Statistical Follies

Center for American Progress Action Fund figures cited by Obama campaign and liberal media wildly misleading, experts say


A recent blog post authored by an employee of the left-wing Center for American Progress Action Fund and touted by the Obama campaign and media sympathizers is under fire from center-right experts, who charge that the post is flawed and misleading.

The post was authored by Michael Linden, Director for Tax and Budget Policy at the action fund, and argues, “Spending, taxes, and deficits are all lower today than when [President] Obama took office.”

Linden cites figures from the non-partisan Congressional Budget Office (CBO)—specifically, its 10-year projections for fiscal years 2009 and 2012—to support his claim:

In January 2009, before President Obama had even taken the oath of office, annual spending was set to total 24.9 percent of gross domestic product. Total spending this year, fiscal year 2012, is expected to top out at 23.4 percent of GDP.

Here’s another interesting fact. Taxes today are lower than they were on inauguration day 2009. Back in January 2009, the CBO projected that total federal tax revenue that year would amount to 16.5 percent of GDP. This year? 15.8 percent.

One last nugget. The deficit this year is going to be lower than what it was on the day President Obama took office. Back then, the CBO said the 2009 deficit would be 8.3 percent of GDP. This year’s deficit is expected to come in at 7.6 percent.

The post and its accompanying chart have been touted by Obama campaign press secretary Ben LaBolt, MSNBC host Ed Schultz, and the official Democratic Party twitter account.

However, though they are technically accurate, the figures are also deceptive.

“There’s so much wrong with the argument they’re trying to advance here,” said Yuval Levin, a fellow at the Ethics and Public Policy Center.

“Saying that these numbers are lower than on the day President Obama took office is not the same thing as saying that his policies lowered them,” one former White House economic adviser told the Washington Free Beacon. “We’d expect the numbers to improve, quite dramatically in fact, after the crisis ended.”

According to data compiled by the Federal Reserve Bank of Minneapolis, the current recovery has significantly lagged compared with those that occurred following other deep recessions over the past 60 years.

The most glaring problem with Linden’s post, one budget analyst told the Free Beacon, is that CBO’s spending projections for 2009 were vastly inflated by temporary funding measures such as TARP ($184 billion net cost scored to 2009, out of $700 billion total) and the federal bailout of Fannie Mae and Freddie Mac ($218 billion).

Absent that temporary funding, federal spending according to CBO’s projection comes out at about 22 percent of GDP, nearly three points lower than the figure Linden cites, and less than the 2012 projection of 23.4 percent.

The deficit projection would have been 5.4 percent of GDP without the temporary funding, more than two points lower than the 2012 projection of 7.6 percent.

In other words, if the temporary measures invoked to stem the economic crisis are taken out of the equation, both spending and deficits have increased significantly since Obama took office, to levels not seen since World War II. Between 1950-2007, the federal government has averaged just over 20 percent of GDP in spending and just over 2 percent of GDP in deficits.

As noted in President Obama’s latest budget proposal, actual spending was 24.3 percent of GDP in 2012; deficits were 8.5 percent.

“[It] is basically an acknowledgment of the fact that Obama wants to make a crisis year (2008-09) into the new normal,” said Levin. “They’re saying spending this year, when we are supposedly three years after the end of the recession, is okay at just a hair below the highest level since World War II, a highest level we achieved in the course of responding to a massive economic crisis. That’s not something to be proud of; it’s an admission of utter failure.”

“One way to think of it is that Obama has replaced large, one-time spending with large, persistent spending—and it will get bigger after 2012 with the new health law,” said former CBO director Douglas Holtz-Eakin.

Furthermore, the CBO estimate for 2009 does not take into account the $787 billion stimulus package and other spending measures enacted under Obama. This discrepancy is clearly illustrated by the same CBO projections cited in Linden’s post.

In 2009, CBO foresaw federal spending at 21.1 percent of GDP in 2012, or about $3.39 trillion. That is essentially a projection of what would happen absent any changes to current law.

Actual spending in 2011 was more than three percentage points of GDP, or $240 billion, higher.

The deficit was projected to fall to just $264 billion, or 1.6 percent of GDP. The actual deficit was $1.3 trillion, or 8.5 percent of GDP.

When it comes to taxes, measuring revenue as a percentage of GDP is not correlated with tax rates, but is a reflection of economic performance. Tax revenues will be low in a persistently sluggish economy. “They are merely showing that the economy remains very weak … that we haven’t recovered from the recession,” said Levin.

Furthermore, the CBO projections Linden cites to claim that taxes are lower under Obama do not comport with the historical tables maintained by the Office of Management and Budget (OMB), which show that the CBO estimates were off and that revenue has actually increased between 2009-2012.

OMB notes that actual revenue was 15.1 percent of GDP in 2009, and projects revenue in 2012 to reach 15.8 percent of GDP.

Obama, who as a candidate in 2008 said George W. Bush was “unpatriotic” for adding $4 trillion to the national debt, is on pace to increase the debt $6.2 trillion by the end of his four-year term.

President Obama promised in 2009 to cut the deficit in half by the end of his first term, and reiterated that pledge as recently as February 2011. He has not even come close to meeting that goal, however.

The deficit, according to OMB, was $1.4 trillion when Obama took office. CBO estimates that this year’s deficit will reach $1.2 trillion.