Pet Peeve

[rowyn]

Reporting on the US federal gov't's deficit always talks about the raw numbers: ($1.35 trillion!) Sometimes it mentions percentage of GDP (9.2%!)

It hardly ever talks about government income.

I get the feeling that government income generally goes up and down in a way that has very little to do with raising or lowering taxes, and a great deal to do with whether or not the economy is booming. But I don't really know, because 'how much money does the government receive?' isn't a question reporters are interested in answering. v.v Maybe I'll dig through the CBO's website and see if they can tell me.

Comments

[rowyn]

Looking at gov't revenue as a fraction of GDP to determine how much revenue is tied to economic growth seems wrong to me, because the GDP is itself tied to economic growth. Eg, if the GDP grows by 5%, we're having an economic boom. If gov't revenues also grow by 5%, the gov't will be happy about the raise. But the GDP:Revenue ratio wouldn't change.

OTOH, the correlation isn't that simple -- revenue is running at 14.8% of GDP for fiscal year 2009, according to the WSJ. And the WSJ thought that the ratio was a meaningful way to measure revenue, so maybe I'm missing something?

[terrycloth.livejournal.com]

Well, what I meant was if they're talking about the GDP it's a useful proxy for talking about revenue. Although (as someone else mentioned) it does wiggle a little in addition and in sync which acts as a magnifying factor. But the wiggle seems pretty small.

And since 'GDP' is the figure people keep tossing around, noting that revenue is historically low as a percentage of GDP is also worth talking about, maybe?

Still, when the deficit triples year to year -- that's not caused or even significantly affected by revenue or GDP or the economy. Unless you count the government programs enacted in response to the state of the economy.

[rowyn]

The thing that really bugs me is that last year's 900 billion dollar stimulus package was supposed to be a one-time thing, and TARP -- another 700 billion from 2008 -- was also supposed to be a one-time thing (most of which has been paid back). So why the heck is the budget projected to be just as large in 2010 as it was in 2009? O_o

[terrycloth.livejournal.com]

It is? The charts I was looking at might be out of date, then, they showed it dropping by at least 500 billion. Assuming budget = revenue + deficit.

Is it possible that the stimulus package was 900 billion total over X years?

Revenue being a low % of GDP during a recession is a good thing

[(Anonymous)]

Economists use the phrase "automatic stabilizers" to refer to the tendency of tax revenues to fall faster than the economy (in part because of the progressive income tax) and spending on programs like unemployment compensation to rise as the economy declines. Unlike "stimulus" bills which are often designed to be the starting point of long term programs, automatic stabilizers provide stimulus in a way which will automatically expire as the economy rebounds.

Re: Revenue being a low % of GDP during a recession is a good thing

[telnar.livejournal.com]

That was me, btw -- I noticed after posting it that I wasn't logged in.

Re: Revenue being a low % of GDP during a recession is a good thing

[rowyn]

It's okay, I could tell it was from you. :D Although having you signed in does make it easier to reply. Anyway, the "automatic stabilizers" is good to hear, since I was wondering how much of the drop was from "tax credits" getting treated as a decrease in revenue instead of the wealth-transfer spending that they really are. :/

Re: Revenue being a low % of GDP during a recession is a good thing

[telnar.livejournal.com]

Tax credits are a part of that number, but a smaller part than the inherent counter-cyclical pieces of the tax code. For an example, visualize how much the capital gains tax would collect in 2009.