Americans want more government

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  • #26
Economist
That spending is on national security - as the defense budget ballooned after 9/11. This is consistent with neoliberal ideology since the state should only be centered on its function of military defense. But otherwise, government spending in all other sectors has not changed much since Reaganomics (despite Clinton's attempts to destroy it).

Not true. When you look at the changes in government spending as a percentage of GDP, you don't see some huge change right around the time of the Iraq War. Rather, you see a steady increase, going from it being less than 5 - 10% around 100 years ago, up to about 25% - 30% today. In some countries (like France) government spending as a percentage of GDP is at approximatly 50%.

For example, the war costs approximately 4.5% of GDP (which is definitely not a small number) in 2007. Even social security is approximately 4.5% of GDP in 2007. Furthermore, social security spending as a percentage of GDP is projected to go up substantially over the next 50 or so years (like double).

You mentioned that the defense budget ballooned after 9/11 which is why you say that government spending as a percentage of GDP has increased. This is possible, but I am still skeptical. While I agree with you that the defense budget increased after 9/11, I imagine that other government programs might have decreased in regards to spending, so on the whole government spending is probably about the same.

Futhermore, you mentioned Clinton, who actually didn't spend that much. However, one must look at the likely reasons that this was the case. Namely that Republicans had control of Congress, and therefore, they weren't going to let Clinton spend as much as he probably would have liked. Now with George W the situation is different as Republicans had control of the Congress, so they let him get away with more. Some people even like to vote for President opposite of who controls Congress because they feel that it balances the power.
 
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  • #27
russ_watters
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Unemployment percentage is one of the slipperiest, slimiest numbers you can use to gauge the health of the economy.....
....And those are all common misconceptions people often complain about with unemployment data. Most are just plain wrong. Here's the actual way they calculate it (as you can see, it is more comprehensive than you believe it to be):
The ILO describes 4 different methods to calculate the unemployment rate:[5]

Labour Force Sample Surveys are the most preferred method of unemployment rate calculation since they give the most comprehensive results and enables calculation of unemployment by different group categories such as race and gender. This method is the most internationally comparable.
Official Estimates are determined by a combination of information from one or more of the other three methods. The use of this method has been declining in favor of Labour Surveys.
Social Insurance Statistics such as unemployment benefits, are computed base on the number of persons insured representing the total labour force and the number of persons who are insured that are collecting benefits. This method has been heavily criticized due to the expiration of benefits before the person finds work.
Employment Office Statistics are the least effective being that they only include a monthly tally of unemployed persons who enter employment offices. This method also includes unemployed who are not unemployed per the ILO definition.
http://en.wikipedia.org/wiki/Unemployment

But like any statistics, they need to be understood and used properly and they have limitations. That doesn't make them flawed.

We've had this discussion many, many times before, but just one specific I'll point out again:
If those 20 people cannot find work, the unemployment rate will show an up-tick until they are no longer eligible for unemployment benefits, at which time the rate will settle back to its previous level.
There are two problems with this:

First, the unemployment rate is a near steady-state condition. You used a local example, but it is calculated nationally, so no single event can affect it like that. In other words, the fact that people drop off the stat after a certain amount of time is true now, was true yesterday, and will be true tomorrow. Thus, it does not affect the usefulness of the statistic. Otherwise, it woudl trend downward over the long term, while we had a continually increasing class of unemployed and underemployed people.

Second, if there was a continually increasing long-term unemployed or underemployed class of people, they'd show up in other stats, such as income stats. And they don't.
 
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  • #28
turbo
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But like any statistics, they need to be understood and used properly and they have limitations. That doesn't make them flawed.
Wiki as a primary reference? You're usually more meticulous, Russ, and I appreciate that. The raw unemployment figures (people who are applying for unemployment insurance and are eligible for such) are so poorly constrained that they are not indicative of the health of our economy. When people drop off the rolls (typically at 13 weeks, but all by 26 weeks) or never even qualify for the rolls in the first place due to the terms of their employment, they are not counted as unemployed. Maine has a huge population of unemployed people who are not counted as unemployed because they do not qualify for the benefits and are under the radar. If you took a census of people who want to work, but cannot find work, and lack the resources to move their families to where they might find work, the unemployment numbers in Maine would be off the charts. I'm sure that other states' numbers would be staggering, as well.
 
