real terms only toward the end of the piece, if at all, but with a headline that you claim is wholly illegitimate on any terms (I guess).
Have you broached this extreme and inflexible position of yours with the business and economic writers for BW, Fortune, Reuters business wire, etc.? Why do you think the specialized business press continues to make what you consider such an egregious and howling error?
Because they’ve never heard of, nor understand, the difference? Or just possibly that, although understanding the difference, there are purposes for which the uses of current dollars are more traditional, and have utility, although you disagree?
This insistence that a near-universal usage must be stopped makes you somewhat like King Canute, ordering back the tides. It’s eccentric, and has you insisting that something that is true (the nominal record status) cannot be mentioned, because it is false.
When people have the experience that a tankful of gas for the first time in their lives costs them over $40 (current dollars), that astonished feeling of sticker shock is only slightly diminished by explaining the $20 they paid in ’76 was more in real terms.
Beside the theoretical issue raised above, the chart shows unfortunate trends, even if you adjust it for inflation. A period of decreasing deficits, culminating in surpluses, was suddenly reversed, and the deficits are worsening, not getting better. Put it in nominal dollars, constant dollars, or by all means, in the gold standard, as a percentage of gdp, and this trend still exists, and will persist and worsen under this president’s economic policies.
Something need not be the worst of all time to be bad.
well today Steve put together a very civil post, which includes not one chart but Three!
and as promised, i happily link to his fine blog for you to enjoy his findings which are that this is not the worst deficit ever.
who said comments arent useful?