21 September 2010

2010 Politics in One Chart

Political Calculations | Ironman | The Biggest Issue of 2010, In One Chart

If you were asked to produce a single chart illustrating the biggest single political issue in America today, what would it look like?

We're taking on that challenge today. Here's what we came up with:


In this chart, where we've graphed the trajectory of the total spending of the federal government with respect to the median household income in the U.S. for the years from 1967 through 2009, we see that the U.S. federal government's spending today has decoupled from the primary source of income that is required to sustain it.

Worse, it has literally "gone vertical" during the last two years. [...]

In practical terms, that means government spending has become completely disconnected from the ability of the typical American household to support it.
Well done. Well done indeed.

As always I will caution that looking at median household income over time is tricky business because the size of households has changed and there are non-negligible effects from immigration. There's also danger trying to suss out long-term trends from this chart because it doesn't account for population size, or better yet number of working age residents. These pitfalls at not as significant over short time periods.

All in all, I think this is a fantastic answer to the challenge of finding a single chart to sum up this election cycle.

Bonus points: focus is on spending, not deficits/debt.

4 comments:

  1. I think this is a scary chart, and probably tells a better story than the scary chart I posted a couple weeks ago. The only thing I would add is that what makes it scary(er) is the tendency to do straightline extrapolation. I don't think anybody is attempting to sustain the current level of spending, but as long as aggregate demand is down this is the situation we're in. I would imagine if we were to fine tune this chart over the last 11 months we would already see a trend toward the mean. But I have a strong imagination.

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  2. Also a quick note. I can't use the Name/URL option for posting comments becuase it says that I have unrecognized symbols in my URL.

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  3. I wouldn't want to extrapolate any kind of conclusion that that trend line is going to continue vertically. It scares me because even if it took a right turn at the 2010 level and stayed perfectly horizontal it would take years (decades?) to get back in line with the 1967-1990 trend. Even if the last few years aren't a new secular trend but are just a deviation they're one hell of a big deviation.

    Not sure what the deal is with the Name/URL option. I'm not really pleased with the Blogger comment system, but I'm not motivated enough to switch to a different platform.

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  4. PS I would feel more optimistic about mean reversion in the years ahead if I saw some in the 2002-2007 period in this chart. Viewed in this char, spending rumps off the rails in the dot com recession and then Bush seems content to keep it off the rails.

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