  • #29
Office_Shredder
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First, the unemployment rate is a near steady-state condition. You used a local example, but it is calculated nationally, so no single event can affect it like that. In other words, the fact that people drop off the stat after a certain amount of time is true now, was true yesterday, and will be true tomorrow. Thus, it does not affect the usefulness of the statistic. Otherwise, it woudl trend downward over the long term, while we had a continually increasing class of unemployed and underemployed people.

So the argument could me made that while in the past, people would cycle in and out of employment, today they don't and instead just drop off the map because our economy is somehow more fundamentally flawed. Of course, that's not necessarily true, but is the prime reason why the stat isn't that great... it doesn't reflect fundamental changes in the economy. For fluctuations it will reflect it, but for more permanent changes, it's not so clear

Second, if there was a continually increasing long-term unemployed or underemployed class of people, they'd show up in other stats, such as income stats. And they don't.

Which is why those statistics are perhaps better for tracking whether the economy has turned in a more fundamental manner. And when you look at them, they don't tell the same story as the low unemployment rate (for example http://neweconomist.blogs.com/new_economist/2006/06/mean_median.html )
 
  • #30
russ_watters
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Wiki as a primary reference?
Wik as an easy reference. And it is right in this case.

Besides - it's better than no reference (which is what you provided).....
When people drop off the rolls (typically at 13 weeks, but all by 26 weeks) or never even qualify for the rolls in the first place due to the terms of their employment, they are not counted as unemployed.
Even if that were true as I explained above, it wouldn't matter. If you changed the criteria and were able to measure a "true" unemployment that fluctuated between 10 and 15% (random guess for emphasis) instead of using the one we have now that fluctuates between 4 and 8%, it doesn't change anything! 10% would be seen as "good" and 15% "bad" instead of 4% good and 8% bad.
 
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  • #31
russ_watters
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It didn't take too much effort to find the BLS's info on how they find unemployment rate:
Some people think that to get these figures on unemployment the Government uses the number of persons filing claims for unemployment insurance (UI) benefits under State or Federal Government programs.
That would be you....
Because unemployment insurance records relate only to persons who have applied for such benefits, and since it is impractical to actually count every unemployed person each month, the Government conducts a monthly sample survey called the Current Population Survey (CPS) to measure the extent of unemployment in the country. The CPS has been conducted in the United States every month since 1940 when it began as a Work Projects Administration project. It has been expanded and modified several times since then. As explained later, the CPS estimates, beginning in 1994, reflect the results of a major redesign of the survey.

There are about 60,000 households in the sample for this survey. The sample is selected so as to be representative of the entire population of the United States. In order to select the sample, first, the 3,141 counties and county-equivalent cities in the country are grouped into 1,973 geographic areas. The Bureau of the Census then designs and selects a sample consisting of 754 of these geographic areas to represent each State and the District of Columbia. The sample is a State-based design and reflects urban and rural areas, different types of industrial and farming areas, and the major geographic divisions of each State.
http://www.bls.gov/cps/cps_htgm.htm

Please stop repeating your false perception on this issue!

[I am glad you got me to find out for myself, though - I'd been giving you the benefit of the doubt, accepting your belief on how the information is compiled as reality even though it is wrong. Now I know for next time that there is no need to argue against the logic - just point out that the belief itself is wrong.]
 
