Wednesday, September 8, 2010

Who is right? Fred or Uncle Milt

Here I contrast the math executed by a Fred Javascript vs the words taken from Milt Friedman. (HT Morgan Warstler in a Money Illusion comment.  Here Uncle Milt talks about Reagan and government spending:

Peter Robinson: But we did get a deficit.;
Milton Friedman: Because actual spending, the increase in spending on the military, was offset by reductions in spending in the rest of the budget. Not entirely.
Peter Robinson: Not entirely.
Milton Friedman: Not entirely. But very largely.

So why was federal spending, as a proportion of disposable after-tax income, greater during the Reagan presidency?  With  tax cuts Reagan never managed to get the proportion of central government down. It takes a Deadlocked government, with a tax hike, to make that happen.

Uncle Milt is was altering data to make his world view correct in that interview. Notice the 'Not Entirely', he likes to leave enough wiggle room.  Go back and read the whole interview.  Why is a larger central government as a proportion of the total economy, a good thing in Milt's mind?  He praises Reagan for socialism.

On the other hand, when you read the interview, he says a Deadlocked government is second best to Reagan, in spit of Bubba and Newt  getting the ratio down below .26 when Reagan averages .31.

Why does a deadlocked government work?  Because both sides present their views and upon seeing both sides, public opinion decides nothing is better than anything.

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