Monday, October 14, 2013

Serve plenty of pie

Economist Dean Baker has an interesting proposal. He observes that dollar figures related to government budgets are invariably mind-bogglingly big, and suggests that journalists should become much more conscientious about always putting them in context:  

[According to a 2011 poll,] a typical person thought funding for the Corporation for Public Broadcasting (CPB) took up 5.0 percent of the budget. The correct number is 0.012 percent. Telling readers that spending on CPB takes up 0.012 percent of the budget immediately tells them how important this spending is to the government. Telling readers that we're spending $400 million on CPB tells the overwhelming majority of readers almost nothing.

I’ve generally tried to abide by Baker’s dictum in my reporting work. One of my all-time favorite graphics is the “By the numbers” pie chart at the right, which accompanied a piece I wrote in 2012 on Pennsylvania’s exemption of farms from the state inheritance tax. 

The article quotes a Revenue Department spokeswoman's estimate that the exemption would cost the state about $5.5 million a year. I don’t know how big or small $5.5 million sounds to you in the context of a state budget, but the graphic makes it clear how very, very small it is: just 0.7 percent of 2.9 percent of total revenues, or roughly two hundredths of a percent.

As for the federal budget, a chart like the one below (Source: Wikipedia) is a good starting point for understanding the stakes. It simply shows the major categories of federal spending (it happens to be from 2010, but the current spending breakdown is broadly similar).

The takeaway should be, as Paul Krugman has said, “The U.S. government is basically an insurance company with an army.” As you can see, defense, Social Security, Medicare, Medicaid and unemployment/welfare programs were the top 5 spending categories in 2010, accounting for three quarters of the budget. Everything else the government does – food safety, air safety, road and dam building, the federal court system, you name it – is crammed into that remaining 25 percent. 

State spending, similarly, is dominated by a few major categories. Pennsylvania spends 73 percent of its budget on K-12 education and welfare and 7 percent on corrections, leaving just 20 percent for everything else. (Source: Pennsylvania Budget and Policy Center)

So there’s a very good reason deficit hawks always come back to entitlement programs in D.C., and why education spending is so contentious at the state level. It's amazing, but pretty much everything else – including, for the record, legislative salaries and benefits – is a rounding error. 

No comments:

Post a Comment