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  • #32
turbo
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Here is some raw data on unemployment in Maine. Regardless of how many people are coming off temporary or part-time work, or working several such jobs to keep fed, the numbers aren't so hot. The southern tip of the state (Portland, Biddeford, Sanford, etc) is not doing too bad, but the numbers in the rest of the state stink, and the geographic regions represented by Lewiston and Bangor don't even begin to register the shortage of employment here in Somerset county or in Washington county (probably the worst in the state).

http://data.bls.gov/cgi-bin/surveymost?la+23
 
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  • #33
opus
Not true. When you look at the changes in government spending as a percentage of GDP, you don't see some huge change right around the time of the Iraq War. Rather, you see a steady increase, going from it being less than 5 - 10% around 100 years ago, up to about 25% - 30% today. In some countries (like France) government spending as a percentage of GDP is at approximatly 50%.
Yes I do certainly believe the French government is in trouble, and one of the reasons why Sarko was voted in. Most people screaming about the budget being the end of the American economy are silly conspiracy theorists. Regardless, however, spending in government as a percent of GDP is going up not because of more social programs, but because the costs are going up. This is exactly why Canada is in a rut - they have to either increase taxes because of health care costs continually going up, or they have to get rid of the system completely. As biotechnology comes out with new and expensive drugs and toys, the government can either keep up or fall behind.
For example, the war costs approximately 4.5% of GDP (which is definitely not a small number) in 2007. Even social security is approximately 4.5% of GDP in 2007. Furthermore, social security spending as a percentage of GDP is projected to go up substantially over the next 50 or so years (like double).
Yes you are right. My point is that new things aren't being added, Americans aren't getting more social services, but just maintaining the status quo is increasingly expensive - especially for Medicare and SS, those are going to ballooooon.
You mentioned that the defense budget ballooned after 9/11 which is why you say that government spending as a percentage of GDP has increased. This is possible, but I am still skeptical. While I agree with you that the defense budget increased after 9/11, I imagine that other government programs might have decreased in regards to spending, so on the whole government spending is probably about the same.
Well I think it's true, the defense budget is growing quite fast and they had to create a whole new department after 9/11. If you look at http://www.whitehouse.gov/omb/budget/fy2008/index.html [Broken] and they describe "defense discretionary" programs as taking up 20.1% of the tax. While this is true, you really have to look at the "discretionary" budget, which requires annual approval as it falls under a separate tax. So if you look here, http://www.thebudgetgraph.com/site/index.php?main_page=product_info&products_id=1 which outlines all the programs of the discretionary budget, 67% of it is going to defense. This an obvious change from pre-9/11. It's also important to note that programs in the discretionary budget historically were social safety net programs. Thus, really, we're spending on defense what we historically had spent on for social programs. Meaning our spending is still the same, but social services are down.
Futhermore, you mentioned Clinton, who actually didn't spend that much. However, one must look at the likely reasons that this was the case. Namely that Republicans had control of Congress, and therefore, they weren't going to let Clinton spend as much as he probably would have liked. Now with George W the situation is different as Republicans had control of the Congress, so they let him get away with more. Some people even like to vote for President opposite of who controls Congress because they feel that it balances the power.
Yup that is true. Not sure about the "strategic" voting though, that does seem silly.
 
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  • #34
Economist
Regardless, however, spending in government as a percent of GDP is going up not because of more social programs, but because the costs are going up.

I don't know about this. Costs of virtually everything in the Economy have went down in real dollars over the years. In fact, this is the reason that Nations have growth rates, because they find cheapter ways of doing things. This is the definition of economic progress, and is the essence of economics.

Now if government expenses are going up, while goods and services in the private sector are generally going down, then this is even more reason why governments can't be realied upon to undertake many actions. This gives me even less faith (which is pretty much non-existent anyway) in government.

Let's take Social Security. You're saying the costs have increased, which is true due to the baby boomers. However, you should ask yourself why baby boomers have placed pretty much no stress or worry on private retirement companies.
 
  • #35
opus
Wait a minute, are you refuting against hard solid numbers that costs have gone up in medicine and social security? You're not that insane of a sceptic, are you?

And private retirement companies have actuaries?
 
  • #36
ShawnD
Science Advisor
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Let's take Social Security. You're saying the costs have increased, which is true due to the baby boomers. However, you should ask yourself why baby boomers have placed pretty much no stress or worry on private retirement companies.

