July 17, 2003

Remedial Econometrics for Journalists

This Reuters graph has been making the rounds:

You'll notice that the graph measure the deficit in nominal dollar amounts. But for the purposes of comparing budget deficits from different years, these numbers are basically meaningless. Here's what an honest version of the graph would look like, measuring deficits as a percentage of Gross Domestic Product:

Less dramatic, to be sure, but if Reuters was just trying to make the administration look bad, the second graph would suffice; though the comparison to the early-nineties deficits is less damning, the trend is still toward more red ink. Perhaps Reuters spun its story for drama-- the hugest mega-deficit in history is a more compelling storyline than just a fairly large deficit. If so, shame on Reuters for its dishonesty.

But there's a more likely, and perhaps more troubling, explanation. Reuters isn't being dishonest at all; instead, the wire service has reporters covering fiscal policy who simply don't know how to correctly compare deficits. And that's truly shameful.

UPDATE: In my chart-making excitement, I forgot to link to my sources. This .pdf from the OMB was the main one; the relevant data is on page 24. For the 2003 updated figure, I relied on news reports like this one from the AP-- which, typically enough, buries the 4.2% figure in the final paragraph.

Posted by John Tabin at July 17, 2003 10:14 PM