Here is a typical public debate about the budget deficit:

Republican:  Republicans are for smaller deficits.  You Democrats just want to increase spending.  Republicans want smaller deficits by cutting spending.

Democrat:  Hypocrite.  You Republicans increase deficits by cutting taxes without paying for them.  And you don’t really want to cut spending.  Democrats are for smaller deficits through a combination of responsible spending cuts and tax increases.

Republican:  When was the last time you enacted or even proposed a net spending cut?  Even when you do propose to cut spending, you just turn around and respend the money on some new government program.  You just want to raise taxes, then increase spending, leaving deficits exactly where they are.  Sometimes you don’t even bother with the tax increase, you just increase spending.  We are the party of lower deficits.

Democrat:  You mean, like you guys did with Medicare or you do with defense every year?  We are the party of lower deficits.

< one shoves the other and all hell breaks loose >

This kind of argument contributes more heat than light, in part because it focuses only on deficits and ignores a major philosophical distinction between the two parties:  different beliefs about the appropriate size of government.

I am going to do my best to illuminate this debate by expanding its scope and introducing a new kind of graph.  I call it a Budget Bubble Graph.

If this goes well we can use Budget Bubble Graphs to better understand the fiscal policy debate in Washington.  We can compare different budget proposals, analyze historic fiscal policy differences, and easily visualize the effects of various legislative proposals.  That’s a lot of responsibility for a little graph.  Today I’m going to introduce the graph format and begin to show how it can help you think about the above fiscal policy food fight.  I anticipate using Budget Bubble Graphs a lot in future posts.  Today’s post is therefore something of an investment for the future.

Introducing the Budget Bubble Graph

Bubble graphs are not new.  They are a standard graph type, a useful way to show three dimensions of data on a flat chart.  As far as I know, it is new to use them for the federal fiscal policy debate.

Let’s begin with the simplest possible graph.  Since the end of World War II the federal government has, on average, spent a little more than 20% of GDP.  Over the same time frame, it has financed this 20% by collecting a little more than 18% of GDP in taxes and borrowing the rest from future taxpayers, running an average deficit equal to about 2% of GDP.  I’m going to round the numbers to 20-18-2 to make it easy.  Frankly, the numbers matter little today.  We’re just trying to get used to the format.

Read the full post here