Actually the same thing does happen in the private sector. When somebody chooses to buy into a mutual fund, they're told right away that the MER is 2%, meaning 2% of your entire investment is taken every year regardless of performance. When you factor in compounding over something like 40 years, that's a fairly significant chunk of cash that has gone missing from your investment. Then of course there are companies Sprint or Nissan where the pension comes up short time and time again. Then there are the worst of the worst, companies like Enron that completely lose all of their investors' money.

The private sector is no better than the government when it comes to screwing up, but they are held accountable when such a screwup happens. Several people went to jail over Enron, but nobody will ever go to jail for pissing away social security.
 
  • #37
Economist
Wait a minute, are you refuting against hard solid numbers that costs have gone up in medicine and social security? You're not that insane of a sceptic, are you?

I don't know that it's correct to say that costs went up. People may have spent more, but the same things probably cost less. In other words, they are spending more, but also for better quality stuff. For example, you were talking about fancy new macinary as a cost going up, but I don't think that's precise, as it makes it sound like you're paying more for the same thing. It's like saying that the cost of VCRs went up because DVD players were more expensive than VCRs when they first came out. Anybody would quickly realize that it's a misleading statement because you are comparing apples to oranges.

My bigger point though was that the costs of medicare and social security have probably went up for very different reasons than when the cost of something in the private sector goes up. For example, social security is not that great of a system in my opinion, and it's filled with problems, which is what makes the costs go up. The failures of the system is what makes it increasingly more costly.
 
  • #38
Economist
Actually the same thing does happen in the private sector. When somebody chooses to buy into a mutual fund, they're told right away that the MER is 2%, meaning 2% of your entire investment is taken every year regardless of performance. When you factor in compounding over something like 40 years, that's a fairly significant chunk of cash that has gone missing from your investment. Then of course there are companies Sprint or Nissan where the pension comes up short time and time again. Then there are the worst of the worst, companies like Enron that completely lose all of their investors' money.

The private sector is no better than the government when it comes to screwing up, but they are held accountable when such a screwup happens. Several people went to jail over Enron, but nobody will ever go to jail for pissing away social security.

I disagree with your analysis.

Here's a Thomas Sowell article on the topic: http://www.jewishworldreview.com/cols/sowell091500.asp

The Social Security money that comes into Washington from our paychecks gets spent, not invested, despite creative accounting to the contrary. When the politicians spend the money, they give the Social Security "trust fund" I.O.U.'s in the form of government bonds. But this paper transaction changes nothing, except for creating the illusion that something is being saved when it isn't. You can't spend money and save it at the same time -- no matter how creative your accounting may be.

Future taxpayers are going to have to pay off the government bonds that have been issued to the Social Security system in exchange for the money that was spent. If no such bonds had ever been issued when that money was spent, we would still have to depend on future taxpayers to come up with the money for the baby boomers' retirement. The bonds in the "trust fund" change nothing economically.

What this accounting sleight-of-hand does politically is to confuse the public and maintain the illusion that your Social Security "contributions" are being put aside for your pension when you retire. That would be true if you were investing in the private sector, but not in the government.

The law requires private insurance or annuities to be backed up by enough assets to cover their liabilities. Private insurance companies can't just promise people anything and leave it to someone else in the future to figure out how to pay them off -- or how to evade the responsibility for paying them off. Only the government can do that.

There is a reason why you don't hear the same hysteria from private financial institutions that you hear from the government about how hard it will be to pay the baby boomers' pensions when they retire. Private pensions are financed by investing the money that comes in, so that the assets will be there when retirement time comes.
 
  • #39
ShawnD
Science Advisor
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The law requires private insurance or annuities to be backed up by enough assets to cover their liabilities. Private insurance companies can't just promise people anything and leave it to someone else in the future to figure out how to pay them off -- or how to evade the responsibility for paying them off. Only the government can do that.
Touche.
 

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